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https://www.courtlistener.com/api/rest/v3/opinions/1387931/ | 259 Ga. 663 (1989)
386 S.E.2d 146
OB-GYN ASSOCIATES OF ALBANY et al.
v.
LITTLETON et al.
S89G0538.
Supreme Court of Georgia.
Decided December 5, 1989.
Watson, Spence, Low & Chambless, G. Stuart Watson, Dawn G. Benson, for appellants.
William S. Stone, for appellees.
Alston & Bird, G. Conley Ingram, Judson Graves, Richard L. Greene, Butler, Wooten, Overby & Cheeley, James E. Butler, amicicuriae.
CLARKE, Presiding Justice.
Plaintiffs/appellees Littleton sued appellants for the allegedly negligent delivery of their infant daughter which resulted in the baby's death two days after delivery. They sued in four counts: Count 1 was for the wrongful death of the daughter under OCGA §§ 19-7-1(c) and 51-4-4; counts 2 and 3 were for loss of her services and for money paid to defendants for services; count 4 was for the mother's mental suffering and emotional distress. The trial court granted summary judgment on count 4, and the Court of Appeals reversed. Littleton v. OB-GYN Assoc., P. C., 192 Ga. App. 634 (385 SE2d 743) (1989). We granted appellants' application for certiorari to resolve two issues: 1) whether Mrs. Littleton will be allowed to recover for emotional and mental distress as well as for the full value of the life of her deceased infant without reduction for any expenses of decedent had she lived; 2) whether the facts of this case create a jury question on the issue of physical injury to the mother so as to give rise to a claim for damages for the resulting emotional distress and mental anguish.
We conclude that recovery for emotional distress is not available in a wrongful death action. We conclude that when Mrs. Littleton entered the delivery room there were two patients: Mrs. Littleton and her unborn child. While Mrs. Littleton is not able to sue for emotional distress as part of her wrongful death action for the death of her daughter, she may bring a claim based on malpractice resulting in injuries to her person. This claim may include a claim for compensation *664 for any emotional distress which is a consequential damage resulting from those injuries.
1. Recovery for wrongful death in Georgia is limited to the full value of the life without deduction for necessary or personal expenses of decedent and does not include recovery for mental anguish or emotional distress. OCGA §§ 19-7-1; 51-4-4; 51-4-1.
The Court of Appeals found that the claim asserted by Mrs. Littleton here was recognized in Smith v. Overby, 30 Ga. 241 (1860). In that case the Smiths sued to recover for the wife's bodily injury and mental anguish due to the death of her child during delivery. The plaintiffs claimed that they were damaged in the amount of $25,000 due to her physical suffering and the destruction of her health and peace of mind.
Smith v. Overby involved particularly heartbreaking facts. The child was deliberately dismembered during the delivery by the doctor, who believed this action necessary to save the mother. The case was reversed because the judge had not allowed the jury to consider the claim for mental anguish for the unnecessary destruction and the death of the child. Smith v. Overby, supra, has little application to the present case. As will be discussed below, a claim for emotional distress is not available in Georgia in a wrongful death action. On the other hand, a person who has suffered a physical injury resulting from the negligence of another may claim damages for emotional distress in the action to recover for the injury.
The Court of Appeals distinguished Bell v. Sigal, 129 Ga. App. 249 (199 SE2d 355) (1973). In Bell v. Sigal the mother of a minor child filed an action against two physicians for negligence in treatment which resulted in his death. She sought damages for the full value of his life. The mother and father then filed another action for breach of contract and claimed damages for solatium in that action. In affirming the trial court's dismissal of the contract action, the Court of Appeals found that the plaintiffs could not proceed in two actions and recover twice. The court further said, "[w]e have found no Georgia case, either in tort or contract, where damages for mental anguish of a relative or friend due solely to grief over injury to another was compensable." 129 Ga. App. at 250. Here the Court of Appeals distinguished Bell v. Sigal because the plaintiff in that case sought to recover both in contract and in tort. We do not find that this distinction dilutes the conclusion of the Bell v. Sigal court that there is no precedent in Georgia for recovery of damages for mental anguish or emotional distress in a wrongful death action. See also Young Men's Christian Assn. v. Bailey, 112 Ga. App. 684 (146 SE2d 324) (1965), cert. denied 385 U. S. 868 (1966); Hudson v. Cole, 102 Ga. App. 300 (115 SE2d 825) (1960) in which the Court of Appeals held:
*665 The emotional upset of the person bringing the action is no part of the measure of damages under Code Ann. § 105-1307, which clearly states that the mother or father shall be entitled to recover the full value of the life of the child, which full value is defined in Code § 105-1308, and in the numerous decisions thereunder, in economic terms, but not in terms of emotion. [Id. at 304.]
2. In this case, however, the claim for emotional distress is not part of the wrongful death claim. Rather, it is part of a separate count in which Mrs. Littleton seeks damages for mental distress. The Restatement of Torts, Second, § 456 provides:
If the actor's negligent conduct has so caused any bodily harm to another as to make him liable for it, the actor is also subject to liability for (a) fright, shock, or other emotional disturbance resulting from the bodily harm or from the conduct which causes it, and (b) further bodily harm resulting from such emotional disturbance.
A. The Impact Rule
Georgia follows the so-called "impact rule," which requires that, there must have been actual bodily contact with plaintiff as a result of defendant's conduct for a claim for emotional distress to lie. The Georgia rule was clearly stated in Candler v. Smith, 50 Ga. App. 667, 673 (179 SE 395) (1934):
Mere wrongful acts of negligence will authorize a recovery where the resulting fright, shock, or mental suffering is attended with actual immediate physical injury, or where from the nature of the fright or mental suffering there naturally follows as a direct consequence physical or mental impairment. [Cits.] In either of such events the fright or mental suffering can itself be considered, together with the accompanying physical injury or resulting physical impairment, as an element of damage.
See also Howard v. Bloodworth, 137 Ga. App. 478 (224 SE2d 122) (1976); Marcelli v. Teasley, 72 Ga. App. 421 (33 SE2d 836) (1945); Goddard v. Watters, 14 Ga. App. 722 (82 SE 304) (1914).
In Christy Brothers Circus v. Turnage, 38 Ga. App. 581 (144 SE 680) (1928), the plaintiff was allowed to seek damages for emotional distress resulting from the impact of a circus horse's evacuating its bowels in her lap. Christy Brothers Circus constitutes an expansion of the impact rule in its holding that
*666 [any] unlawful touching of a person's body, although no actual physical hurt may ensue therefrom, yet, since it violates a personal right, constitutes a physical injury to that person.... The unlawful touching need not be direct, but may be indirect, as by the precipitation upon the body of a person of any material substance. [Id. at 581.]
As noted in Prosser & Keeton, Law of Torts, 5th ed. § 54, p. 364, Christy Brothers Circus reduces the requirement that there be some physical injury or at least an impact for the recovery of damages for emotional distress as a result of defendant's conduct to an absurdity.
In Westview Cemetery v. Blanchard, 234 Ga. 540, 544 (216 SE2d 776) (1975), we held, in construing what is now OCGA § 51-12-6:
This section does not create a cause of action for injury to peace, feelings or happiness but prescribes the measure of recovery where such a cause of action exists. [Cit.] If "mental pain and suffering" is not accompanied by physical injury or pecuniary loss, recovery is allowed only if the conduct complained of was "malicious, wilful, or wanton." [Cit.] The measure of damages under this section is unique in that the jury is permitted to consider the worldly circumstances of the parties.
We take this opportunity to clarify our rule regarding impact and now hold that the impact which will support a claim for damages for emotional distress must result in a physical injury. Christy Brothers Circus v. Turnage, supra, is overruled.
B. Pecuniary Loss
We turn next to Mrs. Littleton's contention that pecuniary loss which she suffered will support a claim for damages for emotional and mental distress. Interpreting our case of Chapman v. Western Union Telegraph Co., 88 Ga. 763 (15 SE 901) (1892), the Court of Appeals in Kuhr Brothers v. Spahos, 89 Ga. App. 885, 890 (81 SE2d 491) (1954), overruled on other grounds, extracted the following principle:
In cases where mere negligence is relied on, before damages for mental pain and suffering are allowable, there must also be an actual physical injury to the person, or a pecuniary loss resulting from an injury to the person which is not physical; such an injury to a person's reputation, or the mental pain and suffering must cause a physical injury to the person. [Emphasis supplied.]
*667 See Davis v. Hall, 21 Ga. App. 265 (94 SE 274) (1917), cited by the court as stating the correct rule as follows: "`Where the injury complained of is not a personal tort, but an injury to property, there can be no recovery for mental suffering.'" Kuhr Brothers v. Spahos, supra at 890. See Montega Corp. v. Hazelrigs, 229 Ga. 126 (189 SE2d 421) (1972), apparently adopting the Kuhr Brothers court's construction of Chapman. But see Barrow v. Ga. Lightweight Aggregate Co., 103 Ga. App. 704 (120 SE2d 636) (1961), in which the Court of Appeals found that plaintiff could claim damages for mental suffering resulting from a trespass in the form of dynamite explosions: "We ... hold that a trespass upon real property imposes liability for damage caused to property and person, including mental and physical injury of the owner and his family." Id. at 709. Insofar as this case stands for the proposition that mental injury flowing from a trespass is compensable, we approve it. However, to the extent that it may stand for the proposition that a plaintiff who has suffered a trespass may recover for emotional distress, we disapprove this case.
We reiterate the rule that for a pecuniary loss to support a claim for damages for emotional distress, the pecuniary loss must occur as a result of a tort involving an injury to the person even though this injury may not be physical. An injury to the reputation would be such an injury.
C. The Zone of Danger or Fear for Another Rules
Finally, Mrs. Littleton claims that she should be allowed to recover damages for emotional distress because she was in the delivery room at the time the infant was delivered, saw and heard the efforts to revive the baby, and later had the baby die in her arms. Georgia does not recognize the so-called "zone of danger" or "fear for another" rule which permits recovery of damages for emotional distress by one (generally a relative) who witnesses injury to another (generally a loved one). In Strickland v. Hodges, 134 Ga. App. 909, 913 (216 SE2d 706) (1975), the Court of Appeals considered the question whether there is a right of action for emotional distress available to parents not present when injuries are inflicted upon their child due to the wilful and wanton negligence of a defendant. The Court of Appeals found no recovery available in Georgia for emotional distress resulting from negligence in the absence of physical injury. Beyond this, the court held in regard to intentional or wanton acts resulting in emotional distress:
To those reasons and that logic [the reasoning and logic of the Court of Appeals of New York in Tobin v. Grossman, 24 NY2d 609 (249 NE2d 419) (1969)] must be added the philosophy *668 inherent in the cited Georgia decisions which require the plaintiff to show that the malefactor's act serving as the basis for the suit must be directed towards the complainant. This is particularly true as to the holding in Southern R. Co. v. Jackson, 146 Ga. 243 [(91 SE 280) (1916)] which denied damages to a mother who witnessed the mangling of her child resulting from defendant's gross negligence.
See also Goddard v. Watters, 14 Ga. App., supra, in which a wife was not allowed to recover for the mental distress she suffered when she miscarried after seeing her husband assaulted with a revolver. The court in Goddard concluded that
such recoveries must be confined to instances where there is physical injury attending the cause of fright, or where, if there is no such physical injury, the fright is of such character as to produce some physical or mental impairment directly and naturally resulting from the wrongful act. ... [Id. at 728.]
We are left with the question whether the peculiar relationship between the mother and the unborn child results in any negligence directed toward the child necessarily being directed at the mother as well. Because an unborn fetus at full term and the mother are considered separate persons for many different purposes in Georgia, we find that they are separate in the context of the delivery itself. The mother and the unborn child in the delivery room are two separate beings. The relationship of the mother and the unborn child in the delivery situation does not of itself require that every action towards one is an action towards the other.
We are in agreement with Judge Beasley's reasoning in her concurring opinion in this case. As she points out, Mrs. Littleton may claim damages for emotional distress in connection with the alleged malpractice of defendants which resulted in injury to herself. The order granting the motion for partial summary judgment in regard to Mrs. Littleton's claim for damages for emotional distress in count 4 contains no findings of fact. We are therefore uncertain as to whether the trial judge considered the presence or absence of material facts which would show an injury to Mrs. Littleton, as distinguished from injury to the infant. The presence of such injury could support a claim for emotional distress under Georgia law. We therefore remand this case for a hearing in the trial court to determine whether Mrs. Littleton suffered a physical injury as a result of negligence of defendants.
Judgment reversed and remanded. All the Justices concur, except *669 Smith, J., who concurs specially.
SMITH, Justice, concurring specially.
We granted the writ of certiorari in this case to decide whether Mr. and Mrs. Littleton, plaintiffs/appellees, could recover for the wrongful death of their daughter and whether Mrs. Littleton could recover for her mental suffering and emotional distress. The rule in Georgia since 1892 when this Court decided Chapman v. Western Union Telegraph Co., 88 Ga. 763 (15 SE 901) (1892), has been:
Where there is a physical injury or pecuniary loss, compensatory damages include recovery for accompanying "mental pain and suffering" even though the tortious conduct complained of is merely negligent. [Cits.]
Westview Cemetery v. Blanchard, 234 Ga. 540, 543 (216 SE2d 776) (1975). As can be seen below, there are concerns in allowing recovery for purely emotional distress; however, the fear of some fabricated emotional distress claims should not prevent all who suffer emotional distress from recovery.
Mental disturbance is easily simulated, and courts which are plagued with fraudulent personal injury claims may be unwilling to open the door to an even more dubious field. But the difficulties may not be insuperable. Not only fright and shock, but other kinds of mental injury are marked by definite physical symptoms, which are capable of medical or other objective proof. It is entirely possible to allow recovery only upon satisfactory evidence and deny it when there is nothing to corroborate the claim, or to look for some guarantee of genuineness in the circumstances of the case. The problem from this perspective is one of adequate proof, and it is not necessary to deny a remedy in all cases because some claims may be false. And where the concern is to avoid imposing excessive punishment upon a negligent defendant, it must be asked whether fairness will permit leaving the burden of loss instead upon the innocent victim. ... [Cits. omitted.] [Keeton, Prosser & Keeton on The Law of Torts 361 (5th ed. 1984).]
As I understand the majority's holding, if Mrs. Littleton suffered any physical injury connected with the birth of her daughter, then a jury must decide whether she should recover for emotional distress [mental pain and suffering]. I agree with this, but I believe it is time to re-examine this area of the law so that it is more in line with the needs of society. I agree with the states that allow recovery for emotional *670 distress even in the absence of a physical injury or "impact."
This is the nearly unanimous view of scholars who have addressed the problem, see, e.g., Goodrich, Emotional Disturbance as Legal Damage, 20 Mich. L. Rev. 497 (1922); Magruder, Mental and Emotional Disturbance in the Law of Torts, 49 Harv. L. Rev. 1033 (1936); Prosser, Handbook on the Law of Torts 327 (4th ed. 1971). Numerous state courts also follow this view. See Annot., 64 ALR2d 100. [Hamilton v. Powell, Goldstein, Frazer and Murphy, 252 Ga. 149, 151 (311 SE2d 818) (1984) (Smith, J., dissenting).]
As stated by Page Keeton:
[T]he great majority of courts have now repudiated the requirement of "impact," regarding as sufficient the requirement that the mental distress be certified by some physical injury, illness or other objective physical manifestation. ...
[A] handful of courts have taken the final step and permitted a general negligence cause of action for the infliction of serious emotional distress, without regard to whether the plaintiff suffered any physical injury or illness as a result. A couple of other recent decisions, over strong dissents, have expressly refused to move this far, opting instead to retain the physical harm requirement. [Cits. omitted.] [Keeton, supra at 364-65 (5th ed. 1984).]
I agree with the "handful of courts" that allow a cause of action to recover for serious emotional distress without regard to whether the plaintiff suffered any physical injury or physical illness. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1693713/ | 389 So.2d 902 (1980)
Mrs. Melba Acquistapace, wife of/and Harry E. LINDSEY, Sr.
v.
SEARS, ROEBUCK AND CO.
No. 11277.
Court of Appeal of Louisiana, Fourth Circuit.
October 9, 1980.
*903 Roccaforte & Rousselle, Leo W. Rousselle, New Orleans, for plaintiffs-appellees.
Chaffe, McCall, Phillips, Toler & Sarpy, James A. Babst, James J. Gillespie, New Orleans, for defendant-appellant.
Before SAMUELS, GULOTTA and BOUTALL, JJ.
GULOTTA, Judge.
Defendant appeals from a $500.00 award in favor of plaintiffs arising out of the detention of Mrs. Melba Lindsey on March 9, 1977, by store detectives when an electronic alarm was triggered by a tag on merchandise purchased and paid for by plaintiff, from which the sales person neglected to remove the tag.
In answer to the appeal plaintiffs seek an increase in the amount of the award.
Relying on Louisiana Code of Criminal Procedure Art. 215(B),[1] defendant contends that notices were posted to advise that the electronic shoplifting device was being utilized in the store and that the signal from the device, under these circumstances, constituted "a sufficient basis for reasonable cause" to detain plaintiff. According to defendant, because of the existence of "reasonable cause" and because the time of detention did not exceed five or ten minutes, well within the "sixty-minute" time permitted under LSA-C.Cr.P. art. 215(A),[2] plaintiffs are not entitled to recover. Defendants further claim that because Mrs. Lindsey failed to observe and heed the posted notices and because she contributed to the sales clerk's confusion by exchanging the original items for same-priced articles of different size after the sale had been run through the register,[3] plaintiffs' recovery is barred by contributory negligence.
Relying on Firstley v. Bill Watson Ford, Inc., 268 So.2d 314 (La.App. 4th Cir. 1972), *904 plaintiffs contend that the neglect of the sales clerk in failing to remove the tag triggered the electronic device, resulting in Mrs. Lindsey's unlawful detention. See also, Jones v. Simonson, 292 So.2d 251 (La. App. 4th Cir. 1974).
In Clark v. I.H. Rubenstein, Inc., 326 So.2d 497 (La.1976), recovery was permitted for embarrassment and detention caused by the sales clerk's failure to remove the tag from the merchandise sounding the alarm, resulting in Clark's detention. Defendant points out, however, that following the result reached by the Clark court in February 1976, the Louisiana Legislature, in the next legislative session, adopted Art. 215(B)[4] of the Code of Criminal Procedure which provided that when notice is posted, reasonable cause to detain exists when the electronic device is triggered.
It is clear that the responsibility for the removal of the tags from the merchandise rests with the sales clerk. There exists some evidence in the record that different sized shirts were exchanged by plaintiff during the time the purchase was being made and the price paid. Nonetheless, it was the sales clerk's failure to remove the tag on the merchandise, which had been purchased, that triggered the electronic device. Despite this fact, it is clear, from a reading of the statute, that the legislature intended to afford to the merchant a right, within statutory limitations, to detain a person when the electronic device has been triggered.
The more troublesome question, therefore, is not whether "reasonable cause" exists, but whether the method and extent of plaintiff's detention was reasonable under the circumstances of this case. In this connection, Melba Lindsey testified that she had purchased two shirts, and after she had descended the escalator and was going out of the side-door of the store at Baronne and Common, a detective gently placed his hand on her arm indicating it would be necessary for her to be taken to another store detective. She stated that she indicated to him that he was making a mistake; however, they went back into the store and the other detective took the package from her hand and emptied the contents on a counter. According to Mrs. Lindsey, during this time she was embarrassed because other customers in the store were looking at her. After the receipt was found in the bag, one of the detectives removed the plastic tag from the merchandise and walked away. Plaintiff stated that instead of the detectives taking her into a private room to conduct the inspection they emptied the contents in the presence of other customers and made a "spectacle" of her, causing humiliation and embarrassment resulting in nervousness, anxiety and vomiting.
According to the sales clerk, plaintiff returned with the security people, and at that time the clerk "apologized for the mistake", although she was of the opinion that Mrs. Lindsey had contributed to the error. According to this witness, only five or ten minutes had elapsed between the time plaintiff walked away from her after the purchase and she returned with the store detective.
The security manager at Sears testified concerning the operation of the system, but added little or nothing regarding the incident. He explained that one of the store detectives who detained plaintiff was not employed by Sears any longer.
Although it would have been advisable, perhaps, to ask plaintiff to produce the receipt for the purchase immediately after the device was triggered, or to escort her to the privacy of an area unobserved by other customers, we cannot say the manner in which Mrs. Lindsey was detained or the extent of her detention was unreasonable. Under the circumstances, plaintiffs are not entitled to recover.
*905 Our determination is not based upon a manifestly erroneous factual conclusion of the trial judge, but is based upon the application of the amended statute to substantially unconflicting facts. Accordingly, the judgment in favor of plaintiffs is reversed and set aside and their suit is dismissed at their cost.
REVERSED AND RENDERED.
NOTES
[1] La.Code of Criminal Procedure Art. 215, sub-paragraph (B), reads as follows:
"B. If a merchant utilizes electronic devices which are designed to detect the unauthorized removal of marked merchandise from the store, and if sufficient notice has been posted to advise the patrons that such a device is being utilized, a signal from the device to the merchant or his employee indicating the removal of specially marked merchandise shall constitute a sufficient basis for reasonable cause to detain the person."
[2] La.Code of Criminal Procedure art. 215(A) reads as follows:
"A. A peace officer, merchant, or a specifically authorized employee of a merchant, may use reasonable force to detain a person for questioning on the merchant's premises, for a length of time not to exceed sixty minutes. when he has reasonable cause to believe that the person has committed a theft of goods held for sale by the merchant, regardless of the actual value of the goods. The detention shall not constitute an arrest.
A peace officer may, without a warrant, arrest a person when he has reasonable grounds to believe the person has committed a theft of goods held for sale by a merchant, regardless of the actual value of the goods. A complaint made to a peace officer by a merchant or a merchant's employee shall constitute reasonable cause for the officer making the arrest."
[3] According to both plaintiff and the sales clerk, Mrs. Lindsey had purchased two shirts of the same size. After the price had been placed on the register, Mrs. Lindsey then exchanged one of the two shirts for a different size. The purchase price of the different-sized shirt was the same. In the exchange between the time the price had been rung up on the machine and payment was made to the clerk, the clerk neglected to remove the plastic tag on the exchanged shirt.
[4] This amendment became effective October 1, 1976 by the adoption of Act 339 of the Regular Session of the Louisiana Legislature of 1976. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1700941/ | 361 So.2d 1281 (1978)
Clifford D. PAUL
v.
NATIONAL AMERICAN INSURANCE COMPANY.
No. 12053.
Court of Appeal of Louisiana, First Circuit.
July 10, 1978.
Rehearing Denied August 31, 1978.
Writ Refused October 26, 1978.
*1282 A. Clay Pierce, Jr., Baton Rouge, of counsel for plaintiff-appellee Clifford D. Paul.
Paul B. Deal, New Orleans, of counsel for defendant-appellant National American Insurance Co.
Before LANDRY, SARTAIN and ELLIS, JJ.
*1283 LANDRY, Judge.
Defendant (Appellant) appeals from judgment awarding plaintiff (Insured) 25% penalties and $3,500.00 attorney's fees for alleged untimely payment of a fire loss which completely destroyed Insured's home and its entire contents. We amend to reduce the penalties to 12% and the attorney's fees to $2,750.00.
The dwelling and contents were insured for $50,000.00 and $25,000.00, respectively. The fire occurred June 30, 1976, on which same day Insured reported the loss to his local insurance agent, who informed Insured that an adjuster would contact Insured within a few days. Shortly thereafter, Insured was contacted by T. J. Pittman, an adjuster in the employ of General Adjustment Bureau, to which concern Appellant assigned the claim for handling. Pittman sent Insured a set of forms to fill out concerning the contents of the residence. Insured completed these forms, listing and itemizing contents valued at approximately $20,000.00. Thereafter, Pittman personally inspected the scene of the fire, examined the remains of the residence and contents, reached a valuation of the structure, and verified content valuations by checking with one or more stores where Insured reported purchases to have been made. After said inspection, Pittman valued the residence at $74,000.00. According to Insured, Pittman discussed in detail the list of contents and upon being advised that Insured had put new carpeting in the residence, Pittman advised Insured that the value of the contents, including carpeting, should equal the policy limits of $25,000.00 on the contents. Pittman concedes that he never requested Insured to sign a formal proof of loss statement, and that Insured was fully cooperative and complied with every request Pittman made for information about the loss. Pittman further concedes that the list of contents was apparently accurate and sufficient for adjustment purposes. Insured acknowledges that he never executed a formal proof of loss statement.
Insured's uncontradicted testimony is that when he submitted the requested itemization of contents, he was told by Pittman that such claims were usually settled within two weeks or so. Hearing nothing from Pittman, Insured began calling Pittman, requesting information as to the status of the claim. Pittman's response was that he had heard nothing from the "main office", although Pittman had recommended settlement. Insured called Pittman every week or every other week, and was told that Pittman could not understand why the claim had not been paid. Insured further stated that on several occasions, commencing in late 1976, or early 1977, Insured made it clear to Pittman that Insured wanted his money, but that Insured never demanded any specific amount. Insured's testimony in effect is that he never demanded any specific amount because he was led by Pittman to believe that policy limits would be paid on contents.
In early February, 1977, Insured was contacted by Richard Green, to whom the matter had been referred for settlement. Green requested a statement and Insured replied that he would let Green know. Insured then consulted an attorney, following which Insured informed Green that Insured would furnish a statement if Insured received payment within 5 to 7 days, because Insured had waited long enough for his money. Insured then engaged an attorney, called Green and advised Green to contact the attorney. This suit was filed February 24, 1977.
In February and March, 1977, Green requested and received formal proof of loss from two mortgagees holding outstanding liens against subject property. Upon submission to Appellant, these claims were paid promptly. Pittman's testimony leaves the clear impression that the claims were not paid sooner because Appellant was waiting to hear from the State Fire Marshall's Office, which it was believed was investigating the fire, but that no such investigation was under way. In any event, Pittman's testimony is crystal clear that the delay was not due to lack of cooperation by Insured or to failure of Insured to furnish any information or data requested. Pittman's *1284 testimony affirmatively shows that Insured was most cooperative.
After filing suit, Appellant posed interrogatories. In response thereto, Insured admitted the content loss to be $17,589.14. Appellant then deposited in court $20,439.91 on June 24, 1977, which included a tender of $17,589.14 for contents loss and $2,850.77 due on the residence over and above the amount paid mortgagees. Based on this alleged tender, Appellant moved to dismiss the action on the ground that the claim was paid within 60 days of demand, Appellant contending that Insured's admission of content value constituted the first legal demand for payment.
Appellant maintains that no penalties and attorney's fees are due because Insured never filed formal proof of loss or made demand for a specific amount. Alternatively, Appellant claims it properly considered Insured's judicial admission of amount claimed as a legal demand pursuant to which the claim was timely paid. In the further alternative Appellant contends: (1) Penalties, if due, are owed in the amount of 12% only, not 25% as awarded by the trial court; (2) Penalties are due only on the amount actually paid Insured personally, namely $20,439.91, and not on the amount paid the mortgagees, as was allowed by the trial court; and, (3) attorney's fees should be reduced in accordance with reduced penalties.
La.R.S. 22:658 provides:
"All insurers issuing any type of contract other than those specified in R.S. 22:656 and 22:657 shall pay the amount of any claim due any insured including any employee under Chapter 10 of Title 23 of the Revised Statutes of 1950 within sixty days after receipt of satisfactory proofs of loss from the insured, employee or any party in interest. Failure to make such payment within sixty days after receipt of such proofs and demand therefor, when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of 12% damages on the total amount of the loss, payable to the insured, or to any of said employees, together with all reasonable attorney's fees for the prosecution and collection of such loss, or in the event a partial payment or tender has been made, 12% of the difference between the amount paid or tendered and the amount found to be due and all reasonable attorney's fees for the prosecution and collection of such amount. Provided, that all losses on policies covering automobiles, trucks, motor propelled vehicles and other property against fire and theft, the amount of the penalty in each of the above cases shall be 25% and all reasonable attorney's fees." Amended and reenacted Acts 1958, No. 125.
Citing Nichols v. Iowa Mutual Insurance Company, 232 La. 856, 95 So.2d 338 (1957); Tedesco v. Columbia Insurance Company, 177 La. 142, 148 So. 8 (1933); and Cryer v. Gulf Insurance Company, 276 So.2d 889 (La.App. 1st Cir. 1973), Appellant correctly urges that the applicable statute is penal and must be strictly construed. On authority of American Motorist Insurance Company v. Wilson, 256 So.2d 813 (La.App. 4th Cir. 1972) and Steadman v. Pearl Assurance Company, 127 So.2d 366 (La.App. 4th Cir. 1961), Appellant argues that penalties and attorney's fees are not due unless demand therefor is made in a specific amount.
Notwithstanding the rule of strict construction applicable in cases of this nature, our jurisprudence establishes that the pertinent statute does not require written proof of loss, or any other formal style of proof; it is required only that the insurer have actual knowledge of the facts. Artigue v. Louisiana Farm Bureau Mutual Insurance Company, 339 So.2d 880 (La.App. 3rd Cir. 1976); Wilkins v. Allstate Insurance Company, 173 So.2d 199 (La.App. 1st Cir. 1965). In this case, Appellant was fully apprised of the claim through Pittman's personal investigation of the premises and the list of contents furnished by Insured. Pittman's testimony establishes conclusively that the delay in payment was not due to any fault of Insured.
*1285 Insured testified without contradiction that beginning in about December, 1976, he repeatedly requested of Pittman that payment of the loss be made. Insured admits that he did not request payment of a specific sum. The clear import of Insured's testimony is that he was led by Pittman to believe that the entire content coverage would be paid. We find, as did the trial court, that Insured made verbal demand for payment. Written demand is not required. Artigue, above. So finding, we reject Appellant's contention that penalties are not due because of a lack of demand and also reject Appellant's alternative argument that payment was made within 60 days of Insured's answer to Appellant's interrogatories, which answer Appellant contends is the only demand made by Insured.
Insured requests that we re-examine Foster v. Western World Insurance Company, 339 So.2d 395 (La.App. 1st Cir. 1976), wherein we held that penalties of 12% and not 25% are due for failure to timely pay a fire loss on a dwelling. In Foster, we reviewed the issue in detail. We think the views expressed in Foster are correct and see no useful purpose to be gained by repeating them herein. We conclude that the trial court erred in assessing penalties of 25% herein.
We find, however, that penalties of 12% are due on the entire loss of $67,589.14, even though a portion of the sum was paid to two mortgagees pursuant to the mortgages and loss payable provisions of the policy. A mortgagor's interest encompasses the full value of the property because, in the event of loss, mortgagor is still liable for the debt. Allen v. Houston Fire and Casualty Company, 243 So.2d 905 (La.App. 3rd Cir. 1971).
Our attention has been directed to Woodard v. Prudential Insurance Company of America, 350 So.2d 948 (La.App. 2d Cir. 1977), which involved payment of proceeds of a health and accident policy to a credit union in discharge of the insured's loan. In the cited case, the court awarded 12% penalties on the amount paid the lender, without discussion of whether such payment was "loss, payable to the insured . . . ."
Since payment to the mortgagees discharged a personal obligation owed by Insured herein, such payment meets the statutory requirement of "loss, payable to the insured . . . ." Penalties of 12% are due for failure to pay such loss within 60 days as provided by La.R.S. 22:658.
We find that Insured is entitled to penalties of 12% of $67,589.14, or $8,110.70. Considering the reduction in penalties and that Insured's attorney has had to defend this appeal, we find an award of $2,750.00 for attorney's fees to be in order.
It is ordered, adjudged and decreed that the judgment of the trial court be and the same is hereby amended to award Insured penalties in the sum of $8,110.70 and attorney's fees in the amount of $2,750.00, together with legal interest from date of judicial demand, until paid. All costs of these proceedings to be paid by Appellant.
Amended and rendered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1810162/ | 370 So.2d 477 (1978)
STATE of Louisiana ex rel. William J. GUSTE, Jr., Attorney General and Charles W. Tapp, Director, Governor's Consumer Protection Division in their official capacity and on Behalf of Barry Simon and all Louisiana Consumers similarly situated
v.
GENERAL MOTORS CORPORATION.
No. 61840.
Supreme Court of Louisiana.
September 5, 1978.
On Rehearing April 9, 1979.
Rehearing Denied May 21, 1979.
*478 Bernard, Micholet & Cassisa, Peter L. Bernard, Jr., Walter M. Babst, Joseph S. Palermo, Jr., Metairie (Otis M. Smith, Gen. Counsel, General Motors Corp., Detroit, Mich., Fulbright & Jaworski, Blake Tartt, Martin D. Beirne, Houston, Tex., of counsel), for defendant-applicant.
William A. Lovett, New Orleans, amicus curiae for La. Law Institute on La.'s Unfair Trade Practices and Consumer Protection Law.
William J. Guste, Jr., Atty. Gen., Warren E. Mouledoux, First Asst. Atty. Gen., Winston G. Decuir, Charles L. Patin, Jr., Asst. Attys. Gen., Rebecca J. Bolton, Staff Atty., Baton Rouge, for plaintiffs-respondents.
Glenn R. Ducote, Baton Rouge, amicus curiae for Baton Rouge Consumer Protection Center.
Ronald L. Hersbergen, Baton Rouge, amicus curiae, LSU Law Center.
SUMMERS, Justice.
This suit was instituted by the petition of the Attorney General of Louisiana, the Director of the Governor's Consumer Protection Division, and Barry Simon, a Louisiana citizen who purchased a motor vehicle manufactured by General Motors Corporation with a substitute engine.
The action is brought in the name of the State of Louisiana and on behalf of Barry Simon and all Louisiana citizens similarly situated. A permanent injunction is sought to restrain General Motors from selling or offering to sell any motor vehicle which it manufactures, particularly the Oldsmobile "Delta 88", unless the Division of General Motors which actually manufactured the engine in the motor vehicle is disclosed to the potential purchaser prior to the sale.
It is alleged that the cause of action is based upon Section 8 of Article IV of the Louisiana Constitution, the Unfair Trade Practices and Consumer Protection Law, (La.Rev.Stat. 51:1401-18), and Article 591 of the Code of Civil Procedure. Petitioners pray for trial by jury.
Petitioners assert they have reason to believe that General Motors has for some time engaged in unfair and deceptive acts, practices and methods in trade and commerce in Louisiana by selling automobiles, particularly 1,100 Oldsmobile "Delta 88's", in violation of Section 1405(A) of Title 51 of the Revised Statutes. These deceptive acts are said to violate Section 1405(A) of the Act in that there was a failure to disclose that a material substitution of an essential component (engine) had been made. Because of this, it is alleged, General Motors is liable to members comprising the class of Louisiana consumers who have been aggrieved by these practices and these consumers should be granted injunctive relief and restitution.
Claiming restitution under Section 1408 of the Act, petitioners pray for orders requiring the customer: 1) to return the vehicle purchased with a substitute engine and to order General Motors to return the purchase price or; 2) to require General Motors to replace the substituted engine with the proper engine at no cost to the customer; or 3) to return the vehicle to General Motors for a new auto with the proper engine; or 4) to order General Motors to pay each aggrieved consumer an amount in money damages equal to the diminution of the value of their vehicle and the inconvenience, past, present and future, suffered by the customer. Further, petitioners pray that the Court award each aggrieved consumer the actual damages sustained; order each vehicle recalled for removal of deceptive labels and require General Motors to direct the consumer to consult the owner's manual; and require changes in the owner's manual made necessary by the substituted engine.
A temporary restraining order was issued on April 19,1977 prohibiting further substitutions unless General Motors disclosed to *479 purchasers that the engine was other than one manufactured by the Oldsmobile Division of that company. Following the temporary restraining order General Motors stipulated that it had taken and would take the necessary steps to make these disclosures. As a result, by consent judgment, a preliminary injunction was entered on May 25, 1977.
Petitioners then moved for General Motors to show cause why this action should not be maintained or certified as a class action. Assuming certification of the class, the motion then prays for prohibition against communication by defendant with members of the class and for approval of a notice to all class members.
General Motors opposed the motion and moved that it be stricken as unauthorized procedure and that maintenance of this suit as a class action be disallowed. General Motors also moved that the claim of petitioner Barry Simon be dismissed, as joinder of his claim with the action of the State of Louisiana was not authorized. In addition, a plea of vagueness was filed.
After a hearing on June 1, 1977 the trial judge maintained the rule, certifying the case as a class action. When an application for rehearing was denied, defendant appealed to the Fourth Circuit.
In denying a motion to dismiss the appeal because the judgment was interlocutory, the Court of Appeal found that irreparable injury may result if the matter were not reviewed on appeal.
In considering the matter on appeal the Court of Appeal recognized the plaintiffs' right to seek injunctive relief, in a class action, on behalf of the State and on behalf of Barry Simon. The court further recognized the right of the plaintiffs to seek restitution and/or diminution, as such, in this class action, on behalf of Barry Simon, holding, however, that plaintiffs are not entitled, in a class action, to seek actual damages on behalf of Barry Simon. As thus amended, the judgment of the trial court was affirmed and the case was remanded for further proceedings. Defendant's application to this Court for certiorari was granted. 356 So.2d 1005 (1978).
The sole question before this Court on review is the propriety of the class action certification.
In Louisiana
"A class action may be instituted when the persons constituting the class are so numerous as to make it impracticable for all of them to join or be joined as parties, and the character of the right sought to be enforced for or against the members of the class is:
(1) Common to all members of the class; or
(2) Secondary, in the sense that the owner of a primary right refuses to enforce it, and a member of the class thereby becomes entitled to enforce the right." La.Code Civil Pro. art. 591.
Under this law the issues are whether the persons constituting the class are so numerous as to make it impracticable for all of them to be joined as parties and whether the character of the right sought to be enforced for or against the members of the class is common to all members of the class. No issue is presented involving the enforcement of a secondary right.
Aside from impracticability of joinder and commonality of the rights to be enforced, Louisiana requires that the party or parties who provoke a class action fairly insure adequate representation of all members. La.Code Civil Pro. art. 592.
General Motors contends that the essentials of commonality required by Article 591 is lacking and for that reason it was error to certify this case as a class action.
An unfair, deceptive practice such as the alleged substitution of engines would, under the Unfair Trade Practices and Consumer Protection Law, present a question of law common to all who purchased automobiles with substitute engines. A common question of fact results because General Motors is the producer of all vehicles involved. But this does not, in itself, satisfy the statutory requirement of a common right. Stevens v. Board of Trustees of Police Pension Fund, 309 So.2d 144,147 (La.1975); Note 50 Tul.L. *480 Rev. 692 (1976). There are other essentials of commonality petitioners must establish as prerequisites to certification of this case as a class action.
The requirement of common character is only involved in true class actions. The hybrid and spurious class actions generally require no more connexity between the rights of the representative and of the absent members than the existence of a common question of law or fact, whereas the true class action requires additional and greater similarity between the claims of the members of the class. Only the true class action has been approved by Louisiana. Williams v. State of Louisiana, 350 So.2d 131 (La.1977); Stevens v. Board of Trustees of Police Pension Fund, supra.
This rule contemplates some relationship between the members of the class and its representative in addition to simply sharing the common question of law under the Unfair Trade Practices and Consumer Protection Law and the fact that they purchased vehicles produced by General Motors. No additional similarities are shown by this record. At this point of inquiry only substantial dissimilarities among the claims of the members of the class is evident. These dissimilarities are evidence of the failure of petitioners to shoulder the burden of establishing the existence of all true class action prerequisites.
In order to make a showing that other similar legal and factual relationships are common to the claims of the members of the class it is necessary to inquire into each and every purchase of a 1977 General Motors automobile with a substituted engine. A determination must then be made if any representations by their dealer or salesman to individual buyers were made regarding the source of the engine installed in the automobile purchased. Only in such an inquiry, by the testimony of the witnesses and parties to the sales transaction, could General Motors defend itself against the claim of unfairness and deceit. Only by such an inquiry could it be determined whether the purchaser was aggrieved or damaged. Only in such an inquiry could General Motors establish that many of the dealers and customers who sold and bought these vehicles had knowledge of the fact that General Motors used engines from its different divisions interchangeably in the automobiles it sold. Only by such an inquiry could it be determined whether purchasers were aggrieved, the extent to which they were aggrieved, or indeed, whether they desired redress on that account.
Another question to be answered with respect to each member of the class would be the performance of the engine acquired as compared to the performance each buyer expected from an engine produced by the division which produced his automobile. Examples of the variables involved in such comparisons are a Buick ordered with a 350 cubic inch V-8 Engine may contain a 350 cubic inch V-8 engine produced by General Motors Chevrolet, Oldsmobile or Buick Divisions; an Oldsmobile ordered with a 305 cubic inch V-8 engine may contain a 305 cubic inch V-8 engine produced by General Motors Chevrolet Division since Chevrolet is the only General Motors division producing 305 cubic inch V-8 engines. Likewise, any 1977 General Motors automobile ordered with a V-6 engine will be equipped with an engine produced by General Motors' Buick Division, since only Buick produces V-6 engines for General Motors passenger cars.
All General Motors divisions do not produce all the engines which may be ordered by purchasers of automobiles made by that division. The same is true of the 14,000 or more parts which make up any General Motors automobile. Many of the components other than engines may be produced by other divisions or by independent suppliers. Specific identification of the source of these components is not required and their use has long been accepted in the automotive industry, and other industries as well. The practice has been recognized by the Federal Trade Commission in In Re General Motors Corporation 53 FTC 1239 (1957), as legitimate, involving no deception, and necessary to America's mass production techniques.
*481 As these recitations indicate, in some instances, the dealer who sells the car may well be the proper defendant because General Motors does not sell directly to the consumer. But this conclusion cannot be reached without a detailed analysis of each transaction to determine where liability, if any, lies.
Thus it is apparent that there are substantial differences among the purchasers of General Motors automobiles as to the representations made with respect to those purchases, the witnesses to the transactions and the defenses to be asserted to almost every claim. There are, moreover, substantial differences pertaining to the motives for the many purchases and the performance expected by different purchasers from different engines. Different defendants may also be appropriate to the claims of the alleged aggrieved parties. The claims of the members of the class are therefore uncommon.
In addition to this lack of commonality there are other significant factors which deny a predominant role to the common issue of law and fact, which arises because these alleged claims would all concern the Unfair Trade Practices and Consumer Protection Law, and the fact that General Motors produced all automobiles involved. These other significant factors must be balanced against factors favoring class actions before the class action is deemed superior to other available methods for the fair and efficient adjudication of the controversy. One such factor requires that the class action be manageable. City of Philadelphia v. American Oil Co., 53 F.R.D. 45 (D.N.J.1971); Lah v. Shell Oil Co., 50 F.R.D. 198 (S.D.Ohio 1970).
Because of the large number of potential claimants, the probable diversity and complexity of their claims and the fact that most reside at considerable distance from the forum, the difficulties likely to be encountered in the management of the case as a class action outweigh the benefits that might be expected from a class action. The problem would undoubtedly be compounded by the jury trial petitioners seek. As the court observed in Schaffner v. Chemical Bank, 339 F.Supp. 329 (S.D.N.Y.1972).
"Parenthetically, the notion of utilizing a jury trial in a class suit containing the varied problems certain to abound herein, is enough to chill any further discussion of the required superiority of a class claim over other available methods for the fair and efficient adjudication of the controversy. Such a trial, whether one trial or the multiple mini-trials probably required, would withdraw from all other usefulness for years to come the federal judicial personnel involved. Where one could muster jurors willing to devote themselves so indefinitely in time from their accustomed tasks, is puzzling. And one might relevantly askwhat public interest would be served by devoting the public's facilities in this way and what just purpose requires such a colossal marshalling of judicial resources and their supporting personnel?"
It should be noted here also, that the Attorney General's suit is not necessarily confined to the 1,100 Delta 88 Oldsmobiles. By its broad allegations and prayer it may conceivably involve all General Motors Automobiles sold in Louisiana in which substitute engines have been installed. The complexity of a suit involving such a situation would unquestionably make it unmanageable.
The principle was approved in Williams v. State of Louisiana, 350 So.2d 131 (La.1977), in these words:
"Great differences of individual issues and evidence involve the possibility of fragmentation of the class action in effect into multiple lawsuits, to the prejudice of its manageability and the judicial efficiency contemplated by this procedural device." 350 So.2d 136.
As the record discloses the 1,100 automobiles involved were purchased from dealers in every section of the State. Purchasers reside in cities, towns and villages throughout the length and breadth of Louisiana. The burdens imposed upon the court in supervising multiple discovery, pretrial hearings, adducing evidence and instructing juries *482 would be enormous. This, together with the prevalence of myriad individual fact questions in the sales transactions militates against a class action certification.
For the reasons assigned, the judgment of the Court of Appeal is reversed and set aside, and the right to maintain this suit as a class action is denied. The case is remanded to the trial court for further proceedings not inconsistent with the reasons assigned.
SANDERS, C. J., assigns additional concurring reasons.
TATE, J., dissents and assigns reasons.
DIXON, J., dissents.
CALOGERO, J., dissents and assigns reasons.
DENNIS, J., concurs and assigns reasons.
SANDERS, Chief Justice (additional concurring reasons).
The Attorney General of Louisiana brings this suit under the Unfair Trade Practices and Consumer Protection Law, LSA-R.S. 51:1401 et seq. The petition sets forth a hybrid action. An action is brought in the name of the State for injunctive relief and restitution. There is also a class action on behalf of Dr. Barry Simon, an aggrieved automobile purchaser, representing all purchasers similarly situated, seeking in addition to injunctive relief and restitution, the actual damages of each aggrieved purchaser.
I agree that the class action cannot be maintained.
LSA-R.S. 51:1409 provides:
"Any person who suffers any ascertainable loss of money or movable property, corporeal or incorporeal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by R.S. 51:1405, may bring an action individually but not in a representative capacity to recover actual damages. If the court finds the unfair or deceptive method, act or practice was knowingly used, after being put on notice by the director or attorney general, the court shall award three times the actual damages sustained. In the event that damages are awarded under this Section, the court shall award to the person bringing such action reasonable attorney's fees and costs. Upon finding by the court that an action under this section was groundless and brought in bad faith or for purposes of harassment, the court may award to the defendant reasonable attorney's fees and costs." (Emphasis supplied.)
If Dr. Simon had attempted to bring a class action on behalf of all purchasers to recover actual damages, the action would be prohibited by the statute. The Attorney General cannot create the authority for a class action for actual damages by championing his cause and making him the representative of the class.
It is true that LSA-R.S. 51:1414 allows the Attorney General to use all other existing authority in actions to enforce the Unfair Trade Practices Law. This section makes clear, however, that the authority applies only to "actions on behalf of the state." The state, itself, can bring no class action for restitution and damages, because among other impediments it is not a member of the class. LSA-C.C.P. Art. 591.
Our holding as to the class action, of course, does not defeat the basic injunction suit, in which a preliminary injunction has already issued.
LSA-R.S. 51:1407 authorizes the Attorney General to bring an action for injunctive relief "in the name of the state" against an offender to enjoin the use of an unfair trade practice.
The very next section, LSA-R.S. 51:1408, then provides:
"The court may issue such additional orders or render judgments against any party, as may be necessary to compensate any aggrieved person for any property, movable or immovable, corporeal or incorporeal, which may have been acquired from such person by means of any method, act or practice declared unlawful by *483 R.S. 51:1405, whichever may be applicable to that party under R.S. 51:1418."
This section authorizes the court in the state's injunction suit to order restitution to any aggrieved person for any property acquired by means of an unfair trade practice. This additional relief, however, lies within the discretion of the court. See Breeden and Lovett, Louisiana's New Unfair Trade Practice and Consumer Protection Law, 20 La.Bar J. 307, 321 (1973); Comment, Louisiana's Consumer Protection LawThree Years of Operation, 50 Tul.L.Rev. 375, 385-386 (1976).
The authority to order restitution in the state's injunction suit does not create a class action, and it should not be so denominated. See 50 Tul.L.Rev. 386. Restitution is not a matter of right. The aggrieved purchasers are not party litigants. The restitution order is in favor of the state. For the enforcement of the order, the statute provides a remedy for contempt of court and a civil penalty of not more than $5,000. LSA-R.S. 51:1416.
For the additional reasons assigned, I respectfully concur.
TATE, Justice, dissenting.
The court of appeal correctly decided the issues involved, 354 So.2d 770 (La.App. 4th Cir. 1978), and I respectfully dissent for the reasons assigned by that court.
CALOGERO, Justice, dissenting.
I respectfully dissent for the reasons so ably expressed by the author of the majority opinion in the Court of Appeal at 354 So.2d 770 (La.App. 4th Cir. 1978).
DENNIS, Justice, concurring.
I respectfully concur in the reversal of the court of appeal judgment. However, I cannot subscribe fully to either the opinion of the Court or the additional concurring reasons of the Chief Justice.
The Unfair Trade Practices and Consumer Protection Law creates two separate causes of action: one to be instituted by the State, and one to be instituted by the private individual who claims to have been aggrieved. La. R.S. 51:1407, 1409. The statute bans class actions, or actions in a representative capacity, in behalf of persons who have suffered loss because of unfair trade practices. La. R.S. 51:1409. However, in connection with an action to enjoin an unfair trade practice brought by the State the Court may issue additional orders or render judgments compensating persons who have been aggrieved by the unfair trade practice. La. R.S. 51:1408. Comment, Louisiana's Consumer Protection LawThree Years of Operation, 50 Tul.L.Rev. 375, 385-86 (1976); Comment, The Louisiana Unfair Trade Practice and Consumer Protection Act: An Analysis, 34 La.L.Rev. 634, 641-42 (1974); P. Breeden and W. Lovett, Louisiana's New Unfair Trade Practice and Consumer Protection Law, 20 La.Bar J. 307 (1973).
The statute does not expressly provide a procedure for the Court to follow in compensating an aggrieved person in connection with an action by the State for injunctive relief. Arguably, it is not necessary that an aggrieved person be made a party to the action in order to redress his grievance. See, Comment, The Louisiana Unfair Trade Practice and Consumer Protection Act: An Analysis, 34 La.L.Rev. 634, 642-43 (1974). Thus, La. R.S. 51:1408 may provide a class action of sorts, different from that authorized by La. C.C.P. art. 591, for which the courts must formulate procedural rules. Id. p. 642. It seems more likely, however, in view of the clear ban against class actions by private persons contained in La. R.S. 51:1409, that the legislature did not intend to create a special kind of class action for aggrieved persons in connection with the State's suit for injunctive relief. Instead, it is probable that the lawmakers meant only to authorize the State's resort to joinder, cumulation of actions and other procedures provided by law in order to implead an aggrieved person and repair the damage done to him. See, La. R.S. 51:1414.
Accordingly, the instant case raises novel procedural questions which should be resolved in order to foster orderly administration *484 of this and similar litigation by the trial courts. Neither the opinion of the court nor the additional concurring reasons adequately addresses these issues. Moreover, both of these opinions seem to agree upon a restrictive interpretation of the class action authorized by La. C.C.P. art. 591 with which I cannot concur. Instead, I continue to adhere fully to the principles of class actions enunciated by this Court in Williams v. State, 350 So.2d 131 (La. 1977) and Stevens v. Board of Trustees of Police Pension Fund, 309 So.2d 144 (La. 1975), although I am of the opinion that the class action is unavailable in the instant case.
For the reasons assigned, I respectfully concur.
ON REHEARING
DIXON, Justice.
This deceptive trade practice suit was brought by the Attorney General of Louisiana, the Director of the Governor's Consumer Protection Division, and Barry Simon, a Louisiana consumer and purchaser of a 1977 Oldsmobile automobile. Their petition alleges that General Motors Corporation, through its Oldsmobile division, installed engines manufactured by its Chevrolet division into one thousand four hundred sixty-seven Oldsmobile automobiles which were thereafter sold to Louisiana consumers in Louisiana. The petition further alleges that the purchasers were not advised of the substitution either prior to the sales or at the actual transactions. The plaintiffs argue that these acts are in violation of the Unfair Trade Practices and Consumer Protection Law, R.S. 51:1401-1418, because General Motors failed to disclose the material substitution of an essential component, the vehicles' engines. Petitioners prayed for injunctive relief, restitution,[1] and actual damage awards to each consumer.
On April 19, 1977 the civil district court for Orleans Parish issued a temporary restraining order prohibiting further substitutions unless General Motors disclosed the engine's source. After the company stipulated to the necessary steps for making these disclosures, a preliminary injunction was entered by consent judgment on May 25, 1977. Petitioners then moved to require General Motors to show cause why the suit should not be maintained as a class action. After a hearing on June 1, 1977, the district court maintained the rule, thereby certifying the case as a class action. The defendant appealed to the Court of Appeal for the Fourth Circuit.
The Court of Appeal recognized the plaintiffs' right to seek injunctive relief and restitution and/or diminution in a class action. However, the court interpreted R.S. 51:1409 to preclude either the Attorney General or Mr. Simon from seeking actual damages in a representative suit. The court then affirmed the district court judgment as amended and remanded the case for further proceedings. 354 So.2d 770 (La.App. 1978). Defendant thereafter sought and was granted certiorari to this court. 356 So.2d 1005 (La. 1978).
On original hearing, this court reversed the decisions of the lower courts and in effect held that a class action was improper for this litigation because the essential of commonality was missing. To reach this result, the court took notice of the issues of knowledge and reliance vigorously propounded by the defendant and concluded that "a detailed analysis of each transaction [was necessary] to determine where liability, if any lies." Furthermore, the court made reference to certain practical considerations, such as the statewide distribution of consumers and dealers who would be required to appear in a single forum if a *485 class action were pursued, as militating against a class action. The State's application for rehearing was granted on October 5, 1978.
In response to widespread consumer dissatisfaction with their treatment in the marketplace, the Louisiana legislature passed Act 759 of 1972 which embodied the Unfair Trade Practices and Consumer Protection Law, R.S. 51:1401-1418. The act created the Governor's Consumer Protection Division, an agency headed by a director which is empowered to conduct studies and research, to investigate, and to conduct public and private hearings into commercial and trade practices in distribution, financing, and furnishing goods and services to or for the use of consumers. The division also has the authority to suggest methods of obtaining consumer representation on public boards and commissions, to advise and assist in developing policies and programs to benefit consumers, to promote consumer education, and to advise the Attorney General of unfair methods of competition and of unfair and deceptive practices. R.S. 51:1404. The act also created the Permanent Consumer Advisory Board, a seventeen member body composed of representatives of many segments of Louisiana society. The director of the Governor's Consumer Protection Division is authorized to draft rules and regulations for the suppression of unfair competitive methods or deceptive practices which he must submit to the board and the Attorney General for approval. If approved, the rules and regulations are adopted as prescribed in the state administrative procedures act (R.S. 49:951-966). R.S. 51:1405.
As a further method of discouraging unfair or deceptive practices, the Attorney General and the director are empowered to make investigative demands for information and for documentary or physical evidence and to issue investigative subpoenas for deposition testimony. R.S. 51:1411, 1412. Those who are requested to disclose information may seek protective orders, but if none is granted, the director and the Attorney General may apply to the court for an order compelling compliance if the information sought is not furnished within specified time periods. R.S. 51:1411, 1412. Disobedience to an order compelling compliance is punishable as a contempt of court. R.S. 51:1413.
The act provides for a private cause of action by permitting any person who suffers ascertainable loss from a deceptive or unfair practice to bring an action for the recovery of actual damages. However, class actions for actual damages are specifically forbidden to private litigants. R.S. 51:1409. The plaintiff in such an action is required to mail a copy of his petition to the Attorney General and the director and a copy of any judgment or decree entered in the matter. If an award is made to the plaintiff, he may also recover reasonable attorney's fees and costs; however, if the suit was groundless and brought in bad faith or to harass the defendant, the defendant is entitled to attorney's fees. Treble damages are available in cases of a knowing use of the deceptive or unfair act. A one year prescriptive period for commencing the action is provided. R.S. 51:1409.
R.S. 51:1407 and 1408 deal with activities undertaken by the State through its representatives to enforce the substantive provisions of the act. Under R.S. 51:1407, the director is empowered to instruct the Attorney General to bring a suit for injunctive relief against any person who is using, has used, or will use a method, act or practice declared unlawful by R.S. 51:1405. The court applied to is authorized to issue temporary restraining orders, preliminary injunctions and permanent injunctions without requiring a bond from the State. R.S. 51:1407.
R.S. 51:1408 provides:
"The court may issue such additional orders or render judgments against any party, as may be necessary to compensate any aggrieved person for any property, movable or immovable, corporeal or incorporeal, which may have been acquired from such person by means of any method, act or practice declared unlawful by *486 R.S. 51:1405, whichever may be applicable to that party under R.S. 51:1418."
The interpretation of this provision has assumed great importance in this case. The defendant argues that this statute, at most, permits the Attorney General to cumulate the claims of private individuals at the same time he seeks injunctive relief, and that it does not authorize a class action on behalf of aggrieved consumers for either restitution or actual damages. The State, on the other hand, initially interpreted this provision to permit a class action instituted by the Attorney General on behalf of Louisiana consumers for both restitution and actual damages. However, after the Court of Appeal ruled that the Attorney General was not authorized to proceed in a representative fashion for actual damages, the State abandoned this theory and now argues for only the remedy of restitution through the class action device.
In reaching its conclusion, the Court of Appeal accepted the defendant's argument that class actions for actual damages were prohibited by § 1409, regardless whether they were instituted by aggrieved consumers (the actual terms of § 1409) or by the Attorney General under the authority granted him in § 1407 and § 1408. However, on the basis of the distinction drawn between damages and restitution in Articles 2545 and 2547 of the Civil Code,[2] the court interpreted "actual damages" as used in § 1409 to mean "relief other than the refund of the purchase price and the return of the status quo that constitutes restitution." 354 So.2d at 775.
We believe that the Court of Appeal correctly interpreted the statute. Certainly the Civil Code appears to distinguish between restitution and diminution on the one hand and damages on the other, C.C. 2545, 2547. The availability of restitution or diminution as an available remedy in enforcement actions has also been recognized by numerous commentators. See Breedon & Lovett, Louisiana's New Unfair Trade Practice and Consumer Protection Law, 20 La.B.J. (1972); Comment, 50 Tul.L.Rev. 375 (1976); Comment, 34 La.L.Rev. 634 (1974).
Moreover, the interpretation of the statute urged by the defendant would give undue breadth to § 1409. Section 1409 prohibits individuals from instituting class actions for actual damages; nothing in the statute can be read to limit the availability of the class action device for a restitutionary recovery in an enforcement action instituted by the Attorney General. The interpretation proposed by the defense appears strained, especially in light of the broad authority granted the Attorney General in R.S. 51:1414:
"The attorney general may use in the enforcement of this chapter all other authority for investigation, supervision and conduct of actions on behalf of the state which is provided in the Louisiana Constitution, and for the enforcement of this chapter and its provisions, the attorney general may use all other authority and procedures available to persons under the Louisiana Civil Code, Code of Civil Procedure and Revised Statutes." [3]
Had the legislature intended to prohibit the class action device in enforcement cases, this was the place to do it. Moreover, *487 we note that an anomalous result would often arise from the defendant's interpretation of this issue. To prohibit the class action in this instance would restrict the availability of compensation under § 1408 to relatively minor infractions of the act, those in which affected consumers could be successfully joined. Under the view propounded by General Motors, once the parties were too numerous to be joined, no compensation could be obtained for the aggrieved consumers. Nothing in common sense or in § 1408 supports this conclusion. Therefore, we conclude that the Court of Appeal was correct in ruling that the Attorney General could bring a class action for restitution or diminution as a part of his enforcement authority.
The defendant has argued that the Attorney General is not permitted to bring the class action because he is not an adequate representative of the class as required by C.C.P. 591. However, § 1414 entitles the Attorney General to use all procedures in the Code of Civil Procedure, which clearly includes the class action. It is only plausible that he would bring such an action on behalf of the aggrieved consumers of the State. Whether the Attorney General may simply bring the class action himself or must authorize a representative aggrieved consumer to do so seems irrelevant, in any matter. What is evident is the legislature's intent that the Attorney General supply the court with the necessary evidence to determine the availability and amount of compensation. Certainly one method of doing this is by the class action.[4] We therefore do not accept the defendant's argument that the Attorney General cannot bring the class action because he is not an adequate representative of the class.
The inquiry now turns to the propriety of maintaining the class action in this litigation. The redactors of the Code of Civil Procedure patterned the Louisiana class action after Federal Rules of Civil Procedure 23 as it was promulgated in 1937. C.C.P. 591, Official Revision Comment (b); Williams v. State, 350 So.2d 131 (La.1977); Stevens v. Board of Trustees of the Police Pension Fund, 309 So.2d 144 (La.1975). The spurious and hybrid class actions of the federal rule were rejected, and only the true class action was authorized by the redactors. C.C.P. 591. Official Revision Comment (c); Stevens v. Board of Trustees of the Police Pension Fund, supra.
Articles 591 and 592 of the Code of Civil Procedure impose certain requirements on the class action device. There must be (1) a class so numerous that joinder is impracticable; (2) the joinder of one or more parties who are members of the class and who are so situated that they will adequately represent absent class members; and (3) a "common character" between the rights of the representatives and the absent members of the class. Williams v. State, supra. If the first two requirements are fulfilled, the proper inquiry is whether the character of the right sought is "common to all members of the class." C.C.P. 591(1).
In Stevens it was noted that "[the] existence of a common question of law or fact does not by itself justify a class action." 309 So.2d at 151. The court should consider certain functional and pragmatic factors in deciding whether the class action is clearly more useful than other procedures for the definitive determination of the right asserted.[5] Furthermore, we noted in Stevens the *488 different but related values involved in determining the propriety of the class action:
"In determining how the legislature intended the courts to define and apply the concept of allowing a class action to enforce rights with a common character, we are mindful of the basic goals or aims of any procedural device: to implement the substantive law, and to implement that law in a manner which will provide maximum fairness to all parties with a minimum expenditure of judicial effort. Implicit, then, in decision that rights are of a common character is a consideration of the extent to which a clear legislative policy might be thwarted, or hampered in its implementation, by the lack of availability of the class action device.
But this does not end the inquiry. Fairness to the parties demands at the least that the relationship between the claims of members of the class should be examined to determine whether it would be unfair to the members of the class, or to the party opposing the class, to permit separate adjudications of the claims. In determining whether it would be unfair to require separate adjudications, for instance, the courts should consider the precedential value of the first decision, as well as the extent of injustice that will be produced by inconsistent judgments in separate actions. Another factor to be considered, for example, is the size of the claims of the absent members of the class, for the greater the claim, the greater the interest of its owner in prosecuting it in a separate action." 309 So.2d at 151.
With these goals in mind, we turn to the application of the criteria announced in Stevens and refined in Williams to the facts of the case at hand.
There are one thousand four hundred sixty-seven members of the proposed class who are spread throughout the State. Certainly this number of separate suits would pose a significant risk of inconsistent adjudications and earlier separate determinations with a prejudicial effect upon subsequent separate litigation. A determination by one court that the defendant owed no duty to disclose the engine's origin, if affirmed on appeal and with review refused or not sought, could affect other suits in which facts not presented in the first case might give rise to a different result. Moreover, the class is so large that the courts would be greatly burdened by separate suits or by the joinder or intervention of interested parties in separately brought actions. In Williams v. State, supra, a class of six hundred prisoners was considered so numerous as to burden the court system if private actions were pursued; the additional eight hundred members of this class reinforce the conclusion that separate litigation would unduly burden the district courts.
A second consideration is whether the prosecution of separate actions poses a serious threat of substantially impeding the ability of class members to protect their interests. In Williams, we emphasized the poverty and isolation of the inmate class members and further stressed the small value of the individual claims. Although the members of this purported class are not necessarily impoverished or isolated, their damages seem relatively small, and, in all *489 likelihood, would not be sought in individual litigation except by a fraction of the class members. General Motors has alleged that twelve suits have been filed which claim damages in the thousands of dollars. However, this information merely demonstrates the necessity of a class action, since more than fourteen hundred arguably aggrieved consumers apparently do not believe their damages sufficiently great to justify the expense of private litigation. Certainly those few consumers who anticipate large damage awards and who wish to control their own litigation are entitled to withdraw from any class action pursued by the Attorney General. Williams v. State, supra.
A third criterion is a determination whether the defendant resists liability for reasons which are generally applicable to the entire class. At this point in the litigation, General Motors has not filed an answer to the substantive charges and it is therefore unclear whether its defense will be applicable to the entire class. It is possible that defendant will be able to raise some defenses, such as notice and lack of reliance, against some plaintiffs and not against others. However, it is also possible that General Motors will seek to defend its actions as not being unfair trade practices, a defense which is applicable to all plaintiffs.
Louisiana law requires the questions of law or fact which are common to class members to predominate over any questions which affect only individual members. In the instant litigation, the common question of law, the existence of a duty on General Motors' part to reveal the independent sources of the car engines, appears to predominate over any individual questions of law or fact suggested by the record.[6] Although it is true, unlike Williams, that competing individual issues of law have been raised in the pleadings, these interjected issues are largely conjectural (that the plaintiffs were somehow aware of the engine substitutions), whereas the issue of the defendant's legal duty is obviously common to every case. A contrary holding would permit a defendant to defeat maintenance of a class action merely by alleging the existence of a possible defense against some class members but not against others. We are also aware that the defendant may use pretrial discovery, C.C.P. 1421 et seq., to determine whether some class members were indeed informed of the engine substitutions. The mere fact that varying degrees of damages may result from the same factual transaction and same legal relationship does not defeat a class action. Williams v. State, supra; Stevens v. Board of Trustees of the Police Pension Fund, supra. Therefore, the fact that some class members may recover damages while others do not should not alone bar the use of this procedure.[7]
A final consideration is whether the class action is the superior procedural vehicle for the fair and efficient adjudication of the controversy. An initial factor for this determination is the interest of class members in controlling the prosecution of individual actions. Although several large claims have been filed, it is significant that only a small fraction of the class members believe their damages to merit the expenses of private litigation. It seems logical to conclude that for the vast majority of the one thousand four hundred sixty-seven consumers *490 who received substituted engines there is no significant interest in controlling the prosecution of individual suits. The fact that only a very few individual suits have been brought is also relevant to a consideration of the second factor, the extent and nature of litigation already begun by the class members. In general, a class action is more useful when only a limited number of additional suits has been filed. Therefore, "the class action device is highly useful here; in one action, the court can process the claims of all but about [1%] of the persons involved." Williams v. State, supra at 135.
A third important factor in deciding whether a class action is superior to other procedures is the desirability of concentrating the litigation in one forum. Unlike the individual suits filed in Williams, which were all brought in the same judicial district, the individual suits in the present controversy have been filed in all areas of the State. It is obviously cumbersome for many parties to be required to come to New Orleans to litigate an action which arose in their home town. This factor militates against the use of the class action.
A fourth factor is "the difficulties likely to be encountered in the management of a class action." In the instant case it is clear that not all the witnesses or class members are within a single vicinity. However, we indicated in Williams that "assuring reasonable notice of incidental episodes in the litigation, as well as . . . distributing any recovery, if awarded," 350 So.2d 131, 136, were the principal concerns involved in weighing class manageability. The members of this class can be discovered by defendant through the sales list of its individual dealers and can be revealed to the plaintiffs to insure that all members of the class are kept abreast of the litigation and that all members can participate in the distribution of the damages, if any are awarded. Even though individual written notice may be required for identifiable class members, Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Williams v. State, supra, the cost of such notice is not unreasonable, especially in light of the amount possibly at issue in the litigation. In short, manageability is no acute problem in this case.
Based on these considerations, we believe the trial judge was correct to maintain the class action. We therefore affirm the decision of the Court of Appeal and remand the case to the district court for further proceedings in accordance with the views expressed herein. Defendant is cast for costs.
SUMMERS, C. J., dissents and would adhere to the original opinion.
MARCUS, J., dissents and assigns reasons.
DENNIS, J., dissents for the reasons assigned by him in concurring in the original opinion.
MARCUS, Justice (dissenting).
I do not agree that this suit can be properly maintained as a class action, whether for damages or restitution, under the wording of La.R.S. 51:1407, 1408 and 1409. According to these provisions, two separate actions are available to obtain relief from unfair trade practices. A private action for damages is created in section 1409 for any person who suffers any ascertainable loss of money or movable property as a result of the unlawful trade practice. Class actions for damages, however, are specifically prohibited. In addition, section 1407 provides that the attorney general can bring an action for injunctive relief in the name of the state against any person engaging in an unlawful trade practice. This section authorizes the district courts in which such suits are brought to issue temporary restraining orders or preliminary and permanent injunctions. Section 1408 authorizes the court to grant additional relief; it does not confer additional rights upon the attorney general. Specifically, it provides that, where the attorney general has instituted a suit for injunctive relief pursuant to section 1407, the district court, in addition to awarding injunctive relief, may issue such additional orders or render judgments *491 against any party as may be necessary to compensate any aggrieved person for any property, movable or immovable, corporeal or incorporeal, which may have been acquired by means of an unlawful trade practice. Thus, in the instant case, the district court would be empowered to grant injunctive relief; moreover, it could compensate aggrieved party plaintiffs by ordering full return of the purchase price, reduction of the purchase price and/or damages, whichever is appropriate. However, in order to qualify for such relief, the aggrieved person must be made a party to the lawsuit whether by resort to the procedural devices of joinder, consolidation of cases, cumulation of actions or intervention. To hold otherwise would be to impermissibly circumvent the explicit ban on representative actions contained in section 1409.
The majority interprets the ban on class actions contained in section 1409 to apply only to actions for damages as opposed to those seeking restitution. In support of this distinction, it cites civil code articles on redhibition. However, Louisiana's unfair trade practices act is modeled after the Uniform Deceptive Trade Practices Act, drafted by the American Bar Association's Committee on Unfair Competition and approved by the National Conference of Commissioners on Uniform State Law. Analogy to the Louisiana Civil Code articles on redhibition is therefore inappropriate to interpretation of this statute. Moreover, it leads to untenable results. Section 1409 provides that an injured party "may bring an action individually but not in a representative capacity to recover actual damages." The majority interprets this to mean that, although class actions for actual damages are prohibited (whether instituted by the aggrieved consumer or the attorney general), class actions seeking restitution are not. Extending this distinction to its logical conclusion, section 1409 (which creates a private action for consumers injured by unfair trade practices) would allow an injured consumer to file suit seeking damages, but would preclude him from seeking restitution. I do not believe the legislature intended such a result. Accordingly, I respectfully dissent.
NOTES
[1] The plaintiffs requested orders (1) requiring the customers to return the vehicle purchased with a substitute engine and to order General Motors to return the purchase price; or (2) requiring General Motors to replace the substituted engine with the proper engine at no cost to the consumer; or (3) requiring the customer to return the automobile and requiring General Motors to supply a new car with a proper engine; or (4) ordering General Motors to pay each customer damages equal to the diminution of the value of the vehicle and for the past, present and future inconvenience suffered.
[2] Article 2545 provides:
"The seller, who knows the vice of the thing he sells and omits to declare it, besides the restitution of the price and repayment of the expenses, is answerable to the buyer in damages."
Article 2547 states:
"A declaration made by the seller, that the thing sold possesses some quality which he knows it does not possess, comes within the definition of fraud, and ought to be judged according to the rules laid down on the subject, under the title: Of Conventional Obligations.
It may, according to circumstances, give rise to the redhibition, or to a reduction of the price, and to damages in favor of the buyer."
[3] See also R.S. 51:1404 B: "The attorney general may receive information and documentary material from the division and may receive and otherwise investigate complaints with respect to acts or practices declared to be unlawful by this chapter or other laws of this state, and inform the public with respect thereto. The attorney general may institute legal proceedings and take such other actions provided for herein or which are necessary or incidental to the exercise of his powers and functions."
[4] In this instance the Attorney General has chosen to bring a class action, apparently for the procedural safeguards it offers. The statute discusses judgments against "any party" in favor of "any aggrieved person," and does not therefore limit this evidence-producing function of the Attorney General to the institution of class action procedures.
[5] The factors considered in Stevens are:
"`* * * An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:
(1) the prosecution of separate actions by or against individual members of the class would create a risk of
(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or
(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or
(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.'" 309 So.2d at 150-151.
In Williams we set forth similar but more detailed criteria; see 350 So.2d 131, 134, n. 3.
[6] On this issue the Court of Appeal stated:
"While we recognize, in the instant case, some minimal differences in the circumstances surrounding the sales of new automobiles involving different dealerships and different profit margins and some varying claims, nevertheless, the proof related to the purchases of automobiles and the consumers' claims will, to a large extent, be similar in nature. Under the circumstances of this case, we reject defendant's argument that the right sought to be enforced is not common to all members of the class because sales were made from different dealerships at different prices, resulting in different degrees of damages in every case. We conclude, therefore, that class action procedure is permitted in the instant case unless the Unfair Trade Practices and Consumer Protection Law prohibits its use." 354 So.2d at 774.
[7] See Note, 38 La.L.Rev. 1061, 1071 (1978), for a discussion of alternative methods for distributing damage awards in class actions in which different recoveries are sought. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2374200/ | 41 F. Supp. 395 (1941)
TRIMM
v.
UNITED FRUIT CO.
District Court, S. D. New York.
July 15, 1941.
Silas B. Axtell, of New York City (Dominick Blasi, of Brooklyn, N. Y., of counsel), for plaintiff.
W. Dale Williams and Burlingham, Veeder, Clark & Hupper, all of New York City (C. B. M. O'Kelley, of New York City, of counsel), for defendant.
KNOX, District Judge.
For six or more years, plaintiff was employed as an engineer upon ships owned or operated by defendant. Upon his last voyage, and while engaged in performing his duties, he fell to the floor plates, sustaining a superficial injury to his head. The man remained in a coma, and was finally flown ashore and placed in a hospital. *396 During his stay there, he became violent and had to be restrained. After a time he quieted down and was brought to New York and given treatment in a marine hospital. Subsequently, he was removed to a State institution where he has received treatment that materially improved his condition.
At the present time he is engaged in doing odd jobs about the hospital and its grounds. Although he speaks fairly well and is able to co-ordinate his movements, his memory is exceedingly poor and he is prone to make contradictory statements.
In making claim against the defendant for indemnity, plaintiff asserted that, in tending the engine of the ship on which he was employed, he slipped and, in falling, was struck by a crank shaft on the machinery. Upon the trial, the occurrence of such an accident, in my judgment, was without credible substantiation. Upon the issue, I ruled in defendant's favor and dismissed the claim. However, plaintiff also declared upon a count of maintenance and cure, and upon this the case went to the jury, which gave him a verdict.
Upon the trial, and when the proofs were closed, defendant moved that a verdict be directed in its favor, upon the ground that the evidence showed affirmatively that plaintiff's disability was directly traceable to a long standing syphilitic condition. Decision upon this motion was reserved. Following the verdict, defendant asked that it be set aside, or, in the alternative, for a new trial, upon the ground that the jury's conclusion is contrary to law, contrary to the evidence, against the weight of evidence, etc., and "upon the further ground that defendant is not liable for any expenses of maintenance and cure, past or future, of plaintiff, his disability since March 10, 1939, having been due solely to syphilis, a loathsome disease of long standing brought on by his own vices." Rulings upon these motions are now in order. The last mentioned motion must be granted.
About ninety years ago, Judge Betts, in Chandler v. The Annie Buckman, 5 Fed. Cas. 449, 450, No. 2,591a, said that "a sailor is not entitled to be treated on shipboard at the expense of the ship, nor to wages, whilst disabled by disease brought on by his own vices, nor when he, being in a diseased state, ships as an able man, the master and owners being ignorant of his real condition."
In the generations that have since come and gone, numerous courts have accepted Judge Betts' statement as representing the law upon this subject matter. See The Alector, D.C., 263 F. 1007; The Coniscliff, D.C., 266 F. 959; The S. S. Berwindglen, 1 Cir., 88 F.2d 125.
My own view is that the rule should be somewhat relaxed, and for the following reasons: Plaintiff acquired his disease many years ago, and in his youthful days. He took treatment for the disorder and regarded himself as cured. For thirty years or more, he has apparently discharged his responsibilities as a mechanic and engineer with fidelity, devotion and competence, a substantial portion of that time being spent in the service of defendant.
That promiscuous and unsanctioned sexual intercourse is a vice is indisputable. Among seamen, however, such extra marital relationships are not only recognized, but condoned. And, upon the humanities, and in this instance, upon equitable consideration, I personally think plaintiff should have the benefit of maintenance and cure at the expense of defendant. Defendant, it appears, made no effort to ascertain if plaintiff was infected with his ailment. The Company accepted him into its employ as he believed himself to be a physically strong and competent engineer.
Plaintiff's attack came upon him while in the service of defendant's vessel, and, to my mind, it is a harsh doctrine that his sin of thirty or more years ago should deprive him of the benefit of the humanitarian boon that the law ordinarily bestows upon seamen who become sick and disabled. If, through some injury occurring on the ship, and in the line of his duties, plaintiff's disease had "lighted" up and brought about his disablement, he would, I assume, under the decision in Calmar S. S. Corp. v. Taylor, 303 U.S. 525, 58 S. Ct. 651, 82 L. Ed. 993, be entitled to recover. See, too, Loverich v. Warner Company, 3 Cir., 118 F.2d 690, 1941 A.M.C. 604.
Whether plaintiff's unexpected and sudden onset of paresis was superinduced by some occurrence on the ship, none can tell. His own fatigue, the heat of the engine room, a forgotten bruise or other minor injury may have served to activate his disease and bring about his stroke. These are matters about which speculation may be had, but each and all of them are inconclusive. It is not improbable, I imagine, that many seamen have disease germs within their *397 systems that were acquired through some untraceable personal fault, indiscretion or willful misconduct. Being untraceable or unadmitted, such previous wrongs do not serve to penalize a seaman who, when the germs finally take their toll, falls ill upon his ship. For the youthful error of this plaintiff who, so far as appears otherwise, was a decent, respectable man, and one that efficiently performed his duties over many years, the law, in my opinion, should grant absolution. Nevertheless, upon the facts as here shown, the illness of plaintiff is definitely attributable to a voluntary vice of his own, and for which defendant, under existing law, is in no way responsible. It follows that plaintiff cannot recover. The verdict of the jury will be set aside and the complaint dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1698359/ | 626 So. 2d 1212 (1993)
Henry BROOM, et al., Plaintiffs-Appellants,
v.
LEEBRON & ROBINSON RENT A CAR, INC. d/b/a Budget Rent-A-Car, Defendant-Appellee.
No. 25,215-CA.
Court of Appeal of Louisiana, Second Circuit.
October 27, 1993.
*1214 Davis & Singleton by S.P. Davis, Shreveport, for appellants.
Wiener, Weiss, Madison & Howell by John M. Madison, Jr., Mark L. Hornsby, Shreveport, for appellee.
Before VICTORY, BROWN and WILLIAMS, JJ.
WILLIAMS, Judge.
In this action to recover damages for breach of contract, the plaintiffs, Henry Broom and Loran Black, appeal a summary judgment rendered in favor of the defendant, Budget Rent-A-Car. We reverse and remand.
In their petition, plaintiffs allege that on June 7, 1991, Henry R. Broom, Sr. went to Leebron & Robinson Rent-A-Car, Inc. d/b/a Budget Rent-A-Car (Budget) in Shreveport to rent a car. Mr. Broom's credit card did not have sufficient credit available, so Budget refused to rent the car to him. Mr. Broom returned to Budget later that same day with his brother-in-law, Loran Black, Sr. At that time, Mr. Black presented his credit card and entered into a written agreement with Budget to rent a Lincoln Town Car for a period of one week, at the rate of $199.00, with a return date of June 14, 1991. Mr. Broom was listed in the contract as an additional driver. Mr. Black also purchased a Loss Damage Waiver from Budget for an additional fee. Mr. Broom and his wife had planned to travel to New Jersey in the rental car. Mr. Broom alleges that they also intended to travel to Houston, Texas.
On or about June 9, 1991, while Mr. Broom was in Houston, Texas, he notified Budget that the tires and wheels had been stolen from the car. Plaintiffs requested that Budget replace the wheels and tires or provide them with a replacement vehicle so that they could complete their trip. Budget demanded that plaintiff's replace the wheels and tires. Budget also refused to give the Broom's another car.
Mr. Broom eventually rented another vehicle in Houston, Texas, and returned to Shreveport. Because of the delay, he and his wife had to purchase airline tickets to travel to New Jersey.
A representative of Budget later traveled to Houston to recover the rental car. The tires and wheels were replaced at a cost of approximately $1,800.
On June 4, 1992, both Mr. Broom and Mr. Black filed this suit against Budget seeking the following damages as a result of Budget's alleged willful, wanton, and intentional *1215 breach of contract: 1) loss of use of the rental vehicle; 2) loss of business trip; 3) mental anguish, distress and inconvenience; 4) economic loss; 5) attorney fees; and 6) exemplary damages. Budget reconvened requesting the rental car fee and the replacement cost of the tires and wheels. On August 10, 1992, Budget filed a motion for summary judgment. On August 31, 1992, the motion was argued and taken under advisement. Subsequently, the trial court granted the defendant's motion for summary judgment and dismissed plaintiffs' claims. Plaintiffs appealed.
LSA-C.C.P. Art. 966 provides that a motion for summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to material fact and that mover is entitled to judgment as a matter of law.
The motion for summary judgment is a procedural device to avoid a full scale trial where there is no genuine factual dispute. The mover for summary judgment has the burden of affirmatively showing the absence of a genuine issue of material fact and any doubt as to the existence of such an issue must be resolved against granting the motion. Ouachita National Bank v. Gulf States Land & Development, Inc., 579 So. 2d 1115 (La.App. 2d Cir.1991), writ denied, 587 So. 2d 695 (La.1991).
To satisfy his burden, the mover must meet a strict standard by showing that it is quite clear as to what the truth is, and that excludes any real doubt as to the existence of material fact. The papers supporting the mover's position are to be closely scrutinized while the opposing papers are to be indulgently treated, in determining whether mover has satisfied his burden. When the court is presented with a choice of reasonable inferences to be drawn from subsidiary facts contained in affidavits and attached exhibits, reasonable inferences must be viewed in the light most favorable to the party opposing the motion. Ouachita National Bank, supra.
Summary judgment will not be granted even if the trial court has grave doubts as to a party's ability to establish the disputed facts. It is not the function of the trial court on a motion for summary judgment to determine or even inquire into the merits of the issues raised. The weighing of conflicting evidence therefore has no place in summary judgment procedure. Ouachita National Bank, supra.
If the supporting documents presented by the moving party are insufficient to resolve all material facts at issue, summary judgment must be denied. If sufficient, the burden shifts to the opposing party to present supporting evidence showing that material facts are still at issue. LSA-C.C.P. Art. 967. A summary judgment is not a substitute for a trial on the merits. Sanders v. City of Blanchard, 438 So. 2d 714 (La.App. 2d Cir.1983).
Appellate courts review summary judgment de novo under the same criteria that govern the district court's consideration of whether summary judgment is appropriate. Schroeder v. Board of Supervisors of Louisiana State University, 591 So. 2d 342 (La.1991).
In the instant case, Budget asserts that since the plaintiffs' suit arose out of the alleged theft of the tires and wheels from the vehicle, summary judgment was properly granted. Budget argues that under the rental contract, it is not liable to the plaintiffs as a result of the theft of the tires and wheels. Budget offers the following language from the rental contract in support of its position:
CUSTOMER IS RESPONSIBLE FOR DAMAGE TO GLASS, WHEELS AND RIMS, AND LIGHTS.
No written reasons for judgment appear in the record of this case. In its "Judgment", the trial court concluded that "any genuine issues of material fact set forth in plaintiffs' petition are not recoverable under the contract between the parties and applicable Louisiana law." We are unsure of the trial court's exact meaning but it appears that it found that the items of damage claimed by the plaintiffs are not recoverable under the contract or Louisiana law.
*1216 Although the cited provision of the agreement holds the customer responsible for damage to the wheels and rims, we find no provision in the contract which makes the customer responsible for the theft of the wheels and rims. To the contrary, paragraph 8 of the contract provides that a renter who declines the optional Loss Damage Waiver is responsible for the full value of any loss or damage due to theft and other enumerated occurrences. The clear implication of this provision is to relieve responsibility for theft damages to those renters who purchase a Loss Damage Waiver.
When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. LSA-C.C. Art. 2045. Also, in determining the meaning of the words to a contract, they are to be given their generally prevailing meaning. LSA-C.C. Art. 2047; Schroeder v. Board of Supervisors, supra.
In this case, the plaintiffs purchased a Loss Damage Waiver. Under the terms of the contract, they were not responsible for the theft of the wheels and tires. Thus, Budget's argument it could not have breached the contract for failing to replace the tires and wheels because plaintiffs were responsible for theft under the contract is without merit.
In its motion for summary judgment Budget additionally cited paragraph 16(B) of the rental agreement in support of its position that it was entitled to judgment as a matter of law. Paragraph 16(B) of the rental agreement provides that Budget "shall have no liability for any indirect, special or consequential damages arising in connection with the furnishing, performance or use of the vehicle or for any claim based on the failure to honor a vehicle reservation requested by Renter."
Apparently, Budget and the trial court believed this "non-liability" provision of the rental contract defeats the plaintiff's entire cause of action. We again disagree.
LSA-C.C. Art. 2004 provides:
Any clause is null that, in advance, excludes or limits the liability of one party for intentional or gross fault that causes damage to the other party.
Any clause is null that, in advance, excludes or limits the liability of one party for causing physical injury to the other party.
Here, the plaintiffs' petition alleges an intentional refusal by Budget to honor the terms of the rental agreement. It is contrary to public policy and in contravention of Louisiana law to allow a contracting party to prospectively absolve itself from liability for injuries incurred through its intentional or grossly negligent acts. LSA-C.C. Art. 2004. See also, Ramirez v. Fairgrounds Corp., 575 So. 2d 811 (La.1991); Walker v. Self Service Storage and Miniwarehouses, Inc., 492 So. 2d 210 (La.App. 4th Cir.1986). There appear to be genuine issues of material fact as to whether Budget's conduct in this case amounted to "intentional or gross fault." That is, was the denial of replacement of the tires and wheels a reasonable interpretation of the contract? Was Budget's refusal intentional or grossly negligent?
In the absence of "intentional or gross fault," there would still remain issues of material fact given that the terms contained in Paragraph 16(B), "indirect," "special," and "consequential" are vague and are not defined by the contract. Whether the items of damage claimed by the plaintiffs would be prohibited by this provision is best decided by the trier of fact following trial.
Finally, Budget argues that summary judgment was appropriate because none of the damages sought by plaintiff are recoverable under Louisiana law. It contends plaintiff cannot recover damages for mental anguish or inconvenience based on a breach of contract.
LSA-C.C. Art. 1994 provides:
An obligor is liable for the damages caused by his failure to perform a conventional obligation.
LSA-C.C. Article 1997 provides:
An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform.
*1217 LSA-C.C. Article 1998 then sets forth the requirements for the recovery of nonpecuniary damages:
Damages for nonpecuniary loss may be recovered when the contract, because of its nature, is intended to gratify a nonpecuniary interest and, because of the circumstances surrounding the formation or the nonperformance of the contract, the obligor knew, or should have known, that his failure to perform would cause that kind of loss. Regardless of the nature of the contract, these damages may be recovered also when the obligor intended, through his failure, to aggrieve the feelings of the obligee.
If plaintiffs intended, and the nature of the contract supports this contention, to gratify a significant nonpecuniary interest by way of the contract, and, if the obligor knew or should have known that failure to perform would cause nonpecuniary loss to the obligee, then the requirements for recovery of nonpecuniary damages are satisfied. See generally, Young v. Ford Motor Company, Inc., 595 So. 2d 1123 (La.1992); Mayerhofer v. Three R's Inc., 597 So. 2d 151 (La.App. 3d Cir.1992); Whitener v. Clark, 356 So. 2d 1094 (La.App. 2d Cir.1978) writ denied, 358 So. 2d 638 (La. 1978).
In the instant case, plaintiffs seek damages for both pecuniary and nonpecuniary loss. They argue that they are entitled to damages for mental anguish and inconvenience because they had a significant nonpecuniary interest in executing the rental contract. This assertion is best proved or disproved after the facts are established at a trial on the merits.
The evidence adduced in support of the motion for summary judgment does not establish beyond genuine dispute that Budget complied with the terms of the rental contract. Consequently, the movers failed to demonstrate that they were entitled to a judgment as a matter of law, and the motion for summary judgment was erroneously granted.
Having found that summary judgment was improperly granted, we do not reach the other issues raised on appeal.
Accordingly, the summary judgment is reversed, and the case is remanded to the district court for further proceedings consistent with this opinion. Costs of this appeal are assessed to the appellee, Budget Rent-A-Car.
REVERSED AND REMANDED.
VICTORY, J., concurs in result. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1698470/ | 626 So. 2d 1288 (1993)
Jimmy H. DODD
v.
NELDA STEPHENSON CHEVROLET, INC., et al.
1911399.
Supreme Court of Alabama.
August 6, 1993.
Rehearing Denied September 24, 1993.
*1289 Robert H. McKenzie of Holt, McKenzie, Holt & Mussleman, Florence, for appellant.
J.A. Keller of Keller & Pitts, Florence, for Nelda Stephenson Chevrolet, Inc.
Nicholas B. Roth of Eyster, Key, Tubb, Weaver & Roth, Decatur, for General Motors Corp.
A. Stewart O'Bannon, Jr. of O'Bannon & O'Bannon, Florence, for Bob Hembree Motor Co., Inc.
ALMON, Justice.
The plaintiff, Jimmy H. Dodd, appeals from a summary judgment entered in favor of the defendants, Nelda Stephenson Chevrolet, Inc., Bob Hembree Motor Company, Inc., and General Motors Corporation. Dodd's action alleged fraud, suppression, fraudulent concealment, breach of express warranty, and breach of implied warranties of merchantability or fitness for a particular purpose, all in connection with his purchase of a 1990 Chevrolet Camaro R.S. automobile from Nelda Stephenson Chevrolet.
On May 5, 1990, Dodd went to Nelda Stephenson Chevrolet ("Stephenson Chevrolet") in Florence, Alabama, to purchase a car. Because Stephenson Chevrolet did not have the type of car Dodd requested, Stephenson Chevrolet arranged to obtain the car Dodd wanted from Bob Hembree Motor Company, Inc. ("Hembree Motors"), a Chevrolet dealership in Guntersville, Alabama. Almon Truitt, an employee of Stephenson Chevrolet, drove to Hembree Motors and exchanged a new car from Stephenson Chevrolet for a 1990 Camaro.
Truitt returned with the Camaro late in the afternoon on May 5, 1990. Approximately two hours later, Dodd picked it up. Because Stephenson Chevrolet had not had an opportunity to clean the car, it instructed Dodd to return the Camaro six days later to be cleaned.
A day or so after Dodd took possession of the Camaro, he noticed what looked like streaks or sand marks on the right rear quarter panel. When Dodd brought the Camaro *1290 to Stephenson Chevrolet the next Friday, Dodd informed a sales representative of Stephenson Chevrolet of the problem. Billy Ray, the sales representative at Stephenson Chevrolet with whom he had been dealing, informed Dodd that the 36-month warranty covered the problem and offered to repaint the car. Dodd, however, declined the offer to paint the Camaro at that time.
In February 1991, while washing the Camaro, Dodd noticed that a groove that was supposed to be on the right rear quarter panel had been filled in. Suspecting that the Camaro had been damaged and repaired before he had purchased it, Dodd complained to Stephenson Chevrolet. In response, Mrs. Nelda Stephenson, president of Stephenson Chevrolet, conducted a paint test of the area of the Camaro that Dodd claimed had been damaged, repaired, and repainted.
A paint test measures the thickness of the paint on a car to determine whether the car has been repainted. According to Nelda Stephenson's affidavit, an automobile factory can apply paint to a vehicle more thinly than an automobile body repair shop can. The test thus helps determine whether a car has been damaged and repaired after it was manufactured.
Dodd and Stephenson Chevrolet dispute the meaning of the paint test conducted on the Camaro. Both Dodd's affidavit and Ray's affidavit state that the paint on the right rear quarter panel of the Camaro measured 6-8 "milliliters" in depth, while the thickness of the paint on other new cars at the dealership and on other portions of Dodd's Camaro, they said, measured only 2-4 "milliliters." According to the affidavits of Dodd and Ray, Nelda Stephenson said, after concluding the paint test, that the right rear quarter panel had been repainted. However, in her own affidavit, Nelda Stephenson says that she told Dodd only that the paint on the right rear quarter panel of the Camaro measured 6 "milliliters," while paint applied by body shops usually measures around 10-14 "milliliters" in depth.
Dodd also had the Camaro inspected by Dan Sharp, an employee of A-One Body, an automobile repair shop, and Kenneth Davis, owner of Davis Body Shop. Sharp and Davis testified that the irregularity in the groove moldings and the paint finish on the right rear quarter panel indicated that the car had been damaged, repaired, and repainted.
A delivery receipt reflecting the delivery of the Camaro from the factory to Hembree Motors in October 1989 states: "Car has serious paint problems all over. Factory." In his affidavit, Robert L. Hembree, Jr., president of Hembree Motors, testified that the Camaro had suffered no damage while in the possession of Hembree Motors and that Hembree Motors had performed no body work, painting, or repairs on it during the six months it was in the possession of Hembree Motors. Robert Hembree's affidavit also states that the inspection of the car by Hembree Motors upon its delivery revealed no damage to the vehicle. In his affidavit, Almon Truitt states that he did not notice any defects in the Camaro when he picked it up at Hembree Motors and drove it to Stephenson Chevrolet.
A summary judgment, under Rule 56, Ala.R.Civ.P., is proper only when the trial court determines that there is no genuine issue of material fact and that the movant is entitled to a judgment as a matter of law. On a motion for summary judgment, when the movant makes a prima facie showing that no genuine issue of material fact exists, the burden shifts to the nonmovant to present substantial evidence creating a genuine issue of material fact.[1]Cobb v. Southeast Toyota Distributors, Inc., 569 So. 2d 395 (Ala.1990); Bean v. Craig, 557 So. 2d 1249, 1252 (Ala. 1990); Rule 56(e), Ala.R.Civ.P.; § 12-21-12, Alabama Code 1975. The evidence is viewed most favorably to the nonmovant, and all reasonable doubts concerning the existence of a genuine issue of material fact are resolved against the movant. Specialty Container Mfg., Inc. v. Rusken Packaging, Inc., 572 So. 2d 403, 404 (Ala.1990); Stark v. Troy *1291 State Univ., 514 So. 2d 46 (Ala.1987); Lolley v. Howell, 504 So. 2d 253 (Ala.1987).
Because this case involves multiple claims against multiple defendants, we examine each defendant and the claims against it separately.
Claims Against Stephenson Chevrolet
Dodd asserts first that Stephenson Chevrolet fraudulently misrepresented that the 1990 Camaro was a "new" car, or, alternatively, that Stephenson Chevrolet fraudulently concealed that it was not "new." Dodd argues, therefore, that the trial court erred in entering the summary judgment in favor of Stephenson Chevrolet because, Dodd says, he presented substantial evidence that, although it had not been previously sold, the Camaro was not "new."
Section 6-5-101, Alabama Code 1975, provides a cause of action for misrepresentations of material fact:
"Misrepresentations of a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitute legal fraud."
(Emphasis added.) We note that under § 6-5-101 "legal fraud" includes misrepresentations of material fact made "by mistake and innocently," as well as those made either "willfully to deceive, or recklessly without knowledge." Young v. Serra Volkswagen, Inc., 579 So. 2d 1337, 1339 & n. 3 (Ala.1991).
Because we find no evidence that Stephenson Chevrolet made any misrepresentation willfully or with reckless disregard of the truth, we address Dodd's argument that Stephenson Chevrolet innocently or mistakenly misrepresented that the Camaro was "new." To recover under a claim of innocent misrepresentation, a plaintiff must prove (1) that there was a false representation; (2) that it concerned a material fact; (3) that the plaintiff reasonably or justifiably relied on the material misrepresentation; and (4) that the plaintiff was damaged as a proximate result of the reliance. Mahoney v. Forsman, 437 So. 2d 1030 (Ala.1983).
Stephenson Chevrolet argues that in the circumstances of this case it cannot be liable because it made no misrepresentation of fact. Moreover, Stephenson Chevrolet contends, no evidence indicates that it knew of the alleged defects in the Camaro or that it even had an opportunity to discover them. In reply, Dodd argues that even if the dealership did not know of the defects or was unable to discover them while the Camaro was in its possession, Stephenson Chevrolet may nonetheless be liable for innocently misrepresenting that the Camaro was "new."
In support of this argument, Dodd refers to the "reasonable expectation" standard first enunciated in Mathis v. Jim Skinner Ford, Inc., 361 So. 2d 113 (Ala.1978):
"Purchasers have a right to assume that new automobiles will perform in accordance with reasonable expectations and in accordance with implied representations inherent in marketing such products. Absent express representation, implied representations are not uncommon in the sale of new products, and reliance thereon may be shown by the totality of the circumstances and the underlying nature of the transaction itself. These concepts have long been recognized in actions based upon breach of an implied warranty and, under proper circumstances, may support a tort action for misrepresentation."
361 So.2d at 115; see also Ford Motor Co. v. Burkett, 494 So. 2d 416 (Ala.1986); Larry Savage Chevrolet, Inc. v. Richards, 470 So. 2d 1168 (Ala.1985); Boulevard Chrysler-Plymouth, Inc. v. Richardson, 374 So. 2d 857, 859-60 (Ala.1979). Thus, under Mathis, implied representations may arise out of the mere sale of a new product, and such representations, if false, may support a claim of fraud. Burkett, 494 So.2d at 417.
The trial court erred in entering the summary judgment as to the claim of innocent misrepresentation on the part of Stephenson Chevrolet. Drawing all relevant inferences in favor of Dodd, as the applicable standard of review requires, we conclude that, given the circumstances of this case, Dodd presented substantial evidence that Stephenson Chevrolet impliedly represented that the car was "new" and that Dodd relied *1292 on this implied representation when he bought the Camaro. Although no evidence indicates that Stephenson Chevrolet specifically told Dodd that the car he was buying was "new," it is reasonably inferable from the undisputed facts and circumstances of the sale that when Dodd visited Stephenson Chevrolet on May 5, 1990, he was looking for a "new" 1990 Chevrolet Camaro R.S. and that Stephenson Chevrolet impliedly represented that it was selling him one.
We also hold that Dodd's deposition testimony, the affidavit testimony of Dodd and Ray regarding the results of the paint test, and the affidavits of the automobile body repairmen Dan Sharp and Kenneth Davis constitute substantial evidence that the Camaro had been damaged before its sale to Dodd and was therefore not "new." Except in rare circumstances, where a car has undergone repair or alteration so major that it is obviously not "new" or so minor that it undisputedly is "new," the question of whether a car initially sold with repaired damage was "new" when it was sold is one of fact. Boulevard Chrysler-Plymouth, Inc., 374 So.2d at 857. The affidavits of the automobile body repairmen and the affidavits of Dodd and Ray concerning the results of the paint test constitute "substantial evidence" from that evidence a fair-minded person could reasonably infer that the Camaro had undergone more than minor repairs and adjustments before its sale to Dodd and thus that it was not "new," "in accordance with reasonable expectations." Id., at 859.
Even though Dodd presented no evidence that Stephenson Chevrolet knew of any prior damage to the Camaro, Stephenson Chevrolet may be liable for innocent misrepresentation. Although knowledge of a falsehood or reckless disregard for the truth is an essential element of the tort of deceit, § 6-5-103, Alabama Code 1975, it is not an element of the tort of innocent misrepresentation. See Ex parte Lewis, 416 So. 2d 410, 411-14 (Ala.1982) (Jones, J., concurring specially).
In Hall Motor Co. v. Furman, 285 Ala. 499, 234 So. 2d 37 (1970), this Court addressed this issue in substantially similar circumstances. In Hall, the plaintiff went to Hall Motor Company in Bessemer, Alabama, seeking a Plymouth station wagon of a certain type and color. Although the dealership did not have in stock what the plaintiff wanted, it located one at another dealership in Selma. The plaintiff drove with a sales representative to Selma to examine the car. Pleased with the station wagon, the plaintiff drove it back to Bessemer, where the parties completed the sale. After noticing defects in the car, the plaintiff had it inspected by two automobile mechanics, who informed him that the car had been damaged. The plaintiff brought an action against Hall Motor Company, alleging that the dealership had fraudulently misrepresented to him that the station wagon was a new automobile in good working condition. The evidence presented to the jury showed that the damage had occurred at the factory and that the dealership had been unaware of the damage when it sold the station wagon to the plaintiff. In holding that the trial court erred in permitting an award of punitive damages against the dealership when there was no evidence of any intent to deceive, the Court stated that the evidence was nonetheless sufficient to establish an innocent misrepresentation. Therefore, like the car dealership in Hall, Stephenson Chevrolet may be held liable for innocently misrepresenting that the car it sold to Dodd was "new," even though it was unaware of any prior damage or major alteration.
We now address Dodd's claim alleging suppression of a material fact by Stephenson Chevrolet. Section 6-5-102, Ala. Code 1975, provides:
"Suppression of a material fact which the party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the confidential relations of the parties or from the particular circumstances of the case."
One can be liable for suppression only of a fact of which one has knowledge. Cornelius v. Austin, 542 So. 2d 1220, 1224 (Ala.1989); Cherokee Farms, Inc. v. Fireman's Fund Ins. Co., 526 So. 2d 871, 875 (Ala.1988); Harrell v. Dodson, 398 So. 2d 272, 276 (Ala.1981).
Dodd introduced no evidence that Stephenson Chevrolet knew of the alleged *1293 defects. There is no evidence that Hembree Motors forwarded to Stephenson Chevrolet the delivery receipt stating "Car has serious paint problems all over. Factory." The evidence is undisputed that Stephenson Chevrolet had possession of the Camaro for only two hours. Undisputed also is the fact that Stephenson Chevrolet did not even have time to clean the Camaro before Dodd took possession of it. A fair-minded person in the exercise of impartial judgment could not reasonably infer from Stephenson Chevrolet's mere possession of the Camaro for two hours that it knew of the alleged defects, much less that it knowingly concealed them with an intent to deceive. In fact, Dodd himself did not notice any problem with the paint until several days after the purchase, when he washed the car, and he did not notice the irregularity in the grooves until almost nine months after buying the car. Dodd has not submitted substantial evidence in support of his claim alleging suppression by Stephenson Chevrolet. The judgment is therefore due to be affirmed as to that claim.
Dodd's complaint also alleged that Stephenson Chevrolet breached an express warranty, an implied warranty of merchantability, and an implied warranty of fitness for a particular purpose. Dodd, however, does not argue or cite authority for the reversal of the judgment as to these warranty claims. Therefore, we affirm the judgment as to these claims on the authority of Young v. Serra Volkswagen, Inc., 579 So. 2d 1337 n. 2 (Ala.1991); Sea Calm Shipping Co., S.A. v. Cooks, 565 So. 2d 212, 216 (Ala.1990); Henderson v. Alabama A & M Univ., 483 So. 2d 392 (Ala.1986).
Claims Against Hembree Motor Company
Dodd's only argument with regard to the claims against Hembree Motors is that he presented substantial evidence to support his claim of fraudulent concealment.[2] Dodd argues that he presented substantial evidence that Hembree Motors knew of the Camaro's serious paint problems while the car was in its possession and that Hembree Motors did not disclose them when it sold the Camaro to Stephenson Chevrolet. Therefore, Dodd argues, Hembree Motors fraudulently concealed that the Camaro had been damaged. In support of his contentions, Dodd notes the October 1989 receipt for the delivery of the Camaro to Hembree Motors, which includes the statement: "Car has serious paint problems all over. Factory."
In reply, Hembree Motors cites the affidavit testimony of Robert L. Hembree, Jr., who stated that while the Camaro was in the possession of Hembree Motors, the Camaro was neither damaged nor repaired. Hembree Motors also contends that its inspection of the car upon its delivery to Hembree Motors revealed no damage to the vehicle and that in his affidavit Almon Truitt stated that he noticed no defect in the Camaro when he delivered it to Stephenson Chevrolet.
To establish a prima facie case of fraudulent concealment of a material fact, a plaintiff must show (1) that the defendant had a duty to disclose a material fact, (2) that the defendant concealed or failed to disclose a material fact, (3) that the defendant's concealment or failure to disclose the material fact induced the plaintiff to act or to refrain from acting, and (4) that the plaintiff suffered actual damage as a proximate result. Soniat v. Johnson-Rast & Hays, 626 So. 2d 1256 (Ala.1993); see Cornelius v. Austin, 542 So. 2d 1220, 1223 (Ala.1989).
Mere silence is not fraudulent in the absence of a duty to disclose. A duty to disclose may arise from the particular circumstances of the case, from a confidential relationship, or from a request for information. Hardy v. Blue Cross & Blue Shield of Alabama, 585 So. 2d 29, 32 (Ala.1991); King v. National Foundation Life Ins. Co., 541 So. 2d 502 (Ala.1989). One may also recover for fraudulent concealment by showing active *1294 concealment of a material fact with an intent to deceive or mislead. § 6-5-103, Alabama Code 1975; Soniat v. Johnson-Rast & Hays; Cornelius v. Austin; Harrell v. Dodson, 398 So. 2d 272, 276 (Ala.1981).
Although Dodd presented substantial evidence that Hembree Motors knew of the Camaro's paint problems, Dodd failed to present substantial evidence that Hembree had a duty to disclose them. As with Stephenson Chevrolet, Dodd produced no evidence of any special circumstances or a confidential relationship.[3] Thus, the summary judgment is correct to the extent that the complaint alleges suppression of a material fact. Neither did Dodd present any evidence of knowing, active concealment of a material fact with an intent to deceive. Although the delivery receipt constitutes substantial evidence from which a reasonable trier of fact could infer that Hembree Motors knew of the paint problems, the record contains no evidence to support the inference that Hembree Motors actively or knowingly concealed these problems with an intent to deceive. See Soniat, 626 So.2d at 1259; Cornelius, 542 So.2d at 1224-25; Harrell, 398 So.2d at 277. Moreover, Dodd cites no authority for the proposition that Hembree Motors, as opposed to Stephenson Chevrolet, had any obligation to disclose facts to him or that he is entitled to bring an action based on the failure of Hembree Motors to disclose those facts to Stephenson Chevrolet. Therefore, the trial court properly entered a summary judgment on Dodd's claim of fraudulent concealment against Hembree Motors.
Because Dodd makes no argument in support of his claims against Hembree Motors alleging breach of express warranty, implied warranty of merchantability, or implied warranty of fitness for a particular purpose, the judgment is affirmed as to those claims. Young v. Serra Volkswagen, Inc., supra; Bogle v. Scheer, 512 So. 2d 1336 (Ala.1987).
Claims Against General Motors
Because Dodd makes no argument in support of his claims against General Motors, the judgment is affirmed as to General Motors. Young v. Serra Volkswagen, Inc., supra; Bogle v. Scheer, supra.
Conclusion
Based on the foregoing, we reverse the trial court's judgment as to Dodd's claim against Stephenson Chevrolet for innocent misrepresentation; as to all other claims, we affirm.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
MADDOX, HOUSTON, STEAGALL and KENNEDY, JJ., concur.
HORNSBY, C.J., and SHORES and INGRAM, JJ., concur in part and dissent in part.
HORNSBY, Chief Justice (concurring in part and dissenting in part):
Although I agree with the majority's holding regarding the claims against Stephenson Chevrolet,[4] I respectfully dissent from its affirmance of the summary judgment in favor of Hembree Motors on Dodd's claim of fraudulent suppression.
As the majority notes, to establish a claim of fraudulent suppression, Dodd must show that Hembree Motors suppressed or concealed a material fact that it was under a duty to disclose, that concealment or failure by Hembree Motors to disclose induced him to act or to refrain from acting, and that Dodd suffered damage as a result. Soniat v. Johnson-Rast & Hays, 626 So. 2d 1256 (Ala. 1993). Unlike the majority, however, I *1295 would hold that Dodd presented substantial evidence creating a genuine issue of material fact as to each of these elements.
Dodd presented substantial evidence that Hembree Motors, unlike Stephenson Chevrolet, knew that the 1990 Camaro he purchased had "serious paint problems all over" when it received it. See Cherokee Farms, Inc. v. Fireman's Fund Ins. Co., 526 So. 2d 871, 875 (Ala.1988) (holding that, as a matter of law, one can be liable only for concealing facts of which one has knowledge); Harrell v. Dodson, 398 So. 2d 272, 276 (Ala.1981). Dodd presented evidence that, on October 22, 1989, when the 1990 Camaro was delivered by Commercial Carriers, Inc., to Hembree Motors, the delivery receipt signed by the Commercial Carrier driver and by the Hembree Motors agent carried the words "Car has serious paint problems all over. Factory." Under general agency law, the knowledge of an agent of Hembree Motors "concerning the subject matter of the agency is imputed to the principal." Wilma Corp. v. Fleming Foods of Alabama, Inc., 613 So. 2d 359, 366 (Ala.1993). Accordingly, Hembree Motors is presumed to have known that the 1990 Camaro had "serious paint problems all over" when it was delivered.
In addition, I would hold that Dodd presented substantial evidence creating a jury question as to whether Hembree Motors owed him a duty to disclose material facts regarding the condition of the car. The question whether Hembree Motors owed Dodd a duty to communicate is a question of law. Berkel & Co. Contractors, Inc. v. Providence Hosp., 454 So. 2d 496, 506 (Ala.1984).
Ala.Code 1975, § 6-5-102, provides that an "obligation to communicate may arise from the confidential relations of the parties or from the particular circumstances of the case." Dodd presented evidence that the particular circumstances of the case gave rise to a duty on the part of Hembree Motors to disclose to Dodd material facts regarding the condition of the car.
This Court has acknowledged that one who knows facts that are unknown to the plaintiff owes an obligation to disclose those facts where the plaintiff cannot reasonably be expected to discover those facts by due diligence. Deupree v. Ruffino, 505 So. 2d 1218, 1222 (Ala.1987); Jim Short Ford Sales, Inc. v. Washington, 384 So. 2d 83, 86 (Ala.1980); Bank of Red Bay v. King, 482 So. 2d 274, 285 (Ala.1985) (holding that a duty to speak depends on the relation of the parties, the value of the particular fact, the relative knowledge of the parties, and other circumstances). See also Dominick v. Dixie Nat'l Life Ins. Co., 809 F.2d 1559 (11th Cir.1987) (where the accused has superior knowledge of the undisclosed fact and the defrauded party has been induced to take action which he might not otherwise have taken, the obligation to disclose is particularly compelling); Kaye v. Pawnee Constr. Co., 680 F.2d 1360 (11th Cir.1982) (an obligation to communicate may arise in a vendor/vendee relationship where the vendor knows the material facts and has a reason to believe that the person with whom he is dealing is ignorant of those facts and cannot, by ordinary diligence, become acquainted with those facts); First Virginia Bankshares v. Benson, 559 F.2d 1307, reh'g denied, 564 F.2d 416 (5th Cir.1977), cert. denied, 435 U.S. 952, 98 S. Ct. 1580, 55 L. Ed. 2d 802 (1978) (recognizing a duty to disclose where one party has some particular knowledge or expertise not shared by the plaintiff).
As early as 1919, this Court recognized that particular circumstances giving rise to a duty to disclose exist where a car dealer knows material facts regarding the condition of the car that are unknown to the purchaser of that car. Standard Motorcar Co. v. McMahon, 203 Ala. 158, 160, 82 So. 188, 190 (1919). See also Neil Huffman Volkswagen Corp. v. Ridolphi, 378 So. 2d 700, 702 (Ala. 1979).
Imposition of a duty to disclose under these circumstances is consistent with the holdings of other courts. Regarding the particular circumstances of the case giving rise to a duty to disclose, Prosser notes:
"[T]here has been a rather amorphous tendency on the part of most courts to find a duty of disclosure in cases where the defendant has special knowledge or means of knowledge not open to the plaintiff and is aware that the plaintiff is acting under a misapprehension as to facts which would *1296 be of importance to him and would probably affect his decision."
Prosser, Torts, Chap. 18, § 106 (4th ed. 1971).
In this case Hembree Motors did not actually negotiate with Dodd for the sale of the car; rather, Hembree Motors negotiated with Stephenson Chevrolet, which, similarly, could not reasonably be expected to have known of the factory paint defects. Dodd presented substantial evidence that Hembree Motors did not disclose its knowledge of the paint defects to Stephenson Chevrolet. In addition, Dodd presented evidence from which one could infer that Hembree Motors knew or should have known that Stephenson Chevrolet wanted the vehicle to sell it to one of its customers.
This Court has repeatedly rejected the argument that a vendor owes a duty to disclose material facts only to the immediate purchaser. Johnny Spradlin Auto Parts, Inc. v. Cochran, 568 So. 2d 738, 743 (Ala. 1990); Lawyers Title Ins. Corp. v. Vella, 570 So. 2d 578 (Ala.1990); Hopkins v. Lawyers Title Ins. Corp., 514 So. 2d 786 (Ala.1986) (noting that a defendant's duty to disclose may exist in the absence of a contractual relationship or without dealing between the parties); Kirkpatrick v. White, 289 Ala. 110, 266 So. 2d 268 (1972); Sims v. Tigrett, 229 Ala. 486, 158 So. 326 (1934). Therefore, I believe that under these circumstances Dodd may proceed against Hembree Motors for fraudulent suppression.
I would hold that, in addition to a common law duty to disclose, Hembree Motors also has an obligation under Ala.Code 1975, § 8-19-1 et seq., to disclose material facts regarding the condition of the car. In Johnny Spradlin Auto Parts, Inc. v. Cochran, 568 So. 2d 738, 743 (Ala.1990), this Court held that a separate statutory requirement may impose a duty on one to disclose facts that can be the subject of a fraudulent suppression claim.
Section 8-19-5 provides:
"The following acts or practices in the conduct of any trade or commerce are hereby declared to be unlawful:
". . . .
"(6) Representing that goods are original or new if they are deteriorated, reconditioned, reclaimed, used, second-hand or altered to the point of decreasing their value or rendering the goods unfit for the ordinary purpose for which they were purchased, provided that this subdivision shall not apply to new goods which have been reconditioned, reclaimed or repaired and such fact is disclosed to the purchaser."
(Emphasis supplied.)
Dodd presented substantial evidence that the paint defects in the 1990 Camaro decreased the value of the car. Therefore, I would hold that the implied or express representation of Hembree Motors that the car was new, when in fact it was "deteriorated, reconditioned, reclaimed, used, second-hand or altered to the point of decreasing [its] value," is prohibited by Alabama's Deceptive Trade Practices Act.
The requirements of the Deceptive Trade Practices Act apply to Hembree Motors, an entity involved "in the conduct of ... trade or commerce." § 8-19-5. Dodd presented substantial evidence that Hembree Motors is involved in selling motor vehicles; this activity is included within the definition of "trade or commerce" in § 8-19-3(8). Motor vehicle dealers are not exempt from the prohibitions of Alabama's Deceptive Trade Practices Act. See § 8-19-7(1)-(6) (enumerating the exemptions to the Act). Therefore, I would hold that § 8-19-5 imposed a duty on Hembree Motors to disclose to Stephenson Chevrolet that the car had paint defects.
Furthermore, I would hold that, under the circumstances of this case, the duty on Hembree Motors to disclose pursuant to § 8-19-5(6) extends to Dodd, the ultimate purchaser of the car. The extension of this duty to Dodd is consistent with the purposes of the Act: "The public health, welfare and interest require a strong and effective consumer protection program to protect the interest of both the consuming public and the legitimate businessperson." Ala.Code 1975, § 8-19-2. The statute also provides for a private right of action by consumers and provides for the attorney general to petition for penalties upon a violation of § 8-19-5. In light of the statute's consumer protection nature, I believe that the duty of Hembree Motors to disclose to Stephenson Chevrolet inures to the benefit of Dodd, the ultimate purchaser of the car.
*1297 Dodd also presented evidence that Hembree Motors did not inform Stephenson Chevrolet or him of the paint defect and possible prior damage to the car. This evidence raises a jury question as to whether Hembree Motors suppressed or concealed its knowledge of material facts regarding the condition of the 1990 Camaro. A "material fact," within the meaning of the Alabama fraud statutes, is a fact of such a nature as to induce action on the part of the complaining party. Bank of Red Bay v. King, 482 So. 2d 274 (Ala.1985). Dodd's evidence that an agent of Hembree Motors signed the delivery receipt that indicated that the "[c]ar has serious paint problems all over" constitutes substantial evidence from which the trier of fact could reasonably infer that Hembree Motors fraudulently suppressed information regarding the condition of the car, in violation of its duty to disclose.
Furthermore, Dodd presented substantial evidence that concealment or suppression on the part of Hembree Motors induced him to purchase the car and that he suffered actual damage as a proximate result. I believe, therefore, that the majority errs in affirming the summary judgment for Hembree Motors as to the suppression claim. Accordingly, I respectfully dissent as to that portion of the majority's opinion.
SHORES and INGRAM, JJ., concur.
NOTES
[1] "Substantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So. 2d 870, 871 (Ala.1989).
[2] Dodd's only allegations against Hembree Motors were in count four, which alleged suppression of a material fact, and count five, which alleged breach of warranty. We will treat count four as sufficient to allege a claim for fraudulent concealment. We disagree with the dissent, however, in its treatment of the appeal as presenting a claim that Hembree Motors made a fraudulent misrepresentation that the car was a new car and as presenting an issue of whether any such misrepresentation was indirectly made to Dodd.
[3] Dodd did not argue, either in the trial court or in his brief to this Court, that Hembree Motors had a statutory duty to disclose pursuant to Ala. Code 1975, § 8-19-5. Therefore, the judgment for Hembree Motors is not due to be reversed on such a ground.
[4] Although this point is not essential to the resolution of this case, I wish to point out that I disagree with the majority's use of "reasonable reliance" language. The majority cites Mahoney v. Forsman, 437 So. 2d 1030 (Ala.1983), which was decided before this Court adopted the standard of "justifiable reliance" in Hickox v. Stover, 551 So. 2d 259 (Ala.1989). Rather than referring to that standard, the majority indicates that a plaintiff may satisfy the element of reliance by proving "that the plaintiff reasonably or justifiably relied on the material representation." At 1291. (Emphasis supplied.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1776524/ | 601 So. 2d 769 (1992)
Mrs. Debra WILLIAMS, Individually and as Legal Tutrix of Her Minor Children
v.
Mr. Steven J. GALLIANO, Galliano Contractors, Inc., Scottsdale Insurance Company, Terrebonne Parish Consolidated Government, American Empire Surplus Lines Insurance, Mack Truck Manufacturing Company, et als.
No. CA 91 1657.
Court of Appeal of Louisiana, First Circuit.
May 22, 1992.
Writ Denied October 2, 1992.
Dr. E.A. Robinson, III, Baton Rouge, for plaintiff and appellant, Debra Williams.
Charles Lanier, New Orleans, L.G. LaPlante, Cutoff, for defendant and appellees, Galliana Contractors and Steven Galliano.
Maurice Mathieu, Houma, for defendant and appellee, Scottsdale Ins. Co.
Before WATKINS, CARTER and FOIL, JJ.
FOIL, Judge.
This is an appeal from the trial court's ruling which granted summary judgment in favor of defendant, Scottsdale Insurance *770 Company, and denied plaintiff's motion for summary judgment. We affirm.
FACTS
Charles Williams, Jr. was employed by Waste Management Company. On July 30, 1990, he went to the Ashland Landfill to unload his garbage truck. After he dumped the refuse, while he was outside of the truck operating the control arms to close the tailgate, a twenty-ton Mack truck reversed toward him to dump its load. Mr. Williams died from head injuries he received when he was pinned between the two trucks. The Mack truck was owned by Galliano Contractors, Inc., and was driven by the company's president, Steven J. Galliano.
Mr. Williams' widow, Debra Williams, individually and as tutrix of their minor children, filed these wrongful death and survival actions. Among others, Mrs. Williams filed suit against Mr. Galliano, Galliano Contractors, Inc. (Galliano), and its comprehensive general liability (CGL) carrier, Scottsdale Insurance Company (Scottsdale). She subsequently filed a motion for partial summary judgment on the issue of liability against those three defendants. Scottsdale then filed a motion for summary judgment on the grounds that the CGL policy issued to Galliano excluded coverage for bodily injury arising out of the ownership, maintenance or use of any automobile owned or operated by any insured. Mrs. Williams argued, on the other hand, that the Galliano garbage truck was "mobile equipment," which was excluded from the definition of "automobile" in the Scottsdale CGL policy.
After a hearing, the trial court granted Scottsdale's motion for summary judgment and denied plaintiff's motion. In very lengthy and thorough written reasons for judgment, the court found that the Mack garbage truck was an "automobile" rather than "mobile equipment" under the terms of the CGL policy and that Mr. Williams' death arose out of the use of that vehicle. As such, coverage was excluded. Plaintiff brings the instant appeal from that ruling.
After a thorough review and evaluation of the record, we are convinced the reasons assigned by the trial court are correct, and we affirm, adopting those reasons as our own, and attach a copy hereto. All costs are to be paid by plaintiff/appellant, Debra Williams.
AFFIRMED.
Mrs. Debra Williams, Individually, and as Legal Tutrix of Her Minor Children, Et Al.
Versus No. 98,839
Mr. Steven J. Galliano, Et Al. 32nd Judicial District Court State of Louisiana Parish of Terrebonne
REASONS FOR JUDGMENT ON MOTIONS FOR SUMMARY JUDGMENT
This matter came before the court on cross motions for summary judgment on the issue of insurance coverage under a comprehensive general liability insurance policy issued by Scottsdale Insurance Company to Galliano Contractors, Inc. Plaintiff, Debra Williams seeks a partial summary judgment on the issue of liability. Scottsdale Insurance Company seeks a summary judgment dismissing it from the case on the basis that its policy does not afford coverage.
This is a wrongful death suit arising out of an accident which occurred at Ashland landfill when Steven Galliano, operating a garbage truck for Galliano Contractors, Inc., backed into a Waste Management Company garbage truck, pinning the decedent between the two trucks.
Galliano Contractors, Inc. was insured under a CGL policy issued by Scottsdale Insurance Company. The CGL policy excluded coverage for bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of any automobile operated by or rented or loaned to any insured. The policy defined automobile as follows:
*771 ... "automobile" means a land motor vehicle, trailer or semi-trailer designed for travel on public roads (including any machinery or apparatus attached thereto), but does not include mobile equipment;...
Since mobile equipment is not excluded from coverage under the policy, the first issue raised by the cross motions is whether the garbage truck operated by Steven Galliano falls within the definition of mobile equipment which is as follows:
... "mobile equipment" means a land vehicle (including any machinery or apparatus attached thereto), whether or not self-propelled, (1) not subject to motor vehicle registration, or (2) maintained for use exclusively on premises owned by or rented to the named insured, including the ways immediately adjoining, or (3) designed for use principally off public roads, or (4) designed or maintained for the sole purpose of affording mobility to equipment of the following types forming an integral part of or permanently attached to such vehicle: power cranes, shovels, loaders, diggers and drills; concrete mixers (other than the mix-in-transit type); graders, scrapers, rollers and other road construction or repair equipment; air-compressors, pumps and generators, including spraying, welding and building cleaning equipment; and geophysical exploration and well servicing equipment; ...
The garbage truck does not meet subsection 1, 2, or 3. Subsection 4 is the part of the definition of mobile equipment that plaintiff contends is met in this case. The second issue presented is whether the injury arose out of the ownership, maintenance, operation, use, loading or unloading of the truck if it is classified as an automobile.
The sole business of Galliano Contractors, Inc. was hauling large containers of garbage from commercial businesses to various public dump sites. Galliano Contractors, Inc. owned and operated two roll off trucks which were used exclusively in the garbage collection business. Galliano Contractors, Inc. would deliver an empty container to a customer, pick up a full one and transport it to a dump site where the garbage would be discarded. The truck in question was a three axle, ten wheel truck which was registered with the Louisiana Department of Motor Vehicle Registration as a truck weighing 40,000 lbs. The truck was equipped with a boom and winch permanently attached to it. This equipment was used to roll the containers on and off the truck and to dump the garbage.
The Louisiana Supreme Court has not issued any definitive guidelines for interpreting the "mobile equipment" definition in CGL policies. The parties have exhaustively discussed the jurisprudence on this issue which is confined to the lower appellate courts, particularly the Third Circuit Court of Appeal. Only one case in this area, Sherville v. National Union Fire Ins. Co., 387 So. 2d 1181 (La.App. 1 Cir. 1980), was decided by the First Circuit. Although the parties have basically cited the same cases, they differ greatly as to the significance each decision has to the facts of this case.
The key to understanding the impact of the various cases is to pay particular attention to the manner in which the vehicle was being used in each case. Analyzing the coverage issue requires a two step process. First, it must be determined whether the vehicle in question is an automobile or mobile equipment. If it is found to be an automobile, the second step must be encountered. It must be decided whether the accident arose out of its ownership, maintenance, operation, use, loading or unloading. The distinction between the two steps in the process of determining the coverage issue can be blurred if the cases are not read in the context of their particular facts.
One category within the jurisprudence deals with accidents which occur when the vehicle is stationary and performing some operation with the equipment. Since no transportation or locomotion of the vehicle is involved and the equipment is performing an operation usually associated with the type of risk which a CGL policy is designed to cover, the courts have gone to great lengths to construe coverage broadly.
*772 Lucas v. Deville, 385 So. 2d 804 (La.App. 3 Cir.1979), writs denied 386 So. 2d 357, 359 (1980), involved a gin pole truck which was used in an off road stationary position to turn over a large cement hopper. A cable was attached from one side of the hopper to the gin pole truck. The gin pole truck was to gradually let down the hopper as it was pulled over from the other side by another gin pole truck. As the hopper was tipped over, the gin pole truck which the plaintiff was operating was tipped up on its back wheels. The cable disengaged or broke and the truck dropped back into its normal position. The force of the truck's dropping injured the plaintiff. The court found that a restrictive interpretation of the mobile equipment definition in the policy was inappropriate in the context of a vehicle which had departed from its transportation or locomotion role and was performing functions independent of that purpose. The court emphasized that the gin pole truck was being used in an off road, non locomotive situation. The Lucas court analogized the gin pole truck to a mobile crane.
Russo v. Veran, Inc., 488 So. 2d 372 (La. App. 3 Cir.1986), likewise held that a gin pole truck was not an automobile within a CGL policy. Relying on Lucas, the court held:
The facts of the Lucas case are very similar to the case at bar. In both cases, the truck was off the highway ..., stationary, and its gears in a mode so locomotion was impossible. The truck was operating as a lifting device, not a vehicle. 488 So. 2d 372 at 375.
Other courts dealing with this coverage issue based their decision on a finding that the accident did not arise out of the use of an automobile or that there was some negligence independent of and not concurring with the use of the vehicle. The First Circuit's decision in Sherville, supra, falls within this category. In Sherville, the insured was operating a winch truck to load aluminum beams or duct work onto a float. After the insured lifted a beam with the winch, the beam fell, killing the insured's father who had walked under the beam. Plaintiffs alleged that the insured had improperly secured the winch hook to the beam, failed to warn his father and/or failed to see him. The trial court, finding no coverage, granted a summary judgment to the insured's CGL carrier. The First Circuit reversed the trial court and found that the phrase "arising out of an automobile" in the policy was ambiguous. The court's opinion does not indicate whether the CGL policy contained a definition of automobile which excluded those vehicles classified as mobile equipment. The court based its decision on the ambiguity it found in the terms "arising out of the use of an automobile". It cited LeJeune v. Allstate Insurance Co., 365 So. 2d 471 (La. 1978), a Louisiana Supreme Court decision dealing with the "arising out of" aspect of coverage (the second step in the two step analysis for coverage). The Sherville court found that the insured's negligence was independent of and not even concurring with his use of the winch truck as a motor vehicle. Rather, it was the insured's use of the truck as a winch which led to possible liability. If the policy contained a definition of mobile equipment as a category of vehicles not included within the definition of an automobile, the court did not use that provision to find coverage. Since it is unclear whether there was a mobile equipment definition in the policy and because the Sherville decision was really based on the "arising out of" aspect of coverage, Sherville has limited applicability to the question of whether the garbage truck should be classified as mobile equipment.
All of the jurisprudence discussed above involved instances where the truck mounted equipment was being used at the time of the accident. In the case at bar, the equipment was not in use. Mr. Galliano was backing the truck in preparation to dump the garbage. Although this was an off road setting, the use or maintenance of the truck as a vehicle was the activity giving rise to possible liability (whether it was due to Steven Galliano's alleged negligent driving and/or the alleged failure of Galliano Contractors, Inc. to maintain the truck in a safe condition because it lacked an audible back up warning device). The truck was *773 not being used as a crane at the time of the accident. The court cannot conclude that the truck had departed from its transportation or locomotion role. Therefore, the jurisprudence relying on the transportation or locomotion distinction made in Sparkman v. Highway Insurance Company, 266 F. Supp. 197 (W.D.La.1967) does not dictate a finding of coverage in this case. Although the Galliano truck was engaged in a transportation or locomotion function at the time of the accident, the jurisprudence recognizing such a distinction, while not supporting coverage, does not foreclose it either. The CGL policy in question expressly provides coverage for mobile equipment while engaged in a transportation function. A vehicle clearly falling within the definition of those listed in Subsection 4 of the mobile equipment definition would be covered for a wreck which occurred while travelling on the public roads on the way to a job site. Since mobile equipment is excluded from the definition of automobile, the policy does cover vehicles which can meet the definition of mobile equipment for risks normally associated with automobile liability insurance.
The first question in this case is simply whether the garbage truck falls within the classification of mobile equipment contained in Subsection 4 of that definition. Since the winch and boom are permanently attached to the truck, the real issues within the Subsection 4 definition of mobile equipment are:
1) Whether the truck is designed or maintained for the sole purpose of affording mobility to the winch and boom, and
2) Whether the winch and boom can be considered equipment of the same type as power cranes, shovels, loaders, diggers and drills; concrete mixers (other than the mix-in-transit type); graders, scrapers, rollers and other road construction or repair equipment; air-compressors, pumps and generators, including spraying, welding and building cleaning equipment; and geophysical exploration and well servicing equipment.
While interpreting the definition of mobile equipment, the court must be mindful of the jurisprudential rule that an exclusion clause in a liability policy is strictly construed against the insurer and in favor of coverage if more than one interpretation is possible. LeJeune, supra.
Plaintiff contends that the boom and winch apparatus can be likened to a power crane, one of the types of equipment listed in Subsection 4. Since the policy contains no language explicitly describing what type of apparatus can be considered a power crane, the court finds that a reasonable interpretation of power crane could include the boom and winch apparatus on the garbage truck which performed essentially the same function as would a power crane. The most difficult obstacle to the truck's meeting the definition of mobile equipment is the requirement that the vehicle be designed or maintained for the sole purpose of affording mobility to the types of equipment listed in Subsection 4. The evidence clearly establishes that the garbage truck did provide mobility to the winch and boom. Since the equipment was permanently attached to the truck and went wherever the truck went, it cannot be argued otherwise. However, the policy provides that affording mobility to the equipment must be the sole purpose for which the truck was designed or maintained. The crux of the coverage issue in this case is the interpretation of the "sole purpose" requirement.
Only one case has specifically considered the "sole purpose" requirement. In Doty v. Safeco Insurance Company, 400 So. 2d 718 (La.App. 3 Cir.1981), a pick up truck which had welding equipment bolted to its bed which was used in connection with a welding business was involved in an accident while being driven by the business owner's son who was returning home from a disco at 3:00 a.m. The evidence established that the welding business was operated with two welding rigs, both installed in pick up trucks. The welding was all done on-site which required the welding equipment to be transported to the various job sites. Nothing else could be put into *774 the bed of the pickup which had the welding equipment installed on it. Aside from the business use to which the truck was applied, the truck was used by the 17 year old son to go to and from school and for personal errands. The CGL carrier contested coverage arguing that, since the truck was put to personal use, it was not designed or maintained for the sole purpose of affording mobility to the welding equipment. The court, distinguishing the word "use" from the words "designed or maintained", found that, since Subsection 4 of the mobile equipment definition did not refer to the vehicle's use as did Subsection 2 and 3, but contained the words "designed or maintained", the fact that the truck was "used" for personal convenience was not relevant in determining whether the vehicle was mobile equipment. The court ascribed to the terms "designed or maintained" a meaning equivalent to "structurally or functionally" suited.
The evidence reveals that the garbage trucks used in Galliano Contractors' business were always operated with a container and the winch and boom were always used in the garbage collection business. It is indisputable that the winch and boom were essential to performing the job of picking up and dumping the containers. The court has no doubt that the job could not have been performed without the winch and boom. However, it is also evident that the garbage truck carried out another function besides merely providing mobility to the equipment. The truck was used to transport the containers to and from the dump sites. Essentially, the winch and boom were used to load and unload the garbage truck. The truck's primary purpose was to transport the garbage even though, technically, it could be said that the truck also provided mobility to the winch and boom. Since the truck provided transportation to the garbage in addition to the equipment, the court must determine whether the "sole purpose" requirement in the definition of mobile equipment can be reasonably interpreted to defeat coverage. Although the policy refers to "sole purpose", the court cannot conclude that a reasonable interpretation of the words "sole purpose" would include any other conceivable purpose however incidental or remotely possible. However, in this case, the function of hauling the garbage containers can not be viewed as incidental or remote. Steven Galliano and Galliano Contractors, who filed a memo in opposition to Scottsdale's motion, present a seemingly attractive argument for coverage, contending that Galliano Contractors maintained the truck for the sole purpose of affording mobility to the winch and boom located on the truck and to the garbage containers which formed an integral part of the vehicle. They point out that the truck was always operated with a container on it. Although they refer to the containers as forming an integral part of the truck, the containers can in no way be reasonably likened to any of the equipment listed in Subsection 4. Therefore, regardless whether the containers form an integral part of the truck, they do not in any way support a finding that the truck is mobile equipment. On the contrary, the fact that the truck functioned as a means of transport for the containers serves to undermine rather than support the logic in any argument for coverage. Even under the interpretation of "designed or maintained" given by the Third Circuit in Doty v. Safeco, supra, this court would have to conclude that the garbage truck was structurally or functionally suited for the purpose of transporting the containers just as well as providing mobility to the equipment. To conclude that the truck fits the definition of mobile equipment would, in the court's opinion, stretch the policy's language unreasonably. Therefore, the court finds that the garbage truck was an automobile within the policy terms.
Having concluded that the garbage truck was an automobile rather than mobile equipment, the court must consider the second step in the process of deciding the coverage issue. Even though the garbage truck was an automobile, the policy exclusion only applies where the injury arises out of the ownership, maintenance, use, loading or unloading of an automobile.
The evidence reveals no basis for liability of Steven Galliano or Galliano Contractors, *775 Inc. independent of and not concurring with the ownership, maintenance, use, loading or unloading of the truck as an automobile. Steven Galliano was not operating any of the truck's equipment at the time of the accident. It was his actual operation of the truck which formed the basis of potential liability. Any liability of Galliano Contractors, Inc. for failing to equip the truck with an audible back up warning is directly related to the ownership or maintenance of the truck. Since the truck was not being used as a crane at the time of the accident, the court can not use the Sherville case as support for a finding of coverage. In any event, it should be noted that the Sherville court's application of the "arising out of the use of an automobile" language has been the subject of some criticism in that it failed to recognize that the exclusion is not limited to operation of a motor vehicle but also includes use, loading and unloading. See McKenzie and Johnson, Insurance (15 La. Civil Law Treatise) § 67 (fn. 49). The viability of the Sherville case as authority for future applications in the context of "arising out of" cases has also been called into question by the Louisiana Supreme Court in Carter v. City Parish Government of East Baton Rouge, 423 So. 2d 1080 (La.1982) which, although not specifically addressing the ultimate conclusion made by the Sherville court, disapproved of the method of analysis the court employed.
Since the court has concluded that the garbage truck was an automobile rather than mobile equipment, and that the ownership, maintenance, use, loading or unloading of an automobile was an essential ingredient of any duty which Steven Galliano or Galliano Contractors, Inc. may have breached in this case, the court must find that the CGL policy issued by Scottsdale Insurance Company does not provide coverage. Therefore, the motion for summary judgment filed by Scottsdale Insurance Company should be granted and the plaintiff's motion should be denied.
Houma, Louisiana, on this the 1st day of May, 1991.
/s/Timothy C. Ellender
JUDGE | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1784238/ | 587 So. 2d 273 (1991)
Thomas F. PUCKETT and Mildred M. Puckett
v.
RUFENACHT, BROMAGEN & HERTZ, INC.
No. 90-FC-1321.
Supreme Court of Mississippi.
September 18, 1991.
Dissenting Opinion October 2, 1991.
*274 Fred Krutz, Alan W. Perry, Forman, Perry, Watkins & Krutz Firm, Jackson, for appellants.
William J. Nissen, Sidley & Austin, Chicago, Ill., Carey R. Varnado, Easterling & Varnado, Hattiesburg, for appellee.
Joseph P. Wise, Wise Carter Child & Caraway, Jackson, for amicus curiae.
En Banc.
Dissenting Opinion of Justice Pittman October 2, 1991.
HAWKINS, Presiding Justice, for the Court:
Under the provisions of Rule 20 of the Mississippi Supreme Court Rules, the United States Court of Appeals, Fifth Circuit, has by certificate of November 14, 1990, certified questions of law to this Court following its decision in Puckett v. Rufenacht, Bromagen & Hertz, Inc., 903 F.2d 1014 (1990).
From these we take extended excerpts.
This case arose out of the commodity futures trading tragedy of Dr. Thomas F. and Mrs. Mildred Puckett. The United States District Court for the Southern District of Mississippi granted summary judgment in favor of Rufenacht, Bromagen & Hertz, Inc. (RB & H), the broker, on all counts below. The Court of Appeals affirmed the summary judgment dismissing the Pucketts' claims that RB & H committed common law fraud or violated § 4b of the Commodity Exchange Act (CEA), 7 U.S.C. § 6b. However, it certified the state law questions of negligence and breach of fiduciary duty to the Supreme Court of Mississippi.
FACTS
Read in the light most favorable to the Pucketts, RB & H, a Chicago-based commodity brokerage firm, operates a branch office in Hattiesburg, where the Pucketts reside. Dr. Puckett is a retired pathologist who successfully ran his own pathology lab in Hattiesburg, with gross revenues of $8,000,000 per year.
Dr. Puckett had continuously traded some form of securities from 1955-56 to 1984. He had previously traded commodities on two occasions. He traded with Merrill Lynch in the late 1950's or early 1960's and lost about $40,000. He also traded for a couple of weeks with Paine Webber in mid-1984 and lost about $1,000.
The Pucketts learned of RB & H in July, 1984, at a dinner party. Roger Parker, the manager of the Hattiesburg branch of RB & H, made a presentation about trading commodities in order to acquire customers. Both of the Pucketts opened accounts. They filled out applications on which they stated the amount of risk capital available for commodities trading as $25,000 (for Dr. Puckett) and $15,000 (for Mrs. Puckett). Both Dr. and Mrs. Puckett signed Risk Disclosure Statements before they traded. Both Pucketts acknowledged by signing that they "examined this document and underst[ood] fully the advice contained therein."
These statements informed the Pucketts of the substantial risk in futures tradings, containing the following language:
The risk of loss in trading commodity futures contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade, you should be aware of the following:
(1) You may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain a position in the commodity futures market. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account.
*275 (2) Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a "limit move."
(3) Placing contingent orders, such as a "stop-loss" or "stop-limit" order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.
(4) A "spread" position may not be less risky than a simple "long" or "short" position.
(5) The high degree of leverage that is often obtainable in futures trading because of the small margin requirements can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
This brief statement cannot, of course, disclose all the risks and other significant aspects of the commodity markets. You should therefore carefully study futures trading before you trade.
(R. 248, 253)
The Pucketts' accounts were non-discretionary. In other words, they made all the trading decisions themselves[1] RB & H could not make unauthorized trades on their behalf. Dr. Puckett spent several days each week at RB & H's offices where he used a quote machine and a news service provided on a screen. He also received comments from the floor of the Chicago Mercantile Exchange. Dr. Puckett regularly received statements (confirmation slips and monthly account statement) which he reviewed.
According to his own deposition testimony and affidavits, Dr. Puckett understood the risks of trading commodity futures contracts. (R. 223-5) Dr. Puckett knew that a risk accompanied every trade and that he had to incur this potential risk in order to reap the potential rewards of large gains. (R. 211-12) Dr. Puckett understood that while some contracts had daily price limits (i.e. limits on how far up or down they could move in a single day), others had no limits and the risk of loss each day on such contracts was unlimited. (R. 221-23) He knew that the potential loss on the Standard & Poors 500 Stock Index Contract (S & P Index) was unlimited. (R. 222-23) Initially, Dr. Puckett was unaware of how quickly the S & P 500 Index could move in a day, but he became aware of this risk when he lost $65,000 trading this contract in one day. (R. 223-24) He continued to trade this contract after learning of this risk. Id.
Dr. Puckett had both successful and unsuccessful trades throughout the thirty-eight months he traded with RB & H. Parker testified that he never tried to influence Puckett in his choice of trades. Dr. Puckett agreed and testified that the initial idea for each of his trades was his own. Parker always properly carried out Dr. Puckett's orders. Puckett could not identify any statements made or information provided by Parker which was untrue. (R. 203) Dr. Puckett believed that any advice which Parker gave about trades was in good faith, even if it didn't pan out. (R. 204) A sampling of Dr. Puckett's deposition reads:
Q. Now, when you did incur losses in your account at RB & H, you were aware of those losses on the day they occurred; is that correct?
A. Yes.
Q. And it was your decision to continue to trade each day after that; is that right?
A. Yes.
Q. And you understood, didn't you, the risk that went along with each particular trade you did?
MR. KRUTZ:
Object to the form of the question. You can answer it, though.
A. Yes.
Q. And you also understood with each trade there was a potential profit that could be made on that trade; is that right?
*276 A. Yes.
* * * * * *
Q. It's true isn't it, that when you made a trade, you knew there was both a potential risk and a potential reward to that trade?
A. Yes.
Q. So, in order to obtain the potential reward, you knew you had to incur that potential risk; is that right?
A. That's right.
(R. 210-212)
The initial risk figures of $25,000 and $15,000 which the Pucketts listed in their customer applications became unimportant to Dr. Puckett once he began trading and he decided to risk more money as time went on. (R. 212, 236) As noted, Dr. Puckett knew his losses on the day they were incurred. (R. 210-211) He generally covered those losses with a check that afternoon or the next morning. (R. 206) Dr. Puckett occasionally liquidated securities at another firm to cover his losses. On those occasions, RB & H always waited the five days it took the security transaction to clear before cashing his check. Eventually, Dr. Puckett began liquidating his pension plan to cover his commodity trading losses. The checks did not indicate the source of funds and Dr. Puckett never informed Parker that he was funding his losses by liquidating his pension fund. (R. 225, 235-38, 629-54)
Dr. Puckett knew that RB & H received a commission for each trade he made. His monthly account statements showed those amounts. (R. 202)
Dr. Puckett quit trading in September, 1987, on the advice of his son. His accountant had informed his son of the state of Dr. Puckett's finances. Dr. Puckett's son told him to stop. By this time, Dr. Puckett had lost over $2,000,000. (R. 229-30) Dr. Puckett told Parker he was quitting because he had lost enough. He made no complaints about the way his account was handled and promptly paid his last loss. (R. 204-05, 214)
Thereafter, the Pucketts brought suit to recover trading losses, punitive damages and attorneys' fees. Their complaint was based on the following counts and allegations:
(i) violation of § 4b of the CEA, 7 U.S.C. § 6b,
(ii) breach of fiduciary duty,
(iii) fraudulent inducement, fraudulent concealment, and actual fraud,
(iv) constructive fraud,
(v) negligence,
(vi) breach of good faith and fair dealing and the just and equitable principles of trade, and
(vii) overreaching that was tantamount to fraud.
In response to RB & H's motion for summary judgment, the Pucketts submitted (by affidavit and deposition) the testimony of three expert witnesses (Jordan, Cullen and Giacona) expressing their opinion that Dr. Puckett traded too many different commodities, that he was not adequately informed and experienced to trade S & P futures contracts, that his trading volumes were so high as to be irrational, that he had no trading plan, and there was an extremely high probability that he would lose all he had if he was allowed to continue trading. The experts expressed their opinion that industry standards required a commodities broker to intervene to advise or require a customer such as Dr. Puckett to discontinue trading commodities. According to the experts, by the time RB & H allowed Dr. Puckett to trade S & P futures, Dr. Puckett had already demonstrated that he was unfit to trade any commodity futures, much less S & P futures. The experts concluded that RB & H's actions in permitting and encouraging Dr. Puckett's continued trading after he had lost substantial sums of money and after RB & H should have recognized the facts demonstrating his unsuitability to trade commodities violated standards of conduct and the minimum standard of care generally recognized and accepted in the commodities industry.
The trial judge held for RB & H on each of these counts and dismissed the Pucketts' suit with prejudice.
*277 On appeal, the Pucketts argued that genuine issues of material fact remain to be resolved. The three issues they raised were:
(i) fraud and a violation of CEA § 4b,
(ii) breach of fiduciary duty, and
(iii) negligence.
The Court of Appeals affirmed the trial court's disposition on the fraud issues and certified the following question of state law to this Court:
1. Under Mississippi law, what duty of care does a commodities broker owe to a commodities customers in a non-discretionary account?
(a) is the duty only properly to execute trades as directed by the customer, or
(b) is the commodities broker required to exercise that degree of care which a commodities broker of ordinary professional skill and prudence would exercise under similar circumstances?
2. Under Mississippi law, does a fiduciary duty exist between a commodities broker and a commodities customer with a non-discretionary account? If so, does that duty extend to require a commodities broker to:
(a) advise a customer to discontinue trading if the commodities broker knows or has reason to know that the customer is trading excessively and irrationally, or
(b) that the customer lacks the experience and ability to trade the commodities which he is trading, or
(c) that the customer has already incurred losses which are very high in proportion to the customer's net worth, so that there is a high probability that the customer will lose his entire net worth if he continues to trade commodities, or
(d) is such duty affected where the customer initiates the ideas for the trades, presumably understands the risks and potential rewards of the trades, directs the broker to execute the trades, and does not ask the broker is there a duty to determine and monitor whether the trades are suitable for the customer?
If, under Mississippi law, there is such a duty of care, is it subject to the doctrine of assumption of risk?
The Supreme Court of Mississippi is not bound by the phrasing of the questions certified.
LAW
The application of Rule 20 must be kept within well-defined ground rules. First, this Court is not called upon to decide the case. Nor should we go behind the facts presented by the certifying court. If either party has any objection to the facts related by the certifying court, the place to voice the objection is with that court, not us. We must understand the facts precisely as the certifying court understands them. Then, from the facts as understood and related by the certifying court, we are asked to make a more assured declaration of the law, when applied to the particular facts as related to us, than the certifying court feels it can comfortably pronounce. Boardman v. United Services Auto Ass'n., 470 So. 2d 1024, 1029-1031 (Miss. 1985).
From the facts related by the Court of Appeals, the following is uncontradicted:
1. In 1984 at a dinner party attended by the Pucketts, there was a sales pitch by Parker, a representative of RB & H, on futures trading.
2. At that time Dr. Puckett could be accurately characterized as a good businessman with some experience in securities investment and futures trading.
3. The Pucketts were warned before engaging in futures trading by RB & H by a written statement, signed and understood by them, of the substantial risk they were undertaking in futures trading.
4. No person attempted to sell the Pucketts any futures. No person sought to induce them to enter into any of the great number of futures contracts they entered from 1984 until September, 1987, when Dr. Puckett ceased trading in futures. See: Dean Witter Reynolds, Inc. v. Hammock, *278 489 So. 2d 761 (Fla.App. 1986), for case where investor was misled by his broker.
5. The Pucketts were not asked to trust or put any faith in any employee of RB & H, except to carry out Dr. Puckett's instructions.
6. Dr. Puckett knew his wins and losses each day.
7. Each transaction, each trade in which RB & H was the broker, and there were perhaps hundreds of them, was a separate and distinct contract. The only interest RB & H had in any of these contracts was that of a broker, receiving a commission from each transaction.
In sum, Dr. Puckett's trading objective was to make profits as a speculator in the commodity markets. He never asked Parker whether particular trades or particular trading strategies were suitable for him in terms of his age, financial needs and investment objectives. Nor did Dr. Puckett ever ask Parker for advice on where he should get the funds to use for trading commodity futures, or whether he should lessen his trading at RB & H. Dr. Puckett neither asked for nor was he given any advice or counseling on his trading tactics and strategies, nor is there anything in the related facts suggesting that he ever expected to receive any advice on the wisdom of any trade.
The only sin the defendants can be accused of committing is standing by while Dr. Puckett committed fiscal hara-kiri. It is equally clear and uncontradicted that no representative of RB & H uttered one word of warning or caution as to any of his trades. In view of the Jordan, Cullen and Giacona affidavits, and for purposes of our analysis, we will assume RB & H had reason to believe Dr. Puckett was, at times at least, trading quite foolishly.
The crux of the inquiry to us is whether RB & H can be held liable to the Pucketts under the common law of this State based upon Parker's and its total silence and passivity during Dr. Puckett's protracted self-immolation.
One word encompasses all the grandeur and majesty of western civilization. That word is "freedom." This, of course, is well known to any student of history. Not as well recognized, but equally true is that the absolute concomitant of freedom is responsibility; the former cannot exist unaccompanied by the latter. They are different sides of the same coin.
The laws of the universe do not forgive mistakes. Every cause must have certain effects. Whether motivated by the best or worst intention, a decision is going to have certain consequences. If it was a mistake, someone must suffer.
If a society is to be free, it must demand of every person who, completely on his own, makes a mistake that he has no legal right to shift from his shoulders onto another's the suffering it causes. In our modern society, en masse we are our brothers' keepers; we pay taxes for schools, highways, public health and hundreds of other public programs. On an individual basis, however, no man should be required by law to pay for what was solely and purely another man's mistake.[2]
It may be morally reprehensible for one man to watch another open a window on the twentieth floor of a skyscraper, climb through it and jump out, when he could easily have reached out and stopped him. To impose a legal responsibility upon the bystander to stop him, however, is an entirely different matter.[3]
THE PUCKETTS' ACCOUNT
The Pucketts' account with RB & H was a non-discretionary account.
*279 A discretionary account is one in which the broker himself on behalf of the investor customer makes and enters into futures contracts. A non-discretionary account is one in which by definition, the broker is only expected to faithfully carry out the instructions of the customer.
From other jurisdictions, certified question 1(a) is generally recognized as the only duty imposed upon a commodities broker on a non-discretionary account.[4]Leib v. Merrill Lynch, Pierce Fenner & Smith, Inc., 461 F. Supp. 951, 953 (E.D.Mich. 1978); Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1049 (11th Cir.1987); First Union Brokerage v. Milos, 717 F. Supp. 1519, 1526 (S.D.Fla. 1989); Platsis v. E.F. Hutton & Co., Inc., 642 F. Supp. 1277, 1308 (W.D.Mich. 1986); Merrill Lynch, Pierce, Fenner & Smith v. Perelle, 356 Pa.Super. 165, 183-184, 514 A.2d 552, 561 (1983).
Certified question 1(b) is the generally recognized duty a commodities broker owes a customer in a discretionary account. Leib, 461 F. Supp. at 953; Howell v. Freifeld, 631 F. Supp. 1222, 1224 (S.D.N.Y. 1986); Paine Webber, Jackson & Curtis, Inc. v. Adams, 718 P.2d 508, 515 (Colo. 1986).
By its very nature, a broker in a discretionary account is a fiduciary in his treatment of his customer's funds to properly advise and properly invest. On the other hand, while a broker in a non-discretionary account as his customer's agent obviously has a fiduciary duty to properly carry out his customer principal's instructions, ordinarily his fiduciary duty ends there. He has no further duty to advise or counsel as to the wisdom of his customer's trades. Paine, Webber, Jackson & Curtis v. Adams, 718 P.2d 508, 514-516 (Colo. 1986); Leib, 461 F. Supp. at 953.
Under the general law from other jurisdictions, the answer to the first question is that a commodities broker in a non-discretionary account only owes his customer the duty to properly execute trades as directed by him, and has no further duty to call upon his own professional skill and prudence as to the wisdom of any of his customer's trades. Leib, 461 F. Supp. at 953; Gochnauer, 810 F.2d at 1049; Milos, 717 F. Supp. at 1526; Platsis, 642 F. Supp. at 1308; Perelle, 356 Pa.Super. at 183-184, 514 A.2d at 561.
Likewise, from other jurisdictions, the commodities broker has none of the fiduciary duties encompassed in the second certified question to a non-discretionary account customer. Leib, 461 F. Supp. at 953; Gochnauer, 810 F.2d at 1049; Milos, 717 F. Supp. at 1526; Platsis, 642 F. Supp. at 1308; Perelle, 356 Pa.Super. at 183-184, 514 A.2d at 561.
We believe the decisions from other jurisdictions are sound and their pronounced principles should apply in this state as well. Dr. Puckett over a period of several years no doubt entered into several hundred futures contracts, each of them separate and distinct. Leib, 461 F. Supp. at 952-953. He gave instructions to RB & H. RB & H in turn entered into the contract precisely as instructed, and charged its commission. Having done so, its contractual duty to Dr. Puckett ended there. It was not legally required to offer an umbrella of professional wisdom between contracts, detect a pattern, and advise him as to any futures trade. Nothing in the related facts suggests that RB & H entered into any kind of contractual obligation to professionally advise or warn Dr. Puckett in any way, or that Dr. Puckett understood RB & H to have such an obligation. We adopt as sound the following holdings from Robinson v. Merrill Lynch, Pierce, Fenner & Smith, 337 F. Supp. 107, 111 (N.D.Ala. 1971), aff'd Robinson v. Merrill Lynch, Pierce, Fenner & Smith, 453 F.2d 417 (5th Cir.1972):
The agency relationship did not arise until the plaintiff placed an order, since defendant did not have discretionary or managerial power over plaintiff's account and therefore had no authority to *280 act for the plaintiff without express direction. [citations omitted]
A broker's office, without special circumstances not present here, is simply to buy and sell. The office commences when the order is placed and ends when the transaction is complete. The risk of the venture is upon the customer who profits if it succeeds and loses if it fails. When the transaction is closed in accordance with the understanding of the parties, the broker gets only his commission and interest upon advances... .
... .
The relationship of agent and principal only existed between plaintiff and defendant when an order to buy or sell was placed, and terminated when the transaction was complete. That is, defendant was a broker and nothing more... . The affair entrusted to a broker who is to buy or sell through an exchange is to execute the order, not to discuss its wisdom.
The result is that at the time of the acts complained of in the present case, there was no "fiduciary relationship" between the parties and there was, accordingly, no breach of duty arising from such relationship.
.....
Where there is no special relationship of trust and confidence between a stockbroker and his customer the stockbroker is not liable for improvident speculation... .
.....
There was no pleading or proof of an express contract or special circumstances which required defendant to transmit to plaintiff the extrinsic facts or opinions in any way related to the market in question. Such a duty existing in the absence of a specific contract would be owed to every signatory of a margin agreement, whether or not he ever placed an order to buy or sell. The magnitude of this duty would be staggering in view of the testimony that each account executive has hundreds and possibly several thousand customers and would be so grossly burdensome as to be patently unreasonable.
The proposition becomes even more untenable when one attempts to analyze the claimed duty to inform. Plaintiff contends that he was entitled to know the significant facts. What are the significant facts? Does a broker have the responsibility to transmit every fact although it is only one of a myriad of facts which might have some bearing on the market? If a broker were under a duty to inform all of its customers of every fact which might bear upon any security held by the customer, the broker simply could not physically perform such a duty.
The complexity and variety of the factors affecting price are so great that any attempt to cast upon the broker the duty to determine, at his peril, which facts are relevant to each customer in each commodity would make the broker an insurer for the trader. Clearly the relationship was not intended as such.
To make this defendant or any other broker the guardian of a customer such as the plaintiff would destroy an important part of the marketplace. In every case a trader could recover damages from his broker merely by proving nontransmission of some fact which, he could testify with the wisdom of hindsight, would have affected his judgment had he learned of it. [Emphasis original]
337 F. Supp. at 111-113.
Commodities futures exchanges and trading are important to our national economy and have been regulated by Congress for over 70 years. Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 360, 102 S. Ct. 1825, 1830, 72 L. Ed. 2d 182 (1981). This Court has no intention in this case of deviating from settled legal principles.
THE DIFFICULT QUESTION
There is a more difficult question arising from the facts of this case as related to us, one not specifically asked by the Court of Appeals, but raised by the Pucketts in their brief, and which presents this Court with a dilemma as to whether we should answer it or not.
*281 The question is, conceding the general rule of law that a commodities broker in a non-discretionary account only owes his customer the duty to properly carry out his instructions, would a custom or standard of the commodities brokers to warn customers who in their professional judgment are making imprudent and foolish futures trades increase the legal duty owed the Pucketts in this case? Conceding the accuracy of the affidavits of Jordan, Cullen and Giacona filed by the Pucketts, there is such a custom or standard recognized by the commodities brokers.
Our considered judgment is that we will not have rendered all the assistance we should give in this case without answering the question as applied to the facts related to us in this in this case.
To begin with, there is nothing in the related facts which suggests that the Pucketts knew of any such custom or standard, and therefore did not enter into any of their futures contracts under any assumption of its existence. The Pucketts never understood or believed RB & H had any such contractual or fiduciary obligation resulting from such a custom or standard, because there is nothing in the related facts to suggest they even knew of it. When Dr. Puckett began his course of trading through RB & H, there is nothing to suggest that in his mind he knew or believed this brokerage house had some duty under some in trade custom or standard to warn him as to his improvidence. RB & H did nothing to lead the Pucketts to believe there was such a custom. Had the Pucketts in directing the many futures trades and RB & H in carrying out their directions recognized the existence of such a custom or standard and relied upon it, we could of course have had an entirely different contractual relationship between the parties than that which they understood to exist. See, Dixon, Irmaos & CIA v. Chase Nat. Bank, 144 F.2d 759 (2nd Cir.1944), cert. denied Chase Nat. Bank of City of New York v. Dixon, 324 U.S. 850, 65 S. Ct. 687, 89 L. Ed. 1410 (1945).
In Postal Telegraph Co. v. Willis, 93 Miss. 540, 47 So. 380 (1908), a Jackson cotton buyer, Willis, by telegram made an offer to sell cotton, in turn accepted by telegram of the cotton merchant buyer in Mobile. The Jackson Postal Telegraph Office delayed delivery of the wire for several hours. In the interim, the Mobile merchant called the Jackson buyer, asked him if he had received the wire, and was told it had not been received. The Mobile buyer then withdrew his acceptance of the offer, to which Willis agreed. Willis later in the day sold the cotton at a reduced price, and sued Postal Telegraph for the difference.
This Court first noted the settled law that when the Mobile buyer delivered the telegram of acceptance to the telegraph office in Mobile, the contract was complete. It was argued by Willis that while this might ordinarily be the law, there was a custom in the cotton trade, recognized and acted upon by cotton buyers, that an acceptance was not binding until the telegram was actually received by the offeror.
We responded:
The contract made by the parties by virtue of these telegrams is clear, unambiguous, and valid, unless the so-called usage or custom can be invoked to relieve the parties from the legal effect of their acts. There is no such uncertainty about this contract as makes it necessary, because of indeterminate terms, to resort to custom or usage in order to understand exactly what was meant; but the contract is express in its terms, unambiguous, and became binding on the parties when the telegram of acceptance was delivered to the telegraph company in Mobile. It would be in the highest degree impolitic, and be the cause of introducing interminable confusion into the contracts, if, when the terms of a contract are express, clear, and valid under the law, its legal effect could be controlled by some local or trade custom. Our court has long since been committed to this wise doctrine. Shackleford v. N.O., J. & Great Northern Ry., 37 Miss. 202. In the case of Hopper v. Sage, 112 N.Y. 530, 20 N.E. 350, 8 Am. St. Rep. 771, citing many authorities, the court says: "Usage and custom cannot be proven to *282 contravene a rule of law, or to alter or contradict the express or implied terms of a contract free from ambiguity, or to make the legal rights or liabilities of the parties to a contract other than they are by the terms thereof.
When the terms of a contract are clear, unambiguous, and valid, they must prevail, and no evidence of custom can be permitted to change them." In the case of Shackleford v. New Orleans, Jackson & Great Northern Railroad Company, 37 Miss. 202, the court has said: "These usages, many judges are of the opinion, should be sparingly adopted, by the courts as rules of law, as they are often founded on mere mistake, or on the want of enlarged and comprehensive views of the full bearings of principles. Their true office is to interpret the otherwise indeterminate intentions of parties, and to ascertain the nature and extent of the contracts, arising, not from express stipulations, but from mere implications and presumptions and acts of a doubtful and equivocal character, and to fix and explain the meaning of words and expressions of doubtful or various senses. On this principle the usage or habit of trade, or conduct of an individual, which is known to the person who deals with him, may be given in evidence to prove what was the contract between them." 2 Greenleaf's Ev. § 251, and note 5. And the court further says that, where a custom or usage is resorted to, such customs must be certain, uniform, reasonable, and not contrary to law.
To the same effect is 2 Page on Contracts, p. 928: "The true and appropriate office of a usage or custom is to interpret the otherwise indeterminate intention of parties, and to ascertain the nature and extent of their contracts, arising, not from express stipulations, but from mere implications, assumptions, and acts of a doubtful or equivocal character."
47 So. at 381. Also, D.S. Pate Lumber Co. v. Weathers, 167 Miss. 228, 146 So. 433 (1933); O.J. Stanton & Co. v. Miss. State Highway Commission, 370 So. 2d 909, 915 (1979), "The law of usage and custom and the courts cannot make contracts for parties."
Courts from other jurisdictions have rejected claims similar to the Pucketts seeking damages based solely upon a brokerage firm's in-house rules or a trade custom to warn customer investors of imprudent investments. Such rules "were never intended to protect him [the investor] from his own greed, as plaintiff seems to suggest." Instead, they "are designed to protect the broker from being saddled with losses which the investor is not able to cover, as was ultimately the case here." J.E. Hoetger & Co. v. Ascencio, 572 F. Supp. 814, 822 (D.C.Mich. 1983); Carras v. Burns, 516 F.2d 251 (4th Cir.1975); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Goldman, 593 F.2d 129 (8th Cir.1979); Farmland Industries v. Frazier-Parrott Commodities, 871 F.2d 1402 (8th Cir.1989). If the violation of the in-house rule or custom were accompanied by fraud, the rule would be otherwise. Goldman, 593 F.2d at 134. Compare, Thropp v. Bache Halsey Stuart Shields, Inc., 650 F.2d 817, 820 (1981), a case holding stockbrokers' own custom and standards of care may be used in establishing breach of proper legal standard in a discretionary account.
The Pucketts argue our recent case of Gilmore v. Garrett, 582 So. 2d 387 (Miss. 1991), as authority for a legal duty on the part of RB & H to exercise some supervision. That case is distinguishable. Generally, prospective home owners place some reliance in the builder contractor for some guidance in the construction of their residences. Keyes v. Guy Bailey Homes, Inc., 439 So. 2d 670, 671-672, 673 (Miss. 1983). In that case there was a certain, specific danger in the subsoil of which the contractor builder was aware, yet he gave no warning of its danger. Had Mr. Gilmore given the prospective home owner the equivalent advance warning of the danger inherent in constructing a home on this site that was given the Pucketts before they engaged in futures trading, he would have had escaped legal liability as well.
We therefore conclude that the trade custom and standard of care elucidated in *283 the Jordan, Cullen and Giacona affidavits, did not increase the duty RB & H owed the Pucketts in this case.
CERTIFIED QUESTIONS ANSWERED.
ROY NOBLE LEE, C.J., DAN M. LEE, P.J., and PRATHER, ROBERTSON, SULLIVAN and BANKS, JJ., concur.
PITTMAN, J., dissents, opinion to follow.
McRAE, J., dissents without written opinion.
PITTMAN, Justice, dissenting:
Believing that the limited fiduciary duty of a commodities broker includes a duty of ordinary care and a duty of loyalty to a customer of a nondiscretionary account, I respectfully dissent.
I first address the extent of a broker's duty to a customer of a nondiscretionary account. I agree with Justice Hawkins that the general law from other jurisdictions is that the duty is a very limited one. Some jurisdictions have found that there is no fiduciary duty unless there are special circumstances or a contract providing such. The Colorado Supreme Court explained that the stockbroker/customer relationship is not per se fiduciary in nature unless there is proof of practical control of a customer's account by a broker. Paine, Webber, Jackson & Curtis v. Adams, 718 P.2d 508, 517 (Colo. 1986). Likewise, the Wisconsin Supreme Court has found that even a broker who provides advice and counsel to a customer with a nondiscretionary account does not have a fiduciary duty to that customer. Merrill Lynch, Etc. v. Boeck, 127 Wis. 2d 127, 377 N.W.2d 605, 608 (1985). The Boeck court explained further that there may be a fiduciary duty to a nondiscretionary account client where there is an express contract or other special circumstances. The Wisconsin justices never interpreted special circumstances. The majority in Boeck did find that a broker owes a customer a duty of ordinary care. Id. Other jurisdictions have also refused to impose a fiduciary duty in the case of nondiscretionary accounts. See, e.g., Robinson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 337 F. Supp. 107 (N.D.Ala. 1971), aff'd. 453 F.2d 417 (5th Cir.1972), Leib v. Merrill Lynch, Pierce, Fenner & Smith, 461 F. Supp. 951, 952-953 (E.D.Mich. 1978), Shearson Hayden Stone, Inc. v. Leach, 583 F.2d 367 (7th Cir.1978), Caravan Mobile Home Sales v. Lehman Bros. Kuhn Loeb, 769 F.2d 561 (9th Cir.1985).
In a concurrence to Boeck, supra, Justice Abrahamson disagreed with the majority as to a broker's duty to a nondiscretionary account client. She explained that the relation is one of principal and agent, and the broker, like other agents, is a fiduciary. Id. at 613, citing 1 Restatement (Second) of Agency, sec. 1 (1958). In her concurrence, Justice Abrahamson also points out that the Boeck majority never explains "special circumstances". Id. at 615.
Justice Ceci of the Wisconsin Supreme Court strongly dissents to the Boeck majority. Justice Ceci suggested that a finding that a client's account is nondiscretionary is irrelevant in determining the existence of a fiduciary duty because even an experienced investor without full information will make poor investment decisions. Id. at 617. I am persuaded by both Justice Abrahamson and Justice Ceci of the Wisconsin Supreme Court that there is a fiduciary duty to a customer owed by a broker as well as a duty of ordinary care.
Other jurisdictions have found that there is a fiduciary duty, but only to properly execute trades as directed. In Index Futures Group, Inc. v. Ross, 199 Ill. App. 3d 468, 145 Ill. Dec. 574, 557 N.E.2d 344 (Ill. App. 1 Dist. 1990), an appellate court of Illinois found that the duty of care owed by a broker carrying a nondiscretionary account for a customer is an exceedingly narrow one, consisting at most of a duty to properly carry out transactions ordered by the customer. Id. 145 Ill.Dec. at 578, 557 N.E.2d at 348, citing Anspacher & Associates, Inc. v. Henderson, 854 F.2d 941 (7th Cir.1988) and Refco, Inc. v. Troika Investment Limited, 702 F. Supp. 684 (N.D.Ill. 1988). And Illinois courts have explained that a commodities broker is the agent of his customer, at least with regard to the execution of a transaction; and, as such, as *284 a matter of law, he owes his customer certain fiduciary duties within the realm of the execution of the transaction. The fiduciary relationship depends on circumstances peculiar to a particular case. Martin v. Heinold Commodities, Inc., 139 Ill. App. 3d 1049, 94 Ill. Dec. 221, 224-225, 487 N.E.2d 1098, 1101-1102 (Ill. App. 1 Dist. 1985). Proper execution of trades is the only duty generally imposed upon a commodities broker on a nondiscretionary account. Leib, supra, 461 F. Supp. at 953, Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1049 (11th Cir.1987), First Union Brokerage v. Milos, 717 F. Supp. 1519, 1526 (S.D.Fla. 1989), Platsis v. E.F. Hutton & Co., Inc., 642 F. Supp. 1277, 1308 (W.D.Mich. 1986), Merrill Lynch, Pierce, Fenner & Smith v. Perelle, 356 Pa.Super. 165, 183-184, 514 A.2d 552, 561 (1986).
Clearly in the minority, California has adopted a broadened fiduciary duty of care owed by brokers to all customers, regardless of who controls the account. This duty requires more than merely carrying out the stated objectives of the customer. It can include informing the customer if the orders are improper and unsuitable. Duffy v. Cavalier, 259 Cal. Rptr. 162, 171, 210 Cal. App. 3d 1514 (Cal. App. 1 Dist. 1989). I am persuaded by the California view.
Recognizing the general law of other jurisdictions, I would follow one of the following two (2) alternatives:
1. If we adopt the majority view of other jurisdictions that there is only a limited duty of a broker to a customer to properly execute trades as directed, I would find that this is one of the "special circumstances" in which the duty should be broadened to include regular assessment of the customer's resources and subsequent financial counsel. Because of Dr. Puckett's advanced age, substantial losses ($65,000 in one day included in a total loss of over $2,000,000 in thirty-eight months), and lack of experience, and because RB & H knew of Dr. Puckett's actions each day since RB & H provided him a desk, quote machine, comments from the floor of the Chicago Mercantile Exchange, and news service screen in the RB & H facility which he used several days each week to make trades, RB & H should have counseled with Dr. Puckett. This is a "special circumstance" in which RB & H owed at least a duty of ordinary care or a limited fiduciary duty.
2. Or, alternatively, I would prefer to see this Court draft its own law rather than adopt the reasoning of other jurisdictions. Since Mississippi law is silent as to the duty of a commodities broker, I would find that even though a broker's duties to a customer of a nondiscretionary account are minimal, such broker does have a duty of ordinary care and loyalty which includes regular assessment of the customer's resources and subsequent financial counseling regarding margin requirements for commodity futures trading accounts with the accompanying risks of liquidation of an undermargined account and liability for account deficits possibly far in excess of the total of margin deposits. Transactions in commodity futures entail a high degree of financial risk, and even where the account is nondiscretionary and the customer signs a risk disclosure statement containing an acknowledgment of the risk, a broker who is earning a fee from the customer's orders should regularly ascertain the suitability of a customer to make investments, especially where the customer has a lack of experience. The customer of a nondiscretionary account can then exercise independent judgment and take responsibility for all trading decisions. The broker can make an effort to see that the decisions made by the customer, whether wise or unwise, are at least informed decisions.
RB & H should have consulted with Dr. Puckett to find out if he could sustain such losses and how he was covering the losses. (Dr. Puckett was funding his losses by liquidating his pension fund.) RB & H should have then discussed courses of action. At this point, Dr. Puckett could exercise his own judgment and control over his nondiscretionary account. Experts at the trial concluded that RB & H's actions violated standards of conduct and the minimum standard of care generally recognized and accepted in the commodities industry. I conclude that a broker should have a *285 legal duty of care toward all customers. A commodities broker should have a duty to advise a customer to discontinue trading if the broker knows or has reason to know that the customer is trading excessively and irrationally, that the customer lacks the experience and ability to trade the commodities which he is trading, or that the customer has already incurred losses which are very high in proportion to the customer's net worth so that there is a high probability that the customer will lose his entire net worth if he continues to trade commodities. A commodities broker should be required to exercise that degree of care which a commodities broker of ordinary professional skill and prudence would exercise under similar circumstances. This duty is recognized where a customer has a discretionary account. Leib, supra, 461 F. Supp. at 953, Adams, supra, 718 P.2d at 515, Howell v. Freifeld, 631 F. Supp. 1222, 1224 (S.D.N.Y. 1986) RB & H did not fulfill this duty.
McRAE, J., joins this dissent.
NOTES
[1] From the record, it appears that Mrs. Puckett did her own trading for the first month or so. It is undisputed that from that time on Dr. Puckett traded both accounts himself.
[2] That a munificent government grants public largesse to rich and poor upon occasion (Chrysler, S & L bailouts, the welfare rolls), does not diminish either the validity or necessity of the principle when applied to individuals.
[3] Assuming it is not otherwise illegal to do so, as yet there is no common law liability imposed against the bartender who sells liquor to a man he knows has cirrhosis of the liver, or the bingo operator who sells the widow more bingo chances than she can afford, or the state which permits the people who can least afford it gamble in state-operated lotteries.
[4] Of course, as in any principal/agent relationship, the duties which the agent is required to perform on behalf of the principal are fiduciary in nature. Just as certainly, if there are no duties owed them, the non-duties cannot be fiduciary in nature. 3 C.J.S. Agency, § 271. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1806768/ | 147 B.R. 461 (1992)
In re J. Lloyd TOMER and Christine Tomer, Debtors.
Tamalou WILLIAMS, Trustee, Plaintiff,
v.
J. Lloyd TOMER, Massachusetts Indemnity and Life Insurance Company, the A.L. Williams & Associates, Inc., Mapleleaf Insurance Services, Inc., First American National Securities, Inc., ALW Marketing Corporation and Mapleleaf Insurance Services, L.P., Defendants.
Bankruptcy No. 89-40634 On Appeal, Nos. 91-CV-4216-JLF, 91-CV-4220-JLF and 91-CV-4198-JLF, Adv. Nos. 90-0043 to 90-0045.
United States District Court, S.D. Illinois.
November 6, 1992.
*462 Steven T. Stanton, Carr, Korein, Tillery, Kunin, Montroy, Glass & Bogard, East St. Louis, Ill., for debtors.
Matthew Niemann, Joe Cologiovanni, Bryan Cave, St. Louis, Mo., for appellants.
*463 Terrell L. Sharp, Mt. Vernon, Ill., for trustee Tamalou Williams.
OPINION
FOREMAN, Senior District Judge:
Before the Court are three appeals from an Order entered by the Bankruptcy Court for the Southern District of Illinois on June 19, 1991. See In re Tomer, 128 B.R. 746 (Bankr.S.D.Ill.1991). The order was entered in a case or proceeding referred to the bankruptcy judge under 28 U.S.C. § 157 (1988). Thus, this Court has jurisdiction to hear the appeals under 28 U.S.C. §§ 158, 1334. The three appeals will be consolidated for purposes of this opinion.[1]
I. FACTS
The debtor, J. Lloyd Tomer ("Tomer"), is engaged in the business of selling insurance policies and securities. He began as an agent for A.L. Williams & Associates ("A.L. Williams"),[2] and moved up the ranks to become a Regional Vice-President, Senior Vice-President, and ultimately a National Sales Director. In re Tomer, 128 B.R. at 750. At each promotion, Tomer became responsible for the training and supervision of other agents. Id. As part of his compensation for training and supervising the "downline agents," Tomer received a small commission for each policy a downline agent would write. The commission was called an override commission. Id. at 749.
A.L. Williams was a general agent for Massachusetts Indemnity and Life Insurance Company ("MILICO"). Thus, the vast majority of Tomer's business consisted of selling MILICO products.[3] Tomer also sold securities and other investment products pursuant to an agreement with First American National Securities, Inc. ("FANS"). Id. at 750.
Whenever Tomer or one of his downline agents sold a MILICO policy, Tomer and the agent would receive an advance equivalent to 75% of the annual commission (i.e., the commission due on 9 months of premiums) on the policy. The payment of this advance was denoted as a "loan" under the terms of the agent's contracts. As the insured paid premiums on the policy, MILICO would withhold the commissions earned by these premiums to repay the advance, until the tenth month when commissions would be paid as earned. If the policy was canceled, or if the premiums on the policy were not paid, MILICO would deduct the commission on the unearned premium from the commissions otherwise payable to Tomer and his downline agents. This procedure is called a "chargeback." Id. at 749.
Under the terms of the agreements with A.L. Williams and MILICO, Tomer was also liable for unearned advances made to his downline agents in the event that the downline agents resigned or terminated. If this occurred, that agent's outstanding debit balance would "roll-up" to the next upline agent in the hierarchy, and so forth, until it eventually rolled up to an agent in the position of the debtor. That person would then be liable as a guarantor to repay the shortfall. This liability is called "roll-up liability." Id.
Under Tomer's contracts with MILICO, the company was entitled to deduct the amount of this liability against commissions which were otherwise due Tomer. The company could do this by reducing advances on policies submitted by Tomer (and his downline hierarchy), or by applying the amount of the indebtedness against *464 commissions earned on such policies.[4] The contracts also provided that this liability could be satisfied by deducting amounts owed to the debtor from other entities entitled to indemnification under the contracts.[5]Id. at 749-50.
In 1989, Tomer had a substantial number of agents in his sales hierarchy. One of those agents, Leroy Love, was a Regional Vice-President. Thus, Love also had a number of agents in his sales hierarchy. In March 1989, a number of policies written by Love and his downline agents lapsed. Love evidently wrote policies on individuals who did not exist and received advance commissions on these policies upon submission of the policy applications. When the ploy was discovered, Love and his agents were terminated. Id. at 750.
The lapse of the policies left Tomer facing substantial roll-up liability. On July 9, 1989, Tomer filed a Chapter 7 bankruptcy petition. In his petition, the debtor stated that he had an approximate roll-up liability of $422,000.00 owing to A.L. Williams; further, the debtor noted that $121,784.63 had been deducted by A.L. Williams prepetition from commissions otherwise payable to the debtor. None of the defendant companies were listed as creditors on debtor's petition, and none of them has filed a claim against the debtor's bankruptcy estate. Id. at 750-51.
At issue in all three appeals is the entitlement to commissions paid after the bankruptcy on insurance policies issued prior to the bankruptcy. The Bankruptcy Court held that pursuant to the contracts, the debtor (and therefore the trustee) was not entitled to the payment of any commissions when he had not satisfied his liability to the company defendants and that once this liability was satisfied, the remaining commissions became property of the bankruptcy estate.
In Adversary Proceeding No. 90-0043 (Civil No. 91-4216 on appeal), the Trustee sought to recover commissions withheld by the company defendants after the filing of the bankruptcy petition, but which were attributable to policies sold before the bankruptcy. The Bankruptcy Court held that the trustee, who steps into the shoes of the debtor as of the commencement of the case, was not entitled to recover commissions withheld by the company defendants as long as the debtor had not satisfied his contractual liabilities to them. In re Tomer, 128 B.R. at 759. The trustee has appealed this decision.
In Adversary Proceeding No. 90-0044 (Civil No. 91-4220 on appeal), the trustee sought to recover as preferences commissions paid during the 90 days prior to the filing of the bankruptcy petition which were applied by the company defendants to reduce the debtor's roll-up liability. Based on the reasoning of Adversary Proceeding No. 90-0043, the Bankruptcy Court held that the trustee was not entitled to the commissions since the debtor was not entitled to them until his liability to the company defendants was satisfied. Therefore, there was not a transfer of the debtor's property as required under 11 U.S.C. § 547. In re Tomer, 128 B.R. at 762. The trustee has appealed this decision.
In Adversary Proceeding No. 90-0045 (Civil No. 91-4198 on appeal), the trustee sought a declaration that commissions attributable to policies submitted prepetition, but paid postpetition were property of the debtor's estate. The Bankruptcy Court held that the trustee was entitled to the commissions (subject to the satisfaction of all liabilities owed to the defendant companies) as property of the bankruptcy estate. In re Tomer, 128 B.R. at 761. The debtor has appealed this decision.
II. DISCUSSION
This appeal raises solely issues of law regarding the proper interpretation of *465 the contracts between the parties.[6] Where questions of law are concerned, the district court will review the bankruptcy court's ruling de novo. In re Sanderfoot, 899 F.2d 598, 600 (7th Cir.1990), rev'd on other grounds, ___ U.S. ___, 111 S. Ct. 1825, 114 L. Ed. 2d 337 (1991); In re Comer, 723 F.2d 737, 739 (9th Cir.1984).
At the time of the debtor's bankruptcy, there were a total of seven contracts delineating the relationships between the parties: 1) Massachusetts Indemnity and Life Insurance Company, Agent Agreement ("MILICO Contract"); 2) Mapleleaf Insurance Services, Inc., Commission Agreement ("MAPLELEAF Contract"); 3) My Agreement with A.L. Williams & Associates, Inc. ("A.L. Williams" Contract"); 4) First American National Securities, Inc., Registered Representative's Agreement ("FANS Contract"); 5) A.L. Williams Agreement for Independent Business of Regional Vice President ("RVP Contract"); 6) A.L. Williams Senior Vice-President Agreement ("SVP Contract"); and 7) A.L. Williams & Associates, Inc., Agreement for Independent Business of National Sales Director ("NSD Contract"). See In re Tomer, 128 B.R. at 752. Additionally, the contracts contain a choice of law provision which provides that Georgia law is to be applied in interpreting the meaning of the contracts. See A.L. Williams Contract, ¶ 17M.[7]
A. Trustee's Entitlement to Commissions Withheld by Defendants
In Civil No. 91-4216, the trustee seeks to reverse the Bankruptcy Court's ruling that the trustee was not entitled to recover commissions paid postpetition on policies solicited prepetition, but withheld by defendant companies in order to satisfy the debtor's roll-up liability.[8]
The filing of a petition in bankruptcy creates an estate pursuant to 11 U.S.C. § 541. The estate consists of "all legal and equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1) (1988). It is a fundamental principle of bankruptcy law that the trustee, who steps into the shoes of the debtor at the commencement of the case, can only assert rights the debtor could assert. See 4 Collier on Bankruptcy § 541.01, p. 541-6 (15th ed. 1992); see also Moutsopoulos v. American Mutual Ins. Co., 607 F.2d 1185, 1189 (7th Cir.1979). If the debtor's interest in particular property is contingent (or non-existent), then so is the trustee's.
Section 544 of the Bankruptcy Code, referred to as the "strong-arm" clause, can give the bankruptcy trustee greater rights than the debtor's at the commencement of the case under certain circumstances. The section can give the trustee the rights of: 1) a judicial lien creditor; 2) a creditor with a writ of execution; or 3) a bona fide purchaser of real property. See 11 U.S.C. § 544(a)(1)-(3). But the trustee cannot utilize the "strong arm" provisions of § 544 if the threshold requirement, that the debtor have an interest in property, is not met.
Thus, the Court must determine what property interest the debtor had in the payment of commissions when he also had roll-up liability to the defendant companies. Resolution of this depends on whether the satisfaction of the debtor's roll-up liability was a condition precedent to the payment of any commissions under the contracts.
Under Georgia law regarding contract interpretation, the intent of the parties is to be determined from "a consideration of the entire contract; and, if possible, all of its provisions should be so interpreted *466 as to harmonize with each other." Morgan Guaranty Trust Co. v. Atlanta Nat'l Real Estate Trust, 149 Ga.App. 118, 119, 253 S.E.2d 774, 775 (1979), quoting McCann v. Glynn Lumber Co., 199 Ga. 669, 674, 34 S.E.2d 839, 848 (1945). In addition, Georgia law establishes a test of clarity, unambiguity, and definiteness for determining the existence of a condition precedent. Jerome Distributors, Inc. v. B.L.I. Constr. Co., Inc., 142 Ga.App. 776, 777, 237 S.E.2d 13, 13 (1977).[9]
The Court holds that the contracts require the satisfaction of the debtor Tomer's roll-up liability as a condition precedent to the payment of commissions. With the roll-up liability unsatisfied, the debtor had no entitlement to the commissions. Consequently, the commissions withheld by the company defendant companies to satisfy this liability were not property of the debtor. Because they were not property of the debtor as of the commencement of the case, they are not property of the bankruptcy estate.
There are numerous provisions contained in the contracts between the parties that support the finding that Tomer was not entitled to any commissions (first-year deferred or renewal) when he owed the company defendants money based on his roll-up liability or any other type of liability.[10] Paragraph 4 of the MILICO Contract, in a section entitled Commission Advance and Chargeback Systems, provides, in pertinent part:
A. Mapleleaf or the Company, as the case may be, will, with the consent of the General Agent, from time to time loan to Agent an advance against Agent's commissions (the "Advance Commission"). The Advance Commission is a loan to Agent. The outstanding balance of such loan shall be referred to as a "Debit Balance," shall be part of the total Debit Balance of Agent (collectively, "Agent's Debit Balance") and (i) as long as the Advance Commission is not reclassified as a Chargeback, as defined in paragraph 4B below, such Debit Balance will be repaid only from commissions earned relating to the policy in respect of which such Advance Commission was paid, and (ii) if the Advance Commission is reclassified as a Chargeback, such Debit Balance will be repaid (to the extent possible) as provided in paragraph 4B. Agent's Debit Balance is Agent's obligation to be repaid by Agent to Mapleleaf or the Company, as the case may be.
B. The portion of Agent's Advance Commission paid to Agent but not fully earned as a result of (i) applications which do not result in the issuance of a policy, (ii) policies which are canceled by the insured, (iii) policies which lapse, (iv) reversal of premium, or (v) misapplication of premium or other error ((i) through (v) being collectively referred to as "Chargebacks") may be recovered as follows:
1. By reducing any Advance Commission (which might otherwise be paid as contemplated by this paragraph 4) by such percentage as may be agreed to from time to time by the Company and the General Agent and applying the amount of such reduction to the payment of Agent's Debit Balance to the extent of Agent's outstanding Chargebacks;
2. By applying Agent's earned commissions due from Mapleleaf or the Company; and
3. By applying to the balance thereof all amounts owing to Agent from the Company, Mapleleaf, The A.L. Williams Corporation or any of their affiliates or from any other Indemnified Party under this Agreement (all such entities and Indemnified Parties being sometimes referred to herein as "Obligees").
*467 C. If, during the term of this Agreement, the sum of (i) Agent's Debit balance and (ii) amounts otherwise owed by Agent to Obligees, exceeds limits established from time to time by the Company and the General Agent, Agent shall, on demand, be obligated to pay Mapleleaf or the Company, as the case may be, such amount as the Company and the General Agent may direct; . . .
MILICO Contract, ¶ 4 (emphasis added). The above provisions demonstrate that Tomer was not entitled to commissions until his liabilities were satisfied. Further, ¶ 4H of the MILICO Contract provides:
Agent understands and agrees that any commissions or other amounts payable to Agent from the Company, Mapleleaf, The A.L. Williams Corporation, or any of their affiliates or the General Agent, under this Agreement, the Prior MILICO Agreement, the Mapleleaf Agreement or otherwise (and the payment thereof to Agent) shall, at the direction of the Company or Mapleleaf, be subject to, and if required thereunder be reduced in accordance with, the Commission and Chargeback System described in this paragraph 4.
MILICO Contract, ¶ 4H (emphasis added).
Further evidence that Tomer's entitlement to commissions was conditioned on the satisfaction of his roll-up liability is found in paragraph 9 of the MILICO Contract:
A. If any agent, manager, field manager, or other member of the sales hierarchy upon whose sales Field Manager receives or ever has received commissions ("Subordinate Agent") is terminated by or terminates his representation of the Company with any Debit Balance owed to the Company or Mapleleaf, such Subordinate Agent's Terminated Agent's Balance owing, including but not limited to Chargebacks, to Mapleleaf, the Company, or any other Obligees, shall first be reduced by any amounts allocated to such Agent in the escrow account described in paragraph 4F above, and then, to the extent Terminated Agent's Balance remains, be immediately added to or subtracted from, as the case may be, the Field Manager's earned commission balance. Such Subordinate Agent's Debit Balance may be recovered from the Field Manager by Mapleleaf or the Company, as the case may be, by deducting the Subordinate Agent's Debit Balance and other amounts owing by such Subordinate Agent to Obligees from earned first-year commissions and renewal commissions due or to become due to the Field Manager. Any subsequent collection from or earned commissions otherwise payable to, such terminated Subordinate Agent will be credited to the Field Manager. . . .
C. To the extent that the earned commission accounts of subordinate Field Managers, when added to any earned commission accounts of Field Managers subordinate to them, if any, reflect a net debit, the Company or Mapleleaf, as the case may be, shall retain sufficient commissions otherwise payable to Field Manager to cover the sum of such debit balances. . . .
MILICO Contract, ¶ 9 (emphasis added).[11]
Further evidence of the existence of this condition precedent is found in provisions of the FANS Contract:[12]
3.4 Deductions from amounts owed to Representative Any money and value owed by Representative to FANS, any Negative Balance, and any money and value which has been advanced or credited by or on behalf of FANS to, or for the benefit of, Representative, may be deducted by FANS from any commissions or other money or value then or thereafter owed by FANS to Representative.
* * * * * *
*468 3.5(j) Limited Liability for Roll Ups from Downline Representatives . . . [I]n any case where representative or an Upline Representative suffers a Roll Up, the liability for payment of that Roll Up by Representative or Upline Representative shall be limited to deduction by FANS from amounts owed by FANS to Representative and Upline Representative, and to the Downline Representatives who caused the Roll Up.
FANS Contract, ¶ 3.4, 3.5(j) (emphasis added).[13]
The combination of the contract provisions noted above meet the test of clarity, unambiguity and definiteness required under Georgia law for the finding of a condition precedent.[14] The Court holds that the debtor, Mr. Tomer, had no entitlement to the payment of commissions under the contract(s) unless (or until) all liabilities to the company defendants were satisfied. Therefore, the trustee also had no entitlement to the commissions.[15]
Under similar facts, other courts have reached the same result the Court reaches today. In American Family Life Assurance Co. v. Parker, 9 B.R. 447 (Bankr. M.D.Ga.1981), the defendant debtor was an independent contractor selling insurance policies of the plaintiff. In this case, the debtor's employment terminated prior to the bankruptcy filing. Parker, 9 B.R. at 448. The employment contract at issue provided that: "`any sums advanced to the Associate [Defendant] shall create a liability to American Family [Plaintiff] on the part of the Associate to be charged back against earned commissions or payable on demand.'" Id. The Parker court held that the renewal commissions are property of the bankruptcy estate. The court further held that:
[t]he Trustee takes, as of the date of bankruptcy, whatever right Defendant had to receive future renewal commissions. However, the Trustee's right can rise no higher than Defendant's, and the only right of Defendant under the contract was to be paid any renewal commissions which might remain after defendant's indebtedness to Plaintiff was satisfied.
Parker, 9 B.R. at 450 (emphasis added). See also In re Sherman, 627 F.2d 594, 594-95 (2d Cir.1980) (under New York law, debtor was not entitled to further commissions until the amount of renewal commissions exceeded what he had already been paid in advance commissions); Wiley v. Public Investors Life Ins. Co., 498 F.2d 101, 103-05 (5th Cir.1974) (where debtor expressly granted a lien to former employer on future commissions, trustee had no right to renewal commissions until debtor's indebtedness to the company was satisfied); Mutual Trust Life Ins. Co. v. Wemyss, 309 F. Supp. 1221, 1231 (S.D.Me.1970) ("the only right of Wemyss under the contract was to be paid any renewal commissions which might remain after his indebtedness to Mutual was satisfied.").
In First National Bank v. Massachusetts General Life Ins. Co., 296 Ark. 28, 752 S.W.2d 1 (1988), the defendant entered into a General Agent's Compensation Agreement with an insurance company, with the contract providing that commissions and bonuses earned by the insurance company would go to reduce the debt owed *469 to the defendant for advanced commissions. The plaintiff bank subsequently obtained an assignment from the insurance company and argued that its interest in commissions and bonuses was superior to that of the defendant. The court held that the bank's interests as an assignee were subject to the same contractual limitation the insurance company had, and therefore the bank's property interest was not superior to the defendant's. Id.
The trustee in the instant case argues that a security interest was created because: (1) this was really a "loan" to the debtor; or (2) a contractual right of set-off was created, either of which require perfection pursuant to Article Nine of the Uniform Commercial Code ("UCC"). It is undisputed that the company defendants failed to file a financing statement in order to "perfect their lien". As a result, the argument goes, the company defendants cannot defeat the strong-arm powers of the trustee under § 544 of the Bankruptcy Code. The Court rejects this argument.
Although it is true that the term "loan" is used throughout the Contracts, it does not follow that this creates a lien requiring UCC perfection. The term "loan" is used, no doubt, to "hit home" to the debtor/agent that he is responsible for paying these commissions back to the defendant companies. But the use of this term in the context of these contracts does not create a secured interest in need of UCC perfection. See In re Sherman, 627 F.2d 594, 595 (2d Cir.1980) ("appellant's right to refrain from paying . . . commissions a second time, commissions which were earned before bankruptcy was filed, hardly falls within the scope of these [UCC] definitions.").
The Court also rejects the trustee's reliance on Continental American Life Insurance Company v. Griffin, 251 Ga. 412, 306 S.E.2d 285 (1983), as support for his argument that the contracts establish a right of set-off.[16] In Griffin, two questions were certified to the Georgia Supreme Court: (1) Under Georgia law, does Article Nine of the UCC apply to contractual rights of set-off?; and (2) If Article Nine applies, does the contractual right of set-off have priority over a perfected security interest? 251 Ga. at 412, 306 S.E.2d at 286. The Georgia Supreme Court held that Article Nine did apply to contractual rights of set-off, and that the contractual right of set-off did not have priority over a perfected security interest. Id.
The Griffin case does not set forth the contract provisions involved, but the very premise of Griffin is that the insurance agent had a property interest in the commissions which was independent of the insurance company's right to withhold commissions. As such, he was able to assign this right to a third party,[17] who in turn perfected the secured interest, thereby defeating Continental's unsecured set-off claim. 251 Ga. at 414, 306 S.E.2d at 287. In our case, pursuant to the contracts, debtor Tomer has no entitlement to any commissions until after his liabilities to the defendant companies are satisfied. As a result, there is no property interest or property right in existence in which to grant (or subsequently perfect) a security interest.[18] In short, the Griffin case is not controlling because it begins at a point beyond the analysis required in this case. The debtor in our case has no property interest in the commissions to begin with these monies belong to the company defendants and there was no need for them to "perfect this interest" by filing a UCC financing statement in their own funds. See In re Sherman, supra; see also First National Bank, 296 Ark. 28, 28-29, 752 S.W.2d 1, 1 (1988) (bank, an assignee of insurance agency's right to commissions, filed a financing *470 statement and claimed an interest superior to that of Massachusetts General; court declined to follow Griffin, and noted that the bank was overlooking a fundamental principle that it could not "obtain a property right superior to that of its assignor").
In summary, this court holds that because the debtor Tomer has no entitlement to the payment of commissions until his roll-up liability to the company defendants was satisfied, the trustee, who steps into the shoes of the debtor at the commencement of the case, also has no entitlement to the commissions. Therefore, in Case No. 91-4216, the Court hereby AFFIRMS the decision of the Bankruptcy Court in Adversary Proceeding No. 90-0043.
B. Trustee's Recovery of Preferential Transfers
In Civil No. 91-CV-4220, the trustee seeks to reverse the Bankruptcy Court's finding that it was not entitled to recover as preferences commissions paid during the 90 days prior to the filing of the bankruptcy petition which were applied by the company defendants to reduce the debtor's rollup liability.
Section 547(b) of the Bankruptcy Code provides that a "trustee may avoid any transfer of an interest of the debtor in property . . ." 11 U.S.C. § 547(b) (emphasis added). Because of this Court's ruling in the first appeal, that the debtor had no entitlement to the commissions (and neither did the trustee), this provision does not apply because the withholding of commissions by the company defendants was not a "transfer of the debtor's property" as required by § 547. Therefore, in Case No. 91-CV-4220, the Court hereby AFFIRMS the Bankruptcy Court in Adversary Proceeding No. 90-0044.
C. Debtor's Entitlement to Commissions Received PostPetition on Policies Written PrePetition
In Civil No. 91-4198, the trustee seeks to affirm a declaration that commissions attributable to policies sold before bankruptcy, but commissions were paid after bankruptcy were property of the debtor's estate. The Bankruptcy Court held that the trustee was entitled to the commissions as property of the bankruptcy estate (subject to the satisfaction of all liabilities owed to the defendant companies). In re Tomer, 128 B.R. at 761. For the reasons detailed below, the Court AFFIRMS the decision of the Bankruptcy Court and holds that the trustee is entitled to commissions paid postpetition on policies solicited prepetition as property of the bankruptcy estate.
The debtor Tomer makes two basic arguments on appeal. First, that the trustee had no "vested" right to the commissions because Tomer had no "vested" right to the commissions at the time of the filing of the bankruptcy petition. Second, that the commissions paid postpetition were the result of Tomer's personal services after the bankruptcy and were therefore exempt from becoming property of the estate pursuant to § 541(a)(6) of the Bankruptcy Code.
Debtor Tomer's first argument revolves around the significance of the "vesting" provisions contained in the contracts between the parties. The RVP Contract, in a section entitled Commissions and Vesting, provides, in pertinent part:
A. RVP [Tomer] acknowledges that [A.L. Williams] is a general agent for MILICO. RVP acknowledges that all insurance commissions, including advanced or earned, first-year deferred, renewal or escrowed commissions, with respect to insurance underwritten by MILICO will be paid, if at all, to RVP and RVP's Sales Hierarchy directly by MILICO or Mapleleaf, as determined by and in accordance with RVP's MILICO Agent Agreement and Mapleleaf Commission Agreement. . . . All such insurance and other commissions are not payable and will not be paid by [A.L. Williams]. If for any reason whatsoever MILICO or Mapleleaf . . . should fail to pay commissions to RVP or RVP's Sales Hierarchy, and if such failure to pay shall not be at the request of [A.L. Williams], then RVP agrees to look *471 solely to MILICO, Mapleleaf . . . for such payment, and not to [A.L. Williams].
B. . . . Nothing stated in this Agreement, nor any act or omission of [A.L. Williams], shall make [A.L. Williams] liable to RVP for any commissions to RVP pursuant to RVP's contract with MILICO, Mapleleaf or any Other Company. . . .
C. To the extent that MILICO or Mapleleaf follows [A.L. Williams] request to pay RVP in accordance with this Section 7C, RVP is hereby vested as to first-year deferred and renewal commissions, if any, to which RVP is otherwise entitled, subject to the following provisions:
(1) Vesting shall mean that RVP is entitled, notwithstanding termination of this Agreement, to receive first-year deferred and renewal commissions that become earned on Life Insurance applications submitted by RVP or RVP's Sales Hierarchy prior to such termination.
(2) Notwithstanding vesting, if there is a violation by RVP of [sections of this agreement relating to noncompete covenants, exclusive use of tradename, indemnification, and proprietary rights] or if there is an act or omission by RVP that (i) causes loss, liability or exposure to [A.L. Williams], MILICO, FANS, [or their agents, representatives, policyholders], or (ii) causes . . . harm to the reputation and good name of [A.L. Williams], MILICO, or FANS (such violations, acts or omissions being collectively and individually referred to as "Divesting Events"), then RVP shall be divested upon the occurrence of a Divesting Event.
(3) Although at the time of the termination, RVP may be vested because of the absence of a Divesting Event, thereafter, upon the occurrence of a Divesting Event, RVP shall no longer be vested.
RVP Contract, ¶ 7A, B, C.[19]
The gist of the debtor's "vesting" argument is that because his employment was never terminated, there was never a "request to pay" made pursuant to ¶ 7C quoted above, and the "vesting" provision was never triggered. Therefore, because the debtor's interest in commissions was contingent upon termination and the request to pay, the trustee's interest is contingent also.[20] Although this argument has a familiar ring to it, it must be rejected.
As discussed in the first appeal, § 541 of the Bankruptcy Code provides that the bankruptcy estate consists of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). The issue is whether the debtor had an entitlement to these commissions (once his outstanding liabilities had been met) as of the time of the filing of the bankruptcy petition.
The debtor incorrectly focuses on the concept of "vesting" as it is defined in Paragraph 7C above as his basis for finding that these commissions cannot be property of the bankrupt estate. Vesting has a very specific definition in these contracts: despite a termination of the contract, Tomer would still be entitled to certain commissions under this vesting provision of the RVP Contract. If the contract is not terminated, however, as is the case here, Tomer is still entitled to commissions directly under his contract with MILICO. The MILICO Contract provides: "[p]rovided Agent is in compliance with the terms, provisions and covenants of this Agreement and the Trademark Licensing Agreement [Associates Contract], the Company shall pay *472 commissions and make advances to Agent for services performed hereunder. . . ." MILICO Contract, ¶ 2B (emphasis added); see also MAPLELEAF Contract, ¶ 2A; FANS Contract, ¶ 3.1. Therefore, regardless of whether Tomer's right to first-year deferred and renewal commissions is "vested," he nevertheless has an enforceable right to the commissions from MILICO. In short, "vesting" is irrelevant to the issue of whether the commissions constitute an interest in property of the debtor as of the commencement of the case pursuant to § 541.[21] As long as the contracts were still in effect, and the debtor Tomer was an agent in good standing, he had an entitlement to the commissions (once his liabilities were satisfied). Because Tomer was entitled to the commissions at the time of the bankruptcy, then the trustee, who stepped into the shoes of the debtor, was entitled to the commissions as property of the bankruptcy estate. See Parker, 9 B.R. 447, 449-50 (renewal commissions paid after bankruptcy were property of the bankruptcy estate); In re Froid, 109 B.R. 481, 483 (Bankr.M.D.Fla.1989) (renewal commissions were property of the bankruptcy estate).
The second argument debtor Tomer makes is that the commissions paid postpetition are the results of his personal services after the filing of the bankruptcy. The Bankruptcy Code excludes from the estate "earnings from services performed by an individual debtor after the commencement of the case." 11 U.S.C. § 541(a)(6). Tomer argues that his right to commissions depends upon his continued efforts and involvement in managing his downline agents and in maintaining good relations with the policyholders after a policy is signed.[22] There is no doubt that the contracts provide for many services to be performed by Mr. Tomer to maintain good relations with the policyholders. But in order to meet the test of exclusion under § 541(a)(6), the "earnings" must accrue, or be the result of, or attributable to, services performed by the debtor after the bankruptcy filing. See In re Palmer, 57 B.R. 332, 334-35 (Bankr.W.D.Va.1986).
In this case, the debtor's entitlement is clearly rooted in the pre-bankruptcy period when the policies are issued. See In re Sloan, 32 B.R. 607, 611 (Bankr.E.D.N.Y. 1983) ("decisive factor in determining whether postpetition income of the debtor will be deemed property of the estate is whether that income accrues from postpetition services of the debtor.") (emphasis added); see also In re Bluman, 125 B.R. 359, 366 (Bankr.E.D.N.Y.1991); In re Froid, 109 B.R. 481, 483 (Bankr.N.D.Fla. 1989); In re Marshburn, 5 B.R. 711, 713-14 (Bankr.D.Colo.1980); see generally, 4 Collier on Bankruptcy, ¶ 541.19 (15th ed. 1992). The Court agrees with the reasoning of the Bankruptcy Court that any postpetition personal services rendered by the debtor certainly enhances the value of the prepetition policies. In re Tomer, 128 B.R. at 761. But, a review of the contract provisions shows that contrary to the debtor's argument, his entitlement to commissions is not contingent upon the performance of subsequent services.[23] Specifically, the contract provides that if the debtor was to terminate the contract or die, and could not possibly perform any future personal services, the payment of commissions would *473 still be made to the debtor or his estate.[24] Therefore, under the contracts, the entitlement to the commissions is not contingent upon the performance of any future personal services of the debtor.
The Court holds that at the time of the filing of the bankruptcy petition, the debtor Tomer was entitled to those commissions which exceeded the amount he was liable to the company defendants. Therefore these commissions became property of the bankruptcy estate. The ruling of the Bankruptcy Court in Adversary Proceeding No. 90-0045 is hereby AFFIRMED.
III. SUMMARY
In Civil No. 91-4216, the Court hereby AFFIRMS the decision of the Bankruptcy Court in Adversary Proceeding No. 90-0043; in Civil No. 91-4220, the Court hereby AFFIRMS the Bankruptcy Court in Adversary Proceeding No. 90-0044; and in Civil No. 91-4198, the Court hereby AFFIRMS the Bankruptcy Court in Adversary Proceeding No. 90-0045. In addition, in Civil No. 91-4198, the Debtor's Motion for Stay of Enforcement of the Bankruptcy Court's Order (Document # 28) is hereby DENIED as moot.
IT IS SO ORDERED.
NOTES
[1] The Debtor, Mr. Tomer, has filed an additional appeal, Civil No. 92-4027, on January 17, 1992; that appeal is not ripe for review.
[2] In November 1989, ALW Marketing Corporation ("ALW") became the owner of the contractual rights to the A.L. Williams sales force. The general agency agreement between MILICO and A.L. Williams was amended accordingly, and there is no effect on the three appeals as a result of this change. In re Tomer, 128 B.R. at 750, n. 4.
[3] On June 19, 1989, Mapleleaf Insurance Services, L.P., became the servicer for MILICO policies; this change does not affect the substance of the appeals. References to MILICO include Mapleleaf Services to the extent that the relevant time period is after June 19, 1989. In re Tomer, 128 B.R. at 749, n. 1.
[4] Included in this latter method are "first-year deferred commissions" (premiums on months 10-12), and "renewal commissions" (commissions on policies renewed beyond the one-year period). In re Tomer, 128 B.R. at 749.
[5] Under the MILICO agreements, A.L. Williams Corporation and Mapleleaf Insurance Services Inc., were to be indemnified against any loss suffered as a result of the actions of the debtor or his downline hierarchy. In re Tomer, 128 B.R. at 750, n. 3.
[6] The MILICO defendants repeatedly refer in their briefs to Judge Meyers' findings of fact regarding the interpretation of the contracts in issue. This characterization is incorrect questions relating to the interpretations of these contracts are questions of law. See Woodbridge Place Apartments v. Washington Square Capital, 965 F.2d 1429, 1439 (7th Cir.1992).
[7] The company defendants concede that Georgia law applies. See Brief of MILICO Defendants, p. 14, n. 11 (Case No. 91-CV-4220, Doc. # 9).
[8] What is not being sought in any of the three appeals is commissions paid postpetition that were also solicited postpetition. These commissions are being paid to Tomer in accordance with the terms of the parties' contracts.
[9] A condition precedent is defined as "one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed." Black's Law Dictionary 266 (5th ed. 1979).
[10] The contracts make no relevant distinction between roll-up liability (liability for downline agents) and liability for advance recoveries (liability attributable to Tomer), and neither does the Court.
[11] Paragraph 7 of the MAPLELEAF Contract is virtually identical to ¶ 9 of the MILICO Contract, as is ¶ 4 of the MAPLELEAF Contract to ¶ 4 of the MILICO Contract.
[12] Tomer, at the time of the filing of the petition, did not owe any amount pursuant to the FANS Contract, but these provisions are still relevant to determining the intent of the parties regarding entitlement to commissions when roll-up liability is unsatisfied.
[13] There are also indemnification provisions which also illustrate the debtor/Tomer's lack of entitlement to commissions when he had outstanding liabilities. See MILICO Contract, ¶ 3D; MAPLELEAF Contract, ¶ 3C; Associates Contract, ¶ 4B.
[14] The Court notes that after the debtor filed for bankruptcy, he executed a new RVP Contract which superseded prior agreements. The new contract contained an additional provision which provided: "RVP is responsible for all Debit Balance amounts of Agents in RVP's Sales Hierarchy with respect to insurance and other business submitted prior to the termination of this Agreement and RVP's vested commissions are subject to periodic reduction to the extent of any such Debit Balance." RVP Contract, ¶ 7(C)(4) (emphasis added). This provision adds additional evidence of the already clear intent of the parties regarding the debtor's entitlement to commissions when liabilities are unsatisfied.
[15] Notably, in the oral argument before the Court, the attorney for the trustee conceded that if Mr. Tomer tried to sue the company defendants for this money, he could not do so without first debiting the amount owed. Oral Argument, p. 24.
[16] Set-off is defined as: "[r]emedy employed by defendant to discharge or reduce plaintiff's demand by an opposite one arising from transaction which is extrinsic to plaintiff's cause of action." Black's Law Dictionary 1230 (5th ed. 1979).
[17] In our case the RVP Contract prohibits the assignment of debtor Tomer's commissions to any third party without the Company's consent. See RVP Contract, ¶ 17F.
[18] The Court notes that Griffin was not decided in the bankruptcy context, but was rather a priority dispute involving the assignment for commissions to a third party, who then perfected this secured interest. The Griffin case is inapposite on this basis as well.
[19] The Associates Contract further provides that:
Agent's entitlement to any insurance commissions is established by the MILICO Agent Agreement and the Mapleleaf Commission Agreement. Agent is not vested as to any commissions and if this Agreement is terminated, Agent has no further right to receive any commissions. Agent may, but has no right to be, granted certain vesting privileges under certain higher level contracts. . . .
Associates Contract, ¶ 15. The RVP Contract quoted at length in the text above is considered a higher level contract.
[20] As has been noted, Tomer is still employed by the company defendants, and therefore ¶ 7C's vesting provision has not been activated.
[21] The debtor Tomer argues that the vesting rights in the RVP agreement are illusory. First, this argument should be rejected since vesting is not relevant. But even if vesting is relevant, the argument relies on a mistaken interpretation of the contract. Tomer argues that vesting rights are illusory because he cannot enforce them. However, the vesting provision of the RVP Contract states that "[i]f for any reason whatsoever MILICO . . . should fail to pay commissions to RVP or RVP's Sales Hierarchy, and if such failure to pay shall not be at the request of [Associates], then RVP agrees to look solely to [MILICO] for such payment and not to [Associates]." RVP Contract, ¶ 7A. Therefore, if Associates fails to issue an instruction to MILICO to pay Tomer the vested commissions, Tomer has a direct action against Associates. If Associates does issue a request to pay, then Tomer would have a direct action against MILICO.
[22] The RVP Contract, ¶ 3 details the various obligations and responsibilities of an RVP.
[23] In oral argument before this Court, the Debtor's attorney notes that all issues raised on appeal can be determined from looking solely at the statute and the contract(s). Oral Argument, p. 37. The Court agrees.
[24] Paragraph 7C of the RVP Contract provides for the payment of vested commissions following termination of the contract, and ¶ 9 provides for payment of commissions after the death of the RVP. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1873580/ | 408 F. Supp. 489 (1976)
Robert F. LAUFMAN et al., Plaintiffs,
v.
OAKLEY BLDG. & LOAN CO., et al., Defendants.
No. C-1-74-153.
United States District Court, S. D. Ohio, W. D.
February 13, 1976.
*490 *491 Donald F. Colegrove, Cincinnati, Ohio, for plaintiff; Robert F. Laufman, Cincinnati, Ohio, Jay P. Mulkeen, NCDH, Washington, D. C., of counsel.
Matthew G. Ash, Washington, D. C., amicus curiae for Federal Home Loan Bank Bd.
Frank E. Schwelb, Housing Sec., Civ. Rts. Div., Dept. of Justice, Washington, D. C., amicus curiae for United States of America.
Louis A. Ginocchio, Cincinnati, Ohio, for defendants.
OPINION
DAVID S. PORTER, District Judge:
This Title VII case, involving "redlining," is before us pursuant to defendants' motion for summary judgment (Rule 56 of the Federal Rules of Civil Procedure) on the asserted ground that there is no genuine issue as to any material fact, that no cause of action is stated and that defendants are entitled to judgment in their favor as a matter of law. Defendants' motion for summary judgment is not well-taken and is denied for the reasons set forth in this opinion. We find that plaintiffs have stated a cause of action under both 42 U.S.C. §§ 3604 and 3605. We also find that plaintiffs have stated a cause of action under 42 U.S.C. § 3617 which provides that "it shall be unlawful to . . . interfere with any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed, or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605, or 3606 of this title. . . ." We further find that plaintiffs have stated a cause of action under Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d.
42 U.S.C. §§ 3604 and 3605
The principal thrust of plaintiffs' argument is that "redlining" is prohibited by Sections 804 and 805 of Title VIII of the Civil Rights Act of 1968, 42 U.S.C. §§ 3604 and 3605.[1] In pertinent part, these provisions declare:
Section 3604 Discrimination in the sale or rental of housing ". . . it shall be unlawful (a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, or national origin.
(b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, or national origin." (Emphasis added.)
Section 3605 Discrimination in the financing of housing
". . . it shall be unlawful for any bank, building and loan association, insurance company or other corporation . . . to deny a loan or other financial assistance to a person applying therefor for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or to discriminate against him in the fixing of the amount, interest rate, duration, or other terms or conditions of such loan or other financial assistance, because of the race, color, religion, sex, or national origin of such person or . . . of the present or prospective owners, lessees, tenants, or occupants of the dwelling or dwellings in relation to *492 which such loan or other financial assistance is to be made or given . . .." (Emphasis added.)
Plaintiffs contend that "redlining" is prohibited by the plain language of these provisions; if interpretation is necessary, they add, the Court should give great deference to the interpretation given these provisions by the Department of Housing and Urban Development (HUD) and the Federal Home Loan Bank Board (FHLBB) and should give these provisions a generous interpretation to effectuate the Congressional purpose. Defendants agree that these provisions are clear and unambiguous and that their literal language should be given effect, but they read these provisions not to prohibit "redlining". Defendants argue for a narrow reading of the terms of the Fair Housing provisions of the Civil Rights Act of 1968.
Plaintiffs contend that § 3604(a) not only prohibits conduct constituting a refusal to sell or rent, but also conduct that "otherwise make[s] [dwellings] unavailable." The "otherwise make unavailable" language, plaintiffs argue, has been given a broad reading by the courts and applied specifically to a variety of discriminatory conduct having nothing to do with refusals to sell or rent. These situations include rejection by an orphanage of minority orphans, adoption by a municipality of exclusionary ordinances, and racial steering by real estate brokers. United States v. Hughes Memorial Home, 396 F. Supp. 544 (W.D.Va. 1975); United States v. Parma, P.H.E. O.H.Rptr. para. 13,616 (N.D.Ohio 1973); Zuch v. Hussey, 366 F. Supp. 553 (E. D.Mich.1973). Thus, it is argued that § 3604(a) also outlaws "redlining."
Plaintiffs also contend that defendants' conduct is prohibited by § 3605 which deals specifically with "Discrimination in the Financing of Housing." Plaintiffs assert that "redlining" is prohibited by the plain meaning of this section. They urge that a narrower reading of § 3605 would reduce the language "or of the present or prospective owners, lessees, tenants, or occupants of the dwelling or dwellings in relation to which such loan is to be made or given," to surplusage and redundancy. This construction of § 3605 is also urged so as to be consistent with the broad scope of protection which Congress intended in enacting Title VIII and with the liberal construction that the Supreme Court directed the Act be given.
Defendants contend that only § 3605 is applicable as that provision specifically governs financing in housing. Reliance on § 3604, which principally concerns the sale or rental of housing, they argue, violates the principle that a specific statutory provision controls a general provision. Defendants buttress their position by reference to the title of § 3604, "Discrimination in the sale or rental of housing," as contrasted with the title of § 3605, "Discrimination in the financing of housing." The titles of legislative enactments are, of course, one indication of legislative intent. First Bank & Trust Co. of Princeton Ky. v. Feuquay, 405 F.2d 990, 993 (6th Cir. 1969). But examination of § 3604 reveals that it not only deals with discrimination in the sale or rental of housing in the broadest possible manner, but also has explicit application to other situations as well, so that its coverage clearly extends beyond the usual purview of the terms "sale or rental." For example, § 3604(b) prohibits racial discrimination "in the provision of services or facilities" in connection with the sale or rental of a dwelling. This has been held to include municipal services such as sewage treatment. United Farm. of Fla. H. Proj., Inc. v. City of Delray Beach, 493 F.2d 799 (5th Cir. 1974); Kennedy Park Homes Ass'n v. City of Lackawanna, D.C., 318 F. Supp. 669, aff'd, 2 Cir., 436 F.2d 108, cert. denied, 401 U.S. 1010, 91 S. Ct. 1256, 28 L. Ed. 2d 546 (1971). And § 3604(c) prohibits racially discriminatory advertising practices in connection with the sale or rental of housing. This subsection has been interpreted as prohibiting the recorder of deeds in the District of Columbia from accepting for filing *493 instruments that contain racially restrictive covenants, Mayers v. Ridley, 151 U.S.App.D.C. 45, 465 F.2d 630 (1972). In view of the wide applicability of § 3604, defendants' suggestion that § 3604 should be limited to discrimination in the sale or rental of housing in some narrow sense loses much of its force. And in any event, the denial of plaintiffs' loan application in this case in fact occurred in connection with the sale of a dwelling. Thus, reference to the caption is not controlling.
Moreover, § 3605 governs financing arrangements which lie beyond the coverage of § 3604, no matter how broadly § 3604 is read, as well as certain financial arrangements which would appear to come within § 3604's literal terms. In the category of transactions not subject to § 3604 are loans or other financial assistance for the purpose of "improving, repairing, or maintaining a dwelling," which the owner or occupant has previously acquired. Also, it is worth noting, the application of § 3604 is limited by §§ 3603(a) and 3607, whereas § 3605 is not.
In view of these considerations, it appears that § 3604 is applicable generally to transactions involving the sale or rental of housing and § 3605 is applicable generally to transactions involving extensions of financial assistance in connection with housing. Transactions involving both the sale or rental of a dwelling and real estate loans or other financial assistance in connection with the sale or rental of the dwelling are subject to both provisions. The same conduct may be prohibited by either or both provisions. In other words, we view §§ 3604 and 3605 as being collateral provisions entitled to equal weight.
If the plain meaning of § 3604 is observed, it becomes clear that plaintiffs have stated a cause of action under its terms. The cost of housing being what it is today, a denial of financial assistance in connection with a sale of a home would effectively "make unavailable or deny" a "dwelling." When such denial occurs as a result of racial considerations, § 3604(a) is transgressed.
42 U.S.C. § 3605
Whether or not § 3604(a) is applicable, § 3605 is applicable. This section prohibits any building and loan company from denying a loan "because of the race . . . of the present or prospective owners, lessees, tenants or occupants of the dwelling or dwellings in relation to which such loan . . . is to be made or given." Although not altogether unambiguous, we read this as an explicit prohibition of "redlining."
Obviously, the blunderbuss language of § 3605 prohibits the straightforward denial of a loan because of the race of the borrower. We think it also goes beyond this. In reaching this conclusion, we have considered defendants' argument that if this is the result Congress intended, it would not have used such "obscure and cryptic phraseology," but we have concluded that there is no other logical explanation for Congress to have done so. Instead of the admittedly rather vague expression "in relation to which," Congress could easily have said "for which" if that was what it meant.
We have also considered defendants' contention that the words "or dwellings" were added only to include multiple-dwelling transactions under the coverage of this section. § 3604 and the remainder of § 3605, however, speak in terms of discrimination in connection with the sale, rental or purchase or construction, etc., of a "dwelling" even though discrimination in connection with more than one dwelling (or in connection with a multiple-dwelling structure) is obviously also meant to be prohibited.
Alternatively, the practice of "redlining" would seem to fall under the proscription against denial of loans and financial assistance on the basis of race because of "the purposes of such loan or other financial assistance," where the purpose of the loan was to finance the purchase of a home in an integrated neighborhood.
*494 We have also considered defendants' argument that Congress chose to enumerate in § 3605 the practices of the housing credit industry it deemed advisable to prohibit, that Congress did not choose to include redlining in its enumeration, and that this failure to explicitly incorporate redlining in its enumeration of prohibited practices is evidence that Congress did not intend to prohibit redlining. Defendants rely on the ancient maxim, "Expressio unius est exclusio alterius" (doc. 34, p. 13). See 1 Sutherland, Statutes & Statutory Construction § 2017 (3d ed. Horack 1943). "This phrase is, of course, a rule of thumb to interpreting legislative intent rather than a principle of law." Equal Employment Opportunity Commission v. Kimberly-Clark Corporation, 511 F.2d 1352, 1362 (6th Cir. February 14, 1975). Indeed, the Supreme Court has observed that this is one of those "rules of statutory construction [that have] come down to us from sources that were hostile toward the legislative process itself and thought it generally wise to restrict the operation of an act to its narrowest permissible compass." S. E. C. v. Joiner Corp., 320 U.S. 344, 350-356, 64 S. Ct. 120, 123, 88 L. Ed. 88 (1943). In modern times, this rule has been subordinated to the doctrine that courts will construe the details of an act in conformity with its dominating general purpose, will read the text in light of its context, and, so far as the meanings of words fairly permit, will interpret the text so as to carry out in particular cases the generally expressed legislative policy. Id.; Passenger Corp. v. Passengers Assn., 414 U.S. 453, 458, 94 S. Ct. 690, 38 L. Ed. 2d 646 (1974).
Similarly, we have found unpersuasive defendants' argument that plaintiffs "are, in effect, seeking to extend and then enforce a federal penal statute" (doc. 34, ps. 13-16). §§ 3604, 3605 and 3617 of Title 42, the provisions of the Fair Housing Act upon which plaintiffs base their claim, are not penal in fact or in effect. See doc. 35. Indeed, we find this line of argument rather misleading. Cf. Texas & Pacific Railway Co. v. Rigsby, 241 U.S. 33, 39-41, 36 S. Ct. 482, 60 L. Ed. 874 (1916).
On the other hand, we agree with plaintiffs and amici that the Court should consider and should attach some importance to the interpretation given this Act by the Department of Housing and Urban Development (HUD) and the Federal Home Loan Bank Board (FHLBB). Both of these agencies, which share responsibility for administering the Fair Housing Act, have unambiguously interpreted its provisions as applicable to racial redlining. HUD, the agency with primary responsibility for the administration of the Fair Housing Act, in a report on an extensive survey of lending institutions conducted by HUD in cooperation with four financial regulatory agencies, the Department of Justice, the U. S. Commission on Civil Rights, and the Office of Management and Budget, issued on April 25, 1972, stated that "redlining of areas in a community in which minority group families are concentrated and the refusal to make loans in these areas . . . are prohibited by Title VIII [of the Civil Rights Act of 1968]." HUD (Office of Equal Opportunity), Private Lending Institutions Questionnaire, Initial Report on Returns (April 25, 1972). The Supreme Court has, we should add, specifically held that HUD's interpretations of the language of the Fair Housing Act are "entitled to great weight." Trafficante v. Metropolitan Life Ins., 409 U.S. 204, 210, 93 S. Ct. 364, 34 L. Ed. 2d 415 (1972).
The Federal Home Loan Bank Board has issued formal regulations and guidelines similarly interpreting the Act as prohibiting racial redlining. In pertinent part, these provide as follows:
"12 C.F.R. 528.2(a) No member institution shall deny a loan or other service rendered by the member institution for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or discriminate in the fixing of the amount, interest rate, duration, application procedures, *495 or other terms or conditions of such loan or other service because of the race, color, religion, sex, or national origin of
* * * * * *
(3) The present or prospective owners, lessees, tenants, or occupant of the dwelling or dwellings in relation to which such loan or other service is to be made or given; or
(4) The present or prospective owners, lessees, tenants, or occupants of other dwellings in the vicinity of the dwelling or dwellings in relation to which such loan or other service is to be made or given."
"12 C.F.R. 531.8(c)(6) Age, income level, or racial composition of neighborhood. Refusal to lend in a particular area solely because of the age of the homes or the income level in a neighborhood may be discriminatory in effect since minority group persons are more likely to purchase used housing and to live in low-income neighborhoods. The racial composition of the neighborhood where the loan is to be made is always an improper underwriting consideration."
Additionally, in a formal opinion dated March 21, 1974, the FHLBB's general counsel advised:
". . . the practice of member institutions of refusing to extend credit, and the practice of extending credit on terms that are less favorable than those usually offered, to borrowers whose security property is located within a predetermined geographic area or areas, because of the location of the property, violate section 528.2(d) if such practices have a discriminatory effect against members of racial ethnic or religious groups."
And in a previous formal opinion dated February 7, 1974, relating to appraisal forms, the general counsel stated:
". . . to extend credit on the basis of an appraisal form which calls for information relating to the ethnic composition of a neighborhood violates section 528.2(d) of the Board's regulations, and therefore use of such forms* by member institutions must be discontinued . . .. The use of appraisal forms which call for racial information regarding the neighborhood clearly violates the well-established legal prohibition against consideration of racial factors in real estate transaction."
There is no question in this case but that defendant Oakley is subject to the regulations issued by the FHLBB, 12 U.S.C. § 1437, or that the FHLBB generally has the authority to regulate lending institutions such as defendant Oakley under the Federal Home Loan Bank Act of 1932; the Home Owner's Loan Act of 1933; and the National Housing Act of 1934. Furthermore, we find that the regulations and guidelines issued by the FHLBB in this instance were issued in a valid exercise of the FHLBB's authority."
As we recently have had occasion to note, see Board of Ed. Cincinnati v. Department of H. E. W., 396 F. Supp. 203, 236 (S.D.Ohio, W.D.1975), this Court is:
". . . mindful of the well established dogma that agency interpretations of this nature are generally entitled to great deference. Griggs v. Duke Power Co., 401 U.S. 424, 434, 91 S. Ct. 849, 28 L. Ed. 2d 158 (1971); United States v. City of Chicago, 400 U.S. 8, 91 S. Ct. 18, 27 L. Ed. 2d 9 (1970); Udall v. Tallman, 380 U.S. 1, 85 S. Ct. 792, 13 L. Ed. 2d 616 (1965); Power Reactor Co. v. Electricians, 367 U.S. 396, 81 S. Ct. 1529, 6 L. Ed. 2d 924 (1961). And, this deference is particularly appropriate where, as here, the administrative practice in question involves a contemporary construction of the statute by the officers charged with the responsibility of setting its machinery in motion and of making its parts work smoothly and efficiently. Power Reactor Co. v. Electricians, supra; Griggs v. Duke Power Co., supra; United States v. Groupp, 459 F.2d 178 (1st Cir. 1972). Likewise, some weight *496 must be given to agency interpretations which Congress has not overturned despite its opportunity to do so is re-enacting and amending the statute. See, e. g., United States v. Brown, 290 F. Supp. 542 (D.Del.1968); Bridgeport Hydraulic Co. v. Kraemer, 219 F.2d 929 (1st Cir. 1955)." Op. Cit.
As defendants observe, Congress amended 42 U.S.C. § 3605 on August 22, 1974 (doc. 34, p. 12), but Congress did not change the language of this provision to make clear that it did not intend to prohibit racial redlining despite the prior agency determinations that this practice was prohibited by the Act. As indicated above, where prior agency interpretations have not been overturned during subsequent congressional reenactment or amendments, these interpretations take on added importance. Accordingly, we have found it appropriate to give great weight to these agency interpretations of the Fair Housing Act.
LEGISLATIVE HISTORY
In this case, a realistic examination of the concerns that led to the adoption of this legislation proves a better guide to congressional intent than the dusty volumes of Sutherland on Statutory Interpretation. Primary among these concerns were the rioting and civil disturbances that had rocked the central cores of many of the nation's major cities the previous summer. These disturbances had not only focused attention on the discontent of the people trapped in the nation's ghettoes, but had also brought many to the realization that the underlying illness, of which the riots of 1967 were symptomatic, had to be treated if a worse catastrophe was to be forestalled. This, indeed, was the conclusion of the National Advisory Commission on Civil Disorders appointed by President Johnson in July, 1967. Its final report was released in March, 1968, during the debate on the Civil Rights Act, and its findings were a matter of general concern to Congress.
Indeed, the Commission on Civil Disorders had examined and compiled a staggering compendium of the underlying causes of the racial disorders of the summer of 1967. In particular, the Commission's report discussed at length the problems of residential segregation and racial slum formation. (Chapter 6, The Formation of Racial Ghettos). The report noted:
"Thousands of Negro families have attained incomes, living standards, and cultural levels matching or surpassing those of whites who have `upgraded' themselves from distinctly ethnic neighborhoods. Yet most Negro families have remained within predominantly Negro neighborhoods, primarily because they have been effectively excluded from white residential areas." (244)
After discussing several common discriminatory tactics, the Commission turned to the problem of "white flight" which it defined as "withdrawal from, or refusal to enter neighborhoods where large numbers of Negroes are moving or already residing." (244) The report singles out as a critical causative factor the "refusal of whites to move into `changing' areas when vacancies occur there from normal turnover," leaving most vacancies to be filled eventually by blacks. Id.
The Commission reported that "two important points to note about this phenomenon" are:
"`Massive transition' requires no panic or flight by the original white residents of a neighborhood into which Negroes begin moving. All it requires is the failure or refusal of other whites to fill the vacancies resulting from normal turnover.
"Thus, efforts to stop massive transition by persuading present white residents to remain will ultimately fail unless whites outside the neighborhood can be persuaded to move in." (245)
Little imagination is required to understand that the imposition of barriers to occupancy in the form of higher mortgage-interest rates or refusals to make loans in connection with housing in changing neighborhoods works to discourage *497 families, white or black, which could afford to purchase homes in such neighborhoods. The practical effect is to discourage whites who may freely move elsewhere from moving into vacancies in "changing" neighborhoods, thereby inducing "massive transition" and, ultimately, "white flight." Thus, according to this view, redlining directly contributes to the decay of our cities.
Of course, the Commission cites other causes of "white flight" as well especially, the interplay between racial segregation in housing and in schooling. In this connection, the Commission stated that the "vast majority of inner-city schools are rigidly segregated." (426) It is also noted that:
"Racial isolation in the urban public schools is the result principally of residential segregation and widespread employment of the `neighborhood school' policy, which transfers segregation from housing to education." (Id.)
Thus, the Commission recognized that discrimination in housing is a major contributing factor to racial isolation in urban schools. That this has direct application to Cincinnati cannot be doubted. See, Deal v. Cincinnati Board of Education, 369 F.2d 55 (6th Cir. 1966), cert. denied, 389 U.S. 847, 88 S. Ct. 39, 19 L. Ed. 2d 114 (1967). Significantly, the Commission predicted that many urban school systems, including Cincinnati's, would have black student majorities by 1985. (391, 431) Cincinnati's school district has reached this mark a decade earlier than predicted.
After canvassing various alternatives, the Commission announced that it had "come to the firm opinion that there is no substitute for enactment of a federal fair housing law." (481) Not surprisingly, Senator Edward W. Brooke, a member of the Commission on Civil Disorders, was a major supporter of efforts to incorporate fair housing provisions into the 1968 Civil Rights Act.
Congress responded to the problems dramatized by the disorders of 1967 by passage of the Civil Rights Act of 1968, including as recommended by the Commission the strong Fair Housing legislation now before the Court. (Other titles in the Act concerned interference with federally protected activities, interstate transportation or communication to incite a riot, Indian rights, civil obedience and civil disorders. As this indicates, the concerns of Congress were large and somewhat varied and its response equally wide-ranging.)
As indicated, plaintiffs urge that the Fair Housing mandate of this Act be given a liberal interpretation so as to effectuate the purposes of Congress. Defendants argue that its terms should be construed niggardly. The plaintiffs have the more persuasive position and, accordingly, the Court will, if necessary to interpret the language used by Congress, give the provisions of the Act "a generous construction." Trafficante, supra, 409 U.S. at 212, 93 S. Ct. 364.
42 U.S.C. § 3617
Plaintiffs also assert that defendants' alleged racial redlining violates § 3617 in that it interferes with plaintiffs' exercise of their right to voluntary interracial association, which is protected under Trafficante.
Section 3617 reads as follows:
"It shall be unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed, or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605, or 3606 of this title. . . ."
Defendants contend that § 3617 is "triggered only after a finding of discrimination under one of the therein enumerated prior sections" (doc. 34, p. 9). Defendants do not, however, cite any case authority for this surprising proposition, nor do they attempt to distinguish the cases cited by plaintiffs (doc. 27, ps. 18-19) and the United States (doc. 25, ps. 22-23). Rather, defendants rely on *498 "that salutary rule of statutory construction that a statute should receive a reasonable and practical interpretation in accord with common sense" (doc. 34, p. 9). We believe that a reasonable and practical interpretation of § 3617 supports plaintiffs' position, and that defendants' interpretation would render § 3617 a mere redundancy in violation of another salutary rule of statutory construction that whenever possible, each provision of a legislative enactment is to be interpreted as meaningful and not as surplusage. And in any event, in this case we have already found defendants' alleged conduct to be in violation of § 3604 and § 3605, two of the enumerated sections.
In the present case, plaintiffs allege that they were denied a loan because of the racial composition of the neighborhood in which the home was located. We agree that this alleged conduct "interfere[s] with [the plaintiffs] in the exercise of or on account of [their] having exercised or enjoyed" the right to equal housing opportunity protected by the Fair Housing Act, causing plaintiffs the "loss of important benefits from interracial association." Trafficante, supra, 409 U.S. at 210, 93 S.Ct. at 367. We believe that this interpretation is in accord with United States v. City of Black Jack, 508 F.2d 1179 (8th Cir. 1975); Smith v. Stechel, 510 F.2d 1162 (9th Cir. 1975); United States v. City of Parma, P.H.E.O.H. Rptr. para. 13,616 at page 14,016 (N. D.Ohio, 1973); Tokaji v. Toth, P.H.E. O.H.Rptr. para. 13,679 (N.D.Ohio, 1974).
At oral argument it was mentioned that there was a bill pending in Congress to require banks and savings and loans to disclose the geographical locations of loans or, in other words, to make more visible the practice of redlining. Congress gave final approval on December 18, 1975, to Public Law 94-200, the Home Mortgage Disclosure Act of 1975, 12 U.S.C. § 2801, et seq. This Court, ever mindful of its function to interpret the law and not legislate, has carefully considered this new legislation to ascertain what light, if any, it may shed on our above interpretation of the Fair Housing Act. The new bill requires mortgage lenders in metropolitan areas to disclose the amount of mortgage money they lend within each city tract area used by the Census Bureau for statistical purposes. If census tract disclosure is not feasible, then lenders can disclose their information by postal zip code areas, which are usually larger and less apt to conform to neighborhood boundaries. The theory behind the Act is that many city residents would not deposit their savings in institutions found to practice redlining.
We conclude that this new Act indicates at the least a grave concern with redlining and the legislative debates in both houses prior to its passage indicate a strong disapproval of redlining where it exists. The main purpose of the Home Mortgage Act of 1975 is to make visible where the practice does exist. This purpose is not inconsistent with Congress' having intended to outlaw redlining earlier by passing the Fair Housing Act. Indeed, it will facilitate the remedying of the problem of redlining by having this new disclosure law on the books. Thus, after careful analysis of this new legislation, we find it to be consistent with our foregoing interpretation of the Fair Housing Act, specifically §§ 3604, 3605 and 3617.
TITLE VI OF THE CIVIL RIGHTS ACT OF 1964, 42 U.S.C. § 2000d
In addition to their claims under the Fair Housing Act, plaintiffs assert a claim for relief under Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d. This provision reads:
"No person in the United States shall, on the ground of race, color, or national origin, be excluded from participating in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance."
Clearly, defendant Oakley Building and Loan Company is subject to the prohibitions of Title VI, see 42 U.S.C. § 2000d-1. And, it appears that plaintiffs do *499 have standing under Title VI. See, Lemon v. Bossier Parish School Board, 240 F. Supp. 709 (W.D.La.1965); Marable v. Alabama Mental Health Board, 297 F. Supp. 291 (M.D.Ala.1969).
Plaintiffs contend:
". . . [T]here is no question under the allegations of the Complaint that race was an element in defendants' denial of plaintiffs' application for the loan. The fact that it was not plaintiffs' own race, but the race of the people who resided in the neighborhood does not exempt defendants from the broad reach of Title VI any more than it exempts them from coverage under Title VIII. See, Evans v. Lynn, No. 157 (2d Cir. 1975)." (doc. 27, p. 20).
Defendants dispute this contention most vigorously (see doc. 34, p. 9). Defendants argue:
"42 U.S.C. Sec. 2000(d) prohibits subjecting a `person' to `discrimination.' The legislature does not therein define just what it is that constitutes `discrimination' against a `person.' To properly interpret 42 U.S.C. Sec. 2000(d)'s application to the instant facts, we must refer to 42 U.S.C. Sec. 3605 wherein the Legislature has specifically spelled out what conduct is to be considered racial discrimination re lending practices." (doc. 34, p. 9).
There are a number of cogent reasons why defendants' argument must fail. First, we have already held that § 3605 of Title VIII of the Civil Rights Act of 1968 does proscribe the conduct complained of by plaintiffs. Secondly, Title VI of the Civil Rights Act of 1964 is entirely distinct legislation from the subsequent Civil Rights Act of 1968, and its provisions are entitled to an independent interpretation, although experience under other acts may be relevant. Thirdly, defendants' emphasis on the prohibition of § 2000d that no "person . . . shall . . . be subjected to discrimination" is misleading inasmuch as it ignores the parallel prohibition of that section that no "person . . . shall . . . be excluded from participation in [or] be denied the benefits of . . any program or activity receiving Federal financial assistance." Plaintiffs complain that the conduct of defendants "excluded [plaintiffs] from participation in" and "denied [plaintiffs] the benefits of . . . [a] program or activity receiving Federal financial assistance," namely participation in defendant Oakley Building and Loan's extensions of home mortgage money to qualified persons, and that the conduct of defendants in so doing was impermissibly grounded on considerations of race. Under these provisions, plaintiffs clearly state a cause of action. Indeed, defendants' alleged conduct in this case might also be actionable under the section's prohibition against "discrimination" on the basis of race against any "person" under a covered program or activity, although it is not necessary to this decision for us to so hold. Defendants are correct in their observation that Title VI does not define "discrimination." "Basically, however, discrimination refers to a denial of equal protection." Board of Ed., Cincinnati v. Department of H. E. W., 396 F. Supp. 203, 225 (S.D.Ohio, W.D.1975). Unquestionably, a denial of federal assistance to loan applicants on the basis of the racial composition of the neighborhood would constitute "discrimination." We believe that Congress could and did prohibit private sources from engaging in such discrimination in connection with any federally assisted activity or program under § 2000d-1.
During oral argument on the defendants' motion for summary judgment, defendants' counsel interjected a new issue into the case, namely, whether plaintiffs have a private right of action under these regulations independent of any action under the specific provisions of the Fair Housing Act itself. Plaintiffs and the amici in this case quickly seized upon this new issue and counsel for the Federal Home Loan Bank Board (FHLBB) submitted to the Court in a letter dated October 15, 1975 (doc. 39A) authorities for the proposition "a private party may *500 derive a right of action from the Board's governing statute, to enforce violations of Board regulations." Defendants have filed a reply memo, the essence of which is that, "regardless of whether [FHLBB] regulations may sometimes afford private litigants a cause of action, those here involved do not afford these plaintiffs a cause of action" (doc. 39, p. 3); although defendants also make the rather frivolous argument that, "to predicate a private cause of action upon a regulation applicable only to those savings and loan associations which are members of the FHLBB system would be violative of the Equal Protection Clause of the Fourteenth Amendment to our federal constitution." Id. It is not necessary to resolve these issues in view of our determination of this case.
Defendants' counsel also presented at oral argument another new issue in connection with the defendants' attack on the FHLBB regulations and guidelines involved in this case, by arguing that these regulations are actually in conflict with Federal Savings and Loan Insurance Corporation (FSLIC) regulations, specifically with FSLIC regulation 12 C.F.R. § 571.1(G). Counsel stated:
". . . [T]his case could be entitled Federal Home Loan Bank vs. Federal Insurance Corporation, because, believe it or not, the Federal Insurance Corporation has Regulation 571.1, Paragraph G, which states exactly the opposite of what the Federal Home Loan Bank Regulation 12 531.8 says. What does 571.1 Paragraph G of the Federal Savings and Loan Insurance Corporation they have regulations, too
. . . . .
"It says watch out about loaning in neighborhoods where the neighborhood is declining, where the area, the homes are declining. So, it can get, if you're sitting on a board of directors of a building and loan
. . . . .
"You're caught in the middle." Tr. 16-17 (doc. 40). (Emphasis added.)
Even assuming that counsel's characterization of § 571.1(G) is correct, it is difficult to see how this regulation can be said to advise "exactly the opposite of what the Federal Home Loan Bank Regulation 12 C.F.R. § 531.8 says." For reference, § 531.8(c)(6) reads:
"12 C.F.R. 531.8(c)(6) Age, income level, or racial composition of neighborhood. Refusal to lend in a particular area solely because of the age of the homes or the income level in a neighborhood may be discriminatory in effect since minority group persons are more likely to purchase used housing and to live in low-income neighborhoods. The racial composition of the neighborhood where the loan is to be made is always an improper underwriting consideration." (Emphasis added.)
This guideline does not suggest that member banks should make loans on "declining" property, or even in "declining" neighborhoods, since that certainly implies more than "solely" because of the age of the homes or the income level in a neighborhood.
Moreover, counsel's characterization of 12 C.F.R. § 571.1(G) is somewhat overstated. This regulation states when and how an appraisal of properties securing bank loans may be conducted. In pertinent part, § 571.1(G) states:
"The Chief Examiner may obtain the services of a professional appraiser to make actual, physical appraisal of specific properties, . . . or to make a preliminary appraisal or survey. The latter procedure is to estimate the highest and best use of the property, to select the approach which, in his opinion, will develop the most rational value indication, to ascertain whether the neighborhood is improving, stabilizing or declining, to determine the condition of the property, etc." [31 F.R. 8004 (June 7, 1966)]
In all fairness, it must be said that this regulation stops considerably short of mandating "exactly the opposite of what the Federal Home Loan Bank Regulation 12 [C.F.R.] 531.8 says."
*501 In this connection, we believe that the remarks made during oral argument by counsel for the Federal Home Loan Bank Board are notable:
"Considering the brief time that's available, I'd like to start by refuting or attempting to refute a couple of points made by counsel for defendants. First, counsel points out that regulations of the Federal Savings and Loan Insurance Corporation discourage savings and loans from making investments or making loans in `declining neighborhoods,' and he used that term several times. I suggest that that's the gist of what Congress was attempting to make illegal in Title VIII and the gist of what the Bank Board was trying to make illegal in its regulations, was the feeling on the part of a great many lenders that a racially integrated neighborhood per se must be a declining neighborhood and per se must be a bad credit risk. There is nothing in the Board's regulations or in the Board's policies which mandates an association to make a bad loan as long as the criteria they use for making the loan are legitimate business criteria, such as the credit worthiness of the borrower, the marketability, the salability of the security property, including the neighborhood in which it's located which has a bearing on its salability, the diversification of the institution's assets. All these things are legitimate criteria. But the facts have shown over the years, it's been shown time and again that a neighborhood which had changed from white to black or a neighborhood that is racially integrated, particularly an older neighborhood within city limits of an established and older city need not be a declining neighborhood, and that often a contributing factor to the decline is the refusal of lenders to provide credit for the purchase of these homes or for the rehabilitation of them. So we take issue with the defense, not on whether or not a financial institution is obligated to make loans in a declining neighborhood, but on the judgment that a declining neighborhood necessarily results when a neighborhood becomes racially integrated.
"THE COURT: You take issue with him, that his client is caught in the middle between two sets of regulations?
"MR. SHORE: Oh, I don't think his client's caught in the middle at all, your Honor. The Board has determined in its regulations that the racial composition of a neighborhood is not a legitimate rationale or criteria and neither is it a business-like criteria for the making of a loan. If a neighborhood in fact is declining, if property can't be sold, for whatever reason, regardless of the racial criteria, why, that's a legitimate business judgment. A neighborhood can decline for a number of reasons. The Board is anxious that lenders not use the racial composition of the neighborhood to effect an automatic judgment that it must be declining." Tr. 28-30.
The foregoing statement constitutes, we believe, a completely satisfactory statement of the relevant FHLBB regulations and policies which we also believe are fully supported by the law.
CONCLUSION
We find that plaintiffs have stated a cause of action under 42 U.S.C. §§ 3604, 3605, and 3617. Additionally we find plaintiffs have stated a cause of action under Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d. Therefore, defendants' motion for summary judgment in this case is hereby denied.
NOTES
[1] As amended Pub.L. 93-383, Title VIII, Section 808(b)(1), Aug. 22, 1974, 88 Stat. 729 (adding word "sex"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3098322/ | NUMBER 13-11-00329-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
GIGNAC & ASSOCIATES, Appellant,
v.
HOWARD MINTZ AND AMANDA MINTZ, Appellees.
On appeal from the 117th District Court
of Nueces County, Texas.
MEMORANDUM OPINION
Before Justices Rodriguez, Benavides and Perkes
Memorandum Opinion by Justice Benavides
This case alleges negligence in professional architectural services under chapter
150 of the Texas Civil Practice & Remedies Code. See TEX. CIV. PRAC. & REM. CODE
ANN. §§ 150.001–.003 (West 2011). Appellant, Gignac & Associates (Gignac), argues
the trial court erred in denying its motion to dismiss and in granting appellees, Howard
and Amanda Mintzes’, motion for leave to file a late certificate of merit. We dismiss this
case for want of jurisdiction.
I. BACKGROUND
The Mintzes contracted with Gignac, a licensed architect, to design and build their
home. The Mintzes were dissatisfied with Gignac’s work, so on March 27, 2009, they
mailed a demand letter to Gignac indicating that they intended to sue for negligence.
The Mintzes formally sued Gignac on October 13, 2009, claiming that Gignac provided
―inadequate, incomplete, and/or inaccurate drawings, or on some instances the lack of
drawings altogether.‖ However, when the Mintzes filed suit, they did not file a certificate
of merit as required under Texas Civil Practice and Remedies Code chapter 150. See
TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(a) (West 2011). Section 150.002 of the
civil practice and remedies code provides that:
In any action or arbitration proceeding for damages arising out of the
provision of professional services by a licensed or registered professional,
the plaintiff shall be required to file with the complaint an affidavit of a
third-party licensed architect . . . who is competent to testify; holds the
same professional license or registration as the defendant; and is
knowledgeable in the area of practice of the defendant. . . .
Id.
The Mintzes eventually filed their certificate of merit on February 25, 2010, four
2
months after filing their lawsuit, along with a motion to extend time to file the certificate
late. They also filed a motion to compel arbitration. In response, Gignac filed a motion
to dismiss the case for failing to file the certificate of merit on time. See id. §150.002(e).
Gignac also claimed that the Mintzes had waived their right to arbitration by failing to file
their motion sooner.
The trial court held a hearing on the motion to compel arbitration on April 7, 2011.
It did not hold a hearing on the remaining motions. On May 12, 2011, the trial court
signed and entered three orders: it granted the Mintzes’ motion to compel arbitration
and their motion to extend time for filing a certificate of merit, and denied Gignac’s
motion to dismiss. Gignac appeals, arguing that the trial court erred in ruling on its
motion to dismiss and the Mintzes’ motion for leave to file late certificate of merit when
the case was referred to arbitration. Gignac does not appeal the trial court’s granting of
the motion to compel arbitration.
II. STANDARD OF REVIEW
Normally, an order granting or denying a motion to dismiss under chapter 150 of
the Texas Civil Practice and Remedies Code is immediately appealable as an
interlocutory order. See TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(f); Landreth v.
Las Brisas Council of Co-Owners, Inc., 285 S.W.3d 492, 496 (Tex. App.—Corpus Christi
2009, no pet.). However, this case comes to us in a different procedural posture.
The trial court ordered this case to arbitration. Under the Texas Arbitration Act section
171.025, a trial court’s order compelling arbitration clearly and unequivocally stays the
3
underlying legal proceedings pending completion of the arbitration proceeding. See
TEX. CIV. PRAC. & REM. CODE ANN. § 171.025 (West 2011).1 Here, however, Gignac did
not appeal the trial court’s order referring this case to arbitration. As such, we conclude
we have no jurisdiction over this case. See id.
III. CONCLUSION
We dismiss this appeal for want of jurisdiction.
________________________
GINA M. BENAVIDES,
Justice
Delivered and filed the
19th day of January, 2012.
1
The Mintzes posit that the trial court may not have had jurisdiction to decide the motion to dismiss
or the motion to extend time if it ruled upon them after referring the case to arbitration. However, they point
to no references in the record, and we find none, demonstrating the order in which the trial court decided the
foregoing motions.
4 | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1408578/ | 880 F.Supp. 1005 (1994)
MOBIUS MANAGEMENT SYSTEMS, INC., Plaintiff.
v.
FOURTH DIMENSION SOFTWARE, INC., Defendant.
No. 94 Civ. 0749 (LAP).
United States District Court, S.D. New York.
November 30, 1994.
*1006 *1007 *1008 Jeffrey S. Trachtman, Jonathan Wagner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, New York City, for plaintiff.
Miriam L. Siroky, Mauro L. Siroky, Skadden, Arps, Slate, Meagher & Flom, New York City, for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
PRESKA, District Judge.
Plaintiff, Mobius Management Systems, Inc. ("Mobius"), seeks damages and a permanent injunction against defendant, Fourth Dimension Software, Inc. ("Fourth Dimension"), for breach of contract, for violations of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and for common law unfair competition. After holding a bench trial on October 6 and 7, 1994, I find that Mobius is entitled to injunctive relief, damages in the amount of $63,026.40, the amount of reasonable attorney fees it expended on this matter, and the costs of this action.
BACKGROUND
Both Mobius and Fourth Dimension market software products for customers that use IBM mainframe computers. After Mobius brought a Lanham Act claim against Fourth Dimension concerning a side-by-side comparison of the products distributed by Fourth Dimension, the parties entered into a settlement agreement that contained a list of representations that Fourth Dimension could not make about Mobius's software package. Mobius brought the instant action after Fourth Dimension sent a letter to a prospective Mobius customer that compared the Mobius product to the Fourth Dimension product. That letter stated that, because of various advantages that the Fourth Dimension had over the Mobius software, the customer would save money if it purchased the Fourth Dimension product instead. According to Mobius, that correspondence contained several statements that Fourth Dimension had promised not to make in the previous settlement. In addition, Mobius argues, those statements, as well as several others mentioned in the letter, were false and therefore violated § 43(a) of the Lanham Act.
The parties made cross motions for summary judgment. I denied those motions for two reasons: first, I found that the settlement agreement was ambiguous as to whether certain statements listed in the agreement categorically could not be repeated by Fourth Dimension; and second, explanation about the technical aspects of the subject matter was needed before the truth or falsity of the statements could be determined. A bench trial was held on October 6-7, 1994. After observing the witnesses who testified at trial and reviewing that testimony and the parties' submissions, I make the following findings of fact and conclusions of law.
I. Findings of Fact
A. Background
Mobius and Fourth Dimension are both in the business of, among other things, developing and marketing computer software programs for MVS[1] system main frame computers. (Tr. 16 (Gross);[2] Tr. 120 (Hollander); Miller Dep. at 32; Complaint ¶¶ 1-2).
Mobius's flagship product, introduced in 1982 under the name "INFOPAC," is a report distribution system, a product that allows large organizations to process, store, and retrieve reports containing financial data and other information. It saves substantial paper and human resources by permitting reports to be viewed on-line or printed out in packets automatically collated for each recipient. (Tr. 13-14 (Gross)). After this product attained marketplace success, Mobius began using the name INFOPAC for nearly its whole line of products; its report distribution *1009 system was renamed INFOPAC-RDS. (Tr. 13, 15-16 (Gross)).
Fourth Dimension markets a report distribution product, called CONTROL-D, which is in direct competition with INFOPAC-RDS. (Tr. 21 (Gross)).
B. The First Advertisement
In or about April, 1993, Mobius became aware that Fourth Dimension had provided a potential customer with a document entitled "REPORT DISTRIBUTION, A Quick Comparison." (Plaintiff's Exh. 2 (the "First Advertisement")). The First Advertisement contained a chart listing approximately 100 product functions or features, indicating CONTROL-D's purported superiority over INFOPAC with a series of "Y's" and "N's." The context of the document focusing on report distribution made clear that CONTROL-D was being compared with Mobius's competing product, INFOPAC-RDS. Many of the statements concerned the basic architecture of the products and went to features and functions critical to the operation of a report distribution product. (Tr. 21-23, 26 (Gross)).
Alleging that the First Advertisement contained more than 70 false statements, and having been unsuccessful in obtaining a retraction or apology, Mobius commenced a Lanham Act suit against Fourth Dimension in this Court in May 1993. The parties entered into a settlement agreement (the "Agreement") in June of 1993. Under the Agreement (Plaintiff's Exh. 3 at 2), Fourth Dimension promised, among other things, to destroy all copies of the First Advertisement and not to "disseminate, either orally or in writing" 65 statements about INFOPAC contained in the First Advertisement. The prohibited statements were listed in Appendix 2 to the Agreement (the "Appendix 2 Statements").
The only first-hand account of the negotiations leading to the settlement was provided by Mr. Gross. Although Fourth Dimension was represented in the negotiations by two attorneys and a staff member, Bob Weslosky, it only offered testimony as to the intent of the parties by its President, Yossie Hollander, who was not present at the negotiations and never spoke with anyone from Mobius about the terms of the settlement. (Tr. 155 (Hollander)). I credit Mr. Gross's account, both because of his personal knowledge of the events at issue and because I find his account to be credible.
Mr. Gross met with Mr. Weslosky and attorneys for both sides in on-and-off discussions over three days in early June 1993, during and after Mr. Gross's deposition in the prior action. Demonstrating INFOPAC-RDS on a computer screen and referring to the INFOPAC-RDS User's Manual, Mr. Gross explained to Fourth Dimension's representatives why each of the challenged Fourth Dimension claims about INFOPAC-RDS was false. The parties agreed, item by item, what to include in Appendix 2 only after agreeing that each such item was in fact false. Certain items were rephrased before being included, and others were omitted because Mr. Gross was unable to convince Fourth Dimension's representatives that they were false. (Tr. 28-42 (Gross)).
In particular, the parties discussed and agreed on the falsity of three items that came to be implicated in this action: Item 8 ("INFOPAC provides for pre-allocated VSAM datasets"); Item 9 ("INFOPAC does not provide for dynamic allocation of required space"); and Item 65 ("INFOPAC creates 2 VSAM datasets for every report version"). (Tr. 33-42 (Gross)). As to at least Item 65, Mr. Hollander personally was consulted by phone and had to be convinced of the item's falsity before authorizing Mr. Weslosky to add it to the list of prohibited statements. (Tr. 328-30 (Gross)). Thus, the testimony conclusively shows that the parties agreed that the statements included in Appendix 2 were false.
These negotiations focused almost exclusively on the INFOPAC-RDS product. It was INFOPAC-RDS that was compared to CONTROL-D in the First Advertisement. Fourth Dimension even obtained a ruling from this Court that Mr. Gross's demonstration during his deposition involve only the functions of INFOPAC-RDS. In any event, I credit Mr. Gross's testimony that most of the items included in Appendix 2 make sense only as applied to a report distribution product. (Tr. 30-31, 42-45, 330-31 (Gross)). Although Fourth Dimension notes that Mr. Gross distinguished in his deposition between INFOPAC and INFOPAC-RDS, (Gross *1010 Dep. at 13-14, 266), the parties appear otherwise to have used the terms interchangeably. (Plaintiff's Exh. 1 ¶ 8 (prior Complaint using both terms); Gross Dep. at 13, 258 (Fourth Dimension counsel referring to INFOPAC)). Fourth Dimension's counsel stressed that "if I use the term INFOPAC, I am referring to INFOPAC-RDS." (Gross Dep. at 13; Miller Dep. at 110 (customer testifies terms used interchangeably)).
On May 17, 1993, counsel for Mobius sent a draft of a settlement agreement to counsel for Fourth Dimension. (Defendant's Exh. B). Yossie Hollander, Fourth Dimension's Chief Executive Officer who was responsible for approving the settlement agreement, (Tr. 135 (Hollander)), had two principal objections to that draft. First, the draft would have prohibited Fourth Dimension from making certain statements "or their equivalent." (Tr. 132 (Hollander); Defendant's Exh. B at 3). Hollander objected to this because he felt that no person could understand what an "equivalent" statement was. (Tr. 132 (Hollander 132)). Second, the draft had no provision permitting Fourth Dimension to make truthful statements. Hollander would not sign an agreement unless it contained a provision permitting truthful claims. (Tr. 141 (Hollander)). This "truthful claims provision" was included as paragraph 7 of the agreement to assure that Fourth Dimension would be free to make truthful comparative statements about Mobius products.[3]
Fourth Dimension also expressed concern about agreeing to bar statements about products that were subject to evolving technology. This concern was addressed by limiting the life of the Agreement to three years through what is commonly referred to as a "sunset clause." (Tr. 47-48 (Gross)).
The action finally was settled pursuant to a Stipulation and Agreement of Settlement dated June 7, 1993 (Plaintiff's Exh. 3; Tr. 25-27 (Gross)). The agreement included, among other things, the truthful statements provision (paragraph 7), the three year sunset provision, and a list of 65 statements that could not be said by Fourth Dimension because the parties had determined that they were false (Appendix 2). The overwhelming weight of the evidence establishes that the parties understood, agreed and intended (a) that the Appendix 2 Statements applied to the RDS product, (b) that the Appendix 2 statements were false, (c) that the intent of the Agreement was to bar Fourth Dimension from repeating those statements not just as applied to INFOPAC products generally but also and more particularly as applied to INFOPAC-RDS. (Tr. 42-45, 331-33 (Gross)).
C. The Second Advertisement
In late 1993, Mobius and Fourth Dimension were competing for the business of M & I Data Services, Inc. ("M & I"), a Wisconsin company that processes customer statements and other data for banks. M & I signed a contract on December 31 to purchase INFOPAC-RDS, subject to an "acceptance clause" permitting it to test the product for 60 days and reject it if not satisfied. Starting in late 1993 and continuing into early 1994, M & I ran tests on both INFOPAC-RDS and CONTROL-D. (Tr. 50-53 (Gross)).
Fourth Dimension sent a letter to M & I on or about December 16, 1993, listing a series of purported advantages of CONTROL-D over INFOPAC-RDS that closely tracked the Appendix 2 Statements, but were phrased to avoid express mention of INFOPAC. After hearing Fourth Dimension's witnesses Michael Anderson and Thomas Trogdon testify about the origination of this letter, I find that Fourth Dimension understood both that the substance of the Appendix 2 Statements applied to the RDS product and that making such statements about INFOPAC-RDS would violate the Agreement. (Tr. 169, 175-76 (Anderson); Tr. 245-49 (Trogdon)).
On or about January 6, 1994, Charles Miller, an M & I employee principally involved with the testing of CONTROL-D and in favor of M & I's purchasing the Fourth Dimension product, telecopied to Thomas Trogdon, Fourth Dimension's Vice-President in charge of marketing in the Midwest, a two-page document purporting to reflect one *1011 set of results emanating from the testing. (Defendant's Exh. L (the "January 6 Chart")). Mr. Miller did not create the document, and was only involved to a minor extent in the underlying testing of the INFOPAC product. No Fourth Dimension representatives were directly involved in the INFOPAC testing. (Miller Dep. at 20-21, 35-36, 57; Tr. 214 (Anderson)).
The January 6 Chart which was the sole basis offered at trial by Fourth Dimension for the truth of its statements (Tr. 169 (Anderson)) does not indicate many important variables underlying the testing, does not reflect changes in subsequent testing leading to different results, and does not establish the basic functional abilities of either product. (Tr. 334-41 (Gross)). It provided, at best, a snapshot of certain results of the testing being conducted at that point. (Tr. 219 (Anderson)).
On January 10, 1994, Mr. Trogdon sent to Mike Hayford, a Senior Vice-President of M & I, a two page letter accompanied by an eight page memo outlining purported cost savings of nearly $5.6 million that would accrue to M & I if it chose CONTROL-D over INFOPAC-RDS. (Defendant's Exh. K (the "Second Advertisement")). Michael Anderson, a Fourth Dimension technical manager who assisted in preparing the Second Advertisement, defended its truth only as applied to testing data contained in the January 6 Chart, and disclaimed any knowledge of subsequent testing. (Tr. 219 (Anderson)). Mr. Anderson never saw the INFOPAC-RDS User's Manual, never saw the product's source code, had no regular experience running the product, and thus admitted that he did not know all the things INFOPAC-RDS can do. (Tr. 211-13 (Anderson)).
Mr. Anderson conceded that much of the Second Advertisement would be false, or its truth or falsity would be beyond his knowledge, if the document were read as applying to the overall functions and capabilities of INFOPAC-RDS. (Tr. 219-25 (Anderson)). However, the Second Advertisement on its face purports not to summarize particular testing but to "prove" that CONTROL-D will provide savings over INFOPAC in actual use. (Defendant's Exh. K, p. 2 of 8). Indeed, Mr. Trogdon confirmed that the Second Advertisement was meant to contrast the basic capabilities of the two products. (Tr. 249 (Trogdon)). In fact, despite some attempt at the inclusion of a disclaimer, Fourth Dimension made blanket statements about the capabilities of Mobius's product statements that were untrue, indeed, some of which that had been demonstrated false during the previous litigation.
D. Specific Statements in the Second Advertisement
1. Statements Regarding Dynamic Space Allocation
The Second Advertisement purported to contrast the abilities of CONTROL-D and INFOPAC-RDS to store data efficiently:
VSAM datasets require a pre-defined allocation of DASD space, and this pre-allocation of space for each job/report must be at least large enough to handle the largest output from a job for any given day/week/month/year. The tests conducted by M & I Data used optimal VSAM parameters for the number of lines done in the test. If at any time during the year, there will be more lines in the report than in the test, the job will abend on B37. In reality, M & I Data Services will probably allocate the VSAM file as large as the largest annual report! Because its [sic] not possible to free the space at the end of the job, the actual compression rate of Infopac will be 0 or even larger than the non-compressed allocation (on regular daily runs).
(Defendant's Exh. K, p. 5 of 8).
As explained by Mr. Gross, this paragraph claims (1) that INFOPAC-RDS requires users to determine in advance the amount of disk space to be allocated to each "dataset," or file; (2) that the system will malfunction if reports containing more than the pre-allocated amount of space are processed, because additional space cannot be allocated dynamically (i.e., at the time of need); and (3) that to avoid this result, INFOPAC requires over-allocation of space that cannot be reclaimed, with a negative result in "compression," or *1012 storage efficiency. (Tr. 60-62, 65-70 (Gross)).
These claims repeat two of the Appendix 2 Statements: "INFOPAC provides for preallocated VSAM datasets" (Item 8), and "INFOPAC does not provide for dynamic allocation of required space" (Item 9). Fourth Dimension has offered no meaningful distinction between these statements on the one hand and the statements that INFOPAC's VSAM datasets "require a pre-defined allocation of DASD space" and a "pre-allocation of space" on the other. (Defendant's Exh. K at p. 5 of 8). I credit Mr. Gross's testimony that the statements are indistinguishable. (Tr. 60-62 (Gross).
Mr. Gross further explained, and Mr. Anderson agreed, that INFOPAC does not require pre-allocation of DASD storage space. To the contrary, INFOPAC provides for dynamic allocation of disk space i.e., automatic allocation of space at the time of need, rather than in advance. (Tr. 33-36, 65-75 (Gross); Tr. 197, 222 (Anderson)). Mr. Miller confirmed this in his deposition. (Miller Dep. at 63-73).
Mr. Anderson testified that the statement about space allocation in the Second Advertisement was meant only to suggest that INFOPAC required the pre-determination of certain parameters according to which space is later dynamically allocated in portions known as "extents":
Q: [Y]our intended statement was that INFOPAC requires the parameters of the extent to be predetermined, not that the actual space needed to be allocated?
A: Correct.
* * * * * *
Q: So it would be a false statement to say that the storage space had to be preallocated under INFOPAC?
A: That is correct.
(Tr. 222 (Anderson)).
However, the Second Advertisement is plainly addressing the allocation of space, not the setting of parameters: INFOPAC's datasets are claimed to require "a pre-defined allocation of space," and this "pre-allocation of space" rather than the setting of parameters must anticipate the largest possible report: using INFOPAC, "M & I Data Services will probably allocate the VSAM file as large as the largest annual report!" (Defendant's Exh. K, p. 5 of 8 (emphasis added)). By Fourth Dimension's own admission, then, the plain reading of its statement is false; I do not credit Mr. Anderson's testimony to the contrary.
The statement that with INFOPAC "its [sic] not possible to free the space at the end of the job," (Defendant's Exh. K, p. 5 of 8), is also false because INFOPAC provides for the automatic releasing of unused disk space. (Tr. 69-70 (Gross)). No Fourth Dimension witness disputed this. Fourth Dimension pointed only to a problem that M & I was having during testing with the space release function, but this was due to a set-up problem of M & I that did not require any programming change from Mobius. (Miller Dep. at 90-91; Tr. 301-02, 344 (Gross)).
In any event, for M & I to have a problem with a known feature of INFOPAC does not establish that the feature does not exist. Moreover, Fourth Dimension does not argue that the testing data suggests that INFOPAC does not allocate space dynamically. Thus, even if the Second Advertisement could be read as making claims only with respect to the test results, the statements about space allocation would be false.
2. Statements Regarding Two Datasets
The Second Advertisement further stated:
To the best of our knowledge, Infopac/RDS creates two datasets one for printing and one for on-line viewing. If we assume ... Infopac/RDS creates two datasets per report (when both print and on-line viewing are needed), then Infopac/RDS must require at least 2 times the amount of DASD than CONTROL-D.
(Defendant's Exh. K, p. 4 of 8). Item 65 of Appendix 2 reads: "INFOPAC creates two VSAM datasets for every report version." Since it is undisputed that printing and viewing are critical functions of a report distribution system, the statement that INFOPAC creates two datasets for viewing and printing is in substance the same as the statement *1013 that it creates two datasets for every report. (Tr. 62-63 (Gross)). Once again, the prohibited statement and the statement in the Second Advertisement are indistinguishable.
Mr. Gross also persuasively explained why the statement is false: INFOPAC can create two datasets for each report, but it can accomplish all of its basic functions by creating only one dataset. For example, a report may be stored and viewed in an On-line Archives dataset, and a hard copy may be printed out directly from that dataset. In certain circumstances, the user may choose to create a second dataset for printing, but that option is only selected if it is more efficient; in that instance, the second dataset is generally not stored but is instead discarded before the job finishes processing. Additional datasets essentially extra copies of particular files generally are not saved unless a back-up is desired. Thus, even where the INFOPAC user chooses to create a second dataset, the system does not use twice the amount of DASD storage space. (Tr. 37-41, 76-79, 341-44 (Gross)). Mr. Anderson did not dispute this explanation. (Tr. 221-22 (Anderson)).
Fourth Dimension's purported reliance on the testing data does not establish the truth of its "two dataset" statements. The statements in the Second Advertisement are phrased in terms of the product's basic capabilities e.g., "Infopac/RDS creates two datasets" rather than expressly being limited to an evaluation of testing results. Moreover, the January 6 Chart does not establish that INFOPAC always creates two datasets it only suggests that M & I had chosen to run the product that way for one particular test. (Tr. 334-38 (Gross)).
Fourth Dimension's false statements about dynamic allocation of space and the creation of two datasets were material. They went to the basic efficiency of the INFOPAC product, and Fourth Dimension itself attributed $2,256,000 of the alleged cost savings to these two factors alone. (Tr. 65 (Gross); Defendant's Exh. K at 2).
Fourth Dimension made these statements knowing they were false. Mr. Hollander personally reviewed the Second Advertisement before it went out and made changes to it. (Tr. 151 (Hollander)). He retained these statements despite knowing that Fourth Dimension had agreed that the same statements were false in the First Advertisement. (Tr. 45-48, 328-32 (Gross)). Mr. Trogdon, who signed the letter, also was familiar with the statements included in Appendix 2. (Tr. 245-46 (Trogdon)). And Mr. Anderson, who provided technical input for the Second Advertisement, knew at least that the statements regarding INFOPAC's allocation of DASD space were false. (Tr. 222 (Anderson)).
3. Statements Regarding AFP Printing
The Second Advertisement stated:
CONTROL-D has the ability to calculate the number of AFP pages that are printed by users thereby allowing for correctly charging back AFP printing to the users. CONTROL-D is the only product that can do this. Other products cannot determine when AFP page mode report pages begin or end, and with this limitation, users cannot be charged when printing AFP reports.
If we assume that M & I Data Services cannot charge back, say, $30,000 a month to customers for AFP printing or re-printing of AFP reports, this is revenue that M & I will be leaving on the table.... [extrapolation of "revenue loss"]
M & I personnel spend up to 20 hours a week (if not more) just re-printing AFP statements for the banks. CONTROL-D will allow the users at the banks (logged on via IMS/DC or CICS or VTAM) to request their own reprints of these statements without any intervention from M & I personnel, and CONTROL-D will automatically print the correct AFP characteristics with the statements.
(Defendant's Exh. K, p. 7 of 8 (emphasis added)).
Advanced Function Presentation (AFP) is an IBM product that allows for automated high speed printing of data and forms together, thus eliminating the need for expensive pre-printed forms for bank statements and similar reports. The ability to support AFP printing is a crucial function of any report *1014 distribution software product. (Tr. 81-82 (Gross)).
The passage quoted above asserts (1) that INFOPAC-RDS cannot calculate the number of AFP pages printed, and thus does not enable users to charge their customers for printing, and (2) that INFOPAC-RDS cannot allow the customer of a user (e.g., a bank serviced by M & I) to access the system directly to reprint a particular report. Fourth Dimension assigned five year costs to each of the two functions, making clear that the comparison being presented was between CONTROL-D and INFOPAC-RDS. (Defendant's Exh. K at 2; Tr. 224-25 (Anderson)).
These statements about the AFP capabilities of INFOPAC-RDS are false. INFOPAC-RDS determines page boundaries, stores each page, and makes a record of the number of AFP pages read and the output generated. Statistics, including the number of pages printed, are available to users in two different files, and INFOPAC-RDS users routinely charge their customers for AFP printing. Moreover, INFOPAC-RDS provides for customers of users to access the system directly to reprint reports, either by storing AFP printing commands with the pages originally printed, or by automatically inserting print commands when reprints are requested. (Tr. 81-89 (Gross)).
Fourth Dimension did not claim at trial that the M & I testing data supported the specific claims about AFP printing described above. It pointed only to a temporary problem that M & I had with INFOPAC-RDS in printing out single pages within reports. However, Mr. Gross testified, without contradiction, that this resulted not from a problem with the INFOPAC software, but from M & I's initial failure to provide certain indexing information necessary for INFOPAC-RDS to interface properly with M & I's systems. (Tr. 86-87 (Gross)).
4. Statements Regarding Processing Time
The Second Advertisement contained two challenged statements about INFOPAC-RDS's processing efficiency. First, in comparing test results of the two products, Fourth Dimension claimed that CONTROL-D's actual processing time would be less than indicated because it, unlike INFOPAC-RDS, could write reports directly to a dataset, without first requiring creation of an intermediate file:
Infopac/RDS will always require the intermediate file (with all possible B37 danger); therefore, the Infopac/RDS results represent a true figure.
(Defendant's Exh. K, p. 2 of 8). The reference to "B37 danger" indicates the increased risk of malfunction that would allegedly accompany this extra necessary step. (Tr. 92-94 (Gross)).
The statement that INFOPAC-RDS always requires creation of an intermediate file is false. As Mr. Gross explained, INFOPAC permits users to write reports directly to datasets through the use of the INFOPAC-RDS Application Program Interface (API), which serves as an interface between the user's system and the INFOPAC dataset. (Tr. 92-94 (Gross)). Mr. Anderson testified that he had no reason to doubt that INFOPAC-RDS had the ability to avoid the intermediate file, although he believed this would require additional programming. He admitted that Fourth Dimension's statement about the intermediate file was false as applied to INFOPAC-RDS generally. (Tr. 219-21 (Anderson)).
The Second Advertisement also repeated the "two dataset" statement in claiming superior processing efficiency:
The hard copy reports are also designated (eventually) for on-line viewing. In such a case, Infopac/RDS will create a second data set, and therefore will run even longer. We have included an estimate for it as well (20% longer).
(Defendant's Exh. K, p. 3 of 8). This statement is false for the same reasons described above: INFOPAC-RDS does not always create two datasets, and in fact is designed to do so only when that choice results in greater processing efficiency. (Tr. 76-78 (Gross)).
5. Statements Regarding Spool Space Reduction
The Second Advertisement also made claims about CONTROL-D's allegedly *1015 unique ability to regulate storage space in connection with printing reports:
CONTROL-D is the only product that can regulate the amount of print output that is sent to the JES Spool for printing.... Unlike Infopac/RDS, CONTROL-D will not reclaim the DASD it "saves" you by bypassing the Spool.
(Defendant's Exh. K, p. 6 of 8).
The Spool is a key component of IBM computers that controls routing to and operation of peripheral devices such as printers. Fourth Dimension's claim is that INFOPAC-RDS does not have the ability to control the flow of output headed for the printer, with the result that reports waiting to be printed will take up inordinate amounts of disk storage space. Thus, Fourth Dimension claims, even if INFOPAC-RDS is able to bypass the Spool by writing reports directly to datasets, it will "reclaim" the space thus saved by wasting it at the printing stage. (Tr. 95-98 (Gross)).
Fourth Dimension's statement about controlling the flow of output to the printer is false. First, Fourth Dimension did not dispute Mr. Gross's testimony that other products regulate output to the printer in precisely the same way as CONTROL-D by "chunking" output by number of lines. (Tr. 345 (Gross)). Nor does Fourth Dimension dispute that INFOPAC-RDS also permits the amount of output to be regulated through a different mechanism, the creation of "report groups," which permit material to be sent to the Spool in various regulated combinations and categories. (Tr. 96, 345-46 (Gross)). Fourth Dimension's argument that report groups must be set up in advance and are not created automatically, (Tr. 203-04 (Anderson)), is irrelevant to the truth of its claim in the Second Advertisement that INFOPAC cannot "regulate the amount of print output."
The additional false statements described above were material. They went to basic functions and features of the INFOPAC-RDS product, and purported to establish an additional nearly $3 million advantage for using CONTROL-D. (Tr. 99 (Gross); Defendant's Exh. K at 2). Overall, if the claims in Fourth Dimension's letter were true, Mr. Trogdon agreed that M & I would have been crazy to buy INFOPAC-RDS. (Tr. 250 (Trogdon)).
E. The Impact of the Second Advertisement
After receiving Fourth Dimension's document, M & I became suspicious of Mobius, began questioning INFOPAC-RDS product, and expanded its testing. Mobius personnel in several areas including product development, technical support, and sales were mobilized to convince M & I that Fourth Dimension's statements were false and that the INFOPAC product in fact did what Mobius claimed. (Tr. 100-03 (Gross)). I find that Mobius's response to devote additional personnel and resources to respond to the Fourth Dimension letter to save the M & I sale was reasonable. This effort involved several senior employees who would not otherwise have been involved in a routine installation, including Mr. Gross himself, Mobius's Executive Vice-President Joseph Albracht, Walter Giernoth, a senior systems troubleshooter, Kary Kleeman, regional marketing manager for the Midwest, and Joe Tinorello, national sales manager. (Tr. 264-76 (Gross)).
M & I, which had signed the contract to purchase Mobius's product at the end of December, 1993, had a contractual right to back out of the contract for a period of 60 days (the "acceptance clause"). (Tr. 52 (Gross)). This acceptance period, therefore, expired by the end of February, 1994. M & I ultimately decided not to exercise this right under the acceptance clause to cancel its contract to buy INFOPAC-RDS.
Mr. Gross offered estimates of the time devoted to Mobius's efforts to correct the confusion caused by Fourth Dimension's false statements, based on his personal knowledge of Mobius's operations and backed up where possible by business records of Mobius. (Tr. 103-10, 264-79 (Gross); Plaintiff's Exh. 8; Plaintiff's Exh. 9). Mr. Gross estimated that the time and expenses devoted to the corrective effort through April 1994 totalled approximately $50,402. Although this figure would have been reasonable *1016 had the effort continued through April, I find that the efforts to convince M & I of the falsehood of Fourth Dimension's letter and repair the relationship with M & I substantially had ended by the end of February; those efforts undertaken thereafter related to implementation of M & I's system rather than repairing damage caused by Fourth Dimension's statements. Thus, Mobius has met its burden of proof that it incurred costs while taking reasonable corrective steps before the end of February, but, Mobius has failed to prove that it took actions (and incurred costs) after that time that it would not have taken in any customer implementation context. After examining the records admitted into evidence, as explained by Mr. Gross, I calculate that Mobius expended costs in the amount of $21,008.80 to reasonably respond to Fourth Dimension's false statements.[4]
Finally, I find that Mobius's relationship with M & I suffered long term damage by Fourth Dimension's actions, despite Mobius's reparative actions. I credit Mr. Gross's testimony that Mobius's relationship with its customer has been harmed with the result of a loss of trust and goodwill between Mobius and M & I. (Tr. 278 (Gross)).
F. Fourth Dimension's Bad Faith
Fourth Dimension acted in bad faith by issuing the Second Advertisement. Fourth Dimension already had been sued for making many of the same false statements about INFOPAC in its First Advertisement; based on Mr. Gross's testimony regarding the settlement negotiations described above, which I credit, and on the testimony of Messrs. Hollander, Anderson, and Trogdon, which I do not, I find that the Fourth Dimension personnel involved in the Second Advertisement knew that some of the statements in the Second Advertisement were prohibited by the settlement agreement because they were false.
Moreover, as to all of its false statements, Fourth Dimension was at least reckless: claiming no other basis for its statements than a single two-page document reflecting the results of one set of tests, it made a series of flat statements about the basic functions and capabilities of INFOPAC-RDS even though, as Mr. Hollander admitted, Fourth Dimension really has "no way of knowing" whether statements it makes about its competitors' products are true. (Tr. 122 (Hollander)). Moreover, Fourth Dimension has never retracted any of its false statements about INFOPAC-RDS. (Miller Dep. at 111).
In sum, after examining the various witnesses at trial and reviewing the other evidence presented, I do not credit Fourth Dimension's claims that it believed its statements about INFOPAC-RDS to be true: it is clear to me that Fourth Dimension knew that several of the statements were false; as to the other statements, because Fourth Dimension had little or no basis for its statements, it is clear that Fourth Dimension simply did not care whether its letter was true. In particular, I note the testimony of Mr. Anderson, whose testimony I affirmatively *1017 do not credit, and that of Mr. Hollander, who admitted that he had no basis for knowing the capabilities of another product.
II. Conclusions of Law
A. Breach of Contract
Interpretation of settlement agreements follows general contract law principles. When confronted with a contract provision that is ambiguous, a district court "may properly consider evidence extrinsic to the contract itself, including testimony offered by the parties." In Time Products, Ltd. v. Toy Biz, Inc., 38 F.3d 660, 665 (2d Cir.1994) (citing In re Consolidated Mutual Insurance Co., 77 N.Y.2d 144, 565 N.Y.S.2d 434, 436, 566 N.E.2d 633, 635, (1990)); see Kinek v. Paramount Communications, Inc., 22 F.3d 503, 509 (2d Cir.1994). In this case, I found at the summary judgment stage that the settlement agreement was ambiguous as to whether the use of the enumerated statements listed in Appendix 2 categorically was prohibited, as asserted by Mobius, or whether they were prohibited only if false, as argued by Fourth Dimension. The parties, therefore, were allowed to present testimony on the significance of the Appendix 2 list. Moreover, because of the technical nature of the subject matter at issue in this case, testimony was necessary to determine whether the statements made were true or false.
To summarize my findings of fact above, I found the following about the meaning of the settlement agreement. First, the previous settlement agreement and the Appendix attached thereto set out statements that could not be made by Fourth Dimension specifically about Mobius's INFOPAC-RDS product. Second, although Fourth Dimension reserved the right to make truthful statements about the Mobius product, the parties in the agreement had determined that the 65 statements about Mobius listed in Appendix 2 were false. The only provision for ever using those statements was included in the three year sunset provision which was included because the truth or falsity of the statements may change over time given the dynamic nature of the technology at issue. To further summarize, I found that the advertisement sent to M & I did include statements that were, in substance, the same as those prohibited by the settlement agreement. Fourth Dimension, therefore, has breached the settlement agreement. None of its arguments to the contrary is persuasive.
Fourth Dimension first argues that the settlement agreement related to all of the INFOPAC family of software products and not specifically INFOPAC-RDS. As I stated above, this position is not consistent with the evidence. First, I credit Mr. Gross's testimony as to what product was the subject of the previous litigation and that most of the itemized statements only made sense as they related to a report distribution system. Second, I issued an order directing Mr. Gross only to discuss the INFOPAC-RDS product at his demonstration during his deposition. Third, given the fact that the INFOPAC-RDS product originally was referred to simply as INFOPAC, a construction that continues to this day with some customers, it was reasonable to use only that name in the settlement agreement. Fourth, I note that the defendant's own witnesses stated that they were referring to INFOPAC-RDS when saying only INFOPAC. It is clear to me that the settlement agreement related to the INFOPAC-RDS product specifically.
Fourth Dimension next argues that the statements in the second advertisement, as a matter of law, could not violate the settlement agreement because they were not the exact statements that were included in Appendix 2. In support of their argument, Fourth Dimension points to a clause that was omitted from the original draft of the agreement. That clause provided that Fourth Dimension would have been prohibited from using the statements contained in Appendix 2, or their equivalent. That provision was omitted at the suggestion of Mr. Hollander because he thought that no person could understand what an "equivalent" statement was. (Tr. 132 (Hollander)). Fourth Dimension now asserts that the omission of this clause leads to the conclusion that it can use the Appendix 2 statements in substance as long as it does not use the statements as written. This argument is specious, at best. *1018 The deletion of the word equivalent, a word that could lead to ambiguity and that could be construed to have relatively broad application,[5] does not mean that the prohibited statements may be made if placed in different syntax. If Fourth Dimension could avoid the prohibitions of the settlement agreement merely by changing sentence structure or by using synonyms, the agreement would be meaningless I refuse to interpret it in such an illogical way.
Fourth Dimension next argues that the statements were not, in substance, the same as those listed in Appendix 2. As found above, however, the statements made in Fourth Dimension's advertisement to M & I were the same, in substance, as the statements listed in Appendix 2.
Fourth Dimension's final argument on the breach of contract claim is that they cannot be liable because the statements in their advertisement to M & I were true. Mr. Hollander, for example, testified that, while insisting on the inclusion of the "truthful statement" provision of the settlement agreement, included in paragraph 7 of the agreement, his intention was to ensure that Fourth Dimension could always say truthful information about Mobius. Mr. Hollander, therefore, stated that he did not care what went into Appendix 2 in his view, the company still could use Appendix 2 statements as long as they were true.
Mr. Hollander's arguments do not affect the conclusion of breach, however, for two reasons. First, as a matter of law, Mr. Hollander's subjective intentions are irrelevant to the determination of what the intentions of the parties were in making the agreement. As the Second Circuit has stated, "[a]s a fundamental matter, the objective of contract interpretation is to give effect to the expressed intentions of the parties." Kimmins Indus. Service Corp. v. Reliance Insurance Co., 19 F.3d 78, 81 (2d Cir.1994) (emphasis added). Moreover, "[a] party's actual or secret intent is immaterial to the formation of a contract." LCA Leasing Corp. v. Borvig Corp., 826 F.Supp. 776, 779 (S.D.N.Y.1993) (Sprizzo, J.). In the instant case, Hollander never expressed his interpretation of the truthful statements clause to anyone at Mobius, nor was there testimony that anyone else from Fourth Dimension expressed this interpretation. Indeed, it is doubtful that Mr. Hollander's testimony is properly admissible to determine the intentions of the parties, as Fourth Dimension could not establish a foundation that the subjective intention was expressed to Mobius. Even fully considering this testimony of his unexpressed intent, I do not credit Hollander's testimony about his intentions. Instead, I credit Mr. Gross's testimony that the Appendix 2 statements were determined by the parties to be false and, by implication, the true statement clause would not affect the application of Appendix 2.[6] Moreover, even if Fourth Dimension's true statements provision defense was legally defensible, it still would be irrelevant to this case I found above that as a matter of fact, Mobius has shown that the statements were false.
Because Fourth Dimension has made statements about Mobius that, in substance, were explicitly prohibited by the parties' settlement agreement, Fourth Dimension has breached the agreement and is liable to Mobius for damages incident thereto. Before discussing damages, however, I first will address Mobius's other claims for relief.
B. Lanham Act Claims
Mobius also claims that, because the statements made by Fourth Dimension were false, *1019 the Second Advertisement violated § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Section 43(a) of the Lanham Act provides, in pertinent part, that
[a]ny person who ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1)(B). This section provides protection against a "myriad of deceptive commercial practices," including false advertising. Resource Developers v. Statue of Liberty-Ellis Island Foundation, 926 F.2d 134, 139 (2d Cir.1991). Mobius seeks both injunctive and monetary relief under this section. Because the elements of a § 43(a) action are slightly different for each type of relief, I will address each in turn.
1. Injunctive Relief
To make out a claim under § 43(a) sufficient to entitle the plaintiff to injunctive relief, the plaintiff must show that defendant: (1) has made material misrepresentations about the nature, characteristics or geographic origin of either defendant's or plaintiff's goods or services; (2) has used the false or misleading representations "in commerce;" (3) has made the representations in the context of commercial advertising or commercial promotion; and (4) has made plaintiff believe that he or she is likely to be damaged by the misrepresentations. See Towers Financial Corp. v. Dun & Bradstreet, Inc., 803 F.Supp. 820, 823 (S.D.N.Y. 1992) (citing McNeil-P.C.C., Inc. v. Bristol Myers Squibb Co., 938 F.2d 1544, 1548-49 (2d Cir.1991); National Artists Management Co. v. Weaving, 769 F.Supp. 1224, 1230 (S.D.N.Y.1991); McCarthy on Trademarks, § 27.04[1][a].
(a) False Statement in Commerce
The first two requirements clearly are satisfied in the instant case. As for the first requirement, I found above that the defendant made materially false statements about the nature and characteristics of Mobius's software program. As to the second, there has been no argument that Fourth Dimension's statements about Mobius were not "use[d] in commerce," nor would there be any grounds for such an argument. Fourth Dimension used the instrumentalities of interstate commerce to make misrepresentations of Mobius's product, which was in interstate commerce, to promote its own product in interstate commerce.
(b) Commercial Advertising or Promotion
Defendant argues,[7] however, that its letter to M & I "did not constitute commercial advertising or promotion within the meaning of section 43(a)" because it was merely a single letter rather than an advertisement disseminated to the public. (Defendant's Response to Plaintiff's Proposed Findings of Fact and Conclusions of Law at 4 n. 7). According to defendant, therefore, plaintiff's Lanham Act claim must fail. I disagree.
In a recent case, another court in this district examined this very issue of what constitutes commercial advertising or promotion under § 43(a). In Gordon and Breach Science Publishers S.A. v. American Institute of Physics, 859 F.Supp. 1521 (S.D.N.Y.1994), Judge Sand analyzed the legislative history and relevant precedent behind the § 43(a) "commercial advertising or promotion" requirement. He concluded that, in order for a misrepresentation to meet this requirement, the communication had to meet a four-part test: (1) it must constitute commercial speech; (2) it must be made by a defendant who is in commercial competition with plaintiff; (3) for the purposes of influencing the purchase of its goods and services; and (4) "[w]hile the representations need not be made in a `classic advertising campaign,' but may consist of more informal types of `promotion,' the representations ... must be disseminated sufficiently to the relevant purchasing *1020 public to constitute `advertising' or `promotion' within that industry." Id. at 1535-36.
In the instant case, the first three parts of the test easily are met. First, commercial speech is defined as "speech proposing a commercial transaction." United States v. Edge Broadcasting, ___ U.S. ___, ___, 113 S.Ct. 2696, 2703, 125 L.Ed.2d 345 (1993). Fourth Dimension's letter to M & I was an explicit invitation to purchase Fourth Dimension's product over that of Mobius. Second, Mobius and Fourth Dimension are in direct competition with one another. Third, Fourth Dimension's letter on its face was made for the express purpose of influencing the purchase decision of M & I.
The more difficult issue is whether Fourth Dimension's letter was "disseminated sufficiently to the relevant purchasing public to constitute `advertising' or `promotion' within that industry." Gordon and Breach, 859 F.Supp. at 1535-36. After examining the relevant caselaw and taking into account the remedial purposes of the Lanham Act, I conclude that it was. It is clear that the primary concern of Congress in requiring "commercial advertising or promotion" was to ensure that the Lanham Act did not reach speech that did not promote a competitor's product. This requirement ensures that political, social, informational or incidental representations are beyond the scope of the Act only promotional representations that are directed at the purchasing public can be reached by § 43(a). See, e.g., National Artists Management Co. v. Weaving, 769 F.Supp. 1224, 1233 (S.D.N.Y.1991) ("Section 43(a) `has never been applied to stifle criticism of the goods or services of another by one ... who is not engaged in marketing or promoting a competitive product or service'" (quoting Wojnarowicz v. American Family Ass'n, 745 F.Supp. 130, 141-42 (S.D.N.Y. 1990)).
An examination of the cases finding no commercial advertising or promotion fall into one of these non-promotional categories of speech that lie beyond the scope of § 43(a). In American Needle & Novelty v. Drew Pearson Marketing, 820 F.Supp. 1072 (N.D.Ill.1993), for example, the court refused to hold defendants liable for one letter "privately addressed to a non-consuming licensor." Id. at 1078 (emphasis added). In Marcyan v. Nissen Corp., 578 F.Supp. 485 (N.D.Ind.1982), aff'd, 725 F.2d 687 (7th Cir. 1983) (Table), the court held that misrepresentations contained in the defendant's user's manual was not actionable because they were not used in promotion of the product. In Vitale v. Marlborough Gallery, No. 93 Civ. 6276 (PKL), 1994 WL 654494, (S.D.N.Y. July 5, 1994), Judge Leisure refused to impose § 43(a) liability on the basis of allegations that the defendants were planning on producing a catalogue containing false representations in the future. See id. at *6. In Gordon and Breach Science Publishers S.A. v. American Institute of Physics, 859 F.Supp. 1521 (S.D.N.Y.1994), a case concerning allegedly false statements contained in academic journals, Judge Sand concluded that the plaintiff's allegations were not "sufficient to convert fully protected commentary into less-protected commercial speech." Id. at 1541. In Hertz Corp. v. Avis, Inc., 725 F.Supp. 170, 171 (S.D.N.Y.1989), vacated on other grounds by, 732 F.Supp. 26 (S.D.N.Y. 1990), Judge Duffy refused to impose Lanham Act liability for an advertisement in a travel agent magazine because the ad never reached consumers of the rental car service. Each of these cases demonstrate that the commercial advertising requirement is meant to deny relief in those cases where the false advertising does not reach the people that matter most under the Lanham Act the consumers. See id. ("Advertising that is not misconceived, misunderstood, or that fails to reach the consuming public does not come within the purview of the Lanham Act, which is aimed primarily at consumer protection." (emphasis added)).
In the instant case, Fourth Dimension's letter to M & I was "disseminated sufficiently to the relevant purchasing public to constitute `advertising' or `promotion' within that industry." The letter concerned the competing products, promoted Fourth Dimension's product over that of Mobius, and was aimed directly at a purchaser, indeed, a purchaser that was about to buy plaintiff's product. As I found above, the relevant purchasing market *1021 is quite small tainting the goodwill of plaintiff with one purchaser could easily affect another purchaser's view. Moreover, in this case the true relevant purchasing public consisted solely of M & I. Fourth Dimension learned of M & I's impending purchase of Mobius's product, and, in bad faith, by way of a knowingly and materially false letter, made a last-ditch effort to torpedo Mobius's sale and convince M & I to buy its product instead. Although I recognize that § 43(a) "does not have boundless application," Alfred Dunhill Ltd. v. Interstate Cigar Co., 499 F.2d 232, 237 (2d Cir.1974), to label this behavior as anything but "commercial advertising or promotion" would defeat the broad remedial purposes of the Lanham Act. See, e.g., PPX Enterprises v. Audio Fidelity Enterprises, 818 F.2d 266, 270 (2d Cir.1987) (recognizing that, although early interpretations of the Act were narrow, subsequent interpretations demonstrate that the Act reaches a wide variety of deceptive commercial practices); Gordon and Breach, 859 F.Supp. at 1532 ("Section 43(a) of the Lanham Act has been characterized as a remedial statute that should be broadly construed.") (citing PPX Enterprises).
In sum, although Fourth Dimension's letter was not a "classic advertising campaign," given that Fourth Dimension's letter (a) was presented directly to M & I, a company known to be in the market for the product, and (b) expressly was designed to discourage M & I from purchasing Mobius's product and buy its product instead, I hold that the letter constituted "commercial advertising or promotion under § 43(a)." See North Shore Medical Center, Ltd. v. Evanston Hospital Corp., No. 92 C 6533, 1993 WL 141717 at *3 (N.D.Ill. April 28, 1993) (recognizing that under broad remedial purposes of § 43(a), "courts have held that false representations contained in private letters sent from one company to another are actionable under § 43(a) of the Lanham Act."); National Artists Management Co. v. Weaving, 769 F.Supp. 1224 (S.D.N.Y.1991) (holding that even private, partially social phone conversations could be actionable if defendant therein promoted her services over that of plaintiff); Radio Today, Inc. v. Westwood One, Inc., 684 F.Supp. 68, 74 (S.D.N.Y.1988) ("The Lanham Act does not apply merely to false advertising through traditional media channels, but to a broad range of deceptive statements made in connection with the sale of goods or services."). In my view, this conclusion does nothing to expand the scope of established § 43(a) liability Fourth Dimension made a false statement directly to a prospective purchaser, for the purpose, indeed the sole purpose, of promoting its product and disparaging another's product. Section 43(a) is written in the disjunctive it requires commercial advertising or promotion. Acceptance of Fourth Dimension's argument that its letter does not constitute commercial advertising or promotion effectively would write the word "promotion" out of § 43(a).
(c) Tendency to Damage the Plaintiff
The final element[8] that plaintiff needs to show to be entitled to injunctive relief is that defendant's misrepresentations harmed the plaintiff. The plaintiff need not show actual damage, but rather need only show that it is likely that defendant's actions have caused or will cause damage. See Ortho Pharmaceutical Corp. v. Cosprophar, 32 F.3d 690, 694 (2d Cir.1994); Johnson & Johnson v. Carter-Wallace, Inc., 631 F.2d 186, 190 (2d Cir.1980). To prove such likelihood of injury, the plaintiff "must also show a logical causal connection between the alleged false advertising and its own sales position." Johnson & Johnson, 631 F.2d at 190; see also Ortho, 32 F.3d at 694. In order to do so, the plaintiff must show that the misrepresentations have a tendency to deceive the purchasing public and the tendency is likely to cause harm to the plaintiff. See Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 316-17 (2d Cir.1982). Although such deception is usually shown with consumer *1022 surveys and other such evidence, when the misrepresentation is "literally or explicitly false," as in this case, "the court may grant relief without reference to the advertisement's impact on the buying public." Id. at 317; see also Barr Laboratories, Inc. v. Quantum Pharmics, Inc., 827 F.Supp. 111, 117 (E.D.N.Y.1993) ("[A] plaintiff must show (1) that some consumers were actually confused by the defendant's false advertising or that the defendant deliberately or intentionally advertised its product falsely, which would pretermit a showing of actual consumer confusion and (2) that the plaintiff's injury was caused by the defendant's false advertising."). Furthermore, in cases concerning misleading comparisons, such as the instant case, irreparable harm warranting injunctive relief will be presumed. See McNeilab, Inc. v. American Home Products Corp., 848 F.2d 34, 38 (2d Cir.1988). In the instant case, this presumption of irreparable harm governs and, therefore, plaintiff has made out its case for injunctive relief. Moreover, even without the assistance of the presumption, plaintiff still would prevail; as I found above, defendant's letter caused M & I to conduct additional testing and to question plaintiff's product to the point that plaintiff reasonably devoted additional personnel to counteract the letter and salvage its sale. This is more than sufficient to satisfy the standard of showing a tendency to deceive and a causal connection to the harm suffered.
Thus, plaintiff has satisfied all the elements of a § 43(a) claim for injunctive relief. Whether I will exercise my discretion to grant such relief will be addressed below.
2. Claim for Monetary Damages
Mobius also seeks monetary relief for the damages caused by Fourth Dimension's letter to M & I. To show entitlement to monetary damages under § 43(a), a plaintiff must show an additional element he or she must show actual damages rather than a mere tendency to be damaged. To do so, the plaintiff must show that he or she suffered actual damages that were causally related to "actual consumer confusion or deception" of the purchasing public. PPX Enterprises v. Audiofidelity Enterprises, 818 F.2d 266, 271 (2d Cir.1987) (citing Burndy Corp. v. Teledyne Industries, 748 F.2d 767, 772 (2d Cir. 1984) and Coca-Cola, 690 F.2d at 316).
The plaintiff successfully has satisfied the actual consumer confusion or deception requirement. When a plaintiff is able to prove that a defendant "deliberately engaged in a deceptive commercial practice, ... a powerful inference may be drawn that the defendant has succeeded in confusing the public. Therefore, upon a proper showing of such deliberate conduct, the burden shifts to the defendant to demonstrate the absence of consumer confusion." Resource Developers v. Statue of Liberty-Ellis Island Foundation, 926 F.2d 134, 140 (2d Cir.1991). As I found above, Fourth Dimension wilfully intended to mislead M & I about Mobius's product in order to gain a competitive advantage and derail Mobius's sale. This deceptive intent makes the presumption of consumer confusion appropriate. Fourth Dimension has failed to present proof that such deception did not occur.[9] Moreover, as I found above, even without the benefit of the inference, M & I was deceived at least to the extent of conducting additional tests and questioning Mobius's product more than it would have had it not received the misrepresentations in Fourth Dimension's letter.
Fourth Dimension argues that monetary damages are inappropriate both because M & I was not deceived and because that plaintiff did not suffer any damages causally related to their letter. In support of this argument, Fourth Dimension notes that Mobius did not lose the M & I sale. Although defendant cites Burndy Corp. v. Teledyne Industries, Inc., 748 F.2d 767, 771, 773 (2d Cir.1984), and Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 744-46 (7th Cir.1985), for the proposition that lost sales are a prerequisite to obtaining money *1023 damages under § 43(a), this is neither an accurate explanation of the law, nor even of the holding in Burndy or Otis Clapp & Son.[10] Although it is true that a plaintiff must show that he or she suffered some damage as a result of the defendant's misrepresentations, see id., lost sales are only one of several types of damages that a defendant may sustain and recover. The District of Columbia Circuit, for example, listed the various types of actual damages that can be incurred due to false advertising: (1) lost profits from sales actually diverted; (2) profits lost from sales made at reduced prices; (3) the costs of completed corrective advertising that reasonably responded to the misrepresentation; and (4) quantifiable harm to the plaintiff's goodwill. See Alpo Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 969 (D.C.Cir.1990).
In the instant case, Mobius's claim for damages rests on the amount of corrective measures that it had to take to combat the defendant's misrepresentations and save the M & I sale. This basis of damages has been recognized not only by the D.C. Circuit in Alpo, but also by other circuits and in other courts within this district. See U-Haul International, Inc. v. Jartran, Inc., 793 F.2d 1034, 1041 (9th Cir.1986) (recognizing validity of basing a damage award on corrective advertising measures); Otis Clapp & Son, Inc., 754 F.2d at 745 (plaintiff reimbursed for the costs of corrective advertising incurred in response to the defendant's misrepresentations); Grant Airmass Corp. v. Gaymar Industries, Inc., 645 F.Supp. 1507, 1514 (S.D.N.Y.1986) (sustaining claims for lost business, loss of reputation and corrective advertising at summary judgment stage); Cuisinarts, Inc. v. Robot-Coupe International Corp., 580 F.Supp. 634, 636 (S.D.N.Y.1984) (monetary damages appropriate for corrective measures even without showing of lost sales).
I found above that Mobius was forced to undertake substantial additional marketing efforts to counteract the negative aspersions on its product and save its sale to M & I. These reparative efforts included the preparation of several memorandum to address Fourth Dimension's statements point-by-point, the assignment of personnel that would normally not have participated in the sales effort, and the devotion of significantly more follow-up resources to the customer than would have occurred had Fourth Dimension not made its misrepresentations. I also found above that the amount of corrective steps taken by Mobius was reasonable given the devastating effect that Fourth Dimension's statements, if believed, would have had on the ability of Mobius to consummate the M & I sale.
Mobius, therefore, has proven that it is entitled to monetary damages under § 43(a).[11]
III. Damages Calculation
A. Relief for Breach of Contract
A breaching party must put the non-breaching party into the same position *1024 as he or she would have been in had the breach not occurred. See Adams v. Lindblad Travel, Inc., 730 F.2d 89, 92 (2d Cir. 1984). Contract damages, therefore, are designed "to compensate the injured party for the loss caused by the breach." U.S. Naval Institute v. Charter Communications, 936 F.2d 692, 696 (2d Cir.1991). In the instant case, had Fourth Dimension not breached the settlement agreement, Mobius would not have had to take additional steps to consummate the M & I sale. The most appropriate measure of damages, therefore, is the cost to Mobius of the corrective measures it was forced to undertake to counteract the false statements contained in the Second Advertisement that also were included in Appendix 2 of the settlement agreement. Because these statements were only a portion of all the false statements in the Second Advertisement, this measure will equal a portion of all the corrective damages that were necessary to save the sale. As I shall discuss below, the total cost of the corrective measures is the appropriate measure of damages for the Lanham Act § 43(a) claim thus, because the contract damages constitute only a portion of the Lanham Act damages, the contract damages will not be calculated separately.
B. Lanham Act Relief
1. Injunctive Relief
Under § 34 of the Lanham Act, the district court has the "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable." 15 U.S.C. § 1116. Under traditional equity standards, an injunction may not be issued without the showing that monetary relief is inadequate. Injunctive relief has been noted to be particularly appropriate in Lanham Act cases, however, indeed, the Supreme Court has stated that any doubt as to appropriateness of injunctive relief is to be resolved in the favor of plaintiff and against the defendant, "which has shown by its conduct that it cannot be trusted." William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 44 S.Ct. 615, 68 L.Ed. 1161 (1924); see also Imagineering, Inc. v. Van Klassens, Inc., 851 F.Supp. 532, 541 (S.D.N.Y.1994) (same) (citing Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 67 S.Ct. 1136, 91 L.Ed. 1386 (1947)). In the context of false advertising, in order to show inadequacy of monetary relief, the plaintiff must show "the likelihood that purchasers of the product may be misled in the future by the false advertising." Burndy Corp. v. Teledyne Industries, Inc., 748 F.2d 767, 772 (2d Cir.1984).
In the instant case, the defendant argues that, because it has stopped making the statements contained in its letter to M & I, injunctive relief is inappropriate, citing Burndy for this proposition. Burndy stated that injunctive relief was not proper in cases where the defendant has ceased its wrongful activity and there is no likelihood of repetition. See id. at 774 (emphasis added). In the instant case, I found above that defendant repeated statements in bad faith that it knew to be false. Given this history of making knowingly false representations, there is some likelihood that, absent an injunction, Fourth Dimension will continue to make misleading representations about Mobius's product. An injunction to prevent such behavior is more than appropriate under the Lanham Act. See id.; see also Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132, 1135 (9th Cir.1986) (where defendant was guilty of wilful infringement of trademark, plaintiff had no burden to introduce evidence of possible future infringement); McCarthy on Trademarks, § 30.06 ("[T]he reform of the defendant must be irrefutably demonstrated and total.").
The scope of the injunction must be as narrow as possible so as to avoid being overbroad and reaching non-violative activity. This concern is particularly present in false advertising cases where speech, and not merely conduct, is implicated. Balancing this concern with the need to protect plaintiff from future violative conduct, I conclude that the defendant shall be enjoined from making, exactly or in substance, those statements that already have been demonstrated to be false, that is, the 65 statements contained in Appendix 2 of the previous settlement agreement and the additional statements that I specifically have found to be false in this action that were not included in Appendix 2. *1025 This injunction shall expire automatically on the third anniversary of the execution of the parties' settlement agreement the parties had agreed that the statements may no longer be false after that date because of the rapid pace of change in the computer industry.[12] This formulation provides protection to plaintiff, yet is as narrow as possible the only statements that defendant may not use are those that already have been determined to be false. Therefore, no non-misleading speech possibly can be limited or chilled. The parties shall submit proposed language for this injunction by December 15, 1994.
2. Monetary Damages
The correct measure of monetary damages in this case should be the amount of corrective action that Mobius reasonably took to combat Fourth Dimension's deceptive letter. I found above that Mobius has proved that it took reasonable actions to combat Fourth Dimension's letter through the end of February. Therefore, the damages should include those costs associated with the extra personnel and resources devoted to M & I after Fourth Dimension's letter through the end of February. Mobius has presented credible evidence sufficient to warrant a damages award for this period of $21,008.80. Although this calculation will not reflect Mobius's actual costs during this period exactly, once the existence of actual damages is established, a district court "may engage in `some degree of speculation in computing the amount of damages.'" PPX Enterprises v. Audio Fidelity Enterprises, 818 F.2d 266, 271 (2d Cir.1987) (quoting Burndy, 748 F.2d at 771).
Mobius has argued that it is entitled to damages beyond this point in time for continued corrective advertising. I disagree for three reasons. First, I found above that the post-February costs related to implementation problems at M & I rather than efforts to convince M & I of the falsehood of the letter. Second, once the M & I sale was safe, continued corrective efforts begin to become less reasonable once Mobius repaired its relationship with its customer enough to save the sale, continued efforts need some other basis for their justification. Without evidence as to possible sales opportunities that could be jeopardized without the continued reparative actions or some other showing that Mobius still could be harmed by Fourth Dimension's actions, such an award would be inappropriate.[13] Third, Mobius's claims for damage to its goodwill, though credible and not speculative, are not quantifiable sufficiently to make any award calculable on the proof submitted by Mobius. The costs incurred by Mobius because of the loss of its goodwill are simply indistinguishable on the current record from those costs that it incurred merely to implement the M & I system.
Pursuant to § 35 of the Lanham Act, a court has the power to assess damages, "according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount." 15 U.S.C. § 1117(a). Such enhancement of the award, however, "shall constitute compensation and not a penalty." Id. Although punitive damages are inappropriate under the Lanham Act, in cases of wilful violation of the Act, this enhancement may be used to deter further wilful violations. See Getty Petroleum Corp. v. Bartco Petroleum Corp., 858 F.2d 103, 113 (2d Cir. 1988), cert. denied, 490 U.S. 1006, 109 S.Ct. 1642, 104 L.Ed.2d 158 (1989).
In the instant case, I find it appropriate to enhance the monetary award, both to compensate the plaintiff for harm that is difficult to quantify, namely the loss of its goodwill with M & I, and to provide some deterrence for future violations by Fourth Dimension. Given the modest amount of actual damages calculated above, I find that a trebling of the actual damages is necessary *1026 to compensate Mobius for its loss of goodwill with M & I and to provide properly for deterrence of Fourth Dimension from committing further acts of wilful bad faith violations of § 43(a). The damages award, therefore, will be $21,008.80 × 3 = $63,026.40. Such an award serves the goal of discouraging violations of the Act, without being so large as to constitute a penalty. See Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 744 (7th Cir.1985).[14]
3. Attorney Fees
Under § 35 of the Lanham Act, a district court is empowered to award attorney fees to the prevailing party in "exceptional cases." 15 U.S.C. § 1117(a). A finding of deliberate, wilful or bad faith violations of the Lanham Act is sufficient to warrant the finding of an exceptional case. See Quaker State Oil Refining Corp. v. Kooltone, Inc., 649 F.2d 94, 95 (2d Cir.1981). Indeed, a district court that fails to at least consider an award of attorney fees after a finding of bad faith abuses its discretion. See Goodheart Clothing v. Laura Goodman Enterprises, 962 F.2d 268, 272 (2d Cir.1992). In the instant case, I find an award of attorney fees appropriate. Once again, a particular need for deterrence is present in this case because of the defendant's bad faith violation of the Act and its prior settlement agreement. Moreover, in the interests of fairness, Mobius should not be forced to bear the burden of its attorney fees to challenge many of the same issues that it already had litigated successfully. Mobius should submit affidavits concerning its legal bills for this action by December 30, 1994. Fourth Dimension will have the opportunity to respond to Mobius's submissions, if it wishes, by January 15, 1995.
4. Costs
Section 35 of the Lanham Act, 15 U.S.C. § 1117, specifically provides for the assessment of costs as a part of the damages calculation. Costs of this action, as defined by 28 U.S.C. § 1920, therefore, shall be taxed against defendant pursuant to § 35 of the Lanham Act and Fed.R.Civ.P. 54(d).
CONCLUSION
Having found that defendant, Fourth Dimension Software, Inc., wilfully and in bad faith violated both the settlement agreement it had with plaintiff, Mobius Management Systems, Inc., and § 43(a) of the Lanham Act, I conclude the following: (a) an injunction will issue prohibiting defendant from stating, exactly or in substance, those statements that have been determined to be false; (b) Mobius suffered $21,008.80 in quantifiable actual damages; (c) that amount appropriately is trebled under § 35 of the Act for a total of $63,026.40; (d) plaintiff is entitled to the amount of its reasonable attorney fees incurred during this litigation; and (e) costs of this action will be assessed against defendant.
SO ORDERED.
NOTES
[1] "MVS" is an IBM-developed operating system used in main frame computers. (Tr. 121 (Hollander)).
[2] Citations to "Tr. ___" indicate portions of the record of the bench trial held on October 6 and 7, 1994. The relevant witnesses are indicated in parentheses.
[3] As I conclude below, this truthful claims provision had no bearing on the Appendix 2 statements the parties had determined the Appendix 2 statements to be false.
[4] Mobius presented documentary evidence showing that the following Mobius personnel expended time between January 10 and February 28, 1994 saving the M & I sale:
Garrity 16.0 hours
Giernath 140.0 hours
McGuigan 4.5 hours
Jaffier 1.0 hours
Kleeman 32.0 hours
Labono 8.0 hours
Morgan .5 hours
Milton 32.0 hours
Ortiz .5 hours
Yokubonis 8.0 hours
(Plaintiff's Exhs. 8, 9). In addition, Mr. Gross testified that he personally spent a total of 40 hours through the end of April. (Tr. 272 (Gross)). Reducing this figure to show only the time spent before the end of February, I estimate that Mr. Gross spent 20 hours on the M & I sale from January 10 through the end of February.
Based on the testimony of Mr. Gross, I have assigned rates to the employee hours depending upon the employees' job descriptions. I find the following rates to be close approximations of the personnel costs incurred by Mobius for the hours expended by the various personnel: (1) $150 per hour for Gross, the founder of Mobius; (2) $75 per hour for Giernath, the main "trouble-shooter" for Mobius, and for Kleeman, a regional manager; and (3) $50 per hour for everyone else.
Finally, Mobius presented documentary evidence as to disbursements relating to saving the M & I sale. The records show that a total of $1583.80 in out-of-pocket expenses was expended by Mobius to save the sale.
[5] The word equivalent, for example, can mean of equal value or equal strength. See Webster's Third New International Dictionary. Each of these concepts is considerably broader and more ambiguous than the concept of merely being the same in substance.
[6] I am not convinced by Fourth Dimension's argument that my interpretation would render the true statements provision superfluous; the provision helped to make it clear that the settlement agreement was limited to prohibiting Fourth Dimension from saying only certain specific false statements, i.e., those set out in Appendix 2. Even if I was convinced that my interpretation would render the true statements provision superfluous, I would still decide this issue the same way because Fourth Dimension's contrary interpretation would be worse it would render the entire settlement agreement meaningless.
[7] Defendant's argument on this issue was raised for the first time in a footnote in its reply to plaintiff's proposed findings of fact. Defendant has not given a reason as to why this potentially dispositive argument was not raised during the substantial summary judgment practice that occurred in this case.
[8] This requirement of showing a tendency to be harmed is sometimes discussed as a substantive element of the Lanham Act claim and at other times discussed as a standing requirement. Compare Ortho Pharmaceutical Corp. v. Cosprophar, 32 F.3d 690, 694 (2d Cir.1994) (standing requirement) with McNeil-P.C.C., Inc. v. Bristol Myers Squibb Co., 938 F.2d 1544, 1549 (2d Cir. 1991) (substantive element). Because the analysis is the same under either approach, it makes little difference which way it is interpreted.
[9] Fourth Dimension argues that M & I was not deceived because it went ahead with the purchase of Mobius's product. As discussed more fully below, however, lost sales is only one measure of damage in this case, Fourth Dimension's letter deceived M & I at least to the point of conducting further tests of INFOPAC-RDS and to question Mobius about its product significantly more than it would have had the letter not been sent. This is sufficient to show deception and support an award of damages for Mobius's subsequent corrective measures.
[10] The conclusion in Burndy was the result of the court's finding that plaintiff had not demonstrated how its losses in profits were causally linked to the defendant's actions. See Burndy, 748 F.2d at 773.
In Otis Clapp & Son, Inc., the Seventh Circuit found that the plaintiff failed to prove its claim for unrealized growth potential because it failed to prove that it lost any sales. See Otis Clapp & Son, Inc., 754 F.2d at 745-46. The plaintiff's claim for the expenses of a curative advertising campaign, however, were fully paid by the defendant. See id. at 745.
[11] The plaintiff also made a claim for common law unfair competition. To make out a claim of unfair competition under New York law, a plaintiff must prove that the defendant engaged in "commercial immorality" or in misappropriation of a benefit or property right for its commercial advantage. See Towers Financial Corp. v. Dun & Bradstreet, Inc., 803 F.Supp. 820, 823 (S.D.N.Y. 1992). Because the elements of unfair competition in this case are satisfied by my analysis under § 43(a), I need not address this claim separately. The only additional element for unfair competition is a finding of bad faith, which I also have found in this case. See Weight Watchers International v. Stouffer Corp., 744 F.Supp. 1259, 1283-84 (S.D.N.Y.1990) ("Common law unfair competition claims closely parallel Lanham Act unfair competition claims; to the extent that they may be different, the state law claim may require an additional element of bad faith or intent." (citing Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044 (2d Cir.1980)). As will be discussed more fully below, I will use the unfair competition claim only as an alternative basis for supporting a damages award above the amount of actual damages that are readily calculable.
[12] This provision is included to ensure that the injunction only reaches deceptive speech according to the parties themselves, there is no guarantee that the false statements will remain false after the three year period.
[13] Although I recognize that damages for corrective advertising can be awarded "regardless of whether [the] advertising undertook expressly to rebut that claim," Alpo Petfoods, Inc. v. Ralston Purina Co., 997 F.2d 949, 952 (D.C.Cir.1993), the corrective advertising also must be reasonable and causally related to the false advertising. For its post-February actions, Mobius has failed to meet its burden to show these two elements.
[14] As an additional basis for the enhancement of the actual damages that were readily calculable, I find that an award of punitive damages is appropriate under plaintiff's common law unfair competition claim. Punitive damages in a New York unfair competition claim are available "where a defendant's conduct has constituted `gross, wanton, or wilful fraud or other morally culpable conduct' to an extreme degree." Getty Petroleum Corp. v. Island Transportation Corp., 878 F.2d 650, 657 (2d Cir.1989) (quoting Smith v. Lightning Bolt Productions, 861 F.2d 363, 371 (2d Cir.1988) (quoting Borkowski v. Borkowski, 39 N.Y.2d 982, 387 N.Y.S.2d 233, 233, 355 N.E.2d 287, 287 (1976))). The Court of Appeals has noted that "New York law clearly permits punitive damages where a wrong is aggravated by recklessness or willfulness, ... whether or not directed against the public generally...." Id. (quoting Roy Export Co. v. CBS, Inc., 672 F.2d 1095, 1106 (2d Cir.), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982)). Given the degree of intentional conduct and bad faith exhibited in this case by Fourth Dimension, and recognizing that the defendant's conduct demonstrates that some sort of deterrence is necessary to avoid further violative conduct, I find that trebling the amount of actual damages calculated is an appropriate amount of penalty to impose on Fourth Dimension. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2235829/ | 929 N.E.2d 269 (2010)
GEIDEMAN
v.
STATE.
No. 71A05-1002-CR-63.
Court of Appeals of Indiana.
July 7, 2010.
DARDEN, J.
Disposition of Case by Unpublished Memorandum Decision Affirmed.
BAKER, C.J., concurs.
CRONE, J., concurs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/803853/ | 11-2236-cv
Stein v. Immelt
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
on the 9th day of July, two thousand twelve,
Present: PIERRE N. LEVAL,
ROSEMARY S. POOLER,
Circuit Judges.1
_____________________________________________________
ALBERT STEIN, DERIVATIVELY O/B/O NOMINAL
DEFENDANT GENERAL ELECTRIC,
Plaintiff-Appellant,
v. 11-2236-cv
JEFFREY R. IMMELT, KEITH S. SHERIN, JAMES I. CASH, JR.,
WILLIAM M. CASTELL, ANN M. FUDGE, CLAUDIO X. GONZALEZ,
SUSAN HOCKFIELD, ANDREA JUNG, ALAN G. LAFLEY, ROBERT
W. LANE, RALPH S. LARSEN, ROCHELLE B. LAZARUS, JAMES
MULVA, ARMED SERVES COMM. SAM NUNN, ROGER S. PENSKE,
ROBERT J. SWIERINGA, ROBERT C. WRIGHT, CHAIRMAN CEO, DOUGLAS A
WARNER, III,
Respondent-Defendant-Appellee,
1
The Honorable Reena Raggi, a member of the original panel recused herself. Therefore,
this case is decided by the two remaining members of the panel pursuant to Second Circuit
Internal Operating Procedure E(b), formerly Section 0.14(b) of the Local Rules of the United
States Court of Appeals for the Second Circuit.
GENERAL ELECTRIC COMPANY, NOMINAL DEFENDANT,
Nominal-Defendant-Appellee.2
_____________________________________________________
Appearing for Appellant: William B. Federman, Federman & Sherwood, Oklahoma City,
O.K.
Appearing for Appellee: Greg A. Danilow, Stephen A. Radin, Evert J. Christensen, Jr.,
Weil, Gotshal & Manges LLP, New York, N.Y.
Appeal from a judgment of the United States District Court for the Southern District of
New York (Holwell, J.).
ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of said District Court be and it hereby is AFFIRMED.
Plaintiff-Appellant Albert Stein, a shareholder in General Electric (“GE”), brought a
derivative action charging GE’s board of directors and other company officials with breach of
fiduciary duty, contribution and indemnification, abuse of control, gross mismanagement, waste,
unjust enrichment and misappropriation of information. Defendants-Appellees moved to dismiss
for failure to adequately allege demand futility. After considering both the original complaint
and appellant’s proposed amendments, the district court granted appellees’ motion to dismiss.
We assume the parties’ familiarity with the underlying facts, procedural history, and
specification of issues for review.
“In addition to meeting the generally applicable rules for pleading under the Federal
Rules of Civil Procedure, the pleading of derivative actions must satisfy the requirements set
forth in Rule 23.1” of the Federal Rules of Civil Procedure. Halebian v. Berv, 590 F.3d 195, 204
(2d Cir. 2009). Under Rule 23.1, a derivative complaint must “state with particularity . . . any
effort by the plaintiff to obtain the desired action from the directors or comparable authority and,
if necessary, from the shareholders or members; and . . . the reasons for not obtaining the action
or not making the effort.” Fed.R.Civ.P. 23.1(b)(3).
Where “determination of the sufficiency of allegations of futility depends on the
circumstances of the individual case, the standard of review for dismissals based on
Fed.R.Civ.P. 23.1 is abuse of discretion.” Scalisi v. Fund Asset Mgmt., L.P., 380 F.3d
133, 137 (2d Cir.2004) (internal quotation marks omitted). Where, however, “a challenge
is made to the legal precepts applied by the district court in making a discretionary
determination, plenary review of the district court's choice and interpretation of those
legal precepts is appropriate.” Id.
Halebian, 590 F.3d at 203.
2
We direct the Clerk of Court to amend the official caption of this case to reflect the parties’
designations herewith.
2
New York is the state of GE’s incorporation, and so New York law governs this case. See
Scalisi, 380 F.3d at 138. In New York, demand is required before bringing a derivative suit. If
demand is not made, demand futility must be established. Business and Corporation Law §
626(c) sets forth this requirement, stating that in any derivative “action, the complaint shall set
forth with particularity the efforts of the plaintiff to secure the initiation of such action by the
board or the reasons for not making such effort.” In analyzing this provision, the New York
Court of Appeals has held that demand is excused because of futility when
(1) . . . a complaint alleges with particularity that a majority of the board of directors is
interested in the challenged transaction. Director interest may either be self-interest in
the transaction at issue, or a loss of independence because a director with no direct
interest in a transaction is “controlled” by a self-interested director.
(2) . . . a complaint alleges with particularity that the board of directors did not fully
inform themselves about the challenged transaction to the extent reasonably appropriate
under the circumstances . . . .
(3) . . . a complaint alleges with particularity that the challenged transaction was so
egregious on its face that it could not have been the product of sound business judgment
of the directors.
Marx v. Akers, 88 N.Y.2d 189, 200-01 (1996) (internal citations omitted).
Stein has failed to make any allegations at all supporting the inference that a majority of
the directors were self-interested within the meaning of New York law in the challenged
transaction. The test for self-interestedness is not whether a director or someone who controls
him has engaged in or is liable for some sort of misconduct, but whether he will “receive a direct
financial benefit from the transaction which is different from the benefit to shareholders
generally.” Marx, 88 N.Y.2d at 202. Stein has pleaded no connection between the press releases
and other challenged actions and any self-interest by any director, much less a majority of them.
This prong of Marx accordingly does not avail him.
As to the second prong, Stein has failed to make any more availing allegations. The
complaint does not even contain a pro forma attempt to meet this part of Marx. Indeed, if Stein’s
complaint suggests anything, it is that the directors were too informed of the challenged
transactions, i.e., that they were intentional. Stein pleads no facts with particularity supporting
the charge that the board did not fully inform itself as reasonably appropriate under the
circumstances.
Finally, as to whether the “complaint alleges with particularity that the challenged
transaction was so egregious on its face that it could not have been the product of sound business
judgment of the directors,” Stein fares no better. On appeal, he conflates the second and third
prongs and argues that the egregious transaction was the failure to remain reasonably informed
about the press releases. But Marx does not contemplate such a conflation. For purposes of the
third prong, the challenged transaction can only be the complained of press releases and other
3
statements. And as to those, Stein has again failed to plead with any particularity that the
challenged transactions were so egregious on their face that they could not have been the product
of sound business judgment. We are mindful in making this determination that New York courts
have suggested it is the “‘rare case[] [in which] a transaction may be so egregious on its face that
board approval cannot meet the test of business judgment.’” Wandel v. Eisenberg, 60 A.D.3d
77, 82 (1st Dep’t 2009).
We have examined the remainder of appellant’s arguments and found them to be without
merit. Accordingly, the judgment of the district court hereby is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
4 | 01-03-2023 | 07-09-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/2597778/ | 213 P.3d 792 (2009)
2009-NMCERT-004
STATE
v.
BALENQUAH.
No. 31,652 (COA 26,678).
Supreme Court of New Mexico.
April 28, 2009.
Denials of Certiorari. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1032714/ | prejudice."). Smith has already exercised his right to a direct appeal and
filed three post-conviction petitions for a writ of habeas corpus. All three
petitions were untimely. Smith also filed a federal petition for a writ of
habeas corpus which was denied in 2003 and the denial was affirmed by
the Ninth Circuit Court of Appeals in 2006 before this court's order of
reversal and remand. Finally, contrary to Smith's assertion, direct review
of his conviction concluded when this court affirmed his conviction on the
merits in 1998, well before the three-year delay. See 28 U.S.C. §
2244(d)(1)(A) (discussing the federal period of limitations); Jimenez v.
Quarterman, 555 U.S. 113, 119 (2009) (discussing when conclusion of
direct review occurs). Therefore, Smith has not demonstrated that the
delay in filing the amended judgment of conviction caused him to lose his
right to challenge his conviction in federal or state court or prejudiced his
ability to exercise his rights in any other way.
As to Smith's claim that the aiding-and-abetting jury
instruction violated his rights under Sharma v. State, 118 Nev. 648, 56
P.3d 868 (2002), and Mitchell v. State, 122 Nev. 1269, 149 P.3d 33 (2006),
this claim was previously resolved in our order of reversal and remand, see
Smith v. State, Docket No. 50122 (January 20, 2009), and is therefore
SUPREME COURT
OF
NEVADA
2
(0) 1947A
-
barred by the doctrine of law of the case, see Hall v. State, 91 Nev. 314,
315-16, 535 P.2d 797, 798-99 (1975). 1 Accordingly, we
ORDER the judgiunt of conviction AFFIRMED.
J.
Douglas
cc: Hon. Elissa F. Cadish, District Judge
Joel M. Mann, Chtd.
Attorney General/Carson City
Clark County District Attorney
Eighth District Court Clerk
other claims are not properly raised in this appeal. See
1 Smith's
NRAP 28(a)(9); NRAP 28(e)(2); NRAP 28(j) ("Briefs that are not in
compliance may be disregarded. . . on motion or sua sponte by the court");
see also Franklin v. State, 110 Nev. 750, 752, 877 P.2d 1058, 1059 (1994)
(explaining that "claims that are appropriate for a direct appeal must be
pursued on direct appeal, or they will be considered waived in subsequent
proceedings"), overruled on other grounds by Thomas v. State, 115 Nev.
148, 150, 979 P.2d 222, 223-24 (1999); Rippo v. State, 122 Nev. 1086, 1095,
146 P.3d 279, 285 (2006) ("Claims of ineffective assistance of trial or
appellate counsel are properly raised for the first time in a timely first
post-conviction petition.").
SUPREME COURT
OF
N EVADA
(0) 1947A
3
11.XTeg. . W4=1- 1:4-4X€2 -
1 ;•••••!4,-
.;;;-,_ | 01-03-2023 | 07-09-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1523741/ | 826 F. Supp. 1299 (1993)
ALBERT T. SMITH COMPANY, a Utah corporation, Plaintiff,
v.
ALBERTSONS, INC., a Delaware corporation, Defendant.
Civ. No. 87-C-105G.
United States District Court, D. Utah, C.D.
July 14, 1993.
*1300 Peter W. Guyon, Salt Lake City, UT, Craig P. Orrock, Las Vegas, NV, for plaintiff.
Robert G. Holt, Salt Lake City, UT, for defendant.
MEMORANDUM DECISION AND ORDER RE: ATTORNEY FEES
J. THOMAS GREENE, District Judge.
This matter came before the court on June 17, 1993 on Defendant's Motion for Award of Costs, Expenses, and Attorney Fees and For Entry of Judgment. Plaintiff was represented by Peter W. Guyon and Craig P. Orrock. Defendant was represented by Robert G. Holt. The parties filed memoranda and supporting affidavits, after which the court heard oral argument and took the matter under advisement. Now being fully advised, the court renders its Memorandum Decision and Order.
BACKGROUND FACTS
Plaintiff brought this case alleging breach of a Lease Agreement entered into between the parties on April 11, 1962. Article 24 of the Lease Agreement contains the following provision:
In the event of any action at law or in equity between Landlord and Tenant to enforce any of the provisions and/or rights hereunder, the unsuccessful party to such litigation covenants and agrees to pay to the successful party all costs and expenses, including reasonable attorneys' fees, incurred therein by such successful party, and if such successful party shall recover judgment in any such action or proceeding, such costs and expenses and attorneys' fees shall be included in and as a part of such judgment.
(emphasis added). A bench trial was held on April 17, 1989, in which the court found in favor of Plaintiff. Thereafter, on November 27, 1991, the court entered judgment, and awarded Plaintiff $94,688.00 in damages for breach of the Lease Agreement, $28,750.00 for restoration of the leased premises, and $33,401.98 in attorney fees, for a total of $156,839.98.
Defendant filed its Notice of Appeal on April 2, 1991 and retained the law firm of Kimball, Parr, Waddoups, Brown & Gee, replacing its trial counsel, Prince, Yeates & Geldzahler. In an unpublished decision, the Tenth Circuit reversed this court's judgment and remanded the case for entry of final judgment in Defendant's favor. 986 F.2d 1426. Defendant now seeks entry of that final judgment and an award of attorney fees, costs, and expenses.
ANALYSIS
I. ATTORNEY FEES UNDER UTAH LAW
In diversity cases, attorney fees are deemed to be substantive in nature, and are determined according to state law. Bill's Coal Co. v. Board of Public Utilities, 887 F.2d 242, 246 (10th Cir.1989). Pursuant to Utah law, Defendant, as the "successful party" under the Lease Agreement, is entitled to reasonable attorney fees, costs, and expenses *1301 incurred during the litigation. Cottonwood Mall Co. v. Sine, 830 P.2d 266, 269 (Utah 1992). In Sine, the Utah Supreme Court explained the burden of a party seeking attorney fees:
A party who requests an award of attorney fees has the burden of presenting evidence sufficient to support an award. Except in the most simple cases, the evidence should include the hours spent on the case, the hourly rate or rates charged for those hours, and the usual and customary rates for such work.
Id. at 268. In Cabrera v. Cottrell, 694 P.2d 622 (Utah 1985), the Utah Supreme Court set forth certain factors a court should consider when reviewing such a request:
[Those factors include] the difficulty of the litigation, the efficiency of the attorneys in presenting the case, the reasonableness of the number of hours spent on the case, the fee customarily charged in the locality for similar services, the amount involved in the case and the result attained, and the expertise and experience of the attorneys involved.
Id. at 625.
II. TRIAL PHASE
Defendant seeks $29,006.25 for attorney fees, and $4,010.55 for costs and expenses incurred during the trial phase of the case. Defendant also seeks $590.00 for attorney fees incurred preparing this portion of Defendant's fee application. In support of its application, Defendant has submitted the affidavit of Ronald E. Nehring of the law firm of Prince, Yeates & Geldzahler. Included with the affidavit are the hourly rates charged by Prince, Yeates attorneys in this case, and time records indicating the number of hours devoted to the case and the type of activities involved.
The amount of attorney fees, expenses, and costs sought by Defendant for the trial phase of this action, $33,606.80, is nearly identical to the stipulated amount this court actually awarded to Plaintiff at the trial level.[1]
III. APPELLATE PHASE
It is well established under Utah law that contractual attorney fees agreements encompass those fees incurred by the successful party on appeal. Management Servs. v. Development Assocs., 617 P.2d 406, 409 (1980). Because the issue of attorney fees was not before the Tenth Circuit on appeal, this court retains jurisdiction to award such fees. Engel v. Teleprompter Corp., 732 F.2d 1238, 1242 (5th Cir.1984).
Defendant seeks $40,028.75 for attorney fees, and $4,319.17[2] for costs and expenses incurred during the appellate phase of the case. The Tenth Circuit awarded Defendant costs amounting to $687.55. In support of its application, Defendant has submitted the affidavit of Robert G. Holt of the law firm of Kimball, Parr, Waddoups, Brown & Gee, Defendant's appellate counsel. With the affidavit, Defendant has submitted a list of the hourly rates charged by Kimball, Parr attorneys, together with sufficiently detailed time records indicating how many hours those attorneys devoted to the appeal and the types of activities involved.
IV. OVERALL FEE APPLICATION
In this case, factual and legal materials were fully developed at the trial level, and ordinarily, any appeal would have utilized these materials. Under such a scenario, this court estimates that the additional cost to the client of an appeal would have ranged between $5,000 and $10,000. In this particular case, however, Defendant thought it prudent to change counsel for the appeal. This change understandably required a substantial investment in duplicative time and effort. While it may be reasonable for Defendant to use one law firm for trial and another for appeal, it is not reasonable to require Plaintiff to pay the attorney fees incurred by new appellate counsel in "getting up to speed" with the facts and issues of the *1302 case. In seeking a fee award, Defendant cannot expect to be placed in a more favorable position than it would have been in if the same law firm which handled the trial had handled the appeal. In this case, Defendant's contractual obligation to pay its attorneys whatever amount was agreed upon may be quite different than what the court finds Plaintiff's obligation for attorney fees to be under the Lease Agreement.
In consideration of all of the documentation submitted and the factors set forth by the Utah Supreme Court in Cabrera, this court makes a general reduction as to both the trial and appellate phases of the trial in order to arrive at a more reasonable overall fee. The court finds the overall fees too large and excessive, and determines that a fee for trial plus appeal should not exceed $40,000 in attorney fees and $6,000 in costs and expenses.
Based on the foregoing, the court awards Defendant $40,000 for attorney fees and $6,000 for costs and expenses incurred in this action.[3] In the absence of a different agreement between Defendant and its trial and appellate counsel, this award of attorney fees, costs, and expenses should be divided equally between the two law firms. Accordingly, it is hereby
ORDERED that the Amended Judgment entered March 27, 1991, is vacated; it is
FURTHER ORDERED that Plaintiff's Complaint is dismissed with prejudice and upon the merits; it is
FURTHER ORDERED that Defendant is entitled to $46,000 for attorney fees, costs, and expenses incurred in this action; it is
FURTHER ORDERED that the Supersedeas and Cost Bond on Appeal entered January 22, 1990, and the Surety Rider entered December 4, 1990, is released, and the principal and surety named therein are fully discharged from all further obligations under the bond.
Counsel for Defendant is directed to prepare and lodge with the court a form of judgment consistent with this Memorandum Decision and Order, after first complying with local rule 206(b).
IT IS SO ORDERED.
NOTES
[1] The court awarded Plaintiff $33,401.98 in the original judgment.
[2] This figure includes $3,113.17 incurred by Defendant's counsel and $1,206.00 incurred directly by Defendant obtaining and maintaining the required supersedeas bond on appeal.
[3] The award for costs and expenses includes the $687.55 awarded as costs by the Tenth Circuit. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1755763/ | 683 S.W.2d 93 (1984)
Ex parte James MATTOX, Appellant.
No. 3-84-201-CR.
Court of Appeals of Texas, Austin.
December 5, 1984.
*95 Roy Q. Minton, Minton, Burton, Foster & Collins, Austin, for appellant.
Ronald Earle, Dist. Atty., Philip A. Nelson, Jr., First Asst. Dist. Atty., Austin, for appellee.
Before SHANNON, EARL W. SMITH and BRADY, JJ.
EARL W. SMITH, Justice.
The appellant, James Mattox, applied for a writ of habeas corpus in the trial court, contending that he is unlawfully restrained pursuant to three indictments pending against him.[1] The indictments allege the offense of commercial bribery, Tex.Pen. Code Ann. § 32.43(c) (1974),[2] and are based on the same alleged incident. Mattox has executed a personal bond in each cause, and it is undisputed that he is restrained in his liberty by reason of the indictments and bonds. Tex.Code Cr.P.Ann. art. 11.22 (1977). Following a hearing upon the writ, the trial court entered an order denying relief and Mattox gave notice of appeal.
In his first two grounds of error, Mattox contends the indictments are fundamentally defective because they fail to allege the forbidden conduct and required culpability elements of commercial bribery. We do not reach the merits of these contentions, because it is well established that this is a matter that cannot be raised in a pretrial habeas corpus proceeding.
The general rule is this: when there is a valid penal statute under which a prosecution may be brought, habeas corpus is not available to test the sufficiency of the charging instrument prior to trial. Ex parte Mangrum, 564 S.W.2d 751 (Tex.Cr. App.1978); Ex parte Menefee, 561 S.W.2d 822 (Tex.Cr.App.1977); Ex parte Ward, 560 S.W.2d 660 (Tex.Cr.App.1978); Ex parte Dickerson, 549 S.W.2d 202 (Tex.Cr. App.1977); Ex parte Greene, 406 S.W.2d 465 (Tex.Cr.App.1966); Ex parte Drenner, 125 Tex. Crim. 331, 67 S.W.2d 870 (1934); Ex parte Jarvis, 109 Tex. Crim. 52, 3 S.W.2d 84 (1928); Ex parte Webb, 113 S.W. 545 (Tex.Cr.App.1908); Ex parte Beverly, 34 Tex. Crim. 644, 31 S.W. 645 (1895). Mattox acknowledges the existence of this long line of precedent, but argues that these cases no longer correctly state the law.
Mattox relies on the oft-stated principle that the failure of the charging instrument to allege all elements of the offense is a fundamental defect depriving the trial court of jurisdiction, and may be asserted at any time. But the opinions in which this language is found and on which Mattox relies deal with post-trial attacks, either direct or collateral, on judgments of conviction. See American Plant Food Corp. v. State, 508 S.W.2d 598 (Tex.Cr.App.1974) [fundamentally defective indictment may be challenged for first time on appeal]; Duplechin v. State, 652 S.W.2d 957 (Tex. Cr.App.1983), and Ex parte Millard, 587 S.W.2d 703 (Tex.Cr.App.1979) [collateral attack on judgment of conviction used for enhancement of punishment]; Salazar v. State, 589 S.W.2d 412 (Tex.Cr.App.1979), and Standley v. State, 517 S.W.2d 538 (Tex.Cr.App.1975) [collateral attack on judgment of conviction in probation revocation proceeding]; Ex parte Munoz, 657 S.W.2d 105 (Tex.Cr.App.1983), and Ex parte Cannon, 546 S.W.2d 266 (Tex.Cr. *96 App.1977) [collateral attack on judgment of conviction pursuant to Tex.Code Cr.P.Ann. art. 11.07 (1977 and Supp.1984)]. Mattox correctly observes that this willingness on the part of the Court of Criminal Appeals to permit belated attacks on the sufficiency of the charging instrument represents a recent change in the law. Compare Ex parte Minor, 146 Tex. Crim. 159, 172 S.W.2d 347 (1943) and Ex parte Roberts, 502 S.W.2d 802 (Tex.Cr.App.1973), with Standley v. State, supra, and Ex parte Roberts, 522 S.W.2d 461 (Tex.Cr.App.1975). However, that court has not manifested a similar willingness to permit pretrial collateral attacks on charging instruments.
It is true, as Mattox points out, that the Court of Criminal Appeals has occasionally entertained pretrial habeas corpus proceedings begun for the purpose of setting aside an indictment or information. But in each of these cases, the issue was not the sufficiency of the allegations in the charging instrument but the legal authority of the State to prosecute the accused. See Ex parte Dickerson, supra, and Ex parte Ward, supra [charging instrument showed on its face that prosecution was barred by limitations]; Ex parte Becker, 459 S.W.2d 442 (Tex.Cr.App.1970) [indictment returned by irregularly empaneled grand jury]; Ex parte Mangrum, supra [indictment based on repealed statute]; Ex parte Menefee, supra [juvenile indicted without examining trial]. Moreover, in Mangrum, Menefee, Ward, and Dickerson, all decided after the Court of Criminal Appeals opened the door to post-trial collateral attacks on charging instruments, the court was careful to point out that it was acting pursuant to a narrow exception to the general rule prohibiting such attacks prior to trial. Mattox is asking this Court to read into these opinions a holding that is contrary to their express language.
Before trial, the accused may challenge the sufficiency of the State's pleading in a motion to quash. Should the motion be overruled and the accused subsequently convicted, the issue may be taken up on appeal. Mattox does not assert any extraordinary interest that would justify the delay and judicial wheelspinning that would result were defendants authorized to institute pretrial collateral proceedings, complete with interlocutory appeals, to test the sufficiency of the allegations in a charging instrument. Cf. Ex parte Robinson, 641 S.W.2d 552 (Tex.Cr.App.1982) [pretrial review of defendant's jeopardy claim]. Rulings on other pretrial motions, even those with a constitutional basis such as motions to suppress unlawfully seized evidence, must be reviewed on appeal and may not be pursued in pretrial collateral proceedings.
In summary, the Court of Criminal Appeals has clearly and consistently held that an accused cannot challenge the sufficiency of the charging instrument's allegations in a pretrial habeas corpus proceeding. None of the cases cited by Mattox are authority to the contrary. We therefore overrule the first and second grounds of error.
In his third and fourth grounds of error, Mattox contends that § 32.43(c) is unconstitutionally vague on its face and as applied to the facts alleged in the indictments. A penal statute must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties, and a statute which 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 violates the first element of due process of law. Connally v. General Construction Co., 269 U.S. 385, 46 S. Ct. 126, 70 L. Ed. 322 (1926). A statute alleged to violate the Constitution may be challenged through application for writ of habeas corpus. Crisp v. State, 643 S.W.2d 487 (Tex. App.1982), aff'd, Ex parte Crisp, 661 S.W.2d 944 (Tex.Cr.App.1983).
Section 32.43, as it read at the time of the alleged offense, provided:
(a) For purposes of this section:
(1) "Beneficiary" means a person for whom a fiduciary is acting.
*97 (2) "Fiduciary" means:
(A) an agent or employee;
(B) a trustee, guardian, custodian, administrator, executor, conservator, receiver, or similar fiduciary;
(C) a lawyer, physician, accountant, appraiser, or other professional advisor; or
(D) an officer, director, partner, manager, or other participant in the direction of the affairs of a corporation or association.
(b) A person who is a fiduciary commits an offense if he intentionally or knowingly solicits, accepts, or agrees to accept any benefit as consideration for:
(1) violating a duty to a beneficiary; or
(2) otherwise causing harm to a beneficiary by act or omission.
(c) A person commits an offense if he offers, confers, or agrees to confer any benefit the acceptance of which is an offense under Subsection (b) of this section.
(d) An offense under this section is a felony of the third degree.
"Benefit" is defined in Tex.Pen.Code Ann. § 1.07(a)(6) (1974) as follows:
[A]nything reasonably regarded an economic gain or advantage, including benefit to any other person in whose welfare the beneficiary is interested.
Mattox argues that § 32.43(c) does not give adequate notice of the conduct it prohibits. He asserts that because the economic gain or advantage need not accrue to the person to whom the offer is made, a person could be prosecuted for offering a benefit to a fiduciary of whom he had no knowledge. Mattox finds a similar problem with the definitions of "fiduciary" and "beneficiary" contained in § 32.43(a), arguing that it is impossible for an individual to know if the person to whom he offers a benefit is a fiduciary. These arguments fail when it is recalled that the State must prove that the offeror acted with the requisite culpable mental state.
A requirement of scienter may mitigate a law's vagueness, especially with respect to the adequacy of notice to an individual that his conduct is proscribed. Hoffman Estates v. Flipside, Hoffman Estates, 455 U.S. 489, 499, 102 S. Ct. 1186, 1193, 71 L. Ed. 2d 362 (1982). Section 32.43(c) is not a strict liability statute. It criminalizes only those offers the acceptance of which would violate subsection (b). Subsection (b), in turn, criminalizes the acceptance of a benefit only if it is in consideration for a breach of a fiduciary duty. Obviously, one can offer a benefit in consideration for a breach of a fiduciary duty only if one knows the offeree is a fiduciary, and that he would violate a duty owed to his beneficiary or otherwise cause harm to his beneficiary by accepting the offered benefit. Thus, the State must prove such knowledge in a prosecution pursuant to § 32.43(c). See Pfleging v. State, 572 S.W.2d 517 (Tex.Cr.App.1978). See also Ledesma v. State, 677 S.W.2d 529 (Tex.Cr. App., 1984); Goss v. State, 582 S.W.2d 782 (Tex.Cr.App.1979).
Mattox further argues that the definition of "benefit" is vague because whether a particular offer may be "reasonably regarded as economic gain or advantage" must be decided on a case-by-case basis at some point after the conduct has been undertaken. However, the requirement of reasonableness narrows, rather than broadens, the definition and hence the scope of § 32.43(c). Moreover, the criminality of a particular defendant's conduct must always be determined after the fact, and on a case-by-case basis.
In Bates v. State, 587 S.W.2d 121 (Tex.Cr.App.1979), it was held that the general bribery statute, Tex.Pen.Code § 36.02 (1975 Tex.Gen.Laws, ch. 342, § 11, at 915), is not unconstitutionally vague or indefinite on its face. The same conclusion applies to the strongly analogous commercial bribery statute. Ground of error three is overruled.
A clear and precise statute may nevertheless be overbroad if in its reach it prohibits constitutionally protected conduct. McMorris v. State, 516 S.W.2d 927 *98 (Tex.Cr.App.1974). In his fourth ground of error, Mattox argues that the State is seeking to prosecute him for nothing more than engaging in negotiations with another attorney. He asserts that it unconstitutionally tortures the language of the statute to apply it to "two lawyers [who] harangue each other during a telephone conversation."
For one lawyer to offer another lawyer an economic benefit in consideration for the latter's breach of a fiduciary duty owed to a client is not a legitimate negotiating tactic; it is bribery. It is just such conduct that has been alleged against Mattox in the indictments pending against him. Whether Mattox is in fact guilty of such conduct is, in the first instance, for a jury to decide.
In Ex parte Meers, 129 Tex. Crim. 465, 88 S.W.2d 100 (1935), the appellants were charged by complaint with the offense of unlawfully keeping and exhibiting a gaming table and bank. While free on bond awaiting the action of the grand jury, they filed a writ of habeas corpus in the trial court seeking their release from restraint. Upon denial of relief in the trial court, they appealed to the Court of Criminal Appeals, voicing arguments similar to those presented to this Court by Mattox. The court rejected these arguments, stating:
This court has consistently held that a writ of habeas corpus will not lie where the remedy at law is adequate, nor will it lie after indictment to prevent a trial on the merits. [Citations omitted.] Relators had not been tried; they had not even been indicted by the grand jury for the offense for which they were charged by complaint, yet they are seeking by means of a writ of habeas corpus to have this court determine in advance of a trial in a court of competent jurisdiction, whether the facts developed at the hearing show them guilty of an offense against the law of this state. Should relators be charged by indictment with said offense, and on trial the evidence is not sufficient to show that an offense has been committed, the trial court will no doubt so decide. If not, then relators have the legal right to appeal to this court. In the case of Ex parte Drenner, 125 Tex. Crim. 331, 67 S.W. (2d) 870, this court said: "The merits of a case on the sufficiency of the evidence to show a violation of the law is not the subject of inquiry by writ of habeas corpus." Relators contend, however, that there is no statute which denounces their act and the operation of their marble table as an offense. Looking to the entire record, it appears to us that relators, under the guise of questioning the validity of article 619, P.C., under which they are charged with the offense of unlawfully keeping and exhibiting a gaming table, to wit, a marble table, are in fact questioning the sufficiency of the facts to bring their act and the marble table within the purview of said article. We do not believe we are required in this proceeding to pass upon that question.... Inasmuch as relators have an adequate legal remedy, this court will not interfere with the jurisdiction of the trial court over the person and subject matter.
Mattox's fourth ground of error is overruled, and the order of the trial court is affirmed.
APPENDIX
IN THE NAME AND BY AUTHORITY OF THE STATE OF TEXAS:
THE GRAND JURY, for the County of Travis, State of Texas, duly selected, empaneled, sworn, charged and organized as such at the January Term A.D. 1984 of the 147th Judicial District Court for said County, upon their oaths present in and to said court at said term that James Mattox, on or about the 17th day of June A.D. 1983 and before the presentment of this indictment in the County of Travis, and State of Texas, did then and there intentionally and knowingly offer a benefit to a fiduciary, to wit, Wiley Caldwell, as consideration for the said Wiley Caldwell's violation of his duty to a beneficiary for whom the said Wiley Caldwell was acting as a lawyer, said duty being the said Wiley Caldwell's duty *99 as a lawyer to exercise independent professional judgment on behalf of his client, Mobil Oil Corporation, in that the said James Mattox did then and there, in the course of a conversation over a telephone between the said James Mattox and the said Wiley Caldwell, threaten to delay approval and deny approval of certain bonds then pending approval by the said James Mattox as Attorney General of the State of Texas, said bonds being those of certain beneficiaries for whom the said Wiley Caldwell was acting as a lawyer, to wit: City of Bedford, Texas; Comal County, Texas; Crockett County Consolidated Common School District Number 1; Lavaca County, Texas; Lavaca County Flood Control District Number 3; Liberty County, Texas; Lower Colorado River Authority; Matagorda County Water Control and Improvement District Number 6; City of Midland, Texas; New Braunfels Independent School District; Oakwood Independent School District; City of Plano, Texas; Rockwall Independent School District; Southeast Texas Hospital Financing Agency; City of Stephenville, Texas; City of Terrell, Texas; and Webb County, Texas; but that he, the said James Mattox, as Attorney General of the State of Texas, would not delay approval and would not deny approval of said bonds then pending approval as aforesaid, for and in return for the said Wiley Caldwell's violation of his duty as a lawyer to his beneficiary, Mobil Oil Corporation, in that he, the said Wiley Caldwell, would order and require that Thomas R. McDade, a lawyer and the partner of the said Wiley Caldwell, cease and desist from his efforts to question and depose Janice Mattox in the course of a certain law suit pending in the 49th Judicial District Court of Webb County, Texas, Cause Number 33,674, styled Clinton Manges, Individually, and Duval County Ranch Company versus Mobil Producing Texas and New Mexico, Inc., et al., against the peace and dignity of the State.
BRADY, Justice, dissenting.
I respectfully dissent. The majority is correct that the general rule is that where there is a valid penal statute under which a prosecution is brought, habeas corpus is not available to test the sufficiency of the charging instrument prior to trial. However, I do not agree that this should be the rule in cases such as this one.
It defies logic, in my opinion, that where there are fundamental defects in the charging instrument, i.e., the indictment or information, that such cannot be challenged at any stage in the criminal proceedings. The office of the motion to quash and its review by the appellate courts only after conviction seems to be totally inadequate to prevent the irreparable damage that a full blown trial will inflict upon an accused, especially a public official, when it is clearly possible that the conviction will be reversed on appeal. The savings of time and money to the State and to the accused, if for no other reason, is a strong argument to support a pre-trial attack.
I do not agree that these types of pre-trial habeas corpus attacks on charging instruments will open the flood gates to such writs in all criminal cases. A narrow exception would be made only where the indictment fails to allege the essential elements of the offense, and thus constitute a fundamental defect depriving the trial court of jurisdiction.
The statute under which the accused has been indicted in this cause was enacted essentially to deal with kickbacks. See Practice Commentary by Seth S. Searcy, III, and James R. Patterson of the Austin Bar, following Sec. 32.43(c) of the Penal Code. It is my view that the State has chosen the wrong statute, and that Sec. 32.43(c) was never intended by the Legislature to embrace a fact situation as herein alleged against the Attorney General.
Further, I am in disagreement with the majority that the appellant's Motion For Leave to File a Supplemental Brief should have been summarily overruled. It has been held that in order to effectuate the cause of justice, an appellate court has the authority to permit an appellant to file an amended brief and to include therein additional grounds or points of error. This is permissible either prior to or after submission, *100 upon such reasonable terms as it may prescribe. Stuart v. Coldwell Banker & Co., 552 S.W.2d 904 (Tex.Civ.App. 1977, writ ref'd n.r.e.). Appellant's Motion For Leave to file a Supplemental Brief alleges that such was made necessary "to clarify issues raised by oral argument regarding jurisdiction and whether the writ of habeas corpus is an appropriate remedy in this matter." It was further stated that the request was made to aid the Court in the administration of justice, and not for purposes of delay.
I perceive no harm, prejudice or delay which would have resulted from the filing of the amended or supplemental brief, and leave to file should have been granted.
NOTES
[1] Travis County cause numbers 71804, 72163, and 73737. The indictment in number 73737 appears as an appendix to this opinion.
[2] This statute was amended effective September 1, 1983, after the alleged act of commercial bribery took place. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1099577/ | 97 So. 2d 776 (1957)
C. J. LARSON et al., d/b/a Tide Finance Company,
v.
STATE of Alabama ex rel. John PATTERSON, Attorney General.
3 Div. 749.
Supreme Court of Alabama.
July 26, 1957.
Rehearing Denied November 14, 1957.
*777 Wallace L. Johnson, Mobile, Winton G. Wilson and S. Palmer Keith, Jr., Birmingham, D. Eugene Loe, Hill, Robison & Belser and Hill, Hill, Whiting & Harris, Montgomery, for appellants.
John Patterson, Atty. Gen., J. Noel Baker and Robt. Bradley, Asst. Attys. Gen., for appellee.
White, Bradley, Arant, All & Rose, Birmingham, amici curiae, in support of appellee.
GOODWYN, Justice.
This is a suit brought in the circuit court of Montgomery County, in equity, by the State of Alabama, on the relation of the Attorney General of the State, against C. J. Larson and Virgil C. Moore, a partnership, doing business as Tide Finance Company, and C. J. Larson, Virgil C. Moore and M. R. Rice, individually. The bill seeks a temporary injunction enjoining and restraining respondents, "their servants, agents and employees, while acting within the line and scope of their employment, from making or entering into any contract or agreement whereby the rate of interest upon the loan or forbearance of money, goods, or things in action, exceeds the rate of $6.00 upon $100.00 for one year, or whereby the rate of interest by written contract exceeds the sum of $8.00 upon $100.00 for one year, or exceeds that rate for a greater or lesser sum or for a longer or shorter time, and on loan contracts and agreements presently in existence on which interest has been charged in excess of the lawful rate, to enjoin and restrain each of the respondents from filing suit thereon for more than the principal amount of the obligation with proper credit for all prior interest payments."
There is also a prayer that upon a final hearing the court "will issue a permanent injunction in accordance with the foregoing prayer for a temporary injunction, and in addition will declare that the acts of the respondents constitute a public nuisance against the citizens of the State of Alabama; that in consequence thereof the contracts taken and held by the respondents in violation of Title 9, Section 60, 1940 Code of Alabama, be declared null and void, and that each of said respondents, and their servants, agents and employees, be forever enjoined and restrained from carrying on and prosecuting their said business in violation of Title 9, Section 60, 1940 Code of Alabama, and from committing the acts as aforesaid which constitute a public nuisance", and will "appoint a receiver who shall be directed by this Honorable Court to examine, investigate and scrutinize each and every loan of record of each and every borrower whose name or names appear in the records kept by the said respondents; that the receiver determine if usurious interest has been charged upon said loan contracts, and determine the amount of usurious interest collected by the respondents upon each and every loan contract; that receiver be directed to deduct from the principal the usurious interest collected on each and every loan contract; further, that the receiver be directed to examine each and every contract made after the entry of the permanent injunction against the respondents to determine whether or not the respondents are charging a rate of interest in excess of that prescribed by law."
The bill also contains a prayer for general relief.
The material averments of the bill, as amended, are as follows:
That John Patterson is the duly qualified Attorney General of the State and as such *778 brings the action in the name of and for the State; that respondents Larson and Moore are partners in the business known as Tide Finance Company, which maintains an office in the City of Montgomery; that respondent Rice is a resident of Montgomery and is manager of said business; that respondents "are engaged in the business of lending money for themselves and others in Montgomery County, Alabama, and have been so engaged for a period of 12 months next before the filing of this bill of complaint"; that respondents "have in the conduct of their business in said county during the 12 months preceding the filing of the bill of complaint, and are now, deliberately, persistently, continuously and intentionally violating the laws of the State of Alabama and in particular Title 9, Section 60, 1940 Code of Alabama, which reads as follows:
"`The rate of interest upon the loan or forbearance of money, goods or things in action, except by written contract, is six dollars upon one hundred dollars for one year, and the rate of interest by written contract is not to exceed eight dollars upon one hundred dollars for one year; and at that rate for a greater or less sum, or for a longer or shorter time';
that constantly and continuously, knowingly and deliberately, the respondents have loaned money to individuals in Montgomery County and exacted from them a rate of interest by written contract in excess of $8 upon $100 for one year; that in making loans in said county during the period of one year next preceding the filing of this bill of complaint the said respondents have charged or received and are now continuously and knowingly charging or receiving high and usurious rates of interest, which said rate of interest so charged or received is greatly in excess of the amount authorized by law to be charged, exacted or received for making such loans"; that respondents "in carrying on and engaging in their business as above set forth have used the courts of this State in enforcing and collecting usurious interest in violation of the provisions of Title 9, Sec. 65, 1940 Code of Alabama, which provides as follows:
"`§ 65. Interest on usurious contracts; recovery back of usury.All contracts for the payment of interest upon the loan or forbearance of goods, money, things in action, or upon any contract whatever, at a higher rate than is prescribed in this chapter, are usurious, and cannot be enforced either at law or in equity, except as to the principal. Nor shall the borrower of money at a usurious rate of interest ever in any case in law or equity be required to pay more than the principal sum borrowed, and if any interest has been paid the same must be deducted from the principal and judgment rendered for the balance only. Provided, however, that the defense of usury may not be pleaded against a holder of any negotiable instrument, in due course.'";
that "the parties contracted with and sued by the respondents are largely ignorant and not advised of their legal rights and are not able to employ counsel to represent them; that the contracts of loan are prepared by the respondents and innocently or ignorantly executed by the borrowers and do not show on their face the usurious interest which is being charged; that because of the inability of the borrowers to retain legal counsel and by reason of their ignorance of the law and their legal rights, the borrowers allow judgments by default to be rendered against them in said actions; that in and by such judgments, in addition to obtaining a judgment for money to which they have no legal right in that proper credit for interest is not given and in and by such suits, the respondents obtain judgments for attorneys' fees greatly in excess of what would be a reasonable fee had the judgment been rendered for the principal amount of the indebtedness less the amount of interest paid thereon"; that "the State of Alabama in its sovereign capacity is interested in the protection of its citizens, particularly small wage earners, from invasions of their legal rights and *779 from the illegal exaction or extortion of monies which such citizens are not legally required to pay" and "is also interested in preserving the courts of Montgomery County from an abuse of their processes on the part of said respondents in their attempt to use the courts of the County in the manner aforesaid for the purpose of collecting money under the aforedescribed contracts, which is not legally collectible; and the State is also interested that the courts of Montgomery County be so conducted that the trial disposition of legal and meritorious matters coming before said courts be not impeded or hampered, and that the practices of the respondents as described above be effectually restrained"; that respondents "will continue to violate the provisions of the statutes of Alabama set forth above and will continue to exact large sums of money as usurious interest, and will continue to institute * * * vexatious actions in the courts of Montgomery County for the purpose of attempting to enforce, and collect, usurious sums of money and interest, and that the processes of the courts of Montgomery County will continue to be abused by such actions unless restrained therefrom by order, judgment or decree of this Court"; that "it is the established public policy of the State of Alabama to protect the interest and welfare of its indigent and helpless citizens against the ravages of the respondents, and to protect the economic prosperity of its industrial areas, and to further the public faith in the integrity and impartiality of its courts of law; that the acts of the respondents as above described constitute a public nuisance to the citizens of the State of Alabama and will continue to be a public nuisance unless the practices of the respondents be effectually restrained."
The bill is sworn to by John Patterson, the Attorney General.
Upon filing the bill the cause was set down for hearing on the question of granting a temporary restraining order as prayed for. Code 1940, Tit. 7, §§ 1054-1055.
Prior to the hearing, Larson and Moore successively demurred to the bill, moved to strike from the bill certain "prolix and irrelevant allegations", moved to dismiss the bill, filed an amended demurrer to the bill as last amended, and answered the bill.
After the hearing the court rendered decrees denying the motion to strike and the motion to dismiss, overruling the amended demurrer to the bill as last amended, and granting the temporary injunction as prayed for. This appeal is from those decrees. However, the only decrees appealable are those overruling the demurrer (Code 1940, Tit. 7, § 755) and granting the temporary injunction (Code 1940, Tit. 7, § 1057). Accordingly, our consideration at this time will be limited to the appealable decrees. The rule is that "if no provision is made by law for an appeal from an interlocutory decree, such decree may not be assigned for error on an appeal from another interlocutory decree." Fogleman v. National Surety Co., 222 Ala. 265, 267, 132 So. 317, 319; Land v. Cooper, 244 Ala. 141, 142, 12 So. 2d 410; Scott v. Leigeber, 245 Ala. 583, 585, 18 So. 2d 275; Reid v. Williams, 250 Ala. 602, 603, 35 So. 2d 496; Dillard v. Gill, 254 Ala. 5, 6, 47 So. 2d 203; Rush v. Newsom Exterminators, 261 Ala. 610, 614, 75 So. 2d 112.
The part of the decree dealing with the temporary injunction is as follows:
"And the matter coming on further to be heard, is submitted upon the motion of the State for the temporary restraining order prayed for in the bill; upon the testimony taken orally before the Court in support of the motion, and the affidavits of the respondents in opposition thereto. Some seventeen witnesses for the State have testified orally in open court and three affidavits have been introduced by the State.
"The respondents, on their part, have submitted some forty-two affidavits, which have been filed in the cause and read to the Court; and the matter now being submitted *780 for ruling on the State's motion for a temporary restraining order, the Court is of opinion that the order should issue as prayed for, and in so ruling the Court finds from the record now before it:
"That all the material and essential averments of the bill are sustained by the proof; and that the record before the Court shows clearly, and without real dispute, that the acts of the respondents complained of are unlawful; that they are against the ancient and established public policy of the State that usury is odious in law; that said Acts constitute a public nuisance with resulting injury to the public welfare and to all persons who come within the sphere of its operation.
"The Court finds thar (sic) during the period of time set forth in the bill, respondents have continuously and intentionally exacted unlawful interest from their borrowers, contrary to the usury laws of Alabama. It appears without dispute that every transaction between the lenders and their borrowers, testified about before the Court, are infected with the taint of usury from start to finish. The testimony proves, and there is no dispute as to this, that the rates of interest charged the borrowers by the respondents were unconscionable and exorbitant.
"It is shown by the uncontroverted evidence that the rate of interest charged by the lender and paid by one borrower was 700 per cent per annum. Another borrower was charged and paid 693 per cent per annum; another 624 per cent per annum; another 537 per cent per annum; yet another 480 per cent per annum, and another 416 per cent per annum. Interest charges ranging anywhere from 272 per cent per annum to 412 per cent per annum were everyday entries on the loan company's books.
"There is no doubt from the testimony that at all times mentioned in the bill the respondents were conducting their lending business in such a way as to deliberately and intentionally exact unlawful interest from their necessitous borrowers.
"The evidence also reasonably satisfies the Court that most of those who made loans from the lending company were in the lower-income brackets of life; were people of little education; some of them positively ignorant, and few of them had any idea whatever what the lawful rate of interest was in their own State, and most of them had only a faint conception, if any, what a promissory note was and what were the legal consequences affecting them when they signed one. All of the borrowers who testified had no assets except their earning power and could not obtain loans from the commercial banks.
"It is plain to the trial judge, after seeing the witnesses on the stand, watching their conduct and demeanor, and listening to their testimony in open court, that they are people who do not fully understand what their legal rights are. They are people who can be easily imposed upon.
"The manner in which the loan company conducted its business of lending small sums of money, ten to fifty dollars, to necessitous borrowers was certainly a nuisance to the public and their way of dealing with their customers has resulted in injury to the public welfare.
"The testimony shows that collectors of the company frequently made visits to the homes of their customers at unreasonable hours of the night, and generally long after usual business hours; that some of the borrowers would be called to the doors of their little homes in the midnight hours, or in the eerie hours before dawn, and have lights flashed in their faces and be confronted with imperative demands for the payment of unconscionable interest.
"It appears from the testimony of one witness that Company collectors came and took him from his job and brought him in a Company car to its office and required him to make a payment on his loan. The Court is convinced that this particular witness *781 did not go with the agents of the Company voluntarily or with eagerness but went through fear and intimidation.
"It further appears that the testimony of some of the witnesses that collectors for the Company would come to their homes and when advised that the borrower was without money, would force him to draw a check on one of the local banks, when it was known to the collectors that the borrower did not have, and never did have any banking account. Suggestions were made to the borrower, if he would sign the check presented to him by the collectors he could pick it up the next day, or the day after, and if he did not then pay the check, it would be turned over to the `sheriff of the county'.
"It appears from the testimony that threats of garnishment against the borrowers were frequently made; and there is testimony to the effect that in order to escape from being garnished, the borrower would quickly beat it to the debtors' court for relief. Approximately 70 per cent of the witnesses who testified at the trial were in the debtors' court. While there is a little testimony that the transactions with the loan company did not drive all of them into the federal debtors' court, the Court is convinced that the charging and collecting of unlawful interest, at extortionate rates as listed above was a materially contributing and powerful factor in the borrowers taking refuge in the federal debtors' court. Undoubtedly the manner in which the respondents conducted their business caused countless necessitous borrowers to go into the federal debtors' court or take advantage of the bankruptcy act.
"The evidence for the State shows,and no witness was introduced by the loan company to deny this,that calls upon the borrowers in their homes after bed-time at night were common, accompanied with threats to cart off the furniture of borrowers, and on one occasion to seize the furniture of a borrower's relative. Quite often the Company collectors came en masse. One borrower testified that three of them descended upon him (sic) home and family in the dark hours of the night and that one of his friends had to advance a two-dollar payment in order to be rid of the collectors. The borrower watched the proceedings from a safe distance in the shadows across the street.
"The testimony shows that, with perhaps one exception, every borrower applying for a loan was pressed by the need of money for the necessities of life. Sometimes loans were needed to pay past-due rent and prevent eviction; sometimes to provide food for the hungry family of the borrowers; to provide clothing; to pay for utilities; sometimes to pay doctors, medical and hospital bills, and funeral expenses. All through the testimony the proof runs that practically all of the borrowers were in needy financial condition, could not get loans from the regular banks and could get money only from a small loan company.
"The evidence for the loan company consists solely of affidavits. It and its co-defendants did not offer oral testimony. The Court has carefully considered each of the affidavits, has permitted respondents' counsel to read them in open court, and has read the affidavits itself. The affidavits are entitled to little, if any, weight. They are all of the same likeness and are drawn up in `mass production.' They do not ring true. They do not speak the language of the type of borrowers who were customers of the loan company. There is hardly a sentence in any of the affidavits that represents the thoughts of the affiantthat is, are clothed in the words customarily used by the affiants.
"Phrases used such as these are the phrases of company agents or legal advisors; `immediately preceding the execution', etc; `completed all contract arrangements', etc.; `the money was urgently needed', etc.; `to meet an indebtedness incurred', etc.; `I am proud to have done business', etc.; `I am at the present time indebted', etc. These phrases are not the *782 words and phrases of small wage earners, of people with the limited education stated by the borrowers in their affidavitsthese are the words and phrases of men familiar with the complexities of the money lending business and with legal terminology. They are not the words usually found in the vocabularies of mechanics' helpers, cooks, housemaids, day-laborers, janitors, cowdrivers, and small tenant farmers, and people following like lines of work who are the affiants here.
"More than fifty per cent of the affidavits sworn to before the same notary contain this paragraph word for word, only the amount varying:
"`Mr. Mathis of Tide Finance Company has always been very courteous to me and he has never threatened me with harassment, bodily harm or legal action in connection with any of the loans. On the contrary, I have at all times been rendered courteous service and I am proud to have done business with the Tide Finance Company. No one forces me to borrow money from this Company and I do not borrow any more than is necessary for me to meet my debts. I repay my loan to the company in payments of $4.00 every other week.'
"The Court is impressed, after hearing all the evidence in this case, with the fact that the loan company has conducted its lending business with studied contempt for our usury laws; and has conducted its business in such manner as not only to affect its borrowers, but also to affect all the people who have come within the range of its operations. Their business methods have created a public nuisance by their charging and collecting unlawful and unconscionable interest from their more than 1050 customers; the visits in the dead of night, of their collectors; their threats against borrowers; their forcing them to sign blank checks on banks in which they had neither accounts nor money, and making them subject to the pains and penalties of the criminal laws,these things are a public nuisance.
"These actions, and others proved by the evidence in this case, present an evil and repulsive picture of oppression and intimidation; of the exaction from lowly and humble folk of unconscionable and extortionate rates of interest on small loans; of intentional flouting of the wise public policy of the State; of taking unlawful advantage of the necessities of financially distressed people, pictures which in their ugliness are hardly shown by any other record found in the books and files of this court.
"This court of equity in the face of the odious conditions shown by the record in this case would be unworthy of its ancient title, `a court of conscience', if it stood idly by and failed now to use its restraining and injunctive powers to stop the oppressive practices of the loan company shown by this record.
"The restraining order prayed for by the State cannot in equity and good conscience, in the interest of the public welfare, be denied. The Register will enroll the following decree:
"This matter now coming on to be heard, is submitted by the parties upon the motion of the complainant for a temporary restraining order against the respondents, upon the pleadings and proof, and upon the testimony taken orally before the Court, and upon the affidavits offered in evidence by the respective parties, and upon a consideration of the same, the Court is of opinion that the temporary restraining order prayed for should issue. It is, therefore,
"Ordered, Adjudged and Decreed by the Court that each of the defendants to this suit, their agents, servants and employees, while acting in the line and scope of their duties, are enjoined and restrained from making or entering into any oral contract or agreement, whereby the rate of interest upon the loan or forbearance of money, *783 goods, or things in action, exceeds the rate of six dollars upon one hundred dollars for one year, or whereby the rate of interest by written contract exceeds the sum of eight dollars upon one hundred dollars for one year, or exceeds that rate for a greater or lesser sum or for a longer or shorter time; and, on loans and contracts presently in existence on which interest has been charged in excess of the lawful rate, the said respondents, and each of them, their servants, agents or employes while acting in the line and scope of their employment, are enjoined and restrained from filing suit thereon for more than the principal amount of the obligation, with proper credit given for all prior interest payments.
"All other questions reserved."
It is apparent from reading the bill that relief is not sought on the basis of appellants' collection methods but mainly on the grounds that appellants have been, and are now, deliberately, persistently, continuously and intentionally violating the usury statutes of Alabama in lending money to necessitous borrowers who "are largely ignorant and not advised of their legal rights and are not able to employ counsel to represent them", and that appellants are using the courts of this state in enforcing collection of such usurious interest. In this connection, it is to be noted that a good part of the trial court's findings deals with appellants' collection methods although there is no allegation with respect thereto. It appears to be established by the evidence that those allegations charging violations of the usury statutes are true. However, the allegations with respect to appellants' use of the state's courts in enforcing collection of such usurious interest are not sustained by the evidence; nor is there any finding by the trial court with respect thereto.
In this posture of the case the principal question presented at this time, as we see it, is whether a lender of money who deliberately, persistently, continuously and intentionally charges highly usurious rates of interest on short term small loans made to necessitous borrowers who "are largely ignorant and not advised of their legal rights and are not able to employ counsel to represent them", may be enjoined from so doing. The answer to this question depends upon whether such acts are violative of the established public policy of this state and constitute a public wrong or nuisance subject to abatement by injunctive process.
In State ex rel. Embry v. Bynum, 1942, 243 Ala. 138, 9 So. 2d 134, this court unquestionably approved the proposition that the operations of a loan company, engaged in the business of habitually and persistently making short term small loans at highly usurious rates of interest to a class of ignorant, necessitous borrowers who are unable to assert theirs rights effectively, can constitute a public wrong or nuisance subject to abatement by injunction. Such holding finds support in decisions from several other jurisdictions, although there is authority supportive of a contrary holding. For cases supportive of the holding in Bynum see: State ex rel. Beck v. Associates Discount Corporation, 1956, 162 Neb. 683, 77 N.W.2d 215; State ex rel. Moore v. Gillian, 1940, 141 Fla. 707, 193 So. 751; State ex rel. Goff v. O'Neil, 1939, 205 Minn. 366, 286 N.W. 316; Commonwealth ex rel. Grauman v. Continental Co., 1938, 275 Ky. 238, 121 S.W.2d 49; State ex rel. Beck v. Basham, 1937, 146 Kan. 181, 70 P.2d 24; State ex rel. Smith v. McMahon, 1929, 128 Kan. 772, 280 P. 906, 66 A.L.R. 1072. For cases supportive of a contrary holding see: State ex rel. Boykin v. Ball Investment Co., 1940, 191 Ga. 382, 12 S.E.2d 574; Ex parte Hughes, 1939, 133 Tex. 505, 129 S.W.2d 270; Means v. State, Tex.Civ.App. 1934, 75 S.W.2d 953; Commonwealth v. Stratton Finance Co., 1941, 310 Mass. 469, 38 N.E.2d 640; People v. Seccombe, 1930, 103 Cal. App. 306, 284 P. 725.
*784 In State ex rel. Embry v. Bynum, supra [243 Ala. 138, 9 So. 2d 139], it is said as follows:
"The public policy of this State condemns usurious contracts as `tainted with an evil * * * intent' Barclift v. Fields, 145 Ala. 264, 41 So. 84, 85 and `offensive to the policy and positive mandate of the law.' Hawkins v. Pearson, 96 Ala. 369, 11 So. 304; McCormick v. Fallier et al., 223 Ala. 80, 134 So. 471. This public policy is supported by Divine Authority, Exodus, Ch. 22, V. 25, and the common law. * * *
* * * * * *
"* * * The right of the state to injunctions to protect its established public policy is sustained in Commonwealth [ex rel. Grauman] v. Continental Co., 275 Ky. 238, 121 S.W.2d 49; State [ex rel. Moore] v. Gillian, 141 Fla. 707, 193 So. 751; State ex rel. Goff v. O'Neil, 205 Minn. 366, 286 N.W. 316, and in principle by our case Try-Me Bottling Co. et al. v. State, 235 Ala. 207, 178 So. 231.
* * * * * *
"Our conclusion, therefore, is that the state in pursuance of its established public policy in protecting the interest of its indigent and helpless citizens against the ravages of the loan shark pest, the economic prosperity of its industrial areas, the furtherance of the public faith in the integrity and impartiality of its law courts, in the administration of justice therein, may invoke the aid of its courts of equity to enjoin the unlawful practices of the defendants as a public nuisance, restrain and enjoin them from proceeding in the law courts to enforce said void contracts, and keep them in subjugation to the law." From State ex rel. Beck v. Associates Discount Corporation, supra [162 Neb. 683, 77 N.W.2d 229], (decided after the Bynum Case), is the following:
"The disastrous effects of usury are universally recognized and in every jurisdiction the state has, as a matter of public policy, enacted some measure of protection for its people from the harsh result and injury to them arising from unconscionable and unlawful exactions for the use of money imposed upon its residents, many of whom are obscure, economically distressed, and unable to protect themselves. The state itself, represented by the Attorney General, has therefore of necessity, in order to protect its people and prevent public wrongs, emerged as the proper party whose duty it is to represent all the public in defense of the state's own sovereignty and bring such actions as that at bar. In doing so, courts have generally recognized the state's right to the equitable remedies of injunction and receivership as a proper and effective method of controlling unlawful lenders under statutes comparable with our own. * * *"
The Supreme Court of Minnesota, in State ex rel. Goff v. O'Neil, supra [205 Minn. 366, 286 N.W. 318], relied on in Bynum, had this to say:
"The next proposition is, Does the complaint state a cause of action for injunctive relief? It is conceded that our statutes forbidding the taking of usury do not subject the transgressor to a penalty by way of imprisonment or fine. So there is no remedy for usury under the criminal law. The plaintiff contends that the business of usury as carried on by defendant is in the nature of a public nuisance and as such may properly be enjoined. * * * As stated, usury, by our statute, is not made a crime, so the state may not put a stop to the practice by criminal prosecution. However our usury legislation clearly establishes the policy of the state outlawing the taking of usury. It is forbidden. Why? In the interest of public welfare, to protect the helpless and the poor, always present in every community, from the rapacity of the money lenders who exact usury. On principle, where there is no adequate remedy either by criminal law or by the ordinary civil suit, equity may properly come to the rescue by appropriate injunctive relief. * * *
* * * * * *
"In opposition defendant cites People v. Seccombe, 103 Cal. App. 306, 284 P. 725. *785 There a demurrer to the complaint in a suit for injunction against a usurer was sustained, because no sufficient facts were alleged, but mere conclusions of law. In the case of Means v. State, 75 S.W.2d 953, 954, Court of Civil Appeals, Texas, a temporary injunction was vacated on appeal. The state filed no brief. The action was to enjoin Means from operating as a loan broker or money lender in the county because he had not been licensed as such, as the Texas law required. It was also alleged that Means collected usurious interest on the money loaned. On the appeal it was held that there was no evidence that Means was a loan broker or money lender of the sort that was required to be licensed, and the court said: `Contracts for the payment of usurious interest are void. The offended individual has his remedy by suit against the lender for recovery of double the amount of the usurious interest paid. See article 5073, R.S.1925. Whether in the future the state shall be empowered to enjoin the business of money lending at usurious rates of interest under the conditions here shown addresses itself to the sound consideration of the Legislature.' Neither case presents the same situation as that stated in the complaint in the instant case. It appears from this complaint that the remedy available to defendant's victims is ineffective to stop the practice. They have not the means to employ a lawyer. The amounts involved are so small that to seek to recover what has been illegally extorted or defend against the obligation given for the loan would cost more than the amounts involved, besides the loss of time and the annoyance of litigation. Unless the state may enjoin a business in which every transaction is a flagrant violation of the usury law enacted for the protection of the many necessitous borrowers of trifling amounts, there is no effective remedy for the enforcement of the law. Injunction has been resorted to in respect to repeated and persistent infractions of other laws than those forbidding usury. (Citing cases) * * *
* * * * * *
"No danger is to be apprehended that courts will grant injunctive relief against violators of statutes where there is an adequate remedy at law. In the case at bar there is no remedy by fine or by imprisonment; and, even were there such, the nature of defendant's business is such that the remedy given his victims for the usury exacted is ineffective because of their helplessness and inability to make use thereof."
From the Kansas case of State ex rel. Beck v. Basham, supra [146 Kan. 181, 70 P.2d 25], cited with approval in the Bynum Case, is the following:
"It has become the public policy of this state to limit interest rates. This is deemed prudent and necessary to prevent grasping persons from taking undue advantage of those in need of money, many times to their financial ruin and to the detriment of our people as a whole. * * *
"The evidence clearly shows, and the court found, that defendant is in the business of violating these statutes. * * *
"On his behalf it is conceded, in effect, that defendant is conducting a business in flagrant violation of our valid statutes and in violation of the long-time, well-settled public policy of this state, but appellee contends that nothing can be done about it for two reasons: (1) Because the statute does not make the charge of usury a crime and fix a penalty therefor. This point was considered in State ex rel. [Beck] v. McMahon, supra, and held not to be a bar to an action for injunction by the state. Indeed, the fact a criminal action cannot be maintained makes injunction all the more appropriate, since the state does not have that remedy for the enforcement of the statute. (2) It is contended that defendant has not conducted his business in such an offensive manner as to amount to a nuisance, as was the case alleged in State ex rel. [Beck] v. McMahon, supra. *786 This argument appears to be predicated upon the view that statutes of this state designed for the public good and evidencing long-continued public policy may be openly and notoriously violated with impunity so long as the violator is pleasant or gracious in his manner of violating the statute. * * *
"Much is said in the briefs of appellee about the conduct of defendant not amounting to a nuisance. That term has been many times defined, perhaps sometimes with too much refinement. We are not convinced defendant's conduct has to be characterized as a nuisance before it can be enjoined, but if so, there is authority so denominating it. In State ex rel. [Vance] v. Crawford, 28 Kan. 726, 733, 42 Am.Rep. 182, it was said: `The repeated, continuous and persistent violations of the statutes, are what makes then nuisances.' This the defendant, by his own testimony, establishes that he has done and is doing. In State v. Rabinowitz, 85 Kan. 841, 847, 118 P. 1040, 1042, 39 L.R.A.,N.S., 187, it was said: `At the common law acts done in violation of the law, or which are against good morals or public decency, and which result in injury to the public, constitute a public nuisance.
* * * * * *
"It is fundamental that courts are open to the state for an action either in its sovereign capacity or as a corporate entity. (59 C.J. 299.) The sovereignty of a state embraces the power to execute its law. The state, on the relation of the Attorney General, may maintain an action to enjoin the flagrant violation of its law. See, State ex rel. [Beck] v. McMahon, supra. * * *
* * * * * *
"There is no reason defendant should be permitted openly, notoriously, and flagrantly to violate our valid laws enacted for the benefit of our people. The state would be weak indeed if it were powerless to prevent it. Criminal prosecution is not available. Injunction is the only remedy. That remedy can be and should be enforced. * * *"
From another Kansas case, State ex rel. Smith v. McMahon, supra [128 Kan. 772, 280 P. 907], also cited with approval in the Bynum Case, we quote the following:
"* * * Has the law no adequate preventive for such a deplorable condition of affairs? Counsel for defendants answer with a confident negative. He says there is for each of the hundreds of borrowers a plain and adequate remedy at law, and that the exaction of usurious interest is of no concern of third parties, not even of the state itself. Is that so? We have a statute which limits the contract rate of interest to 10 per cent. per annum. This statute provides that any person who contracts for a greater rate of interest than 10 per cent per annum shall forfeit the excess; and in addition thereto shall forfeit a sum of money to be deducted from the amount due for principal and lawful interest equal to the amount of interest contracted for in excess of 10 per cent. per annum. R.S. 41-102.
"But according to plaintiff's allegations, the truth of which is conceded by the demurrers, this statute is systematically set at naught by the defendants. Between money lender and borrower, of course it is altogether ineffective until invoked in some lawsuit. And according to the plaintiff's allegations such a lawsuit will not arise once in every hundred times the usurious toll is taken from the wages of his victim. The wage-earner has no time to attend court nor means to employ a lawyer to invoke the defense to the usurer's claim accorded by this statute. He must earn wages every working day to support his family. If garnishment proceedings are instituted which will bring his employer into court on matters of no concern to that employer, the unfortunate debtor is discharged. This dread consequence to the debtor can only be avoided by continued submission to defendants' usurious exactions.
*787 "It is undeniable that many an isolated oppression is practiced on a debtor by an exacting creditor for which the law furnishes no practical relief. In the situation portrayed by plaintiff, it is perfectly obvious that for the hundreds of indigent debtors held in financial peonage by defendants the remedy supplied by law is pitifully inadequate; and the ruling in Pritchett v. Mitchell, 17 Kan. 355, 22 Am.Rep. 287, that the exaction of usury is a mere contractual matter of no concern to anybody but the parties themselves is imperatively in need of revision in the light of the complex social and economic conditions brought about by the industrial development in the half century since that doctrine was announced. The long-continued subjection of hundreds of indigent debtors to the usurious exactions of defendants by keeping them in fear of losing their jobs if they should have the temerity to assert the rights accorded them by the beneficent statutes of this commonwealth presents a situation which cannot be tolerated, and one which quite justifies the institution of this litigation by the state itself. In the State ex rel. v. Howat, 109 Kan. 376, 198 P. 686, 25 A.L.R. 1210, where the right of the state to initiate litigation over matters primarily of private concern but secondarily of far-reaching consequence to the public was thoroughly discussed, an excerpt appears from the Supreme Court of Illinois worth repeating here:
"`"It is one of the most useful functions of a court of equity that it may give complete and adequate relief against acts which will constitute nuisances. * * *
"`"* * * The public authorities have a right to institute the suit where the general public welfare demands it and damages to the public are not susceptible of computation. The maintenance of the public health, morals, safety, and welfare is on a plane above mere pecuniary damage, although not susceptible of measurement in money, and to say that a court of equity may not enjoin a public nuisance because property rights are not involved would be to say that the state is unable to enforce the law or protect its citizens from public wrongs." [Stead v. Fortner] 255 Ill. 474-477, 99 N.E. 683.' Pages 387, 388, of 109 Kan., 198 P. 691, 692.
"The same principle was well stated in the case of In re Debs, Petitioner, 158 U.S. 564, page 586, 15 S. Ct. 900, 907, 39 L. Ed. 1092, where it was said:
"`It is obvious from these decisions that while it is not the province of the government to interfere in any mere matter of private controversy between individuals or to use its great powers to enforce the rights of one against another, yet, whenever the wrongs complained of are such as affect the public at large, and are in respect of matters which by the constitution are entrusted to the care of the nation, and concerning which the nation owes the duty to all the citizens of securing to them their common rights, then the mere fact that the government has no pecuniary interest in the controversy is not sufficient to exclude it from the courts, or prevent it from taking measures therein to fully discharge those constitutional duties.'
"The courts are not helpless to put a stop to such a nefarious business as that of which plaintiff complains when that business has reached the widespread prevalence it has attained in the principal industrial communities of the state. What in any case is the justification for equitable interference with the multifarious doings of men but the natural reaction of the judicial conscience towards some peculiar evil for which the law by reason of its universality is inadequate to correct? From the foundation of our commonwealth it has been a matter of civic pride that one of this state's primary concerns has been that the poor man shall have a fair chance to better his material condition. To that end we have made the family homestead immune to judicial process in invitum. The household goods of the family, the tools of the workman, and the needful agricultural chattels *788 of the husbandman are generously exempted from execution sale. R.S. 60-3501 et seq. So, too, 90 per cent. of the current wages of a laborer who is the head of a family are protected from garnishment as prescribed in R.S. 60-3495. * * *
* * * * * *
"Precedents for the particular form of redress sought by plaintiff to suppress the evil complained of are rare, but in State v. Martin, 77 N.J.L. 652, 73 A. 548, 24 L.R.A., N.S., 507, 134 Am. St. Rep. 814, 18 Ann.Cas. 986, the New Jersey Court of Errors and Appeals went a good deal further than we are asked to do in these cases. It held that, although the taking of usurious interest was not a criminal offense in New Jersey, yet interest in excess of 6 per cent. per annum being forbidden under a civil penalty, a loan office where the exaction of such usurious interest was systematically practiced was a disorderly house, for the maintenance of which the usurer could be indicted and punished. In the opinion the court said:
"`The title of our statute is "An Act against usury." 3 Gen.Stat. 1895, p. 3703. The provision of its first section is "that no person or corporation shall, upon contract, take directly or indirectly, for loan of any money, wares, merchandise, goods and chattels, above the value of $6 for the forbearance of $100 for a year, and after that rate for a greater or less sum or for longer or shorter time." The object disclosed in the title of the act is the prevention of usury; the method by which the legislature provides for the carrying of that object into effect is by enacting an express prohibition against taking it. Counsel argues that a violation of this mandate of the statute by a person loaning money does not constitute an unlawful act, first, for the reason that the statute imposes no penalty upon him for so doing. * * *
"`The statement that the statute does not impose any penalty upon a person who takes usury is not accurate; for the second section of the act deprives him of the power to enforce the payment of any interest on his loan, and entitles the borrower to have the amount of the usury deducted from the principal of the loan in case usury has been paid. * * * The fact that the statute imposes no penalty, except the deprivation of the money which the statute prohibits the lender from taking, affords no ground for holding that the taking of usury is not unlawful.' Pages 653, 654, of 77 N.J.L., 73 A. 549.
* * * * * *
"It will thus be seen that the exaction of usurious interest has been denounced as unlawful and penalized by our Legislature although it is not one of the specific offenses enumerated in our Crimes Act. It is not only illegal, but it is a grievous antisocial iniquity (Marshall v. Beeler, 104 Kan. 32, 178 P. 245), and, when its practice assumes the proportions and prevalence alleged by the plaintiff, a court of equity should not hesitate to suppress it.
* * * * * *
"* * * The Kansas statute does prohibit usury and does prescribe penalties (civil penalties inuring to the debtor), and, the practice of usury being unlawful in this state, upon sufficient aggravation it may be suppressed by injunction."
We do not understand appellants to question the decision in the Bynum case. Rather, in their argument they seek to distinguish that case from the case at bar on the grounds that the facts are dissimilar and that the status of the law has changed since the Bynum decision.
In their very able brief appellants analyze the allegations of the bill in the Bynum case in great detail to demonstrate the differences in the factual situation there and the factual situation presented by the pleadings and proof in the case at bar. While there are differences, it should be borne in mind that the question here is whether the principles laid down and approved in the Bynum case are applicable to the case now before us. The dissimilarity in some of the facts is not necessarily controlling.
*789 The principal distinction drawn by appellants is that the allegations of the bill in the Bynum case show that the loan companies there had used the courts to enforce collection of void usurious loan contracts and in so doing had clogged the courts' dockets, while in the case at bar the loan contracts are not void and there is no evidence that the defendants have so used the courts. Appellants' view is that in the Bynum case it was the loan companies' abuse of the courts in the respect indicated which rendered the companies' operations a public nuisance and not the persistent exaction of usurious interest from necessitous borrowers who were unable to assert their rights effectively.
With this we are unable to agree. The basic activity which the court condemned as a public nuisance was the habitual and persistent exaction of usurious interest from a class of borrowers who were helpless to assert their rights. It seems to us that this is made clear from a consideration of the opinion itself and the cases there relied on. Although the aggravation of the defendants' activity by their abuse of the courts was censured in the opinion, we do not think such abuse was the underlying basis for the court's conclusion that the defendants' operations constituted a public nuisance.
Appellants' next argument is that equity should decline jurisdiction of this case because the state now has an adequate remedy at law which was not available at the time the Bynum case was decided. The insistence is that the state now has a full and adequate remedy at law for combatting any illegal operations of small loan companies by virtue of the provisions of the Harris Act, originally enacted in 1945 and last amended in 1951 (Act No. 159, appvd. June 23, 1945, Gen. Acts 1945, p. 200; Act No. 787 appvd. Sept. 11, 1951, p. 1385; Code 1940, Tit. 5, §§ 263-275, Pocket Part).
The Harris Act was enacted for the purpose of licensing those engaged in the small loan business and providing a measure of supervision over the activities of those so engaged. The Act contains a number of provisions regulating the conduct of such business but the charging of usurious interest is not specifically forbidden. To administer the provisions of the Act, a bureau of small loans, headed by a supervisor, was created (§ 267). The last section of the Act specifies that the violation of any of its provisions shall be a misdemeanor (§ 275). As a further means of enforcing its provisions the Act provides: "The supervisor may, either before or after the suspension or revocation of any license, apply to any court of competent jurisdiction for an injunction or other order enjoining or prohibiting any person from violating any of the provisions of this chapter or any rules, regulations or orders of the bureau, and upon a proper showing the court shall issue such injunction or order as may be deemed proper" (§ 267).
Appellants insist that the state has an adequate means of policing the small loan companies through the action of the bureau of small loans and has no need to resort to a suit in equity for injunctive relief. The fallacy of this argument appears from a careful reading of the Harris Act itself. As already noted, none of its provisions specifically forbids the charging of usury. Section 275 provides as follows: "The charging of interest at an interest rate in excess of eight percent (8%) per annum shall not be deemed to be a criminal offense but nothing contained in this chapter shall be construed as legalizing the charging of interest at a rate in excess of eight percent (8%) per annum."
The activity which is sought to be enjoined in this case is the habitual and persistent exaction of usury from a class of borrowers who are unable to assert their rights effectively. This type of activity is not in itself violative of the provisions of the Harris Act, and the sanctions of the *790 Act cannot be used to suppress it. It is our conclusion, therefore, that the state does not have an adequate remedy at law under the provisions of the Harris Act so as to prevent resort to equity for relief in this case.
The decree provides that "on loans and contracts presently in existence on which interest has been charged in excess of the lawful rate, the said respondents * * * are enjoined and restrained from filing suit thereon for more than the principal amount of the obligation, with proper credit given for all prior interest payments." The undoubted meaning of "proper credit" is that "if any interest has been paid the same must be deducted from the principal and judgment rendered for the balance only", as provided in § 65, Tit. 9, Code 1940, supra. It seems to us that if the equity court has the power to abate by injunction the operations of a loan company engaged in habitually and persistently making short term small loans at highly usurious rates of interest to a class of ignorant, necessitous borrowers who are unable to assert their rights effectively, a necessary adjunct thereto, in order to do complete justice, is the power to prohibit the loan company from using the courts of this state in collecting "more than the principal amount of the obligation, with proper credit given for all prior interest payments." The obvious effect of this restraint is to invoke, on behalf of the stated class of borrowers, the prescription of § 65, Tit. 9, Code 1940, supra, that if any usurious interest has been paid it "must be deducted from the principal and judgment rendered for the balance."
With reference to the authority of the Attorney-General to bring this suit, we quote the following from appellants' brief:
"The Governor of Alabama, in whom is vested the supreme executive power of the State, has the constitutional responsibility to take care that the laws of the State be faithfully executed, and the Attorney General of Alabama is without authority to institute and prosecute, in the name of the State, suits and other proceedings at law or in equity contrary to and in direct violation of the orders of the Governor.
"The Constitution of the State of Alabama provides for the creation of an executive department, to consist, among others, of a Governor and an Attorney General. Art. 5, Sec. 112, Ala.Const.1901. The supreme executive power of the State is vested by our Constitution in the Governor, art. 5, Sec. 113, Ala.Const. 1901, and to the Governor alone is delegated the power and responsibility to take care that the laws be faithfully executed. Art. 5, Sec. 120, Ala. Const.1901.
"The Legislature has authorized the Attorney General to institute and prosecute, in the name of the State, all suits and other proceedings in law or in equity necessary to protect the rights and interests of the State. Tit. 55, Sec. 229, Ala.Code 1940. The Legislature has further specified that all litigation concerning the interest of the State shall be under the direction and control of the Attorney General. Tit. 55, Sec. 244, Ala.Code 1940. There is, of course, constitutional authority for this power, since our Constitution provides that the Attorney General shall perform such duties as may be prescribed by law, art. 5, Sec. 137, Ala. Const.1901; and the constitutionality of the foregoing Code sections has been upheld in cases in which the point was specially raised by demurrer that the Attorney General was without authority to institute the proceedings since, for aught that appeared, he acted without the direction or consent of the Governor. Try-Me Bottling Co. v. State, 235 Ala. 207, 178 So. 231; Montgomery v. Sparks, 225 Ala. 343, 142 So. 769; McDowell v. State, 243 Ala. 87, 8 So. 2d 569; State ex rel. Carmichael v. Jones, 252 Ala. 479, 41 So. 2d 280.
"We do not here contend that it is necessary for the Attorney General to allege that he is authorized by the Governor to institute suits, nor do we raise the issue as to whether the Attorney General, under our Constitution, is empowered to institute suits *791 without the consent or authority of the Governor; however, we respectfully urge that under our Constitution the Governor is the chief law enforcement officer, has vested in him the supreme executive power of the State, and has the constitutional responsibility to take care that the laws of the State be faithfully executed, so that the Attorney General of Alabama is without authority to institute and prosecute suits in the name of the State contrary to and in direct violation of the orders of the Governor; and to the extent that they might purport to authorize such action by the Attorney General, Tit. 55, Sec. 229, Ala.Code 1940, and Tit. 55, Sec. 244, Ala.Code 1940, would be unconstitutional. Board of Revenue of Jefferson County v. State, 172 Ala. 138, 54 So. 757; Parke v. Bradley, 204 Ala. 455, 86 So. 28; art. 5, secs. 112, 113, 120, and 121, Ala.Const. 1901.
"The appellants moved to dismiss the bill of complaint and demurred to the bill of complaint on the ground that, for aught that appeared, the Attorney General acted contrary to and in direct violation of the orders of the Governor in instituting this action. * * *"
At the present stage of the case we are not called upon to decide the specific point raised. Appellants apparently agree that the Attorney-General is authorized to bring the suit unless he has acted "contrary to and in direct violation of the orders of the Governor." Assuming, without deciding, that the suit cannot be maintained if such orders are given, we see no necessity of the bill negating such action by the Governor.
The decrees overruling the amended demurrer to the bill as last amended and granting the temporary injunction are due to be affirmed.
Affirmed.
SIMPSON, STAKELY, MERRILL and COLEMAN, JJ., concur.
LIVINGSTON, C. J., and LAWSON, J., concur specially.
LIVINGSTON, Chief Justice, and LAWSON, Justice (specially concurring).
We agree with the holding of the court to the effect that the demurrer was overruled without error. We are also in agreement with the court's action in upholding the temporary injunction ordered by the trial court. However, our agreement on this phase of the case is grounded on the belief that the proof shows that the overall manner in which appellants have conducted their business constitutes a public nuisance subject to being enjoined by the equity courts of this state in a suit instituted on behalf of the State at the instance of the Attorney General.
We do not understand the court to hold that the charging and collection of interest in an amount in excess of that provided by law, standing alone, is sufficient to constitute a public nuisance subject to injunctive relief. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1879621/ | 643 So. 2d 937 (1994)
Tommy D. BROWN,
v.
STATE of Mississippi.
No. 92-KP-0622.
Supreme Court of Mississippi.
October 6, 1994.
Tommy D. Brown, pro se.
Michael C. Moore, Atty. Gen., Wayne Snuggs, Asst. Atty. Gen., Jackson, for appellee.
Before HAWKINS, C.J., and PITTMAN and BANKS, JJ.
HAWKINS, Chief Justice, for the Court:
On February 28, 1984, appellant Tommy D. Brown was indicted for the crime of armed robbery. After originally pleading not guilty, Brown changed his plea to guilty at a hearing held March 15, 1984, in the Circuit Court of Quitman County by Judge Elzy Smith. At a second hearing, held March 29, 1984, Brown was sentenced by Judge Smith to serve 20 years. On July 18, 1991, Brown filed a motion in the style of a motion for post-conviction relief titled Motion to Vacate and Set Aside the Judgment or Sentence which was denied by Judge Smith on June 2, 1992. Brown appealed to this Court on June 11, 1992.
FACTS
Tommy D. Brown was indicted for armed robbery on February 28, 1984. According to the indictment, Brown used a knife to steal a pistol, various articles of jewelry, and $375.00 in cash and traveler's checks from Jessie Mae Furr on March 23, 1983. After originally pleading not guilty, Brown changed his plea to guilty at a hearing held before Judge Elzy Smith in the Circuit Court of Quitman County. In the course of this proceeding Judge Smith thoroughly questioned Brown in regard to his plea, its consequences, and the adequacy of the representation provided by defense counsel Charles Easterling. At a second hearing, held March 29, 1984, Judge Smith sentenced Brown to serve 20 years. The transcript of these proceedings was not filed until April 19, 1984.
On June 18, 1991, Brown filed a motion in the form of a motion for post-conviction relief styled Motion to Vacate and Set Aside or Correct the Judgment or Sentence. In it Brown listed as grounds for relief:
a) The guilty plea was the result of reliance upon erroneous advice from Movant's counsel that he would be eligible while in custody to "parole, to earn good time" toward early release as would any other prisoner.
b) The guilty plea was unintelligently and involuntarily entered.
c) The trial court committed reversible error when it failed to advise Movant of *938 the consequences of Movant's plea as required by law.
This was not Brown's first attempt to have himself freed. He cited as previous motions:
a) Motion to Vacate Sentence, was filed in this court on September 17, 1984.
b) Petition for Writ of Habeas Corpus was forwarded to this court for filing on June 17, 1985.
c) Motion for leave to proceed in forma pauperis, pursuant to § 11-53-17, MCA (Supp. 1984), Section 4, Post-Conviction Collateral relief was forwarded to this court for filing on June 17, 1986.
d) Petition for writ of mandamus was filed in this court on February 17, 1987.
According to Brown, all of these motions were improperly prepared and were dismissed by the court without prejudice.
On June 2, 1992, Judge Smith dismissed Brown's Motion to Vacate and Set Aside or Correct the Judgment or Sentence as time barred:
The Motion to Vacate and Set Aside or Correct the Judgment or Sentence was filed by Petitioner with the Clerk of this Court on July 18, 1991, more than three years subsequent to the entry of his guilty plea and sentencing. No appeal or other pleading for relief was filed by him prior to the motion sub judice and no exceptions to this procedural bar are applicable. 99-39-5(2), Miss. Code Ann.
Brown filed a Notice of Appeal on June 18, 1992.
LAW
I. THE GUILTY PLEA WAS UNINTELLIGENTLY AND INVOLUNTARILY ENTERED.
II. THE GUILTY PLEA WAS THE RESULT OF RELIANCE UPON ERRONEOUS ADVICE FROM APPELLANT'S COUNSEL.
III. THE TRIAL COURT MADE REVERSIBLE ERROR WHEN IT FAILED TO ADVISE THE APPELLANT OF THE CONSEQUENCES OF HIS PLEA AS REQUIRED BY RULE 3.03.
Although Brown cites the above three points as error on appeal, he does not refer to the issue of the statute of limitations upon which the case was dismissed below. According to the Mississippi Uniform Post-Conviction Collateral Relief Act,
A motion for relief under this chapter shall be made within three (3) years after the time in which the prisoner's direct appeal is ruled upon by the supreme court of Mississippi or, in case no appeal is taken, within three (3) years after the time for taking an appeal from the judgment of conviction or sentence has expired, or in case of a guilty plea, within three (3) years after entry of the judgment of conviction. Excepted from this three-year statute of limitations are those cases in which the prisoner can demonstrate either that there has been an intervening decision of the supreme court of either the state of Mississippi or the United States which would have actually adversely affected the outcome of his conviction or sentence or that he has evidence, not reasonably discoverable at the time of trial, which is of such nature that it would be practically conclusive that had such been introduced at trial, it would have caused a different result in the conviction or sentence. Likewise excepted are those cases in which the prisoner claims that his sentence has expired or his probation, parole or conditional release has been unlawfully revoked.
Miss. Code Ann. § 99-39-5(2).
Furthermore, as Brown pled guilty before the post-conviction relief statute became effective on April 17, 1984, the doctrine of Odom v. State, 483 So. 2d 343 (Miss. 1986), must apply. "[The Mississippi Uniform Post-Conviction Collateral Relief Act, Miss. Code Ann. § 99-39-1 et seq.] applies prospectively from its date of enactment, April 17, 1984. Individuals convicted prior to April 17, 1984, have three (3) years from April 17, 1984, to file their petition for post-conviction relief." 483 So.2d at 344.
Over seven years passed in the case at bar between the effective date of the statute and the filing of this motion for post-conviction relief. Absent an exception, this motion must be viewed as time barred and the holding of the lower court must be affirmed.
*939 In his original Motion to Vacate and Set Aside or Correct the Judgment or Sentence, Brown did not point to an exception to the statute of limitations or even acknowledge that his motion may be time barred. Furthermore, the closest his brief on appeal comes to addressing this issue is:
Brown isn't procedurally barred from rising his claim of ineffective assistance of counsel because counsel wouldn't have been considered as erroneous until Brown in-fact done the time that counsel had advise him in order to convince him to plea guilty to the charge of armed robbery, whereas now he had done over seven (7) years as advised by his court-appointed-counsel of record on or about March 29, 1984... .
Brown does not further explain what he means by this nor cite any law that would support this proposition. Certainly, his brief does not refer to a United States or Mississippi Supreme Court ruling which would affect his case, new evidence which would change his case's outcome, or claim that his sentence has expired or that his parole or conditional release has been unlawfully revoked.
Since the record of this case has been filed, Tommy Brown has sent this Court several letters saying that he was due to be released from prison in July of 1993. As a claim by a prisoner "that his sentence has expired or his probation, parole, or conditional release has been unlawfully revoked," Miss. Code Ann. § 99-39-5(2) (Supp. 1993) is an exception to the Post-Conviction Relief Act statute of limitations. Brown is not precluded from raising this issue in another motion. Such matter, however, is not before us in this petition. The judgement of the lower court is therefore affirmed.
LOWER COURT'S DENIAL OF POST-CONVICTION RELIEF AFFIRMED.
DAN M. LEE and PRATHER, P.JJ., SULLIVAN, PITTMAN, BANKS, McRAE, JAMES L. ROBERTS, Jr. and SMITH, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1222080/ | 230 Ga. 500 (1973)
197 S.E.2d 711
BROOKS
v.
HICKS et al.
27736.
Supreme Court of Georgia.
Argued February 14, 1973.
Decided April 25, 1973.
*503 McCurdy, Candler & Harris, George H. Carley, for a appellant.
Zachary & Segraves, William E. Zachary, Jr., William E. Zachary, Sr., Rich, Bass, Kidd & Broome, Robert K. Broome, for appellees.
PER CURIAM.
The appellant and the appellees entered into a twelve-month option on July 21, 1971, which provided that it would terminate upon the failure to pay $3,750 on the 21st day of each month during said term. The appellant failed to pay said sum on Sunday, *501 May 21, 1972. His tender said amount the following day was refused. On motion for summary judgment the trial court held that the option had terminated. Held:
The facts of this case show that the appellant paid, from the inception of the option through April 1972 the sum of $37,500 to preserve his rights to the optioned property. To hold that his failure to tender $3,750 on Sunday, May 21, 1972, at a particular business address came too late perpetrates an injustice to which this court will not lend its aid. It is fundamental that forfeiture of rights is not favored. McDaniel v. Mallary Bros. Machinery Co., 6 Ga. App. 848 (1) (66 S.E. 146); Pearson v. George,209 Ga. 938, 944 (77 SE2d 1).
It is true that Code Ann. § 102-102(8) is a rule of statutory construction, and does not, as was held by the Court of Appeals in Maxwell Bros. v. Liverpool & London &c. Ins. Co., 12 Ga. App. 127, 131 (76 S.E. 1036), apply to contractual limitations; yet, this Code Section states a rule of reason with respect to limitations, be they statutory or contractual, which should be applied to limitations in contracts in the absence of any sound reason for not applying them. This question does not seem to have been considered and determined by the courts of many states, but those which have had the occasion to consider the question seem almost, without exception, to have applied the statutory rule to contractual obligations. The cases are reviewed and collected in 86 CJS 897, Time, § 14(10), where it is said, in part: "Although statutes which provided that a terminal Sunday or holiday is to be excluded from a period of time within which an act is to be performed may apply only to acts required by law or to acts to which the statutes refer specifically, and have no application to acts required to be done by private contract where the time for performance is stipulated, nevertheless such statutes provide a safe and sound rule to be observed in the interpretation of contracts where *502 no different meaning is given by the instrument to be construed or where no different intention is manifest from the contract. Accordingly, except where the act is one which may be performed on Sunday, if the time for exercise of rights or performance or tender of performance of an act under a contract falls on a holiday or Sunday, as a general rule it may be legally performed on the following day, unless that day is a holiday, in which event it may be performed on the next succeeding business day. . ."
In our society, Sunday is a legal holiday on which it is generally unlawful to transact business except works of necessity. While the contract sued on provides that, "If, on the 21st day of any month during the term of this option, selling partner fails to deliver to buying partners the check provided for in the preceding sentence [that is, a bank cashier's or certified check in the amount of $3,750, and had to be paid at 5555 Memorial Drive, Stone Mountain, Georgia, admittedly a business closed on Sunday], this option shall terminate and selling partner shall thereafter have no rights under this agreement," and "time is and shall be of the essence of this agreement," we do not think these provisions need to be construed so as to work a forfeiture. Although Rowell v. Harrell Realty Co., 25 Ga. App. 585 (103 S.E. 717) and Maxwell Bros. v. Liverpool & London &c. Ins. Co., 12 Ga. App. 127, 131, supra, hold to the contrary, these decisions are not binding on us and we refuse to follow them.
We think this court should accept the old Latin Maxim, "dies dominicus non est juridicus" Sunday is not a day in law.
Judgment reversed. All the Justices concur, except Nichols and Undercofler, JJ., who dissent. Hawes and Gunter, JJ., concur specially.
HAWES, Justice, concurring specially.
The trial court, in rendering its judgment in the court below, relied on Rowell v. Harrell Realty Co., 25 Ga. App. 585 (103 S.E. 717), decided in 1920. This case has lain dormant for some 53 years. When it was resurrected in the present case, the majority saw fit not to follow it.
In my opinion, the judgment in the Rowell case should not become further imbedded in the case law of this State, for it did not represent the true spirit of the law which favors fair play, justice and abhors a forfeiture. This is the first opportunity this court had had to establish a uniform rule of law that gives the same construction to contractual limitation as now given to statutory limitations, thus avoiding the pitfall that occurred in this case. This court was justified when it seized, upon this its first opportunity, to put the State of Georgia under uniform rules of limitation as established in such jurisdictions as Tennessee, Pennsylvania, New Jersey, South Carolina, Massachussetts, California, Maryland, North Carolina, Kansas, New Mexico, Texas, etc., which seems to be the general rule followed.
For the reasons contained in the majority opinion and the additional reasons given above, I concur in the reversal.
GUNTER, Justice, concurring specially. When a contract requires that installment payments are to be made on a specified date in each month at a business-operations office, and the date specified in the contract falls on a Sunday, or a holiday, or a day when business operations are not carried on at the specified paying location, then I am of the opinion that the paying *504 party may tender and make payment on the next business-operations day at the specified business location. To my mind, such a rule is just and fair and comports with current business practices in this state.
In 40 AmJur 720, Payment, § 14, we find the following: "Due Date Falling on Sunday or Holiday. While at common law Sunday was not a dies non, Sunday statutes in most jurisdictions have made it such, to a greater or less extent; even in the absence of such statutes, it seems to be the general rule that where the day for making a payment on a non-negotiable contract falls on Sunday, failure to make it on that day does not subject the promisor to liability as for a default in payment, but he has the following day in which to make it."
The general rule seems to me to be a reasonable rule to be applied by courts in construing contracts. The phrase "Time is of the essence" included in contracts must be construed along with the requirement that the place of payment is a place where business operations are carried on. And if the date of payment falls on a day of the week when business operations are not carried on at the designated place of payment, then I construe the phrase "Time is of the essence" as meaning that payment or tender may be made at the designated place on the next succeeding day when business operations are carried on at that place.
I concur in the judgment of reversal.
UNDERCOFLER, Justice, dissenting. "The illegality of a bargain for the reason that it is made or is to be performed on Sunday is dependent entirely upon a statute. At both common law and in equity such bargains were lawful and enforceable to the same extent as if made on any other day of the week." 6A Corbin on Contracts 623, § 1477; Hayden v. Mitchell, 103 Ga. 431 (3) (30 S.E. 287); Dorough v. Equitable Mortgage Co., 118 Ga. 178 (2) (45 S.E. 22).
The only Georgia statute applicable here provides, *505 "Any person who shall pursue his business or the work of his ordinary calling on the Lord's day, works of necessity or charity only excepted, shall be guilty of a misdemeanor." Code Ann. § 26-9908 (Ga. L. 1968, pp. 1249, 1337).
"Substantially the same provision has been the law of Georgia since the passage of the Act of 1762. The effect of this statute is to declare illegal, as being contrary to the public policy, all contracts made on Sunday which are executed in the work of one's ordinary calling or in the pursuit of his ordinary business." Dorough v. Equitable Mortgage Co., 118 Ga. 178, 179, supra.
The contract here is not illegal. It was not entered into on Sunday. Furthermore, it was an isolated transaction. It was the sale of a partnership interest with an option to repurchase. It was not in the ordinary business of either party. Neither is the monthly option payment which is required to be made on Sunday in the ordinary business of either party.
The contract provided, "Time is and shall be of the essence of this agreement." The appellant made no effort to tender the payment due on Sunday, May 21, 1972. He testified that he forgot it was due.
In my opinion the correct law is stated in Rowell v. Harrell Realty Co., 25 Ga. App. 585 (103 S.E. 717) as follows: "The petition in this case showing that time was of the essence of the contract, and that there was no offer to exercise the right to purchase the property under the option within the time limit contracted, and there being no statutory enactment which extends the time in the contract, it was error for the court to overrule the general demurrer."
The majority opinion admits that it is applying a rule of statutory construction to contracts. This is erroneous. Furthermore, the majority opinion concedes this rule does not apply to a contract where the intention is *506 manifest. Here the intention of the contract is manifest by the provision which states, "Time is and shall be of the essence of this agreement."
In my opinion the majority has established a rule of law which extends to Monday a specific legal option contract requiring payment on Sunday something the legislative bodies of this State have not seen fit to do in the last 210 years.
The trial court's judgment was correct and should be affirmed.
I am authorized to state that Justice Nichols concurs in this dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1249991/ | 386 N.W.2d 767 (1986)
Philip Mark BLY, et al., Appellants,
v.
Brian W. GENSMER, et al., Respondents.
No. C4-86-340.
Court of Appeals of Minnesota.
May 13, 1986.
David K. Hackley, Minneapolis, for appellants.
Robert L. McCollum, Cragg, Bailly, Gordon & McCollum, Ltd., Minneapolis, for respondents.
Considered and decided by SEDGWICK, P.J., and PARKER and FORSBERG, JJ., with oral argument waived.
*768 OPINION
PARKER, Judge.
This appeal is from an order granting partial summary judgment to respondents Brian Gensmer and Georgianne Gensmer and discharging the notice of lis pendens that had been filed on two pieces of property, lots 1 and 3, by appellants Philip Bly and Brenda Urke. Appellants essentially contend the trial court erred in discharging the notice because their complaint involves an existing lien. We disagree and affirm.
FACTS
Respondents were owners of Creek Ridge Estate Addition, a piece of land located within the boundaries of the City of Eden Prairie. They planned to subdivide the property into five lots for single-family homes and two outlots. In March 1982 the city council approved the plat contingent upon respondents granting the city a conservation easement covering all of Outlot B, a flood plain through which Purgatory Creek runs. It was agreed that the city would not issue building permits for the lots until the final granting of the easement.
Respondents sold lots 5, 2, and 1 to third parties under contracts for deed. They retained lot 3 as a site for their own home. Respondents claim that all the purchasers were given preliminary plats showing the easement area and were advised of the restrictions on the use of Outlot B.
Appellants entered into a purchase agreement for lot 4 and Outlot B in March 1984. They claim they knew nothing of the proposed easement. Respondents, however, contend that appellants were aware of the restrictions which appeared in the city records, in the abstract of title reviewed by appellants' attorney, and in the subdivision plat.
In early June respondents submitted the proposed conservation easement over Outlot B to the city. The easement, executed on June 25, 1984, provides that Outlot B shall be "preserved predominantly in its natural condition" and that "[n]o building * * * or other man-made structure shall be placed in the conservation area without the prior written consent of city." One day after respondents granted this easement to the city, lot 4 and Outlot B were sold when appellants tendered $16,000 to respondents and a contract for deed was executed.
In April 1985 appellants commenced this action alleging breach of warranty of title, fraud, unjust enrichment, and entitlement to punitive damages. In conjunction with their suit, they filed a notice of lis pendens on lots 1 and 3. Respondents' motion for partial summary judgment was subsequently granted by the trial court, and the notice of lis pendens was discharged. Appeal was timely taken from this order.[1]
ISSUE
Did the trial court err in cancelling the notice of lis pendens?
DISCUSSION
A notice of lis pendens may properly be filed only if a party pleads a cause of action "in which the title to, or any interest in or lien upon, real property is involved or affected." Minn.Stat. § 557.02 (1984); Joslyn v. Schwend, 89 Minn. 71, 93 N.W. 705 (1903). Appellants assert no right in or title to lots 1 and 3. The notice of lis pendens is therefore justified, if at all, solely on the theory of an equitable lien. If the cause of action and notice of lis pendens involves a lien, the lien must exist at the time the action is commenced. Grace Development Co., Inc. v. Houston, 306 Minn. 334, 335, 237 N.W.2d 73, 75 (1975).
*769 Appellants argue that their cause of action involves both an equitable lien and a constructive trust which arose immediately upon respondents' "unjust enrichment of themselves by creation of the servitude against Appellants' Outlot." They contend that by granting the conservation easement to the city, respondents "sacrificed all value of Outlot B" in order "to enhance the value [respondents] received from Lots 1, 2, 3 and 5, which thus became buildable lots rather than mere vacant land."
A constructive trust is not, in itself, construed as a lien on or as affecting title to property; it does not exist so as to affect the property held by the wrongdoer until it is declared by a court as a means of affording relief. International Refugee Organization v. Maryland Drydock Co., 179 F.2d 284, 287 (4th Cir.1950). If appellants' complaint establishes that they are entitled to a constructive trust on the property, legal title would be held in trust for their benefit. An equitable lien would arise for the enforcement of this trust, thus bringing their cause of action within the lis pendens statute. See Rehnberg v. Minnesota Homes, Inc., 236 Minn. 230, 234, 52 N.W.2d 454, 456 (1952) (constructive trust arising out of joint adventure in certain real property was action involving equitable lien and therefore within provisions of § 557.02).
A constructive trust will arise "whenever the legal title to property is obtained through fraud, oppression, duress, undue influence, force, crime, or similar means, or by taking improper advantage of a confidential or fiduciary relationship * * *." Wright v. Wright, 311 N.W.2d 484, 485 (Minn.1981) (citations omitted). Such a trust is imposed "to prevent unjust enrichment of a person holding property under a duty to convey it or use it for a specific purpose" and arises in favor of the person "equitably entitled to the property." Id.
Appellants assert no right to lots 1 and 3 which would give rise to a constructive trust. They seek damages based on the fact that granting the conservation easement made the other lots more valuable as building sites and enabled respondents to sell them. No claim is made that respondents are under a duty to convey lots 1 and 3 to them or that respondents must use the property for a specific purpose.
Respondents accurately state that appellants' "claim is simply that because they allege that Lot 1 and 3 became somehow enriched as a result of the transaction between the parties they should be granted an equitable lien against those properties. * * * The only lien that appellants can hope to have against the property in question is a lien that will be created as a result of the litigation between the parties, not one that has existed as a result of the dealings between the parties." A lien resulting from the ultimate entry of judgment is not a present lien and "provides no basis for the filing of a notice of lis pendens." Rehnberg, 236 Minn. at 234, 52 N.W.2d at 456.
A lis pendens serves warning that title to property is in litigation and impedes a property owner's right to free alienability of real estate. Respondents indicate that construction on lots 1 and 3 is nearly complete and that the owners must soon obtain permanent financing. The notice of lis pendens may cause a delay in securing this financing. If appellants are allowed to file this notice based on an alleged future interest in the property, they would, realistically, be placed improperly in a position to affect negotiations with the property owners.
If done maliciously, filing a false statement on real property may constitute slander of title, subjecting the person filing the notice to civil and sometimes even criminal penalties. See Kelly v. First State Bank of Rothsay, 145 Minn. 331, 177 N.W. 347 (1920); State v. Minniecheske, 118 Wis. 2d 357, 347 N.W.2d 610 (App.1984). While we do not imply a comment on appellants' motives, *770 the improper filing of a lis pendens cannot be condoned.
The trial court found appellants had "no right to maintain a Notice of lis pendens" because they "assert no right, title or interest in Lots 1 and 3 * * *." This statement seems to us to be precisely correct.
DECISION
The trial court did not err in discharging appellants' notice of lis pendens because they claimed no existing interest or lien on the property.
Affirmed.
NOTES
[1] An order cancelling a notice of lis pendens is appealable as of right. Rehnberg v. Minnesota Homes, Inc., 235 Minn. 558, 49 N.W.2d 196 (1951). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1458561/ | 827 F. Supp. 1114 (1993)
BIRTHRIGHT, Plaintiff,
v.
BIRTHRIGHT, INC. and Birthright of Woodbury, Inc., Defendants.
Civ. A. No. 92-1837(SSB).
United States District Court, D. New Jersey.
July 23, 1993.
*1115 *1116 *1117 *1118 *1119 Susan Singer, Singer & Goger, Newark, NJ, Roberta Jacobs-Meadway, Panitch Schwarze Jacobs & Nadel, Philadelphia, PA, for plaintiff.
Thomas F. McGuire, III, Pennsauken, NJ, and Robert J. Brooks, Washington, DC, for defendants.
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW (pursuant to order dated July 21, 1993)
BROTMAN, District Judge.
Before the court is a trademark infringement and unfair competition case brought by plaintiff Birthright under the Lanham Act, 15 U.S.C. § 1051 et seq, and the common law. Count I of plaintiff's second amended complaint states a claim for trademark infringement under Section 32, 15 U.S.C. § 1114. In count II, plaintiff makes a claim of unfair competition under Section 43(a)(1)(A), 15 U.S.C. § 1125(a)(1)(A). In count III, plaintiff alleges a claim of false or misleading representations of fact under Section 43(a)(1)(B), 15 U.S.C. § 1125(a)(1)(B). Finally, count IV is a pendant state claim of common law unfair competition. Plaintiff seeks injunctive and monetary relief, as well as an award of attorneys' fees. Also before the court are defendants' counterclaims for common law unfair competition, breach of contract, and defamation.
Plaintiff filed suit on April 24, 1992. The court held hearings on the parties' motions for preliminary relief on July 17, August 10, and August 11, 1992. On October 5, 1992, *1120 the court, with the consent of the parties, ordered the consolidation of the hearings on preliminary relief with the trial on the merits pursuant to Federal Rule of Civil Procedure 65(a)(2). On December 26, 1992, defendants submitted proposed findings of fact and proposed conclusions of law. On December 28, 1992, plaintiffs submitted the same. After careful consideration of the entire record in this matter, the court enters the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).
Findings of Fact
1. The "Birthright" name is a service mark, registered with the United States Patent Office in the name of plaintiff Birthright. The "Birthright" name functions to identify the kind of pregnancy counselling services offered by the entities affiliated with the Birthright movement. Pl.'s Exs. 7, 7A, 7B.
2. The stylized "B" logo is an unregistered service mark that also functions to identify the kind of pregnancy counselling services offered by the entities affiliated with the Birthright movement. The logo consists of the letter "B" in heavy print, surrounding the silhouette of a telephone handset that resembles a fetus. Defs.' Ex. 5 (Louise Summerhill, The Story of Birthright 19 (1973)).
I. The Parties, Witnesses, and Key Figures
3. Plaintiff Birthright is a Canadian corporation, organized on February 4, 1969 under the laws of Ontario by Louise Summerhill ("mother Louise") and others, with offices in Toronto, Canada. Pl.'s Ex. 19.
4. Mother Louise was the founder and dominating figure in the Birthright movement from its origins until the time of her death in August 1991. II Tr. at 46, 53, 83, 210. At all times relevant to this litigation, mother Louise's actions were taken in her official capacity as a member of the Board of Directors of plaintiff Birthright. II Tr. at 276.
5. Louise R. Summerhill ("daughter Louise") is one of three co-presidents and a member of the board of directors of Birthright. She is the daughter of mother Louise. I Tr. at 24, 31.
6. Defendant Birthright, Inc. is a United States corporation, organized on June 17, 1972 under the laws of New Jersey by mother Louise and others. Defs.' Ex. 1; II Tr. at 209.
7. Joan Evelyn Coleman has been active in the Birthright movement since the summer of 1971 and currently serves on the board of directors of Birthright, Inc. She is also the director of a Birthright chapter in Alexandria, Virginia, and holds the positions of regional consultant and regional representative. II Tr. at 154-55.
8. Denise Cocciolone is the executive director and member of the board of directors of defendant Birthright Inc. and a member of the board of directors of Birthright of Woodbury ("Woodbury Birthright"). Defs.' Ex. 11 ("Aff. of Cocciolone") ¶ 1. She is the leading figure of both Birthright Inc. and Woodbury Birthright, and controls and directs these two entities. II Tr. at 295. Cocciolone first became involved in the Birthright movement in 1970, and she formerly served as the national director for Birthright in the United States. II Tr. at 202.
9. Terry Weaver is a member of the board of directors of Birthright and the national director for Birthright in the United States. She assumed these positions in September 1991. She first became active in the Birthright movement in 1969, when she founded an Atlanta chapter. She has also served as a regional consultant and as a conational director for Birthright. II Tr. at 86, 87, 92.
10. Bernadette Sanders is the director of the Wichita, Kansas Birthright Center, which she founded in 1971. She also serves as a regional consultant for Birthright. II Tr. at 127.
11. Defendant Woodbury Birthright is a United States corporation, organized on November 17, 1975 under the laws of New Jersey. Pl.'s Ex. 58. Its offices are located in Woodbury, New Jersey. Before its incorporation, Woodbury Birthright operated as an unincorporated entity since December 1970. II Tr. at 204. On December 1, 1971, plaintiff Birthright issued Woodbury Birthright a charter document making the latter a "Chartered Member of Birthright" with the *1121 right to use the "Birthright" name.[1] Woodbury Birthright is located at the same address as Birthright, Inc., and is directed and controlled by Denise Cocciolone. II Tr. at 272, 295; Defs.' Ex. 10; Decl. of Berney, Ex. F.
II. Goals and Activities of the Birthright Organizations
12. The Birthright movement comprises non-profit, charitable, interdenominational, and non-political organizations that provide emergency services to counsel women with crisis pregnancies. Based on the idea that every pregnant women has the right to give birth and every unborn child has the right to live, the Birthright movement encourages women with unplanned and/or unwanted pregnancies to bear their babies and not to have abortions. I Tr. at 31; Pl.'s Ex. 20 ("Decl. of Daughter Louise") ¶ 6.
13. Formulated in 1971, the Birthright Charter articulates the underlying philosophy and guiding principles of the Birthright movement.[2] I Tr. at 36-37; II Tr. at 131.
14. The Birthright Charter also provides the standards that govern the activities of the Birthright chapters. I Tr. at 36-37; Pl.'s Ex. 4 ("Decl. of Birthright Administration") ¶ 5; Pl.'s Ex. 65 ("Decl. of Weaver"), Ex. A.
15. The Declaration of Birthright Administration outlines the administrative structure of the Birthright movement and the relationship among the entities comprising it. I Tr. at 43.
16. Article I of the Birthright Charter states that:
The guiding principle of every Birthright Chapter shall be:
"It is the right of every pregnant woman to give birth, and the right of every child to be born."
Pl.'s Ex. 1; Defs.' Ex. 10.
17. The Birthright Charter states the following aims for all entities affiliated with the Birthright movement:
1. To uphold at all times, that every pregnant woman has the right to whatever help is needed to bring her child to term.
2. To attempt to effect in every possible way, a decrease in the number of abortions by encouraging pregnant girls and women to have their babies, that is, to offer them the alternative to abortion.
3. To maintain a crisis centre where any pregnant girl or woman, wed or unwed, may find help as near as her telephone.
4. To create and maintain in society an awareness of the needs of pregnant girls and women, to remove the social stigma associated with the unwed mother and her child and to encourage a more humane understanding of her and her problems.
Pl.'s Ex. 1; Defs.' Ex. 10.
18. The Birthright Charter articulates the following policies, to which all entities affiliated with the Birthright movement must adhere:
1. To refrain, at all times, and in every situation from giving aid to induced abortion, directly or indirectly.
2. To refrain in every instance from offering or giving advice on the subjects of contraception or sterilization, and to refrain from referring any person to another person, place or agency for this type of advice.
3. To remain strictly and completely separate from all lobbying groups, and from activities affecting abortion legislation.
4. To remain strictly inter-denominational, in name, function and advertising.
*1122 5. To give help without charge for normal Birthright services.
6. To refer all matters concerning adoption and adoption procedures to legally authorized agencies.
7. To offer person to person help, giving love, understanding, and all needed moral, emotional and practical support to every pregnant woman who requests it, employing the use of non-professional workers. Birthright does not function solely as a referral agency although use is made of the professional service agencies.
8. To keep all services strictly confidential refusing to discuss any girl's problems with any person or agency without her consent, and to preserve her anonymity if she so desires.
9. To use the official and registered symbol, the stylized "B", on all official Birthright stationary and documents and when possible, in all advertising.
Pl.'s Ex. 1; Defs.' Ex. 10.
19. To supplement and clarify the Birthright Charter, the Birthright Board has the exclusive authority to issue policy directives. These policy directives are "as important as any of the terms of the Charter," and all entities and individuals connected to the Birthright movement are required to follow them. I Tr. at 40-42; II Tr. at 186-87; Pl.'s Ex. 8 ("The Birthright Charter and Policy Directives: Additional Comments").
20. One of the purposes of the Birthright Charter and the policy directives is to ensure that the Birthright entities maintain a separate and distinct identity as providers of a pregnancy counselling service. In line with this goal, the Charter and the policy directives prohibit conduct and activities which the Birthright Board believes will undermine Birthright's distinctive identity. According to the Introduction to the policy directives:
Many of the activities that Birthright intentionally does not engage in are well meaning and desirable. However, in virtually all cases, these services are provided by other organizations. If Birthright engages in additional activities it will only detract from our main purpose. As indicated, it will also create confusion in the minds of those we are attempting to serve.
Pl.'s Ex. 3. As mother Louise stated: "`Birthright's' image must be uniform from coast to coast." The Story of Birthright at 23.
21. The Life Guardian is the official Birthright newsletter. Among its purposes is to publish the Birthright Board's policy directives, as well as explanations and clarifications of policy issues. I Tr. at 60.
22. In an editorial published in the Life Guardian in October 1979, Denise Cocciolone recognized the necessity for policy directives in a growing organization as well as the exclusive authority of the Birthright Board to issue such directives.
Birthright belongs to no one person. I believe that the larger we become, the more specific our guidelines must become, and there will naturally be more possibilities of deviation. The fact that [a Birthright chapter] received a charter under one mode of operation does not make it an absolute, meaning that those methods can never be changed. The governing Board of the parent organization [i.e., the Birthright Board] obviously has the right and duty to direct in a manner that will benefit the whole of the organization.
Pl.'s Ex. 57 ("Supp.Decl. of Daughter Louise"), Ex. J.
23. A Birthright Board policy directive prohibits Birthright chapters from being associated with any political or religious organization. The reason for this prohibition is that:
The essential purpose of Birthright has always been to provide the greatest possible assistance to pregnant women and engaging in activities which are political, religious or judgmental can only create a reluctance on the part of pregnant women to use Birthright services.
Pl.'s Ex. 3; see also The Story of Birthright at 22.
24. A further Birthright Board policy directive states that:
Birthright centres may not use graphic pictures, slides or videos [of] abortion to *1123 persuade women to have their babies. This is not our method. Ours is the way of love and compassion.
Pl.'s Ex. 3.
25. A further Birthright Board policy directive states that:
a) Birthright volunteers are not to get involved in the abortion controversy. We do not demonstrate, carry placard[s] or go on anti-abortion marches or "sit-ins". This includes Operation Rescue. It is important always to maintain our identity as a service. Any public display will do harm to our public image and abortion-minded women might not then come to Birthright....
b) It is important that we have a good relationship with other pro-life groups but we must be separate in that we are not to speak on the same platform or share booths at fairs. It is difficult enough to maintain our own identity.
Pl.'s Ex. 3. As explained by mother Louise:
Birthright, being an entirely new type of service should be careful not to be identified as a "lobbying group," working for further changes in abortion legislation. I honestly think that this would weaken the influence with the girls we hope to help, and will alienate many in the community.
The Story of Birthright at 21.
26. A further Birthright Board policy directive states that:
a) Under no circumstance must Birthright centres affiliate with other organizations or services. There is often pressure put on centres to join other pro-life groups but we must remain separate. We must maintain our own identity. You do not need to affiliate....
b) There are many other pregnancy services although Birthright in Toronto was the first in the world. Many do not operate as we do. Some evangelize, some give contraceptive counselling, some deceive by pretending to offer abortion referrals, and some are into adoptions. Birthright's reputation could be harmed if we are linked to any of these by affiliation.
Pl.'s Ex. 3.
27. The Birthright movement, through its chapters in North America, provides the following services to pregnant women in order to achieve its goal of counselling women with unexpected pregnancies to bear their babies and not to have abortions:
a. pregnancy tests;
b. educational services, such as home tutoring or night school;
c. medical and hospital assistance;
d. maternity and infant clothing and layettes;
e. employment advice;
f. referrals for professional counseling for marriage, family and financial problems;
g. referrals to licensed adoption agencies;
h. emergency and long-term accommodation through "shelter" homes;
i. pre- and post-natal classes on fetal development, childbirth, and childcare.
Decl. of Daughter Louise ¶ 10.
28. The Birthright chapters offer these services to any girl or woman who finds herself with an unplanned or unexpected pregnancy. II Tr. at 129. They also provide counselling services to the family and boyfriend of a woman with an unexpected pregnancy. II Tr. at 74-75.
29. The Birthright chapters typically provide these services free-of-charge, whenever financially feasible. Decl. of Daughter Louise ¶ 11.
30. The Birthright chapters support their activities through donations from private individuals and some churches. II Tr. at 128; Decl. of Daughter Louise ¶ 12.
31. Birthright, Birthright Inc., and the Birthright chapters regularly advertise and publicize services in local newspapers, telephone directory books, and other publications and media. These entities regularly use the "Birthright" name and the "B" logo is these advertisements. II Tr. at 128-29; Decl. of Daughter Louise ¶ 20 & Ex. C.
32. In 1985, the Birthright movement, through Birthright Inc., established and began *1124 to operate a crisis hotline by means of a toll-free 1-800 telephone number available from 8:00 am until midnight throughout the United States and its territories. Birthright Inc. also operates a toll-free crisis hotline telephone service for Canada. II Tr. at 233-33. The hotline got its start when a New Jersey businessman donated $100,000 for a Birthright advertisement in Reader's Digest on the condition that a 1-800 telephone hotline be installed. The same man donated $25,000 as seed money for the hotline and for the first fundraising mailing. II Tr. at 233-34. Hotline operators provide a source for immediate help to callers. The operators counsel callers and refer them to a local Birthright center. II Tr. at 237-39.
33. To pay for the hotline's operation, Birthright Inc. raises funds by means of a national direct mailing campaign to individuals and organizations throughout the United States. II Tr. at 232.
34. The hotline fundraising letters are sent to prior Birthright donors and volunteers, to Birthright chapters, and to individuals on lists compiled by a fundraising consultant. The lists are obtained by renting lists from organizations, magazines, or other entities that the fundraising consultant believes will be sympathetic to the Birthright movement. II Tr. at 146-47, 241, 269. These hotline fundraising letters are mailed on letterhead that uses the "Birthright" name and the "B" logo. Decl. of Daughter Louise ¶ 29 & Ex. E.
35. None of the money raised by means of the hotline fundraising letters and telephone solicitations is ever used to pay for the activities of the Birthright chapters. Rather, this money goes solely to defray the costs of operating the hotline. II Tr. at 245.
36. It is estimated that the fundraising letters for the crisis hotline raise approximately $600,000 per year. II Tr. at 244.
III. Organizational History and Structure
37. Mother Louise established Birthright in Toronto, Canada on October 15, 1968 in order to provide a counselling service for pregnant women that would aid and assist them to carry their pregnancies to term and not to have abortions. The Story of Birthright at 8.
38. Birthright operated initially in Toronto as an unincorporated association under the direction and leadership of mother Louise. I Tr. at 44. It was incorporated as an Ontario corporation in February 1969. See supra Findings of Fact ¶ 3.
39. Mother Louise introduced the Birthright idea into the United States through speaking engagements and by meeting with individuals who were interested in providing crisis pregnancy services. For example, Terry Weaver heard mother Louise speaking at a pro-life meeting in the Chicago area in July 1969, and was inspired to establish the first Birthright center in the United States in Atlanta, Georgia, in October 1969. II Tr. at 85-86; Decl. of Weaver ¶ 3; Decl. of Daughter Louise ¶ 15.
40. By 1971, a "Directory of Birthright Groups" identified 43 entities operating in 21 states and the District of Columbia. Aff. of Cocciolone, Ex. J.
41. On August 15, 1971, mother Louise convoked a meeting of all people involved in Birthright. At this time, the language for the Birthright Charter was drafted and finalized by mother Louise and a group of 15-18 other people. II Tr. at 131, 224-25.
42. Throughout the 1970s and 1980s, the Birthright movement continued to grow, with more Birthright chapters and more pregnant women obtaining counselling services. Today, there are approximately 600 Birthright chapters worldwide and almost 500 chapters in the United States. Decl. of Daughter Louise ¶ 8.
43. Toward the end of the 1980s, the Birthright movement addressed the issue of who would assume leadership upon the death of mother Louise. At the 1989 Birthright International Convention held in Toronto, mother Louise announced that her daughters would take over her role as head of Birthright upon her death or when she was no longer physically capable of carrying out her duties. Although some individuals questioned, or may even have opposed, this decision, it was in fact implemented upon mother *1125 Louise's death in 1991. Pl.'s Ex. 17; Decl. of Berney ¶ 14; Aff. of Sanders ¶¶ 7-8.
44. Throughout its history, the Birthright movement has as a general rule operated through an informal and decentralized organizational structure. According to mother Louise, this organizational model was better suited to attract volunteers and encourage spiritual people to open new centers. In addition, mother Louise believed that a formal, centralized organization would create internal lobbying for power among members and volunteers. The Story of Birthright at 18, 41-42, 95-96, 118; Aff. of Cocciolone ¶¶ 14, 15.
45. Despite this generally informal and decentralized structure, authority over critical aspects of the Birthright movement, including over monitoring the use of the name and logo, lay in the hands of plaintiff Birthright. See infra Findings of Fact ¶¶ 69-74.
46. Today, the Birthright movement is comprised of local chapters, regional consultants, regional representatives, regional directors, a U.S. national office, Birthright Inc., and an international office located in Toronto, Canada. I Tr. at 32-34; see infra Findings of Fact ¶¶ 47-74.[3]
A. Local Birthright Chapters
47. Birthright provides its services to pregnant women primarily through local Birthright chapters. There are currently approximately 500 Birthright chapters in the United States. Decl. of Daughter Louise ¶ 8. Defendant Woodbury Birthright is one such local chapter.
48. Birthright chapters are formed by local volunteers who understand and concur in the goals and philosophy of Birthright. I Tr. at 54, 61.
49. To become a Birthright chapter, a group of people must apply to plaintiff Birthright for a charter. Defs.' Ex. 5 (Handbook for Birthright at 4); Decl. of Birthright Administration ¶ 7. Generally, Birthright receives an inquiry as to the formation of a chapter directly or through a regional consultant. Plaintiff then sends out information, including a copy of the charter. The Birthright Board then reviews the application and, if it is in order, issues a charter. I Tr. at 54-56.
50. The Birthright Board has the sole authority to grant charters for the establishment of a local Birthright chapter. The Board issues charters only to entities that share the Birthright philosophy. The Birthright Board also has the exclusive authority to terminate the charter of a local chapter. Included in this authority to grant and revoke charters is the authority to grant and terminate a local chapter's authorization to use the "Birthright" name and the "B" logo. I Tr. at 61; II Tr. at 275; Decl. of Birthright Administration ¶¶ 7, 8.
B. Regional Consultants
51. Above the local chapters are the regional consultants. The position of regional consultant was formed in 1972 in order to help increase Birthright's activities in the United States. Decl. of Weaver ¶ 16; II Tr. at 157.
52. Regional consultants are appointed upon the joint consultation of Birthright and the U.S. National Director. II Tr. at 15, 275.
53. Regional consultants help in the development and organization of new Birthright centers, and they are available to existing centers for help and advice in dealing with problems. Defs.' Ex. 19; II Tr. at 157.
54. In 1980, mother Louise, in her capacity as president of Birthright, and Denise Cocciolone, in her capacity as U.S. National Director, developed the Regional Consultants Guidelines, which outlined a set of principles and policies to aid Regional Consultants in their tasks. Defs.' Ex. 19; II Tr. at 223-24.
*1126 C. Regional Representatives
55. In June 1989, Birthright and Birthright Inc. established the position of Regional Representative to serve as a channel of communication between the Regional Consultants and the management of the Birthright movement. This position is presently inoperative. II Tr. at 159-60.
D. U.S. National Director, the U.S. National Office, and Birthright Inc.
56. Above the regional directors is the national office. In Canada, the plaintiff Birthright constitutes the national office. In the United States, various individuals and organizations have comprised the national office throughout the history of the Birthright movement.
57. The U.S. national office is run by a national director responsible to plaintiff Birthright. The purpose of the U.S. national office is to serve the Birthright chapters located in the United States and to help the chapters to follow the directives and policies set forth by plaintiff. The national office and the national director are appointed and may be terminated by plaintiff Birthright. II Tr. at 88, 91; Pl.'s Ex. 70; Defs.' Ex. 3; Aff. of Cocciolone, Ex. D.
58. The first U.S. National Director was Lore Maier. Mother Louise appointed Maier to "[a]ct as a co-ordinator of Birthright operation in the United States of America in the capacity of the National Director of the United States of America, only being responsible to the International Committees, the Birthright Board and the Founder of Birthright." The location of the national office during Maier's tenure as National Director was in Toledo, Ohio. Defs.' Ex. 3.
59. In September 1971, mother Louise, acting in her capacity as an officer of Birthright, terminated the appointment of Maier as National Director. II Tr. at 132-33, 284-85.
60. Upon Maier's termination, Birthright appointed Denise Cocciolone to the position of U.S. National Director. On September 18, 1971, plaintiff changed the address of the U.S. national office from Toledo, Ohio to Woodbury, New Jersey. Defs.' Ex. 3.
61. Defendant Birthright Inc. was established approximately nine months after the appointment of Cocciolone to the position of national director and the relocation of the national office to Woodbury. Defs.' Ex. 1; Defs.' Ex. 3; II Tr. at 82, 220-21.
62. Birthright Inc. was formed to operate as the national office for Birthright. II Tr. at 13. Birthright Inc., however, does not itself comprise the national office for the Birthright movement.
63. Neither Denise Cocciolone, as U.S. National Director, nor Birthright Inc., as the U.S. national office, was ever granted exclusive control over the operations, activities, or organizations of the Birthright movement in the United States.
64. Cocciolone acted as U.S. National Director until approximately May 1987. On or about May 5, 1987, plaintiff Birthright appointed Cocciolone and Weaver to serve as national co-directors. In an announcement, the Birthright Board defined the duties of Cocciolone as comprising fundraising for Birthright Inc. and for the hotline service. The Board directed Weaver to help and to guide the chapters and consultants in the United States. Pl.'s Ex. 71.
65. On or about July 8, 1987, plaintiff informed Weaver that her services as national co-director were no longer needed, and she stepped down from that position and resumed her duties as a regional consultant. II Tr. at 91-92. Cocciolone once again functioned as the sole U.S. National Director.
66. On April 24, 1991, plaintiff dismissed Cocciolone from her position as National Director. Pl.'s Ex. 18.
67. Thereafter, plaintiff appointed Terry Weaver to the position of National Director in the United States, and the national office was moved to Atlanta, Georgia. II Tr. at 24, 26-27, 92.
E. The Toronto Office
68. The international headquarters and parent organization of the Birthright movement is plaintiff Birthright, located in Toronto, Canada. See Decl. of Berney, Exs. C, D; Pl.'s Ex. 70.
*1127 69. Plaintiff Birthright has the sole power to issue and to revoke the charters of local Birthright chapters. See supra Findings of Fact ¶ 50.
70. Plaintiff shared with Birthright Inc. the power to hire and terminate regional consultants. II Tr. at 152, 175.
71. Plaintiff has the sole power to hire and terminate the national director in the United States. Denise Cocciolone defined Birthright's authority in this regard in a letter she wrote on September 27, 1971:
We are aware, however, that an appointed National Director of any organization or corporation is responsible to the Board of Directors and must confine himself to carrying out those responsibilities delegated to him by the Executive Board. If any Executive Director deviates from policy, defaults his responsibilities, or oversteps his authority, the Board is obligated to review what has happened and take prompt, positive action.
Pl.'s Ex. 60.
72. Plaintiff has the sole power to interpret the Birthright Charter. II Tr. at 279.
73. Plaintiff has the sole power to formulate, implement, and enforce policy directives that articulate the Birthright movement's philosophy. See supra Findings of Fact ¶ 19. For example, in 1983, the Birthright Board decided to forbid the use of the Pearson abortion slides. The Board then enforced this policy as against a Birthright Chapter located in New Haven, Connecticut. Supp. Decl. of Daughter Louise, Ex. P; Pl.'s Ex. 10.
74. Plaintiff has the sole power and responsibility to monitor the use of the "Birthright" name and the "B" logo, including the authority to revoke the charter of any Birthright chapter that violated the Birthright philosophy and to bring lawsuit against any entity that illegally used the name and/or logo. See infra Findings of Fact ¶¶ 87-92.
IV. The "Birthright" Name and the "B" Logo
75. The Birthright entities use the "Birthright" name as a service mark to identify the kind of pregnancy counselling services they offer. The Birthright entities frequently modify the name by adding a word or phrase, often identifying a geographic location, that further identifies the entity. For example, defendant Birthright Inc. uses the name "Birthright USA;" plaintiff Birthright uses the name "Toronto Birthright" or "Birthright International." However, these modified marks share the same core, i.e. the word "Birthright," and are therefore substantially the same.
76. The "Birthright" name appears on fundraising letters mailed throughout the United States and is therefore used in interstate commerce. Decl. of Daughter Louise, Ex. E.
77. The Birthright entities also use the "B" logo as a service mark to identify the kind of pregnancy counselling services they offer. The Story of Birthright at 18.
78. The "B" logo appears on fundraising letters mailed throughout the United States and is therefore used in interstate commerce. Decl. of Daughter Louise, Ex. E.
A. History of the Name and Logo
79. On August 16, 1971, plaintiff registered with the United States Patent Office, as registration no. 940,150, the "Birthright" name as a service mark for the counseling of pregnant women. Pl.'s Ex. 7B. In the late 1970s, plaintiff allowed registration No. 940,150 to lapse. I Tr. at 27.
80. On July 27, 1982, plaintiff registered with the United States Patent and Trademark Office, as registration no. 1,203,140, the "Birthright" name as a service mark for the counseling of pregnant women. Pl.'s Ex. 7. Plaintiff has also filed declarations with the United States Patent and Trademark Office pursuant to Sections 8 and 15 of the Lanham Act. I Tr. at 25-26.
81. On March 21, 1975, plaintiff registered with the Canadian Department of Consumer and Corporate Affairs, as registration no. 205,989, the "Birthright" name as a trademark. Pl.'s Ex. 7A. On January 12, 1990, plaintiff obtained from the Canadian Department of Consumer and Corporate Affairs a certificate of renewal for registration *1128 no. 205,989, renewing the trademark registration for a period of fifteen years. Pl.'s Ex. 7A.
82. The "B" logo was designed in 1968 for mother Louise to use as a symbol for the Birthright movement and the services it offers. The Story of Birthright at 18-19.
83. Since 1968, plaintiff Birthright and its licensed U.S. organizations, have publicized the "Birthright" name and the "B" logo throughout the United States as symbols for the kind of pregnancy counselling service offered by the Birthright entities. The name and logo represent the assets of a valuable reputation and good will associated with Birthright. Decl. of Daughter Louise ¶¶ 20, 21, 24 & Exs. C, D.
84. Despite plaintiff's registration of the "Birthright" name as a trademark in Canada and the United States, plaintiff, mother Louise, and others connected to the Birthright movement have represented that the "Birthright" name and the "B" logo are owned by mother Louise and/or copyrighted in the name of mother Louise. See Decl. of Birthright Administration ¶ 4.
85. Plaintiff and others have also represented the status of the "Birthright" name as a registered trademark in Canada and the United States. Decl. of Weaver, Ex. A; Aff. of Cocciolone, Ex. I. For example, in a speech given to the Birthright International Convention in June 1983 and subsequently published in the Life Guardian, Gordon Kaiser, Esq., a trademark attorney who sat on the Birthright Board, stated:
The trademark `Birthright' is owned by Birthright, the Canadian corporation, and that is true of all the trademark registrations around the world. Birthright licences each chapter to use that mark. And as you know, each chapter is required to fill out and sign a charter there is an application and attached to that application is a charter. One section of that charter deals with the trademark. That charter is, among other things, a trademark licence. Birthright therefore has an obligation to ensure that anyone using the name Birthright lives up to the terms of that charter or licence. If they don't, Birthright has an obligation at law to REQUIRE those people to cease using the name `Birthright'. And of course, the "B" logo, which is also a protected symbol.
Second Supp.Decl. of Daughter Louise, Ex. B; II Tr. at 230.
86. Throughout the period relevant to this litigation, Denise Cocciolone and therefore both Birthright Inc. and Woodbury Birthright knew of the status of the "Birthright" name as plaintiff's registered trademark and knew that the "B" logo was owned and controlled by plaintiff. II Tr. at 278.
B. Birthright's Monitoring Activities
87. Plaintiff Birthright has the responsibility and authority to monitor the use of the "Birthright" name and the "B" logo. I Tr. at 6, 13; II Tr. at 187; Pl.'s Exs. 10, 12, 21, 23; Defs.' Exs. 7d, 7f.
88. Denise Cocciolone and therefore both Birthright Inc. and Woodbury Birthrightknew of and acknowledged the fact of plaintiff Birthright's role and authority in monitoring the name and logo. II Tr. at 187, 278; Supp.Decl. of Daughter Louise, Ex. I.
89. Plaintiff has the authority to revoke a charter and terminate a local chapter's use of the "Birthright" name and the "B" logo where the local chapter is not in compliance with the Birthright Charter or policy directives. An example of Birthright's monitoring of the name and logo occurred in 1990, when the San Diego chapter was not operating in conformity with the Birthright Charter and policy directives. In a letter dated October 1, 1990, the Birthright Board stated that it would revoke the San Diego chapter's charter, thereby terminating the latter's right to use the name and logo, "if immediate action is not taken to resolve the problems." Pl.'s Ex. 11. Daughter Louise travelled to San Diego to try to resolve the matter, but when the San Diego chapter failed to take steps to bring itself sufficiently in compliance with the charter, it voluntarily changed its name. II Tr. at 8-10.
90. One of the grounds on which plaintiff may revoke the charter of a Birthright chapter is for performing overtly political activities and/or adopting overtly political positions. *1129 For example, in 1983, plaintiff enforced its decision to forbid the use of the Pearson abortion slides. In a letter dated April 12, 1983, the Birthright Board informed the director of a Birthright Chapter located in New Haven, Connecticut that Birthright
maintain[s] the right to guarantee the beliefs and philosophy of Birthright. Should you decide to use [the Pearson] slides in your office, in opposition to the decision of the Board of Directors, we will have no choice but to insist, legally if needed, that you stop using the name of Birthright.
Pl.'s Ex. 10. As a result of this correspondence, the New Haven Chapter came into compliance, ended its use of the slides, and was permitted to continue its use of the "Birthright" name. II Tr. at 10-11.
91. As part of its monitoring responsibilities, plaintiff may threaten or take legal action against entities using the "Birthright" name without plaintiff's permission. For example, in 1977, plaintiff retained counsel and sued such an organization in Indiana using the "Birthright" name, forcing it to change its name to "Birthline, Inc. of St. Joseph County." II Tr. at 6-7; Pl.'s Ex. 12.
92. Another example of Birthright's monitoring of the name and logo occurred in 1990, when Denise Cocciolone, acting on behalf of Birthright Inc., signed a contract with Christianson, Barkley and Shaw ("CBS"), pursuant to which CBS represented itself as Birthright's exclusive representative for placing advertisements in Yellow Pages telephone directories. In connection with this contract, Cocciolone permitted CBS to use the "Birthright" name and the "B" logo. Cocciolone did this without any authorization from Birthright. II Tr. at 254-56, 292-93. In response to this situation, plaintiff sent a letter to CBS on June 28, 1990, stating that the representation that CBS is the "exclusive" agent for Birthright advertising in Yellow Page directories is false, and that CBS is not authorized to use the Birthright mark and the "B" logo. Plaintiff demanded that CBS cease this activity immediately, and informed CBS that the principal Birthright office is located in Toronto, not Woodbury. Aff. of Cocciolone, Ex. I.
V. The Dispute Between Birthright and Birthright Inc.
A. The Controversy Over the Fundraising Letters
93. The dispute between plaintiff and defendant Birthright Inc. centers around the tone and content of the fundraising letters sent out by Birthright Inc. as part of its direct mail fundraising efforts for the telephone hotline. II Tr. at 281.
94. Beginning in 1990, plaintiff perceived the following problems in the fundraising letters:
i. that the letters had taken on a changed tone, emphasizing political aspects of the abortion controversy and deemphasizing the loving and non-judgment nature of Birthright;
ii. that the letters gave some Birthright donors the mistaken impression that their local Birthright centers, would receive a portion of any donation when in fact all the money went to support the telephone hotline;
iii. that some Birthright donors and volunteers resented receiving direct mail fundraising letters when they were already strong supporters of their local Birthright centers;
iv. that the mailings were followed up with high-pressure telephone calls.
Decl. of Daughter Louise ¶ 31. At a December 1, 1990 meeting of Regional Consultants, mother Louise expressed her concern "that fundraising letters are giving Birthright a bad name." Supp.Decl. of Weaver, Ex. A.
95. In comparison with the letters after 1990, the fundraising letters from the period 1986-1990 place greater emphasis on the activities of the Birthright organizations and the need to obtain funding to support these activities rather than on explicit references to political aspect of the abortion controversy. Decl. of Daughter Louise, Ex. E.
96. Beginning in 1990, the tone of the fundraising letters did in fact change in comparison with the pre-1990 letters. After 1990, the number of positive statements contained in each fundraising letter and on each page of the fundraising letter became significantly *1130 smaller. See Pl.'s Proposed Findings of Fact, Exs. A, B. In addition, after 1990, the fundraising letters contained an increased number of references to political aspects of the abortion controversy. When read as a whole, these letters advanced a more political, strident tone in comparison with the pre-1990 letters. Decl. of Daughter Louise, Ex. E.
97. Plaintiff Birthright has determined that the post-1990 letters are political in tone and that they, therefore, are in violation of the Birthright Charter and policy directives. Decl. of Daughter Louise ¶¶ 32-35.
98. The fundraising letters were also misleading to the average reader because they suggested that donations made in response to the letters would fund the activities of a local Birthright center when, in fact, all donations were used to support the operation of the telephone hotline. For example, a March 29, 1991 letter informs the potential donor that "Birthright relies on these contributions to fund all our baby-saving programs." Decl. of Daughter Louise, Ex. E.
99. Another letter, dated "Monday Afternoon," and apparently mailed to potential donors sometime in 1992, states: "Birthright has never been a money making organization. We depend solely on the charity of our members for financial support." Decl. of Daughter Louise, Ex. E. These statements mislead the potential donor into believing that his or her donation will be used to support all of the programs and services offered by the Birthright entities rather than just the hotline.
100. Birthright received complaints about the fundraising letters from local Birthright donors, Birthright volunteers, a member of the Atlanta board of directors, a clergyman, and a Georgia state senator. II Tr. at 20, 95-98; Decl. of Weaver ¶ 22. For example, Georgia State Senator Joe Burton wrote to Terry Weaver:
The author of this mailing identifies herself as the National Executive Director. Do the receipts from this solicitation go directly to the leadership of Birthright in the USA and Canada? Are the receipts shared with each local chapter? On what basis are they divided? Is there an accounting or audit of this solicitation?
He further wrote:
In the 17th paragraph, the letter states that donated funds will be used to open new birthright centers. Is this being done with the funds from this solicitation?
Decl. of Weaver, Ex. B. Terry Weaver also received complaints that the fundraising letters were taking away money from the local Atlanta center and that their tone was not in keeping with the gentle, loving character of Birthright. II Tr. at 96, 98.
101. There is no evidence that prospective donors received high-pressure follow up phone calls.
102. As a result of the problems with the fundraising letters, Mother Louise requested that her name be removed from at least one fundraising letter sent out by Birthright Inc. II Tr. at 281; Decl. of Daughter Louise, Ex. E.
103. At a December 1990 meeting of Birthright regional consultants held in Woodbury, New Jersey, a discussion took place regarding the problem of the direct mail fundraising letters sent by Birthright Inc. The Regional Consultants expressed their concern that the letters had hurt their fundraising efforts, were too political in spirit and tone, and did not reflect Birthright's positive, gentle, and loving approach. II Tr. at 20-21; Decl. of Weaver ¶¶ 21-22; Supp.Decl. of Weaver, Ex. A; see also Decl. of Houseal ¶¶ 17-18; Decl. of Farley ¶¶ 17-18.
104. Thereafter, the Birthright Board discussed the problem of the direct mail letters, and directed that each letter be reviewed and approved by Birthright before it was sent out by Birthright Inc. II Tr. at 21. These directions were conveyed to Birthright Inc., and Denise Cocciolone knew of these instructions. II Tr. at 21, 281. Despite these directions, Birthright Inc. continued to send out direct mail fundraising letters without Birthright's prior review and approval. II Tr. at 21-22, 281.
105. In February 1991, the Birthright Board met with Denise Cocciolone and the direct mail fundraisers for Birthright Inc. to discuss the problem of the letters. At this *1131 meeting, the Board expressed its concerns about the letters, and explained what it found offensive and how it thought the language could be softened to take on a more positive tone. As a result of this meeting, the Board believed that Birthright and Birthright Inc. had reached an understanding on the letters. II Tr. at 22-23.
106. After the February 1991 meeting, Birthright Inc. sent out a fundraising letter asking recipients to sign a 1991 Sustaining Membership Card. Birthright considered this letter to be in violation of the guidelines established at the February 1991 meeting. Pl.'s Ex. 67; Decl. of Daughter Louise ¶ 35.
B. Dismissal of Cocciolone From the Position of National Director
107. Because of the ongoing controversy over the fundraising letters sent out by Birthright Inc., mother Louise, acting on behalf of plaintiff Birthright, dismissed Denise Cocciolone from the position of national director in the United States on April 24, 1991. On September 25, 1991, the Birthright Board, at a meeting which Cocciolone attended, affirmed this dismissal. Pl.'s Ex. 17; Pl.'s Ex. 18; II Tr. at 287.
108. Cocciolone was dismissed because her actions contravened the Declaration of Birthright Administration incorporated into the Birthright Charter and because of her failure as national director to follow the directives of the Birthright Board. Pl.'s Ex. 18; II Tr. at 76.
109. After her dismissal from the position of national director in September 1991, Cocciolone continued to hold herself out to be U.S. National Director. She sent out letters in the name of Birthright, signing them under the title of "National Director." These letters bore the "Birthright" name and the "B" logo. Supp.Decl. of Daughter Louise, Ex. M; II Tr. at 24, 282-83.
110. On January 15, 1992, Denise Cocciolone was removed from the Birthright Board. Pl.'s Ex. 18; II Tr. at 287.
111. By letter dated January 16, 1992, Cocciolone was informed that on January 15, 1992, the Birthright Board had removed her from that body. II Tr. at 25, 287; Pl.'s Ex. 54.
112. In a letter dated May 8, 1992 to directors of Birthright centers, the board of directors of Birthright Inc., including Denise Cocciolone, represented that Cocciolone continued to occupy the position of "National Director." Supp.Decl. of Daughter Louise, Ex. O.
C. Revocation of Birthright Inc.'s Authorization to Use the "Birthright" Name and the "B" Logo
113. On January 15, 1992, the Birthright Board terminated the authorization for Birthright Inc. to use the "Birthright" name and the "B" logo. The reasons for this action were the Birthright Inc. board of director's defiance of plaintiff's policy directives and Birthright Inc.'s refusal to accept Denise Cocciolone's dismissal from the position of U.S. National Director. Pl.'s Ex. 18; II Tr. at 28-30.
114. Birthright Inc., through Denise Cocciolone, received notice of the termination of its authorization to use the "Birthright" name and the "B" logo. II Tr. at 65-66, 287; Pl.'s Ex. 54.
D. Birthright Inc.'s Continued Use of the Mark and Logo
115. After the termination of its authorization to use the "Birthright" name and the "B" logo on January 15, 1992, and despite its knowledge of such termination, Birthright Inc. continued to use the name and logo. II Tr. at 287.
116. After the termination of it authorization to use the name and logo on January 15, 1992, and despite its knowledge of such termination, Birthright Inc. continued to collect donations sent to it as a result of its fundraising letters. Decl. of Holly ¶ 4a.
117. On or about January 21, 1992, Denise Cocciolone sent a letter addressed "MY Dear BIRTHRIGHT People," which states:
Our BIRTHRIGHT Inc. U.S.A. Board of Directors wishes you to know that nothing has changed here in the last 21 years, except growth and experience. We are *1132 still operating just as we have always done and will continue to be of service to you.
We regret any confusion or misinterpretation that may have occurred in conversation between Mr. McCullough and Louise R. However, BIRTHRIGHT U.S.A. does intend to continue its commitment to serve women and girls and help save preborn lives as we have always done.
The letterhead contained the "Birthright" name. Supp.Decl. of Daughter Louise Ex. M.
118. After the commencement of the present litigation, the board of directors of Birthright Inc. sent a letter dated May 8, 1992, addressed "Dear BIRTHRIGHT Director." The letter advised the recipient of the pending litigation, and stated that Birthright Inc. "was willing to make painful concession to resolve the situation, thus avoiding costly litigation." The letter further stated that
Among the demands that we cannot accept, is the condition which required BIRTHRIGHT Inc., U.S.A. to make no use of the established 800 number. That would mean, based on the figures of March, 1992 alone, every month an average of 4500 women and babies helped by the HOTLINE would be at risk.
The letter further stated that:
As stated in past correspondence, the Board of BIRTHRIGHT Inc., U.S.A. and Denise Cocciolone, in her position as National Director, reaffirm our commitment to the Charter Document and BIRTHRIGHT's "main purpose ... to offer the alternative to abortion".
Since BIRTHRIGHT Inc., U.S.A.'s funds are committed to the HOTLINE and Advertising thereof, a separate Legal Defense Fund has been established. We are confident that you, our U.S. Chapters, will help us in defense of BIRTHRIGHT and our quest for justice.
The letterhead contained the "Birthright" name and the "B" logo. Supp.Decl. of Daughter Louise Ex. O.
119. On or about May 11, 1992, Des Burge, chairman of Birthright Board, wrote a letter addressed "Dear Birthright Director," in response to the May 8th letter to clarify the dispute between Birthright and the "Woodbury group." The letter stated:
Although the Woodbury group is clearly committed to offering an alternative to abortion, we are concerned about the spirit and philosophy under which they operate. Our particular concern arises from the direct mail fundraising letters which are sent from Woodbury.... The tone and spirit of this letter is clearly not in keeping with the gentle and loving nature of Birthright.
The letter further stated that the "Woodbury group" does not believe that Birthright has the authority to oversee the fundraising operations and that the Woodbury group has continued to send such letters without any notice to or input from Birthright. In addition, the letter stated:
The Woodbury group has stated that it is prepared to change the name under which it operates, but has indicated that it will take up to 1 year to do so. As well, we have been told that the other conditions we sought are not open to discussion or negotiation. We are unable to allow this situation to continue for another year, and believe that it is in everyone's best interests to negotiate other terms.
For your information, Birthright International has absolutely no intention of shutting down the Hotline. We believe that all Hotline calls must be answered, and asked the Woodbury group to cease use of the current number so that Birthright calls would continue to be received by Birthright people. It is our intention to simply move the Hotline, without any interruption of service. We certainly have no objection to the Woodbury group establishing its own hotline in providing its services and operating as a separate organization with its own identity.
This letter also contained an attached copy of the complaint filed in this litigation. Supp. Decl. of Daughter Louise, Ex. N.
VI. The Dispute Between Birthright and Woodbury Birthright
120. On January 15, 1992, the Birthright Board revoked the charter of Woodbury Birthright. Pl.'s Ex. 18. The reason for *1133 revoking the charter of Woodbury Birthright was that Woodbury Birthright was controlled by Denise Cocciolone. II Tr. at 30. This revocation meant that Woodbury Birthright's authorization to use the name and logo was also terminated. Woodbury Birthright, through Denise Cocciolone, received notice of the termination of its authorization to use the "Birthright" name and the "B" logo. Pl.'s Ex. 54; II Tr. at 65-66.
VII. "Campaign Life"
121. Beginning as early as 1985, Denise Cocciolone sent out fundraising letters under the name "Campaign Life." The funds raised by these letters were used for the Birthright hotline service. Cocciolone recently sent out a fundraising letter under the rubric of Campaign Life that does not mention Birthright. II Tr. at 299, 301.
122. On April 29, 1992, Denise Cocciolone and Mrs. Cook established a bank account in the name of Campaign Life. This account was initially funded with $25,000 of donation raised by Birthright Inc. for the Birthright hotline service. II Tr. at 299.
123. Cocciolone recently registered Campaign Life as an alternative name for Birthright Inc. II Tr. at 299.
Conclusions of Law
I. Jurisdiction and Venue
1. This court has diversity, trademark, and supplemental jurisdiction over the claims in this action pursuant to 28 U.S.C. §§ 1332, 1338, and 1367. Nugget Distrib. Co-Op v. Mr. Nugget, Inc., 776 F. Supp. 1012, 1024-25 (E.D.Pa.1991). Venue is proper in the District of New Jersey pursuant to 28 U.S.C. § 1391, because the defendants are doing business within this district. Id.
II. Plaintiff's Claims
2. The law of trade and service mark protection, as embodied in the federal Lanham Act and the common law of unfair competition, advances two related goals. First, it serves the general interest of the public by protecting consumers from false and misleading representations concerning the source, identity, or quality of a product or service. Secondly, the law protects the right of the owner of a trade or service mark to have his or her product or service identified by a distinct name or label. See Industrial Rayon Corp. v. Dutchess Underwear Corp., 92 F.2d 33, 35 (2d Cir.1937), cert. denied, 303 U.S. 640, 58 S. Ct. 610, 82 L. Ed. 1100 (1938). In other words, the trademark laws exist not only "to protect the consuming public from confusion" but also to protect the trade or service mark owner's "right to a non-confused public." Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1225, 1228 (3d Cir.1978) (quoting James Burrough Ltd. v. Sign of the Beefeater, Inc., 540 F.2d 266, 276 (7th Cir.1976)); see also Weil Ceramics and Glass, Inc. v. Dash, 878 F.2d 659, 672 (3d Cir.), cert. denied, 493 U.S. 853, 110 S. Ct. 156, 107 L. Ed. 2d 114 (1989); A.J. Canfield Co. v. Honickman, 808 F.2d 291, 304 (3d Cir.1986).
3. The "Birthright" name and the "B" logo are service marks. A service mark is "a word, name, symbol, device or advertising of services to identify the service of the entity and distinguish them from the services of others." Estate of Presley v. Russen, 513 F. Supp. 1339, 1362 (D.N.J.1981). The service identified by the name and logo is the unique kind of pregnancy counselling offered by the Birthright entities.
A. Count I: Trademark Infringement Claim Under the Lanham Act
4. Plaintiff's first claim is for trademark infringement in violation of Section 32 of the Lanham Act. 15 U.S.C. § 1114(1).[4] Because *1134 Section 32, by its terms, applies only to registered marks, this claim concerns only defendants' use of the registered "Birthright" name.
5. To succeed on a trademark infringement claim under Section 32, a plaintiff must establish three elements:
i. that the mark is valid and legally protectable;
ii. that the mark is owned by the plaintiff;
iii. that the defendant's use of the mark to identify goods or services is likely to create confusion concerning the origin of the goods or services.
S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 375 (3d Cir.1992); Opticians Ass'n v. Independent Opticians of Am., 920 F.2d 187, 192 (3d Cir.1990). In addition, in a case like the one at bar, where defendants' previous use of the mark occurred with plaintiff's permission, plaintiff must also establish that a defendant's use of the mark is unauthorized. S & R Corp., 968 F.2d at 375; United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 137 (3d Cir.1981).
1. Validity, Ownership, and Protectability of the Mark
6. The first and second elements of plaintiff's Section 32 infringement claim the validity, ownership, and protectability of the mark may be proven by a showing that the mark at issue was federally registered and had become "incontestable" under the Lanham Act. Opticians Ass'n v. Independent Opticians of Am., 920 F.2d 187, 194 (3d Cir.1990); see also Ford Motor Co. v. Summit Motor Prod., Inc., 930 F.2d 277, 291 (3d Cir.), cert. denied, ___ U.S. ___, 112 S. Ct. 373, 116 L. Ed. 2d 324 (1991). In the present case, plaintiff's ownership and control of the "Birthright" name are established by virtue of Birthright's registration of the mark in 1982 with the United Stags Patent and Trademark Office. Plaintiff's confirmation of its registration in 1989, pursuant to Sections 8 and 15 of the Lanham Act, made plaintiff's registration incontestable. 15 U.S.C. §§ 1058, 1065; Opticians Ass'n, 920 F.2d at 192. Under Section 33(b) of the Lanham Act:
To the extent that the right to use the registered mark has become incontestable, ... the registration shall be conclusive evidence of ... the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce.
15 U.S.C. § 1115(b). Defendants do not dispute that plaintiff's registration of the "Birthright" name as a trademark has attained an incontestable status under the Lanham Act.
2. Unauthorized Use
7. A third element for proving a Section 32 infringement claim under the facts of this case is that the defendants' use of the mark was unauthorized. Defendants' use of the "Birthright" name was pursuant to licenses, implied or otherwise, so that once plaintiff revoked these licenses, defendants' continued use of the mark became unauthorized.
8. The court first addresses whether defendant Birthright Inc. used the name pursuant to an implied license with plaintiff. An implied license in fact "arises out of the objective conduct of the parties, which a reasonable man would regard as indicating that an agreement has been reached." Allen-Myland v. International Business Mach. Corp., 746 F. Supp. 520, 549 (E.D.Pa.1990). The case of United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134 (3d Cir.1981), which involved a trademark infringement claim brought by the national Jaycees organization against the Philadelphia Jaycees chapter, illustrates the application of this rule. There, the national organization, having revoked the charter of the Philadelphia chapter because it admitted women, sought an injunction barring the latter from using the "Jaycees" name. Id. at 136-37. The district court found as fact that a local chapter affiliated with the United States Jaycees was authorized to use the name "Jaycees" *1135 only during the term of the affiliation. The Third Circuit concluded from these facts that "some type of license agreement existed" between the Philadelphia chapter and the national Jaycees organization. Id. at 139 n. 7.
9. The analysis in United States Jaycees controls this case. It has been found as fact that plaintiff monitored and controlled the use of the "Birthright" name. See supra Findings of Fact ¶ 74. It has further been determined that Birthright Inc. used the mark subject to the authorization and control of plaintiff, and that both parties understood this arrangement. See supra Findings of Fact ¶¶ 85-88. It is irrelevant that here, unlike in United States Jaycees, Birthright Inc. was not a local chapter with a charter issued by the parent organization. What is critical is that Birthright Inc. knew which entity owned the mark; that Birthright Inc. knew that plaintiff monitored and controlled the use of the mark; and that Birthright Inc. knew that authorized use of the mark required the permission of plaintiff. Given these facts, the court concludes, as a matter of law, that the relationship between plaintiff and Birthright Inc. amounted to an implied license authorizing the latter to use the name.
10. An implied license is terminable at will. Coach House Restaurant, Inc. v. Coach & Six Restaurant, Inc., 934 F.2d 1551, 1563 (11th Cir.1991). In the present case, plaintiff (the licensor) terminated the implied licensing agreement with Birthright Inc. (the licensee) when on January 15, 1992 it ended defendants' authorization to use the name.
11. As to Woodbury Birthright, the Charter granted by plaintiff constituted a license for the use of the "Birthright" name. Findings of Fact ¶ 50. Thus, once plaintiff revoked its charter, Woodbury Birthright's continued use of the mark was unauthorized.
3. Likelihood of Confusion
12. The final element of plaintiff's infringement claim concerns whether defendants' use of the "Birthright" name creates a likelihood of confusion. A likelihood of confusion exists "when consumers viewing the mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark." Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1225, 1229 (3d Cir.1978).
13. The parties' use of the "Birthright" name generally occurs with a geographic modifier. See supra Findings of Fact ¶ 75. Plaintiff often identifies itself as "Birthright International," "Birthright of Toronto," or "Birthright of Canada." Defendants identify themselves as "Birthright Inc. U.S.A." or as "Birthright of Woodbury." Despite these differing uses, when the parties' use the name "Birthright," with or without a geographic modifier, they are using essentially the same mark because the word "Birthright" constitutes the dominant portion of the mark. Country Floors, Inc. v. Partnership of Gepner and Ford, 930 F.2d 1056, 1065 (3d Cir.1991); United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 142 (3d Cir.1981); see also Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636, 640-41 (D.C.Cir.1982); Council of Better Business Bureaus, Inc. v. Better Business Bureau of South Florida, Inc., 200 U.S.P.Q. 282, 298 (S.D.Fla.1978); United States Jaycees v. San Francisco Junior Chamber of Commerce, 354 F. Supp. 61, 77 (N.D.Cal.1972), aff'd, 513 F.2d 1226 (9th Cir. 1975).
14. "[I]f the overall impression created by marks is essentially the same, `it is very probable that the marks are confusingly similar.'" Opticians Ass'n of America v. Independent Opticians of Am., 920 F.2d 187, 195 (3d Cir.1990) (quoting McCarthy, Trademarks and Unfair Competition § 23:7 (2d ed. 1984)). In determining the overall impression given by the service mark at issue in this case, the court notes that the "consumers" or targets of the "Birthright" name fall into two categories. First are the women and girls who may desire counsel and assistance on how to address an unexpected pregnancy. See supra Findings of Fact ¶¶ 27-28. These individuals, who may use the hotline or may turn to the local chapters, become aware of the Birthright entities' services through advertisements, mailings, or word of mouth. The second category of "consumers" are the *1136 individuals who contribute or provide money, services, and other types of support to the Birthright entities, whether to the local Birthright chapters or to Birthright Inc. to support the hotline telephone number. See supra Findings of Fact ¶¶ 30-34. These individuals, who make donations in order to support the pregnancy counselling services, become aware of the Birthright entities' activities in this regard through participation in Birthright activities, direct mailings, telephone solicitations, or word-of-mouth. From the perspective of the two categories of "consumers," the mark used by plaintiff is virtually identical to the marks used by defendants. An individual from either category of "consumers" could not discern any differences between plaintiff and defendants just by looking at the mark.
15. Under controlling law, the determination that defendants' service marks are virtually identical to plaintiff's suffices to support a conclusion of a likelihood of confusion. See S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 375 (3d Cir.1992). As the Third Circuit has noted, "there is a great likelihood of confusion when an infringer uses the exact trademark." Jaycees, 639 F.2d at 142; see also Ford Motor Co. v. Summit Motor Prod., 930 F.2d 277, 293 (3d Cir.), cert. denied, ___ U.S. ___, 112 S. Ct. 373, 116 L. Ed. 2d 324 (1991); see also Opticians Ass'n, 920 F.2d at 195 (quoting 2 McCarthy on Trademarks § 23:3) ("Cases where a defendant uses an identical mark on competitive goods hardly ever find their way into the appellate reports. Such cases are `open and shut' and do not involve protracted litigation to determine liability for trademark infringement."). Accordingly, the court holds that there is a likelihood of confusion.
16. Plaintiff has satisfied the elements necessary to succeed on a Section 32 trademark infringement claim. Accordingly, the court will enter judgment in plaintiff's favor on this claim, unless defendants are able to establish an affirmative defense.
B. Count II: Unfair Competition Claim Under the Lanham Act
17. Plaintiff's second claim is that defendants violated Section 43(a)(1)(A) of the Lanham Act by continuing to use the "Birthright" name and the "B" logo subsequent to the termination of their licenses. 15 U.S.C. § 1125(a)(1)(A).[5] The elements for an unfair competition claim under Section 43(a)(1)(A) of the Lanham Act are "(1) that the trademark or trade name is distinctive and therefore, protectable; and (2) that the second comer's actions cause a likelihood of confusion among the relevant consumers." Dominion Bankshares Corp. v. Devon Holding Co., Inc., 690 F. Supp. 338, 344 (E.D.Pa.1988). In addition to furnishing a further source of protection for registered marks, Section 43(a)(1)(A) also protects unregistered service marks, such as the "B" logo. See Two Pesos, Inc. v. Taco Cabana, Inc., ___ U.S. ___, ___, 112 S. Ct. 2753, 2757, 120 L. Ed. 2d 615 (1992).
18. As to defendants' use of the "Birthright" name, it is clear from the above Conclusions of Law with regard to the infringement claim that plaintiff has satisfied both elements of a Section 43(a)(1)(B) unfair competition claim. Indeed, the courts have held that "[s]ince trademark infringement is a narrower concept, any finding that it has occurred will, by necessity, support an additional finding that the defendant is also guilty of unfair competition." Nugget Distrib. Co-op v. Mr. Nugget, Inc., 776 F. Supp. 1012, 1024 (E.D.Pa.1991) (quoting Smithkline Beckman Corp. v. Pennex Products Co., 605 F. Supp. 746, 749 (E.D.Pa.1985)). The "Birthright" name is registered and incontestable, and thus deserving of trademark *1137 protection. Further, defendants' use of the name was unauthorized and causes a likelihood of confusion among the two groups of "consumers" of Birthright services pregnant woman and contributors.
19. As to defendants' use of the unregistered "B" logo, plaintiff has also satisfied the elements for a Section 43(a)(1)(A) unfair competition claim. First, the facts support the conclusion that plaintiff is the owner and senior user of the "B" logo. Findings of Fact ¶ 82-83.
20. Second, the "B" logo is a unique and distinctive service mark deserving of legal protection. It is well established that "the more distinctive, unique and well-known the mark, the deeper is the impression it creates upon the public's consciousness and the greater the scope of protection to which it is entitled." I McCarthy on Trademarks and Unfair Competition § 11.-24[1], at 11-126 (3d ed. 1992). The Third Circuit recognizes four categories by which a mark's inherent distinctiveness may be measured:
i. Arbitrary (or fanciful) terms, which bear no logical or suggestive relation to the actual characteristics of the goods;
ii. Suggestive terms, which suggest rather than describe the characteristics of the goods;
iii. Descriptive terms, which describe a characteristic or ingredient of the article to which it refers; and
iv. Generic terms, which function as the common descriptive name of a product class.
A.J. Canfield Co. v. Honickman, 808 F.2d 291, 296 (3d Cir.1986); see also Berner Int'l Corp. v. Mars Sales Co., 987 F.2d 975, 979 (3d Cir.1993). Arbitrary and suggestive terms exhibit the greatest amount of inherent distinctiveness, and will generally "automatically qualif[y] for trademark protection at least in those geographic and product areas in which the senior user applies it to its goods." A.J. Canfield, 808 F.2d at 297. A descriptive term features little or no inherent distinctiveness, and is entitled to trademark protection only upon a showing that the term has taken on a "secondary" meaning among consumers identifying the term with the claimant. Id. Finally, a generic term "is never protectable because even complete `success ... in securing public identification ... cannot deprive competing manufacturers of the product of the right to call an article by its name.'" Id. (quoting Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir.1976)).
21. In the present case, the "B" logo is not completely arbitrary because the inherent meaning of the symbol gives the consumer an idea that the services provided by the organization are connected to matters involving telephones and fetuses. The logo, however, also cannot be categorized as descriptive because it is not capable of conveying to a consumer the specific notions that the particular service being provided is pregnancy counselling, that the philosophy of the organization is to encourage birth and to prevent abortions, or that the counselling must be given in a loving, non-confrontational manner that avoid religious and political issues. Accordingly, the "B" logo is a suggestive term, and it therefore qualifies under A.J. Canfield for trademark protection.
22. Defendants used the logo pursuant to licenses identical to the ones existing for the name "Birthright." Once plaintiff terminated these licenses, defendants' use of the logo became unauthorized. Finally, as with the "Birthright" name, defendants' unauthorized use of the "B" logo creates a clear likelihood of confusion for the two groups of Birthright "consumers."
23. Plaintiff has therefore satisfied its burden of showing a violation of Section 43(a)(1)(A) of the Lanham Act with respect to the "Birthright" name and the "B" logo. Accordingly, the court holds that judgment will entered in plaintiff Birthright's favor on its claim of unfair competition pursuant to Section 43(a)(1) of the Lanham Act, unless defendants are able to establish an affirmative defense.
C. Count III: False and Misleading Statements Claim Under the Lanham Act
24. Plaintiff's third claim under the Lanham Act is that Birthright Inc. made *1138 false and misleading statements in violation of Section 43(a)(1)(B) of the Lanham Act. 15 U.S.C. § 1125(a)(2).[6] The theory of liability under Section 43(a)(1)(B) is commonly known as a false advertising claim. Although, strictly speaking, Birthright Inc.'s fundraising letters were not commercial advertisements, Section 43(a)(1)(B) is broad enough to support, in the context of non-profit fundraising, a claim of false and misleading statements about the services represented by a protected mark. This Section provides for liability for misrepresentations not only in commercial advertising but also in the "promotion" of services. The statements contained in fundraising letters about the services provided by a non-profit organization represent a promotion of those services.
25. To succeed on a claim of false and misleading promotion under section 43(a)(1)(B) of the Lanham Act, plaintiff must prove the following elements:
i. that the defendant has made false or misleading statements as to his own product or the product of another;
ii. that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience;
iii. that the deception is material in that it is likely to influence purchasing decisions;
iv. that the advertised goods travelled in interstate commerce; and
v. that there is a likelihood of injury to the plaintiff in terms of declining sales, loss in goodwill, etc.
U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d 914, 922-23 (3d Cir.), cert. denied, 498 U.S. 816, 111 S. Ct. 58, 112 L. Ed. 2d 33 (1990); see also Ditri v. Caldwell Banker Residential Affiliates, Inc., 954 F.2d 869, 872 (3d Cir.1992).
26. Plaintiff contends that the letters failed to properly notify a potential donor that the money being raised goes only to support the hotline. As to elements (1) and (2), it has been found as facts that the fundraising letters in evidence that were sent out by Birthright Inc. contained misleading statements and had a tendency to deceive a recipient as to where donations would end up. Findings of Fact ¶ 98-99.
27. In analyzing the third element of a Section 43(a)(1)(B) claim, the court must distinguish between letters received and contemplated by potential donors before and after January 15, 1992. The letters' tendency to deceive is not material for those letters received prior to January 15, 1992. Until the disaffiliation in January 1992, Birthright Inc. was part and parcel of the Birthright movement. The donations used to support the hotline service provided a means by which pregnant women could contact the local Birthright chapters. This fundraising directly aided in the goal of the local chapters to reach as many pregnant women as possible. Thus, even if some recipients of the letters were in fact deceived as to where the donations were going, this deception was not material to the decision of a potential donor on whether or not to support the Birthright movement.
28. However, after January 15, 1992, the impact of the misleading statements contained in the fundraising letters became material, because Birthright Inc. was no longer affiliated with the Birthright movement. After January 15, 1992, the fundraising letters confused or were likely to confuse a potential donor as to the use of a contribution to Birthright Inc., and this confusion was material in that the potential donor may not have wished to contribute to an entity no longer connected to the Birthright movement. Accordingly, plaintiff has satisfied the third element of its Section 43(a)(1)(B) claim.
*1139 29. Plaintiff satisfies the fourth element of false and misleading statements claim by the fact that the fundraising letters travelled in interstate commerce. See Findings of Fact ¶ 33.
30. Finally, plaintiff has shown that the post-January 1992 letters resulted or were likely to result in donors sending money to the disaffiliated Birthright Inc. who would otherwise only send donations to a Birthright entity.
31. Thus, the court holds that plaintiff has satisfied the elements for a claim of false or misleading statements, and judgment will be entered in plaintiff's favor, unless an affirmative defense is established.
D. Affirmative Defenses
Defendants raise three equitable defenses to plaintiff's claims under the Lanham Act: abandonment, acquiescence, and laches.
1. Abandonment
32. Defendants argue that plaintiff's course of conduct with respect to Birthright Inc.'s use of the mark and the logo constitutes an abandonment of ownership. "Abandonment, being in the nature of a forfeiture, must be strictly proved." United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 139 (3d Cir.1981). The Lanham Act provides two alternative methods for showing abandonment.[7] First, abandonment may be established by the owner's (1) non-use of the mark combined with (2) an intent to abandon. 15 U.S.C. § 1127; United States Jaycees, 639 F.2d at 138; BIEC Int'l, Inc. v. Global Steel Serv., Ltd., 791 F. Supp. 489, 533 (E.D.Pa.1992). Second, abandonment may also occur as a result of "any acts of commission or omission causing the marks at issue to lose their significance as indications of origins." United States Jaycees, 639 F.2d at 139 (interpreting 15 U.S.C. § 1127(b)).
33. Defendants' abandonment defense must fail. As to the first definition of abandonment, defendants have not established plaintiff's non-use of the "Birthright" name and/or the "B" logo. "[A]bandonment occurs only when [a] registrant fails to use its mark anywhere in the nation." Id. (citing Dawn Donut Co. v. Hart's Food Stores, Inc., 267 F.2d 358, 363 (2d Cir.1959)). As the Third Circuit has stated, "[c]onsistent and proper use of [a] mark[] elsewhere in the United States ... defeats any claim of non-use." Id. (citation omitted). Here, the record shows that plaintiff, on its own and through its chartered and licensed chapters and entities, used the name and the logo throughout the nation. In addition, the record fails to establish any intent to abandon on plaintiff's part. On the contrary, plaintiff has consistently monitored the name and the logo in an attempt to protect their identification with a particular kind of pregnancy counselling. Indeed, the present litigation represents a strong indication of plaintiff's intent to retain control over the mark and logo.
34. Nor have defendants proven that plaintiff abandoned the mark and logo within the meaning of the second definition of abandonment. It is true that for over 20 years plaintiff knew of and allowed both Birthright Inc. and Woodbury Birthright to use the "Birthright" name and the "B" logo to signify the kind of pregnancy counselling services offered by them. However, as ruled above, such use occurred pursuant to licenses. And although "either naked licensing or licensing without reasonable control can work an abandonment," see United States Jaycees, 639 F.2d at 140, neither of these conditions exists in this case because defendants' use was subject to their compliance with the Birthright Charter and policy directives, as *1140 monitored and controlled by the Birthright Board.
35. Indeed, it is precisely this circumstance that distinguishes the instant matter from those cases cited by defendants in which one entity has been found to have abandoned, acquiesced, or been barred by laches from asserting its rights over a mark vis-a-vis a competitor in a product market. E.g. Anheuser-Busch v. DuBois Brewing Co., 175 F.2d 370 (3d Cir.1949), cert. denied, 339 U.S. 934, 70 S. Ct. 664, 94 L. Ed. 1353 (1950). In the case at bar, the parties were clearly not competitors. Rather, they belonged to a single movement composed of many entities which, however loosely organized, retained a structure of authority as to such matters as the monitoring and control of the "Birthright" name and the "B" logo. Indeed, as determined above, plaintiff and defendants stood in a licensing relationship as to the latter's use of the name and logo.
36. Accordingly, the court rejects defendants' affirmative defense of abandonment.
2. Acquiescence
37. A second defense raised by defendants is that plaintiff acquiesced in defendants' use of the "Birthright" name and the "B" logo. "The equitable defense of acquiescence ... `constitutes a ground for denial of relief only upon a finding of conduct on the plaintiff's part that amounted to an assurance to the defendant, express or implied, that the plaintiff would not assert his trademark rights against the defendant." Estate of Presley v. Russen, 513 F. Supp. 1339, 1351 (D.N.J.1981) (citations omitted).
38. The facts of this case cannot support a defense of acquiescence. As determined above, the relationship of plaintiff to defendants Birthright Inc. and to Woodbury Birthright was one of a licensor to a licensee. Plaintiff authorized defendants to use the "Birthright" name and "B" logo so long as the defendants complied with the Birthright Charter and policy directives. Plaintiff possessed the authority to monitor and control defendants' use of the name and logo and to revoke their licenses if they failed to maintain compliance with the charter and policy directives. Given these facts, there can be no finding that plaintiff's conduct amounted to any kind of assurance that plaintiff would not assert its trademark rights in the name and logo as against the defendants. Accordingly, defendants' defense of acquiescence must be rejected.
3. Laches
39. Defendants third and final defense pursuant to the Lanham Act is laches. The defense of laches applies when, in light of all the existing facts and circumstances in a case: (1) plaintiff has inexcusably delayed in instituting suit and (2) this delay results in prejudice to the defendant. University of Pittsburgh v. Champion Prod., Inc., 686 F.2d 1040, 1044 (3d Cir.), cert. denied, 459 U.S. 1087, 103 S. Ct. 571, 74 L. Ed. 2d 933 (1982); Transfer Print Foils v. Transfer Print America, Inc., 720 F. Supp. 425, 440 (D.N.J.1989). However, even if proven, laches generally will bar a claim for an accounting for past infringement but not a claim for prospective injunctive relief. University of Pittsburgh, 686 F.2d at 1044.
40. Under the facts of this case, there was no inexcusable delay in instituting suit on the part of plaintiff. As determined above, plaintiff authorized defendants to use the "Birthright" name and the "B" logo pursuant to licenses, implied or express. Thus, plaintiff had no ground for bringing the present suit until January 15, 1992, when it revoked its authorization of defendants' use of the name and logo. Plaintiff then filed suit a little more than three months later, on April 24, 1992. A period of approximately three months cannot, under the circumstances of this case, be held to constitute delay of any kind, much less inexcusable delay. Moreover, even assuming, arguendo, the existence of inexcusable delay, there has been no showing of prejudice.
41. Accordingly, the court rejects defendants' third affirmative defense of laches.
E. Count IV: Common Law Unfair Competition Claim
42. Plaintiff's final claim is for common law trademark infringement. It is well *1141 established that the test for a common law unfair competition claim under New Jersey law is essentially the same as under the federal Lanham Act. See SK & F Co. v. Premo Pharmaceutical Labs., Inc., 625 F.2d 1055, 1065-66 (3d Cir.1980); Estate of Presley v. Russen, 513 F. Supp. 1339, 1366, 1376 (D.N.J.1981). Accordingly, a separate analysis of plaintiff's common law claims is not required. The court holds that, for the same reasons defendants violated Section 43(a)(1)(A) of the Lanham Act, defendants are also guilty of common law unfair competition.
F. Conclusion
43. Having determined that plaintiff has satisfied the necessary elements for its Lanham Act claims of trademark infringement, unfair competition, and false and misleading statements, as well as for its common law claim of unfair competition, and having determined that none of the equitable defenses raised by defendants as affirmative defenses apply, the court now holds that judgment will be entered in plaintiff's favor.
III. Defendants' Counterclaims
Before turning to plaintiff's remedies for these trademark violations, the court addresses defendants' counterclaims of common law unfair competition, breach of contract, and defamation.
A. Common Law Unfair Competition
44. Defendants claim that plaintiff committed the common law tort of unfair competition by engaging in efforts to discredit Birthright Inc. and to dismiss its national director, Denise Cocciolone, as well as by publicizing these efforts. The court reads this claim to be one for disparagement of services provided by Birthright Inc. A necessary element of defendants' unfair competition counterclaim is that Birthright Inc. possessed ownership rights in the name and logo. However, as determined above, the ownership rights belong to Birthright. Accordingly, the court holds that defendants' unfair competition counterclaim must fail.
B. Breach of Contract
45. Defendants' second counterclaim is for breach of contract. Specifically, defendants contend that plaintiff committed a breach when it set up in Atlanta an alternative structure for the U.S. National Office to carry out the functions previously performed by Birthright Inc. According to defendants:
For 20 years the two Birthright corporations [i.e. Birthright and Birthright Inc.] worked hand-in-hand, each performing discrete, complementary functions, in a course of conduct which portrays a mutual contractual agreement. Birthright [Inc.] invested substantially in expanded activities for the benefit of the plaintiff and its several hundred chapters, and performed all of its agreed functions effectively. This suit brought by the plaintiff, the attempt to erect an alternative structure in United States and the actions taken by the plaintiff to discredit Birthright [Inc.] and its national director are acts in breach of the contract, for which the plaintiff should be restrained from any further breach and be required to dismantle said alternative structure.
Defs.' Proposed Findings at 35.
46. It has already been determined that the contractual relationship between plaintiff and Birthright Inc. and plaintiff and Woodbury Birthright comprised an implied license, pursuant to which defendants were authorized to use the "Birthright" name and the "B" logo, while plaintiff retained the responsibility to monitor defendants' activities in order to ensure compliance with the Birthright Charter and the policy directives. On January 15, 1992, plaintiff, in accordance with its authority under the terms of the licensing agreements, revoked defendants' licenses to use the name and logo, in effect disaffiliating these organizations from the Birthright movement. The ground for revoking Birthright Inc.'s license was that it violated the Charter and the policy directives by engaging in political activities and that it refused to follow the orders of plaintiff in regard to the use of the mark and logo. Woodbury Birthright had its license revoked because plaintiff considered it to be, in effect, the same organization as Birthright Inc. *1142 The court has determined that these reasons constituted good and valid grounds for plaintiff's termination of the licensing agreements with defendants. Accordingly, there was no breach of contract, and defendants' second counterclaim must fail.
C. Defamation
47. Defendants' final counterclaim is for defamation. Specifically, defendants contend that statements in the May 11, 1992 letter issued by plaintiff's board of directors were defamatory. Under New Jersey law, "[d]efamation imposes liability for publication of false statements that injure the reputation of another." Printing Mart v. Sharp Elec., 116 N.J. 739, 765, 563 A.2d 31 (1989). Defendants' defamation counterclaim must fail because they have failed to carry their burden of proof to show by a preponderance of the evidence that the alleged defamatory statements in the May 11th letter are false.
48. Defendants first contend that the depictions of defendants in the May 11th letter as not being Birthright people, as not providing services in consonance with the Birthright spirit and philosophy, and as having violated the Birthright charter are false and defamatory. Defendants further claim that plaintiff's portrayal in the May 11th letter of Birthright "as having powers specifically accorded exclusively to defendant Birthright Inc. by the Certificate of Incorporation issued by the state of New Jersey and to said defendant's board of directors by that defendant's Bylaws" is false and defamatory. Defs.' Answer ¶ 34. These contentions, however, must be rejected because the court has concluded that none of these statements is false. By May 11, 1992, defendants, in fact, were no longer "Birthright people," having been in effect properly disaffiliated by the Birthright Board on January 15, 1992 for violating the Birthright Charter and policy directives.
49. A second alleged instance of defamation consists of the May 11th letter's attachment of the original complaint in the present litigation, which, defendants claim, contains legal inadequacies and deceptions. This theory, too, must fail because defendants have not proven that any of the statements in the complaint are false.
IV. Remedies
Plaintiff seeks four forms of relief. Plaintiff asks for a permanent injunction prohibiting defendants from using the "Birthright" name and/or the "B" logo as service marks. Plaintiff also asks for an order requiring defendants to destroy any and all material that uses the "Birthright" name and/or the "B" logo. Plaintiff's third prayer for relief is for an accounting and "lost profits," that is for the return of all monies donated to defendants as a result of their unauthorized use of the "Birthright" name and the "B" logo. Finally, plaintiff seeks an award of attorneys' fees. The court addresses in turn each of these claims for relief.
A. Prohibitory Injunction
50. Section 34(a) of the Lanham Act grants the district court the "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable." 15 U.S.C. § 1116(a). In this case, plaintiff seeks a permanent injunction barring defendants from using the "Birthright" name and the "B" logo as service marks. The court has already held that defendants have violated, and will continue to violate, the Lanham Act by the use of any mark that contains the word "Birthright" or the logo. As a predicate to this holding, the court found as a fact that defendants' use of the name and logo causes a strong likelihood of confusion among the "consumers" of Birthright's pregnancy counselling services. Put simply, a pregnant woman seeking advice or a potential donor will likely not be able to tell the difference between the services offered by plaintiff and those offered by defendants.
51. The object of the Lanham Act is to protect the mark and the public. A permanent injunction in furtherance of these goals is justified where a likelihood of confusion arises from a defendant's use of a mark. United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 142 (3d Cir.1981). In light of the facts of this case, the court holds that a permanent injunction fully and fairly *1143 fulfills the Lanham Act's purposes. Accordingly, defendants Birthright Inc. and Woodbury Birthright are permanently enjoined from using the "Birthright" name and the "B" logo as service marks.
B. Destruction of Property
52. Section 36 of the Lanham Act allows the district court to order the destruction of infringing articles where a defendant's liability arises under Section 43(a).[8] 15 U.S.C. 1118. Plaintiff seeks an order requiring defendants to destroy any and all material of defendants that uses the "Birthright" name or the "B" logo as a service mark. The court, however, finds this remedy unnecessary given the issuance of an injunction prohibiting defendants from using any such material bearing the name or logo. Neva, Inc. v. Christian Duplications Int'l, Inc., 743 F. Supp. 1533, 1549 (M.D.Fla.1990); Bonanza Int'l, Inc. v. Double "B", 331 F. Supp. 694, 696 (D.Minn.1971). Because the prohibitory injunction suffices to protect plaintiff from future infringements or misleading statements, plaintiff's prayer for relief under Section 36 is denied.
C. Lost Profits
53. As a third form of relief, plaintiff seeks an accounting and a return of all donations made to defendants as result of defendants' use of the "Birthright" name and the "B" logo since January 15, 1992, when plaintiff revoked defendant's authorization to use these marks. The court analyzes whether plaintiff is entitled to this remedy under the Lanham Act's provision for recovery of lost profits. 15 U.S.C. § 1117(a).
54. A trademark violation may give rise to the relief of an accounting for profits in three situations: "[1] if the `defendant is unjustly enriched, [2] if the plaintiff sustained damages from the infringement, or [3] if an accounting is necessary to deter a willful infringer from doing so again.'" Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767, 772 (2d Cir.1984) (quoting W.E. Bassett Co. v. Revlon, Inc., 435 F.2d 656, 664 (2d Cir. 1970)); see also George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir.), cert. denied, ___ U.S. ___, 113 S. Ct. 510, 121 L. Ed. 2d 445 (1992).
55. In the present case, the relevant basis for recovery is the deterrence situation.[9] Under the deterrence theory:
a court may award a defendant's profits solely upon a finding that the defendant fraudulently used the plaintiff's mark.... The rationale underlying this [theory] is not compensatory in nature, but rather seeks to protect the public at large. By awarding the profits of a bad faith infringer to the rightful owner of a mark, [the courts] promote the secondary effect of deterring public fraud regarding the source and quality of consumer goods and services.
Id. at 1539; see also Burger King Corp. v. Mason, 855 F.2d 779, 781 (11th Cir.1988). In the context of not-for-profit fundraising, an award of all donations made to a willfully infringing defendant emerges from the deterrence rationale for awarding lost profits. This remedy protects the mark by functioning as a deterrent to potential infringers seeking to take advantage of the good will and reputation of a non-profit organization by fundraising under its protected mark. Moreover, it advances the interests of the relevant consuming public by ensuring that contributions reach their likely intended target.
*1144 56. Defendant Birthright Inc. continued to seek and to accept contributions using the "Birthright" name and the "B" logo even after its authorization to use the marks had ended. Plaintiff, the guardian and monitor of the mark, had determined that the nature and quality of defendant Birthright Inc.'s activities no longer satisfied the distinctive identity symbolized by the name and logo. Nevertheless, defendant Birthright Inc. knowingly and willfully drew upon the good will and reputation of the name and logo in its continued fundraising efforts. While plaintiff has not introduced evidence of actual confusion, it is nevertheless clear that Birthright Inc.'s actions deprived potential donors of the knowledge that plaintiff had revoked Birthright Inc.'s right to use the name and logo and the reasons for this revocation.
57. In light of these facts and circumstances, the court concludes that Birthright Inc. engaged in a willful and fraudulent course of conduct, thus justifying an award of "lost profits" based on a deterrence rationale. Accordingly, the court will enter an order requiring defendant Birthright Inc. to account for and turn over to plaintiff Birthright all monies received after January 15, 1992 as a result of its fundraising letters for the telephone hotline.[10]
D. Attorneys' Fees
58. The final form of relief sought by plaintiff is attorneys' fees. Section 35(a) of the Lanham Act provides that "[t]he court in exceptional cases may award reasonable attorneys' fees to the prevailing party." 15 U.S.C. § 1117(a). The Third Circuit defines "exceptional cases" as those in which the defendants' acts are deliberate or willful. Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 (3d Cir.1991); Standard Terry Mills, Inc. v. Shen Mfg. Co., 803 F.2d 778, 782 n. 7 (3d Cir.1986). Thus, "a district court must make a finding of culpable conduct on the part of the losing party, such as bad faith, fraud, malice, or knowing infringement," before it may grant an award of attorney's fees. Ferrero, 952 F.2d at 47.
59. In the present case, it has already been found as fact that defendants willfully and fraudulently continued to use the "Birthright" name and the "B" logo even after plaintiff revoked its authorization for such use, and that defendants made such use of the name and logo in order to take advantage of and benefit from the good will and reputation of these marks. See infra Findings of Fact ¶¶ 83, 115-16. These circumstances make this matter an "exceptional" case in which attorneys' fees may be awarded.
60. The language of Section 35(a), however, is permissive. A district court "may," but is not required to award reasonable attorneys' fees, even if the matter before it is an exceptional case. See Dieter v. B & H Indus., Inc., 880 F.2d 322, 329 (11th Cir.1989), cert. denied, 498 U.S. 950, 111 S. Ct. 369, 112 L. Ed. 2d 332 (1990). The court, having considered the equities of the matter, and using its sound discretion, holds that the present case does not warrant an award of attorneys' fees. In particular, the court notes that the present matter involves a dispute between non-profit organizations within the same social movement for control of the movement's name and logo. Political and social concerns rather than profit motivated the principal individuals and entities. Where a defendant's trademark violation occurs in a non-profit, noncommercial context, the equities favor a denial of an award of attorneys' fees. Kappa Sigma Fraternity v. Kappa Sigma Gamma Fraternity, 659 F. Supp. 117, 118 (D.N.H.1987).
Conclusion
For the foregoing reasons, judgment will be entered in favor of plaintiff Birthright and against defendants Birthright Inc. and Woodbury Birthright on plaintiff's trademark claims under the Lanham Act and the common *1145 law. As a result of these violations, the court will permanently enjoin defendants from using the "Birthright" name or the "B" logo as service marks, and will order an accounting and return of lost profits, in the form of donations made to Birthright Inc. after January 15, 1992 as a result of its use of the name and logo. The court denies plaintiff's request for a destruction order and for an award of reasonable attorney's fees. Finally, the court enters a judgment of no cause for action on defendants' counterclaims.
An appropriate order will be entered.
AMENDED ORDER (pursuant to order dated July 21, 1993)
This matter having come before the court on a consolidated hearing for a preliminary injunction and trial on the merits, pursuant to Federal Rule of Civil Procedure 65(a)(2);
The court having reviewed the submissions of the parties and the entire record of the case; and
The court having entered pursuant to Federal Rule of Civil Procedure 52(a) its findings of fact and conclusions of law in the Amended Opinion filed on this date;
IT IS on this 21st day of July 1993 hereby
ORDERED, ADJUDGED, and DECREED that judgment is entered in favor of plaintiff Birthright and against defendants Birthright Inc. and Birthright of Woodbury in that:
1. defendants Birthright Inc. and Birthright of Woodbury have engaged in conduct constituting trademark infringement, in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114; and
2. defendants Birthright Inc. and Birthright of Woodbury have engaged in conduct constituting unfair competition, in violation of Section 43(a)(1)(A) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A); and
3. defendants Birthright Inc. and Birthright of Woodbury have made false and misleading statements in violation of Section 43(a)(1)(B) of the Lanham Act, 15 U.S.C. 1125(a)(1)(B); and
4. defendants Birthright Inc. and Birthright of Woodbury have engaged in conduct constituting unfair competition, in violation of New Jersey common law;
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that as a result of the above violations plaintiff Birthright is entitled to the following remedies:
1. defendants Birthright Inc. and Birthright of Woodbury are permanently enjoined from using the "Birthright" name and/or the "B" logo as service marks; and
2. defendant Birthright Inc. shall account for and pay plaintiff Birthright all monies received by defendant Birthright Inc. after January 15, 1992 in response to any and all fundraising letters sent out under the "Birthright" name and/or the "B" logo and such accounting and payment shall occur no later than 30 days from the date of entry of this Amended Order; and
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that judgment is entered in favor of plaintiff Birthright and against defendants Birthright Inc. and Birthright of Woodbury on all of defendants' counterclaim against plaintiff.
No costs.
NOTES
[1] The court rejects plaintiff's contention that Birthright of Woodbury was never granted a Birthright charter.
[2] The parties are in dispute as to what document constitutes the true Birthright Charter. Compare Pl.'s Ex. 1 with Defs.' Ex. 10. The court, after examining both documents, finds that this dispute need not be resolved because the differences between the two documents are irrelevant to the disposition of this case. All references to the Birthright Charter in these Findings of Fact and Conclusions of Law will be only to provisions that are contained in both documents.
[3] The court rejects defendants' contention that the diagram contained in defendants' exhibit 17 represents an accurate portrayal of the organizational structure among the Birthright entities. It apparently represents the opinion of a consultant as to the Birthright's organizational structure. II Tr. at 156, 182-83. There is no evidence as to the material relied upon by this consultant, and the consultant did not appear as a witness in the present matter. Accordingly, the court discounts defendants' exhibit 17 and relies upon its own review of the record to determine the Birthright organizational structure.
[4] Section 32 provides in relevant part:
(1) Any person who shall, without the consent of the registrant
(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with ... services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or
(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, ... to labels, signs, prints, packages, ... upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action by the registrant. 15 U.S.C. § 1114(1).
[5] Section 43(a)(1)(A) of the Lanham Act provides, in relevant part:
(a)(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, ... which
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person ...
. . . . .
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
15 U.S.C. § 1125(a)(1)(A).
[6] Section 43(a)(1)(B) provides in relevant part:
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, ... which
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his ... services, or commercial activities,
. . . . . .
shall be liable in a civil action by any person who believe that he or she is or is likely to be damages by such act.
15 U.S.C. § 1125(a)(1)(B).
[7] Section 45 of the Lanham Act provides the following definition of "abandonment:"
A mark shall be deemed to be "abandoned"
(a) When its use has been discontinued with intent not to resume. Intent not to resume may be inferred from the circumstances. Nonuse for two consecutive years shall be prima facie abandonment.
(b) When any course of conduct of the registrant, including acts of omission as well as commission, causes the mark to lose its significance as an indication of origin. 15 U.S.C. § 1127.
[8] Section 36 provides in relevant part:
In any action arising under this Chapter, in which a violation of any right of the registrant ... or a violation under § 43(a), shall have been established, the court may order that all labels, signs, prints, packages, wrappers, receptacles, and advertisements in the possession of the defendant, bearing the registered mark or ... the word, term, name, symbol, device ... or representation that is the subject of the violation, or any reproduction, counterfeit copy, or colorable imitation thereof, and all plates, molds, matrices, and other means of making the same, shall be delivered up and destroyed.
15 U.S.C. § 1118.
[9] Recovery under an unjust enrichment or a damages theory requires a showing of actual consumer confusion, George Basch Co., 968 F.2d at 1538, 1539. Such a finding has not been established here.
[10] The court notes that plaintiff requests an accounting and award of all monies received by Birthright Inc. from the fundraising letters. While plaintiff may be entitled to such relief under a different legal theory, it raises only trademark claims in the present action. Accordingly, the court must limit relief to damages flowing from an established violation of the trademark laws. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1029544/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-6566
UNITED STATES OF AMERICA,
Plaintiff – Appellee,
v.
ANTHONY WILKINS, JR.,
Defendant – Appellant.
Appeal from the United States District Court for the Southern
District of West Virginia, at Charleston. John T. Copenhaver,
Jr., District Judge. (2:07-cr-00149-1; 2:08-cv-01123-1)
Submitted: July 23, 2009 Decided: July 30, 2009
Before WILKINSON and AGEE, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Dismissed by unpublished per curiam opinion.
Anthony Wilkins, Jr., Appellant Pro Se. Monica Lynn Dillon,
Assistant United States Attorney, Charleston, West Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Anthony Wilkins, Jr., seeks to appeal the district
court’s order accepting the recommendation of the magistrate
judge and denying relief on his 28 U.S.C.A. § 2255 (West Supp.
2009) motion. The order is not appealable unless a circuit
justice or judge issues a certificate of appealability. 28
U.S.C. § 2253(c)(1) (2006). 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) (2006). 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 Wilkins has
not made the requisite showing. Accordingly, we deny a
certificate of appealability and dismiss the appeal. We
dispense with oral argument because the facts and legal are in
the materials before the court and argument would not aid the
decisional process.
DISMISSED
2 | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2600603/ | 186 P.3d 1157 (2008)
STATE of Washington, Respondent,
v.
Kenith Wayne SHERRILL, Appellant.
No. 25193-4-III.
Court of Appeals of Washington, Division 3.
July 1, 2008.
*1158 Stephanie C. Cunningham, Attorney at Law, Seattle, WA, for Appellant.
Kevin Gregory Eilmes, Prosecuting Attorney's Office, Yakima, WA, for Respondent.
KULIK, J.
¶ 1 Kenith Wayne Sherrill challenges the sufficiency of the evidence supporting premeditation for his conviction of first degree murder of his girl friend. We conclude that the evidence of premeditation is sufficient to support the conviction and affirm.
FACTS
¶ 2 Kenith Sherrill and Teressa Hilton lived together for approximately three years. The couple had a history of domestic violence during the last year and one-half of their relationship. When the couple fought, Ms. Hilton often called her friend, Peggy Sue Darden, to pick her up. Ms. Darden noted that Ms. Hilton had bruises on her body and face, and bald spots on her head where Mr. Sherrill ripped out her hair. In September 2003, Ms. Hilton was treated in a Wenatchee emergency room after Mr. Sherrill beat her into unconsciousness. Six months later, Mr. Sherrill was arrested in Wenatchee after a passerby saw Mr. Sherrill trying to restrain Ms. Hilton in his car as she struggled to get out.
¶ 3 In the summer of 2004, Mr. Sherrill and Ms. Hilton moved from Wenatchee to Sunnyside where they lived in a motor home parked in the backyard of Mr. Sherrill's adult son. The motor home faced the adjoining property of Shirley and Allen Reavis, and sat just a few feet from the fence. The Reavises noticed scratches and bruises on Ms. Hilton's face when she came over for a July 4 barbeque.
¶ 4 On July 6, 2004, Mr. Sherrill's son was away on a fishing trip with his family. Mr. Reavis spent the day doing yard work. At about 3:00 or 4:00 PM, Ms. Reavis visited Ms. Hilton in the motor home. They watched television and talked while Mr. Sherrill worked in the shop.
¶ 5 At 6:00 PM, Ms. Reavis saw Ms. Hilton fall backwards out of the motor home, landing on her back upon the concrete patio. Mr. Sherrill was on the steps, trying to catch Ms. Hilton's fall. Mr. Sherrill helped Ms. Hilton back into the motor home. About 90 minutes later, Ms. Reavis went to check on her neighbor. She found Ms. Hilton lying on the floor in the front area of the motor home. Ms. Hilton appeared happy and in a good mood, but she acted as though her back bothered her.
¶ 6 When it was almost dark, Mr. Reavis turned off his lawn mower. As both he and his wife were heading into their house at about 9:00 PM, they heard moaning coming from the motor home. Mr. Reavis went outside to quiet his barking dog at about 11:00 PM and saw Mr. Sherrill standing in front of the trailer with his hands on his head, yelling profanities. Mr. Reavis went in the house and told his wife that there was something going on next door. Ms. Reavis went into the motor home and found Ms. Hilton, her face "all black and blue," lying on the floor in the back of the trailer.[1] Mr. Sherrill was on the telephone to 911 and was trying to give Ms. Hilton cardiopulmonary resuscitation (CPR).
¶ 7 When police and paramedics arrived at about 11:30 PM, they found Ms. Hilton's bloody body on the floor. Efforts to resuscitate Ms. Hilton were unsuccessful. Mr. *1159 Sherrill's dentures were broken in two, lying under the body. Mr. Sherrill was upset, crying, and covered with blood. He smelled of intoxicants. Mr. Sherrill said that he and Ms. Hilton had been drinking and got into a fight, then she "spaced out" and quit breathing.[2]
¶ 8 Police arrested Mr. Sherrill. He was ultimately charged with first degree murder and violation of a protection order.
¶ 9 Mr. Sherrill waived his constitutional rights and said that he wanted to talk to police. He said he tried to resuscitate Ms. Hilton. During a police interview the following day, Mr. Sherrill stated that he had fallen down and gotten his blood all over Ms. Hilton when he tried to give her CPR. He later asserted that he and Ms. Hilton had argued, that she had fallen down, and that her death was an accident. In taped statements, Mr. Sherrill denied that he and Ms. Hilton were fighting, but he stated that she fell down backward and hit her head on the table at about 4:00 PM. When confronted with the evidence of blood at the scene, he stated that he blacked out and did not remember what happened. Mr. Sherrill's right hand was swollen and stained with Ms. Hilton's blood.
¶ 10 Forensic scientists found blood spatter in several distinct locations around the trailer, including the kitchen, bathroom, living room, on appliances, on the carpet, and high and low on the walls. Clumps of hair were found throughout the trailer, and outside the trailer. Blood and imbedded hair were on the VCR, the television receiver, and a step outside the trailer. Blood spatter was also found on the trailer's wheels. The pattern of blood spatters was not consistent with a fall.
¶ 11 Ms. Hilton's autopsy revealed at least 42 separate blunt impact injuries. She suffered internal injuries to her brain and abdominal areas, several fractured ribs, a lacerated liver, and significant internal bleeding in her chest area. The cause of death was multiple internal injuries due to the blunt impact to the head, chest and abdomen.
¶ 12 Rick Hoffman was appointed as Mr. Sherrill's counsel on July 7, 2004, but Mr. Hoffman was ordered to withdraw on July 16, when a conflict of interest was discovered concerning Mr. Hoffman and a State's witness.
¶ 13 Timothy D. Cotterell was assigned as Mr. Sherrill's counsel on July 22, 2004. On August 4, Mr. Cotterell advised the court that Mr. Sherrill no longer wanted him to be involved in his representation. Mr. Sherrill advised Judge James Lust that Mr. Cotterell was "prejudiced"[3] and trying to set Mr. Sherrill up, Mr. Sherrill wanted nothing to do with Mr. Cotterell or any other court-appointed lawyer, and Mr. Sherrill wanted to represent himself. Mr. Sherrill also claimed that Mr. Cotterell was acting inappropriately by asking for a trial when Mr. Sherrill did not need a trial and it was the State's job to take the case to trial. Mr. Sherrill asserted that he was arrested on suspicion of second degree manslaughter and that his attorney was making things worse by going to trial for first degree murder. Because Judge Lust was concerned about Mr. Sherrill's capacity to assist with his defense, with or without counsel, he ordered a mental evaluation.
¶ 14 On October 14, Mr. Sherrill appeared before Judge Michael Schwab, who, based on a psychiatric report, signed an order declaring Mr. Sherrill competent. Because of Mr. Sherrill's continued complaints about Mr. Cotterell, Judge Schwab ordered a hearing on whether Mr. Cotterell would remain as Mr. Sherrill's counsel and on the availability of counsel or standby counsel if Mr. Sherrill waived counsel and proceeded pro se.
¶ 15 On October 19, the court entered an order allowing Mr. Cotterell to withdraw and setting a hearing on October 21 as a status on the appointment of counsel for Mr. Sherrill. On October 31, Judge Lust heard from Daniel Fessler, who administers the public defender contracts. Mr. Fessler advised the court that he had been in contact with two potential defense attorneys Mr. Sherrill refused one and the other declined to represent him. Mr. Fessler was attempting to contact a third attorney, but he doubted that *1160 attorney was available. Mr. Sherrill informed the court that he did not want the help of a state-funded attorney because he would hire private counsel if the State took him to trial. Mr. Sherrill wanted to be left alone. Mr. Sherrill stated that he was unlawfully before the court because he had not been served with notice of a trial. Judge Lust discouraged Mr. Sherrill from representing himself, but held that Mr. Sherrill had voluntarily waived his right to counsel. The court asked the State to ensure that Mr. Sherrill had been handed the appropriate trial documentation. The court indicated it would talk to Mr. Sherrill again to see if he still wanted to represent himself. At that time, the case was set for trial that day, and the matter was placed on the trailing docket.
¶ 16 On November 2, Mr. Sherrill received the requested documentation after having appeared before Judge Lust and Judge Blaine Gibson. Judge Lust ruled that he would not appoint standby counsel, as was Mr. Sherrill's wish.
¶ 17 Mr. Sherrill appeared before Judge Ruth Reukauf on November 3 to determine whether he still wanted to proceed pro se. Mr. Sherrill informed the court that he had a private attorney he would bring in if necessary, but for the time being he wished to be heard on a motion to dismiss based on the State's failure to provide the appropriate documentation to bring him to trial. Mr. Sherrill asserted that the documentation that he had received to date was "illegal"[4] because it related only to second degree manslaughter and the signature on the order on arraignment for the first degree murder was not his signature. Judge Reukauf reviewed the seriousness of the charge with Mr. Sherrill and found that he voluntarily waived counsel.
¶ 18 On November 4, Mr. Sherrill received additional discovery before Judge Reukauf, but he continued to assert that he had not been properly served with documents calling him to trial. Another hearing was set to review his argument.
¶ 19 On November 7, Mr. Sherrill told Judge Reukauf that he did not intend to participate in the "illegal proceeding" at all.[5] Instead, he intended to sit through any further hearings with his "mouth shut."[6] Judge Reukauf asked Mr. Sherrill to identify the private attorney who was advising him, but under pain of contempt of court, he refused to identify the person. Judge Reukauf explained the difference between having counsel in a representative capacity and having standby counsel. She offered to again appoint standby counsel. Mr. Sherrill responded, "I am representing myself. For the eighteenth time, your Honor. What part of English do you not understand?"[7] Mr. Sherrill then demanded a change of venue, and the court conducted the CrR 3.5 hearing.
¶ 20 On November 8, Mr. Sherrill asked for a continuance to secure his witnesses. Mr. Sherrill informed the court that he would, in fact, participate in the proceedings because he had no choice, but that he intended to have an attorney in the next day or two. The court ordered Mr. Sherrill to return from recess with the name and addresses of his witnesses and the name of the attorney he intended to hire. After lunch, Mr. Sherrill asked Judge Reukauf to appoint an attorney on his behalf because he had just learned that he could not afford the private attorney. Judge Reukauf indicated that she would sign an order reappointing counsel, but warned Mr. Sherrill that she would not tolerate any more games. The court also ruled that the State properly called the matter to trial. On November 29, Judge Robert Hackett reappointed Mr. Cotterell.
¶ 21 On January 20, 2006, Mr. Cotterell informed Judge Reukauf that Mr. Sherrill was again objecting to his representation. Again, Mr. Sherrill insisted that if the State forced him to trial, he would call a private attorney, identified as Wes Hinsley of Wenatchee. Judge Reukauf discouraged Mr. Sherrill from representing himself because it was a very serious charge. Mr. Sherrill acknowledged that if he was found guilty he would likely receive a life sentence.
*1161 ¶ 22 On January 27, Mr. Sherrill asked Judge Reukauf to appoint a different attorney. Judge Reukauf reminded Mr. Sherrill that he had previously told her he did not want anyone from the public defender's office. Mr. Sherrill answered: "That's not what I meant at all. I would like the court to assign me a new attorney."[8] When asked repeatedly to specifically state, in a nonconclusory manner, what Mr. Cotterell was doing or not doing that Mr. Sherrill was dissatisfied with, Mr. Sherrill stated that (1) Mr. Cotterell "is prosecuting me and not helping me"; (2) "[h]e has done nothing"; (3) "I would like to see him do the right thing and release me from this ugly attack"; and (4) "[a]ll Mr. Cotterell has done to me is threaten me. . . . Every time that Mr. Cotterell has spoke to me, . . . he tells me . . . that [the prosecutor] wants to lock me up for 240 or 360 [months] and to me that is a threat."[9] Mr. Cotterell told Judge Reukauf that Mr. Sherrill wanted to be charged with second degree manslaughter and released for time served, but that was not a realistic outcome. The judge ruled that because Mr. Sherrill could not articulate a legitimate basis for his dissatisfaction, she would not appoint substitute counsel. Mr. Cotterell was left as standby counsel, over Mr. Sherrill's objection.
¶ 23 As the case wound through pretrial hearings, Mr. Sherrill again expressed his desire for an appointment of an attorney on January 30. Over Mr. Sherrill's objection, Judge Reukauf ordered Mr. Sherrill not to mention in front of the jury that he was representing himself under protest. The court stated that Mr. Sherrill had made a sufficient record.
¶ 24 After the jury was impaneled on February 1, Mr. Sherrill again expressed a desire for help with his case. He stated: "I don't know why the court keeps forcing Mr. Cotterell in my face when he won't do a thing for me."[10] Mr. Sherrill stated that Mr. Cotterell told him that he would not help him, but he needed help. Judge Reukauf told Mr. Sherrill that, as previously explained, Mr. Cotterell was assigned to act as standby counsel.
¶ 25 The judge asked Mr. Sherrill if he wanted to accept Mr. Cotterell in a representative capacity, to which Mr. Sherrill responded that he would do so if Mr. Cotterell would help him. Judge Reukauf questioned Mr. Cotterell as to how long it would take him to bring himself up to speed to assume Mr. Sherrill's representation if it were ordered. Mr. Cotterell answered the question, but told the judge that he doubted that Mr. Sherrill would trust and accept his guidance. Mr. Cotterell stated: "I don't think I can represent him because he just doesn't want me to be his attorney. He wants me thrown out of the courtroom. He needs some help, but I don't think he really wants me to be his attorney."[11] Mr. Sherrill responded: "No, ma'am, I don't."[12] Satisfied with the record, the case proceeded to trial.
¶ 26 After the mid-afternoon recess on the first day of trial, Mr. Cotterell stated that he wanted the record to reflect that Mr. Sherrill was "quite emotional and sobbing and he's quite distraught right now."[13] Mr. Cotterell asked the court to take notice of Mr. Sherrill's state and make sure that he was fit to continue. The judge told Mr. Sherrill to let her know when he needed a break.
¶ 27 During trial, Mr. Sherrill cross-examined two witnesses with one question each. He decided not to call the witnesses he planned because he did not feel up to the task of examining his family members. Mr. Sherrill stated that he asked Mr. Cotterell to examine the witnesses, but he would not. The judge explained that Mr. Cotterell was only appearing as standby counsel. Mr. Sherrill did not present an opening or closing argument, and he did not put on a case.
¶ 28 The jury convicted Mr. Sherrill as charged. This appeal follows.
*1162 DISCUSSION
¶ 29 I. Mr. Sherrill contends the trial court abused its discretion by denying his request for the reappointment of counsel based on his dissatisfaction with appointed counsel. Decisions relating to reappointment based on attorney-client differences are reviewed for abuse of discretion. State v. Cross, 156 Wash.2d 580, 607, 132 P.3d 80, cert. denied, ___ U.S. ___, 127 S. Ct. 559, 166 L. Ed. 2d 415 (2006); State v. Varga, 151 Wash.2d 179, 200, 86 P.3d 139 (2004). The right to retain counsel of choice is recognized by the Sixth Amendment. In re Pers. Restraint of Stenson, 142 Wash.2d 710, 725-26, 16 P.3d 1 (2001). But a defendant does not have an absolute, Sixth Amendment right to choose any particular advocate. Id.
¶ 30 "To justify appointment of new counsel, a defendant `must show good cause to warrant substitution of counsel, such as a conflict of interest, an irreconcilable conflict, or a complete breakdown in communication between the attorney and the defendant.'" Varga, 151 Wash.2d at 200, 86 P.3d 139 (quoting State v. Stenson, 132 Wash.2d 668, 734, 940 P.2d 1239 (1997)). Mr. Sherrill's loss of confidence or trust in Mr. Cotterell was not a sufficient reason to appoint new counsel. See Stenson, 132 Wash.2d at 734, 940 P.2d 1239.
¶ 31 Here, Judge Reukauf examined Mr. Sherrill extensively on his reasons for wanting a new attorney. Mr. Sherrill could not identify any specific reason.
¶ 32 Mr. Sherrill seems to argue that his continuous pleas for counsel were ignored and that the trial court gave him the choice of representing himself or remaining with Mr. Cotterell. Throughout the proceedings, Mr. Sherrill stated inconsistently that he did not want any attorney, he would hire private counsel, he was being advised by counsel whom he refused to identify, he could not afford an attorney, he did not want any State-paid attorney, he would accept Mr. Cotterell, he would accept any attorney except Mr. Cotterell, he would accept a public defender, he would not accept standby counsel, he would not use Mr. Cotterell as standby counsel, and he would accept Mr. Cotterell only if he would help. Mr. Sherrill was heard on this issue numerous times from August 2005 through his trial in February 2006. The trial judge finally determined that Mr. Sherrill's antics were nothing more than game-playing.
¶ 33 The trial court did not abuse its discretion by denying Mr. Sherrill's request for new counsel.
¶ 34 II. Mr. Sherrill argues on appeal that there is insufficient evidence of premeditation. He argued at trial that the evidence was insufficient to submit premeditation to the jury.
¶ 35 The jury was instructed that:
To convict the defendant of the crime of First Degree Murder, each of the following elements of the crime must be proved beyond a reasonable doubt:
(1) That on or about July 6, 2004, the defendant struck Teressa Lynn Hilton[;]
(2) That the defendant acted with intent to cause the death of Teressa Lynn Hilton;
(3) That the intent to cause the death was premeditated;
(4) That Teressa Lynn Hilton died as a result of defendant's act; and
(5) That the acts occurred in the State of Washington.
Clerk's Papers (CP) at 41 Instruction No. 7.
¶ 36 The jury was also instructed on premeditation:
Premeditated means thought over beforehand. When a person, after any deliberation, forms an intent to take human life, the killing may follow immediately after the formation of the settled purpose and it will still be premeditated. Premeditation must involve more than a moment in point of time. The law requires some time, however long or short, in which a design to kill is deliberately formed.
CP at 40 Instruction No. 6.
¶ 37 The test for reviewing a defendant's challenge to the sufficiency of evidence in a criminal case is "whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the elements of the crime *1163 beyond a reasonable doubt." State v. Gentry, 125 Wash.2d 570, 596-97, 888 P.2d 1105 (1995). All reasonable inferences from the evidence are drawn in favor of the State. Id. at 597, 888 P.2d 1105.
¶ 38 Premeditation is "the deliberate formation of and reflection upon the intent to take a human life." State v. Hoffman, 116 Wash.2d 51, 82, 804 P.2d 577 (1991). Premeditation may be shown by circumstantial evidence where the jury's inferences are reasonable and substantial evidence supports the jury's verdict. State v. Finch, 137 Wash.2d 792, 831, 975 P.2d 967 (1999). Where the sufficiency of the evidence has been challenged with respect to the element of premeditation, Washington cases hold that a wide range of factors can support an inference of premeditation. Id. Motive, procurement of a weapon, stealth, and method of killing are "particularly relevant" factors in establishing premeditation. State v. Pirtle, 127 Wash.2d 628, 644, 904 P.2d 245 (1995).
¶ 39 Here, no evidence of motive, procurement of a weapon, or stealth was presented. Accordingly, Mr. Sherrill argues that the evidence was insufficient to establish premeditation. We disagree.
¶ 40 In State v. Allen, 159 Wash.2d 1, 8, 147 P.3d 581 (2006), the defendant also asserted insufficient evidence of premeditation arguing that "he never expressed a preconceived intent to kill, he did not take weapons to his mother's home, and he himself was shocked at how their heated argument escalated into violence." The court disagreed, noting that "a physical struggle over `an appreciable period of time' prior to strangulation is sufficient evidence of premeditation." Id. In Allen, the altercation with his mother went from the kitchen to the bedroom and involved pushing and wrestling before escalating to strangulation. Id.
¶ 41 Here, the high and low blood spatter evidence showed that Ms. Hilton was attacked while she was on the ground and while standing up. Blood on the ground and clumps of traumatically-removed hair also showed that the attack occurred inside and outside the motor home. Witness testimony suggested that the fighting began in the early evening and continued for several hours.
¶ 42 Blood spatter was found in the kitchen, bathroom, living room and outside on the step and wheels of the trailer. The appliances and carpet had blood on them. Blood and imbedded hair was found on a VCR and television receiver as well as on a step outside the door.
¶ 43 In cases of premeditated intent to cause death, the cause of death is a significant factor. Here, there were at least 42 separate blunt impact injuries on Ms. Hilton's body. She sustained injuries to her head, abdomen, and also had fractured ribs and a lacerated liver. Forensic pathologist Dr. Gina Fino answered "yes" when asked if the head injury was "in and of itself a life threatening situation."[14] The rib fractures resulted in the collection of a "moderate" amount of internal bleeding in the chest cavity.[15] Dr. Fino again answered "yes" when asked if the rib fractures and bleeding were "something that in and of itself would be life threatening to a person."[16] The laceration to the liver was, in and of itself, potentially a life-threatening injury.
¶ 44 Dr. Fino could not determine how long Ms. Hilton was conscious after she sustained the injuries and before she died. Dr. Fino estimated it could have been from 15 minutes to one hour or several hours. Dr. Fino stated that due to the injuries to Ms. Hilton's hands, Ms. Hilton was conscious for some of the attack. Dr. Fino concluded that the cause of death was multiple internal injuries due to blunt impact to the head, chest and abdomen.
¶ 45 Mr. Sherrill argues that State v. Bingham, 105 Wash.2d 820, 719 P.2d 109 (1986) is applicable to the facts here. In Bingham, the court held that manual strangulation alone is insufficient evidence to support a finding of premeditation where no evidence was presented of deliberation or reflection before or during the strangulation. Id. at *1164 827-28, 719 P.2d 109. But manual strangulation involves one continuous act. Here, there were multiple attacks over several hours. And while standing alone, multiple wounds and sustained violence are insufficient to support an inference of premeditation; other evidence, combined with multiple wounds and sustained violence, does support an inference of deliberation and reflection. Evidence including prior threats or quarrels and defensive wounds on the victim will support an inference of premeditation. See State v. Millante, 80 Wash.App. 237, 248, 908 P.2d 374 (1995). Here, a lengthy history of violence and fighting existed. And there were defensive wounds on Ms. Hilton.
¶ 46 In 2003, Ms. Hilton was taken to an emergency room for treatment after Mr. Sherrill beat her unconscious. In 2004, Mr. Sherrill was arrested after a passerby saw Mr. Sherrill attempting to restrain Ms. Hilton in his car as she attempted to get out. Ms. Darden testified that Ms. Hilton often called her to pick her up when she and Mr. Sherrill fought. Ms. Darden noted that Ms. Hilton had bruises on her body and face, and bald spots on her head where Mr. Sherrill ripped her hair out. Two days before the attack causing Ms. Hilton's death, Ms. Darden saw scratches and bruises on Ms. Hilton's face. On one occasion, Ms. Hilton's nose was nearly torn off.
¶ 47 Here, Ms. Hilton was attacked as she was on the ground, standing up, inside and outside the house, and over a period of several hours. The history of violence, the defensive cuts on Ms. Hilton's hands, and the 42 blunt impact injuries are evidence sufficient for a jury to infer deliberation and reflection before and during the beating. While Mr. Sherrill correctly asserts that, standing alone, multiple wounds and sustained violence cannot support an inference of premeditation, the infliction of multiple blows is strong evidence of premeditation. See State v. Ortiz, 119 Wash.2d 294, 312, 831 P.2d 1060 (1992); Cross, 156 Wash.2d at 627, 132 P.3d 80.
¶ 48 We conclude that a rational juror could find that the evidence, taken together, is sufficient to find premeditation beyond a reasonable doubt. Accordingly, we affirm.
I CONCUR: STEPHENS, J. Pro Tem.
SCHULTHEIS, C.J. (dissenting).
¶ 49 To find premeditation there must be at least circumstantial evidence "where the inferences drawn by the jury are reasonable and the evidence supporting the jury's verdict is substantial." State v. Bingham, 105 Wash.2d 820, 824, 719 P.2d 109 (1986) (citing State v. Luoma, 88 Wash.2d 28, 558 P.2d 756 (1977)). Because of the absence of evidence of premeditation in this record, I would reverse.
¶ 50 The cases relied upon by the majority share two characteristics: the defendant's use of some instrument in accomplishing the act of murder and specific fatal injuries. Neither characteristic is present here.
¶ 51 For instance, in State v. Allen, 159 Wash.2d 1, 147 P.3d 581 (2006), the defendant first wrestled with and then strangled the victim, using a telephone cord until it broke, and then he got a rifle from a cabinet that he used to strike the fatal blows. Id. at 5-6, 8-9, 147 P.3d 581. This shows sufficient evidence of premeditation a deliberate formation of and reflection upon the intent to take the victim's life. When there is evidence of a decision to use a weapon, particularly in escalation of a hand-to-hand struggle, the jury can infer that the user identified some purpose and consequence of the weapon's use, which shows deliberation. But there is no such evidence in the case before this court. Kenith Wayne Sherrill could have picked up any number of objects in the cluttered motor home to use as a weapon. But he used nothing. "[S]tanding alone, multiple wounds and sustained violence cannot support an inference of premeditation." State v. Ortiz, 119 Wash.2d 294, 312, 831 P.2d 1060 (1992).
¶ 52 The absence of a weapon is also particularly significant in this case when considering the slight stature of both Mr. Sherrill and Teressa Hilton. I can envision cases of premeditation where no weapon is used but a defendant's size outmatches the victim and there is sustained violence with specific devastating *1165 injuries. But that is not the case here.
¶ 53 On direct examination of forensic pathologist Dr. Gina Fino, the State asked whether internal bleeding of the brain is "in and of itself a life threatening situation." Report of Proceedings (RP) (Feb. 2, 2006) at 229. Her response was open ended: "Depending upon which parts of the brain are involved, yes." Id. When addressing Ms. Hilton's specific injury, Dr. Fino described it as something one would see in "low speed or low impact vehicle type crashes." Id. In response to questioning as to whether the amount of blood that had collected in Ms. Hilton's chest was significant, Dr. Fino stated that it was "a moderate loss of blood." Id. at 233. Dr. Fino was asked whether the internal bleeding in the chest cavity was "something that in and of itself would be life threatening to a person." Id. Dr. Fino responded that it was because with "blood . . . irritating the chest cavity, it's going to cause a decreased ability to breathe." Id. The State questioned Dr. Fino regarding whether the laceration on the edge of the liver, is "in and of itself potentially a life threatening injury." Id. at 235. Dr. Fino responded that it was, mainly because such an injury "causes bleeding and loss of blood, [which] decreases the amount of nourishment that gets to the tissues." Id. at 236.
¶ 54 It is also noted that Ms. Hilton had a dangerously high blood/alcohol level of .32 grams per 100 milliliters, which can be judicially noted under ER 201(b) to be within the fatal range. E.g., 4 ROSCOE N. GRAY & LOUISE J. GORDY, ATTORNEYS' TEXTBOOK OF MEDICINE ¶ 134A.82 (3d ed.1988); see also State v. Smissaert, 41 Wash.App. 813, 815, 706 P.2d 647 (1985) (holding that the effects of alcohol are commonly known).
¶ 55 In State v. Harris, 62 Wash.2d 858, 868, 385 P.2d 18 (1963), the victim "had been struck on the head several times with a blunt instrument with such force that in one place her skull had been fractured into her brain." The victim was also strangled with a garrote fashioned from a vacuum cleaner cord and handle. Id. at 860, 385 P.2d 18. While strangulation was the immediate cause of death, the victim would have died as a result of the skull fracture. Id. at 860-61, 385 P.2d 18. In this case, none of Ms. Hilton's injuries were, on their own, specific or devastating.
¶ 56 The absence of an identifiable coup de grace separates the injuries in this case from those that might be found in a premeditated beating death. None of Ms. Hilton's injuries, alone or together, can be viewed as being struck with such brutal force to show that they were borne of "`deliberate formation of and reflection upon'" the intent to take Ms. Hilton's life. State v. Gentry, 125 Wash.2d 570, 597, 888 P.2d 1105 (1995) (quoting State v. Robtoy, 98 Wash.2d 30, 43, 653 P.2d 284 (1982)).
¶ 57 As noted in Harris: "`[P]roof of the fact of killing, alone, does not raise a presumption of premeditation or deliberation, but premeditation or deliberation may be inferred from the circumstances of the killing.'" Harris, 62 Wash.2d at 868, 385 P.2d 18 (quoting State v. Gaines, 144 Wash. 446, 467, 258 P. 508 (1927)). The challenge in the case before us is to discern premeditation from the circumstances of the fatal beating apart from the death itself. There is nothing to be found.
¶ 58 In Bingham, the evidence showed three to five minutes were required to manually strangle the victim. Bingham, 105 Wash.2d at 824, 719 P.2d 109. The Supreme Court found the evidence of the strangulation alone insufficient. Id. at 827, 719 P.2d 109. The court held:
[T]o allow a finding of premeditation only because the act takes an appreciable amount of time obliterates the distinction between first and second degree murder. Having the opportunity to deliberate is not evidence the defendant did deliberate, which is necessary for a finding of premeditation.
Id. at 826, 719 P.2d 109 (emphasis added).
¶ 59 Here, Mr. Sherrill had an opportunity to deliberate but the evidence does not establish facts from which an inference of deliberation can be found. The majority does not point to any evidence of premeditation, but determines the jury could have concluded that the evidence existed anyway. Bingham *1166 requires us to ask, did the premeditation occur? not could the premeditation have occurred?
¶ 60 Because Mr. Sherrill did not use counsel and participated precious little in his own defense, it is easy to see how the jury could be swayed by the one-sided presentation. But the State limited its closing argument to the opportunity for premeditation and the sustained violence:
Ladies and gentlemen, when you consider this and all the evidence, there is no question but that the defendant was able to engage in the cognitive process to build an intent to kill, which clearly took more than a moment in time. . . .
. . . .
What do we know about the situation as it was? Was there an accident? Not 42 times. Was there any showing of anything other than traumatic force that was intentionally and volitionally applied after having ample time to stop? But not stopping, hitting and continuing to hit and killing, killing in ways where there are three major traumatic injuries.
RP (Feb. 7, 2006) at 507-09 (emphasis added).
¶ 61 The jury was instructed that in order for premeditation to be found the law requires evidence of deliberation to form an intent to take human life, and some time, after the formation of the settled purpose, in which a design to kill is deliberately formed. The evidence here shows three traumatic injuries, none of which were individually fatal, that occurred over some time and took place in a number of rooms while the victim was both standing up and lying on the ground. This evidence does not show the formation of a design to kill by the infliction of multiple blows to various parts of a victim's body. It does not seem logical to plot the death of another in this manner.
¶ 62 While I am struck and sickened by the evidence of violence in this case, viewing that evidence in the light most favorable to the State, it is insufficient from which a reasonable jury could infer that Mr. Sherrill formed the intent to beat Ms. Hilton to death with his bare hands. Because I find insufficient evidence to establish premeditation, I would reverse.
NOTES
[1] Report of Proceedings (RP) (Feb. 2, 2006) at 187.
[2] RP (Feb. 1, 2006) at 41.
[3] RP (Aug. 4, 2005) at 8.
[4] RP (Nov. 3, 2005) at 12.
[5] RP (Nov. 7, 2005) at 14.
[6] RP (Nov. 7, 2005) at 14.
[7] RP (Nov. 7, 2005) at 21.
[8] RP (Jan. 27, 2006) at 17.
[9] RP (Jan. 27, 2006) at 18-21.
[10] RP (Feb. 1, 2006) at 25.
[11] RP (Feb. 1, 2006) at 30.
[12] RP (Feb. 1, 2006) at 30.
[13] RP (Feb. 1, 2006) at 131.
[14] RP (Feb. 2, 2006) at 229.
[15] RP (Feb. 2, 2006) at 233.
[16] RP (Feb. 2, 2006) at 233. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2600604/ | 186 P.3d 609 (2008)
ALLSTATE INSURANCE COMPANY, Plaintiff-Appellee, Cross-Appellee,
v.
Pearl PRUETT; Meredith Pruett; and Ikaika Pruett, a minor, Defendants-Appellants, Cross-Appellees, and
Charlene Manglicmot, a minor; Michelle Casil, a minor, Defendants-Appellees, Cross-Appellees, and
Salvador Pebenito; Board of Water Supply, City and County of Honolulu, Defendants-Cross-Appellees, and
Doe 1-10, Defendants.
Pearl Pruett, individually and as guardian of Ikaika Pruett and Meredith Pruett, Third-Party Plaintiffs-Appellants, Cross-Appellees,
v.
AIG Hawaii Insurance Company, a Hawai`i corporation, Third-Party Defendant-Appellee, Cross-Appellant.
No. 26830.
Supreme Court of Hawai`i.
June 25, 2008.
*611 Randall Y.S. Chung and Ward F.N. Fujimoto of Matsui Chung Sumida & Tsuchiyama, Honolulu, on the briefs, for third-party defendant-appellee, cross-appellant AIG Hawaii Insurance Company.
Richard B. Miller and Patricia Kehau Wall of Tom Petrus & Miller, LLLC, Honolulu, on the briefs, for plaintiff-appellee, cross-appellee, Allstate Insurance Company.
Stuart N. Fujioka of Nishioka & Fujioka, AAL, ALC, Honolulu, on the briefs, for defendants-appellants, third-party plaintiffs-appellants, cross-appellees Pearl Pruett, Meredith Pruett and Ikaika Pruett, a minor.
MOON, C.J., LEVINSON, NAKAYAMA, and DUFFY, JJ. and ACOBA, J., concurring and dissenting.
*612 Opinion of the Court by NAKAYAMA, J.
Defendants-Appellants, Third-Party Plaintiffs-Appellants, Cross-Appellees, Pearl Pruett, Ikaika Pruett, and Meredith Pruett (collectively, "the Pruetts"), appeal from the Circuit Court of the First Circuit's ("circuit court's") October 18, 2004 final judgment partially in favor of Plaintiff-Appellee, Cross-Appellee, Allstate Insurance Company ("Allstate").[1] On appeal, the Pruetts assert that the circuit court erred when it determined that Allstate was not obligated to defend or indemnify Pearl and Ikaika Pruett under Allstate's homeowner's insurance policy naming Pearl Pruett as the named insured.
Both Allstate and Third-Party Defendant-Appellee, Cross-Appellant, AIG Hawaii Insurance Company ("AIG") (collectively, "the Insurers"), appeal from the circuit court's October 18, 2004 final judgment partially in favor of the Pruetts. On appeal, the Insurers present the following points of error: (1) the circuit court erred when it held that the Pruetts were entitled to coverage under the Insurers' automobile insurance policies; (2) the circuit court erred when it determined that the phrase "any person" as used in the automobile insurance policies was ambiguous; and (3) the circuit court erred when it determined that the Pruetts were entitled to recover costs and attorney's fees against the Insurers.
For the following reasons, we hold that the circuit court: (1) did not err when it determined that liability coverage was afforded to Meredith Pruett and Ikaika Pruett pursuant to the terms of AIG's automobile insurance policy, inasmuch as the manner in which the term "any person" was used in AIG's policy was ambiguous; (2) did not err when it determined that Personal Injury Protection ("PIP") coverage was afforded to Ikaika Pruett pursuant to the terms of Allstate's automobile insurance policy, inasmuch as the manner in which the term "any person" was used in Allstate's policy was ambiguous; (3) erred when it determined that Pearl Pruett and Ikaika Pruett were afforded liability coverage under Allstate's automobile insurance policy because any claim arising from the automobile accident would not arise out of the use of an "insured auto"; (4) abused its discretion in awarding costs and attorney's fees to the Pruetts because the circuit court did not order the Insurers to "pay benefits"; and (5) did not err when it determined that the Pruetts were excluded from coverage under the terms of Allstate's homeowner's insurance policy. Accordingly, we affirm in part and reverse in part the circuit court's October 18, 2004 final judgment.
I. BACKGROUND
A. Factual Background
Pearl Pruett is the biological grandmother and adoptive mother of Ikaika Pruett, who is a minor. Meredith Pruett is Pearl's biological daughter, Ikaika's biological aunt, as well as Ikaika's sister as a result of the adoption. Pearl, Meredith, and Ikaika all reside together.
On February 8, 2002, Ikaika was involved in an automobile accident while operating a vehicle owned by Meredith. Ikaika did not have a driver's license at the time of the accident. He also did not have a reasonable belief that he was entitled to operate the vehicle, and had neither Meredith's nor Pearl's permission to use or operate the vehicle.
According to the circuit court's undisputed findings of fact, Charlene Manglicmot, Michelle Casil and others may claim to suffer injuries from the accident. Additionally, Salvador PeBenito and the Board of Water Supply of the City and County of Honolulu and others have claimed or may claim property damage from the accident.
Meredith was listed as the named insured on an AIG automobile insurance policy, which was in effect on the day of the accident. Pearl was listed as the named insured on an Allstate automobile insurance policy and an Allstate homeowner's insurance policy, both of which were in effect on the day of the accident.
*613 B. Procedural Background
On June 10, 2002, Allstate filed a complaint in circuit court seeking, inter alia, a judicial declaration that it did not owe duties to defend or indemnify the Pruetts under its automobile insurance policy for any claims or injuries arising out of the automobile accident. Allstate also sought a declaration that it was not required to provide PIP coverage to, inter alia, Ikaika Pruett.
On July 8, 2002, the Pruetts filed a counterclaim against Allstate, as well as a third party complaint against AIG. In their counterclaim, the Pruetts alleged that Allstate owed duties to defend and indemnify under both its automobile and homeowner's insurance policies. The Pruetts claimed that coverage was owed under the homeowner's policy because the Pruetts "expect property damage and personal injury claims to be asserted against them . . . based on allegations including but not limited to negligent entrustment and negligent supervision of a minor." In its third party complaint, the Pruetts asserted that AIG owed them duties to defend and indemnify under AIG's automobile insurance policy issued to Meredith.
On November 7, 2002, AIG moved for summary judgment on the Pruett's third party complaint. On November 25, 2002, Allstate moved for summary judgment on its complaint and on the Pruett's counterclaim. On December 17, 2002, the Pruetts filed a cross-motion for summary judgment against Allstate and AIG.
On March 4, 2003, the circuit court filed its findings of fact, conclusions of law and order granting in part the Pruetts' cross-motion for summary judgment against Allstate and AIG. The circuit court also denied in part Allstate's motion for summary judgment, and denied AIG's motion for summary judgment. Therein, the circuit court ruled that the exclusions from coverage enumerated in both AIG's and Allstate's insurance policies did not apply to the Pruetts because the phrase "any person" as used in the policies was ambiguous. Accordingly, the circuit court determined that the Pruetts were entitled to coverage under the Insurers' auto policies for personal injury and property damage claims. For the same reason, the circuit court also determined that Ikaika Pruett was entitled to personal injury protection coverage through Allstate's auto insurance policy.
On June 28, 2004, Allstate filed a motion for partial summary judgment as to its duty to defend on a claim alleging negligent parenting by the Pruetts. On September 7, 2004, the circuit court granted Allstate's motion for partial summary judgment. In its order, the circuit court concluded that Allstate was not obligated, pursuant to the terms of its homeowner's insurance policy, to defend or indemnify any of the Pruetts for any claim to recover for injuries arising from the automobile accident, which included claims for negligent parenting.
On September 8, 2004, the circuit court granted the Pruetts' request for an award of costs and attorney's fees. This award was based on the Pruetts' prevailing on the issue of coverage under AIG's and Allstate's automobile insurance policies, and not under Allstate's homeowner's insurance policy.
The circuit court's final judgment was filed on October 18, 2004. Notices of appeal were timely filed by the Pruetts on October 22, 2004, AIG on November 15, 2004, and Allstate on November 16, 2004.
II. STANDARDS OF REVIEW
A. Summary Judgment
On appeal, the grant or denial of summary judgment is reviewed de novo. See State ex. rel. Anzai v. City and County of Honolulu, 99 Hawai`i 508, 514, 57 P.3d 433, 439 (2002); Bitney v. Honolulu Police Dep't, 96 Hawai`i 243, 250, 30 P.3d 257, 264 (2001).
[S]ummary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. The evidence must be viewed in the light most favorable to the non-moving party. In other *614 words, we must view all of the evidence and inferences drawn therefrom in the light most favorable to the party opposing the motion.
Kahale v. City and County of Honolulu, 104 Hawai`i 341, 344, 90 P.3d 233, 236 (2004) (citation omitted).
B. Interpretation of Insurance Policies
Regarding interpretation of insurance policies, this court has stated:
[I]nsurers have the same rights as individuals to limit their liability and to impose whatever conditions they please on their obligation, provided they are not in contravention of statutory inhibitions or public policy. As such, insurance policies are subject to the general rules of contract construction; the terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended. Moreover, every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy.
Nevertheless, adherence to the plain language and literal meaning of insurance contract provisions is not without limitation. We have acknowledged that because insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys, we have long subscribed to the principle that they must be construed liberally in favor of the insured and any ambiguities must be resolved against the insurer. Put another way, the rule is that policies are to be construed in accord with the reasonable expectations of a layperson.
Dairy Rd. Partners v. Island Ins. Co., Ltd., 92 Hawai`i 398, 411-12, 992 P.2d 93, 106-07 (2000) (citations, quotation marks, and brackets omitted).
C. Attorney's Fees and Costs
This court reviews the circuit court's denial and granting of attorney's fees under the abuse of discretion standard. Eastman v. McGowan, 86 Hawai`i 21, 27, 946 P.2d 1317, 1323 (1997) (citation omitted); Coll v. McCarthy, 72 Haw. 20, 28, 804 P.2d 881, 887 (1991). "The trial court abuses its discretion if it bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Lepere v. United Public Workers, 77 Hawai`i 471, 473, 887 P.2d 1029, 1031 (1995) (citation, internal quotation marks, and brackets omitted). Stated differently, "[a]n abuse of discretion occurs where the trial court has clearly exceeded the bounds of reason or disregarded rules or principles of law or practice to the substantial detriment of a party litigant." State ex rel. Bronster v. United States Steel Corp., 82 Hawai`i 32, 54, 919 P.2d 294, 316 (1996).
TSA Int'l Ltd. v. Shimizu Corp., 92 Hawai`i 243, 253, 990 P.2d 713, 723 (1999) (some citations omitted); see Ranger Ins. Co. v. Hinshaw, 103 Hawai`i 26, 30, 79 P.3d 119, 123 (2003) (same).
III. DISCUSSION
A. The Circuit Court Did Not Err When It Determined That the Term "Any Person" Was Ambiguous As Used In the Insurers' Automobile Policies.
The Insurers maintain that the circuit court erred when it determined that the term "any person" was ambiguous as used in their respective automobile insurance policies. In so maintaining, the Insurers urge this court to construe the term "any person" as unambiguously including family members of the named insured.
1. Selective use of the term "any person" within AIG's auto insurance policy creates an ambiguity that must be resolved against it.
AIG's insurance policy defines an "Insured" as follows:
Part A Liability Coverage
A. We will pay compensatory damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident.
B. Insured as used in this Part means:
*615 1. You or any family member for the ownership, maintenance or use of any auto or trailer.
2. Any person using your covered auto with your permission.
3. For your covered auto, any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.
4. For any auto or trailer, other than your covered auto, any other person or organization but only with respect to legal responsibility for acts or omissions of you or any family member for whom coverage is afforded under this Part.
Contained within this same "Part" is the following pertinent exclusion ("Exclusion No. 8") from coverage enumerated in AIG's insurance policy: "We do not provide Liability Coverage for any person: . . . 8. Using a vehicle without a reasonable belief that that person is entitled to do so."
The terms "you" and "your" are defined in the "Definitions" section of AIG's insurance policy as "[t]he `named insured' shown in the Declarations; and . . . [t]he spouse if a resident of the same household." The term "family member" is defined as "a person related to you by blood, marriage or adoption who is a resident of your household, or such person while temporarily living elsewhere. This includes a ward or foster child[.]"[2] The term "any person" is not defined in the policy.
As set forth above, the Insurers urge this court to construe the term "any person" as used in the exclusions section of their insurance policies as unambiguously including family members of the named insured. To support their argument, they point to a majority of jurisdictions which have held accordingly. See, e.g., Hartford Ins. Co. of the Midwest v. Halt, 223 A.D.2d 204, 212, 646 N.Y.S.2d 589, 594 (1996) (overruling Paychex, Inc. v. Covenant Ins. Co., 156 A.D.2d 936, 549 N.Y.S.2d 237 (N.Y.App.Div.1989) because "the majority of courts that have addressed the issue is correct and that the countervailing view is unreasonable and unjust");[3]Close v. Ebertz, 583 N.W.2d 794 *616 (N.D.1998) ("The majority of courts[] . . . have concluded the `any person' language unambiguously includes a `family member[.]'").
However, notwithstanding what these jurisdictions have held, this court has agreed that the term "any person" may be ambiguous when construed within the context of the terms of the insurance policy itself. See AIG Hawai`i Ins. Co. v. Smith, 78 Hawai`i 174, 182-83, 891 P.2d 261, 269-70 (1995) (agreeing with Econ. Fire & Cas. Co. v. Kubik, 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d 504 (1986)). In Smith, we observed that the "appellants' construction of clause four runs counter to the selective use of" the terms "any person" and "family member" "in defining the scope of coverage in the policy."[4]Id. at 182, 891 P.2d at 269 (emphasis added).
As stated by the Kubik court, by itself, the term "any person," "encompass[es] every possible individual including the insured and his family members." Kubik, 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 507.
However, while the terms "family member" and "any person" have a clear meaning when standing alone, that meaning can become, as in the instant case, ambiguous through the manner in which those terms are used throughout the policy. In this regard, we note that the terms "family member" and "any person" are used selectively throughout the policy's exclusions in such a way as to create the impression that they refer to mutually exclusive classes.
Id. (emphasis in original).
This court agreed with the Kubik court's reasoning and concluded that "the selective use of the terms `any person' and `family member' in clause four of AIG's policy creates mutually exclusive classes[.]" Smith, 78 Hawai`i at 183, 891 P.2d at 270. Accordingly, a person could not "claim entitlement to coverage . . . by asserting that he is both `any person' and a `family member.'" Id.
Allstate asserts that Smith is distinguishable from the instant case, insofar as "there is no Hawai`i case law construing the term `any person' as used in" the exclusions to coverage section of an automobile insurance policy. Allstate points out that Smith construed the term "any person" as it was used to define the term "covered person" in the insurance policy in that case, and not as used in the exclusions to coverage section in this case. Additionally, the Insurers assert that the majority view is consistent with Hawaii's rules governing insurance contract interpretation.
However, Allstate overlooks that the Kubik court interpreted a clause that excluded coverage "[f]or any person using a vehicle without a reasonable belief that the person is entitled to do so." 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 506. The exclusion at issue in Kubik is virtually identical to Exclusion No. 8 in AIG's automobile insurance policy, as quoted supra. To reiterate, this court in Smith agreed with the Kubik court's analysis and construed the term "any person" as it was used to define the term "covered person" in the insurance policy in that case. See Smith, 78 Hawai`i at 180, 182-83, 891 P.2d at 267, 269-70. Because we applied the Kubik court's analysis to the policy language at issue in Smith, and the interpretation of "any person" as used in an exclusion was at issue in Kubik, it is logical to apply the same analysis to the exclusions *617 in this case.[5]
The Insurers correctly point out that this court has long held that "the terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended." Dairy Rd. Partners, 92 Hawai`i at 411, 992 P.2d at 106. Additionally, "[a] court must `respect the plain terms of the policy and not create ambiguity where none exists.'" Smith v. New England Mut. Life Ins. Co., 72 Haw. 531, 537, 827 P.2d 635, 638 (1992) (quoting First Ins. Co. of Hawaii, Inc. v. State ex rel. Minami, 66 Haw. 413, 423-24, 665 P.2d 648, 655 (1983)).
However, we have also said that "because insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys, we have long subscribed to the principle that they must be construed liberally in favor of the insured and any ambiguities must be resolved against the insurer." Dairy Rd. Partners, 92 Hawai`i at 411-12, 992 P.2d at 106-07 (brackets, block format, quotation marks, and citation omitted). In other words, "the rule is that policies are to be construed in accord with the reasonable expectations of a layperson." Id. at 412, 992 P.2d at 107 (block format, quotation marks, and citation omitted). In light of this court's long held principles in construing the terms of an insurance policy, the Insurers' argument that these terms cannot become ambiguous through the manner in which they are used is unpersuasive.[6]
As noted supra, the term "any person" is not defined in AIG's policy. Accordingly, standing by itself, this term "should be interpreted according to [its] plain, ordinary, and accepted sense in common speech. . . ." Dairy Rd. Partners, 92 Hawai`i at 411, 992 P.2d at 106 (quotation marks, block format, and citation omitted). However, this court need not do so if "it appears from the policy that a different meaning is intended." Id. (quotation marks, block format, and citation omitted). Indeed, our analysis of the terms of an automobile insurance policy is not confined to either a single clause or term in isolation from the rest of the policy. See id. ("[E]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy." (Quotation marks, citations, and some brackets omitted.)).
In this case, we read AIG's policy as classifying an "Insured" in one of several possible ways: (1) "You" or, as defined, "[t]he `named insured' shown in the Declarations; and . . . [t]he spouse if a resident of the same household[,]" "for the ownership, maintenance or use of any auto or trailer"; (2) "any family member for the ownership, maintenance or use of any auto or trailer"; (3) "any person" either "using your covered auto with your permission[ ]" or "[f]or your covered auto, . . . only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part"; or (4) "[f]or any auto or trailer, other than your covered auto, any other person . . . but only with respect to legal responsibility for acts or omissions of you or any family member for whom coverage is afforded under this Part." It is undisputed that Ikaika Pruett qualifies as "any family member" as defined in AIG's policy.
The foregoing categories of an "Insured" appear to be preserved in the exclusions *618 from coverage section of AIG's insurance policy. For example, AIG's policy states that
[w]e do not provide Liability Coverage for any person: . . . (2) For damage to property owned or being transported by that person[;] . . . (8) Using a vehicle without a reasonable belief that that person is entitled to do so[;] . . . [and] (10) For any liability assumed by you or any family member under any contract.
(Emphases added.) In light of the manner in which these exclusions are used, we believe that "the reasonable expectations of a layperson" would construe the phrase "that person" to refer to the term "any person," and the terms "you or any family member" to be mutually exclusive to the classification of "any person." See Dairy Rd. Partners, 92 Hawai`i at 412, 992 P.2d at 107 ("[T]he rule is that policies are to be construed in accord with the reasonable expectations of a layperson." (Block format, quotation marks, and citation omitted.)); see also Smith, 78 Hawai`i at 182-83, 891 P.2d at 269-70. Construing the term "any person" as used in the exclusion section "liberally in favor of the insured[,]" and in light of the multiple classifications created by the definition of an "Insured," the term "any person" is ambiguous and its meaning "must be resolved against the insurer." Dairy Rd. Partners, 92 Hawai`i at 412, 992 P.2d at 107 (brackets omitted). Accordingly, mutually exclusive classes were created from AIG's selective use of the terms "you," "any family member," and "any person." See Smith, 78 Hawai`i at 182-83, 891 P.2d at 269-70. Inasmuch as Ikaika Pruett cannot qualify both under the distinct classes of "any person" and "any family member," we hold that the circuit court did not err when it determined that AIG's Exclusion No. 8 did not apply to Ikaika.
2. Selective use of the term "any person" within Allstate's auto insurance policy creates an ambiguity that must be resolved against it.
Allstate asserts that the circuit court erred when it determined that the term "any person" as used in its exclusions to PIP coverage section of its automobile insurance policy was ambiguous. Specifically, Allstate points to the following exclusions that operate to exclude PIP coverage to Ikaika Pruett:
[PIP] coverage does not apply to bodily injury, sickness, disease or death[ ] . . . to any person while committing an act punishable by imprisonment for more than one year[,] . . . [and] to any person while operating or using a motor vehicle without a good faith belief that such person is legally entitled to do so.
The circuit court, however, concluded that an ambiguity existed between the policy's definition of an "insured person" and the exclusions to PIP coverage quoted above.
Black's Law Dictionary defines a "person" simply as "[a] human being." Black's Law Dictionary 1178 (8th ed.2004). Standing by itself, it would thus be reasonable for a layperson to expect that the term "any person" to mean "any human being." See id.; see also Dairy Rd. Partners, 92 Hawai`i at 412, 992 P.2d at 107 ("[T]he rule is that policies are to be construed in accord with the reasonable expectations of a layperson." (Block format, quotation marks, and citation omitted.)); id. at 411, 992 P.2d at 106 ("[T]he terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended."). As the Kubik court observed, the term "any person, . . . standing by itself, . . . encompass[es] every possible individual including the insured and his family members." 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 507.
However, to reiterate, "while the terms `family member' and `any person' have a clear meaning when standing alone, that meaning can become[ ] . . . ambiguous through the manner in which those terms are used throughout the policy." Id. (emphasis added). In this regard, when these terms "are used selectively throughout the policy's exclusions in such a way as to create the impression that they refer to mutually exclusive classes[,]" an ambiguity results, id., which "must be resolved against the insurer[,]" Dairy Rd. Partners, 92 Hawai`i at 412, 992 P.2d at 107 (block format, brackets, and citation omitted).
*619 Liability coverage is provided by Allstate's auto insurance policy, in pertinent part, as follows: "Allstate will pay for all damages an insured person is legally obligated to pay[ ] because of[ ] . . . bodily injury sustained by any person[.]" (Emphases added.) An "insured person" is defined as, inter alia, either "you" or "any resident relative." "You" is defined as "the policyholder named on the declarations page and that policyholder's resident spouse." "Resident" is defined as "the physical presence in your household with the intention to continue living there." The term "any person" is undefined.
Accordingly, the foregoing quoted sentence can be interpreted in the following manner: "Allstate will pay for all damages ["the policyholder named on the declarations page and that policyholder's resident spouse[,]" and "any resident relative"] is legally obligated to pay[ ] because of[ ] . . . bodily injury sustained by any person[.]" As discussed supra, this sentence appears to explain Allstate's duty to indemnify an "insured person" from "damages" that an "insured person is legally obligated to pay. . . ." Pursuant to the foregoing language, it simply does not make sense for an "insured person" to seek indemnification for bodily injuries incurred on himself if a layperson were to construe the term "any person" to mean "any human being." Therefore, in this context, it would be unreasonable to expect a layperson to construe the term "any person" to mean "any human being," inasmuch as the manner in which the term is used above clearly cannot include an "insured person." See Kubik, 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 507; see also Dairy Rd. Partners, 92 Hawai`i at 411, 992 P.2d at 106. Accordingly, Allstate's use of the terms "any person" and "insured person" in its liability coverage section is ambiguous because its selective use of these terms creates "mutually exclusive classes" contrary to the meaning of the term "any person" in its "plain, ordinary, and accepted sense in common speech. . . ." See Kubik, 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 507; see also Dairy Rd. Partners, 92 Hawai`i at 411, 992 P.2d at 106.
In this case, an insured must seek compensation from Allstate for his own bodily injuries through any PIP coverage he may have. PIP coverage is provided by Allstate's insurance policy, as follows: "Allstate will pay to or on behalf of the injured person the following benefits in accordance with Hawaii no-fault law." According to its policy, "[p]ayments will be made only when bodily injury, sickness, disease or death is caused by an accident arising out of the operation, maintenance, or use of a motor vehicle as a motor vehicle." Allstate's auto policy defines an "injured person" in pertinent part, as follows:
a) you or a resident relative who sustains bodily injury, sickness, disease, or death:
(i) arising out of the operation, maintenance or use of any motor vehicle as a motor vehicle[.]
. . . .
b) any other person who sustains bodily injury, sickness disease or death:
(i) arising out of the operation, maintenance or use of the insured motor vehicle or a temporary loaner vehicle[.]
In the PIP coverage section of Allstate's auto policy, the terms "you" and "your" are defined as "the policyholder named on the declarations page." The term "resident relative" is defined as "any person related to you and residing in your household[,]" and "any minor residing in your household who is . . . in your custody[ ] or . . . in the custody of any relative who resides in your household." The terms "any person" and "any other person" are not defined by the policy.
There are thirteen exclusions to PIP coverage included in Allstate's automobile policy. Nine of these exclusions refer to the undefined term of "any person," and do not refer to the terms "insured person," "you," or "resident relative." For example, PIP exclusion numbers 1, 2, 3, 4, 7, and 10 state, as follows:
This coverage does not apply to bodily injury, sickness, disease or death:
1. to you or any resident relative while occupying a motor vehicle owned by you which is not an insured motor vehicle.
2. to a resident relative while occupying a motor vehicle owned by that person *620 and for which the security required by the Hawaii no-fault law is not in effect.
3. to a resident relative who is a named insured under any other contract providing the security required by the Hawaii no-fault law.
4. to any person while committing an act punishable by imprisonment for more than one year.
. . . .
7. to any person while operating or using a motor vehicle without a good faith belief that such person is legally entitled to do so.
. . . .
10. to any person, other than you or a resident relative, while occupying any motor vehicle outside the State of Hawaii. . . .
Allstate contends that PIP exclusion number 10 demonstrates that the term "resident relative" is included within the broader term of "any person." However, Allstate overlooks that our analysis of the terms of an automobile insurance policy is not confined to either a single clause or term in isolation from the rest of the policy. See Dairy Rd. Partners, 92 Hawai`i at 411, 992 P.2d at 106 ("[E]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy." (Emphasis added and quotation marks, citations, and some brackets omitted.)).
As discussed above, the liability coverage section of Allstate's policy creates mutually exclusive classes through its selective use of the terms "any person" and "insured person." See Kubik, 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 507. Moreover, the term "any person" is undefined throughout both the liability and PIP coverage sections of Allstate's auto policy. Because it would be unreasonable for a layperson to construe the term "any person" to mean "any human being" as that term is used in Allstate's liability coverage section, and Allstate essentially argues that the term "any person" should be construed to mean "any human being" in its PIP coverage section, the term "any person" is ambiguous as used throughout Allstate's policy and its meaning must therefore be resolved against the insurer. See Dairy Rd. Partners, 92 Hawai`i at 412, 992 P.2d at 107. Accordingly, we hold that the circuit court did not err when it determined that Allstate's exclusions to PIP coverage did not apply to Ikaika Pruett, inasmuch as he is a part of the "resident relative" class of an "insured person," and not the "any person" class as created by the selective use of those terms in Allstate's auto policy.
B. The Circuit Court Erred When It Determined That Liability Coverage Was Afforded To Pearl and Ikaika Pruett Pursuant To the Terms Of Allstate's Automobile Insurance Policy.
Allstate asserts that Pearl and Ikaika Pruett are not entitled to liability coverage because Meredith's vehicle does not qualify as an "Insured Auto" as defined in its automobile insurance policy. Liability coverage is provided by Allstate's auto insurance policy, as follows:
Allstate will pay for all damages an insured person is legally obligated to pay because of:
1. bodily injury sustained by any person, and
2. damage to or destruction of property, including loss of use.
Under these coverages, your policy protects an insured person from claims for accidents arising out of the ownership, maintenance or use, loading or unloading of an insured auto.
We will defend an insured person sued as the result of an auto accident, even if the suit is groundless or false. We will choose the counsel. We may settle any claim or suit if we believe it is proper.
(Emphasis added.)
Allstate's policy defines an "insured person" in the following ways:
Insured Persons
1. While using your insured auto:
a) you,
b) any resident, and
c) any other person using it with your permission.
2. While using a non-owned auto:
a) you,
*621 b) any resident relative using a four wheel private passenger auto or utility auto.
3. Any other person or organization liable for the use of an insured auto if the auto is not owned or hired by this person or organization, provided the use is by an insured person under either of the two preceding paragraphs.
The policy defines an "insured auto" as including, inter alia, "[a] non-owned auto used by you or a resident relative with the owner's permission. This auto must not be available or furnished for the regular use of an insured person."
Meredith's vehicle, which was a 1990 Toyota Corolla, was listed on AIG's auto insurance policy naming Meredith as the named insured. It is undisputed that Ikaika did not have permission to operate Meredith's vehicle on the day of the accident. Additionally, it is undisputed that Meredith's car is not listed as an "insured auto" under Allstate's auto insurance policy. Thus, notwithstanding that Ikaika Pruett qualifies as an "insured person" under Allstate's policy, inasmuch as he is a "resident relative" who used a "non-owned auto" or a "four wheel private passenger auto or utility auto," Allstate's auto insurance policy "protects" neither Pearl Pruett nor Ikaika Pruett as "insured persons" because any "claim[ ]" arising from the February 8, 2002 accident would not "aris[e] out of the . . . use[ ] . . . of an insured auto." See Dairy Rd. Partners, 92 Hawai`i at 411, 992 P.2d at 106 ("[T]he terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended."). Accordingly, we hold that the circuit court erred in its determination that Pearl Pruett and Ikaika Pruett were afforded liability coverage pursuant to the terms of Allstate's automobile insurance policy.
C. The Circuit Court Abused Its Discretion When It Awarded Costs and Attorney's Fees To the Pruetts.
Hawai`i Revised Statutes (HRS) § 431:10-242 (2005) provides, in its entirety:
Where an insurer has contested its liability under a policy and is ordered by the courts to pay benefits under the policy, the policyholder, the beneficiary under a policy, or the person who has acquired the rights of the policyholder or beneficiary under the policy shall be awarded reasonable attorney's fees and costs of suit, in addition to the benefits under the policy.
(Emphasis added.)
The circuit court's order granting costs and attorney's fees to the Pruetts states that the award was made based on the Pruetts "prevail[ing] on the issue of coverage under the automobile insurance policies as to Allstate and AIG . . . in accordance with [HRS § 431:10-242][.]" AIG contends that the circuit court erred when it awarded costs and attorney's fees to the Pruetts because it was not ordered to "pay benefits" under its policy for purposes of HRS § 431:10-242.
In Mikelson v. United Servs. Auto. Ass'n, 108 Hawai`i 358, 360, 120 P.3d 257, 259 (2005), this court acknowledged that the "fundamental question with respect to the issue of awarding ['attorney's fees and the costs of suit'] is whether [the insurer] has in fact been ordered to pay benefits within the meaning of HRS § 431:10-242." (Brackets added.) In Mikelson, this court denied the insured's request for attorney's fees because the trial court ordered the insurer to provide "[underinsured motorist ("UIM") ] coverage" and not "UIM benefits," the latter of which would be sufficient to satisfy "the plain and obvious meaning" of the phrase "pay benefits" as used within HRS § 431:10-242. 108 Hawai`i at 360-61, 120 P.3d at 259-60.
Similarly, in Ranger Insurance Co. v. Hinshaw, 103 Hawai`i 26, 30, 79 P.3d 119, 123 (2003), multiple complaints for declaratory relief were dismissed with prejudice. This court held that HRS § 431:10-242 was inapplicable because the insurer was not ordered to pay any benefits under its policy. Id. at 34, 79 P.3d at 127.
In this case, the circuit court ordered that the exclusions in both Allstate's and AIG's automobile insurance policies were inapplicable to the Pruetts, "and coverage is afforded under [AIG's automobile insurance policy] and [Allstate's automobile insurance policy][.] *622 . . . In addition, [PIP] coverage is afforded to Ikaika Pruett under the Allstate Auto Policy arising from the February 8, 2002 accident." Because the circuit court did not order the Insurers to "pay benefits," as mandated by the plain language of HRS § 431:10-242, HRS § 431:10-242 does not apply to this case. See Mikelson, 108 Hawai`i at 360-61, 120 P.3d at 259-60; see also Ranger Ins. Co., 103 Hawai`i at 34, 79 P.3d at 127. Accordingly, we hold that the circuit court abused its discretion when it awarded costs and attorney's fees to the Pruetts pursuant to HRS § 431:10-242. See TSA Int'l Ltd., 92 Hawai`i at 253, 990 P.2d at 723 ("This court reviews the circuit court's denial and granting of attorney's fees under the abuse of discretion standard. . . . `The trial court abuses its discretion if it bases its ruling on an erroneous view of the law or on clearly erroneous assessment of the evidence.'" (Citations omitted.)).
D. The Circuit Court Did Not Err When It Determined That the Pruetts Were Excluded From Coverage From Allstate's Homeowner's Insurance Policy.
"Coverage X" under Allstate's homeowner's insurance policy states that "[s]ubject to the terms, conditions and limitations of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and is covered by this part of the policy."[7] Exclusion number 5 under "Coverage X" ("Exclusion No. 5") states: "Losses We Do Not Cover Under Coverage X: . . . 5. We do not cover bodily injury or property damage arising out of the ownership, maintenance, use, occupancy, renting, loaning, entrusting, loading or unloading of any motor vehicle or trailer." (Italics and bold omitted.)
The Pruetts contend that Exclusion No. 5 does not apply in this case because "Ikaika's taking of the keys and vehicle, without license or permission, is causally related to the anticipated injury claims[ ]" and, therefore, Ikaika's act "do[es] not fall under his ownership, maintenance, use, occupancy, renting, etc. of a motor vehicle." In other words, the Pruetts allege that "negligent parental supervision"[8] is a separate claim that is not excluded by the terms of Exclusion No. 5. Accordingly, the Pruetts contend that liability coverage should be afforded to both Pearl Pruett and Ikaika Pruett through the terms of Allstate's homeowner's policy.[9]
In support of their claim, the Pruetts rely on McDonald v. Home Insurance Co., 97 N.J.Super. 501, 235 A.2d 480 (1967), and Worcester Mutual Insurance Co. v. Marnell, 398 Mass. 240, 496 N.E.2d 158 (1986). Both of these cases hold that "negligent parental supervision" is a claim that is "separate and distinct from the use or operation of an automobile." Worcester Mut. Ins. Co., 398 Mass. 240, 496 N.E.2d at 161 (noting, however, that "without the severability provision" in the insurance policy, "a literal reading of the motor vehicle exclusion by itself precludes the [the parents] from coverage under the policy because [their son], an insured, owned and operated the motor vehicle involved in the fatal accident"); see McDonald, 97 N.J.Super. 501, 235 A.2d at 482 (holding that the "[a]ction" against the insureds "was not based upon the ownership, maintenance, operation, use, loading or unloading of automobiles[,]" but rather the insureds "alleged negligence in failing to supervise and control *623 their child, knowing of his violent and dangerous habits").
Notwithstanding the issue of whether a "negligent parental supervision" claim is covered by the terms of Allstate's policy, the Pruetts overlook that potential "[l]iability of the insured to the plaintiff is not the criterion; it is the allegation in the complaint of a cause of action which, if sustained, will impose liability covered by the policy." Danek v. Hommer, 28 N.J.Super. 68, 100 A.2d 198, 203 (1953), aff'd, 15 N.J. 573, 105 A.2d 677 (1954). Indeed, we have said that a duty to defend "is broader than the duty to pay claims and arises whenever there is a mere potential for coverage." Sentinel Ins. Co., Ltd. v. First Ins. Co. of Hawai`i, Ltd., 76 Hawai`i 277, 287, 875 P.2d 894, 904 (1994) (emphasis in original) (quotation marks and citation omitted). "The possibility may be remote, but if it exists[,] the [insurer] owes the insured a defense." Id. (brackets in original) (quotation marks and citation omitted).
However, the duty to defend "is limited to situations where the pleadings have alleged claims for relief which fall within the terms for coverage of the insurance contract. Where pleadings fail to allege any basis for recovery within the coverage clause, the insurer has no obligation to defend." Hawaiian Holiday Macadamia Nut Co., Inc. v. Indus. Indem. Co., 76 Hawai`i 166, 169, 872 P.2d 230, 233 (1994) (quotation marks and citation omitted). When a claim has not been pled, this court has expressly declined to consider whether that particular claim is covered by the terms of a liability insurance policy. See Fortune v. Wong, 68 Haw. 1, 4 n. 1, 702 P.2d 299, 302 n. 1 (1985) (declining to consider "the issue of whether a homeowner's policy affords coverage when negligent entrustment of an automobile is alleged[,]" because "`[n]egligent entrustment' was not pleaded"); see also County of Kaua`i v. Scottsdale Insurance Co., Inc., 90 Hawai`i 400, 403, 978 P.2d 838, 841 (1999) (alleging, inter alia, negligent supervision in the following manner: "The County failed to properly train, supervise, hire and discharge its employees and/or agents including but not limited to Officer Abadilla" (emphasis added and brackets omitted)); Hawaiian Insurance & Guaranty Co., Ltd. v. Chief Clerk of the First Circuit Court, 68 Haw. 336, 339, 713 P.2d 427, 429 (1986) ("[S]everal suits alleging, inter alia, the negligent entrustment of the car by Gerald August Lapenes, Jr. to Mervoine Kaio were brought. . . . ").
On January 8, 2004, Federico Casil and Angelina Casil, individually and on behalf of Michelle Casil (collectively, "the Casils"), filed a complaint against the Pruetts alleging, inter alia, that "Pearl Pruett is the mother of . . . Ikaika Pruett and is thus liable for the negligent actions of her minor son which caused injuries to . . . Michelle Casil." It also alleged that "Meredith Pruett was the owner of the car being driven negligently by . . . Ikaika Pruett, which car was being driven with the knowledge and consent of" Meredith and, therefore, Ikaika's "negligence is imputed to" Meredith. Ben Manglicmot and Elizabeth Manglicmot, individually and on behalf of Charlene Manglicmot (collectively, "the Manglicmots"), filed a complaint on the same day and made identical allegations against the Pruetts.[10]
It does not appear that these complaints allege "negligent parental supervision." Instead, it appears that the complaints claim vicarious liability and negligent entrustment on the part of Pearl Pruett and Meredith Pruett, respectively. The Pruetts do not argue that the vicarious liability and negligent entrustment claims are covered by the terms of Allstate's homeowner's policy, notwithstanding the applicability of Exclusion No. 5. The Pruetts make their "negligent parental supervision" argument under the assumption that the complaints will be amended sometime in the future pursuant to the Hawai`i Rules of Civil Procedure. The record on appeal does not indicate that any such amendment has been made. Accordingly, we *624 decline to express an opinion as to whether a claim of "negligent parental supervision" is covered under the terms of Allstate's homeowner's policy. See Hawaiian Holiday Macadamia Nut Co., 76 Hawai`i at 169, 872 P.2d at 233; see also Fortune, 68 Haw. at 4 n. 1, 702 P.2d at 302 n. 1.
The Pruetts also claim that, as the named insured, Pearl Pruett had a reasonable expectation of coverage under the terms of Allstate's homeowner's policy. In Fortune, however, this court observed that the parents' purchase of "two policies specifically written to insure the risks associated with the operation of automobiles[ ] . . . belies an expectation on their part that the homeowner's policy would cover [their son's] negligent driving[.]" 68 Haw. at 11, 702 P.2d at 306. Accordingly, this court applied the terms of an exclusion[11] to negate the insurer's liability for damages arising from the accident. Id.
Similarly, it is undisputed that Pearl Pruett is the named insured under an automobile insurance policy issued by Allstate. Because Pearl has a policy "specifically written to insure the risks associated with the operation of automobiles[,]" Pearl's expectation that she is also covered under her homeowner's insurance policy is unreasonable. See Fortune, 68 Haw. at 11, 702 P.2d at 306.
Finally, the Pruetts claim that Exclusion No. 5 is ambiguous because Ikaika's "act" of taking the keys and vehicle, without a driver's license or permission, "is subject to differing interpretation[s] in the context of" Exclusion No. 5. They also appear to assert that Allstate's "Joint Obligations"[12] clause creates an ambiguity between it and Exclusion No. 5 because "Allstate claims that this [clause] applies to Coverage X[.]"
However, "the rule" construing an ambiguity against an insurer "is not applied without exception upon mere assertions of ambiguity ." Fortune, 68 Haw. at 10, 702 P.2d at 306. "Rather, ambiguity is found [and the rule] is followed only when the contract taken as a whole is reasonably subject to differing interpretation." County of Kaua`i, 90 Hawai`i at 406, 978 P.2d at 844 (brackets in original) (quotation marks and citation omitted).
As such, the Pruetts' assertion that Ikaika's act creates an ambiguity with the terms of Allstate's policy is without merit because it is the terms of the policy "taken as a whole[,]" and not the actions of the insured, that can be "reasonably subject to differing interpretation." See id. Moreover, Allstate did not refer to its "joint obligations" clause in a manner suggesting that it was asserting that the clause constituted an exclusion to coverage. Instead, in an attempt to distinguish a case relied on by the Pruetts, Worcester Mutual Insurance Co., Allstate merely refers to the clause to illustrate that its policy does not have a severability clause. Accordingly, we hold that the circuit court did not err when it determined that the Pruetts were excluded from coverage under the terms of Allstate's homeowner's insurance policy.
IV. CONCLUSION
Based on the foregoing analysis, we affirm in part and reverse in part the circuit court's October 18, 2004 final judgment.
*625 Concurring and Dissenting Opinion by ACOBA, J.
I concur with the majority's decision except that I disagree with the majority's holding that the Circuit Court of the First Circuit (the court) erred in ruling that liability coverage should be afforded to Defendants/Third Party Plaintiffs-Appellants/Cross-Appellees/Cross-Appellees Pearl Pruett (Pearl) and Ikaika Pruett (Ikaika).
I.
The following undisputed facts are taken from the parties' briefs and the record on appeal. Pearl is the biological grandmother and adoptive mother of Ikaika who is a minor. Defendant/Third Party Plaintiff-Appellant/Cross-Appellee/Cross-Appellee Meredith Pruett (Meredith) is the biological daughter of Pearl and the biological aunt of Ikaika. Pearl, Ikaika, and Meredith reside in the same household.
On February 8, 2002, Ikaika was involved in an auto accident. The auto involved in the accident was a four wheel private passenger auto owned by Meredith and was insured under an auto insurance policy issued by Third-Party Defendant-Appellee/Cross-Appellant AIG Hawaii Insurance Company (AIG) to Meredith. The auto was not listed on the declarations page of the auto insurance policy issued by Plaintiff-Appellee/Cross-Appellee Allstate Insurance Company (Allstate) to Pearl.
Ikaika was driving the auto without permission from Meredith when he became involved in the accident. On the day of the accident, Ikaika did not have a reasonable belief that he was entitled to operate the vehicle. Defendants-Appellees/Cross-Appellees Charlene Manglicmot (Manglicmot) and Michelle Casil (Casil) have filed claims against Pearl, Meredith, and Ikaika for bodily injury. Defendants-Cross-Appellees Salvador PeBenito and Board of Water Supply, City and County of Honolulu have filed claims against Pearl, Meredith, and Ikaika for property damage.
II.
Part I of the Allstate auto insurance policy pertained to liability coverage and is entitled "Automobile Liability Insurance Bodily Injury Coverage AA Property Damage Coverage BB." The pertinent statement regarding liability coverage reads as follows:
Allstate will pay for all damages an insured person is legally obligated to pay because of:
1. bodily injury sustained by any person, and
2. damage to or destruction of property, including loss of use.
Under these coverages, your policy protects an insured person from claims for accidents arising out of the ownership, maintenance or use, loading or unloading of an insured auto.
(Emphases added.) The section under Part I is subtitled "Insured Persons." It defines "Insured Persons" as falling within two categories. Relevant to this case, an insured person is first described in (1)(b) as a resident using the policyholder's "insured auto." No qualification of the insured person being a "relative" or of obtaining "permission" of the policyholder to drive is attached to this definition of an "insured person."
Insured Persons
1. While using your insured auto:
a) you,[[1]]
b) any resident,[2] and
c) any other person using it with your permission.
(Some emphases in original and some added.)
Second, in (2)(b) of the same section, an insured person is also described as a "resident relative using a four wheel private passenger auto" that is a "non-owned auto."
2. While using a non-owned auto:
a) you,
*626 b) any resident relative using a four wheel private passenger auto or utility auto.
(Some emphases in original and some added.)
There is a policyholder "relative" qualification in 2(b). Similar to the "resident" reference in the first definition of insured persons in (1)(b), no "permission" to drive qualification is attached to the status of an insured person described in (2)(b). Plainly, Ikaika falls within the (2)(b) category of insured persons inasmuch as he is a resident relative who used a "non-owned auto" that was "a four wheel private passenger auto."[3]
Immediately following the section defining insured persons in the Allstate auto insurance policy is a section subtitled "Insured Autos." Relevant to this case, that section states:
Insured Autos
1. Any auto described on the declarations page. This includes the four wheel private passenger auto or utility auto you replace it with.
. . . .
4. A non-owned auto used by you or a resident relative with the owner's permission. This auto must not be available or furnished for the regular use of an insured person.
(Some emphases in original and some added.)[4] The Pruetts do not argue that Ikaika was driving an "insured auto." Allstate is correct that the car involved in the accident was not an insured auto under the policy terms.[5]
III.
Allstate argued before the court that liability coverage should not be provided to Ikaika and Pearl under its auto insurance policy because "in order to have coverage" there must be both an "insured person" and an "insured auto." According to Allstate, liability coverage should be denied to Pearl and Ikaika because he was not driving an "insured auto." The majority agrees with Allstate that because the accident-related claims in question do not involve the use of an "insured auto," Allstate was not bound to afford liability coverage to Ikaika.
However, Allstate's auto insurance policy was ambiguous in that it did not provide that liability coverage was limited to an "insured person" using an "insured auto" as opposed to an "insured person" using a "non-owned auto." To reiterate, Part I provides that Allstate will pay all damages an insured person is legally obligated to pay because of bodily injury sustained by "any person," i.e., Manglicmot and Casil.
This policy statement is not qualified by any language limiting coverage only to insured persons using insured autos. Allstate *627 owed coverage to Ikaika under the unambiguous language of this provision. As the court ruled, Ikaika was an "insured person" under the Allstate auto insurance policy insofar as he was (1) a "resident relative" of the policyholder, Pearl, named on the declarations page, and (2) was using a "four wheel private passenger auto[.]" As mentioned before, Ikaika comes within the second category of an "Insured Person" as noted above in (2)(b); insured person defined as one who uses "a non-owned auto."
By virtue of that definition, an insured person includes "any resident relative using a four wheel private passenger auto" if using a "non-owned auto." (Emphasis added.) However, the second paragraph in Part I, as set forth above, states that "[u]nder these coverages, your policy protects an insured person from claims for accidents arising out of the ownership, maintenance or use, loading or unloading of an insured auto." As opposed to insured auto, the term non-owned auto is not defined. However, the term indisputably applies to the vehicle Ikaika was using at the time of the accident. See Dairy Rd. Partners v. Island Ins. Co., 92 Hawai`i 398, 411, 992 P.2d 93, 106 (2000) (explaining that "insurance policies are subject to the general rules of contract construction; the terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended" (citation, quotation marks, and brackets omitted)). Accordingly, the reference to an insured person in (2)(b) as being one who, while using "a non-owned auto," is "a resident relative" using a "four wheel private passenger auto," creates a patent ambiguity when read with the statement that coverage would be provided to insured persons using an insured auto.[6]
Allstate's argument that liability coverage is limited only to insured persons using insured autos, then, is inconsistent with the reading that an insured person such as a resident is afforded coverage while driving a non-owned auto as well as the policyholder's "insured auto." Under the circumstances, the issue of liability coverage under the policy must be resolved in favor of the insured and against the insurer. See Tri-S Corp. v. Western World Ins. Co., 110 Hawai`i 473, 489, 135 P.3d 82, 98 (2006) (explaining that ambiguities must be resolved in favor of the insured and "policies are to be construed in accord with the reasonable expectations of a layperson"); Oahu Transit Services, Inc. v. Northfield Ins. Co., 107 Hawai`i 231, 235, 112 P.3d 717, 721 (2005) (stating that if the automobile exclusion provision in the insurance policy in question were ambiguous, "this court would construe [the] phrase in favor of the insured"); Allstate Ins. Co. v. Ponce, 105 Hawai`i 445, 458, 99 P.3d 96, 109 (2004) (holding that the ambiguity in the term of the insurance contract should be resolved in favor of the insured); Estate of Doe v. Paul Revere Ins. Group, 86 Hawai`i 262, 277, 948 P.2d 1103, 1118 (1997) (stating that this court must "resolve any contractual ambiguities against the insurer"); Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 110 n. 5, 839 P.2d 10, 25 n. 5 (1992) (noting that there is a "fundamental principle that any ambiguities in a contract should be interpreted most strongly against the party who has drafted the language . . . where a contract is open to more than one reasonable construction"); Sturla, Inc. v. Fireman's Fund Ins. Co., 67 Haw. 203, 209, 684 P.2d 960, 964 (1984) (explaining that "[b]ecause insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys, we have long subscribed to the principle that they must be construed liberally in favor of the insured and [any] ambiguities [must be] resolved against the insurer" (internal quotation marks and citations omitted)).[7] For the foregoing reasons I would *628 affirm the court's determination of liability coverage under the Allstate policy.
NOTES
[1] The Honorable Victoria S. Marks presided.
[2] It is undisputed that Meredith Pruett is the named insured. It is also undisputed that Ikaika Pruett satisfies the policy's definition of a "family member," inasmuch as he is related to Meredith "by blood" and "adoption," and both of them reside in the same household.
[3] As explained by the New York court,
The vast majority of courts considering the issue . . . [hold] that the policy unambiguously excludes coverage for anyone, including a "family member", who uses the vehicle without permission (see, Newell v. Nationwide Mut. Ins. Co., 334 N.C. 391, 432 S.E.2d 284; Allied Group Ins. Co. v. Allstate Ins. Co., 123 Idaho 733, 852 P.2d 485; Estate of Ge Yang v. General Cas. Co., 185 Wis. 2d 919, 520 N.W.2d 291 [unpublished decision-text at 1994 WL 269281], review denied 524 N.W.2d 142; Harlan v. Valley Ins. Co., 128 Or.App. 128, 875 P.2d 471, review denied 319 Or. 407, 879 P.2d 1285; Cincinnati Ins. Co. v. Plummer, 213 Ga. App. 265, 444 S.E.2d 378; Hanover Ins. Co. v. Locke, 35 Mass.App.Ct. 679, 624 N.E.2d 615; Kelly v. Threshermen's Mut. Ins. Co., 176 Wis. 2d 513, 502 N.W.2d 618 [unpublished decision-text at 1993 WL 98770]; Omaha Prop. & Cas. Ins. Co. v. Johnson, 866 S.W.2d 539 [Tenn.App.]; State Farm Mut. Auto. Ins. Co. v. Casualty Reciprocal Exch., 600 So. 2d 106 [La. App.]; Omni Ins. Co. v. Harps, 196 Ga.App. 340, 396 S.E.2d 66; St. Paul Ins. Co. v. Rutgers Cas. Ins. Co., 232 N.J.Super. 582, 557 A.2d 1052; General Acc. Fire & Life Assur. Corp. v. Perry, 75 Md.App. 503, 541 A.2d 1340, cert denied 313 Md. 612, 547 A.2d 189; Georgia Farm Bur. Mut. Ins. Co. v. Fire & Cas. Ins. Co. of Conn., 180 Ga.App. 777, 350 S.E.2d 325; State Farm Mut. Auto. Ins. Co. v. Kelly, 132 Wis. 2d 187, 389 N.W.2d 838, review denied 132 Wis. 2d 485, 393 N.W.2d 545; see also, Driskill v. American Family Ins. Co., 698 F. Supp. 789 [E.D.Mo.] [applying Missouri law]; cf., Donegal Mut. Ins. Co. v. Eyler, 360 Pa.Super. 89, 519 A.2d 1005; Wallen v. Acosta, 799 F. Supp. 83, 85, n. 1 [D.Kan.] [applying Kansas law]). The foregoing cases hold that, because the term "any person" is unambiguous and has no technical or otherwise restricted definition in the policy itself, it should be accorded its common meaning (see, Newell v. Nationwide Mut. Ins. Co., supra, 334 N.C., at 401, 432 S.E.2d, at 290; Cincinnati Ins. Co. v. Plummer, supra, 213 Ga.App., at 265-266, 444 S.E.2d, at 380; State Farm Mut. Auto. Ins. Co. v. Casualty Reciprocal Exch., supra, at 108; St. Paul Ins. Co. v. Rutgers Cas. Ins. Co., supra, 232 N.J.Super., at 586, 557 A.2d, at 1054). As a result, those cases hold that "any person" means exactly that, necessarily including any "family member" or even the named insured (see, Newell v. Nationwide Mut. Ins. Co., supra, 334 N.C., at 401, 432 S.E.2d, at 290; Omaha Prop. & Cas. Ins. Co. v. Johnson, supra, at 541; State Farm Mut. Auto. Ins. Co. v. Casualty Reciprocal Exch., supra, at 108; Omni Ins. Co. v. Harps, supra, 196 Ga.App., at 341-342, 396 S.E.2d, at 68). The cases reason that no ambiguity is created merely because one part of the policy establishes general coverage, whereas the other part establishes specific exclusions (see, Omaha Prop. & Cas. Ins. Co. v. Johnson, supra, at 541; General Acc. Fire & Life Assur. Corp. v. Perry, supra, 75 Md.App., at 509, 541 A.2d, at 1342; see also, Driskill v. American Family Ins. Co., supra, at 793).
Hartford Ins. Co. of the Midwest, 646 N.Y.S.2d at 592-93, 223 A.D.2d at 209-10 (alterations added and in original).
[4] Clause four of the insurance policy at issue in Smith stated, as follows:
"Covered person" as used in this Part means:
. . . .
4. For any auto or trailer, other than your covered auto, any person or organization but only with respect to legal responsibility for acts or omissions of you or any family member for whom coverage is afforded under this Part. This provision applies only if the person or organization does not own or hire the auto or trailer.
Id. at 180, 891 P.2d at 267 (bold in original).
[5] AIG contends that Retherford v. Kama, 52 Haw. 91, 470 P.2d 517 (1970), construed the term "any person" "as all-encompassing in determining whether or not a particular claimant qualified as `any person' sustaining bodily injury under a business general liability policy." However, AIG's reliance on Retherford is misplaced, inasmuch as this court's decision focused primarily on construing the term "with respect to" as used in the insurance policy at issue in that case, and not the term "any person." See generally Retherford, 52 Haw. 91, 470 P.2d 517.
[6] Moreover, it should be noted that the Kubik court's framework for analysis is similar to the manner in which this court analyzes the terms of an insurance policy. The Kubik court recognized that "the terms `family member' and `any person' have, standing by themselves, a clear and unambiguous meaning." 142 Ill.App.3d 906, 97 Ill. Dec. 68, 492 N.E.2d at 507. However, it further recognized that the "meaning" of these terms "can become[] . . . ambiguous through the manner in which those terms are used throughout the policy." Id.
[7] An "occurrence" is defined by the policy as "an accident[ ] . . . resulting in bodily injury or property damage."
[8] Apparently, a claim of "negligent parental supervision" is subsumed under Restatement (Second) of Torts § 316 (1965), which states:
A parent is under a duty to exercise reasonable care so to control his minor child as to prevent it from intentionally harming others or from so conducting itself as to create an unreasonable risk of bodily harm to them, if the parent
(a) knows or has reason to know that he has the ability to control his child, and
(b) knows or should know of the necessity and opportunity for exercising such control.
[9] We note that it is undisputed that Pearl Pruett is the named insured on Allstate's homeowner's insurance policy. Additionally, the parties do not dispute that Ikaika Pruett qualifies as an "insured person" as defined by the policy.
[10] To reiterate, on September 7, 2004, the circuit court filed its written order granting Allstate's motion for partial summary judgment. Therein, the circuit court ruled that Allstate was not "obligated" under the terms of the homeowner's insurance policy "to defend or to indemnify any of [the Pruetts] for any claim to recover for injuries sustained in the automobile accident of February 8, 2002, including but not limited to claims for negligent parenting."
[11] The exclusion at issue in Fortune excluded coverage for "bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of:. . . . (2) any motor vehicle owned or operated by or rented or loaned to any Insured[.]" 68 Haw. at 10, 702 P.2d at 305.
[12] The "joint obligations" clause is contained within the policy's explanation of the "Insuring Agreement," and states:
The terms of this policy impose joint obligations on the person named on the Policy Declarations as the insured and on that person's resident spouse. These persons are defined as you or your. This means that the responsibilities, acts and omissions of a person defined as you or your will be binding upon any other person defined as you or your.
The terms of this policy impose joint obligations on persons defined as an insured person. This means that the responsibilities, acts and failures to act of a person defined as an insured person will be binding upon another person defined as an insured person.
(Bold omitted.)
[1] "You" is defined, inter alia, as "the policyholder named on the declarations page[.]"
[2] "Resident" is defined as one having "physical presence in [the named policy holder's] household with the intention to continue living there."
[3] As is evident from the face of these provisions concerning an insured person, "permission" is wholly irrelevant where the insured person is a "resident."
[4] "Insured Autos" also includes the following definitions:
2. An additional four wheel private passenger auto or utility auto you become the owner of during the premium period. This auto will be covered if we insure all other private passenger autos or utility autos you own. You must, however, tell us within 60 days of acquiring the auto. You must pay any additional premium.
3. A substitute four wheel private passenger auto or utility auto, not owned by you or a resident, being temporarily used while your insured auto is being serviced or repaired, or if your insured auto is stolen or destroyed.
. . . .
5. A trailer while attached to an insured auto. The trailer must be designed for use with a private passenger auto or utility auto. This trailer can't be used for business purposes with other than a private passenger auto or utility auto.
[5] The car did not meet the first definition of an insured auto because the auto driven by Ikaika apparently was not described on the declarations page. The car in question did not meet the second definition of an insured auto because Pearl was not the owner of the auto. The car in question did not meet the third definition of an insured auto because there is no evidence in the record, and neither party asserts, that the auto was being temporarily used while an insured auto was being serviced or repaired or while an insured auto was stolen or destroyed. The car in question did not meet the fourth definition of an insured auto because it is undisputed that the auto was not being used with the owner's (Meredith's) permission. The car in question does not meet the fifth definition of an insured auto because it is not a trailer.
[6] Even more confusing is the fact that in the definition of "insured persons" as applied to a "resident," permission is wholly irrelevant, see supra note 3, whereas no. 4 in the definition of "insured autos" describes an insured auto as a non-owned auto used with the owner's permission.
[7] I agree with the majority that the court did not err in determining that the Pruetts were excluded from coverage under Allstate's homeowner's insurance policy. However, I disagree with the majority's interpretation of Fortune v. Wong, 68 Haw. 1, 702 P.2d 299 (1985), to support its argument that the Pruetts had no reasonable expectation of coverage under the Allstate homeowner's policy. In the case of Fortune, the homeowners insurance policy contained an exclusion that "declared in unambiguous language that it did not apply to bodily injury arising from the operation of a motor vehicle by an insured." Id. at 11, 702 P.2d at 306. In light of this exclusionary provision, the court held that it could not be concluded that liability for the insured's negligent operation of his motor vehicle "was within the intendment of the parties." Id.
Furthermore, the parents of the insured, who were insureds themselves under the homeowner's policy, "purchased two policies specifically written to insure the risks associated with operation of automobiles." Id. (emphasis added). The Fortune court cited the purchase of the two auto insurance policies in its conclusion that there were no "grounds for inferring the insured[s] could have reasonably expected their homeowner's policy to insure the risk of [the insured's] negligence in driving." Id.
Consequently, Fortune should not be read as establishing a presumption that an insured has no reasonable expectation of coverage for motor vehicle accidents under his or her homeowner's policy if the insured has an auto insurance policy written specifically to insure against liability arising from motor vehicle accidents. Rather, the Fortune court considered the unambiguous exclusion provision in the homeowner's insurance policy excluding coverage for motor vehicle accidents in conjunction with the insureds' purchase of two auto insurance policies in its determination that the insureds did not have a reasonable expectation of coverage under the homeowner's policy for the motor vehicle accident.
Like the insured in Fortune, Pearl had a policy, i.e. the Allstate auto policy, specifically written to insure the risks associated with automobile operation. As in Fortune, in this case there was an exclusion provision in Pearl's homeowner's policy with Allstate that clearly stated coverage would not be provided for "bodily injury or property damage arising out of the ownership, maintenance, use, occupancy, renting, loaning, entrusting, loading or unloading of any motor vehicle or trailer." It is the presence of an unambiguous exclusion provision in the homeowner's policy excluding coverage for auto accidents that makes an expectation of such coverage unreasonable. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2600610/ | 186 P.3d 155 (2008)
TRICON KENT CO., Plaintiff-Appellee,
v.
LAFARGE NORTH AMERICA, INC.; Lafarge West, Inc.; and Safeco Insurance Co. of America, Defendants-Appellees.
No. 06CA0595.
Colorado Court of Appeals, Div. II.
May 1, 2008.
*156 Berg, Hill, Greenleaf, & Ruscitti, LLP., Daniel M. Gross, Heidi C. Potter, Boulder, Colorado, for Plaintiff-Appellee.
Wells, Anderson, & Race, LLC, Larry S. McClung, Denver, Colorado, for Defendants-Appellees.
Preeo Silverman Green & Egle, P.C., Gilbert R. Egle, Denver, Colorado, for Amici Curiae American Subcontractors Ass'n, Inc. and American Subcontractors Ass'n of Colorado.
Opinion by Judge ROTHENBERG.
I. Background
In 2003 and 2004, Lafarge was the general contractor for a highway construction project in Douglas County, Colorado, involving the regrading and resurfacing of State Highways 83 and 86. The project was supervised by the Colorado Department of Transportation (CDOT), and Lafarge sought bids from subcontractors to perform the earthwork on the project. Tricon was the successful bidder, and in March 2004, the parties entered into a subcontract drafted by Lafarge. It provided, as relevant here, that Tricon agreed to work "in accordance with the terms and provisions of the Contract between the Owner [CDOT] and Contractor [Lafarge], including all general and special conditions, drawings, specifications and other documents."
*157 The subcontract also included a clause commonly referred to in the construction industry as a "no damages for delay" clause. It provided:
Section 6. Delays. (a) In the event the Subcontractor's performance of this subcontract is delayed or interfered with by acts of the Owner, Contractor or other Subcontractors, he may request an extension of time for the performance of same, as herein provided, but shall not be entitled to any increase in the subcontract price or to damages or additional compensation as a consequence of such delays or interference, except to the extent that the prime contract entitled the Contractor to compensation for such delays and then only to the extent of any amounts that the Contractor may, on behalf of the Subcontractor, recover from the Owner for such delays.
This action arose because the parties could not agree on the amount of Tricon's final compensation. Tricon alleged in its complaint that Lafarge breached the express and implied covenants of the subcontract, including the implied covenants of good faith and fair dealing. According to Tricon, the scope of its work was changed during the performance of the subcontract because of Lafarge's failure to schedule and sequence the project in accordance with the requirements of the prime contract and with the ordinary custom and practice in the industry. Tricon maintains that Lafarge's interference with Tricon's performance of the subcontract caused it to encounter significant obstacles and costly delays.
At trial, Tricon presented evidence that its estimator and project manager prepared its bid after reviewing the contract between CDOT and Lafarge and used the project plans and specifications for Tricon's calculations. The bid documents in the CDOT-Lafarge contract included the project phasing plan, which contained important information regarding the construction project, including the anticipated construction sequence, conditions under which the work would be performed, and the work zones that would be available during a particular phase. According to Tricon's witnesses, CDOT's phasing plan was crucial in Tricon's bid preparations and planning because it divided the earthwork into two segments of the job and helped Tricon determine where fill material would come from and the type of equipment to use.
Under CDOT's phasing plan, a new phasing lane was to be built first and while it was under construction, traffic was to flow in two lanes next to the work zone where earthen fill and retaining walls were being built. The retaining wall was to be constructed by another subcontractor, 5L, and the traffic was then to be switched to the eastbound side of the road. The last phase involved paving all three lanes with a final layer of asphalt, grading, landscaping, and installing guardrails.
The phasing plan showed that Tricon's truckers would have access to the job for hauling material because of the two open lanes and because CDOT required that a specially engineered, imported material, R-50, be placed on top of the fill. Tricon had estimated the amount of this material that would have to be trucked to the project, and Tricon's witnesses testified that before beginning work, it had submitted a method statement to Lafarge as required by CDOT's specifications; that the method statement tracked the phasing plan and categorized Tricon's work based on which side of the road was under construction; and that it also detailed the production rates and the amount of time the work would take.
CDOT's plan also called for native earth to be used on both sides of the roadway and a layer of R-50 to be placed on top of the fill. According to Tricon's estimator, approximately 10,000 cubic yards of R-50 was needed for this project, and the subcontractor performing the earthwork had to truck it in from a pit. Tricon presented evidence that it had to conduct earthwork operations in the midst of traffic and with different equipment than anticipated. Tricon also presented evidence that CDOT's design required the retaining wall to be built by 5L before Tricon could place the fill on top of it, that Lafarge could not begin paving on top of the R-50 layer until Tricon's earthwork was complete, and that the new passing lane could not be *158 used for traffic until the paving was in place. Tricon's superintendent testified that he was concerned about 5L's slow progress, that he repeatedly notified Lafarge's on-site project manager that the new passing lane could not be completed until 5L had finished its construction of the retaining wall, and that he also notified Lafarge about Tricon's need for better access for its trucks.
Tricon introduced correspondence from Lafarge establishing that Lafarge knew 5L had to complete its work before Tricon could proceed, and that Lafarge nevertheless directed Tricon to proceed and threatened to seek liquidated damages if Tricon did not do so. There was also evidence that 5L did not complete the retaining wall until late September 2004; that Lafarge decided not to open the project to two-way traffic; and that if the phasing plan had been followed, Tricon's work area would have been larger and its access to the project considerably greater. Tricon's witnesses testified to similar problems on the westbound shoulder work, which required Tricon to use smaller equipment in the work area, because it was more confined than as shown in the phasing plan.
In a letter dated December 17, 2004, Tricon sought additional compensation from Lafarge based on alleged delays relating to the construction of the retaining wall and traffic lane closures. Lafarge requested more documentation from Tricon, but after receiving it, Lafarge denied the claim, maintaining that such compensation was precluded by the "no damages for delay" clause in the subcontract. At the end of the project, CDOT also assessed Lafarge twenty-seven days of liquidated damages for the entire project, and Lafarge passed on to Tricon the liquidated damages for three of the twenty-seven days. Tricon denies responsibility for those damages.
The parties disagreed whether, during a preconstruction conference, Tricon had received a schedule from Lafarge showing a different sequence than the one Tricon claimed existed. Lafarge also contended that until Tricon's December 2004 letter, Tricon had not asked for additional compensation for delays relating to the wall, and that its request was untimely.
After Tricon's case-in-chief, Lafarge moved for a directed verdict, contending the "no damages for delay" clause precluded any damages to Tricon as a matter of law; that Tricon's request for compensation was untimely and was barred by the notice provision of the contract; and that Tricon's numerous letters to Lafarge regarding the situation were insufficient notice. The trial court denied Lafarge's motion, stating:
There are certainly factual disputes here . . . [s]uch as whether the difficulties . . . encountered in the course of the project such as the construction of the retaining wall by 5L and difficulties with lane closures, whether those were or should have been within the original contemplation with the parties at the time of contracting, or rather were sources of additional costs, extensions of time, damages for delays as referenced in section 23 of the subcontract which requires that notice be given of that fact or those facts to justify either an extension of time or damages or additional costs or all of the above.
It's also a jury question as to whether [Lafarge] changed the sequence of work in the phasings or whether [Tricon] was or should have been on notice of the scheduling of these other subcontractors such as 5L. It's a jury question of whether [Lafarge] is justified in holding back the balance due under the contract price.
It is most likely a question of law as to whether section six, the no damages for delays clause[,] applies here but that can't be invoked until these factual issues are adequately resolved. . . .
At the close of its case, Lafarge renewed its motion for a directed verdict. The court deferred ruling on the motion and said it would treat the motion as a post-verdict motion if necessary.
The jury returned a verdict in favor of Tricon and awarded it $29,276 on the contract balance and $144,600 for additional compensation. Lafarge did not file any post-trial motions, and the trial court awarded Tricon prejudgment interest and costs.
*159 II. Sufficiency of the Evidence
Lafarge contends the trial court erred in denying its motion for a directed verdict because the uncontroverted evidence established the existence of a valid and enforceable "no damages for delay" clause. Tricon contends that the "no damages for delay" clause is inapplicable, but that even if it applies, there was evidence that Lafarge's actions constituted "active interference" with the parties' contract.
We conclude "no damages for delay" clauses are valid and enforceable in Colorado; that active interference by an owner or contractor is a recognized exception to such clauses; and that Tricon presented sufficient evidence for the jury to find such interference by Lafarge. Thus, the trial court did not err in denying Lafarge's motion for a directed verdict.
A. Standard of Review
In ruling on a motion for directed verdict, a trial court must consider the evidence in the light most favorable to the nonmoving party and draw all inferences in that party's favor. In general, we apply that same standard on review. Fair v. Red Lion Inn, 943 P.2d 431, 443 (Colo.1997). However, where a motion for directed verdict involves a question of law and undisputed facts, we review the trial court's ruling de novo. Omedelena v. Denver Options, Inc., 60 P.3d 717, 722 (Colo.App.2002).
A motion for directed verdict should not be granted unless the evidence compels the conclusion that reasonable jurors could not disagree and that no evidence or inference was received at trial upon which a verdict against the moving party could be sustained. Fair, 943 P.2d at 436; Salstrom v. Starke, 670 P.2d 809, 811 (Colo.App.1983).
B. Validity of the "No Damages for Delay" Clause
We are unaware of any published state court decision in Colorado addressing a "no damages for delay" clause. However, a federal appeals court in a case arising in Colorado and the majority of courts in other jurisdictions that have addressed the issue have generally upheld the validity of such clauses. See W.C. James, Inc. v. Phillips Petroleum Co., 485 F.2d 22, 25 (10th Cir. 1973) (observing that "[s]uch clauses are commonly used in the construction industry and are generally recognized as valid and enforceable"); Owen Constr. Co. v. Iowa State Dep't of Transp., 274 N.W.2d 304, 306 (Iowa 1979) ("Such clauses are defended [in cases involving public contracts] on the theory they protect public agencies which contract for large improvements to be paid for through fixed appropriations against vexatious litigation based on claims, real or fancied, that the agency has been responsible for unreasonable delays.")(citing A. Kaplen & Son, Ltd. v. Hous. Auth., 42 N.J.Super. 230, 233, 126 A.2d 13, 15 (1956)); Maurice T. Brunner, Annotation, Validity and Construction of "No Damage" Clause with Respect to Delay in Building or Construction Contract, 74 A.L.R. 3d 187 (1976 & 2007 Cum.Supp.)(collecting numerous state and federal cases upholding "no damages for delay" clauses); see also In re Marriage of Bolding-Roberts, 113 P.3d 1265, 1267 (Colo. App.2005); Kohn v. Burlington N. & Santa Fe R.R., 77 P.3d 809, 811 (Colo.App.2003) (observing that when there are no Colorado decisions, we may look to other jurisdictions, including federal jurisdictions, for guidance).
Nevertheless, "no damages for delay" clauses have been strictly construed against owners or contractees because of the harsh results that may flow from the enforcement of such clauses. See John E. Green Plumbing & Heating Co. v. Turner Constr. Co., 742 F.2d 965, 966 (6th Cir.1984) (applying Michigan law); E.C. Ernst, Inc. v. Manhattan Constr. Co., 551 F.2d 1026, 1029 (5th Cir. 1977) (applying Alabama law); Cunningham Bros., Inc. v. City of Waterloo, 254 Iowa 659, 664, 117 N.W.2d 46, 49 (1962).
We are persuaded by these decisions, and we similarly conclude "no damages for delay" clauses are valid and enforceable in Colorado, but they are to be strictly construed against the owner or contractee.
C. Exceptions to "No Damages for Delay" Clauses
Courts in other jurisdictions have recognized several exceptions to, or limitations *160 on, the general rule that a "no damages for delay" clause precludes the recovery of delay damages. The most widely recognized exception to the enforceability of such a clause is for fraud, misrepresentation, or bad faith. See United States ex rel. Williams Elec. Co. v. Metric Constructors, Inc., 325 S.C. 129, 133, 480 S.E.2d 447, 449 (1997)(observing that "[o]f those cases addressing [the bad faith] exception, it appears to have been adopted in all but one jurisdiction").
Here, however, the only exception seriously argued in the trial court and to the jury was the active interference exception, which frequently has been applied where a contracting party has affirmatively or directly interfered with the work of a contractor or subcontractor. See John E. Green Plumbing & Heating Co., 742 F.2d at 966-67 (applying Michigan law and observing that the contractor was "not arguing that it suffered damages from delay, but rather that it suffered damages from obstacles created by [the construction manager]" and "as a result of [the manager's] hindrances failure to properly coordinate work on the project"); Newberry Square Dev. Corp. v. Southern Landmark, 578 So. 2d 750, 751 (Fla.Dist.Ct.App.1991); see also A.G. Cullen Constr., Inc. v. State Sys. of Higher Educ., 898 A.2d 1145, 1160 (Pa.Commw.Ct.2006) ("The government possesses a duty not to act in a way that will hinder or delay a contractor's performance.").
As a Pennsylvania court explained in James Corp. v. North Allegheny School District:
Ordinarily, "no damages for delay" clauses are enforceable. However, Pennsylvania law recognizes exculpatory provisions in a contract cannot be raised as a defense where (1) there is an affirmative or positive interference by the owner with the contractor's work, or (2) there is a failure on the part of the owner to act [in] some essential manner necessary to the prosecution of the work. Thus, affirmative or positive interference sufficient to overcome the "no damages for delay clause" may involve availability, access or design problems that pre-existed the bidding process and were known by the owner but not by the contractor.
938 A.2d 474, 484 (Pa.Commw.Ct.2007) (citation omitted).
We conclude, as did the trial court, that there was sufficient evidence for the jury to find that Lafarge's actions constituted "active interference" with Tricon's performance. This evidence included testimony that Lafarge (1) failed properly to schedule, sequence, and coordinate Tricon's activities on the project; (2) ordered Tricon to proceed with its work knowing that 5L had not completed the retaining wall, see Gasparini Excavating Co. v. Pa. Tpk. Comm'n, 409 Pa. 465, 476, 187 A.2d 157, 162 (1963) (owner held liable for delays where it instructed contractor to proceed despite lack of access to area because of another contractor's work); (3) threatened Tricon with liquidated damages if it did not perform the out-of-sequence work; and (4) knew Tricon needed two lane openings for efficient performance of its work, yet failed to provide it with open lane access. See Grant Constr. Co. v. Burns, 92 Idaho 408, 415, 443 P.2d 1005, 1012 (1968) (an order to a contractor to proceed in the face of the contractee's failure to schedule removal of utility facilities constituted interference); Johnson v. State, 5 A.D.2d 919, 920, 172 N.Y.S.2d 41, 43 (1958); Am. Bridge Co. v. State, 245 A.D. 535, 538, 283 N.Y.S. 577, 581 (1935)(an order to proceed in spite of a delay in other work constituted interference); Seglin-Harrison Constr. Co. v. State, 30 N.Y.S.2d 673, 676 (N.Y.Ct.Cl.1941) (state's occupancy of a building or use of a way prior to completion of the work constituted interference), modified, 264 A.D. 466, 35 N.Y.S.2d 940 (1942).
Contrary to Lafarge's contention, Tricon was not required to show bad faith in order to invoke the active interference exception.
The obligation of noninterference with a contractor's ability to perform "arises from the common law duties of parties to a contract to deal fairly and in good faith with each other." J. David Arkell, Construction Disputes and Dispute Resolutions, IC Colo. Methods of Practice § 56.15 (2008 update); see Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo.1995). However, what constitutes "active *161 interference" in a given case has varied among jurisdictions and even within the same jurisdiction. See Steven B. Lesser & Daniel L. Wallach, Risky Business: The "Active Interference" Exception to NoDamage-For Delay Clauses, 23 Construction Law. 26 (Winter 2003) (Risky Business); see also Pellerin Constr., Inc. v. Witco Corp., 169 F. Supp. 2d 568, 583 (E.D.La.2001)(observing that the concept of active interference "has not attained any precise judicial description").
Lafarge relies on early cases holding that, to show active interference, the owner or contractee must commit "some affirmative, willful act, in bad faith, to unreasonably interfere with plaintiff's compliance with the terms of the construction contract." Peter Kiewit Sons' Co. v. Iowa S. Utils. Co., 355 F. Supp. 376, 399 (S.D.Iowa 1973); see U.S. Steel Corp. v. Mo. Pac. R.R. Co., 668 F.2d 435, 438 (8th Cir.1982) (adopting Peter Kiewit standard); Phoenix Contractors, Inc. v. Gen. Motors Corp., 135 Mich.App. 787, 355 N.W.2d 673, 677 (1984)(same); P.T. & L. Constr. Co. v. State, 108 N.J. 539, 531 A.2d 1330, 1343 (1987) (same).
Later cases, however, have reached a different result, and commentators have acknowledged that, "the bad faith component of that definition has all but been eviscerated due to the recognition of a separate `bad faith' exemption from a no-damage-for-delay clause." Risky Business, at 27; see Williams Elec. Co., 325 S.C. at 134 n. 3, 480 S.E.2d at 449 ("As there is already a specific exception for bad faith, we decline to adopt so much of [the Peter Kiewit] definition as requires a showing of `bad faith.'").
The jurisdictions that have adopted a modern version of the Peter Kiewit definition have held that a plaintiff contractor or subcontractor claiming active interference on the part of the defendant owner or contractee need only to show that the defendant committed an affirmative, willful act that unreasonably interfered with the plaintiff's performance of the contract, regardless of whether that act was undertaken in bad faith.
As the South Carolina Supreme Court explained in Williams Electric Co.:
A majority of courts also adopt an exception to a nodamage-for-delay clause in cases of direct, active, willful interference with the work of the contractor. This Court has recognized that where performance of a contract by the vendor is prevented by the vendee, the vendee may not take advantage of the delay. Such active interference effectually violates the implied obligation of fair dealing. Accordingly, we find this exception to be a logical extension of South Carolina law. [FN3]
FN3. [The general contractor] does not oppose adoption of this exception, but urges us to adopt the definition of "active interference" embraced by the Iowa court in Peter Kiewit [355 F.Supp. at 399] as follows: ["] . . . to be guilty of `active interference' . . ., the defendants herein would have to have committed some affirmative, willful act, in bad faith, to unreasonably interfere with plaintiff's compliance with the terms of construction contract. . . . [U]se of the term `active' to modify `interference' . . . clearly implies more than a simple mistake, error in judgment, lack of total effort, or lack of complete diligence. . . . ["] As there is already a specific exception for bad faith, we decline to adopt so much of this definition as requires a showing of "bad faith." Trial courts of this state may, however, utilize the remainder of the Kiewit definition in fashioning an appropriate jury charge.
325 S.C. at 134 & n. 3, 480 S.E.2d at 449 & n. 3.(emphasis added; citations and additional footnote omitted).
We are persuaded by this reasoning and similarly conclude that a plaintiff contractor or subcontractor claiming active interference on the part of the defendant owner or contractee needs only to show that the defendant committed an affirmative, willful act that unreasonably interfered with the plaintiff's performance of the contract, regardless whether it was undertaken in bad faith. However, we further conclude that, while it is unnecessary to show bad faith or reprehensible conduct, active interference requires more than a simple mistake, error in judgment, lack of total effort, or lack of complete diligence. See Peter Kiewit, 355 *162 F.Supp. at 397; Risky Business, at 27. The trial court should give the jury an instruction to that effect where active interference is raised as a defense to a "no damages for delay" clause and sufficient evidence is introduced to warrant such an instruction.
In summary, we conclude the trial court did not err in denying Lafarge's motion for a directed verdict because there was sufficient evidence from which the jury could find that Lafarge actively interfered with Tricon's performance of the contract.
Given our conclusion, we need not address the viability in Colorado of any other exceptions to or limitations on "no damages for delay" clauses, nor do we address Tricon's argument that its claim was based on changes to the subcontract.
III. Instruction on Liquidated Damages
Lafarge also contends the trial court abused its discretion in giving the jury an instruction on liquidated damages. Lafarge objected to the instruction at trial, contending that it was unsupported by case law and that it also was confusing and misleading. The trial court concluded that there was evidence presented about the liquidated damages assessed by CDOT and its per diem calculation, and that the jury had to consider it. We agree with the court.
A trial court has substantial discretion in formulating jury instructions so long as they include correct statements of the law and fairly and adequately cover the issues presented, Taylor v. Regents of Univ. of Colo., 179 P.3d 246, 248 (Colo.App.2007), and we will not reverse a trial court's decision to give a particular jury instruction absent an abuse of that discretion. Fishman v. Kotts, 179 P.3d 232, 234 (Colo.App.2007).
Here, the trial court gave the following instruction to the jury regarding liquidated damages:
If you find in favor of Tricon on its breach of contract claims against Lafarge, you must also consider whether Tricon's damages should be reduced for liquidated damages assessed by the Colorado Department of Transportation (CDOT) against Lafarge under the prime contract between Lafarge and CDOT. To reduce Tricon's damages for such liquidated damages you must also find that:
1. Lafarge's performance time of the prime contract was extended as the result of improper performance by Tricon; and that
2. CDOT assessed liquidated damages against Lafarge for the time period that the project was extended; and that
3. The extended performance time of the project resulted from Tricon's improper performance and was not caused, in whole or in part, by the actions or fault of Lafarge or others for whom Lafarge was responsible.
If any of these propositions has not been proved, then Lafarge is not entitled to lessen Tricon's damages.
See City of Westminster v. Centric-Jones Constructors, 100 P.3d 472, 481 (Colo.App. 2003) (holding that a "liquidated damages" clause addressing delay in a construction contract will not be enforced "where [the] delay is due in whole or in part to the fault of the party claiming the clause's benefit" (quoting Medema Homes, Inc. v. Lynn, 647 P.2d 664, 667 (Colo.1982))).
The jury found that Lafarge had breached the parties' contract, that Tricon had been damaged, and that its damages were caused by Lafarge's breach. There was no finding by the jury of any improper performance by Tricon. Thus, any error in giving this instruction was harmless. See Martin v. Minnard, 862 P.2d 1014, 1017-18 (Colo.App.1993) (any error in failing to instruct on negligence per se was harmless where jury found plaintiff had not suffered any injury or damages).
The judgment is affirmed.
Judge FURMAN and Judge J. JONES concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2600611/ | 186 P.3d 978 (2008)
2008 UT App 192
Garth LUNT, trustee of the Garth O. Lunt Revocable Trust, Plaintiff, Appellee, and Cross-appellant,
v.
Harold LANCE and Diane Lance, Defendants, Appellants, and Cross-appellees.
No. 20070014-CA.
Court of Appeals of Utah.
May 30, 2008.
*981 Shawn W. Potter and Kraig J. Powell, Park City, for Appellants and Cross-appellees.
Randy B. Birch and Corey S. Zachman, Salt Lake City, for Appellee and Cross-appellant.
Before GREENWOOD, P.J., BENCH and McHUGH, JJ.
OPINION
GREENWOOD, Presiding Judge:
¶ 1 Harold and Diane Lance appeal the trial court's conclusion that Garth Lunt, trustee of the Garth O. Lunt Revocable Trust, had a prescriptive easement to land between his property and the Lances' (the Lane). The Lances also appeal the denial of their post-trial motion to disqualify Judge Pullan and their motions for a new trial. Lunt cross-appeals, claiming that the trial court inappropriately ruled on the issue of abandonment and, assuming that such a ruling was appropriate, incorrectly applied the doctrine of abandonment to the facts of this case. We affirm.
BACKGROUND
¶ 2 In 2002, Lunt brought suit against the Lances asserting rights to use and ownership of the Lane, a strip of land measuring thirty-four feet wide by approximately two-hundred feet long.[1] The Lane is located within the legal boundaries of the Lances' property. Despite the Lances' countersuit, the only issues remaining to be resolved at trial were whether Lunt was entitled to ownership or use of the Lane through either boundary by acquiescence or prescriptive easement. These two issues were heard by Judge Pullan in a bench trial in early November 2005. On the first day of trial, Judge Pullan noted that he had been "consulted about a boundary line issue" related to the Lunt property in his former capacity as the county attorney, but that he had "no recollection with whom [he had] talked." Both parties stated affirmatively at that time that they "had no concerns about a possible conflict of interest."
¶ 3 After conclusion of the trial, Judge Pullan ruled that Lunt had failed on his boundary by acquiescence claim but had prevailed in establishing that he had a prescriptive easement with respect to the Lane. Approximately four months later, on March 24, 2006, the Lances filed a rule 63(b) motion seeking to remove Judge Pullan and requesting a new trial, claiming that they had just learned the full extent of Judge Pullan's prior involvement with the Lunt property. Pursuant to rule 63, Judge Pullan immediately certified the motion to Judge Taylor, the presiding judge. See Utah R. Civ. P. 63(b)(2). Refusing to overturn Judge Pullan's factual findings or Ruling or to order a new trial, Judge Taylor reassigned any further proceedings in the case to Judge Schofield in order to avoid any appearance of impropriety. Shortly thereafter, the Lances filed a Motion for New Trial or in the Alternative to Amend Judgment and/or Take Additional Testimony. Judge Schofield denied the Lances' motion for a new trial, stating that Judge Pullan was in the best position to evaluate the evidence at trial and that his prior limited involvement with the property *982 "did not create a bias or prejudice which justifies a new trial." In addition, Judge Schofield denied the Lances' alternative motion to amend or take additional testimony, holding that they "simply have no reason which justifies amending or relieving them from judgment."
Testimony at Trial
¶ 4 In addition to testifying himself, Lunt called three witnesses as part of his case in chief: (1) his brother Jack Lunt, who lived on the Lunt property temporarily and used the Lane numerous times over the years; (2) his sister Moneves Boren, who lived on and worked at the farm formerly located on the Lunt property; and (3) his eighty-eight-year-old neighbor, Eldon Carlisle, who lived near the Lunt property throughout his life. Jack Lunt testified that both the Lunt family and their predecessors in interest (the McNaughtens) used the Lane for moving farm equipment, mowing machines, cattle, bob sleighs, and wagons to and from the rear acreage of the Lunt property. Boren testified similarly, that the Lane was historically used for parking cars and for transporting farm equipment, hay, and cattle to and from the rear acreage of the Lunt property. Carlisle likewise testified that the Lane was historically used to transport cattle to and from the rear acreage of the Lunt property and that he remembered the Lane being used to park cars as early as the late 1920s. Carlisle further testified that he personally witnessed Mr. McNaughten using the Lane in this manner from the 1950s through the early 1990s. Each of these witnesses also testified as to their estimations of the Lane's dimensions.
¶ 5 In support of their case, the Lances called Duane Smith, Frankie Housell, and Frank Pia to testify.[2] Smith testified that he had worked on both the Lunt property (when owned by the McNaughtens) as well as the Lances' property (when owned by the Lances' predecessors in interest, the Witts). He also testified that he did not remember using the Lane to access the rear acreage of the Lunt property when he worked for Mr. McNaughten. Smith further stated that the Witts had machinery and farm equipment parked on both sides of the Lane, implying to him that the Lane was the Witts' property. Housell is the Witts' granddaughter and stayed with them every weekend during the late 1940s and early 1950s. She testified that the Lane was a driveway to the Witt property and that it measured roughly two-hundred feet in length. Finally, Pia, an expert photogrammetrist,[3] testified that he believed the Lane to be approximately 150 to 175 feet in length.
Judge Pullan's Prior Experience
¶ 6 As stated above, Judge Pullan informed the parties on the first day of trial that he vaguely remembered some involvement in a boundary issue related to the Lunt property when he worked in the county attorney's office. Further inquiries by the Lances revealed that before his appointment to the bench, Judge Pullan was a member of the Heber City Planning Commission. It was in this capacity that then-Commissioner Pullan was involved with the Lunt property at issue. In September 1998more than seven years prior to commencement of this suitBoren appeared before the Heber City Planning Commission in an attempt to change the zoning of a portion of the Lunt property from agricultural to residential. The zoning change was unopposed and the seven-member planning commission approved the change unanimously.
ISSUES AND STANDARDS OF REVIEW
¶ 7 The Lances first claim that Judge Pullan erred by failing to recuse himself in light of his prior involvement with the property at issue. "`Determining whether a trial judge committed error by failing to recuse *983 himself . . . is a question of law, and we review such questions for correctness.'" State v. Tueller, 2001 UT App 317, ¶ 7, 37 P.3d 1180 (alteration in original) (quoting State v. Alonzo, 973 P.2d 975, 979 (Utah 1998)).
¶ 8 Next, the Lances allege that both Judge Schofield and Judge Taylor erred in denying the Lances' motions for a new trial. A trial court's denial of a motion for a new trial is upheld unless there is a clear abuse of discretion. See Alvey Dev. Corp. v. Mackelprang, 2002 UT App 220, ¶ 9, 51 P.3d 45.
¶ 9 Finally, the Lances argue that the trial court erred in holding that there was clear and convincing evidence to justify the conclusion that a prescriptive easement existed. A trial court's decision that clear and convincing evidence was presented is reviewed by the appellate courts for clear error, "notwithstanding the clear and convincing standard of proof below." In re R.R.D., 791 P.2d 206, 208 (Utah Ct.App.1990) (internal quotation marks omitted). And, while the conclusion that a prescriptive easement exists is a question of law, see Valcarce v. Fitzgerald, 961 P.2d 305, 311 (Utah 1998), it is so fact-dependent that trial courts are generally accorded "a broad measure of discretion when applying the correct legal standard to the given set of facts" and are only overturned if the trial court's decision was in excess of this broad discretion. Id.
¶ 10 On cross-appeal, Lunt argues that the trial court should not have addressed the issue of abandonment because it was not pleaded or argued by consent of the parties. This presents "a [question] of law that we review under a correction-of-error standard." Cowley v. Porter, 2005 UT App 518, ¶ 31, 127 P.3d 1224.
¶ 11 In addition, Lunt asks this court to hold that the trial court incorrectly applied the doctrine of abandonment and, as a result, unjustly limited his prescriptive rights in the Lane. The factual findings of a trial court sitting without a jury are reviewed for clear error. See Department of Human Servs. ex rel. Parker v. Irizarry, 945 P.2d 676, 678 (Utah 1997).
ANALYSIS
I. Judge Pullan's Recusal Was Not Required
¶ 12 The Lances argue that Judge Pullan erred in failing to recuse himself because of his previous involvement in a zoning issue related to the Lunt property. Concomitantly, they contend that Judge Taylor should have ordered a new trial for the same reasons. A judge shall recuse himself from any proceeding in which his "impartiality might reasonably be questioned, including but not limited to instances where . . . the judge has . . . personal knowledge of disputed evidentiary facts concerning the proceeding." Utah Code of Jud. Conduct Canon 3(E)(1)(a) (1997). Nonetheless, parties may waive disqualification of a judge otherwise disqualified under canon 3(E) of the Utah Code of Judicial Conduct if, after disclosure of the basis for disqualification, the parties consent to the judge's continued participation in the proceeding. See Utah Code of Jud. Conduct Canon 3(F). "Although litigants are entitled to a judge who will hear both sides and decide an issue on the merits of the law and the evidence presented, they are not entitled to a judge whose mind is a clean slate." Madsen v. Prudential Fed. Sav. & Loan Ass'n, 767 P.2d 538, 546 (Utah 1988).
¶ 13 On the first day of trial Judge Pullan disclosed that prior to becoming a judge he had been "consulted about a boundary line issue" related to the Lunt property but that he had "no recollection with whom [he had] talked." There is nothing in the record showing, nor do the Lances suggest, that Judge Pullan misstated his recollection of his prior involvement with the Lunt property. Following this full disclosure, the parties each stated that they did not recall previously interacting with Judge Pullan and the proceedings resumed. Four months after Judge Pullan ruled in favor of Lunt, the Lances filed their first objection to Judge Pullan's participation in the case.
¶ 14 Judge Pullan's involvement with the Lunt property was approximately seven years prior to trial when he was acting chair for the eight-member Heber City Planning *984 Commission.[4] At the meetings in question,[5] Boren moved to rezone a portion of the Lunt property from agricultural to residential. Hearing no objection, the planning commission unanimously approved the motion in less than ten minutes.[6]
¶ 15 We are not persuaded that Judge Pullan's involvement with a zoning issue for less than ten minutes nearly a decade earlier could have provided him with "personal knowledge of disputed evidentiary facts concerning the [trial at issue]." Utah Code of Jud. Conduct Canon 3(E)(1)(a). Furthermore, both parties waived the disqualification when they were apprised of Judge Pullan's recollection of his involvement and did not object to his continuing to hear the case. Any residual, non-specific information retained by Judge Pullan from that involvement is insufficient grounds for disqualification as neither party is "entitled to a judge whose mind is a clean slate." See Madsen, 767 P.2d at 546. Finally, the Lances point to nothing in the record demonstrating that Judge Pullan's prior involvement with the planning commission resulted in actual bias or prejudice.[7] As such, we hold that Judge Pullan was not required to recuse himself.
¶ 16 Furthermore, in denying the Lances' motion for a new trial Judge Taylor stated that the motion before him was not the appropriate vehicle with which to seek a new trial. Specifically, Judge Taylor pointed out that "[q]uestions about a trial already conducted and a ruling already rendered must be determined by either the appellate process or through Rule 60, Utah Rules of Civil Procedure."
¶ 17 Despite this fatal deficiency, Judge Taylor carefully reviewed Judge Pullan's Ruling and noted that
[Judge Pullan] necessarily made extensive findings of fact about the historic use and condition of the property from the late 1920's through the present. The past, present or future zoning classifications of the area was not considered or relevant to his conclusion that from the 1930's through at least the mid-1970's there was open, notorious, continuous and adverse use of the subject lane for more than 20 years to establish a prescriptive right in favor of [Lunt].
In light of the inappropriateness of the Lances' motion, and seeing no demonstration of actual bias, prejudice, or impropriety, Judge Taylor denied the Lances' request for a new trial. As stated above, Judge Pullan was not required to recuse himself, and, accordingly, we conclude that Judge Taylor did not abuse his discretion in denying the Lances' motion to disqualify Judge Pullan and for a new trial.
II. The Evidence Supports the Existence of a Prescriptive Easement
¶ 18 The Lances also contend on appeal that there was not clear and convincing evidence sufficient to justify the existence of a prescriptive easement. A prescriptive easement exists where a party proves that their use of another's land was "(1) open, (2) notorious, (3) adverse, and (4) continuous for at least 20 years." Marchant v. Park City, 788 P.2d 520, 524 (Utah 1990). Each of these elements must be proven by clear and convincing evidence. See Marchant v. Park City, 771 P.2d 677, 682 (Utah Ct.App.1989), aff'd, 788 P.2d 520 (Utah 1990). An appellate court will reverse a trial court's decision that clear and convincing evidence was presented only if that decision is clearly erroneous. See In re R.R.D., 791 P.2d 206, 208 (Utah Ct. App.1990). To qualify as clearly erroneous, a *985 trial court's "findings [must be] either against the clear weight of the evidence or [must] induce a definite and firm conviction that a mistake has been made." Id. (internal quotation marks omitted). Moreover, the finding that an easement exists is generally so highly fact-intensive that appellate courts "`accord[] the trial judge a broad measure of discretion when applying the correct legal standard to the given set of facts.'" Orton v. Carter, 970 P.2d 1254, 1256 (Utah 1998) (quoting Valcarce v. Fitzgerald, 961 P.2d 305, 311 (Utah 1998)).
¶ 19 The Lances do not appeal the trial court's determination as to any of the prescriptive easement elements individually. Instead, they simply assert that "[their] witnesses were at least as credible as [Lunt's], and arguably more so." In support of this assertion, the Lances present nearly six pages detailing the strengths and weaknesses of the testimonial evidence presented at trial and ask this court to evaluate it anew. However, we may not substitute our judgment for that of the trial court as trial courts are in a better position to weigh conflicting evidence and evaluate the credibility of witness testimony. See Utah R. Civ. P. 52(a); Richins v. Struhs, 17 Utah 2d 356, 412 P.2d 314, 315 (1966) (noting that, in reviewing a trial court's conclusion that an easement exists, appellate courts "make allowance for the advantages the trial court has because of [its] proximity to the parties, the witnesses and the trial"). Or, as Judge Schofield stated in denying the motion for a new trial, "[The Lances] had their opportunity at trial to show that [Lunt] did not use the Lane in the manner asserted by [the Lances'] witnesses, but failed satisfactorily to do so."
¶ 20 Although faced with numerous witnesses and conflicting testimony regarding decades of historical use, the trial court specifically noted in its Ruling that it found "the testimony of Mr. Eldon Carlisle [(a witness for Lunt)] . . . [to be] particularly credible." Trial courts are explicitly vested with the responsibility of making credibility determinations in a bench trial and are particularly adept at doing so. See Utah R. Civ. P. 52(a). In determining that the elements of a prescriptive easement had been met, the trial court made extensive findings of fact. More specifically, the trial court found that the Lunt/McNaughten use of the Lane from the 1930s to the present was common but varied. In the early years the Lane was used to move cattle and farm equipment, park cars, and access the Lunt/McNaughten acreage and barn. By 1979, the Lane was used almost exclusively as a driveway for access to the Lunt/McNaughten property, and by 1984, all other uses had ceased.
¶ 21 In addition, the trial court compared the facts of this case to those in Richins v. Struhs, 17 Utah 2d 356, 412 P.2d 314 (1966). Struhs involved two adjoining landowners whose sole access to their respective properties was a common driveway, which their predecessors built together and maintained and used cooperatively for more than forty years. See id. at 314-15. Upon purchasing one of the properties, the Struhs "caused a survey to be made and thereafter erected a fence in the driveway on what they assert[ed was] the true boundary," thereby blocking the Richins' access to their property. Id. at 315. The Struhs court held that the parties' (and their predecessors') cooperative use of the shared driveway for more than the prescriptive period was such that Richins "ha[d] established a prescriptive right to continue to so use it." Id. at 316-17. The trial court in the instant case stated that, "[l]ike the adjoining property owners in Struhs, the Witts and McNaughtens established and harmoniously used a common lane from the 1930's through at least the mid-1970's." Thus, according to the trial court, this harmonious use established a prescriptive right in favor of Lunt as a matter of law.[8] We conclude that there is sufficient evidence to support the trial court's findings and therefore hold that there is no clear error in the trial court's determination that there was clear and convincing *986 evidence of the existence of a prescriptive easement.[9]
III. Partial Abandonment of the Easement
¶ 22 On cross-appeal, Lunt argues that the trial court's consideration of abandonment was inappropriate because it was not properly before the trial court. In the alternative, Lunt claims that even if abandonment was appropriately considered, the trial court erred in its application of the doctrine of abandonment. Each of these arguments will be discussed below.
A. Lunt Failed to Preserve an Objection to the Appropriateness of the Abandonment Ruling
¶ 23 Lunt asks this court to find that the trial court erred in ruling on the issue of abandonment because it was not argued by either party and the trial court is precluded from granting relief which was neither pleaded nor tried. However, "claims not raised before the trial court [generally] may not be raised on appeal." State v. Holgate, 2000 UT 74, ¶ 11, 10 P.3d 346. An issue is not preserved unless it is "`presented to the trial court in such a way that the trial court has an opportunity to rule on that issue.'" Pratt v. Nelson, 2007 UT 41, ¶ 15, 164 P.3d 366 (quoting Brookside Mobile Home Park, Ltd. v. Peebles, 2002 UT 48, ¶ 14, 48 P.3d 968); see also Tschaggeny v. Milbank Ins. Co., 2007 UT 37, ¶¶ 20-22, 163 P.3d 615. This preservation rule has been extended to apply to every claim "unless a [party] can demonstrate that exceptional circumstances exist or plain error occurred." Holgate, 2000 UT 74, ¶ 11, 10 P.3d 346 (internal quotation marks omitted). Furthermore, appellants are required to "cit[e] to the record showing that the issue was preserved in the trial court." Utah R.App. P. 24(a)(5)(A).
¶ 24 Lunt has not cited to the record to show that he objected to the court's consideration of the issue of abandonment, and we find no evidence of such preservation in the record. Although the parties did not refer to or argue abandonment during trial, and it was not raised in the pleadings, the trial judge briefly addressed the issue with the Lances' counsel during closing arguments. Abandonment was subsequently explicitly addressed in the trial court's Ruling. The Lances filed Objections to Proposed Findings, Order and Judgment, but Lunt did not. At a hearing on the objections, Lunt's counsel discussed the basis for the abandonment ruling, but did not assail the power of the trial court to address the subject. Ultimately, the preservation rule is grounded in "orderly procedure," and Lunt's failure to object deprived the trial court of its "opportunity to address [the] claimed error and, if appropriate, correct it." Pratt, 2007 UT 41, ¶ 15, 164 P.3d 366 (internal quotation marks omitted). Finally, Lunt has not argued that there are exceptional circumstances or that the trial court committed plain error. See Holgate, 2000 UT 74, ¶ 11, 10 P.3d 346. Accordingly, we refuse to address whether the trial court erred in ruling on the issue of abandonment.
B. Correctness of Abandonment Application
¶ 25 Alternatively, Lunt argues that the trial court erred in its application of the doctrine of abandonment. "It is well recognized that an easement . . . may be abandoned." Western Gateway Storage Co. v. Treseder, 567 P.2d 181, 182 (Utah 1977). An easement is abandoned where there is action releasing the right to use the easement combined with clear and convincing proof of the intent to make no further use of it.[10]See Harmon v. Rasmussen, 13 Utah 2d *987 422, 375 P.2d 762, 765 (1962). Put another way, "a history of non-use, coupled with an act or omission showing a clear intent to abandon" is sufficient to show abandonment. 25 Am.Jur.2d Easements & Licenses in Real Property § 98 (2004). Actual abandonment or intent to abandon may also be inferred from extended non-use of a portion of an easement "in connection with other facts." Brown v. Oregon Short Line R.R. Co., 36 Utah 257, 102 P. 740, 742 (1909). In determining whether an easement has been abandoned, courts should consider "whether or not the right was acquired by prescription or grant, the extent of its use, and the actual intent of the owner." Western Gateway, 567 P.2d at 182.
¶ 26 Lunt argues that the use of the Lane as a whole was never abandoned and that he never intended to abandon any part of it. In its Ruling, the trial court limited the length of the easement to 150 feetthe distance from 600 West to the gate across the Laneand the width of the easement to the standard width of a driveway as "required by Heber City ordinances"20 feet. The partial abandonment of the easement will be discussed below.
1. Length of the Easement
¶ 27 While it is unclear who built the gate across the Lane, the trial court found that Lunt did not use the Lane past the gate after it was erected in the early 1980s. Specifically, the trial court found that "the gate blocking the [L]ane was constructed in the early 1980's. From that date, [Lunt] ceased to use the [L]ane west of the gate. For more than 20 years, [Lunt] has acquiesced in the closure, never taking any action to object." Based on these findings, the trial court concluded that Lunt's right to the easement west of the gate had been extinguished. Although the extinguishment was couched in terms of abandonment, the trial court's reference to the twenty year time period seems not accidental and implies that the trial court also used the elements of modification by prescription, see Restatement (Third) of Prop.: Servitudes § 7.7 (2000), to find that Lunt had abandoned that portion of the easement west of the gate. This conflation is understandable as the facts that lead to a determination of each are very similar.
¶ 28 An easement is extinguished by prescription where "use of [the] property violates a servitude burdening the property and the use is maintained adversely to a person entitled to enforce the servitude for the prescriptive period." Id.; see also Marchant v. Park City, 788 P.2d 520, 524 (Utah 1990). In other words, adverse use by the servient estate holder (the Lances) for more than twenty years, without objection by the dominant estate holder (Lunt), is sufficient to extinguish the easement. In contrast, as stated above, an easement is abandoned only where the easement holder releases its rights in the easement with evidence of a clear and convincing intent to no longer exercise the easement rights. See Harmon, 375 P.2d at 765. The difference between these two methods of modification appears to be one of perspective. When an easement is extinguished by prescription it is primarily the actions of the servient estate holderthe one whose land is burdened by the easementwith which the court is concerned. See Restatement (Third) of Prop.: Servitudes § 7.7 (2007). However, in determining whether the easement has been abandoned the trial court focuses on the actions and intentions of the dominant estate holderthe one who benefits from the easement. See Harmon, 375 P.2d at 765.
¶ 29 Given Lunt's failure to use the Lane west of the gate for the past twenty-plus years, the dispositive question on appeal becomes whether there is clear and convincing proof of Lunt's intent to abandon that portion of the easement.[11]See id. It is *988 undisputed that a gate was installed blocking a portion of the Lane. The trial court was unable, however, to determine who built the gate. Without evidence of who built the gate, the trial court relied, in large part, on Hudson v. Pillow, 261 Va. 296, 541 S.E.2d 556 (2001), to aid in its decision. In Hudson, the Virginia Supreme Court held that, in addition to non-use, a person seeking to prove abandonment of an easement must prove either that the easement holder intended to abandon it or that the easement holder acquiesced in the adverse use of the easement by the servient estate holder. See id. at 560-61. The Virginia court determined that abandonment was established where there was "nonuse of the easement coupled with acts by the servient owners that were inconsistent with, or adverse to, the future enjoyment of the easement by the dominant owners for a period of time sufficient to create a prescriptive right." Id. at 561 (internal quotation marks omitted). While not expressly adopting the Hudson holding, the trial court implicitly adopted Hudson's rule as an alternative way of proving intent to abandon.[12] Thus, the trial court interpreted the twenty-plus years of adverse use by the Lances, without objection from Lunt and coupled with non-use by Lunt, as evidence of Lunt's intent to abandon the easement west of the gate. Consequently, and in light of the specific, aforementioned factual deficiency in the evidence, we cannot say that the trial court clearly erred in ruling that Lunt had abandoned the remaining length of the easement by "ceas[ing] to use the lane west of the gate" without "taking any action to object" to the Lances' adverse use of the same "[f]or more than 20 years."
2. Width of the Easement
¶ 30 Relying almost exclusively on the trial court's statements made three months after its Ruling, Lunt also argues that the trial court incorrectly determined that a portion of the easement width had been abandoned. In the section of its Ruling addressing the "Scope of the Remaining Prescriptive Easement," the trial court stated that "[Lunt] ha[s] a prescriptive easement for a driveway[and t]he width of the driveway shall be commensurate with the width required by Heber City ordinances." Earlier in the Ruling, however, the trial court described the Lane as being "34 feet wide." Despite this unambiguous determination, the trial court, at a hearing three months after the Ruling, addressing the Lances' Objection to Proposed Findings, Order and Judgment, noted that its intent was "that the width of the easement was at one period of time the broader width [of 34 feet] but that it had been abandoned, and . . . what remained was a 20-foot width for purposes of a driveway." Thus, the threshold issue facing this court is whether the trial court's finding that Lunt had abandoned approximately fourteen feet of the width of the Lane was clearly erroneous.
¶ 31 Evidence of Lunt's non-use of the fourteen feet in width of the Lane is certainly more tenuous than that regarding the portion of the Lane west of the gate. Primarily, it consists of Lunt using the Lane from the early 1980s for vehicular use only, not for driving cattle and other agricultural uses. We must thus determine if this justifies the trial court's limiting the width of the easement to the width of a driveway as "required by Heber City ordinances." Although addressing the width of a public easement in a highway, the Utah Supreme Court, in Whitesides v. Green, 13 Utah 341, 44 P. 1032 (1896), held that the width of an easement gained by prescription may be inferred from "the usual width of highways in the locality . . . in connection with other evidence." Id. at 1033. Further, the Whitesides court stated *989 that the width of the prescriptive easement was not strictly limited to the "beaten path." Id.
The purpose for which the easement was acquired must determine the effect of the right parted with by the owner, and the width necessary for enjoyment by the [easement holder]. Where the easement is acquired by prescription . . . such width must be determined from a consideration of the facts and circumstances peculiar to the case, because in such event the court cannot say that in law the [easement] is of a certain width. . . .
Id.
¶ 32 In the instant case, Lunt's historic use of the Lane varied but was consistently confined to the use that one would make of a driveway to access the rear of his or her property.[13] Recognizing this, the trial court ruled that Lunt had clearly established a prescriptive easement in the Lane "for [purposes of] a driveway." The court further ruled that the width of the easement would be inferred, in connection with other facts, from the standard width of a driveway as "required by Heber City ordinances." We can only assume from the record before us that the trial court, in so holding, determined that the width of a standard Heber City driveway was "the right parted with by the [Lances], and the width necessary for enjoyment by [Lunt]." See id. Thus, we conclude that the trial court did not clearly err in limiting the width of the prescriptive easement in the Lane to twenty feet.
CONCLUSION
¶ 33 Recusal of Judge Pullan was not required and Judge Taylor did not abuse his discretion in refusing to order a new trial because of Judge Pullan's prior involvement regarding the property in question. Furthermore, it was not clear error for the trial court to hold that clear and convincing evidence of the existence of a prescriptive easement was presented. Moreover, Lunt failed to preserve his argument that the trial court inappropriately ruled on the issue of abandonment, and we determine that the trial court appropriately applied the doctrine of abandonment to the length of the easement west of the gate and its width east of the gate. In addition, there was no abuse of discretion in Judge Schofield's denial of the Lances' motion for a new trial. Based on the foregoing, we affirm.
¶ 34 WE CONCUR: RUSSELL W. BENCH and CAROLYN B. McHUGH, Judges.
NOTES
[1] Although the exact length of the Lane was disputed, trial testimony generally estimated it to be roughly 150 to 235 feet.
[2] In addition to the above mentioned witnesses, both the Lances and Paulette Thurber testified. However, neither party makes more than cursory reference to the testimony of these three witnesses and, consequently, we do not describe their testimony.
[3] Photogrammetry is defined as "the science of making reliable measurements by the use of photographs and esp. aerial photographs." Webster's Ninth New Collegiate Dictionary 885 (Merriam-Webster Inc. 1986), available at http:// www.merriam-webster.com/dictionary/ photogrammetry.
[4] Due to a conflict of interest, then-chairman Paul Royall excused himself, and vice-chair Pullan was required to conduct two meetings.
[5] The motion at issue was initially presented at a planning commission meeting on August 27, 1998. Following a brief discussion, the planning commission decided to set this issue for a public hearing on September 24, 1998.
[6] Despite this unanimous approval, the zoning change was not effective until it received final approval from the Heber City Council, with which Judge Pullan apparently had no involvement.
[7] It appears that the Lances' only allegation of actual bias is the adverse ruling in the present case. However, in In re Affidavit of Bias, 947 P.2d 1152 (Utah 1997), the Utah Supreme Court noted that "the mere fact that a judge decides a case against a party may not be considered in determining bias." Id. at 1154.
[8] In Struhs, the Utah Supreme Court further clarified how "harmonious use" could satisfy the seemingly diametric adverseness requirement, stating that, because the defendant did not know that the common driveway was on his property, he could not have granted permission. See Richins v. Struhs, 17 Utah 2d 356, 412 P.2d 314, 315-16 (1966). This lack of permission makes the historical use presumptively adverse from its inception. See id.
[9] In so holding, we also necessarily determine that Judge Schofield did not abuse his discretion in denying the Lances' motion for new trial.
[10] Lunt points to State v. Rynhart, 2005 UT 84, 125 P.3d 938, to support his claim that proof of abandonment must be by "clear, unequivocal, and decisive evidence." See id. ¶ 14. However, Rynhart was a criminal case discussing the propriety of a police search and seizure of a van found unoccupied in a marsh. See id. ¶ 1. In dicta, the Rynhart court stated that proof of abandonment of personal property generally requires "clear, unequivocal, and decisive evidence." See id. ¶ 14 (citing Linscomb v. Goodyear Tire & Rubber Co., 199 F.2d 431, 435 (8th Cir. 1952)). Despite requiring that unequivocal evidence be presented to demonstrate an intent to abandon other property rights, see, e.g., Anderson v. Brinkerhoff, 756 P.2d 95, 98, 99 (Utah Ct.App.1988) (implicitly recognizing that the abandonment of a property right under a contract requires "intentional, unequivocal relinquishment"), no Utah court has directly required "clear, unequivocal, and decisive evidence" to prove intent to abandon a prescriptive easement. Thus, we are bound by the Utah Supreme Court's explicit pronouncement that "clear and convincing proof" of an intent to abandon an easement is all that is required. Harmon v. Rasmussen, 13 Utah 2d 422, 375 P.2d 762, 765 (1962).
[11] We note that whether clear and convincing proof was presented is a very fact-intensive question and is resolved through weighing the credibility of the various witnesses and exhibits presented at trial. Trial courts are in the best position to weigh these competing pieces of evidence and, therefore, we grant deference to a trial court's determination of the same. See Valcarce v. Fitzgerald, 961 P.2d 305, 311, 314 (Utah 1998) (granting trial judges "a broad measure of discretion" in evaluating the complex factual scenarios routinely present in a prescriptive easement context).
[12] Adoption of this alternative method of proving intent to abandon is also supported by Utah precedent. See Brown v. Oregon Short Line R.R. Co., 36 Utah 257, 102 P. 740, 742 (1909) (stating that extended non-use of an easement, "in connection with other facts, may be evidence of an intention to abandon or of actual abandonment").
[13] It is clear, under Utah law, that the extent of use of a prescriptive easement must be limited to its historical use. See Valcarce, 961 P.2d at 312. However, the present question is not what use Lunt may make of the Lane, but to what dimensions Lunt's use should be confined. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1766288/ | 756 S.W.2d 295 (1988)
Rita LUJAN, et al., Petitioner,
v.
HOUSTON GENERAL INSURANCE COMPANY, Respondent.
No. C-7056.
Supreme Court of Texas.
July 6, 1988.
Rehearing Denied October 5, 1988.
Michol O'Connor, Houston, and Robert Trenchard, Jr., Wesch & Trenchard, Kermit, for petitioner.
Bruce Bangert, Shafer, Davis, McCollum, Ashley, O'Leary & Stocker, P.C., Odessa, for respondent.
OPINION
RAY, Justice.
The question in this workers' compensation case is whether the death of Abelardo Lujan occurred in the course of his employment. The trial court rendered judgment for Lujan's statutory heirs based on the jury's verdict. The court of appeals reversed and rendered judgment that the Lujan family take nothing. 740 S.W.2d 34. Because we hold that Lujan's death occurred in the course of his employment, we reverse the court of appeals' judgment and render judgment for the Lujan family.
Abelardo Lujan was a painter employed by Ezell Paint & Tank Company in Kermit, Texas. On July 11, 1985, Lujan, along with co-worker Randy Heath, was painting pipe, using a pressurized spray unit to apply paint mixed with thinner. About mid-afternoon, Heath noticed that the unit was leaking. Lujan tried to tighten the connection with a crescent wrench. The unit, which was under ninety pounds of pressure, blew the line off and soaked Lujan with industrial paint.
Lujan used gasoline to remove the paint. He soaked himself with gasoline and wiped *296 off some of the paint and gasoline with paper towels and rags. Lujan decided to go home early to bathe since there were no facilities provided by his employer at the job site for such purposes. On the way back to the shop, Lujan remarked that his skin was burning. In order to reduce the burning, Lujan draped some clothing over himself as protection from the sun.
Lujan closed the shop and went home. Mrs. Lujan testified that when he arrived home, her husband was "full of paint," and that when he took his clothes off, he had paint all over his body. Lujan went into the bathroom to bathe, and the pilot light in the water heater ignited the fumes from his body and caused a flash fire.
When Mrs. Lujan opened the bathroom door, Lujan came out covered with fire. She helped him get the fire out with some clothing, and took him outside, yelling for help. Lujan was taken to the hospital, where he died two days later. The gasoline fumes had triggered the flash fire, but the paint and the thinner, which completely covered Lujan's body, caused the severity of his burns.
The jury's verdict consisted of its answer to one question: whether Lujan's work or the conditions of his employment result in an injury to him which was a producing cause of his death. The jury answered "yes," and the trial court rendered judgment for the Lujan family.
The Lujans complain that after discussing the applicable statute and arguments made by them, the court of appeals sustained all the insurance carrier's points of error in one sentence: "All points of error are sustained." The opinion did not mention any point of error, or reveal the reasoning for the holding. Before reaching the merits of the appeal, we must address the problems presented by such a holding.
Texas Rule of Appellate Procedure 90(a) mandates that the "court of appeals shall hand down a written opinion which ... shall address every issue raised and necessary to final disposition of the appeal." Since the court of appeals in this case sustained all the insurance carrier's points to reverse and render, the points sustained were apparently "necessary to [a] final disposition of the appeal." We are not presented with a court merely overruling points not necessary to the outcome of the appeal. See, e.g., Davis v. Pletcher, 727 S.W.2d 29, 36 (Tex.App.San Antonio 1987, writ ref'd. n.r.e.). Instead, the court of appeals sustained points without discussion.
We agree with the Lujans that Rule 90 does not permit a court of appeals to sustain points which are dispositive of the case without revealing its reasoning. Such a practice not only goes against Rule 90, it undermines the very purpose behind issuing opinions. When a court of appeals does not address points which it has sustained, this court and the parties before it are left with nothing but speculation as to why the court of appeals ruled as it did.
The vice inherent in this blanket disposition is demonstrated by the primary issue of this appeal: whether Lujan's death was an injury sustained in the course of his employment. Because the court of appeals reversed and rendered judgment that the statutory beneficiaries take nothing, but did not favor us or the parties with its reasoning, we must assume that the court of appeals held, as a matter of law, that Lujan's injury was not sustained in the course of his employment. We conclude otherwise, and therefore reverse the judgment of the court of appeals.
Under the Workers' Compensation Act, an injury is compensable if it is sustained in the course of employment. Tex.Rev.Civ. Stat.Ann. art. 8306, § 3b (Vernon 1967). The Act provides that the term "injury sustained in the course of employment"
(4) ... shall include all other injuries of every kind and character having to do with and originating in the work, business, trade or profession of the employer received by an employee while engaged in or about the furtherance of the affairs or business of his employer whether upon the employer's premises or elsewhere. (emphasis supplied).
Tex.Rev.Civ.Stat.Ann. art. 8309, § 1 (Vernon 1967).
*297 Often, the manifestation of an injury occurs later than the precipitating event. In his treatise on workers' compensation law, Larson uses the label "delayed-action" to describe cases in which the risk associated with employment causes an injury after work hours and off the premises of the employer. 1A A. Larson, The Law of Workmen's Compensation § 29.22 (1985); see also Larson, Range of Compensable Consequences in Workmen's Compensation, 21 Hastings L.J. 609 (1970). Texas courts have allowed recovery in delayed-action cases. For example, claimants have recovered under the Workers' Compensation Act when a fatal heart attack occurred at home, days or months after the strain or overexertion occurred at work. This is because the injury to the heart originated in the employment, but manifested itself at a later time. See Stodghill v. Texas Employers Insurance Ass'n, 582 S.W.2d 102 (Tex.1979); Texas Employers Insurance Ass'n v. Mitchusson, 515 S.W.2d 168 (Tex. Civ.App.Eastland 1974, no writ); Hardware Mutual Casualty Co. v. Wesbrooks, 511 S.W.2d 406 (Tex.Civ.App.Amarillo 1974, no writ); Aetna Casualty & Surety Co. v. Calhoun, 426 S.W.2d 655 (Tex.Civ. App.Beaumont 1968, writ ref'd n.r.e.); Lyles v. Texas Employers' Insurance Ass'n, 365 S.W.2d 819 (Tex.Civ.App.Texarkana 1963, writ ref'd n.r.e.). These heart attack cases highlight the importance of the "originating in" language of article 8309, section 1. It is the origin of an injury which is crucial, since the real question is whether the event was an industrial accident. The moment of manifestation is almost immaterial. See 1A A. Larson, The Law of Workmen's Compensation, § 29.22 (1985).
In Daniello v. Machise Express Co., 119 N.J.Super. 20, 289 A.2d 558 (Atlantic County Ct.1972), a New Jersey court was confronted with a delayed-action case, the facts of which are similar to those of the case at bar. Mr. Daniello was a truck driver. On the day of his injury, he delivered jet fuel, which splashed on him and permeated his body and uniform. When he arrived home at the end of the work day, his eight year old son was taking trash to the incinerator to be burned. Since he never allowed his son to burn trash, Daniello told his son that he would burn it. When he struck a match, the fire ignited the fumes from the jet fuel on his clothes and body. Based on a similar workers' compensation statute, the New Jersey court of appeals reversed a denial of benefits. The court held that although Daniello's injury occurred at home, he was in the course of employment because the incident originated at his work.
In this case, Houston General Insurance Company urges a strict construction of article 8309, section 1. The carrier argues that because the accident itself, the fire which burned Lujan, did not occur while Lujan was working, he may not recover. It is well settled that the Workers' Compensation Act should be liberally construed in favor of the worker. Hargrove v. Trinity Universal Insurance Co., 152 Tex. 243, 246, 256 S.W.2d 73, 75 (1953). More recently, we have warned that the provisions of the Act "should not be hedged about with strict construction, but should be given a liberal construction to carry out its evident purpose." Yeldell v. Holiday Hills Retirement & Nursing Center, Inc., 701 S.W.2d 243, 245 (Tex.1985).
The obvious and stated purpose of the Act is to provide compensation to employees whose injuries "hav[e] to do with and originat[e] in the work, business, trade or profession of the employer...." Art. 8309, § 1. Thus, we conclude that the court of appeals erred in holding that Lujan's death is not a compensable injury merely because the injury manifested itself at home. Mr. Lujan was on the job painting when he was soaked with paint. Still on the job, he tried to remove the paint with gasoline. Lujan went home to wash the gasoline and paint from his body. He was severely burned in a flash fire which occurred because of the substances on his body. He became covered with these substances, gasoline, paint, and paint thinner, while he was furthering the business of his employer. Although a delay of the action occurred, reasonable minds cannot differ that his injury "had to do with his work" as *298 a painter, and the cause of his death "originated at his work" when he was covered with gasoline, paint, paint thinner, and surrounded by the fumes attendant to these liquids. The fact that the fumes ignited at home in his bathroom does not preclude the injury from being one sustained in the course of employment. Article 8309, section 1 specifically anticipates that injuries in the course of employment may occur "upon the employer's premises or elsewhere."
An employee is not deprived of the benefits of workers' compensation merely because he was not actually working when the accident occurred. Recently in Yeldell v. Holiday Hills, we allowed recovery for a claimant who was on the employer's premises, but was injured while making a personal phone call. We held, as a matter of law, that Ms. Yeldell was in the course of her employment.
In Yeldell we noted that often an employee, in the course of employment, reasonably performs acts of a personal nature for purposes of health and comfort. As examples, we listed quenching thirst or relieving hunger. In the case at bar, Lujan went home early to bathe because the gasoline, paint, and paint thinner were causing him personal discomfort and irritation, and needed to be removed from his skin. For this court to deny recovery to Lujan because he could not bathe at his place of employment, even though he was drenched with gasoline on the job, would work an absurd and unjust result. Such a holding would violate the liberal construction rules which favor the employee, and would defeat the obvious, evident, and stated purpose of the Workers' Compensation Act. While ordinarily the issue of course of employment is one for the factfinder, under the undisputed facts of this case we hold as a matter of law that Lujan was in the course of his employment.
Houston General brings cross-points which complain of the jury charge. The carrier also calls to our attention factual sufficiency points raised, and requests a remand following our disposition of the case so that the court of appeals may determine the sufficiency of the evidence to support the jury finding. Because we hold that Lujan was in the course of employment as a matter of law, and thus that reasonable minds could not differ, Houston General's cross-points are moot. We reverse the judgment of the court of appeals, and render judgment for the statutory beneficiaries.
GONZALEZ, J., dissents.
CULVER, J., not sitting.
GONZALEZ, Justice, dissenting.
The court's opinion is overly broad. I would reinstate the jury verdict and remand this cause to the court of appeals for consideration of respondent's insufficiency of the evidence points of error.
An injury must be sustained in the course of employment before an employee or statutory beneficiary can recover benefits under the Workers' Compensation Act, Tex.Rev.Civ.Stat.Ann. art. 8306, § 1. Generally, in order to recover, a claimant must show that (1) the injury occurred while the employee was engaged in or about the furtherance of the employer's business; and (2) the injury was of such kind and character as had to do with and originated in the employer's business. Biggs v. United States Fire Ins. Co., 611 S.W.2d 624, 627 (Tex.1981); Deatherage v. International Ins. Co., 615 S.W.2d 181, 182 (Tex.1981); Texas Employers Ins. Ass'n v. Page, 553 S.W.2d 98, 99 (Tex.1977).
In this case, the first prong of the course of employment test was hotly contested. The issue was properly submitted to the jury and it was answered in Lujan's favor. There is some evidence, more than a scintilla, to support the jury's answer. Therefore, I would reinstate the jury verdict. By refusing to honor the verdict of the jury, the court is sending a signal to the trial judges not to submit this ultimate question of fact to the jury, but to rule on it as a matter of law. In my opinion, absent a stipulation or agreement, this is clearly a fact question for resolution by the trier of fact.
*299 The court's opinion has great potential for mischief. I am concerned that it will result in many unnecessary appeals. Also, respondent perfected numerous insufficiency of the evidence points of error. Under McKelvy v. Barber, 381 S.W.2d 59 (Tex. 1964), it is entitled to have the cause remanded to the court of appeals for consideration of these points of error. I would reverse the judgment of the court of appeals and remand this cause to that court for consideration of the insufficiency points of error. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2031420/ | 459 N.E.2d 760 (1984)
CITY OF MICHIGAN CITY, Indiana, and Board of Aviation Commissioners of the City of Michigan City, Indiana, Appellants (Defendants below),
v.
LAKE AIR CORPORATION, Appellee (Plaintiff below).
No. 3-1282A327.
Court of Appeals of Indiana, Third District.
February 16, 1984.
*761 Steven J. Henry, Michigan City, for appellants.
W. Jonathan Forker, LaPorte, for appellee.
HOFFMAN, Judge.
On January 1, 1962, appellant Board of Aviation Commissioners of the City of Michigan City (Board) leased property to appellee Lake Air Corporation (Lake Air) for a period of twenty years for the purpose of operating an airport. A comprehensive lease contract was executed enumerating the specific obligations and liabilities assumed by the parties. The Board, along with appellant City of Michigan City (City) took responsibility for snow removal, grass mowing, construction of taxiways, and maintenance of lights.
Sometime during 1965, the agreement broke down when the City failed to provide maintenance services. By verbal agreement Lake Air undertook maintenance operations under the following fee schedule:
Grass Mowing $ 75.00 per week
Light Maintenance 150.00 per month
Snow Removal 15.00 per hour
Although the Board had agreed to furnish equipment, it failed to purchase a tractor for mowing the grass. Lake Air purchased a tractor which it rented to the Board for $250 per month. The Board later purchased the tractor for $5,990, but failed to pay for its cab, valued at $2,000. Furthermore, the Board refused to pay $1,750 for past rental of the tractor.
The Board also refused to construct a taxiway for one of Lake Air's corporate customers. Lake Air constructed a makeshift taxiway at a cost of $575, but the customer nevertheless vacated, causing a $5,317.35 loss in profits.
In April 1979, Lake Air filed suit for breach of contract. Following a bench trial, the following decree was entered:
"DECREE
The parties on January 1, 1962, entered into an Airport Operator's Agreement whereby plaintiff leased certain property from the Board of Aviation Commissioners of the City of Michigan City, Indiana, for the purpose of operating the airport thereon. The contract was for the benefit of both plaintiff and defendant. As a result of said contract, both parties accurred [sic] rights and liabilities. One of the liabilities of defendants was the maintenance of the real estate and improvements thereon.
Defendants fulfilled their liabilities under said contract for a number of years. There is no dispute between the parties as to the total amount of money paid by defendants to plaintiff.
Plaintiff claims that defendants since 1971 have only partially fulfilled their liabilities and have only partially paid plaintiff for the work that plaintiff performed which was the responsibility of defendants.
Defendants claim that the contract is void and that they do not owe because they did not have the items budgeted. The Court finds that this is a contract in aid of local government, that for a number of years, funds were budgeted to pay the liabilities created by said contract, the contract is valid, and that defendants cannot now relieve themselves from liability under said contract by simply failing to appropriate funds. The Court further finds that by statute, the Commission had the power and authority to execute the lease for operation of the airport.
The Court further finds that defendants have breached said contract by failing to mow the grass, remove the snow, maintain the lights and have failed to adequately *762 maintain the runways, approaches thereto, roads and buildings.
The Court further finds that because of said breaches by defendants, plaintiff has lost customers at said airport and has suffered damage.
The Court finds the following amounts to be due from defendants to plaintiff:
Grass Mowing - Labor $ 4,500.00
Grass Mowing - Gas 751.81
Grass Mowing - Tractor Purchase 5,990.00
Lighting 4,200.00
Snow Removal - Gas 266.19
Snow Removal - Labor 427.50
Slagg Purchase 575.80
__________
Loss of Profits, $16,711.30
Tonn & Blank 4,000.00
__________
TOTAL $20,711.30
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that plaintiff recover of and from the defendants the sum of twenty thousand seven hundred eleven dollars and thirty cents, ($20,711.30), together with the costs of this action.
[signed]
Marvin D. McLaughlin, Judge
STARKE CIRCUIT COURT"
The Board and the City now appeal this judgment.
Appellants first maintain that the contract executed with Lake Air was not accompanied by the necessary appropriation required by statute, and was therefore void ab initio. IND. CODE § 18-1-6-8 (Burns Code Ed.)[1] provides in part:
"Contracts and agreements Appropriations necessary When void. No executive department, officer or employee thereof shall have power to bind such city to any contract or agreement, or in any other way, to any extent beyond the amount of money at the time already appropriated by ordinance for the purposes of such department; and all contracts and agreements, express or implied, and all obligations of any and every sort, beyond such existing appropriations are declared to be absolutely void[.]"
The record is silent in respect to whether any appropriations were made.
Appellants claim that Lake Air carried the burden of proving that sufficient appropriations were made as a condition precedent to recovering under their contract. Therefore, any defect in the record indicates a failure of proof to support Lake Air's claim.
Lake Air maintains that appellants' reliance on this statute to avoid liability is in the nature of an affirmative defense, which they failed to plead and prove at trial.
Indiana Rules of Procedure, Trial Rule 8(C) provides:
"Affirmative defenses. A responsive pleading shall set forth affirmatively and carry the burden of proving: Accord and satisfaction, arbitration and award, discharge in bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, injury by fellow servant, laches, license, payment, release, res judicata, statute of frauds, statute of limitations, waiver, lack of jurisdiction over the subject-matter, lack of jurisdiction over the person, improper venue, insufficiency of process or service of process, the same action pending in another state court of this state, and any other matter constituting an avoidance, matter of abatement, or affirmative defense. A party required to affirmatively plead any matters, including matters formerly required to be pleaded affirmatively by reply, shall have the burden of proving such matters. The burden of proof imposed by this or any other provision of these rules is subject to the rules of evidence or any statute fixing a different rule. If the pleading mistakenly designates a defense as a counterclaim or a counterclaim as a defense, the court shall treat the pleading as if there had been a proper designation."
Cities and their executive agencies are presumed to act in conformance with statutory directive and within the limited powers granted by the Legislature. *763 IND. CODE § 18-1-6-8 makes it illegal for cities to enter into contracts without first appropriating sufficient funds. Therefore, where no evidence is presented to show otherwise, it must be presumed that proper monies were appropriated by a city prior to executing a contract. In such situations, the party attempting to prove otherwise shall carry the burden of proof.
In this case appellants had the burden of proving that they did not appropriate sufficient funds before contracting with Lake Air in 1962. Not only is the record devoid of evidence on this issue, but appellants failed to raise this question in their pleadings or motion to correct errors. Failure to raise an affirmative defense at trial will be deemed as waiver of that issue on appeal. Miller v. Griesel et al., (1974) 261 Ind. 604, 308 N.E.2d 701; Noble v. Moistner, (1979) 180 Ind. App. 414, 388 N.E.2d 620. It is improper to raise this issue for the first time on appeal since it would deprive Lake Air of the opportunity to litigate the question, and to raise any factual and legal contentions concerning it. Miller, supra.
Appellants next contend that the Board was without authority to execute a twenty-year contract under IND. CODE § 19-6-1-6 (Burns Code Ed.).[2] This statute provides in part:
"Seal Powers of board Purchase or lease of land Sale of buildings and machinery Eminent domain Construction of drainage system Franchises.
* * * * * *
That the said board of aviation commissioners shall have as a part of its powers, full and exclusive power on behalf of such municipality:
* * * * * *
To manage and operate any and all airports and landing fields and other air navigation facilities now or hereafter acquired or maintained by any such municipality; and to lease all or any part of any such airport or landing field and any buildings and other structures thereon and parts hereof and to fix, charge, and collect rentals therefor and for commercial privileges thereon, and to fix, charge and collect rentals, tolls, fees and charges to be paid for the use of the whole or any part or parts of any such airports or landing fields, and other air navigation facilities and for aircraft landing thereon, and the servicing thereof[.]
* * * * * *
Provided, That contracts or leases for the maintenance, operation or use of such airport or any portion thereof may be made for any term not exceeding ten [10] years, and may be extended for similar terms of years, except that any parcels of the land of such airport may be leased for any use, connected with the operation and convenience of such airport for an original term of not exceeding twenty [20] years, and may be extended for a period not to exceed ten [10] years: Provided, further, That if any person or organization, whose character, experience, and financial responsibility has been determined satisfactorily by the board, shall offer to erect a permanent structure which shall both facilitate and be consistent with the operation, use, and purpose of the airport on land belonging to said airport, a lease may be entered into for a period not to exceed ninety-nine [99] years[.]" (Emphasis added.)
Appellants contend that this contract was for "the maintenance, operation or use of such airport," and could only last for a term of ten years. In reviewing the provisions of this contract, it appears that Lake Air bargained for and received the right to exclusive use of the premises and did in fact erect buildings on the property in question. The use of airport land was therefore "connected with the operation and convenience of such airport," and subject to a twenty-year lease under IND. CODE § 19-6-1-6. Appellants may not now absolve themselves from liability in this regard.
*764 Finally appellants contend that the trial court's award of $5,990 for the tractor is not supported by the evidence and in fact is contrary to the evidence. Their motion to correct errors states in this regard:
"5. THAT the verdict and decision of the Court relating to the damages awarded for slag purchase and tractor purchase is not supported by sufficient evidence and contrary to law in that no specific appropriation was made for said purchases and further that the Michigan City Board of Aviation Commissioners did not have the authority to enter into a verbal agreement for the purchase of slag or the purchase of a tractor, and further that the municipality cannot be bound by the acts of a Commission outside of its statutory authority."
This statement is not in substantial compliance with Ind.Rules of Procedure, Trial Rule 59(D)(2), which provides that:
"Content of Motion. In all cases in which a motion to correct error is made, such motion shall separately state the error or errors which are claimed. The error claimed is not required to be stated under, or in the language of the bases for the motion allowed by this rule, by statute, or by other law. Each claimed error shall be stated in specific rather than general terms, and shall be accompanied by a statement of the facts and grounds upon which the errors are based." (Emphasis added.)
The motion to correct errors serves primarily to afford the trial court an opportunity to rectify any errors it has committed. Bennett v. State, (1973) 159 Ind. App. 59, 304 N.E.2d 827. Because appellants failed to specifically apprise the trial court of error under the theory now forwarded, this issue is waived. Ind.Rules of Procedure, Appellate Rule 8.3(A)(7); Stanley v. Fisher, (1981) Ind. App., 417 N.E.2d 932.
The judgment of the trial court is affirmed.
Affirmed.
STATON, P.J., and GARRARD, J., concur.
NOTES
[1] See now, IND. CODE § 36-4-8-12.
[2] See now, IND. CODE § 8-22-2-5. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8326569/ | MacLeod-Mancuso, Bonnie H., J.
INTRODUCTION
This matter is before the court on the motion of defendant, Dr. Jeffrey M. Brody (“Dr. Brody”) to dismiss the complaint filed by the plaintiff, Tebucky S. Jones (“PlaintifF) for lack of personal jurisdiction. Further, the court addresses the defendant, Shields MRI & CT of Rhode Island’s (“MRI/CTj2 motion for summary judgment due to lack of personal jurisdiction. Plaintiff alleges that Dr. Brody and MRI/CT, as well as two of his treating physicians, misdiagnosed and negligently treated his injury, resulting in the premature end of his professional football career. For the following reasons, Dr. Brody’s motion to dismiss is ALLOWED and MRI/CTs motion for summary judgment is also ALLOWED.
BACKGROUND
In August 2006, the Plaintiff suffered an injury during a preseason football game for the New England Patriots. Following the injury, the Plaintiff sought medical treatment from Dr. Thomas Gill (“Dr. Gill”) and Dr. Betram Zarins (“Dr. Zarins”), both Massachusetts physicians. The Plaintiffs physicians referred him to MRI/CTs Rhode Island facility for three separate magnetic resonance imaging (MRI) scans. Rhode Island Medical Imaging (“RIMI”) actually performed the three separate scans at MRI/CTs facility on August 27, 2006, September 27, 2006, and December 8, 2006. *606RIMI has a contractual agreement with MRI/CT to provide radiological services at MRI /CT’s Rhode Island facility.
After scheduling an appointment with a MRI/CT staff member via phone, the Plaintiff traveled to Rhode Island for the scans where he did not meet or interact with Dr. Brody. Some time after the third MRI scan was performed, another MRI/CT staff member brought the Plaintiffs file to Dr. Brody for review. He examined the scans and sent a medical report, which stated that Plaintiff had an “intact anterior cruciate ligament,” to the treating physicians, Dr. Gill and Dr. Zarins. Dr. Brody only examined the December 8, 2006 scan. Other doctors examined the previous scans, but Plaintiff does not allege that these other doctors acted negligently.
The Plaintiff later sought to contract with the Oakland Raiders. During the routine physical examination, the Raiders’ medical team concluded that the Plaintiff had a torn anterior cruciate ligament and posterior lateral corner injury. Consequently, the Oakland Raiders declined to sign the Plaintiff, essentially ending his professional football career. The Plaintiff then brought this action claiming that Dr. Brody negligently diagnosed him resulting in delayed treatment of the injury that ultimately cost him his career.
Dr. Brody brought his original motion to dismiss for lack of personal jurisdiction in April 2010. This court heard arguments on the motion and deferred any ruling in order to allow the Plaintiff ninety (90) days for jurisdictional discovery, during which Plaintiffs counsel deposed Dr. Brody. The discovery period has now ended and Dr. Brody’s Renewed Motion to Dismiss as well as MRI/CTs Motion for Summary Judgment are both before the court at this time.
DISCUSSION
I. Dr. Brody’s Renewed Motion to Dismiss for Lack of Personal Jurisdiction
A plaintiff facing a motion to dismiss under Mass.R.Civ.P. 12(b)(2) bears the burden of establishing facts sufficient to show that the court has personal jurisdiction over each defendant. Droukas v. Divers Training Acad., Inc., 375 Mass. 149, 151 (1978). The court assumes the specific facts alleged by the plaintiff to be true and construes them in the light most favorable to the plaintiffs jurisdictional claim. Cepeda v. Kass, 62 Mass.App.Ct. 732, 737 (2004).
“Generally, a claim of personal jurisdiction over a nonresident presents a two-fold inquiry: (1) is the assertion of jurisdiction authorized by the [Massachusetts long arm] statute, and (2) if authorized, is the exercise of jurisdiction under State law consistent with basic due process requirements mandated by the United States Constitution?” Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 5-6 (1979). The plaintiff must satisfy both prongs in order to proceed. Id. at 6.
A. Specific Jurisdiction
Constitutionally, the Plaintiff must show that Dr. Brody had “such minimum contacts with the state that the maintenance of the suit does not offend traditional notions of fair play and justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). In order to exercise personal jurisdiction over the defendant the court must find that Dr. Brody purposefully availed himself of the privileges of conducting activities within Massachusetts. See Hanson v. Denckla, 357 U.S. 235, 253 (1958); Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 7 (1979).
Based on the facts alleged by the Plaintiff as discussed above, this court cannot exercise personal jurisdiction over Dr. Brody. Dr. Brody’s only contact with Massachusetts consists of mailing a medical report to the Plaintiffs treating physicians. Dr. Brody mailed the report in response to the Plaintiff voluntarily seeking treatment from MRI/CT and Dr. Brody in Rhode Island, where all relevant testing, evaluation and the creation of the medical report took place. Dr. Brody did not purposefully avail himself of the privileges of Massachusetts’ law when he sent the report to the Plaintiffs doctors in Massachusetts. Thus, this court finds that Dr. Brody has insufficient contacts with Massachusetts and therefore the exercise of personal jurisdiction over Dr. Brody does not meet the Constitutional due process requirements.
Additionally, the facts do not support the exercise of personal jurisdiction over Dr. Brody under the Massachusetts longarm statute, G.L.c. 223A, §3. Pursuant to G.L.c. 223A, §3 this court may exercise personal jurisdiction over the defendant as to a cause of action arising from the defendant “(a) transacting any business in this commonwealth; (b) contracting to supply services or things in this commonwealth; (c) causing tortious injury by an act or omission in this commonwealth.” G.L.c. 223A, §3(a)-(c).3
Dr. Brody did not transact business in the Commonwealth. G.L.c. 223A, §3(a). Courts have generally construed “transacting any business" broadly, although an isolated and minor transaction would be insufficient without some purposeful and successful solicitation. Tatro v. Manor Care, Inc., 416 Mass. 763, 767 (1994). Dr. Brody’s single report in response to the Plaintiff seeking treatment in Rhode Island is insufficient contact to establish personal jurisdiction. In this case, the Plaintiff entered Rhode Island to undergo an MRI and Dr. Brody’s resulting contact with Massachusetts, mailing the results of that MRI to the treating physicians, was minor, isolated, and instigated by the Plaintiffs own actions outside of Massachusetts. The Plaintiff claims that Dr. Brody’s actions are part of a course of treatment in Massachusetts; however, this argument instills the actions of other physicians on Dr. Brody. The Plaintiff does not offer sufficient evidence to demonstrate that the mailing of the report amounted to a continuous activity rather than a sin*607gle, isolated transaction. Dr. Brody did not purposefully intend to reach into Massachusetts to transact business; he merely sent a copy of his report to the treating physicians of a patient as part of his conducting business in Rhode Island.4
Dr. Brody also did not contract to supply services or things in the Commonwealth. G.L.c. 223A, §3(b). In fact, the only contract Dr. Brody entered into relevant to this case was his employment contract with RIMI to practice exclusively in Rhode Island. None of the evidence indicates that Dr. Brody has any contract to perform services or supply things in Massachusetts.
Finally, Dr. Brody did not cause tortious injury by mailing the report to Massachusetts. Even taking what the Plaintiff alleges as true, Dr. Brody’s alleged tortious conduct occurred in Rhode Island, where he evaluated the MRI scan and wrote the medical report, not in Massachusetts. See G.L.c. 223A, §3(c). The Plaintiff cannot establish jurisdiction over Dr. Brody in Massachusetts merely because the Plaintiff resides in Massachusetts and feels the effects of his injury in his home state. The consequences of medical care may be a constant companion throughout a patient’s lifetime, but jurisdiction does not follow the patient wherever he may travel. Harlow v. Children’s Hosp., 432 F.3d 50, 63 (1st Cir. 2005). The Harlow court went further to say, “that the reputation and expertise of an institution lead to referrals from out of state cannot be enough to establish specific jurisdiction.” Id.
For the reasons above, the Plaintiff fails to satisfy any applicable subsection of the Massachusetts longarm statute, G.L.c. 223A, §3(a)-(c). Therefore, jurisdiction is not authorized by statute and this court cannot assert specific jurisdiction over Dr. Brody
B. General Jurisdiction
The Plaintiff alternatively suggests that the court may exercise general jurisdiction over Dr. Brody. “General jurisdiction exists when the litigation is not directly founded on the defendant’s forum-based contacts, but the defendant has nevertheless engaged in continuous and systematic activity, unrelated to the suit, in the forum state.” United Elec., Radio and Mach. Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1088 (1st Cir. 1992), citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 & n.9 (1984). General jurisdiction is recognized by the Commonwealth in the longarm statute as “causing tortious injury in this commonwealth by an act or omission outside this commonwealth if [the person] regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth.” G.L.c. 223A, §3(d). The court could exercise jurisdiction if the defendant engaged in purposeful and successful solicitation of business. See Tatro, 416 Mass. at 767.
Dr. Brody’s limited contacts with the Commonwealth, however, do not constitute regular solicitation of business or a persistent course of conduct. The Plaintiff points to the number of Dr. Brody’s patients from Massachusetts and the financial benefit he receives from physicians in Massachusetts who refer patients to him.5 However, the Plaintiff fails to allege that Dr. Brody solicited patients from Massachusetts or engaged in any agreements with Massachusetts’ physicians to refer patients. Moreover, the physicians refer patients to the MRI/CT facility and not to Dr. Brody individually. Finally, the plain language of the statute requires revenue to be derived from “services rendered in this commonwealth.” G.L.c. 223A, §3(c). Dr. Brody performs his duties entirely in Rhode Island. Overall, the Plaintiff failed to provide evidence that Dr. Brody engaged in a persistent course of conduct or gained substantial revenue from Massachusetts and therefore, the Plaintiff has not met his burden for general jurisdiction either.
II. MRI/CTs Motion for Summary Judgment Due to Lack of Personal Jurisdiction
A motion for summary judgment should be granted where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Mass.R.Civ.P. 56(c). The moving party must demonstrate that the absence of a triable issue entitles it to judgment as a matter of law. Kourouvacilis v. General Motors Corp., 410 Mass. 706, 711 (1991). Once the moving party “establishes the absence of a triable issue, the party opposing the motion must respond and allege specific facts which would establish the existence of a genuine issue of material fact.” Pederson v. Time, Inc., 404 Mass. 14, 17 (1989). The court reviews the evidence in the light most favorable to the non-moving party, but does not weigh evidence, assess credibility, or find facts. Attorney Gen. v. Bailey, 386 Mass. 367, 370-71 (1982).
A. Specific Jurisdiction
As discussed above, the Plaintiff bears the burden to prove that MRI/CT has sufficient minimum contacts so that the exercise of personal jurisdiction in Massachusetts does not offend traditional notions of fair play and substantial justice. See Int’l Shoe Co., 326 U.S. at 316. Here, MRI/CT’s only contact with Massachusetts consists of Dr. Brody mailing the medical report on MRI/CT letterhead in response to the Plaintiff seeking treatment at MRI/CT’s Rhode Island facility. Since MRI/CT’s limited contact with the Commonwealth was a result of the actions of the Plaintiff and not its own purposeful activity, this court cannot exercise personal jurisdiction over MRI/CT. To hold otherwise would mean that MRI/CT avails itself of the benefits of other jurisdictions by merely allowing non-residents to seek care at its facility and forwarding medical documents to their treating physicians. Such a rul*608ing would offend traditional notions of fair play and substantial justice. See Int’l Shoe Co., 326 U.S. at 316. Accordingly, as a matter of law, the Plaintiff has not established sufficient facts to satisfy the constitutional prong of personal jurisdiction.
Further, the Plaintiff must show that jurisdiction can be based on a provision of the Massachusetts longarm statute. G.L.c. 223A, §3. In this matter, the Plaintiff is unable to establish any of the statutory requirements for specific jurisdiction against MRI/CT, as explained above.
MRI/CT did not transact business in Massachusetts. G.L.c. 223A, §3(a). MRI/CT’s conduct took place in Rhode Island and MRI/CT does not operate in Massachusetts at all. Instead, the Plaintiff took purposeful action by crossing state lines to undergo an MRI at MRI/CT’s facility in Rhode Island. The MRI was scheduled, completed, and reviewed in Rhode Island. The only contact that the Plaintiff can point to with Massachusetts was Dr. Brody mailing his report on MRI/CT letterhead to the Plaintiffs treating physicians in Massachusetts. As discussed above, jurisdiction cannot be based on a single report being mailed to the forum state without the defendant taking some purposeful action to reach into the forum state.
Further, the Plaintiff cannot establish that MRI/CT contracted to supply services in the Commonwealth. G.L.c. 223A, §3(b). In fact, the only contracts established by the evidence are Dr. Brody’s employment contract with RIMI and RIMI’s contract to provide radiological services for MRI/CT, both exclusively at the MRI/CT facility in Rhode Island.
Finally, MRI/CT did not cause tortious injuiy by an act or omission in the commonwealth because all of its actions took place in Rhode Island, except for the mailing of a medical report. G.L.c. 223A, §3(c). Certainly mailing the report cannot be sufficient to establish jurisdiction when the action of mailing caused no injuiy. Simply because the Plaintiff resides in Massachusetts and felt the effects of his injuiy there does not make the injuiy occur in Massachusetts. See United States v. Swiss Am Nat’l Bank, 274 F.3d 610, 618 (1st Cir. 2001).
For the reasons above, the Plaintiff fails to satisfy any applicable subsection of G.L.c. 223A, §3. Therefore, jurisdiction is not authorized by statute or the Constitution and this court cannot assert jurisdiction.
B. General Jurisdiction
The Plaintiff alternatively suggests that the court may exercise general jurisdiction over MRI/CT but has not provided sufficient evidence to establish that MRI/CT “regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from . . . services rendered, in this commonwealth.” G.L.c. 223A, §3(d). Plaintiff points to MRI/CT having a significant number of patients from Massachusetts and receiving financial benefit from treating those patients referred by physicians in Massachusetts. There is, however, no evidence that MRI/CT solicited patients from Massachusetts or engaged in any agreements with physicians from Massachusetts to refer patients to MRI/CT. Indeed, the record before the court shows that non-residents come to Rhode Island for treatment and that MRI/CT does not provide services anywhere except in Rhode Island, thus, not fulfilling the plain language of the statute that the services must be rendered in the Commonwealth. G.L.c. 223A, §3(d).
ORDER
For the foregoing reasons, Dr. Brody’s Motion for Dismissal is ALLOWED and MRI/CT’s Motion for Summary Judgment is also ALLOWED.
When first named as Shields MRI & CT of Rhode Island, this party was under different ownership. The name has since changed and the facility is now named MRI/CT of Providence, LLC. This court will use this new name for the sake of accuracy.
The Plaintiffs arguments for jurisdiction on subsection (d) are discussed below. Subsections (e) through (h) are not applicable and are not addressed by the Plaintiff.
Plaintiffs reliance on Santos v. Kim, 429 Mass. 130 (1999), is misplaced. He attempts to use the case to persuade the court that a legal duty between radiologist and patient extends to the patient’s home state with his treating physician, carrying jurisdiction in its wake. Through this argument, Plaintiff is either misconstruing a legal duty between doctor and patient with continuing medical service or is claiming Dr. Brody caused an injuiy to the Plaintiffs treating physicians, the other defendants. Regardless, Santos was not discussing jurisdiction as to the court but, rather, jurisdiction of the medical malpractice tribunal pursuant to G.L.c. 231, §60B. There is no discussion of personal jurisdiction in that case nor is there any issue of tribunal jurisdiction before this court. Thus, Santos is irrelevant to the present matter.
Plaintiff also relies on Durette v. Int'l Screening Labs., Inc., 3 Mass. L. Rptr. 604 (1995), to show that Dr. Brody’s mailing of the report constituted purposeful action in Massachusetts. The court in Durette, however, distinguished between doctors, “who have essentially local practices [and] become involved in another state not as a result of their intention to do so, but rather as a result of the action of their out-of-state patients,” and a “doctor who has ‘purposefully directed’ his actions to the forum state by performing medical services through the mail for a patient in the forum state, Id. at 607, quoting Kennedy v. Freeman, 919 F.2d 126, 129 (10th Cir. 1990). The patients in Durette were tested in the forum state, the results of those tests were sent to the doctor in another state for analysis and the medical report was then returned to the treating physician in the forum state. Here, the Plaintiff was tested in Rhode Island; Dr. Brody evaluated that test in Rhode Island and then sent the medical report to Massachusetts. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1877940/ | 391 B.R. 210 (2008)
IN RE COOL FUEL, INC.
COOL FUEL, INC.
v.
BOARD OF EQUALIZATION OF STATE OF CALIFORNIA.
Nos. CC-05-01121-KPaB, CC-05-01325-KPaB, 06-56017, 06-56018.
United States Bankruptcy Appellate Panel for the Ninth Circuit.
February 19, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2600614/ | 186 P.3d 1038 (2008)
STATE of Washington, Respondent,
v.
Octavio Gonzales FLORES, Petitioner.
No. 79135-0.
Supreme Court of Washington, En Banc.
Argued September 11, 2007.
Decided June 26, 2008.
*1040 Dennis W. Morgan, Attorney at Law, Ritzville, WA, for Petitioner.
Karl F. Sloan, Okanogan County Prosecuting Attorney, Okanogan, WA, for Respondent.
Octavio Gonzales Flores, Connell, WA, Appearing Pro Se.
MADSEN, J.
¶ 1 Octavio Gonzales Flores challenges his convictions of six counts of unlawful delivery of a controlled substance, two counts of involving a minor in an unlawful drug transaction, and one count of possession with intent to deliver. He contends that insufficient evidence supports the convictions for involving a minor, that the State's use of a written statement by his wife violated his constitutional right to confrontation, and that the imposition of an exceptional sentence based on judge-made findings violated his constitutional right to a jury trial. The Court of Appeals affirmed the convictions and sentence after considering supplemental briefing on the applicability of Crawford v. Washington, 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004) and Blakely v. Washington, 542 U.S. 296, 124 S. Ct. 2531, 159 L. Ed. 2d 403 (2004), which were published while the case was on direct review.
¶ 2 We hold the offense of involving a minor in a drug transaction, former RCW 69.50.401(f) (1998), recodified as RCW 69.50.4015, does not encompass the act of merely allowing a minor to remain present during the transactions that took place at Flores'[1] residence. Accordingly, we reverse his convictions on those charges for insufficient evidence. But we affirm the other convictions, agreeing with the Court of Appeals that the confrontation clause violation was harmless. Finally, we hold the imposition of an exceptional sentence violates Flores' right to a jury trial, following Blakely, because the judge, not the jury, made the factual determination that the offense constitutes a major violation of the Uniform Controlled Substances Act (VUCSA), chapter 69.50 RCW, which was "more onerous than the typical offense." Former RCW 9.94A.535(2)(e) (2001).
FACTS
¶ 3 This case arises from a sting operation conducted by the North Central Washington Narcotics Task Force. In July, August, and September 2001, the task force conducted a series of controlled drug buys from Flores and his wife, Sandra, acting through a confidential informant. The confidential informant agreed to participate in lieu of charges.
¶ 4 The confidential informant did not speak Spanish. Flores did not speak English. *1041 Sandra translated during each of the drug transactions.
¶ 5 The first transaction occurred on July 26, 2001, at the orchard cabin where Flores and Sandra lived, together with Sandra's daughter, Jessica (born July 7, 1988). 1 Verbatim Report of Proceedings (VRP) at 108-09 (Feb. 7, 2002); 3 VRP at 449 (Feb. 11, 2002). The confidential informant encountered Sandra and Jessica sitting on a bench outside the cabin. He told Sandra he wanted "150." 1 VRP at 107. Sandra waved Flores over. They conversed in Spanish. The confidential informant gave Sandra the money, and Flores handed her a plastic baggie of 2.5 grams of cocaine. Sandra gave the plastic baggie to the informant. Neither Sandra nor Flores asked Jessica to leave.
¶ 6 Based on the evidence obtained at the first transaction, the police secured a court order that authorized the use of a "body wire." 1 VRP at 118, 126. All of the subsequent controlled buys were recorded via a wire worn by the confidential informant. In addition, aerial surveillance was used during the final controlled buy.
¶ 7 The second transaction occurred inside the cabin. Jessica was sitting on a couch in the living room. Flores either gave the drugs to Sandra in the bedroom, which was separate from the living room, or in the kitchen, which adjoined the living room.[2] According to the confidential informant, Jessica "was in the general area. It was a small cabin." 3 VRP at 457. He felt she "was aware of what was going on." Id. at 452. Flores did not ask her to leave.
¶ 8 The final controlled buy occurred on September 25, 2001. 2 VRP at 318 (Feb. 8, 2002). The confidential informant purchased 25.5 grams of cocaine in exchange for $1,425. The transaction took place in an open field. It was videotaped from a military surveillance plane. Police on the ground saw the confidential informant approach a truck, hand money inside, and receive a package of drugs from Flores.
¶ 9 After the transaction was complete, the police arrested Flores and then executed a search warrant at the orchard cabin. Sandra responded to police questioning and provided a written statement.
¶ 10 The police recovered 155 grams of cocaine from the premises, cash, including some of the recorded money used in the controlled buys, cutting agents, and packaging materials. Flores had $1,018 and seven bindles[3] of cocaine in his pants pocket when he was arrested. 4 VRP at 670, 720 (Feb. 12, 2002). Sandra had 11 bindles in her pants pocket. 2 VRP at 337.
¶ 11 The State charged Flores with six counts of unlawful delivery of a controlled substance[4] (counts I, III, V, VI, VII, VIII), two counts of involving a minor in drug dealing[5] (counts II and IV), and one count of unlawful possession with intent to deliver a controlled substance[6] (count IX). Clerk's Papers (CP) at 12-16.
¶ 12 Anticipating that Flores would invoke his spousal privilege to prevent Sandra from testifying, the State moved for admission of her out-of-court statements under ER 801(d)(2) (hearsay exemption for admission by party-opponent) and ER 804(b)(3) (hearsay exception for statements against penal interest). Over Flores' objection, the trial court ruled that Sandra's statements made during the controlled buys were admissible under ER 801(d)(2)(v), as statements by a co-conspirator in furtherance of the conspiracy. The trial court also ruled, again over Flores' objection, that Sandra's oral and written statements to the police were admissible under ER 804(b)(3), as statements against penal interest.
¶ 13 Accordingly, a written statement signed by Sandra was read into the record. In it, she admits participating in the drug transactions and inculpates her husband in the offenses. She also states her daughter *1042 was present during some of the drug transactions.
¶ 14 The State played the audio recordings of the drug buys for the jury. A translator read the English translation of the recordings into the record.
¶ 15 At the close of the State's case-in-chief, defense counsel moved for dismissal of the two counts for violation of former RCW 69.50.401(f) (involving a minor in an unlawful drug transaction). The trial court denied the motion.
¶ 16 Speaking through a translator, Flores testified. He conceded guilt as to counts eight and nine, relating to the September 25, 2001 controlled buy (which was captured on videotape). He admitted he handed cocaine to the confidential informant (count VIII), and he intended to give the seven bindles of cocaine found in his pocket to his wife (count IX). But he denied involvement in the other transactions.
¶ 17 On cross-examination, Flores admitted he was present when the confidential informant came to his house several times. He also admitted the voices on the audio recordings were his and his wife's.
¶ 18 A jury convicted Flores as charged. CP at 108-10.
¶ 19 The trial court sentenced Flores at the top of the standard range for five of the controlled substance offenses (120 months) and the two offenses for involving a minor (60 months), ordering they run concurrently. CP at 120. The trial court sentenced Flores to 60 months on the remaining two controlled substance offenses (counts VIII and IX) and ordered they run consecutively to the other offenses. Thus, the court sentenced Flores to an exceptional consecutive sentence of 180 months. CP at 127.
¶ 20 The court concluded the offenses were major VUCSAs, "more onerous than the typical offense." CP at 126. The court also concluded the multiple offense policy resulted in a sentence that was "clearly too lenient," based on Flores' offender score (18), and "some additional punishment should be imposed for allowing the child to be present" at two of the drug transactions. Id.
¶ 21 While Flores' case was on direct review, the United States Supreme Court issued its decisions in Crawford and Blakely. The Court of Appeals accepted supplemental briefing on the applicability of those decisions and affirmed the convictions. State v. Gonzales Flores, noted at 134 Wash.App. 1024, 2006 WL 2130668, 2006 Wash.App. LEXIS 1656. The court held that allowing a minor to be present during a drug transaction constitutes sufficient "involvement" to support a conviction for violation of RCW 69.50.4015. The court further held the trial court improperly admitted Sandra's out-of-court statements to police but the error was harmless. Finally, the trial court affirmed the exceptional sentence, holding the trial court did not engage in improper judicial fact-finding because the aggravating factor of a "major VUCSA" is based on facts found by the jury beyond a reasonable doubt, i.e., more than three convictions.
ANALYSIS
¶ 22 Flores challenges the sufficiency of the evidence in support of his convictions for involving a minor in a drug transaction. He argues that allowing a minor to remain present during an unlawful drug transaction does not, alone, constitute a violation of former RCW 69.50.401(f). We agree.
¶ 23 The resolution of this issue depends on this court's interpretation of former RCW 69.50.401(f). Statutory interpretation is a question of law subject to de novo review. State v. Hacheney, 160 Wash.2d 503, 512, 158 P.3d 1152 (2007).
¶ 24 Former RCW 69.50.401(f) provides:
It is unlawful to compensate, threaten, solicit, or in any other manner involve a person under the age of eighteen years in a transaction unlawfully to manufacture, sell, or deliver a controlled substance.
¶ 25 State v. Hollis, 93 Wash.App. 804, 970 P.2d 813 (1999), is the only decision addressing the statute's scope. Hollis involved the consolidated appeals of Mark Hollis and Lawrence Reddick. Id. at 808, 970 P.2d 813. Each man was convicted of involving a minor in a drug transaction, in violation of former RCW 69.50.401(f). An undercover officer approached *1043 Hollis on the street and said he wanted to purchase rock cocaine. Hollis said he would get it for him. Hollis then approached a minor and asked her to "deal to" the undercover officer. Id. at 809, 970 P.2d 813. The minor reluctantly agreed after Hollis found someone to "vouch" for the officer. Id.
¶ 26 In Reddick's case, an undercover officer approached two men on a downtown street and said he was looking for "a twenty," i.e., $20 worth of narcotics. Id. One of the men agreed to arrange the deal. Reddick approached the men arm-in-arm with his girl friend, a minor. After a brief exchange of signals, Reddick handed over a rock of cocaine, received a $20 bill, and then walked away with his girl friend.
¶ 27 Hollis and Reddick challenged their convictions, arguing the phrase "in any other manner involve" in former RCW 69.50.401(f) is unconstitutionally vague.
¶ 28 Because Hollis involved a void-for-vagueness challenge, the issue was whether, in light of the particular facts of the case, the statute defines the offense "with sufficient definiteness that ordinary people can understand what conduct is proscribed" and whether it provided "ascertainable standards of guilt to protect against arbitrary enforcement." Hollis, 93 Wash.App. at 810-11, 970 P.2d 813 (quoting State v. Myles, 127 Wash.2d 807, 812, 903 P.2d 979 (1995)).
¶ 29 The Court of Appeals rejected the constitutional challenge after considering the ordinary, dictionary meaning of the term "involve." The court stated:
A defendant violates RCW 69.50.401(f) if he or she compensates, threatens, solicits or in any other manner involves i.e., surrounds, encloses, or draws in a minor in an unlawful drug transaction, or obliges a minor to become associated with the drug transaction, e.g., by inviting or bringing a minor to a drug transaction, or allowing the minor to remain during a drug transaction.
Hollis, 93 Wash.App. at 812, 970 P.2d 813 (emphasis added).
¶ 30 The court ruled the statute sufficiently notified Reddick that the "acts of approaching the drug transaction arm-in-arm with a minor, . . . and allowing that minor to remain present during the drug transaction, thereby obliging her to become associated with the drug transaction" would constitute a violation of the statute. Id.
¶ 31 Flores urges us to disapprove of Hollis to the extent it suggests that allowing a minor to remain during a drug transaction, alone, constitutes a violation of former RCW 69.50.401(f). He contends the statute requires proof of the minor's active involvement in the transaction. He asks this court to apply the principles of accomplice liability and constructive possession in setting forth the standard of proof required.
¶ 32 As the Court of Appeals correctly observed, the statute does not require the minor's actual participation in the drug transaction: "the minor's culpability and actions which are proscribed under other statutes are inapposite for the purposes of the involving a minor in a drug transaction statute. Instead, the focus is on the defendant's affirmative acts." Hollis, 93 Wash. App. at 812, 970 P.2d 813. It is not necessary to establish the minor had any criminal intent. Accordingly, the analogy to accomplice liability and constructive possession is inapt.
¶ 33 However, we agree with Flores that the statute does not encompass the mere act of selling drugs in the presence of a minor. We recognize that exposing children to unlawful drug transactions is deplorable. However, our task is to decide whether the legislature intended to penalize that conduct when it enacted RCW 69.50.401(f). We conclude that it did not.
¶ 34 Three principles of statutory construction are germane to our analysis. First, a single word in a statute should not be read in isolation. Rather, the meaning of a word may be indicated or controlled by reference to associated words. State v. Roggenkamp, 153 Wash.2d 614, 623, 106 P.3d 196 (2005) (applying the doctrine of noscitur a sociis); State v. Van Woerden, 93 Wash.App. 110, 117, 967 P.2d 14 (1998). In applying this principle to determine the meaning of a word in a series, a court should "`"take into consideration *1044 the meaning naturally attaching to them from the context, and . . . adopt the sense of the words which best harmonizes with the context."'" Roggenkamp, 153 Wash.2d at 623, 106 P.3d 196 (quoting State v. Jackson, 137 Wash.2d 712, 729, 976 P.2d 1229 (1999) (quoting 50 AM.JUR. STAUTES § 247 (1944))).
¶ 35 A closely related and equally well-established principle of statutory interpretation is that specific words modify and restrict the meaning of general words when they occur in a sequence. State v. Roadhs, 71 Wash.2d 705, 708, 430 P.2d 586 (1967), superseded by statute as stated in State v. Wentz, 149 Wash.2d 342, 349, 68 P.3d 282 (2003) (applying the doctrine of ejusdem generis); Port of Seattle v. Dep't of Revenue, 101 Wash.App. 106, 113, 1 P.3d 607 (2000). "The ejusdem generis rule is generally applied to general and specific words clearly associated in the same sentence in a pattern such as `[specific], [specific], or [general]' or `[general], including [specific] and [specific].'" Sw. Wash. Chapter v. Pierce County, 100 Wash.2d 109, 116, 667 P.2d 1092 (1983) (alterations in original).
¶ 36 When viewing the phrase "or in any other manner involve" in light of the words immediately preceding it ("compensate, threaten, solicit"), it is clear the legislature did not intend to encompass the act of exposing a child to an unlawful drug transaction. Each of these words describes an act directed at the minor whereby the defendant brings, or attempts to bring, the minor into the transaction in some way.
¶ 37 It is significant that when the legislature wants to protect children from the harmful effects of exposure to criminal activity, it knows how to say so. For example, the legislature created a sentence enhancement for committing an act of domestic violence "within sight or sound" of a minor. RCW 9.94A.535(3)(h)(ii) (emphasis added). Similarly, the legislature enacted enhanced penalties for conducting drug transactions at places where minors are likely to be present, including schools, school buses, within 1,000 feet of a school bus stop, public parks, public housing projects, and public buses. RCW 69.50.435(1)(a)-(g); see State v. Jacobs, 154 Wash.2d 596, 601, 115 P.3d 281 (2005) (discussing mandatory penalties under former RCW 9.94A.533(6) (2003)).
¶ 38 Another fundamental principle of statutory interpretation is that when the legislature uses different words in statutes relating to a similar subject matter, it intends different meanings. Roggenkamp, 153 Wash.2d at 625, 106 P.3d 196. The legislature enacted a mandatory sentence enhancement for unlawfully manufacturing methamphetamine when a minor "was present in or upon the premises of manufacture." RCW 9.94A.605(2) (emphasis added). The purpose of the statute is to protect children from the risk of injury resulting from chemical toxicity, explosions, and fires, which are commonly associated with methamphetamine labs. Accordingly, it targets the act of exposing children to such risks of harm. In contrast, the plain language of former RCW 69.50.401(f), "compensate, threaten, solicit, or in any other manner involve," indicates a legislative purpose to protect children from being induced by adults to participate in unlawful drug transactions. Unlike RCW 9.94A.605(2), the statute targets conduct that actively seeks to engage the minor in unlawful activity. Had the legislature intended RCW 69.50.401(f) to encompass the act of merely exposing a minor to unlawful drug activity, it could have chosen language similar to that in RCW 9.94A.605(2), making it unlawful to conduct such activity in the presence of a minor.
¶ 39 RCW 69.50.401(f) is similar to federal laws that penalize adults who involve children in drug transactions. Similar to Washington's law, 21 U.S.C. § 861(a)(1), (2) makes it unlawful for any adult to "employ, hire, use, persuade, induce, entice, or coerce" a minor to either participate in a drug offense or "to assist in avoiding detection or apprehension" for a drug offense. And the federal sentencing guidelines provide a sentence enhancement for "using a minor to commit a crime," which is defined as "directing, commanding, encouraging, intimidating, counseling, training, procuring, recruiting, or soliciting." U.S. Sentencing Guidelines Manual § 3B1.4 (2000); see also Anti-Drug Abuse Act of 1988, Pub.L. No. 100-690, § 6454, 102 Stat. 4181 (1988) (directing the sentencing *1045 commission to promulgate a sentencing enhancement for "involving" a minor in a drug offense).[7]
¶ 40 Construing these similar federal provisions, federal courts hold there is no need to prove the minor participated in any way, only that the defendant committed some affirmative act to involve the minor in the commission of the offense. United States v. Paine, 407 F.3d 958 (8th Cir.2005) (defendant brought his son along for "moral support"); United States v. Curry, 902 F.2d 912 (11th Cir.1990) (defendants asked nephew to drive them across the street to consummate a drug deal), cert. denied, 498 U.S. 1091, 111 S. Ct. 973 (1991). "The enhancement . . . focuses on whether the defendant used a minor in the commission of a crime, not whether the minor knew that he was being used to commit a crime." United States v. Ramsey, 237 F.3d 853, 861 (7th Cir.2001). The circuits differ as to the scope of conduct encompassed by the sentence enhancement but agree it applies only when the defendant commits an affirmative act to bring or attempt to bring the minor into the criminal enterprise. United States v. Taber, 497 F.3d 1177, 1180-81 (11th Cir.2007); United States v. Radermacher, 474 F.3d 999, 1002 (7th Cir.2007). Thus, a minor's mere presence is not sufficient to warrant the sentence enhancement. United States v. Jimenez, 300 F.3d 1166, 1170 (9th Cir.2002); United States v. Alarcon, 261 F.3d 416, 422 (5th Cir.2001); United States v. McDonald, 278 U.S.App. D.C. 156, 877 F.2d 91 (1989).
¶ 41 In McDonald, for instance, the State presented evidence that a minor fled during a police raid at the defendant's "stash house," the minor's personal possessions were found in the house, and he had $198 cash in his pocket when caught. Id. at 93. The court concluded the evidence was insufficient to support conviction of using a minor in a drug operation. The court reasoned the evidence "at best shows that [the minor] was present and able to observe." Id.
¶ 42 Using a child as a decoy may be sufficient evidence of "involving" a minor. For example, in United States v. Castro-Hernandez, 258 F.3d 1057 (9th Cir.2001), the court affirmed a sentence enhancement where the defendant attempted to cross into the United States from Mexico in a pickup truck with his young son at his side. Border officials found 46 kilograms of marijuana concealed in the truck. The court inferred the defendant used the boy as a decoy to reduce the likelihood of detection, and imposed a sentence enhancement. On review, the Ninth Circuit affirmed. The Court reasoned that Congress' directive to provide "`an appropriate sentence enhancement if the defendant involved a minor in the commission of the offense,' is broad enough to cover intentionally using a minor as an innocent decoy." Id. at 1060 (quoting the Violent Crime Control and Law Enforcement Act of 1994, Pub.L. No. 103-322, § 140008(a)(2), 108 Stat. 1796, 2033 (1994)). The defendant admitted that he made a special stop at home to pick up his son after loading the drugs onto the truck. Ordinarily, the defendant's mother-in-law cared for the boy during the workday. The court concluded this evidence raised a reasonable inference that the defendant intentionally used the boy as a decoy.
¶ 43 However, the court observed, "the mere presence of a minor in the truck would not have been enough." Id. at 1060. In Alarcon, for example, the minor was a passenger in a truck containing a hidden compartment of cocaine. The defendant, who traveled closely behind in a rental car, was convicted of drug offenses and received a sentence enhancement based on the use of a minor as a decoy. The Fifth Circuit reversed, holding the evidence was insufficient to establish the defendant intentionally committed an affirmative act to involve the children. The court noted there was no evidence *1046 the defendant "made, wanted or suggested" the children ride in the truck. Alarcon, 261 F.3d at 422; see also United States v. Jimenez, 300 F.3d 1166 (9th Cir. 2002) (evidence insufficient to prove use of a minor where defendant's 11 year old son routinely accompanied her during border crossings to visit family in Mexico).
¶ 44 Even assuming the phrase "in any other manner involve" is susceptible to more than one reasonable interpretation, the rule of lenity requires this court to adopt the interpretation most favorable to the defendant. State v. Jacobs, 154 Wash.2d 596, 603, 115 P.3d 281 (2005). Accordingly, we reject the State's argument that "in any other manner involve," as found in former RCW 69.50.401(f), encompasses the act of allowing a minor to remain during a drug transaction, absent evidence of an intent for the minor to play some role in the transaction.
¶ 45 Unlike in Hollis, Flores' actions, in relation to the minor, were purely passive. He did not bring her to the site, he did not have any contact with her, physical or verbal, and there is no indication she was not free to leave. His failure to require her to leave was not an affirmative act that is encompassed by the statute.
¶ 46 Nor is there sufficient evidence to establish that Flores used Jessica as a decoy. Of the five drug transactions that occurred at the cabin, Jessica was present only twice. Two of the transactions occurred off the premises. There is no evidence that Flores intended to use Jessica as a cover to avoid detection of the drug transactions. Rather, it appears her presence was a matter of happenstance, not design. Most of the transactions occurred off the premises, outside the minor's presence. On the two occasions that drug transactions occurred at the orchard cabin in Jessica's presence, the confidential informant had arrived at the residence on his own: he was not invited there by Flores.
¶ 47 Because there is insufficient evidence to infer that Flores knowingly and purposefully brought or attempted to bring his stepdaughter into the drug buys, we reverse his convictions for involving a minor in a drug transaction.
¶ 48 Flores next contends the trial court committed reversible error by admitting out-of-court statements made by his wife in violation of his constitutional right to confrontation. The State concedes error but argues it was harmless.
¶ 49 The trial court divided Sandra's out-of-court statements into two categories: (1) statements she made during the drug transactions and (2) statements she made to the police following her arrest. The court admitted the first category of statements under ER 801(d)(2)(v), as statements in furtherance of a conspiracy, and the second category under ER 804(b)(3), as statements against penal interest.[8] Flores challenges the admission of only the second category of statements.[9]
¶ 50 Sandra's oral and written statements to the police following her arrest fall squarely within the "core" class of testimonial statements. See Crawford, 541 U.S. at 51, 124 S. Ct. 1354. Thus, the Court of Appeals correctly accepted the State's concession of error. Gonzales Flores, 2006 WL 2130668, 2006 Wash.App. LEXIS 1656.
¶ 51 A confrontation clause violation is subject to harmless error analysis. State v. Watt, 160 Wash.2d 626, 635, 160 P.3d 640 (2007). In evaluating whether the error is harmless, this court applies the "`overwhelming untainted evidence'" test. State v. Davis, 154 Wash.2d 291, 305, 111 P.3d 844 (2005) (quoting State v. Smith, 148 Wash.2d 122, 139, 59 P.3d 74 (2002)), aff'd on other grounds by 547 U.S. 813, 126 S. Ct. 2266, 165 L. Ed. 2d 224 (2006). Under that test, when the properly admitted evidence is so overwhelming *1047 as to necessarily lead to a finding of guilt, the error is harmless. Id.
¶ 52 Evidence that is merely cumulative of overwhelming untainted evidence is harmless. State v. Nist, 77 Wash.2d 227, 236, 461 P.2d 322 (1969); see also Dennis J. Sweeney, An Analysis of Harmless Error in Washington: A Principled Process, 31 GONZ. L.REV. 277, 319 (1995) ("Regardless of the announced standard of review for harmless error, Washington has a long history of ruling error harmless if the evidence admitted or excluded was merely cumulative.").
¶ 53 Flores contends the Crawford error is not harmless because Sandra's statements "were the only corroborating evidence of the [confidential informant's] testimony that Octavio was involved in the activities charged in Counts I through VII of the Information." RAP 13.4(a) Pet. for Discretionary Review at 13. On the contrary, as detailed in the recitation of facts, the State presented overwhelming evidence corroborating the confidential informant's testimony, including audio recordings, video recordings, drugs, money, and the defendant's own admissions. The tainted evidence is merely cumulative of this overwhelming untainted evidence. Thus, we hold the improper admission of Sandra's out-of-court statements was harmless beyond a reasonable doubt.
¶ 54 Finally, Flores challenges his exceptional sentence. The imposition of a consecutive sentence under former RCW 9.94A.589(1)(a) violates the right to a jury even when the sentence for each offense is within the standard range, if the judge, not the jury, makes the predicate findings in support of the consecutive sentence. In re Pers. Restraint of VanDelft, 158 Wash.2d 731, 147 P.3d 573 (2006).
¶ 55 Here, the trial court sentenced Flores within the standard range for each offense but ordered him to serve the last two counts consecutively to the first seven counts, under former RCW 9.94A.589(1)(a). The court found that two aggravating factors supported a consecutive sentence: former RCW 9.94A.535(2)(e)(i)-(vi) ("major VUCSA") and former RCW 9.94A.535(2)(i) ("clearly too lenient").[10] CP at 126.
¶ 56 The existence of an aggravating factor is a factual question, not a question of law. State v. Suleiman, 158 Wash.2d 280, 292-93, 143 P.3d 795 (2006). Thus, unless an aggravating factor is established solely by the jury verdict or the defendant's stipulation, it cannot be used to support an exceptional sentence.
¶ 57 It is well established that the "clearly too lenient" factor cannot support an exceptional sentence when found by the judge. VanDelft, 158 Wash.2d at 734, 147 P.3d 573; Suleiman, 158 Wash.2d at 287, 143 P.3d 795; State v. Hughes, 154 Wash.2d 118, 140, 110 P.3d 192 (2005), overruled on other grounds by Washington v. Recuenco, 548 U.S. 212, 126 S. Ct. 2546, 165 L. Ed. 2d 466 (2006). The State concedes the invalidity of the "clearly too lenient" factor in this case, because the judge, not the jury, made this factual determination.
¶ 58 However, we have not yet addressed whether an exceptional sentence based on the aggravating factor of a "major VUCSA" can withstand constitutional scrutiny, following Blakely.
¶ 59 An exceptional sentence may withstand such a challenge when based on facts necessarily found by the jury. For example, an exceptional sentence based on a finding of "sexual motivation" may be affirmed because the statute expressly requires the finding to be made by a jury beyond a reasonable doubt. See Hughes, 154 Wash.2d at 134, 110 P.3d 192 ("RCW 9.94A.535(2)(f), listing sexual motivation as an aggravating factor, also is still valid because RCW 9.94A.835 requires a jury to find beyond a reasonable doubt that sexual motivation was present.").
¶ 60 On the other hand, when the trial court is left to draw any inferences from the facts in determining the existence of an aggravating *1048 factor, the aggravating factor is not a valid ground for an exceptional sentence. Thus, in State v. Hagar, 158 Wash.2d 369, 144 P.3d 298 (2006), this court held that an exceptional sentence based on a "major economic offense" violates the right to a jury even when a defendant stipulates to facts that establish one of the statutorily enumerated factual predicates for this aggravating factor, i.e., that the offense involved multiple incidents or multiple victims.
¶ 61 At the time Flores was sentenced, a trial court could impose an exceptional sentence if
[t]he current offense was a major violation of the Uniform Controlled Substances Act, chapter 69.50 RCW (VUCSA), related to trafficking in controlled substances, which was more onerous than the typical offense of its statutory definition: The presence of ANY of the following may identify a current offense as a major VUCSA:
(i) The current offense involved at least three separate transactions in which controlled substances were sold, transferred, or possessed with intent to do so.
Former RCW 9.94A.535(2)(e) (emphasis added).
¶ 62 The State argues the jury's verdict sufficiently supports a finding of a "major VUCSA," under former RCW 9.94A.535(2)(e)(i), because the jury convicted Flores of more than three unlawful drug transactions.
¶ 63 We recently rejected a similar argument addressing the aggravating factor of a "`major economic offense.'" Hagar, 158 Wash.2d at 374, 144 P.3d 298. Under former RCW 9.94A.535(2)(d), a court could impose an exceptional sentence if
[t]he current offense was a major economic offense or series of offenses, so identified by a consideration of any of the following factors:
(i) The current offense involved multiple victims or multiple incidents per victim.
¶ 64 In Hagar, the defendant pleaded guilty to three counts of first degree theft. As part of his plea agreement, he stipulated to facts sufficient to prove he committed 4 counts of second degree theft and 20 counts of first degree theft in an embezzlement scheme. Hagar, 158 Wash.2d at 371, 144 P.3d 298. Based on his stipulations, the trial court imposed an exceptional sentence, finding the crimes constituted a "major economic offense" in that they involved multiple incidents per victim.[11]Id. at 372, 144 P.3d 298.
¶ 65 We concluded the trial court
"engaged in improper Blakely fact finding when it found the crimes constituted a "major economic offense."
"Hagar stipulated certain facts but did not stipulate that the crimes constitute a `major economic offense.' The trial court imposed an exceptional sentence of 30 months, . . . based on its finding that Hagar had committed a major economic offense. Hagar's sentence is in violation of Blakely because the exceptional sentence was predicated on an unstipulated fact that was not found by a jury beyond a reasonable doubt."
Id. at 374, 144 P.3d 298.
¶ 66 This case is indistinguishable from Hagar. The jury convicted Flores of seven drug transactions. Like the "major economic offense" aggravator, the "major VUCSA" aggravator allows, but does not compel, an exceptional sentence when the defendant commits multiple violations ("[t]he presence of ANY of the following may identify a current offense as a major VUCSA"). Former RCW 9.94A.535(2)(e) (emphasis added). Thus, the trial court had to make factual determinations in order to justify the exceptional sentence. In particular, the trial court had to infer the offenses were "more onerous than the typical offense." Id. In drawing that inference an inference the State correctly observes is sufficiently supported (but not compelled) by the jury verdict the trial court made a factual determination that must be made by a jury. Compare State v. Cubias, 155 Wash.2d 549, 120 P.3d 929 (2005) (finding no Blakely violation where the jury *1049 verdict necessarily implies the defendant committed multiple serious violent offenses, triggering the imposition of a mandatory consecutive sentence). The "statutory maximum" is the maximum that a judge may impose "without any additional findings." Suleiman, 158 Wash.2d at 289, 143 P.3d 795 (emphasis added) (quoting Blakely, 542 U.S. at 303-04, 124 S. Ct. 2531). Because the jury verdict does not necessarily imply Flores' multiple offenses were a "major VUCSA," the exceptional sentence is based on a finding made by the judge, not the jury.
¶ 67 Even assuming the court relied solely on the jury's factual finding that Flores committed more than three controlled substance offenses to infer the crime was a "major VUCSA," the exceptional sentence would be invalid.[12] Trial courts lack the authority to deviate from legislatively prescribed exceptional sentencing procedures. State v. Pillatos, 159 Wash.2d 459, 150 P.3d 1130 (2007). At the time Flores was tried, the Sentencing Reform Act of 1981(SRA), chapter 9.94A RCW, required the judge, not the jury, to find the existence of this statutory aggravating factor, according to the preponderance of the evidence standard of proof. In re Pers. Restraint of Hall, 163 Wash.2d 346, 359-361, 181 P.3d 799 (2008); see also Hughes, 154 Wash.2d at 148, 110 P.3d 192 (the former SRA "explicitly directs the trial court to make the necessary factual findings and does not include any provision allowing a jury to make those determinations during trial, during a separate sentencing phase, or on remand." (emphasis added)). The trial court could neither delegate its fact-finding duty to the jury nor impose a more demanding standard of proof. Hall, 163 Wash.2d at 361, 181 P.3d 799. Even if the record showed that Flores' jury expressly found, beyond a reasonable doubt, that he committed a "major VUCSA," that finding could not support the imposition of an exceptional sentence under then-existing law. See id. (concluding "it was procedurally impossible" for a jury to make the requisite factual findings in support of an exceptional sentence); State v. Womac, 160 Wash.2d 643, 663, 160 P.3d 40 (2007) (same).
CONCLUSION
¶ 68 We hold that allowing a minor to remain present during a drug transaction is not among the acts encompassed by former RCW 69.50.401(f) (involving a minor in a drug transaction). The statute requires evidence that the defendant committed some act, directed at the minor, to bring or attempt to bring the minor into the transaction. We reverse Flores' convictions on counts II and IV for insufficient evidence.
¶ 69 We further hold the confrontation clause violation was harmless and affirm the convictions on counts I, III, V, VI, VII, VIII and IX.
¶ 70 Finally, we hold the court erred in imposing an exceptional sentence because the trial court, not the jury, made the factual determination that the offenses are "a major VUCSA." We reverse and remand for further proceedings consistent with this opinion.
*1050 WE CONCUR: GERRY L. ALEXANDER, C.J., CHARLES W. JOHNSON, JAMES M. JOHNSON, TOM CHAMBERS, JJ., and BOBBE J. BRIDGE, J. Pro Tem.
SANDERS, J. (dissenting).
¶ 71 The court is tasked to determine whether admission of statements made by defendant's wife, Sandra, to the police violated the defendant's, Octavio Gonzales Flores, confrontation rights. We must then determine whether violation of Flores's confrontation right requires reversal of his resulting conviction. The majority properly holds Sandra's statements to the police were "squarely within the `core' class of testimonial statements." Majority at 1046 (quoting Crawford v. Washington, 541 U.S. 36, 51, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004)). However, the majority also holds admitting Flores's wife's statements, although unconstitutional, was harmless notwithstanding the statements implicated him in the drug transaction. I disagree. These statements were significant evidence against Flores. I would hold the admission of these statements was not harmless and remand the case for a new trial.
¶ 72 "[C]onstitutional error is presumed to be prejudicial and the State bears the burden of proving that the error was harmless." State v. Watt, 160 Wash.2d 626, 635, 160 P.3d 640 (2007). To prove an error is harmless, the State must prove the error was "trivial, or formal, or merely academic, and was not prejudicial to the substantial rights of the party assigning it, and in no way affected the final outcome of the case." State v. Britton, 27 Wash.2d 336, 341, 178 P.2d 341 (1947). Moreover the court cannot know "the probabilities any evidence may have upon the minds of jurors." State v. Robinson, 24 Wash.2d 909, 917, 167 P.2d 986 (1946). When the court reweighs the evidence used by the jury, it makes "a tacit admission that an appellate court is necessarily engaging in fact-finding and thereby invading the province of the jury." Dennis J. Sweeney, An Analysis of Harmless Error in Washington: A Principled Process, 31 GONZ. L.REV. 277, 279 (1995).
¶ 73 Here the unconstitutional evidence under consideration were statements by Flores's wife implicating Flores in a drug transaction. Statements by one spouse implicating another spouse are incredibly damning evidence and when unconstitutionally received in evidence, reversal is required. A jury is unlikely to perceive a wife as biased against her husband, and therefore her testimony is likely to bear heavily in the mind of a juror. Such powerful evidence is hardly "trivial" or "merely academic," and its admission is not harmless.
¶ 74 Apparently ignoring the power of a wife's statements implicating her husband, the majority claims the unconstitutional admission of the statements was harmless because the evidence is cumulative. Majority at 1047. This is an error. Sandra's statements were the only evidence corroborating the informant's testimony that Flores was involved in the drug transactions. Through her statements she corroborated the informant's claim that Flores was involved and therefore implicated her husband in the drug transaction.
¶ 75 Contrary to the majority's assertion, the other evidence listed did not place Flores in the midst of the drug transactions. Flores was convicted based on three different drug transactions. There was no recording of the first transaction, instead only the testimony of the informant. The second and third transactions were audio-recorded but mention only Sandra by name. Verbatim Report of Proceedings at 309. The other voices, including Flores's, are only disembodied voices requiring identification by the listener. It was only the informant's testimony, and Sandra's corroboration, which identified Flores as a participant in the transaction.
¶ 76 The majority also claims corroboration was established by "video recordings, drugs, money, and the defendant's own admissions." Majority at 1047. However, there was no video recording of two of the three transactions giving rise to the conviction. Id. at 1040-41. Nor was there evidence tying Flores to the drugs or money from the first two transactions. Lastly, Flores's "admissions" related only to the third transaction and came when he took the *1051 stand, after his wife's statements incriminating him of the crimes had been read into evidence. This can hardly be considered corroborative evidence of Flores's involvement, at least for the first two transactions.
¶ 77 The majority today allows a man to be convicted of seven felonies based in part on unconstitutional statements received in evidence from his wife, statements that implicated him. It allows this because it holds statements by a wife implicating her husband in a criminal act are trivial or academic and would not affect the jury's decision making. The majority also holds the admission of the unconstitutional statements were cumulative; however it fails to identify other evidence which corroborates the informant's testimony that Flores was involved in all three transactions. We cannot place ourselves in the minds of the jury. Robinson, 24 Wash.2d at 917, 167 P.2d 986.
¶ 78 I dissent.
OWENS, J. (dissenting).
Involving a Minor in a Drug Transaction
¶ 79 The majority concludes that a parent who deals drugs in his living room in front of his child does not in any manner involve the child in the drug deal. Because this holding is contrary to the plain meaning of former RCW 69.50.401(f) (1998), recodified as RCW 69.50.4015, and to common sense, I dissent.
¶ 80 Former RCW 69.50.401(f) states:
It is unlawful to compensate, threaten, solicit, or in any other manner involve a person under the age of eighteen years in a transaction unlawfully to manufacture, sell, or deliver a controlled substance.
Proper analysis of the issue presented by this case requires a two-part inquiry: whether Gonzales's[1] 13-year-old stepdaughter was "in any . . . manner involve[d]" in his drug transactions and if so, whether it was Gonzales who involved her in the transactions.
Was Gonzales's 13-Year-Old Stepdaughter "Involved" in his Drug Transactions?
¶ 81 The word "involve" has a wide range of meaning. As the majority recognizes, the plain and ordinary meaning[2] of "involve" is "to enfold or envelop so as to encumber . . . to draw in as a participant . . . to oblige to become associated (as in an unpleasant situation)." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1191 (2002). Furthermore, in the statute, the phrase "in any other manner" modifies "involve." By including "in any other manner," the legislature demonstrated its intent to give "involve" its full range of meaning.
¶ 82 Under the ordinary definition, a person need not actively participate in order to be involved: Two people involve a co-worker in their politics by arguing over candidates in the same small office; a passenger is involved in a car accident; parents involve their child in domestic violence if they physically abuse each other in front of the child.
¶ 83 Using the plain meaning of "involve," a child is "involved" in a drug transaction by being a member of the party conducting the transaction, by being in a confined space with the transaction, by participating in the transaction, or by being inextricably proximate to and aware of the transaction. In such situations, the child is "enveloped and enfolded" by the potential dangers of the transaction in two meaningful ways. First, the child bears risks inherent in the transaction-she is an intimate of one of the parties and a known witness and thus a potential target if violence ensues. Second, the child is encumbered by the psychological effects of exposure to illegal drug activity. Under the proper interpretation of former RCW 69.50.401(f), there is sufficient evidence to show that Gonzales's teenage stepdaughter was involved "in some manner" in his drug transactions. See Verbatim Report of Proceedings (VRP) (Feb. 11, 2002) at 452, 482-87.
¶ 84 Contrary to the majority's assertions, this reading of "in any other manner involve" *1052 does not criminalize drug transactions in the mere presence of children. A child may be merely present when hundreds of feet away from the drug dealacross a busy street or in a crowded mall; a child further may be "within sight or sound," former RCW 9.94A.535(3)(h)(ii) (2001), of a transaction even though separated from the transaction by a substantial barrier that shields the child from the particular risks and influences of the transaction. "Involvement" requires something more than mere presence; the child must be enveloped in and encumbered by the transaction, as Gonzales's stepdaughter was here.
¶ 85 The majority's reliance on federal law to support its constricted interpretation of "involve" is misplaced. The majority cites 21 U.S.C. § 861 and case law interpreting the federal provision. Majority at 1044. The federal statute reads in part:
It shall be unlawful for any person at least eighteen years of age to knowingly and intentionally
(1) employ, hire, use, persuade, induce, entice, or coerce, a person under eighteen years of age to violate any provision of this subchapter or subchapter II of this chapter.
21 U.S.C. § 861(a).
¶ 86 A comparison of the federal statute with former RCW 69.50.401(f) supports a broader interpretation of the state statute. The federal provision enumerates a comprehensive list of specific conduct prohibited, instead of employing a general phrase such as "in any other manner involve." The legislature chose not to use the language of 21 U.S.C. § 861, high-profile legislation passed just the year before, indicating that it intended to proscribe more behaviors than the federal provision. The federal statute also requires the intent to make the child an active participant in criminal behavior, while former RCW 69.50.401(f) has no such requirement. The majority's holding in this case is perhaps accurate under 21 U.S.C. § 861, but not under the Washington provision at issue in this case.[3]
Did Gonzales Involve his Stepdaughter in his Drug Transactions?
¶ 87 The majority argues that Gonzales did not affirmatively act to involve his stepdaughter because he did not "knowingly and purposefully" bring or attempt to bring her into the drug transaction.[4] Majority at 1046. However, affirmative acts are usually contrasted with omissions or failures to act. State v. Chester, 82 Wash.App. 422, 426, 918 P.2d 514 (1996), aff'd, 133 Wash.2d 15, 940 P.2d 1374 (1997); Zamora v. Mobil Oil Corp., 104 Wash.2d 199, 209, 704 P.2d 584 (1985). Gonzales's choice to transact without first dismissing his daughter was an act, not a failure to act.
¶ 88 Gonzales's teenage stepdaughter would not have been involved in his transactions but for his choice to transact in her immediate presence. Gonzales created the situation by choosing the time and place of the transaction. He was not forced to transact when he was approached by a buyer at home. He knew that his stepdaughter was in the room; she did not arrive unexpectedly outside of his control.[5] He chose to sell drugs then and there; he did not simply fail to stop the sale.
¶ 89 The majority emphasizes the 13-year-old stepdaughter's failure to leave instead of holding the drug dealer accountable for his actions. Majority at 1046. She may have been free to leave the situation, but her *1053 stepfather had control over whether to sell cocaine when and where he did. The child's failure to leave does not relieve Gonzales of culpability for involving her in his drug transactions.
Conclusion
¶ 90 We should not recognize a viable defense to the crime of involving a minor in a drug transaction for a parent who says, "I don't involve my kids in my drug business; I only sell when they're with me at home." Instead, we should give "involve" its full and ordinary meaning and give effect to the legislature's words "in any other manner."
¶ 91 The evidence here is sufficient for a rational trier of fact to reasonably conclude that Gonzales's stepdaughter was involved in Gonzales's drug transactions and that Gonzales involved her by not dismissing her or leaving himself before commencing his deals. I would affirm Gonzales's conviction for involving his stepdaughter in two of his drug transactions.
Blakely
¶ 92 Gonzales alleges that the trial court violated the rule in Blakely v. Washington, 542 U.S. 296, 124 S. Ct. 2531, 159 L. Ed. 2d 403 (2004), by imposing an exceptional sentence based on the aggravating factor of a major violation of the Uniform Controlled Substances Act (VUCSA), chapter 69.50 RCW. Former RCW 9.94A.535(2)(e). The majority agrees with Gonzales, holding that the trial judge made an impermissible finding of fact by treating the jury's findings of more than three VUCSAs as a major VUCSA. In my view, when the jury found more than three VUCSAs, it found a major VUCSA by definition. The sentencing judge thus made no findings of fact. Therefore, I dissent.
¶ 93 The statute under which the trial judge sentenced Gonzales states, in part:
The current offense was a major violation of the Uniform Controlled Substances Act, chapter 69.50 RCW (VUCSA), related to trafficking in controlled substances, which was more onerous than the typical offense of its statutory definition: The presence of ANY of the following may identify a current offense as a major VUCSA:
(i) The current offense involved at least three separate transactions in which controlled substances were sold, transferred, or possessed with intent to do so.
Former RCW 9.94A.535(2)(e).
¶ 94 The majority's reading of the word "may" treats the word as though it points out an arguable conclusion that creates a factual question (e.g., "I may be taller than he is," begging the question, "Am I taller?"). However, in the context of the statute in question, "may" has a permissive connotation (e.g., "You may proceed," informing the listener that conditions are adequate to move forward). The statute lists six ways in which a major VUCSA can be established, former RCW 9.94A.535(2)(e)(i)-(vi), and it emphasizes that any one of the factors is independently sufficient to constitute a major VUCSA. In other words, if the jury finds three or more VUCSAs under former RCW 9.94A.535(2)(e)(i), the trial court can move forward by using the "major VUCSA" aggravating factor in its discretionary sentencing determination. "[W]hether facts alleged and found are sufficiently substantial and compelling to warrant imposing an exceptional sentence," is a legal judgment which a sentencing judge may properly make under Blakely. State v. Hughes, 154 Wash.2d 118, 137, 110 P.3d 192 (2005), abrogated on other grounds by Washington v. Recuenco, 548 U.S. 212, 126 S. Ct. 2546, 165 L. Ed. 2d 466 (2006).
¶ 95 The trial judge did not infer that Gonzales's VUCSAs were "`more onerous than . . . typical,'" as characterized by the majority. Majority at 1040 (quoting former RCW 9.94A.535(2)(e)). Rather, the legislature stipulated that a defendant's offense is "more onerous than . . . typical" when a jury finds three or more separate VUCSAs. The jury found more than three VUCSAs here.
¶ 96 The majority asserts that this case is "indistinguishable" from State v. Hagar, 158 Wash.2d 369, 144 P.3d 298 (2006). Majority at 1048. In Hagar, the defendant stipulated to facts sufficient to establish that the crime involved multiple victims and multiple offenses per victim. The court imposed an exceptional sentence based on the court's finding of the existence of the "major economic *1054 offense" aggravating factor. See former RCW 9.94A.535(2)(d). This court overturned Hagar's sentence, holding, "Hagar stipulated [to] certain facts but did not stipulate that the crimes constituted a `major economic offense.' . . . Hagar's sentence is in violation of Blakely because the exceptional sentence was predicated on an unstipulated fact that was not found by a jury beyond a reasonable doubt." Hagar, 158 Wash.2d at 374, 144 P.3d 298.
¶ 97 The differences in the language of the two statutes at issue distinguish this case from Hagar. Former RCW 9.94A.535(2)(d), the statute at issue in Hagar, states, in part:
The current offense was a major economic offense or series of offenses, so identified by a consideration of any of the following factors:
(i) The current offense involved multiple victims or multiple incidents per victim.
As discussed above, former RCW 9.94A.535(2)(e) explicitly makes the finding of three or more VUCSAs a "major VUCSA." Conversely, former RCW 9.94A.535(2)(d) states that any combination of numerous predicate factors could be considered to determine whether an aggravating factor exists. Unlike the "major VUCSA" aggravating factor, the aggravating factor of a "major economic offense" does not have a set of facts which, if found, are sufficient by law to constitute the "major economic offense" aggravating factor. As such, under the statute in Hagar, the jury was required to find that the crimes constitute a "major economic offense" as described by former RCW 9.94A.535(2)(d),[6] but no additional fact-finding is necessary here.
¶ 98 The exceptional sentence imposed by the sentencing judge is valid despite the majority's contention that it was procedurally impossible for the court to submit the aggravating facts to the jury during the trial. The majority cites In re Personal Restraint of Hall, 163 Wash.2d at 359-361, 181 P.3d 799 (2008), and State v. Womac, 160 Wash.2d 643, 663, 160 P.3d 40 (2007), for the proposition that the Sentencing Reform Act of 1981, chapter 9.94A RCW, at the time of Gonzales's trial required the trial judge to find facts supporting an aggravating factor by a preponderance of the evidence. Majority at 1049. That proposition does not apply to this case.
¶ 99 It is true that prior to 2005 there was no procedure allowing the trial court to submit to the jury questions of fact regarding aggravating factors. But here the jury did not need to find additional facts to support the aggravating factor. All the facts constituting the aggravating factor of a "major VUCSA" were necessarily found by the jury beyond a reasonable doubt as drug offense counts in Gonzales's criminal trial.
¶ 100 The trial court did not make a finding of fact when it exercised its discretion to award Gonzales an exceptional sentence based on the jury's findings of more than three separate violations of the Uniform Controlled Substances Act. The jury's findings alone qualified the offenses as a "major VUCSA" under former RCW 9.94A.535(2)(e). The trial court appropriately exercised judicial discretion by assigning the exceptional sentence based on the "major VUCSA" aggravating factor, and it committed no Blakely violation.
¶ 101 For the foregoing reasons, I respectfully dissent from the majority opinion.
I CONCUR: MARY E. FAIRHURST, J.
NOTES
[1] Gonzales Flores' surname consists of a patronym and a matronym. We address him by his matronymic surname, according to his apparent preference. See Statement on Plea of Guilty, Clerk's Papers at 127 (signature block); Chicago Manual of Style, 8.14, at 315 (15th ed.2003) ("persons with [Spanish surnames] are usually referred to by both family names but sometimes by only one, according to their own preference").
[2] At trial, the confidential informant gave two different accounts of this event.
[3] A "bindle" refers to a package containing a single dose of cocaine.
[4] Former RCW 69.50.401(a)(1)(i).
[5] Former RCW 69.50.401(f).
[6] Former RCW 69.50.401(a)(1)(i).
[7] Although no legislative history exists explaining our legislature's intent in promulgating RCW 69.50.401(f), the legislative history of the federal provisions indicates Congress was responding to the problem of adults conscripting children to carry out drug transactions or drawing them into dangerous situations by using them as decoys. United States v. Ramsey, 237 F.3d 853, 858 (7th Cir.2001) (citing 103d Cong., 139 Cong. Rec. S1,5638 (1993)). It is reasonable to infer our legislature was similarly concerned with punishing the exploitation of children by adults who commit drug offenses.
[8] Flores fails to recognize the statements he challenges were admitted under the hearsay exception for statements against penal interest, rather than as statements by a coconspirator. He correctly, but inaptly, argues the statements were not made in furtherance of a conspiracy.
[9] The admission of Sandra's statements during the drug transactions does not implicate the confrontation clause because they are nontestimonial. See Crawford, 541 U.S. at 56, 124 S. Ct. 1354. (observing that statements in furtherance of a conspiracy are nontestimonial).
[10] Former RCW 9.94A.535(2)(i) provides: "The operation of the multiple offense policy of RCW 9.94A.589 results in a presumptive sentence that is clearly too lenient in light of the purpose of this chapter, as expressed in RCW 9.94A.010."
[11] The court also found that the stipulated facts established the existence of the other criteria for a "major economic offense."
[12] In fact, the record indicates the number of convictions, alone, was not the court's major consideration in finding a "major VUCSA" and imposing an exceptional sentence. In affirming [Flores'] exceptional sentence, the Court of Appeals stated, "the record indicates the court would have imposed the exceptional sentence based only on [the major VUCSA violation predicated on multiple transactions]." Gonzales Flores, 2006 WL 2130668, at *5, 2006 Wash.App. LEXIS 1656, at *15. Not every aggravating factor need be valid in order for a reviewing court to uphold an exceptional sentence. Hughes, 154 Wash.2d at 134, 110 P.3d 192 (citing State v. Jackson, 150 Wash.2d 251, 276, 76 P.3d 217 (2003)). If a reviewing court is satisfied the trial court would have imposed the same sentence based on an aggravating factor that withstands appellate scrutiny, it may uphold the exceptional sentence. Id. However, the record indicates the court's primary reason for imposing the exceptional sentence was its view that "the defendant should receive some additional punishment for having a child present during the transactions." VRP (Feb. 27, 2002) at 5. The trial court reluctantly agreed these offenses must be sentenced concurrently with the associated drug transactions as "same criminal conduct." But the trial court relied on the "clearly too lenient" aggravator as a means to justify an exceptional sentence. CP at 126. Moreover, the trial court did not state it would have imposed the same sentence in consideration of the number of drug transactions alone. On this record, a reviewing court cannot fairly conclude the sentence would have been the same even if the trial court had considered the sole arguably proper factor (major VUCSA based on more than three transactions).
[1] We address Octavio Gonzales Flores by his patronymic surname.
[2] "We give words in a statute their plain and ordinary meaning unless a contrary intent is evidenced in the statute." C.J.C. v. Corp. of Catholic Bishop, 138 Wash.2d 699, 708, 985 P.2d 262 (1999).
[3] The majority also cites the United States Sentencing Guidelines Manual section 3B1.4 (2000) and case law interpreting it. Majority at 1044-45. The two provisions are not comparable. Section 3B1.4 states, "If the defendant used or attempted to use a person less than eighteen years of age. . . ." "Use" has a very different meaning from "involve." See Webster's, supra, at 2523-24 (defining "use" in part as "to carry out a purpose or action by means of: make instrumental to an end or process: apply to advantage").
[4] The majority relies on the language of 21 U.S.C. § 861 that the dealer intend to make the child a participant in illegal behavior.
[5] The majority also inaccurately states that Gonzales "did not have any contact with her, physical or verbal." Majority at 1046. The record shows that Gonzales and the child's mother conversed with her throughout the transactions. VRP (Feb. 11, 2002) at 483-84, 487.
[6] The majority also argues that former RCW 9.94A.535(2)(d) is indistinguishable from former RCW 9.94A.535(2)(e) because they both "allow[], but do[ ] not compel, an exceptional sentence when the defendant commits multiple violations." Majority at 1048. However, imposition of an exceptional sentence is never compelled; it is always a matter of judicial discretion and thus not a meaningful test of the two statutes' similarity. Hughes, 154 Wash.2d at 137, 110 P.3d 192. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1505867/ | 375 S.W.2d 330 (1964)
CENTRAL STATES LIFE INSURANCE COMPANY, Appellant,
v.
Mrs. Margaret M. BYRNES, Appellee.
No. 11143.
Court of Civil Appeals of Texas, Austin.
January 29, 1964.
Rehearing Denied February 19, 1964.
Liddell, Austin, Dawson & Sapp, W. Robert Brown, Houston, for appellant.
Fred Parks and Donn C. Fullenweider, Houston, for appellee.
HUGHES, Justice.
This suit was brought against Central States Life Insurance Company, appellant, by Margaret Byrnes, widow of Galen *331 Byrnes, to recover on a life insurance policy (No. OL7854) issued to him by Community National Life Insurance Company[1] on August 12, 1954, in the amount of $25,000.00 and in which she was designated beneficiary. Mr. Byrnes died November 28, 1960. The policy sued on contained an incontestability clause reading, "This Policy will be incontestable after two years from its date of issue, except for non-payment of premium and except as to provisions and conditions relating to benefits in the event of disability and those granting additional insurance specifically against loss by accidental means."
It was stipulated between the parties herein that at the time of the death of Galen Byrnes, all premiums accrued and due under the policy in question were paid.
Appellant's liability under the policy is based on its assumption of liability thereon under a merger agreement, effective October 1, 1959, between it and the issuing Company.[2]
Trial was to a jury after which, and upon its verdict, judgment was rendered for Mrs. Byrnes against appellant for the face value of the policy sued on, 12% statutory penalty, $7500.00 attorneys' fees,[3] $2500.00 of which was contingent on appeal, and 6% interest from December 5, 1960, until paid.
It is our opinion that any defense based on the invalidity of this policy is precluded by force of the incontestable clause quoted above, however, in order to reflect the position of appellant and our holding relative thereto, we outline the facts and state the substance of appellant's points and contentions.
Appellant primarily contends that the policy was issued in violation of fiduciary duties which the deceased, Galen Byrnes, and appellee owed to the issuing Insurance Company.
When the policy in suit was issued Galen Byrnes was President, General Manager and Director and appellee was Secretary-Treasurer and a director of the issuing Company. The by-laws of such Company provided that its president and secretary should sign all policies issued. The instant policy was signed by Mr. and Mrs. Byrnes.
This policy was issued pursuant to a salary contract between Galen Byrnes and the Community National Life Insurance Company acting by and through Galen Byrnes, President, Paul I. Ross, Vice-President and M. M. Byrnes (appellee) *332 Secretary-Treasurer. The execution of such contract was authorized by the by-laws of the Insurance Company and the minutes of the Company reflect that an executive committee was named to execute "salary contracts." The salary contract of Mr. Byrnes provided, in part:
"5. PROTECTION During the life of this Contract, the Company shall furnish personal insurance on the life of Galen Byrnes in the minimum amount of $25,000.00, with adequate increasing amounts as Company earnings and growth warrants.
"6. IRREVOCABILITY (a) In the event the Company merges, sells, or changes to any other form or name, this Contract must follow and be fully honored with such change.
"(b) This Contract shall remain in full force and effect, irrespective of any Directorship or Officership that Galen Byrnes may or may not hold."
All premiums on this policy were paid by the Company prior to its merger with the appellant. As part of the agreement of the two Insurance Companies to merge, a mutual release was authorized and executed, October 22, 1959, between Central States Life Insurance Company and Galen Byrnes and others in consideration of the cancellation of certain stock and the right to purchase additional stock. We quote from such release:
"NOW, THEREFORE, in consideration of the premises and other good and valuable considerations hereinabove recited, Community National Life Insurance Company and Central States Life Insurance Company, and Central States Life Insurance Company, the surviving corporation, having been duly authorized by its Board of Directors in accordance with the resolution hereto attached, and in pursuant thereto, does release the said Galen Byrnes, E. F. Lingle and Weldon A. Steinmann, individually and collectively, from any and all claims of every nature whatsoever by reason of their actions as an organizer, original incorporator, stockholder officer or director of Community National Life Insurance Company and/or Community National Corporation.
"For the same consideration, Galen Byrnes, E. F. Lingle and Weldon A. Steinmann, individually and collectively, do hereby release Community National Life Insurance Company and Central States Life Insurance Company and Central States Life Insurance Company, the surviving corporation, of any and all claims of every nature whatsoever by reason of being an organizer, original incorporator, stockholder or director or officer of Community National Life Insurance Company and/or Community National Corporation."
Following the execution of this release appellant, in August 1960, sent a notice to Mr. Byrnes that the annual premium of $1,082.00 was due on the policy in suit. Such premium was paid by Mr. Byrnes on September 6, 1960, and it has since been exclusively retained by appellant.
On the trial of this case, appellant made no offer to return this premium, or any of the premiums paid on this policy under the salary contract, nor did it offer to pay the cash surrender value of such policy.
There is in the record an agreement, dated April 12, 1954, between Community National Life Insurance Company and Republic National Life Insurance Company by which, in general, Community National agreed to cede to Republic and Republic agreed to automatically accept for reinsurance all amounts of life insurance in excess of the amount regularly retained by Community National, but not exceeding *333 400% of such retention. The amount of such retention was originally $2500.00, and was later raised to $5000.00.
Subsequent to the issuance of the policy in suit, application was made to Republic by Mr. Byrnes for reinsurance of its amount in excess of $2500.00. On August 24, 1954, Republic advised Mr. Byrnes by wire and letter that it would not reinsure. This wire and letter were not found in the records of either Community National or appellant.
There are, however, records of these two Companies in evidence from which it could have been ascertained by anyone who had access to them, which would include the officers of the Company, that no reinsurance had been issued by Republic on the Byrnes policy. We do not discuss these records in detail but we refer specifically to the statements sent by Republic to appellant or its predecessor for its portion of the premiums due on policies reinsured by it. These statements did not include any claim for premiums for reinsuring any portion of the Byrnes policy. This knowledge that the Byrnes policy was not reinsured is reinforced, as to appellant, by its retention of the whole cash premium received by it in 1960.
The Trial Court submitted many issues to the jury, and we will give the substance of its findings.
Galen Byrnes was at the time the policy sued on was issued was insurable; at such time Mr. Byrnes believed he was insurable; Mrs. Byrnes at such time believed her husband to be insurable. When appellant sent notice of policy premium due to Mr. Byrnes its records reflected that such policy was not reinsured with Republic; that at such time the officers and employees of appellant knew such policy was not reinsured with Republic; that appellant waived its right to contend that the Byrnes policy was unenforceable because of its non-reinsurance with Republic by accepting the 1960 premium, and that by such action it ratified such policy.
That Mr. Byrnes did not fail to disclose to the other Directors of Community National that his policy was not reinsured; that Mrs. Byrnes did fail to make such disclosure; that Mr. Byrnes did not remove the letter and telegram from Republic rejecting reinsurance from the files of Community National; that Mrs. Byrnes did not so remove such exhibits. Mr. Byrnes did not fail to disclose to Officers and Directors of appellant that his policy was not reinsured.
That the life underwriting precedures of Republic and Community National were the same; that a part of the underwriting procedure of Community National was that it would reinsure all life insurance policies in excess of $2500.00; that as a part of such procedure Community National would not issue a policy where such excess was rejected by Republic for reinsurance; that the Byrnes policy was issued in violation of these procedures; that the Directors of Community National never had actual knowledge that Republic had declined to reinsure the Byrnes policy.
The jury also made findings as to attoreys' fees which we will notice infra.
Appellant has points to the effect that many of these findings are without any support in the evidence or that they are against the overwhelming weight and preponderance of the evidence. Since we believe the incontestable clause is applicable in this case we pretermit a discussion of these evidentiary points.
The two year incontestable provision in the Byrnes policy was mandatorily required by Art. 3.44, Vol. 14 V.A.C.S., Insurance Code, which provides, in part, that no policy of life insurance may be issued or delivered in this State by a life insurance company organized under the laws of this State which does not contain a provision. *334 "That the policy, or policy and application, shall constitute the entire contract between the parties and shall be incontestable not later than two years from its date, except for nonpayment of premiums; * * *"
The premiums on the Byrnes policy were fully paid; more than two years elapsed from the date of such policy before any contest of it was made. Therefore, the policy is, ipso facto, incontestable.
This statutory provision has been a part of insurance law since 1909 (Acts 1909, p. 192). It has been before our Courts many times. Its application is inflexible. In American National Insurance Co. v. Tabor, 111 Tex. 155, 230 S.W. 397, the Court stated:
"The policy before us departs from subdivision 3 in that it allows the insurer to contest same for fraud, after two years, though all premiums have been paid. It was the obvious purpose of subdivision 3 to prescribe two years as a maximum period of limitation, after which no defense should be allowed to defeat payment of the policy, except nonpayment of premiums, or violations of conditions relative to naval or military services during war. The subdivision allows the insuring company to fix a period of time, not to exceed two years, during which it may make fully available to itself all the legal consequences of fraud which ought to be discovered through the exercise of proper diligence; but, after the expiration of the period fixed, the subdivision eliminates all defenses, save those specially mentioned."
In Howard v. Missouri State Life Ins. Co., 289 S.W. 114, San Antonio Civil Appeals, writ ref. 3-2-27, the Court in reference to an incontestable period of one year as provided in the policy stated:
"* * * that after the lapse of the first year the insurer is prohibited from contesting the validity of the policy, from abrogating it, from avoiding it, from escaping the liability fixed by its terms upon the insurer; that after the lapse of that period the insurer will be bound by its terms against every defense."
Peculiarly applicable here is the case of Kansas Life Insurance Company v. First Bank of Truscott, 124 Tex. 409, 78 S.W.2d 584, opinion by Smedley, Judge, writing for the Commission of Appeals. There it was held that after expiration of the incontestable period a life insurance company could not defeat suit on a policy on the ground of fraud notwithstanding its agent was a participant in the fraud. We quote from that case:
"The Supreme Court of Tennessee, in construing an incontestable clause in similar language to that in the policy in this case said:
"`The meaning of the provision is that, if the premiums are paid, the liability shall be absolute under the policy, and that no question shall be made of its original validity. No reasonable construction can be placed upon such provisions other than that the company reserves to itself the right to ascertain all the facts and matters material to its risk and the validity of its contract, for one year; and if within that time it does not ascertain all the facts, and does not cancel and rescind the contract, it may not do so afterwards upon any ground then in existence. * * * It is said, however, that fraud appearing in the origin of the contract must, as in any other case, render it null and void from the beginning. It is true that fraud vitiates all agreements and undertakings based upon it, and they may be set aside at the instance of the party defrauded. So, in this case, fraud in obtaining the policy would vitiate at the option and upon the motion of the party defrauded; but, under the provision in question, the party must within the year exercise his right to repudiate and rescind it. The effect *335 of this agreement not to contest is to put the company in the attitude of being unable to set up any fraud or false swearing in obtaining the policy, or any other defense to it, save the one excepted, so far as its original validity is concerned.' Clement v. New York Life Insurance Company, 101 Tenn., 22, 46 S.W., 561, 562, 42 L.R.A., 247.
"The fraud alleged in the answer of plaintiff in error is urged as a defense to defeat the payment of the policy, and further the allegations go to the original validity of the policy, presenting as grounds of invalidity facts existing at the time the policy was issued. The facts alleged therefore are defensive matters which, by the terms of the incontestable clause as construed in the authorities cited, the insurer has agreed shall not be urged, after the expiration of the period named, to defeat payment of the policy.
"Plaintiff in error concedes the validity of the statute and of the incontestable clause contained in the policy, and does not question the general rule that the incontestable clause, after the expiration of the prescribed period, eliminates the defense of fraud in connection with the application for the policy. It contends, however, that because Mrs. Clark, in procuring the issuance of the policy, represented both parties to the contract without the knowledge of plaintiff in error and acted against the interest of plaintiff in error, her principal, and in the interest of the other party, and participated in a fraud upon her principal, no contract binding upon plaintiff in error was ever made.
"[2] The fault in this contention is that perfidy of an agent in negotiating a contract for his principal does not render the contract absolutely void, but makes it voidable at the option of the principal."
Citation of other authorities would be mere supererogation. It is our opinion that the evidence in this case does not make issuable any fact which could be offered as a defense to this suit.
Appellant's only complaint regarding the allowance of attorneys' fees is in regard to the contingent allowance of $2500.00 in the event of an appeal. The jury found that such amount was reasonable in the event of an appeal. This point is overruled upon the authority of American Bankers Insurance Co. v. McDonald, 369 S.W.2d 688, Austin Civil Appeals, writ dism., w. o. j. See also Grimes v. Robitaille, 288 S.W.2d 211, Galveston Civ.App., writ ref., n. r. e.
The judgment of the Trial Court is affirmed.
Affirmed.
NOTES
[1] This Company and appellant were insurance companies organized under the laws of Texas.
[2] "CENTRAL STATES
LIFE INSURANCE COMPANY
HOUSTON, TEXAS
ASSUMPTION CERTIFICATE
To be attached to and made a
part of Policy No. OL7854
of the
COMMUNITY NATIONAL LIFE
INSURANCE COMPANY
Effective October 1, 1959, the above designated policy issued by the Community National Life Insurance Company of Houston, Texas, is hereby assumed by Central States Life Insurance Company of Houston, Texas, in accordance with the terms of a Merger and Consolidation Agreement which Agreement has been approved by the Commissioner of Insurance for the State of Texas, as provided by the Texas Insurance Code.
Central States Life Insurance Company does hereby agree to fulfill all obligations and pay all benefits in the same manner and to the same extent as provided in said policy. The premiums of this policy will remain the same.
IN WITNESS WHEREOF the Central States Life Insurance Company has caused this Assumption Certificate to be executed at its Home Office as of the first day of October, 1959.
CENTRAL STATES LIFE
INSURANCE COMPANY
By: /s/ John W. Collis
President
Attest:
/s/ W. J. Noad.
Secretary"
[3] See Art. 3.62, Texas Insurance Code, V.A.C.S. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1751829/ | 587 F. Supp. 1342 (1984)
Candida AFONSO, Rogenio Afonso, Plaintiffs,
v.
CITY OF BOSTON, John H. Exner, Defendants.
Civ. A. No. 83-3105-K.
United States District Court, D. Massachusetts.
May 25, 1984.
*1343 Thomas Smith, Steven L. Hoffman, Sugarman & Sugarman, P.C., Boston, Mass., for plaintiffs.
Marianne B. Bowler, Asst. U.S. Atty., Boston, Mass., for defendants.
Claire Berman, City of Boston Law Dept., Boston, Mass., for City of Boston.
Opinion
KEETON, District Judge.
This case presents questions concerning the interpretation of the federal medical malpractice immunity statute, 10 U.S.C. § 1089. The undisputed facts relevant to the issues before me now are that defendant John Exner treated plaintiff Candida Afonso at the Boston City Hospital in May 1981. At that time, Exner was on military duty with the U.S. Air Force. He was detailed to a private university, where he was training in a residency program at the hospital. While on the residency, Exner was not treating military personnel. Plaintiff herself was a civilian.
Afonso and her husband sued Exner and the City of Boston for malpractice in Suffolk County Superior Court. The United States Attorney, acting for Exner and the United States, then petitioned to remove the case to federal court and to have the United States substituted as a defendant in Exner's stead. These motions were made pursuant to 10 U.S.C. § 1089(a). The United States simultaneously filed a motion to dismiss, claiming that plaintiffs had not given the government notice of a claim under the Federal Tort Claims Act (F.T.C. A.), within the period required by 28 U.S.C. § 2401. Plaintiffs have opposed all these motions.
Disposition of the various issues presented by pending motions depends on the meaning of the following statutes:
The remedy against the United States provided by sections 1346(b) and 2672 of title 28 for damages for personal injury, including death, caused by the negligent or wrongful act or omission of any physician, dentist, nurse, pharmacist, or paramedical or other supporting personnel (including medical and dental technicians, nursing assistants, and therapists) of the armed forces, ... in the performance of medical, dental, or related health care functions (including clinical studies and investigations) while acting within the scope of his duties or employment therein or therefor shall hereafter be exclusive of any other civil action or proceeding by reason of the same subject matter against such physician, dentist, nurse, pharmacist, or paramedical or other supporting personnel (or the estate of such person) whose act or omission gave rise to such action or proceeding.
10 U.S.C. § 1089(a);
Upon a certification by the Attorney General that any person described in subsection (a) was acting in the scope of such person's duties or employment at the time of the incident out of which the suit arose, any such civil action or proceeding commenced in a State court shall be removed without bond at any time before trial by the Attorney General to the district court of the United States of the district and division embracing the place wherein it is pending and the proceeding deemed a tort action brought against the United States under the provisions of title 28 and all references thereto. Should a United States district court determine on a hearing on a motion to remand held before a trial on the merits that the case so removed is one in which a remedy by suit within the meaning of subsection (a) of this section is not available against the United States, the case shall be remanded to the State court.
10 U.S.C. § 1089(c);
The head of the agency concerned or his designee may, to the extent that he or his designee deems appropriate, hold harmless or provide liability insurance for any person described in subsection (a) for damages for personal injury, including *1344 death, caused by such person's negligent or wrongful act or omission in the performance of medical, dental, or related health care functions (including clinical studies and investigations) while acting within the scope of such person's duties if such person is assigned to a foreign country or detailed for service with other than a Federal department, agency, or instrumentality or if the circumstances are such as are likely to preclude the remedies of third persons against the United States described in section 1346(b) of title 28, for such damage or injury.
10 U.S.C. § 1089(f); and
[T]he district courts ... shall have exclusive jurisdiction of civil actions on claims against the United States, for money damages ... for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.
28 U.S.C. § 1346(b).
Although the basic facts concerning Exner's service are undisputed, the parties differ as to whether, in May 1981, Exner was acting "within the scope of his duties or employment" for the military, under 10 U.S.C. § 1089(a). Exner's status is further complicated by the arguments, made both by plaintiffs and the United States, that Exner was a "borrowed servant" within the meaning of Massachusetts agency law. Plaintiffs claim that the result of this characterization is that Exner must be considered a "servant" only of the city hospital to whom he was lent, not of the Air Force. The federal government responds that, although Exner may be characterized as a "borrowed servant" of the city, he is still to be considered an employee of the lending employer, the Air Force, for purposes of § 1089(a). One troubling implication of the government's argument on this point is that the government declines to concede that it is vicariously liable as Exner's "master" for any tortious acts committed by Exner while he was "on loan" to the city hospital. The certification that the government has provided, pursuant to § 1089(c), states that Exner was on military duty in May, 1981. However, the certification cannot be read as a binding admission by the government that Exner, when treating the plaintiff Candida Afonso, was a servant acting within the scope of employment for the United States.
I.
May the United States maintain (as stated in its certification) that a physician is a federal employee for the purposes of converting an action against the individual into one against the United States, while at the same time preserving the defense that the physician was not a "servant" for whose negligence the United States is vicariously liable?
Section 1089(c) provides that, upon certification by the Attorney General that a physician being sued "was acting in the scope of such person's duties or employment," removal of the action to federal court is proper. However, the statute goes on to say that should the district court "determine on a hearing on a motion to remand held before a trial on the merits that the case so removed is one in which a remedy by suit within the meaning of subsection (a) of this section is not available against the United States, the case shall be remanded to the State court." Id. The remedy mentioned in subsection (a) is that provided under the Federal Tort Claims Act. This remedy against the United States is available only for acts performed by "any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the laws of the place where the act or omission occurred." 28 U.S.C. § 1346(b) (emphasis supplied). Thus the *1345 plaintiffs have a remedy under the F.T.C.A. only if the United States is vicariously liable for the employee's acts under state tort and agency law principles.
A close examination of the malpractice immunity statute shows that Congress anticipated situations in which a physician might be a member of the military on duty and yet not be immune from individual liability. The statute provides that the government shall indemnify any physician found liable for acts performed "while acting within the scope of such person's duties if such person is ... detailed for service with other than a Federal department, agency or instrumentality or if the circumstances are such as are likely to preclude the remedies of third persons against the United States described in section 1346(b) of title 28, for such damage or injury." 10 U.S.C. § 1089(f). In this context, "within the scope of duties" must be construed to mean only that the physician was on active military duty. Cf. 28 U.S.C. § 2671 (defining same language in § 1346(b)). It does not automatically mean that the physician was "acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the laws of the place where the act or omission occurred," 28 U.S.C. § 1346(b). The statute anticipates that a physician may be both within the scope of his military duties and acting in a way that would not create vicarious liability for the United States. See Baker v. Barber, 673 F.2d 147, 150 (6th Cir.1982) (per curiam).
This conclusion is reinforced by legislative history, which indicates that Congress anticipated cases in which the United States would be held not liable for acts of a military physician on loan to a non-federal facility. Congress recognized that "when ... [one on military duty] is assigned to other than a federal departmentfor example, as part of his military training a doctor is assigned to a private hospitalhe may not be covered under the Federal Tort Claims Act. Subsection (f) [of § 1089] authorizes the appropriate Secretary to provide protection through indemnification or insurance to medical personnel in those situations." S.Rep. No. 1264, 94th Cong., 2d Sess. 10, reprinted in 1976 U.S.Code Cong. & Ad.News 4443, 4451.
Given this recognition of the possibility that malpractice by a military doctor may not in some circumstances be actionable under the F.T.C.A., I cannot conclude that Congress intended for a federal court to take jurisdiction of such a case simply on the bare assertion by the government that the defendant physician was in the military. If the case were not tried under the Federal Tort Claims Act, the plaintiff would have a right to a jury trial in state court against the individual doctor. The government would have me deprive plaintiffs of that right based solely on an ambiguous certification which does not concede that this is properly a case brought against the sovereign under the F.T.C.A.
The government points to Green v. United States, 709 F.2d 1158 (7th Cir.1983), as an instance in which the government was allowed to argue at the trial that "borrowed servant" analysis applied to relieve the government of liability, even though the individual physician had already been immunized under § 1089(a). However, in Green, it does not appear that the individual physician's petition to invoke § 1089(a) was ever opposed. The trial judge did note that, as a matter of policy, the government should not be allowed to have the individual defendant dismissed and then later evade vicarious liability under borrowed servant analysis. Green v. United States, 530 F. Supp. 633, 640 (E.D.Wis.1982). If the appellate decision is read as holding or implying that the government could have successfully avoided vicarious liability at trial after invoking § 1089(a), I must respectfully predict that, if and when confronted with this issue, the First Circuit and the Supreme Court will hold otherwise.
As noted above, to let the government in effect have it both ways is a result not anticipated by the drafters of the malpractice immunity statute. It also is unfair to plaintiffs who are forced to suffer the special *1346 difficulties of suing the sovereign, such as losing the right to a jury trial, in cases in which they have not asserted a claim against the government and in which the government seeks to avoid liability.
There are two other distinct problems with the government's position.
First, it invites potentially troublesome conflict of interest situations when the government attorney represents both the United States and the individual physician. The physician may well wish the government to concede vicarious liability so that § 1089(a) will clearly immunize him. Yet the government attorney here, who also represents the physician, has refused to make that concession and instead, in an effort to preserve the government's borrowed servant defense, takes a position that conflicts with the physician's interests. This conflict is also illustrated by the government attorney's stance on the City of Boston's motion to refer this case to the state malpractice tribunal pursuant to Mass.Gen.Laws ch. 231, § 60B. The government attorney has opposed this referral, apparently hoping first to get a resolution of the jurisdictional issues. Yet, typically, physicians welcome referral to the tribunal, which subjects the merits of a plaintiff's malpractice claim to early scrutiny by a panel that includes a physician. If the government is forced at an early stage to choose between reliance on § 1089(a) to immunize the doctor or on borrowed servant analysis to shield the government, this conflict will, at least, not continue through the trial.
Secondly, the government's position may often lead to inefficient use of judicial resources. For instance, in cases where there is a co-defendant not amenable to suit in federal court, such as a state, removal under § 1089(c) will force plaintiff to sever or to forego suit against one defendant. Yet, as long as the borrowed servant question is present, either the federal or non-federal employer, or both, may ultimately be found liable. If the government is allowed to invoke § 1089(a) while still preserving its borrowed servant defense, plaintiffs would at best be forced to pursue duplicative suits in state and federal courts and at the worst, they may suffer a serious injustice if they abandon the suit against one defendant who may ultimately be found to be the only "master" responsible for the physician's malpractice. Forcing an early determination of the United States' vicarious liability avoids needless risk of these undesirable results.
For the foregoing reasons, I conclude that I cannot retain jurisdiction of this case simply on the ground that the doctor was in military service. As directed by § 1089(c), I am required to determine whether a remedy under the F.T.C.A. is available, and if I find it is not, to remand.[1] This requires me to determine if, under Massachusetts tort law, Exner was in May 1981 a "servant" of the United States such that the United States is liable for his acts under respondeat superior. It is not necessary for me to have an evidentiary hearing on this question, since the undisputed facts before me are sufficient to answer the question posed.
II.
Borrowed servant analysis may be used in two distinct ways: as a sword by the plaintiff, who seeks to impose liability on the borrowing employer (whether or not the plaintiff contends that the lending employer is liable too); and as a shield by the lending employer, who seeks to avoid vicarious liability. Thus, a borrowed servant may be considered the employee of the lender or the borrower, or both. See Restatement (Second) of Agency § 227 (1958). Questions as to which master or masters are liable for the particular acts of the servant that gave rise to the plaintiff's claim are answered by considering the factors used generally under state agency law to define a master-servant relationship. Id., Comment "c."
*1347 Under Massachusetts law, the critical test of a master-servant relationship is the existence of a right to control the servant's actions. Cowan v. Eastern Racing Ass'n, 330 Mass. 135, 111 N.E.2d 752 (1953). "It is well settled that one who is a general servant of another may be lent or hired by his master to another, for some special service, so as to become, as to that service, the servant of such third party. The test is whether, in the particular service which he is engaged to perform, he continues liable to the direction and control of his master, or becomes subject to that of the party to whom he is lent or hired." Coughlan v. City of Cambridge, 166 Mass. 268, 44 N.E. 218, 219 (1896). Accord Keaney's Case, 341 Mass. 571, 171 N.E.2d 154 (1960). Other tests, such as who employs or pays the servant, are not decisive; they are important only to the extent that they bear on the question of control. Cowan, supra, 111 N.E.2d at 756.
In this case, the undisputed facts indicate that Exner was not under the control of the Air Force while he was providing medical services at a city hospital under the auspices of a residency sponsored by a private university. No military personnel were involved in the direction of either the hospital or the university residency program. The only interest of the Air Force in this residency was the education and training that Exner received. The military retained no right to control his provision of medical services in the hospital. The facts that Exner received a salary from the Air Force and that he may have been subject to military discipline for activities other than his provision of medical care are not decisive and do not contradict the conclusion that Exner was not under the Air Force's control in the performance of his medical functions. In a situation like this, the United States would not be liable for any torts committed by its loaned servant while he was on loan. Ledbetter v. M.B. Foster Electric Co., 354 Mass. 780, 260 N.E.2d 174 (1970); Keaney's Case, supra, 171 N.E.2d 154.
I note that my conclusion differs from that reached in Green, supra, 530 F. Supp. 633, which, on similar facts, found that the military doctor continued to be the servant of the Air Force during his residency in a private hospital. Green, however, applied the Wisconsin test of "borrowed servant." Massachusetts law applies here.
Based on the undisputed facts material to this question, I conclude that the only finding that can be made by a fact finder, correctly applying Massachusetts law, is that Exner was not a servant of the United States with respect to his provision of service to plaintiff Afonso. Cf. Dornan v. United States, 460 F.2d 425, 429 (9th Cir. 1972) (worker's status considered a question of law when relevant facts are undisputed). Therefore, as a matter of law, the United States would not be vicariously liable in this case and this action can not be brought under the F.T.C.A. Accordingly, pursuant to 10 U.S.C. § 1089(c), I must deny the defense motion that the United States be substituted for John Exner as a party defendant, and must remand this case to state court where it may proceed against defendant Exner individually, as well as the City of Boston.
NOTES
[1] Plaintiffs have not actually moved to remand. They have, however, filed written opposition to a petition for removal and, in conferences in chambers, have requested remand. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1146720/ | 501 So.2d 416 (1987)
Richard F. CHERRY and Edward L. Cherry,
v.
ANTHONY, GIBBS, SAGE, a/k/a Underwriter's at Lloyds, London, Lloyds of London.
No. 56652.
Supreme Court of Mississippi.
January 21, 1987.
*417 Alfred Lee Felder, McComb, C.R. McRae, Margaret P. Ellis, Pascagoula, for appellants.
K. Hayes Callicutt, Shell, Buford, Bufkin, Callicutt & Perry, Jackson, John C. McLaurin, Sr., McLaurin & McLaurin, Brandon, for appellee.
BEFORE ROY NOBLE LEE, P.J., and ANDERSON and GRIFFIN, JJ.,
ANDERSON, Justice, for the Court:
Both parties appeal from a judgment of the Circuit Court of Rankin County. The Cherry brothers feel aggrieved by that judgment insofar as it denied that they were entitled to be paid the face value of the insurance contract in dispute. Anthony, Gibbs, Sage, Underwriter's at Lloyds of London (hereinafter Lloyds) are cross-appealing as to the trial court's rejection of their plea of res judicata in bar to the Cherry's action.
In 1974 Richard and Edwin Cherry decided to go into the trucking business together. To that end, they bought a new Peterbilt tractor-trailor rig, which they described as "top of the line" for 1974. In 1978, the brothers began to think it expedient to have their truck insured in case it was damaged. They were especially concerned that the rig not be underinsured. Their usual insurance agent did not handle business of this type and recommended that the Cherrys see Jimmy Ray Estes of the Green Insurance Agency. It was determined that only Lloyds of London or Travelers offered the insurance the Cherrys sought, with premiums they could afford to pay. Ultimately, the Cherrys decided to buy a policy from Lloyds of London with a face value of $35,000. The Green agency got the policy through the Haynes Brinkley Co., a general agency company handling risks that would not normally be accepted by standard market insurance companies. The Cherrys alleged that Estes represented to them that Lloyds would pay the face value of the policy if the truck were destroyed. Over the next four years the Cherrys made regular payments on the premiums.
On August 8, 1978, Ed Cherry was driving the truck to Houston, TX when it caught fire on the highway near Union Church, MS and was completely destroyed. The Cherrys notified Estes of the loss; Estes in turn notified Haynes Brinkley, the agent for Lloyds. They dispatched Mr. J.D. Douglas to adjust the claim. Douglas and Haynes Brinkley insisted throughout that the policy was for the actual cash value of the truck, which was assessed by Douglas at $21,500. Later, Douglas learned that before destruction the truck had had an out of frame overhaul, which normally increases the value of the truck from $9,000 to $10,000. The circuit judge incorporated this increase in his judgment for the actual cash value of the truck.
The Cherrys sued, claiming that the policy entitled them to be paid on its face value, regardless of the condition of the *418 truck. Lloyds, on the other hand, has insisted throughout the litigation that the face value was only a ceiling and the coverage was for actual cash value of the truck.
The Cherrys originally filed this action in the Circuit Court of Hinds County. Lloyds demurred on the ground that their liability if any, was limited to the actual cash value. The court sustained the demurrer, giving the plaintiffs leave to amend their complaint within seven days. The Cherrys, however, took no action within the prescribed period, and so the judgment against them became final. The Cherrys then refiled the action in Jackson County, whereupon Lloyds moved for a transfer to Hinds County, the site of the original action. The Jackson County Court, for reasons not apparent from the record, transferred the action to Rankin County. It was the circuit court of that county that rendered the judgment now being appealed.
LAW
CROSS-ASSIGNMENT OF ERROR
Since Lloyds knew that the Circuit Court of Hinds County had rendered a take-nothing judgment against the Cherrys, it is not surprising that it pleaded that judgment in bar to the present action. The trial judge denied the motion to dismiss, finding that a certain letter from Lloyds counsel, Hayes Callicutt, constituted a waiver of any res judicata argument on Lloyds behalf. Lloyds now argues that there was no such waiver, and that the Hinds County judgment was res judicata to this action.
The briefs contain detailed discussion of the Callicutt letter. It is, however, not necessary for us to determine its significance, since the argument for res judicata suffers from a flaw much more glaring.
Mississippi follows the general rule that for res judicata to apply, the parties in the two actions must be substantially identical. Dickson v. Western Tar Products Corp., Inc., 277 So.2d 430 (Miss. 1973); Pray v. Hewitt, 254 Miss. 20, 179 So.2d 842 (1965). See also Nilsen v. City of Moss Point, 674 F.2d 379, 382 (5th Cir.1982) (applying Mississippi law).
In the present action, the list of co-defendants includes Haynes Brinkley, Inc. In the first action the Cherrys sued Haynes Brinkley as an individual. We cannot agree that there is not a substantial legal difference between the corporate insurance agency and the individual who runs it. Therefore, the parties of the two actions are not the same, and res judicata does not apply.
DIRECT ASSIGNMENT OF ERROR NO. I
The disputed insurance contract has several parts, three of which pertain to this appeal. The first is a "Certificate of Insurance" effected with Underwriter's at Lloyds, London." It contains a section setting forth the limits of the insurer's liability and stating that "[t]he limits of the company's liability against each such coverage shall be as stated herein, subject to all terms of this policy having reference thereto." The amount of insurance on the Peterbilt tractor is $35,000.
Attached to this was a second document, marked "Insuring Agreements." It is to this that Lloyds points in order to establish "the terms of this policy having reference thereto." Paragraph 2 of this document contains the following language: "The limit of the Underwriter's liability ... is the amount insured stated in the Schedule or the actual cash value of the vehicle, whichever is the less." (Emphasis added).
The Cherrys' argument rests on the third document attached to the contract proper, which is denominated a "Stated Amount Coverage Endorsement." It says:
In consideration of the premium of which this policy is issued, the insured warrants that the value of the vehicle is the amount of insurance carried. In the event of loss, the Company may, at its option, pay the stated amount of insurance to the insured, less the deductible amount provided, and such payment shall entitle the Company to all salvage resulting after loss.
*419 The Cherry brothers argue that the endorsement supports them in a reasonable belief that in the event of a total loss, they would receive the "stated amount" that is, the full face value of the policy regardless of the actual condition of the vehicle at the time of the loss. Lloyds, on the other hand, insists that the endorsement was merely the insureds' warranty that the goods were worth the amount for which they were to be insured, and that payment was to be for the actual cash value, the figure of $35,000 being merely a ceiling. The trial judge found that there was no ambiguity in the contract, and that Lloyds position was the correct one.
It has long been the law in Mississippi that in construing particular provisions in a contract, a court will look to the document as a whole. Hinds Motor Co. v. Hederman, 201 Miss. 859, 867, 30 So.2d 70, 72 (1947). When this principle is applied to the case at bar, the Cherrys' interpretation collapses. The insuring agreement unequivocally states that the coverage will be limited either to the face value of the policy or to the actual cash value at the time of loss, whichever is less. In other words the face value is to act as a ceiling; it does not irrevocably fix the amount to be awarded. When the endorsement is considered in conjunction with the plain terms of the rest of the contract, it becomes obvious that the insured was merely warranting that the truck was worth the face value of the policy at the time it was bought.
The Cherrys protest that the circumstances surrounding the sale of the policy indicate that they were seeking a policy which would pay off in the full face amount in the event of any loss. Even if this be admitted, it avails them nothing. The most basic principle of contract law is that contracts must be interpreted by objective, not subjective standards. A court must effect "a determination of the meaning of the language used, not the ascertainment of some possible but unexpressed intent of the parties." Hunt v. Triplex Safety Glass Co., 60 F.2d 92, 94 (6th Cir.1932). The mere fact that the parties disagree about the meaning of a provision of a contract does not make the contract ambiguous as a matter of law. Union Planters Leasing v. Woods, 687 F.2d 117, 119 (5th Cir.1982). Parole evidence as to surrounding circumstances and intent may be brought in where the contract is ambiguous, but where, as here, the contract was found to be unambiguous it has no place. The parties are bound by the language of the instrument.
Both Richard Cherry and Edwin Cherry testified that they had read the entire policy. Even if they had not, knowledge of its contents would be imputed to them as a matter of law. Atlas Roofing Mfg. Co., Inc., v. Robinson and Julienne, Inc. 279 So.2d 625, 629 (Miss. 1973); Zepponi v. Home Ins. Co., 248 Miss. 828, 833-34, 161 So.2d 524, 526 (1964).
Lastly, it strains credulity to argue that the Cherrys could reasonably have expected an insurance company to pay them the face amount of an insurance policy regardless of the actual cash value of the item insured. Very few, if any, insurance companies would issue a policy on this basis. It is the general practice in the insurance industry to pay the actual cash value at the time of loss. R. Keeton, Insurance Law § 3.9 (1971).
In short, we have no basis for holding that the trial judge erred in his construction of the contract.
DIRECT ASSIGNMENT OF ERROR NO. II: THE COURT ERRED IN NOT SUBMITTING THE ISSUE OF FRAUD TO THE JURY.
In his opinion on the motions for new trial, the trial judge stated, "this court remains convinced that insufficient evidence was presented that the defendant was guilty of any fraud ..." In order to prove fraud in Mississippi:
... The plaintiff must prove (1) a representation, (2) its falsity, (3) its materiality, (4) the speaker's knowledge of its falsity or ignorance of its truth, (5) its intent that it should be acted on by the hearer and in the manner reasonably contemplated, *420 (6) the hearer's ignorance of its falsity, (7) its reliance on its truth, (8) his right to rely thereon, and (9) his consequent and proximate injury.
Franklin v. Lovett Eqmt. Inc., 420 So.2d 1370, 1373 (Miss. 1982).
In substance, the Cherrys' claim of fraud is based on the allegation that Jimmy Ray Estes of the Green Insurance Agency made a false representation to them that in the event of total loss, they would be paid the entire face amount on the policy. The difficulty here is that neither Richard Cherry nor Jimmy Ray Estes testified that Estes had told the Cherrys they would get $35,000 no matter what. The only testimony to that effect was by Edwin Cherry who said, "the way Mr. Estes explained to me, that's what it (i.e., the endorsement) was to insure that we would in the event of a loss get $35,000." This statement however, was made on a proffer of evidence after the jury had retired. It was not repeated in the presence of the jury.
This Court has held that a trial court's conclusion that a deed had not been procurred by fraud would not be disturbed on appeal in the absence of compelling evidence that the trial judge was wrong. Hickey v. Anderson, 215 Miss. 52, 60 So.2d 513 (1952). That is certainly not the case in the action sub judice. In fact, except for the single statement of Edwin Cherry made out of the presence of the jury, there was a complete failure of proof as to the issue of fraud. Moreover, in Mississippi fraud must be shown by clear and convincing evidence. Parker v. Howarth, 340 So.2d 434 (Miss. 1976). We are of the opinion that the record does not show, by clear and convincing evidence or otherwise, that the defendants were guilty of fraud.
It follows, of course, that without any proof of fraud or abuse the Cherrys were not entitled to an instruction on punitive damages.
DIRECT ASSIGNMENT OF ERROR NO. III: THE COURT ERRED IN NOT SUBMITTING THE QUESTION OF TORTIOUS BREACH OF CONTRACT OR BAD FAITH TO THE JURY.
This entire assignment of error is based on the assumption that Lloyds had a contractual obligation to pay the Cherrys the face amount of the policy in the event of a total loss. As seen above, there was no such obligation. In the alternative, the Cherrys argue that bad faith was demonstrated when the adjuster offered $21,500 as the actual cash value of the truck at the time of loss. Further, they complain that the adjuster did not amend that estimate after learning the truck had an out-of-frame overhaul which would have increased its value substantially.
However, it is difficult to see how the insurance adjuster can be faulted for bad faith when it is clear that the Cherrys did not cooperate with him in his investigation. It is undisputed that the Cherrys categorically refused to accept anything less than $35,000, the face amount of the policy. The Cherrys refused even to give Douglas a statement. In order to estimate the value of the truck, Douglas was compelled to contact local truck dealers, so that they could quote him prices on comparable trucks. In view of this record, any error in fixing the actual cash value of the truck could be attributed to the Cherrys with at least as much justice as it could to Douglas.
In fact, Clum Lindsey, the owner of Capital Truck and Body Shop in Jackson, testified that a truck of that age would be worth between $19,000 and $22,000 depending on its condition. Nine pictures of the truck taken by Douglas after the accident appear in the record; after looking at these pictures Lindsey noted damage unrelated to the fire and said that after seeing them he would lower his estimate some $2,500.
In short, the record before this Court furnishes no basis for saying the trial judge erred by not submitting the bad faith issue to the jury.
DIRECT ASSIGNMENT OF ERROR NO. IV: THE TRIAL COURT ERRED IN REDUCING THE AWARD OF THE JURY.
*421 The jury brought an award for $53,231.47. On motion for a remittitur the court reduced this judgment to $41,137.73. Essentially, this incorporated the $21,500 offered by Douglas, plus $10,000 to account for the added value of the out-of-frame overhaul, together with towing and storage fee, plus interest. The trial court made this adjustment on the motion by the defendant for a new trial or in the alternative a judgment notwithstanding the verdict or remittitur. In the end, the adjustment took the form of a judgment notwithstanding the verdict.
Our leading case on remittiturs is Houston v. Page, 208 So.2d 901, 905 (Miss. 1968). There this Court stated:
Although fixing the amount of damages in a case of this kind is primarily a matter for the jury, the statute clearly contemplates that the trial judge, from his station of vantage, shall see to it that such awards are kept reasonably within the bounds of the evidence. If the trial court should consider that a verdict is, upon the evidence, either grossly excessive or inadequate, he may, and indeed should, set it aside and award a new trial. Where a new trial is granted upon the ground that a verdict is excessive, the trial court may suggest a remittitur as an alternative to the new trial. 208 So.2d at 905.
It appears the trial judge selected the wrong vehicle for adjusting the jury's verdict. Instead of issuing a judgment notwithstanding the verdict, he should have granted the motion for new trial or denied it on condition of plaintiffs accepting the remittitur. However, the result would have been the same had the technically correct procedure been followed. Therefore, the judge's action was harmless error within the meaning of Supreme Court Rule 11.
Nor is there any basis for saying the trial judge abused his discretion in this matter. The only witnesses who estimated the value of the truck at more than $35,000 were the Cherrys themselves. The defendants, on the other hand, produced four heavy-duty truck salesmen/mechanics, none of whom placed the value of a Peterbilt truck of comparable age and wear higher than $22,000.
Finding no reversible error, we conclude that the judgment of the Circuit Court must be affirmed.
AFFIRMED.
WALKER, C.J., ROY NOBLE LEE and HAWKINS, P.JJ., and DAN M. LEE, PRATHER, ROBERTSON, SULLIVAN and GRIFFIN, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1139082/ | 578 So. 2d 537 (1991)
AETNA CASUALTY AND SURETY COMPANY, Plaintiff-Appellant,
v.
Barbara LANDRY, Defendant-Appellee.
No. 89-1204.
Court of Appeal of Louisiana, Third Circuit.
April 17, 1991.
*538 Raggio, Cappel, Chozen & Berniard, Christopher M. Trahan, Lake Charles, for plaintiff-appellant.
Jones, Jones & Alexander (Jennifer Bercier), Cameron, for defendant-appellee.
Before STOKER, KNOLL and KING, JJ.
KING, Judge.
The sole issue presented by this appeal is whether the trial judge was correct in granting defendant's peremptory exception of res judicata and dismissing plaintiff's suit.
Aetna Casualty and Surety Company (hereinafter plaintiff) brought suit against Barbara Landry (hereinafter defendant) seeking to recover $20,000.00 it had paid to her, pursuant to the Louisiana Worker's Compensation laws, as settlement of a death claim for her son's death. Defendant filed a peremptory exception of res judicata and sought dismissal of plaintiff's suit.
After a hearing, oral reasons for judgment were given by the trial judge and judgment was rendered in favor of defendant and against plaintiff sustaining the exception and ordering the suit dismissed. A formal written judgment was signed. Plaintiff timely filed a devolutive appeal. We affirm.
FACTS
The following facts were stipulated by the parties at the hearing of the exception.
Defendant's son, Vernon Jackson (hereinafter Jackson), died from an accident sustained while in the course and scope of his employment with Norwood Construction Company, Inc. (hereinafter Norwood). Plaintiff was the worker's compensation insurer for Norwood at the time of the accident. After Jackson's death, plaintiff's adjuster contacted defendant to inquire about Jackson's survivors. Defendant told the adjuster that Jackson's father was dead, that Jackson had been married three times, that Jackson had one legitimate child, Theresa Jackson, that Jackson was divorced from this child's mother, and that Jackson had not been paying child support for this child. Defendant also told the adjuster that, at the time of his death, Jackson was living with, but not married to, Tammie Choate, who was pregnant with his child.
The adjuster concluded that defendant was entitled to the $20,000.00 death benefit, as provided by Louisiana Worker's Compensation law, as Jackson's surviving parent. A check was issued to defendant which stated on its face that it was in payment for a death benefit, that it was for the claim of Jackson, and that the insured *539 was Norwood. Defendant endorsed the check and negotiated it.
Approximately seven months later, Tammie Choate filed suit against plaintiff claiming that she and her child, Mindy Rae Choate, were Jackson's legal dependents and entitled to benefits pursuant to the Louisiana Worker's Compensation law. That suit was compromised and Choate received worker's compensation benefits from plaintiff for herself and her child.
Subsequently, plaintiff filed this suit against defendant alleging that the payment made to defendant constituted a payment in error of a thing not due and seeking return of the money it had paid defendant.
Defendant filed a peremptory exception of res judicata alleging that the payment was made in settlement and compromise of a claim and that the compromise has the effect of a final judgment.
After a hearing on the motion, the trial judge sustained defendant's exception and dismissed plaintiff's suit. The trial judge found that plaintiff's adjuster knew all of the facts and made an error of law, when he concluded that the money for the death benefit was owed to defendant rather than to Tammie Choate and her unborn child, and that the payment was made to defendant as a compromise of any claim she might have against plaintiff resulting from Jackson's death. A formal written judgment was signed sustaining defendant's exception and dismissing plaintiff's suit.
It is from this ruling that plaintiff appeals contending that the payment made to defendant was not a compromise and can only be construed as a payment of a thing not due. Defendant contends that a compromise took place and it cannot now be attacked because of an error of law.
LAW
The Louisiana Worker's Compensation law provides for death benefits to be paid to the legal dependent of the deceased employee, who are actually and wholly dependent upon him for support, or if there is no legal dependent, to each of the surviving parents of the deceased employee. At the time of the payment to defendant, La.R.S. 23:1231 provided that:
"For injury causing death within two years after the accident, there shall be paid to the legal dependent of the employee, actually and wholly dependent upon his earnings for support at the time of the accident and death, a weekly sum as hereinafter provided. If the employee leaves legal dependents only partially actually dependent upon his earnings for support at the time of the accident and death, the weekly compensation to be paid shall be equal to the same proportion of the weekly payments for the benefit of persons wholly dependent as the amount contributed by the employee to such partial dependents in the year prior to his death bears to the earnings of the deceased at the time of the accident.
"However, if the employee leaves no legal dependents, the sum of twenty thousand dollars shall be paid to each surviving parent of the deceased employee, in a lump sum, which shall constitute the sole and exclusive compensation in such cases."
In the instant case, plaintiff clearly had a legal obligation to pay a worker's compensation death benefit. Pursuant to the Louisiana Worker's Compensation law, plaintiff owed death benefits to someone. The question was whether the money was owed to defendant or to Choate and her unborn child.
Louisiana Civil Code Article 3071 states in pertinent part that:
"A transaction or compromise is an agreement between two or more persons, who, for preventing or putting an end to a lawsuit, adjust their differences by mutual consent, in the manner which they agree on, and which every one of them prefers to the hope of gaining, balanced by the danger of losing.
"This contract must be either reduced into writing ..."
Transaction and compromise are synonymous terms in the Louisiana Civil Code. Hill v. Hill, 173 La. 574, 138 So. 107 (1931); *540 Audubon Ins. Co. v. Farr, 453 So. 2d 232 (La.1984).
The effect of a compromise between parties is set forth in Louisiana Civil Code Article 3078:
"Transactions have, between the interested parties, a force equal to the authority of things adjudged. They can not be attacked on account of any error in law or any lesion. But an error in calculation may always be corrected." (Emphasis supplied.)
Louisiana Civil Code Article 3079 further provides that:
"A transaction may be rescinded notwithstanding, whenever there exists an error in the person or on the matter in dispute. It may likewise be rescinded in the cases where there exists fraud or violence."
The defense of compromise or transaction may be properly raised through the peremptory exception of res judicata. Murphy v. Hoffpauir, 540 So. 2d 573 (La. App. 3 Cir.1989), writ den., 544 So. 2d 406 (La.1989); Boudreaux v. Leblanc, 517 So. 2d 911 (La.App. 3 Cir.1987), and cases cited therein.
The check given to defendant by plaintiff stated on its face that it was in payment for a death benefit, that it was for the claim of Jackson, and that the insured was Norwood. There was no specific release language on the check and no separate release was presented to defendant or signed by her. Defendant endorsed and negotiated plaintiff's check. The check was clearly given to compromise the obligation of plaintiff to pay a claim for death benefits under the Louisiana Worker's Compensation Act. As the Louisiana Supreme Court stated in Audubon Ins. Co., supra, in discussing what was necessary to constitute a compromise:
"Despite the absence of a specific release, there is no question that an accord and satisfaction took place between Paul and Allstate when she negotiated Allstate's draft. There was a disputed claim, a tender of a certain amount in settlement of that claim and an acceptance. Henriques v. Vaccaro, 220 La. 216, 56 So. 2d 236 (1951). LSA-C.C. art. 3071, in pertinent part, defines a compromise as an agreement for preventing a lawsuit by which parties adjust their differences in writing. The only formal essential for a compromise is a writing. Antoine v. Smith, 40 La.Ann. 560, 4 So. 321 (1888). The check here recites that the insured is Edward Farr and the claimant Donna Paul; and it was issued `in payment of property damage of 6-1-78' in the amount of $4,000. It was signed by an agent of Allstate Insurance Company and endorsed by Donna Paul. It is clearly a written compromise of Paul's claim against Allstate. By endorsing and negotiating Allstate's draft, Paul compromised her claim against that company and its insured. Frazier v. Louisiana Central Lumber Company, et al., 144 La. 599, 80 So. 890 (1919) ..." Audubon Ins. Co. v. Farr, 453 So. 2d 232, at page 234 (La.1984).
A person who has paid money to another by mistake, thinking he owed a debt, may reclaim what he has paid. La.C.C. Art. 2302. A person who receives what is not due him, whether he receives it through error or knowingly, obliges himself to restore it to him from whom he has unduly received it. La.C.C. Art. 2301. A thing not due is that which is paid on the supposition of an obligation which did not exist. La. C.C. Art. 2304. Negligence per se is not a bar to recovery for payment of a thing not due. Tischler v. City of Alexandria, 471 So. 2d 1099 (La.App. 3 Cir.1985); contra: Pennsylvania Casualty Co. v. Brooks, 24 So. 2d 262 (La.App. 1 Cir.1945); Talbot v. Douglass Moving & Warehouse Company, 228 So. 2d 222 (La.App. 3 Cir.1969), writ den., 255 La. 247, 230 So. 2d 94 (1970); Mongrue v. State Farm Mut. Auto., etc., 396 So. 2d 466 (La.App. 4 Cir.1981).
When plaintiff's adjuster contacted defendant, he clearly intended to resolve the claim for a death benefit arising on account of Jackson's death by paying the death benefit and closing his file. A compromise for consideration to settle a claim cannot be attacked for an error of law even though the compromise and payment might have been made in error. It was stipulated by *541 the parties to this matter that, at the time defendant was given the death benefits check, that plaintiff's claims representative knew that Jackson was living with Tammie Choate at the time of his death, and that Tammie Choate was expecting a child. The claims representative issued the check to defendant, based on his erroneous legal conclusion that an illegitimate child and a concubine would not be entitled to death benefits, to compromise a claim for death benefits by defendant. There was no error in the person of defendant or on the matter to be resolved and there was no fraud or concealment on the part of defendant. In fact, it was defendant who informed the claims representative of Ms. Choate's relationship with her deceased son. Therefore, plaintiff's error of law cannot be the basis for setting aside the compromise of defendant's death benefits claim. Matthew v. Melton Truck Lines, Inc., 310 So. 2d 691 (La.App. 1 Cir.1975). It is also well established that subsequent developments, such as the lawsuit of Ms. Choate, which reveal an error of law on the part of either or both of the parties will not invalidate the agreement. Eaglin v. Southern Kraft Corporation, 200 So. 63 (La.App. 2 Cir. 1940); Spears v. St. Charles Dairy, 194 So. 738 (Orl.App.1940). Defendant did not initiate the settlement negotiations; plaintiff's claim representative contacted her. Defendant did not conceal facts or commit fraud; plaintiff's adjuster had all of the facts but made an error of law. The fact that plaintiff compromised the claim by paying the wrong person is an error of law and, pursuant to Civil Code Article 3078, it cannot be attacked.
We find that the stipulation of facts and evidence before the trial judge furnished a reasonable factual basis for his finding that plaintiff intended a transaction or compromise, even though it was made because of an error of law. The trial judge further found that this transaction or compromise could not be attacked because of an error of law. We will not disturb these findings absent manifest error. Murphy v. Hoffpauir, supra. Thus, we hold that the trial judge's grant of the peremptory exception of res judicata was correct.
For these reasons, the judgment of the trial court is affirmed. All costs of this appeal are taxed to plaintiff-appellant.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2984693/ | Order filed February 20, 2014.
In The
Fourteenth Court of Appeals
____________
NO. 14-13-00970-CV
___________
IN THE INTEREST OF E.L.M., a child
On Appeal from the 246th District Court
Harris County, Texas
Trial Court Cause No. 321010246
ORDER
No reporter’s record has been filed in this case. The official court reporter
for the 246th District Court, Jenine Redden, informed this court that appellant,
Manuel Morell, had not made arrangements for payment for the reporter’s record.
On November 6, 2013, the clerk of this court notified appellant that we would
consider and decide those issues that do not require a reporter’s record unless
appellant, within 15 days of notice, provided this court with proof of payment for
the record. See Tex. R. App. P. 37.3(c).
Appellant filed a request for additional time to pay for preparation of the
record. This court granted an extension until January 15, 2014. When the record
was not filed, and appellant did not file proof of payment for the record or that he
has been declared indigent and permitted to appeal without the advance payment of
costs, on January 28, 2014, this court ordered appellant to file a response to this
order providing proof of payment for the reporter’s record on or before February
14, 2014. The court’s order stated that if appellant failed to comply, the court
would order him to file a brief without the benefit of the reporter’s record. See Tex.
R. App. P. 37.3(c). Appellant filed no response.
Accordingly, we order appellant, Manual Morell, to file a brief in this
appeal on or before March 21, 2014. If appellant fails to comply with this order,
the court will dismiss the appeal for want of prosecution. See Tex. R. App. P.
42.3(b).
PER CURIAM
2 | 01-03-2023 | 09-22-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2611973/ | 1 Wash. App. 192 (1969)
459 P.2d 976
THE STATE OF WASHINGTON, Respondent,
v.
WALTER CAMPBELL RUMMELHOFF, Appellant.
No. 72-40617-1.
The Court of Appeals of Washington, Division One, Panel 2.
October 27, 1969.
Marie Moreau Donohoe, for appellant.
Charles O. Carroll, Prosecuting Attorney, and Barbara Durham, Deputy, for respondent.
STAFFORD, J.
This is an appeal from a judgment of the trial court which found defendant Walter Rummelhoff guilty of assault in the second degree.
*193 A lengthy recitation of the facts is not necessary. The defendant failed to assign error to the findings of fact, thus we must accept them as the established facts in this case. CAROA 43.
The victim, a cabdriver, drove defendant to a restaurant during the evening. He was asked to wait outside. The defendant emerged a short time later and walked away from the cab without paying. The victim followed him a short distance on foot, tapped him on the shoulder and said, "Hey, where are you going? You are going the wrong way; come back to the cab." At that point the defendant whirled, stabbed the victim, and said, "You've had it now, ..." and walked away.
[1] The defendant does not deny the stabbing. He argues that he had twice been assaulted on the streets, was justifiably apprehensive, and thus had a right to act in the belief that he was defending himself. This contention has been answered in State v. Hill, 76 W.D.2d 728, 458 P.2d 171 (1969), at 736:
Appellant urges that it was error to instruct the jury that the amount of force that may be lawfully used in self-defense is to be measured by what a reasonably prudent man would have done under the existing circumstances. Although he submitted no proposed instruction on the subject, he criticizes the instruction given because it did not make him the sole judge as to existence of the peril of great bodily harm confronting him and the amount of force necessary to protect himself against it.
If we were to agree with appellant's position, there would be no limit to the amount of force which a person could use in defending himself against such alleged peril.
(Italics ours.)
One's right to resist force with force is dependent upon what a reasonably cautious and prudent man would have done under the conditions then existing. State v. Miller, 141 Wash. 104, 250 P. 645 (1926). Under the facts of this case the defendant did not meet the test.
[2] The defendant asserts the trial court erred by refusing to recognize that he was the victim, rather than the *194 original aggressor. The trial court chose to believe the testimony of the victim. There was substantial evidence, based upon conflicting testimony, to support the trial court's determination. We will not substitute our judgment. State v. Nesrallah, 66 Wash. 2d 248, 401 P.2d 968 (1965), State v. Bell, 59 Wash. 2d 338, 368 P.2d 177 (1962).
[3] The trial court's refusal to accept defendant's theory of self-defense was entirely correct. One who initially is an aggressor cannot invoke the doctrine of self-defense until he, in good faith, endeavors to withdraw from and abandon the conflict. State v. Currie, 74 Wash. 2d 197, 443 P.2d 808 (1968). There was no evidence that Mr. Rummelhoff ever sought to avoid or withdraw from the conflict.
The judgment is affirmed.
HOROWITZ, A.C.J., and UTTER, J., concur.
Petition for rehearing denied November 25, 1969. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1965442/ | 139 Conn. 79 (1952)
THOMAS R. MARUCA
v.
CHARLES A. PHILLIPS
Supreme Court of Connecticut.
Argued May 6, 1952.
Decided June 24, 1952.
BROWN, C. J., JENNINGS, BALDWIN, INGLIS and O'SULLIVAN, JS.
*80 Irwin I. Krug, for the appellant (defendant).
Robert F. Kahan, with whom, on the brief, was Robert J. Pigeon, for the appellee (plaintiff).
BALDWIN, J.
The plaintiff brought suit against the defendant for the dissolution of their partnership, an accounting, the appointment of a receiver, and damages. The first count of the complaint alleges breach of the partnership agreement. The second count alleges that the defendant made false representations to induce the plaintiff to enter into the partnership so that he could obtain the plaintiff's money and that the plaintiff relied upon them to his damage. It further alleges misappropriation of the partnership funds. The case was referred to a state referee, who found that the plaintiff, in full performance of his promises under the contract, had delivered to the defendant $7000 in cash or its equivalent, *81 a deed to real estate valued, by agreement, at $3000, and a note for $10,000. He also found that the defendant had falsely represented the value of his interest in the partnership and that he had used partnership property and money to meet his own personal obligations. It was agreed that the plaintiff was indebted to the partnership in the amount of $789.75. The court accepted the report of the referee and rendered judgment dissolving the partnership, canceling the deed and the $10,000 note, and awarding $6210.25 damages to the plaintiff. The defendant has appealed.
The defendant's claims of error raise two issues. The first is that the plaintiff is not entitled to restitution on the ground of fraud because the specific acts of fraud relied upon are not pleaded. Where a claim for damages is based upon fraud, the mere allegation that a fraud has been perpetrated is insufficient; the specific acts relied upon must be set forth in the complaint. Gates v. Steele, 58 Conn. 316, 318, 20 A. 474; Bradley v. Reynolds, 61 Conn. 271, 279, 23 A. 928; Robert v. Finberg, 85 Conn. 557, 561, 84 A. 366. The allegations of the complaint met this test. In addition to general assertions of fraudulent representations, the complaint stated that they were made to allow the defendant to get the plaintiff's money without in fact setting up the partnership as a going business and that the defendant misappropriated the partnership's funds. The latter is fraud as a matter of law. Filley v. Phelps, 18 Conn. 294, 300. As amended, the complaint further alleged that the defendant concealed and failed to disclose certain material facts when there was a duty to disclose and that this was a factor inducing the plaintiff to enter into the partnership agreement. The first claim of error is without merit.
*82 The defendant's second claim is that the plaintiff is not entitled to restitution because he has not elected to seek such relief but has affirmed the contract by asking enforcement of his rights under it, and, further, that he has failed to return the consideration he received in order to put the defendant in statu quo ante. Neither claim appears in the written claims of law attached to the report of the referee and nothing in the memorandum of decision in the Superior Court indicates that it was raised there. There was no finding. Under these circumstances we are not required to consider the claims. Practice Book §§ 154, 409; Maltbie, Conn. App. Proc., § 44. That aside, the judgment can be supported on the theory that the plaintiff was affirming the partnership contract and seeking a recovery for the fraud itself. It does not appear from the report that the plaintiff received anything of benefit from the defendant or from the partnership which he should return except $789.75, for which the court made allowance in the judgment. This was proper. Cain v. Norman, 140 Wash. 31, 35, 37, 248 P. 71. The complaint and the answer both seek equitable relief: the one, dissolution of the partnership, an accounting, and the appointment of a receiver; the other, reformation of the partnership agreement. The settlement of partnership affairs comes properly within the equity jurisdiction of the court, and the relief which equity can afford is particularly appropriate and effective. Barber v. International Co., 73 Conn. 587, 606, 48 A. 758; Niles v. Williams, 24 Conn. 279, 284; 4 Pomeroy, Equity Jurisprudence (5th Ed.) pp. 1078, 1079. "The governing motive of equity in the administration of its remedial system is to grant full relief, and to adjust in the one suit the rights and duties of all the parties, which really *83 grow out of or are connected with the subject-matter of that suit." 1 Pomeroy, op. cit., § 114; Nichols v. Nichols, 79 Conn. 644, 653, 66 A. 161.
The rule that equity, having taken jurisdiction for one purpose, will hear all issues is applied to cases in which the court, on a proper ground for the intervention of equity, has taken jurisdiction in respect to questions concerning partnership matters. 1 Pomeroy, op. cit., §§ 114, 239. The plaintiff, as he was entitled to do, sought equitable relief. Brownback v. Nelson, 122 Mont. 525, 529, 206 P.2d 1017. It was within the equity powers of the court to grant a decree ordering the contract rescinded for fraud and the partnership dissolved. Oteri v. Scalzo, 145 U.S. 578, 588, 12 S. Ct. 895, 36 L. Ed. 824; Knapp v. First National Bank & Trust Co., 154 F.2d 395, 398; Harlow v. La Brum, 151 N.Y. 278, 281, 45 N.E. 859; 40 Am. Jur. 294. The court could, by ordering restitution and damages, restore the partner accorded the benefit of rescission to his former position, in so far as it was possible for it to do so. Grossman v. Lewis, 226 Mass. 163, 166, 115 N.E. 236; Smith v. Everett, 126 Mass. 304, 306; Crane, Partnership, § 85; 68 C. J. S. 422.
The right to recover money damages is not always the sole remedy for the breach of a contract. When one party has fully performed his part of the agreement, he may invoke, in an appropriate case, the exercise of the equity power of the court and seek rescission and restitution, if damages are wholly inadequate to do justice. Caramini v. Tegulias, 121 Conn. 548, 551, 186 A. 482; Penfield v. Penfield, 41 Conn. 474, 480; Peck v. Hoyt, 39 Conn. 9, 15.
There is no error.
In this opinion the other judges concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1861270/ | 360 So. 2d 1060 (1978)
Vernon Cleve McELROY
v.
STATE.
7 Div. 572.
Court of Criminal Appeals of Alabama.
May 2, 1978.
Rehearing Denied May 30, 1978.
*1061 Myron K. Allenstein, Gadsden, for appellant.
William J. Baxley, Atty. Gen., and David W. Clark, Asst. Atty. Gen., for the State, appellee.
LEIGH M. CLARK, Retired Circuit Judge.
On August 19, 1977, appellant-defendant was indicted for the alleged sale of "a quantity of amobarbital, cocaine hydrochloride, methaqualone, meperidine hydrochloride, phendimetraxine, secobarbital, hydromophone, methamphetamine, dextroamphetamine, methlyphenidate, diethylpropion, controlled substances, to another, contrary to and in violation of Act No. 1407, Art. IV, Section 401(a), of the 1971 Regular Session of the Alabama Legislature, otherwise known as the Uniform Alabama Controlled Substances Act." He was arraigned and pleaded not guilty on September 2, 1977. His trial commenced on September 27 and was concluded on September 28, 1977. The jury found him guilty and fixed punishment at a fine of $18,000. On October 6, 1977, he was sentenced to imprisonment for twelve years.
All of the witnesses testifying in the case were presented by the State. At the conclusion of the State's case, defendant rested without testifying himself and without presenting any witness in his behalf.
A well-planned purchase of a quantity of controlled substances had been arranged by the Gadsden City Police for the late afternoon of August 13, 1977. The site therefor and other details were arranged for its purchase from one Howard Dickerson for the sum of $3,300. The sum of money stated had been obtained for the purpose and photographed.
Officer J. W. Gulledge, accompanied by a confidential informant, drove to the scene with the money and parked beside a gold Chevelle automobile. The informant got out of the car driven by Officer Gulledge and entered the Chevelle. Dickerson approached the Gulledge automobile on foot and sat inside that car for a few moments. Gulledge showed Dickerson $3,300; then Gulledge received a signal from the informant and handed Dickerson the money, who promptly left the scene. The informant got out of the Chevelle with a brown paper bag and its contents in his possession.
In the Chevelle automobile from which the informant obtained the brown paper bag and its contents were two white males, including appellant-defendant and Darrell Phillips, the apparent driver of the vehicle.
*1062 McElroy and Phillips were arrested on the scene by other officers and were promptly taken into custody. Howard Dickerson was also arrested and the identical $3,300 that had been handed him by Officer Gulledge was recovered from his possession.
It was beginning to get dark when the incident stated occurred and there was a heavy rain at the time.
There was evidence presented by the State to show that several of the items of alleged controlled substances were in the paper bag.
Although the circumstances as to exactly what took place as between the informer and the two persons in the Chevelle automobile are not shown with the most desirable clarity possible, we must conclude that the evidence is sufficient upon which to base the finding that one of the persons in the Chevelle automobile at the time sold and delivered to the informer controlled substances in consideration of the sum of $3,300 handed Dickerson by Officer Gulledge. Appellant makes much of the point that it is not conclusively shown whether the sack of substances was obtained from appellant or from the other person in the Chevelle automobile.
We see little basis for any assumption that the two persons in the Chevelle automobile were not working in concert with each other. There was ample evidence that each aided or abetted the other and was thereby guilty as principal, whether he was the more active or the principal offender or not. Code of Alabama 1940, Recomp. 1958, Tit. 14, § 14. Patterson v. State, 234 Ala. 242, 175 So. 371; Stokley v. State, 254 Ala. 534, 49 So. 2d 284.
The participation in a crime and the community of purpose of the perpetrators need not be proved by direct or positive testimony, but may be inferred from circumstantial evidence. Stokley v. State, supra; Parsons v. State, 33 Ala.App. 309, 33 So. 2d 164.
Appellant complains that the trial court improperly allowed evidence of defendant's having a sawed-off shotgun while in the Chevelle automobile and his holding it while he was getting out of the automobile. He says that such evidence constitutes that of the commission of another crime and for that reason is inadmissible. The fact that the possession of a sawed-off shotgun does or does not constitute the commission of a crime has nothing to do with the question of the admissibility of the evidence under the circumstances here presented. It was one of the actual acts taking place during the commission of the crime charged.
"Evidence of other and distinct criminal offenses, at other times and places, is admitted in evidence only in exceptional cases and for limited purposes.
. . . . .
"But this case is governed by another and different principle. Everything constituting the one continuous transaction is admissible as of the res gestae. No matter how many distinct crimes may be involved, all the details of the one continuous criminal occurrence or adventure may be considered by the jury in passing upon the culpability, the wickedness and depravity of the crime for which the party is being tried. . . ." Jackson v. State, 229 Ala. 48, 155 So. 581 (1934)
Appellant urges that there is a variance between the indictment and the evidence by reason of the fact that the indictment does not specify all of the controlled substances that the evidence shows were in the paper bag and further that the evidence does not show that every controlled substance specified in the indictment was in the paper bag. This does not constitute a fatal variance. In Parks v. State, 46 Ala. App. 722, 248 So. 2d 761, 762, we held:
"The indictment charged the appellant with unlawful possession of one bottle containing opium alkaloid; twenty ampules containing isonitecaine, and one hundred tablets containing morphine. The appellant contends that there is a fatal variance as the state failed to prove the appellant's possession of the exact *1063 quantity of narcotics as alleged in the indictment. Such is not a variance. It is sufficient to prove only so much of an indictment as shows that the accused has committed a substantial offense specified therein. Fuller v. State, 39 Ala.App. 219, 96 So. 2d 829; Blakeney v. State, 244 Ala. 262, 13 So. 2d 430."
During the cross-examination of Officer Gulledge, the following occurred:
"Q Now, in the car with you, that was Phillip Patterson, is that correct?
"A It was a confidential police informant.
"Q Was it Phillip Patterson?
"MR. CARNES: We object, Your Honor.
"Q Judge, this man is a witness to the crime. Now, before we were talking about someone who set up something, allegedly set up something. Here, we are talking about a specific witness to an alleged crime.
"THE COURT: What was the question?
"Q I asked him if it was Phillip Patterson that was in the car with Officer Gulledge here.
"THE COURT: And you
"MR. CARNES: I object to it.
"THE COURT: Sustained.
"Q This confidential informant, is he in the courthouse here today?
"A No, sir, he is not.
"Q Okay, he is not going to testify today
"A No, sir.
"Qthat you know of? You never got out of the car, is that correct?
"A That is correct, I never moved."
On redirect examination of the witness, the following occurred:
"Q Officer Gulledge, Mr. Allenstein asked you about the confidential informant and where he is, or if he is here in the courthouse. Do you know where he is?
"A No, I do not.
"Q All right.
"A I believe he may be out of the state.
"Q Have you seen him in some time?
"A Sir?
"Q Have you seen the informant lately?
"A No, sir, I have not.
"Q I believe that's all."
Immediately thereafter, the following occurred:
"RECROSS EXAMINATION BY MR. ALLENSTEIN:
"Q Do you know anything about a Peggy Henderson or a person named Salvador? Do you know anything about them being
"A I understand they were arrested at the time along with these other persons.
"Q Do you know where [sic] they were involved in all of this?
"A No, sir, I don't.
"Q You just heard they were arrested?
"A Yes, sir.
"Q Have charges been filed against them, if you know?
"MR. CARNES: We object.
"A I believe they were
"MR. CARNES: We object.
"THE COURT: I sustain.
"Q Okay. I believe that's all I have. "(Witness excused)
"MR. ALLENSTEIN: May I approach the bench?
"(Whereupon, a discussion was had outside of the hearing of the jury, during which the following occurred)
"MR. ALLENSTEIN: Judge, it appears from the evidence that the confidential informant actually made the purchase, and he is the only person that has personal knowledge that it actually occurred. Therefore, we move that we be furnished with the name of that informant.
"THE COURT: I'm going to deny that.
"MR. ALLENSTEIN: I just want to get it on the record that we do request the name of that informant, and even a continuance, if necessary, to secure his attendance here at this trial.
"THE COURT: I'm not going to allow you to put him on or to find out about him.
"MR. ALLENSTEIN: I understand. We except.
*1064 "MR. CARNES: It is our understanding that he is out of state."
In Davenport v. State, 50 Ala.App. 321, 278 So. 2d 769, 772, we held:
"The general rule that the identity of an informer is privileged and may not be revealed, does not apply in the present set of facts, where the informer, at the instigation, and in the presence of the officer, was an active participant with the accused at the commission of the offense. Authorities, supra.
"We find no other error injurious to the substantial rights of the appellant.
"But the case must be reversed on account of the refusal of the court to admit cross-examination as to the identity of the informer."
To the same effect and result is Davis v. State, 51 Ala.App. 532, 287 So. 2d 243 (1973). In Kenny v. State, 51 Ala.App. 35, 282 So. 2d 387, cert. denied, 291 Ala. 786, 282 So. 2d 392 (1973), the principle is also declared, but no prejudicial error occurred as defense counsel "on a hunch" called the informer as a witness. In Kilgore v. State, 50 Ala.App. 501, 280 So. 2d 206 (1973), the court, in holding that the informer therein was not an active participant, said:
". . . The fundamental requirements of fairness compel disclosure in such cases where the informer plays a major and active part in bringing about the sale of narcotics and continues an active participant therein . . ."
In support of its position that the cited action of the trial court does not constitute reversible error, appellee relies upon Johnson v. State, 54 Ala.App. 187, 306 So. 2d 55, cert. denied, 293 Ala. 760, 306 So. 2d 56, cert. denied, 95 S. Ct. 1998, 421 U.S. 990, 95 S. Ct. 1996, 44 L. Ed. 2d 481, in which it was held that the state is under no duty to ascertain the whereabouts of the informer and advise the defendant thereof and that a denial of defendant's motion for a mistrial or interruption of the trial for a short time to seek the informer was not error.
Appellee also relies upon an additional conclusion reached in Johnson v. State, in contending that defendant's counsel knew the name of the informer and has no valid complaint arising from the court's sustention of the State's objection to defendant's question to Officer Gulledge as to the name of the informer. Appellee directs attention to a question that had been asked Captain Bowman, the first witness for the State, and his answer as follows:
"Q Who was in the car with Officer Gulledge?
"A Who was in the car with him? Phillip Patterson."
The question just quoted was asked by defendant's counsel on cross-examination of Captain Bowman. The interrogation and answers continued as follows:
"Q Okay. And, of course, you weren't present to see what transpired while they were in the parking lot.
"A No, sir, I was not.
"Q Okay. Then, you say Officer Gulledge and Phillip Patterson left the scene in their car? Left the scene of the purchase, is that correct?
"A They left the scene.
"Q Then, about how much time lapsed from the time they left the scene until you got there?
"A Approximately thirty to forty-five seconds.
"Q Okay. And you were the first car on the scene, is that right?
"A That is correct, yes, sir."
Captain Bowman, the record shows, was testifying in some respects as to what he saw. However, he testified largely as to what he heard via the "intelligence" communications passing through a network of walkie-talkies, operating on a private channel, among the law enforcement personnel as they made and executed arrangements for the purchase of the narcotics. Captain Bowman did not see the man in the automobile with Officer Gulledge at the time the transaction was consummated, or at any time while that automobile was at the scene of the crime.
We are not convinced that the testimony of Captain Bowman was sufficient to establish beyond question that Phillip Patterson *1065 was the man, to the preclusion of further inquiry by defendant as to who the man was.
Appellee further argues that knowledge by defendant's counsel of the name of the informer is also indicated by his question addressed to Officer Gulledge: "Now, in the car with you, that was Phillip Patterson, is that correct?"
Although there is some basis for appellee's argument that defendant's attorney knew the name of the informer, it does not seem that such was the basis for the trial court's ruling as to the identity of the informer. If it were clear to all concerned that it had been definitely established that Phillip Patterson was the informer, it is difficult to understand the continued insistence by defendant's attorney that the identity of the informer be disclosed, the continued objection by the State that it not be disclosed, and the action of the court in sustaining the State's objection to the action of defendant's counsel in attempting to show or determine the identity of the informer.
In the defendant's argument in support of the motion to exclude the evidence, which the court overruled, counsel said, inter alia:
"In addition to my motion to exclude the evidence on those I would also like to renew my motion for the State to produce the name and address of this informer, and we ask that if they would do that we would need a continuance to secure his attendance here at trial. This came as a surprise. We thought that the person who bought the drugs would be present at trial."
In response to the quoted statement of defendant's counsel, counsel for the State said:
". . . I think that the evidence shows through Captain Bowman, the first witness, that the person who was out there with Officer Gulledge was a man named Phillip Patterson. And for the record, I want to make it known to the court that we do not know where Mr. Phillip Patterson is. I asked one of the officers if he knew and he said no. It is our information that he has left the State. But, his address is unknown to us. I have talked with all of the officers in one room, several of them, at least, and asked if they knew where he was. Frankly, I would like to have him here. We don't have him, and don't know where to find him. I don't think there was anyone else out there in the car. All the evidence shows is there were two people. And Captain Bowman testified that the other man was Phillip Patterson."
Thereafter, the court announced that it was overruling all motions of defendant made at the conclusion of the State's case, and defendant rested.
There are similarities between the facts in this case and the facts in Johnson v. State, supra, relied upon by appellee, but there also are significant dissimilarities. In Johnson, defendant knew the first name of the informer and had known him for about sixty days prior to the alleged sale in that case. He knew where the informer was working, and about two days after defendant was arrested, "he had an occasion to check where Howard [the informer] was working, and he was not there. . . . that he stopped a few times thereafter but never found him." The defendant in Johnson gave such information to his attorney. We said in Johnson:
"The state was under no duty to ascertain the whereabouts of the informer, Howard, and advise the defendant. Diligence in finding him was addressed to the defendant. Thigpen v. State, 49 Ala. App. 233, 270 So.2d 666(4)." 306 So. 2d 55, 56.
There is nothing to indicate in the case before us that either defendant or his attorney knew the name of the informer, or had any information whatever as to his name, until his name was called by Captain Bowman in his testimony as a witness for the State.
The fact that Captain Bowman had testified that the informer was Phillip Patterson did not impair defendant's right to cross-examine *1066 the most vital witness in the case against defendant, Officer Gulledge, as to the name of the informer. Although denied that right, defendant continued, without success, to press for the name and further identification of the informer to the completion of the evidence in the case.
There is nothing in the record to indicate that the action of defendant's counsel in attempting to find out more about the informer and to obtain time, if necessary, to find out more about him and have him in court, if possible, smacked of a delaying tactic. Defendant and his counsel met the requirements of dispatch. There was no lack of cooperation on the part of either. Their entry without remonstrance or objection into the trial of the case on September 27, 1977, less than five weeks after the indictment was returned (September 2, 1977), and approximately six weeks from the time of the alleged crime (August 24, 1977) could at the most be said to have been an error of judgment. Their defense as a whole refutes any charge of cognizable dilatoriness.
A mere error of judgment in the light of hindsight only is not sufficient to support a conclusion of a lack of diligence. Defendant knew, defendant's attorney knew, and in fact, all of the witnesses knew that the person whose identity defendant's attorney was attempting to establish was the only person who came to the automobile in which defendant and another were sitting and from which the bag of controlled substances was obtainedthe only person, other than appellant and his companion who had the constitutional right to remain silent, who actually witnessed what took place in the automobile at the time, particularly any and all inculpatory or exculpatory remarks or conduct of appellant. We think his being called as a witness for the prosecution was reasonably expectable.
Although we have heretofore held herein that by the circumstances stated sufficient evidence was presented to support a guilty verdict, we cannot say that better evidence would not have been the testimony of the man who apparently obtained the bag of controlled substances from the automobile in which the defendant and the other man were sitting. His testimony, if credible, would have been more direct as to the guilt or innocence of defendant than the circumstances relied upon by the State, and which we have held sufficient, to support a conviction. As a trustworthy witness, he would have been a pillar of light to the jury in its quest for truth, in a case which otherwise is somewhat hazy, if not densely cloudy.
Resourceful counsel for the State were able to win the case without using the particular witness, which of itself was a noteworthy achievement, but the circumstances as a whole are insufficient, we think, to cause defendant's counsel to believe before trial that such course of action would be pursued by the prosecution.
We are unable to find fault with defendant's counsel in his being surprised, as he stated, that the State did not use such witness or in thinking, as he said, "that the person who bought the drugs would be present at trial."
We cannot say that defendant's counsel should have done more than he did on the trial to obtain more information about the identity of the informer or to urge that court to grant him time to locate the informer, in the light of the positive statement of the court:
"I'm not going to allow you to put him on or to find out about him.",
to which defendant's counsel responded:
"I understand. We except."
The emphatic ruling of the court just quoted is not in the pale of rulings denying requests for a continuance or suspension of the trial, as to which the trial court's discretion is so broad as to prevent a finding of reversible error on appeal. The reason for such broad discretion is that generally a ruling on a motion for continuance requires a process of balancing and counterbalancing of many factors, pro and con, for which the trial court is often at a better vantage point than the reviewing court to arrive at a just conclusion. Here, however, the trial court based its conclusion unreservedly and exclusively *1067 upon the conviction that defendant was not entitled to "put him [the informer] on or to find out about him." From this it seems that, if the informer could have been better identified and located even that day, during the noon recess of the trial, or that evening or night, and the trial suspended only until the following day, no such opportunity was afforded defendant. The court obviously was not attempting to weigh the considerations that ordinarily enter into the process of determining whether a continuance or delay should be granted for the purpose of finding out more about the informer. With commendable forthrightness, it decided and ruled that defendant was not entitled to use the informer as a witness or to find out about him, that is, if the informer could have been located and brought to court without unreasonable interference with the progress of the trial, it would have profited defendant nothinghe could not have "put him [the informer] on" or "find out about him."
We hold that the action of the court was such as to deny to defendant his right to such information as to the identity of the informer as to enable his counsel to defend him adequately. To hold otherwise would not be in harmony with our decisions in Davis v. State, supra; Kenny v. State, supra; Kilgore v. State, supra, and Davenport v. State, supra.
The importance of preserving the "informer privilege," or the law enforcement authorities' privilege, of withholding from disclosure is not to be treated lightly, but it does not rise above the importance of affording a fair trial to litigants.
". . . Where the disclosure of an informer's identity, or of the contents of his communication, is relevant to the defense of an accused, or is essential to a fair determination of a cause, the privilege must give way. . . ." Roviaro v. United States, 353 U.S. 53, 60, 77 S. Ct. 623, 628, 1 L. Ed. 2d 639, 645 (1957)
In the case under review, the informer was not only "an active participant with the accused at the commission of the offense," but he was the "only" active participant with the accused and the companion of accused at the commission of the offense.
For the error indicated, the judgment of the trial court should be reversed and the cause remanded for another trial in accordance with this opinion.
The foregoing opinion was prepared by Retired Circuit Judge Leigh M. Clark, serving as a judge of this Court under the provisions of § 6.10 of the New Judicial Article (Constitutional Amendment No. 328). His opinion is hereby adopted as that of the Court.
REVERSED AND REMANDED.
All the Judges concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1032710/ | conclude that the district court did not abuse its discretion at sentencing.
Accordingly, we
ORDER the judgment of conviction AFFIRMED.
Gibbons
J.
E-
.uglas
cc: Hon. Steve L. Dobrescu, District Judge
State Public Defender/Ely
State Public Defender/Carson City
Attorney General/Carson City
White Pine County District Attorney
White Pine County Clerk
SUPREME COURT
OF
NEVADA
(0) 1947A
2 | 01-03-2023 | 07-09-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2615166/ | 668 P.2d 306 (1983)
100 N.M. 190
Ralph ABBOTT, d/b/a Tasco, Petitioner-Appellee,
v.
Alex J. ARMIJO, Commissioner of Public Lands, State of New Mexico, Respondent-Appellant.
No. 14522.
Supreme Court of New Mexico.
August 24, 1983.
J. Scott Hall, Sp. Asst. Atty. Gen., for respondent-appellant.
Armijo, Baggett, Cameron & Vandiver, Dennis F. Armijo, Farmington, for petitioner-appellee.
OPINION
SOSA, Senior Justice.
It is the opinion of this Court that the district court should be reversed. The issue is whether the appellant, the Commissioner of Public Lands, fulfilled the statutory requirements for giving notice when he sent the appellee, Mr. Abbott, a notice of intent to cancel an oil and gas lease by certified mail, even though Mr. Abbott did not receive such notice.
On January 2, 1981, the Commissioner sent Mr. Abbott a courtesy notice stating that the delay rentals on his oil and gas lease would be due on February 1, 1981. When Mr. Abbott failed to make payment, *307 the Commissioner sent a notice of intent to cancel the lease by certified mail to Mr. Abbott's address of record as shown on the lease. This notice was mailed on February 6, 1981. No return receipt was received by the Commissioner and Mr. Abbott alleged that the certified letter was never delivered to him. The Commissioner subsequently terminated Mr. Abbott's oil and gas lease for nonpayment of delay rentals.
Mr. Abbott commenced this action in the district court for San Juan County on April 10, 1981, pursuant to NMSA 1978, Section 19-10-23. The district court held that Mr. Abbott's oil and gas lease should be restored because actual notice is necessary in order to terminate a lessee's interest in an oil and gas lease. The Commissioner appeals and we reverse.
Actual notice is not required in order to terminate a lessee's interest in an oil and gas lease. Section 19-10-20 expressly states that "the mailing of a notice as provided in this section shall constitute notice of the intention of the commissioner to cancel the lease and no proof of receipt of such notice shall be necessary or required."
We next consider whether sending notice of intent to cancel by certified mail constitutes compliance with the statutes. We must construe two statutory provisions which address notice of intention to cancel an oil and gas lease. These two statutes, NMSA 1978, Sections 19-10-3 and 19-10-20, are in pari materia and, if possible by reasonable construction, must be construed so that effect is given to both. State ex rel. State Park and Recreation Commission v. New Mexico State Authority, 76 N.M. 1, 411 P.2d 984 (1966).
Section 19-10-3 is the statutory lease form which was used in this case. This is an "unless" type of lease and, as a general rule, termination of such a lease for nonpayment of delay rentals is automatic unless a statute provides for notice of intent to terminate. 3 H. Williams, Oil and Gas Law §§ 606, 606.2 (1981). Subparagraph 13 of New Mexico's lease form does require notice by providing that "before any such cancellation shall be made, the lessor shall mail to the lessee * * * by registered or certified mail * * * a notice of intention of cancellation." § 19-10-3. Section 19-10-20 which governs cancellation of leases for nonpayment provides that "before any such cancellation shall be made the commissioner must mail to the lessee * * * by registered letter * * * a notice of intention to cancel said lease." Both statutes represent a legislative intent that mailing of notice be accomplished by a method that has a high assurance of delivery. We believe that both registered and certified mail meet this requirement. See Pacific Discount Co. v. Jackson, 37 N.J. 169, 179 A.2d 745 (1962). We see no irreconcilable conflict in the two statutes and, therefore, hold that the Commissioner fulfilled the statutory requirement for notice when he sent Mr. Abbott a notice of intent to cancel by certified mail.
In any event, a later statute, as the most recent expression of legislative intent, will control over an earlier statute to the extent of any inconsistency. City of Alamogordo v. Walker Motor Co., 94 N.M. 690, 616 P.2d 403 (1980). Section 19-10-20 was enacted into law by 1929 N.M. Laws, ch. 125, § 11. The portion of Section 19-10-3 requiring notice by registered mail first appeared in New Mexico law as part of a lease form in 1931 N.M. Laws, ch. 18, § 2. It was amended in 1967 to provide that notice may be sent by registered or certified mail. 1967 N.M. Laws, ch. 189, § 1. We hold that Section 19-10-20, as the more recent legislative enactment, controls the extent to which either registered or certified mail is allowed.
For the foregoing reasons, the judgment of the district court is reversed and the Commissioner's termination of Mr. Abbott's lease is upheld. This cause is remanded to the district court for further proceedings not inconsistent herewith.
IT IS SO ORDERED.
PAYNE and STOWERS, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1865691/ | 422 So.2d 1109 (1982)
Jerry Wayne JENKINS
v.
ST. PAUL FIRE & MARINE INSURANCE CO., et al.
No. 81-C-0776.
Supreme Court of Louisiana.
October 1, 1982.
Rehearing Denied November 19, 1982.
John A. Richie, C. Vernon Richie, Richie & Richie, Edward O. Kernaghan, Shreveport, for applicant.
Charles E. Tooke, Alex F. Smith, George T. Allen, Mayer, Smith & Roberts, Shreveport, for respondents.
LEMMON, Justice.
This is a legal malpractice action brought against plaintiff's two former attorneys, who allegedly allowed prescription to run before filing suit on plaintiff's claim for damages for personal injuries sustained in a truck-train collision. The trial court, after a jury trial and verdict in favor of plaintiff, rendered judgment against both attorneys in the sum of $87,000. The court of appeal reversed, holding that plaintiff's negligence was a contributing cause of the collision and would have barred his recovery against the railroad company. 393 So.2d 851. We granted certiorari to review that judgment. 399 So.2d 607. The grant was prompted to some extent by the concern over the "case within a case" approach used by the court of appeal in this case and by other courts in *1110 earlier decisions. Under that approach a plaintiff in legal malpractice litigation must prove not only that the attorney was negligent in handling the client's claim or litigation, but also that the claim or litigation would have been successful but for the attorney's negligence. See King v. Fourchy, 16 So. 814 (La.1895); Dyer & Stevenson v. Drew, 14 La.Ann. 657 (La.1859); Spiller v. Davidson, 4 La.Ann. 171 (La.1849); Toomer v. Breaux, 146 So.2d 723 (La.App. 3rd Cir. 1962); Lewis v. Collins, 260 So.2d 357 (La. App. 4th Cir.1972).
I.
In the present case, the attorneys concede that they were negligent in not filing suit until two days after prescription had run.[1] The remaining question is whether the client, after proving the attorneys' negligence, must also establish the validity of the underlying claim by proving that the attorneys' negligence caused him damages and by further proving the amount of the damages.
Plaintiff contends that, once the client has established negligence on the part of the attorney, the burden should be placed on the negligent attorney to prove that the mishandled claim or litigation would have been unsuccessful.
Causation, of course, is an essential element of any tort claim. However, once the client has proved that his former attorney accepted employment and failed to assert the claim timely, then the client has established a prima facie case that the attorney's negligence caused him some loss, since it is unlikely the attorney would have agreed to handle a claim completely devoid of merit. In such a situation, a rule which requires the client to prove the amount of damages by trying the "case within a case" simply imposes too great a standard of certainty of proof. Rather, the more logical approach is to impose on the negligent attorney, at this point in the trial, the burden of going forward with evidence to overcome the client's prima facie case by proving that the client could not have succeeded on the original claim, and the causation and damage questions are then up to the jury to decide. Otherwise, there is an undue burden on an aggrieved client, who can prove negligence and causation of some damages, when he has been relegated to seeking relief by the only remedy available after his attorney's negligence precluded relief by means of the original claim.[2]
Accordingly, when the plaintiff (as in this case) proves that negligence on the part of his former attorney has caused the loss of the opportunity to assert a claim and thus establishes the inference of causation of damages resulting from the lost opportunity for recovery, an appellate court (viewing the evidence on the merits of the original claim in the light most favorable to the prevailing party in the trial court) must determine whether the negligent attorney met his burden of producing sufficient proof to overcome plaintiff's prima facie case.
II.
The accident occurred in Plain Dealing at the point where Palmetto Street crosses the track of the St. Louis Southwestern Railway Company. The configuration of the intersection (including three tracks, storage tanks, and other structures) is shown on the following exhibit (not drawn to scale), which was filed in evidence by plaintiff:
*1111
The railroad crossing at Palmetto Street was controlled by electric signals, which were designed so that the red lights flashed and a bell rang when a train approached. There was also another railroad crossing at Highway 2, about 340 feet north of the Palmetto Street crossing. (This crossing is shown on the above sketch.)
On the day of the mid-morning accident, the weather was cold and foggy, with drizzling rain. As plaintiff drove from his home into town, the signal lights at the Palmetto Street crossing were flashing, and the bell was ringing. Plaintiff stopped his pickup truck and looked in both directions, determining that no train was coming. He then proceeded across the tracks and parked at a store approximately a block beyond the crossing, where he shopped for clothing for about 20 minutes.
Plaintiff testified: When he left the store, he proceeded west on Palmetto Street toward the railroad crossing, traveling in first gear at five to six miles per hour. Although the signal device was operating, he did not stop completely at the signal, but looked in both directions and continued forward at the same rate of speed.[3] After looking to his right when he passed the signal, he glanced again to his right as he crossed the storage tracks (15 feet beyond the signal), and the next thing he remembered was waking up in the hospital.
Other evidence established that plaintiff was struck broadside by a train traveling south on the main track at 40 to 49 miles per hour. Plaintiff never saw the train before it hit him. His windows were up, and his windshield wipers and heater blower were operating at the time, and he did not hear the train sound a whistle. Other evidence conflicted on whether the train blew its whistle.[4]
Plaintiff contends that his failure to stop at the signal was inconsequential, because his view of the main track to the north was partially obstructed by the tanks and buildings and by a boxcar parked on the storage track next to the building. However, he conceded that once he passed the signal and reached the storage track, he thereafter had an unobstructed northward view of the main track to a point a little beyond the *1112 Highway 2 crossing (340 feet away). He also admitted that he could have stopped his pickup truck "on a dime" at the slow speed at which he was traveling.
The following photograph illustrates the unobstructed northward view of a westbound motorist on Palmetto Street who had just crossed the storage tracks:
When plaintiff approached the flashing signal, he may reasonably have disregarded the malfunctioning signal as meaningless, but he was not misled into believing that he did not have to look for oncoming trains or to control his vehicle in crossing the tracks. Since there was a distance of more than 55 feet between the storage tracks and the main tracks, and since a vehicle moving at six miles per hour travels nine feet per second, it took plaintiff approximately six seconds to travel the distance between the two sets of tracks. During that six-second period of travel, he had an unobstructed view of the main track to the north. During that same six-second period, the train traveled approximately 400 feet in full view of anyone situated in plaintiff's position.
Plaintiff could have stopped his vehicle almost instantly at his rate of speed in low gear, if he had seen the approaching train at any time during the six-second period of travel between the two tracks. His failure to see the train prior to the collision indicates that he did not look to his right again after crossing the storage tracks (a fact he virtually admitted in his testimony) or that, if he did look, he negligently failed to see the plainly visible hazard.
The court of appeal held that plaintiff's undisputed conduct in failing to see what he should have seen and in driving his truck into the path of the oncoming train in plain view constituted contributory negligence. Plaintiff points out, however, that the duties breached by the railroad were duties imposed because of the expectation that some motorists will be inattentive in crossing railroad tracks.[5] Citing Outlaw v. Bituminous Ins. Co., 357 So.2d 1350 (La.App. 4th Cir.1978), plaintiff argues that foreseeable inattention should not be both the basis for *1113 imposing the duty and the reason for excusing a breach of the duty.[6]
The Outlaw decision (and others such as Baumgartner v. State Farm Mutual Auto Ins. Co., 356 So.2d 400 [La.1978] and Boyer v. Johnson, 360 So.2d 1164 [La.1978]) represented an effort, during the time that contributory negligence prevailed as an absolute bar to recovery, to reach a just result when a comparison of the respective duties of two negligent parties (and of the risks created by breaches of those duties) revealed an extreme imbalance favoring the plaintiff.[7] The circumstances of those particular cases (in each of which the plaintiff was hampered by some type of curtailed capacity) dictated that the defendant should have protected the particular plaintiff from the consequences of his own negligence. In the present case, however, the comparison of the duties imposed on and breached by the two negligent parties does not reveal such an extreme imbalance. While a passenger in the plaintiff's vehicle could perhaps have recovered from defendant (and from plaintiff), plaintiff cannot, since his claim arose before the legislative adoption of comparative negligence.
We conclude that, even viewing the evidence of the collision with the burden of proceeding shifted to the defendant, the court of appeal correctly concluded that plaintiff's substantial blameworthy conduct bars his recovery.
Accordingly, the judgment of the court of appeal is affirmed.
MARCUS, J., concurs and assigns reasons.
BLANCHE, J., concurs for reasons assigned by MARCUS, J.
DENNIS and WATSON, JJ., dissent and assign reasons.
MARCUS, Justice (concurring).
I agree with the result reached in this case but adhere to the rule that in a legal malpractice case plaintiff must prove not only that the attorney was negligent in handling his client's claim or litigation but also that the claim or litigation would have been successful but for the attorney's negligence. Accordingly, I respectfully concur.
WATSON, Justice, dissenting.
This is a troublesome case, both on the facts and the law.
On a cold, foggy, misty morning the plaintiff-motorist crossed railroad tracks where the bell and light were operating, despite the absence of any train, conducted his emergency shopping (his house had been completely burned to the ground two days prior), and returned to the same crossing. Unfortunately, a lengthy freight train, traveling at an excessive rate of speed and failing to sound its whistle for about two-thirds of the legally required distance, came along and hit plaintiff's pickup truck. Plaintiff did not see the train at all and the engineer and the brakeman did not see plaintiff's truck until about one second before impact. Needless to say, in the train-pickup collision, the party occupying the *1114 truck was severely injured, although there was no damage, as far as the record indicates, to the train.
The jury found the railroad negligent, the plaintiff not negligent, and damages of $87,000.
On the law, laying aside for the moment the questions concerning legal malpractice, the Court of Appeal determined that the railroad company was obviously negligent, but plaintiff was contributorily negligent. The verdict for plaintiff was reversed. Counsel for plaintiff presents an interesting argument: under a duty-risk analysis the Court of Appeal excuses the breach of the railroad's duty by the conduct which requires the duty. The argument is that an attentive motorist has no need for protection from locomotives which fail to sound the whistle for the prescribed distance, from an improperly operating warning light and bell, and from a train operated at an unsafe speed; the attentive motorist sees the train and avoids the collision. It is only the inattentive (contributorily negligent) motorist who needs the protection afforded by the railroad's duty and if his lack of attention places the fault on him and excuses the railroad, then the railroad really has no duty in the first place. Thus, says counsel, the duty-risk analysis will not support the Court of Appeal's decision.
However, counsel suggests a better legal analysis to solve the problem. It should be noted parenthetically that if comparative negligence were in effect as to this accident, there is no question that the negligence of the railroad far exceeds that of plaintiff and he would recover a substantial judgment. The proper solution, and the one which I would apply under the difficult facts, is fundamentally that of Baumgardner v. State Farm Mutual Automobile Insurance Co., 356 So.2d 400 (La.1978). I would parallel Baumgardner by saying that the operator of a dangerous instrumentality, such as a freight train, creates a great risk of injury to the motoring public while an automobile or pickup truck poses almost no risk to a train. Then following the Baumgardner reasoning, due to the great disparity of risk, contributory negligence is not a defense in a case such as presented.
The reversal of burden of proof espoused by the majority opinion has no significance. If this is a contributory negligence case, as held by the Court of Appeal, then the burden of proof, at least to the resolutory issue of contributory negligence, was already on the defendant lawyers.
I would hold plaintiff could have recovered from the railroad, if his case had not prescribed. Therefore, I respectfully dissent.
DENNIS, Justice, dissenting.
I commend the plurality for its improvement in the law by modifying the "case within a case" requirement by placing the burden of going forward with the evidence upon the defendant attorney once his malpractice has been established. This is certainly more just than the former rule of law. However, I think our civil code and justice require that a person whose legal rights have been permanently prejudiced by the wrongful acts of his attorney be afforded a more complete remedy. La.Civ.Code art. 2315 ("Every act whatever of man that caused damage to another obliges him by whose fault it happened to repair it.") La. Civ.Code art. 2316 ("Every person is responsible for the damage he occasions not merely by his act, but by his negligence, his imprudence, or his want of skill.").
Although the plaintiff's rights were litigious, they surely had some value before they were allowed to prescribe by his attorney. The plaintiff should be allowed to recover for the loss of this value regardless of whether he would have triumphed in a full-scale hypothetical trial. Furthermore, as suggested by Mr. Justice Watson's able dissent, it is not outside the realm of all possibility that Mr. Jenkins could have recovered at some point in the judicial process after a real trial on the merits. See Baumgardner v. State Farm Mutual Automobile Insurance Co., 356 So.2d 400 (La.1978). Had Mr. Baumgardner's attorney allowed his cause of action to prescribe, under the case within a case requirement, he would have recovered "zero" for his loss of a cause *1115 of action which ultimately was worth $31,288.17 after litigation terminating in this court.
Accordingly, in the interest of justice and the faithful application of our civil code, I would jettison the case within a case requirement. I would require that the party guilty of malpractice repair the wrong he has done to his client by paying him an amount equal to the value of the right destroyed.
With this approach, we would reach a result under our code similar to that adopted by jurisdictions which have abandoned the case within a case requirement in favor of more modern rules. See Smith v. Lewis, 13 Cal.3d 349, 118 Cal.Rptr. 621, 530 P.2d 589, overruled on the grounds Re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 663, 544 P.2d 561 (Calif.1975) (replacing the "but for" approach of "case within a case" with a lesser standard of "lost opportunity") and Fuschetti v. Bierman, 128 N.J.Super. 290, 319 A.2d 781 (New Jersey 1974) (adopting a bifurcated procedure for the resolution of the issue of "cause"). Additional proposed approaches include the "lost substantial possibility" test suggested by cases in the medical malpractice arena, Hicks v. United States, 368 F.2d 626 (4th Cir.Ct.App.1966) noted at Jensen, The Standard of Proof of Causation in Legal Malpractice Cases, 63 Cornell L.Rev. 666, 679 (1978), or the award of damages based upon "reasonable settlement value." This last approach has considerable logical appeal, since as many as 92.9% of personal injury suits are settled prior to trial. Bridgman, Legal MalpracticeA Consideration of the Elements of a Strong Plaintiff's Case, 30 S.C.L.R. 213, 234 (1979).
Because the plurality fails to resolve the major legal issue which is presented by this case in a manner which I find faithful to the precepts of our civil code and to a sense of justice, I respectfully dissent.
* * *
NOTES
[1] In the lower courts, each attorney claimed that the client had established an attorney-client relationship with the other, who was solely responsible to file the suit timely. The jury found, however, that they were solidarily liable and that one could not recover over against the other. No such claims have been urged in this court.
[2] The client's problem is frequently compounded when the attorney's negligence and the lapse of time has left a new attorney to search for stale evidence and has prevented or severely hampered thorough and effective preparation of the claim for trial.
[3] Other evidence established that the signal frequently malfunctioned and operated continuously for several hours (or even days).
[4] Several witnesses testified that they heard the train's whistle just before the train reached the Highway 2 crossing, about 340 feet north of the Palmetto Street crossing. R.S. 45:561 requires trains to sound a whistle continuously for 900 feet before a crossing.
[5] The court of appeal held that the railroad was negligent in failing to maintain the signal device, in operating the train through the town at a rate of speed which was excessive in view of the fact that the signal was not functioning properly, and in failing to commence sounding the whistle at least 900 feet before the Palmetto Street crossing.
[6] In the Outlaw case, defendant drove a golf ball in the general direction of a nine-year old golfer who was crouched behind a golf bag 172 feet away. The child lost an eye when he raised his head above the bag as defendant hit the ball. The court held that the mature golfer's duty under such circumstances was not to drive the ball at all in that general direction. Addressing the issue of the child's negligence, the court added:
"Rather than excuse contributory negligence on a last-clear-chance theory, however, we hold that the child's negligence (if any) was not contributorily (sic) negligence barring his recovery. A nine-year-old may be capable of contributory negligence, but like a 12-year-old, Plauche v. Consolidated Companies, 1958, 235 La. 692, 105 So.2d 269, he is not held to adult standards of comprehension of danger and duty of self-care. We may assume that the jury properly evaluated this child's awareness of danger and properly concluded that he was negligent. But his negligence cannot be both the foreseen risk which imposes the duty on the mature golfer not to hit the ball and at the same time a defense to an action for damages for breach of the mature golfer's duty. The youngster's leaving a place of safety cannot both impose a duty and excuse its breach."
[7] The legislative adoption of comparative negligence should largely resolve such problems. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2462284/ | 563 S.W.2d 950 (1977)
CALVIN V. KOLTERMANN, INC., et al., Appellants,
v.
UNDERREAM PILING CO. and D. E. W., Inc., Appellees.
D. E. W., INC., Appellant,
v.
CALVIN V. KOLTERMANN, INC., et al., Appellees.
Nos. 15889 and 15920.
Court of Civil Appeals of Texas, San Antonio.
March 1, 1977.
Rehearing Denied April 12, 1978.
*953 Peter Torres, Jr., James F. Gardner, Wolff & Wolff, Phillip Yeager, San Antonio, for appellants.
Wolff & Wolff, Phillip Yeager, Peter Torres, Jr., James F. Gardner, San Antonio, for appellees.
KLINGEMAN, Justice.
This is a consolidated cause of three suits arising out of a contract between Calvin V. Koltermann, Inc. as general contractor, and San Antonio Independent School District, to construct an administrative center. Koltermann subcontracted with Underream Piling Co. for excavation and foundation work, with Redondo Manufacturing Co., Inc. for pre-cast concrete, and with D. E. W., Inc. for plumbing and heating work. After the election of new members of the School Board, the Board of trustees of San Antonio Independent School District voted to cancel the Koltermann contract.
On June 17, 1976, Redondo Manufacturing Co., Inc. [herein called "Redondo"], not a party to this appeal, filed a suit against Calvin V. Koltermann, Inc. [herein called "Koltermann"], alleging that the San Antonio Independent School District [herein called "SAISD"] had entered into a contract with Koltermann on March 29, 1976 in which Koltermann agreed to construct the administration building involved. Redondo asserted that its bid for pre-cast concrete was accepted by Koltermann and that Redondo was authorized to proceed pursuant to the agreement. Similarly, D. E. W., Inc. [herein called "D. E. W."] and Underream Piling Co. [herein called "Underream"] filed suits against Koltermann on their subcontracts. All the causes were consolidated and trial was before a jury.
The jury, in answer to special issues submitted, found: (1) that the School Board of *954 Trustees authorized Grace Durr, President, to sign the contract of March 29, 1976 between SAISD and Koltermann; (2) that on such date, SAISD had sufficient unencumbered funds to pay the obligation of the contract of March 29, 1976 between Koltermann and SAISD; (3) that Redondo, Underream, and D. E. W., as subcontractors, and Koltermann, on or about March 30, 1976, agreed upon all of the essential and important terms of their respective agreements with Koltermann; (4) that the actions of SAISD, causing Koltermann to breach his contract with Redondo, Underream, and D. E. W., were with justifiable cause and were done to serve some legitimate interest of SAISD; (5) that Redondo, Underream, and D. E. W., subcontractors, and Koltermann, general contractor, did not understand and agree that each would be relieved of its respective obligations to the other if SAISD cancelled or terminated its contract with Koltermann; (6) that the reasonable and necessary costs incurred by Underream for remaining ready and able to perform its subcontract with Koltermann between the time Underream received notice to stop work and the time it received notice that the contract had been terminated, is $16,048.00; (7) that the reasonable and necessary costs which would have been incurred in such contracts for completion of the respective agreements with Koltermann are as follows: Redondo$160,000.00; Underream$16,828.00; D. E. W.$285,451.00.
Koltermann and SAISD moved for judgment n.o.v.; SAISD moved for a take nothing judgment; and D. E. W. and Underream moved for judgment under the verdict. Judgment was entered by the trial court as follows: (1) Koltermann's and SAISD's motions for judgment n.o.v. are overruled; (2) Redondo take nothing from Koltermann and SAISD; (3) Underream receive $16,048.00 against Kolterman; (4) Koltermann receive as an indemnity from SAISD, $16,048.00; (5) D. E. W. receive $4,970.00 from Koltermann, but takes nothing from SAISD; (6) Koltermann receive an indemnity from SAISD of $4,970.00.
SAISD does not here complain of the indemnity awards to Koltermann.
KOLTERMANN'S AND SAISD'S APPEAL
All of Koltermann's and SAISD's points of error are no evidence or legal insufficiency points of error. Koltermann's and SAISD's first point of error complains that the trial court erred in overruling their motion for judgment n.o.v. because Underream and D. E. W. failed to exhaust their administrative remedies as required by § 11.13 of the Tex.Education Code (1972).
§ 11.13 provides in part as follows: (1) Persons having any matter of dispute among them arising under the school laws of Texas or any persons aggrieved by the school laws of Texas or decisions of any board of trustees or board of education may appeal in writing to the Commissioner of Education, who, after due notice to the parties interested, shall hold a hearing and make and render a decision without cost to the parties involved, but nothing contained in this section shall deprive any party of any legal remedy.
Appellees, Underream and D. E. W., assert that appellants' first point of error should be overruled because (1) the failure of appellants to file a motion for new trial precludes their raising on appeal the purported failure of appellees to exhaust their administrative remedies; (2) the matter of failure to exhaust administrative remedies is moot because appellees were not awarded a judgment against SAISD; (3) appellees did not fail to exhaust the administrative remedies because there were no administrative remedies to exhaust in such a case.
We have concluded that appellants' point of error No. 1 is without merit and should be overruled. Appellees are subcontractors whose contract was with the general contractor and not with SAISD. Their obligations, rights, and duties arose out of their subcontracts. Appellees here were not aggrieved by the school laws of *955 Texas or by any actions or decisions of any board of trustees, and the administrative remedies of the Texas Education Code are inapplicable. Appellees here contracted only with Koltermann and not SAISD, and the validity of these contracts was an issue, making the central question legal and not factual.
It is a well established rule that, in all matters pertaining to the administration of school law, involving questions of fact as distinguishable from pure questions of law, resort must be first had to school authorities and the method of appeal there provided for exhausted before the courts will entertain jurisdiction of a complaint with regard to such matters. State ex rel. Nevills v. Sanderson, 88 S.W.2d 1069 (Tex.Civ.App. Waco 1935, no writ).
However, we do not have such a situation here. The subcontractors here involved contracted with Koltermann alone and not SAISD,[1] and we have here involved the validity of the contracts between the general contractor and the subcontractors. The central question is a legal one, not factual.
See Board of Trustees of Crystal City Ind. School Dist. v. Briggs, 486 S.W.2d 829 (Tex.Civ.App.Beaumont 1972), where the court said:
Whether or not District was entitled to reassign Briggs under the terms of the contract was one of law urged by District in defense of Briggs' claim for money. The Commissioner of Education does not exercise judicial power to determine the legality of contracts or the legal rights of parties thereto. Such are matters for the courts to determine under our system of a division of powers of government. Texas Constitution, Art. 2, § 1, Vernon's Ann.St.; Davis v. City of Lubbock, 160 Tex. 38, 326 S.W.2d 699, 711 (1959); Scott v. Texas State Board of Medical Examiners, 384 S.W.2d 686, 691 (Tex.1964).
Koltermann's and SAISD's second point of error is that the trial court erred in overruling their motion for judgment n.o.v. because there was no evidence to support the jury's answer to Special Issue No. 1;[2] that the undisputed evidence shows that the School Board did not authorize Grace Durr, as President, to sign the contract of March 29, 1976; and that such contract is void. We disagree. Under the record, the jury could properly conclude there was such authorization from a number of things in the record, including (a) the minutes of the meeting of the Board of Trustees accepting the low bid of Koltermann on the construction of the administration building; (b) the signature of the president on the contract, with attestation by secretary; (c) testimony that Koltermann performed no work on such building until he had received approval of the architect for the SAISD; (d) an exhibit which is a written authorization from SAISD to Koltermann to proceed; (e) testimony by some of the trustees evidencing recognition of the contract but asserting that Koltermann breached the contract; (f) testimony by some of the trustees, who voted to give notice to cease work, that they ran for School Board on a platform to repeal the action of the School Board pertaining to the construction of the administration building; (g) testimony by the architect for the School Board that he was authorized by the Board to draw the working *956 drawings for the administration building, which he did, and that after the acceptance of the low bid he told Koltermann to proceed; (h) testimony that, thereafter, Koltermann performed work under such contract and certain payments were made under the contract.
Appellees further contend that any irregularities in the execution of the SAISD contract are immaterial to this appeal since the appellees are subcontractors who are suing on their contract with Koltermann and not on Koltermann's contract with the School Board. Such contention is well taken.
By their third point of error, Koltermann and SAISD assert that the trial court erred in overruling their motion for judgment n.o.v., in that the evidence shows that appellees and Koltermann did not agree upon all of the essential and important terms of their respective agreements and, therefore, there was no evidence to support the jury's answer to Special Issue No. 3,[3] and as a matter of law there was no contract between appellees and Koltermann. In support of such contention they rely on cases holding that, to constitute a contract, the minds of parties must meet with respect to all of the subject matter of the contract and as to all of its essential terms. Smulcer v. Rogers, 256 S.W.2d 120 (Tex.Civ.App.Fort Worth 1953, writ ref'd n.r.e.); South Texas Water Co. v. Bieri, 247 S.W.2d 268 (Tex.Civ.App.Galveston 1952, writ ref'd n.r.e.); H. B. Zachry Co. v. Maerz, 223 S.W.2d 552 (Tex.Civ.App.San Antonio 1949, no writ); 13 Tex.Jur.2d, Contracts § 14 (1960). We have no argument with these cases or authorities, but they are not here applicable.
The undisputed evidence shows that Koltermann and appellees, Underream and D. E. W., had an oral contract which was to be later reduced to writing; that it is customary for the subcontractor to begin work on the project before a written contract is signed; that here, before any such written contract was prepared, some work had been actually performed pursuant to such oral contract. There is evidence of acts by each party which indicate assent to the oral agreement. It is clear that Koltermann initiated work on the job which included work by these subcontractors and that some payments were made by SAISD to Koltermann. A meeting of the minds can be implied from and evidenced by conduct and course of dealing of the involved parties.
Appellants' point of error No. 3 is without merit and overruled.
Koltermann's and SAISD's point of error No. 4 asserts that the trial court erred in overruling their motion for judgment n.o.v., in that the evidence showed that appellees and Koltermann would be relieved of their respective obligations if SAISD cancelled its contract with Koltermann and therefore there was no evidence to support the jury's answer to Special Issue No. 5.[4]
The evidence shows that the subcontractors and Koltermann had contracts which were separate and independent from that of Koltermann's with SAISD. There is nothing in the contracts, documents, or evidence which shows or indicates that the cancellation of SAISD's contract with Koltermann would terminate the subcontractors' contracts with Koltermann. The evidence does show that the oral contracts were later to be reduced to writing and there was introduced into evidence a standard A.I.A. form of subcontract which was to be used for this purpose. Such form does not contain a provision to the effect that if *957 the contract between the owner and the general contractor is terminated, the contracts between the general contractor and subcontractors would be terminated.
A court cannot make a contract for the parties. We can declare that an implied covenant exists only where there is a satisfactory basis in the express contract of the parties which makes it necessary to imply certain duties and obligations in order to effect the purposes of the parties in the contract which they have made. Before a covenant will be implied, it must appear from the express terms of the contract that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it, or that it is necessary to imply such covenant in order to give effect to and to effectuate the purpose of the contract as a whole. Freeport Sulphur Co. v. American Sulphur Royalty Co. of Texas, 117 Tex. 439, 6 S.W.2d 1039 (1928); Emmord's, Inc. v. Obermiller, 526 S.W.2d 562 (Tex.Civ.App.Corpus Christi 1975, writ ref'd n.r.e.).
Where the obligation to perform is absolute, impossibility of performance occurring after the contract was made is not an excuse for nonperformance if the impossibility might have reasonably been anticipated and guarded against in the contract. This is true even though an impossibility may subsequently have occurred by virtue of an act of God or some other circumstance over which the parties had no control. Impossibility of performance is also not an excuse if it is subsequently occasioned by the act or default of the promisor or by the acts of a third party. 13 Tex.Jur.2d, Contracts §§ 318, 319 at 578 (1962); Foster v. Atlantic Refining Co., 329 F.2d 485 (5th Cir. 1964), at 862.[5]
Appellants' point of error No. 4 is overruled.
By their last point of error, Koltermann and SAISD complain that the trial court erred in overruling their motion to enter judgment in that Special Issue No. 4[6] supported the entry of a take nothing judgment. A take nothing judgment was entered as against SAISD. Koltermann and SAISD, on this appeal, assert that the same ruling ought to apply to Koltermann, and rely heavily on Cox v. Process Engineering, Inc., 472 S.W.2d 585 (Tex.Civ.App.Amarillo 1971, no writ). Cox was a suit by a subcontractor against a general contractor in which the owner evicted the subcontractor from the job. Such suit was premised on a breach of an implied contract to protect the subcontractor from interference with the progress of his work and to provide and maintain access to the job site. It was alleged that the eviction of the subcontractor by the owner constituted a breach of this implied obligation by the prime contractor, for which he is liable. The subcontract had no provision that the subcontractor would be furnished a job site by the general contractor. The court held for the general contractor, and stated:
A cause of action must both be alleged and proved in order to obtain relief from the party sought to be held liable. A. H. Belo Corp. v. Blanton, 133 Tex. 391, 129 S.W.2d 619 (1939). A cause of action cannot exist unless one party fails to perform an obligation owed to another. The suit by plaintiff against Process is an ex contractu action based on the alleged nonperformance of an implied contractual duty. In this case the evidence shows as a matter of law that Process did not breach any duty, express or implied, owed to Cox. Failure to perform an act neither expressly nor impliedly contract to be done or performed does not constitute, in law, a breach of contract.
*958 In the case before us appellees had no dealing with SAISD and SAISD did not evict or order appellees off the job. Appellees' contracts were with Koltermann alone. In Cox, the general contractor never told the subcontractor to stop his work, and did not evict the subcontractor, while in our case, Koltermann did tell the subcontractors to stop their work and his suit is premised on such breach of contract. These cases are distinguishable on their facts, and under the record herein, we decline to follow Cox.
Without reiterating all of the authorities hereinbefore discussed, we feel that they are here applicable, and this case falls within the rule in Ellwood v. Nutex Oil Co., 148 S.W.2d 862 (Tex.Civ.App.El Paso 1941, writ ref'd n.r.e.), as follows:
We think this case falls within the general rules applicable to contracts, that one who unconditionally obligates himself to do a thing possible of performance, must be held to perform it (Kingsville Cotton Oil Co. v. Dallas Waste Mills, Tex.Civ. App., 210 S.W. 832; Masterson v. Amarillo Oil Co., Tex.Civ.App., 253 S.W. 908, writ refused); and though performance, subsequent to the contract, may become difficult or even impossible, does not relieve the promisor, and particularly where he might have foreseen the difficulty and impossibility. Levy Plumbing Co. v. Standard Sanitary Mfg. Co., Tex.Civ. App., 68 S.W.2d 273 writ refused; Embry v. Lewis, Tex.Civ.App., 19 S.W.2d 87.
Under the record here, the jury's answer to Special Issue No. 4 does not release Koltermann of his obligation to the subcontractors.
All of Koltermann's and SAISD's points of error have been considered and all are overruled. Koltermann and SAISD do not here complain of the amount of the damage award.
D. E. W.'s APPEAL
All of D. E. W.'s points of error pertain to the damages awarded. By such points of error it asserts there is no evidence and insufficient evidence to support the jury's answer to Special Issue No. 7C,[7] and that the jury's answer thereto is against the great weight and preponderance of the evidence.
The testimony on which D. E. W. relies is that of an interested witness, Mr. Wurzbach, who is President and sole shareholder of D. E. W. He testified that he bid $290,451.00 to install the heating, air-conditioning, plumbing and ventilation in the building involved; that he was given notice to proceed on March 30, 1976; that he started work on that date; that he was told to stand by on April 6, and did no work after that time; that up to that time the work that D. E. W. did consisted of negotiations with numerous suppliers and manufacturers of equipment to be installed, preparation of quantity take-offs, and familiarizing itself with the job; and that a reasonable charge for the work done is $5,000.00. He further testified that the reasonable cost of completion of D. E. W.'s contract was $224,073.00. He was cross examined extensively as to how he arrived at such figure and his testimony is somewhat vague and confusing. Such cross examination indicated that he was not sure how much profit he was to make on the contract, or exactly how he arrived at the figure of $224,073.00 as the reasonable cost of completion. In answer to some of the questions as to individual items of such cost, he stated that the figures were ones that he pulled out of the air. He testified that his anticipated profit was $61,378.00, which is approximately the difference between the bid price and his completion price. He stated that such profit might be considerably more or considerably less.
The only other testimony pertaining to damages was by Koltermann, who testified that D. E. W. had men working on the job on either March 30th or 31st, and that D. E. W. did not submit shop drawings to him.
*959 It is sometimes said that the courts have always recognized the general rule that the measure of damages for breach of contract is just compensation for the damages actually sustained by the plaintiff as the result of defendant's action. In A. B. C. Truck Rental & Leasing Co. v. Pletz, 540 S.W.2d 532 (Tex.Civ.App.San Antonio 1976, writ ref'd n.r.e.), this Court said:
It is fundamental that damages for breach of contract are to compensate one party to a contract for the breach by the other by awarding the value of the expected performance. 17 Tex.Jur.2d, Damages, § 51 (1960). This value is usually determined in one of two ways: (1) by awarding the difference in the market value of the property as completed and the value if completed in accordance with the plans and specifications; or (2) by awarding the cost of correction or completion.
The general rule is that the testimony of an interested witness does no more than raise a fact issue to be determined by the jury. While there are exceptions to the rule, it seems settled that when testimony comes from an interested party and is of such a nature that cannot be readily contradicted if untrue, an issue relating to the credibility of the witness is presented. James T. Taylor & Son, Inc. v. Arlington Ind. School Dist., 160 Tex. 617, 335 S.W.2d 371 (1960).
While we will not here attempt to go into the thought process by which the jury arrived at its figure of $285,451.00, it might logically be assumed that the jury accepted Wurzbach's testimony that a reasonable charge for the work done by D. E. W. was $5,000.00, and subtracted this figure from the bid figure of $290,451.00, in arriving at its cost of completion answer; and that the jury refused to believe the witness' testimony that the reasonable cost of completion was $224,073.00.
It is the jury's province to determine the credibility of the witness and the weight to be given his testimony. In exercising such power, the jury may consider the demeanor of the witness and determine his credibility under the facts and circumstances of the particular case. It may accept part of a witness' testimony and reject the remainder, if the facts of the case justify such action. In short, generally, the jury is free to believe or reject all or any part of the testimony of an interested witness or a party to the suit. The jury apparently disregarded much of the testimony of the witness here involved and concluded from the testimony as a whole that the reasonable cost of completion was $285,451.00. Since the weight to be given the evidence and the witness' credibility is ordinarily for the trier of the facts, the findings by the jury are binding on the appellate court unless it finds that there is no evidence to support such finding or that such finding is so against the great weight and preponderance of the evidence as to the manifestly unjust. We do not so find. All of D. E. W.'s points of error are overruled.
Finding no reversible error in the record, we affirm the judgment of the trial court.
NOTES
[1] In the absence of an express contract making the owner liable, the compensation of persons who perform labor for or furnish material to the builder are generally to be paid by such builder, and not by the owner, although the work is done under the direction of and in accordance with the plans furnished by the owner's engineer; and subcontractors and materialmen must resort for payment to the builder or contractor, as in the absence of an express contract there is not privity between a subcontractor employed by the general contractor and the owner, and the liability of the owner is only to the general building contractor, who is liable to subcontractor. Carruth v. Valley Ready-Mix Concrete Co., 221 S.W.2d 584 (Tex.Civ.App.Eastland 1949, writ ref'd).
[2] The jury found that SAISD authorized Grace Durr, as President of the Board of Trustees, to sign the contract between SAISD and Koltermann.
[3] The jury found that Koltermann, as general contractor, and Redondo, Underream, and D. E. W., as subcontractors, agreed upon all of the essential and important terms of their respective contracts.
[4] In answer to Special Issue No. 5, the jury found that the plaintiffs and Koltermann did not understand and agree that each would be relieved of its respective obligations to the other if SAISD cancelled or terminated the contract with Koltermann.
[5] As a general rule, the fact that an act is impossible to perform at the time the contract is made is not a valid excuse for nonperformance of the act, unless the contract so provided. 13 Tex.Jur.2d, Contracts § 319.
[6] In Special Issue No. 4 the jury found that the action of SAISD causing Koltermann to breach his contract with the subcontractors, was with justifiable cause and was done to serve some legitimate interest of SAISD.
[7] In answer to Special Issue No. 7C, the jury found that the reasonable and necessary cost which would have been incurred by D. E. W. for completion of its agreement with Koltermann, was $285,451.00. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1900200/ | 84 B.R. 721 (1988)
In re Gerald Dean KAHLER, Iris Lucille Kahler, dba Jerry's Sandhill Automotive and Truck Repair and dba Iris' Sandhill Beauty Salon, Debtors.
In re SOLSTICE, INC., dba Pearl Auto Body, Debtor.
Bankruptcy Nos. 87-B-13476-M, 87-B-07701-M.
United States Bankruptcy Court, D. Colorado.
March 24, 1988.
*722 David S. Oppenheim, Englewood, Colo., for Gerald and Iris Kahler.
Peter Alan Shelley, Boulder, Colo., for Solstice, Inc.
MEMORANDUM OPINION AND ORDER
SIDNEY B. BROOKS, Bankruptcy Judge.
THESE MATTERS come before the Court on two applications filed by attorneys for two unrelated debtors. Each attorney is requesting that he be paid his pre-petition attorney's fees from the assets of the respective bankruptcy estate for which he provided services. They seek payment of those fees as an administrative expense pursuant to 11 U.S.C. § 503. Additionally, one of the attorneys seeks payment of fees for post-petition legal services rendered for the debtor, but not rendered as counsel employed by the debtor pursuant to 11 U.S.C. § 327.
The legal issues presented in each case are almost identical and therefore the Court will rule on them jointly. The principal issue presented to the Court by these applications is whether or not the attorney's fees incurred by the debtors for prepetition legal services rendered by the attorney for the debtors can be paid as an administrative expense pursuant to 11 U.S.C. § 503.
In re Kahler87-B-13476-M
Counsel for the Debtors filed his Motion for Approval of Administrative Claim wherein he itemized the various legal services rendered on behalf of the Debtors prior to the Debtors petition in bankruptcy being filed. Debtors' counsel argues that 11 U.S.C. § 503(b)(4) allows payment of the Debtors' pre-petition attorney's fees as a cost of administration of the bankruptcy estate. Section 503(b) provides, in pertinent part, as follows:
After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including
(3) [T]he actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by
(D) a creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under chapter 9 or 11 of this title. . . .
(4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expense is allowable under paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant.
Debtors' counsel argues that the language of Section 503 is not restrictive such that fees are available only to attorneys that are employed by the debtor in the bankruptcy estate. Counsel further argues *723 that inasmuch as notice of his application for attorney's fees was submitted to all creditors and no objection was filed, he is entitled to such fees.
Finally, although counsel in this case (as does counsel in the companion case) does not expressly argue the issue, he implicitly inveighs the argument that an estate payment of pre-petition legal fees is useful, sensible, and helpful in availing to prospective debtors affordable legal assistance in filing for bankruptcy.
For the reasons set forth hereinbelow, counsel's application is hereby DENIED.
First, 11 U.S.C. § 503(b)(4) provides for reasonable compensation for professional services rendered by an attorney of an entity whose expense is allowable under paragraph three. Paragraph three requires that there be a
". . . creditor . . . or a committee representing creditors . . . (which makes) a substantial contribution in a case under chapter . . . 11. . . . "
In this case, it is the attorney for the Debtors who seeks pre-petition attorney's fees, not an attorney for a creditor or other similar entitled entity. In this case there is no "entity whose expense is allowable . . ." under subsection (3). Moreover, the within case is a proceeding under Chapter 7, it is not a case under Chapter 9 or 11. Counsel simply does not and cannot qualify for payment of pre-petition attorney's fees under the express language of the statute. See, U.S. v. Turkette, 452 U.S. 576, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981); In re Storage Technology Corp., 48 B.R. 862 (D.Colo. 1985).
Second, it is clear that expenses and compensation which qualify as administrative expenses for an estate under subsection 503 must be "actual" and "necessary." In re Grynberg, 19 B.R. 621, 623 (Bankr.D. Colo.1982). More germane to the within application, such compensation must relate to services which were a "substantial contribution" in a case under Title 11. In Grynberg, Judge Moore found that compensation applied for by creditors who individually made a substantial contribution to a Chapter 11 estate by meaningful participation in its administration could qualify, in the Court's discretion, for Section 503(b)(3) "actual" and "necessary" expenses incurred:
In this context, then, it is clear Congress has left to the discretion of the Court, on a case by case basis, to determine whether an individual creditor is entitled to compensation on the basis of that creditor's own role in the case . . . suffice that section 503(b)(3)(D) compensation is grounded upon the limitation that the expenses be `actual' and `necessary,' and leave each application to be determined upon its own merits. Hence, there will always remain in each case questions of whether the services of any applicant creditor have been `substantial' and whether the expenses incurred in that service have been `actual' and `necessary.'
At page 623.
In the instant case, the attorney's services will be deemed "actual" and "necessary" absent objection or a showing otherwise, and they presumptively reflect a substantial contribution to the filing of the bankruptcy case. Nonetheless, they still do not qualify as a "substantial contribution" to the administrative process of a bankruptcy case and that is what is required. See, Matter of Consolidated Bancshares, Inc., 785 F.2d 1249 (5th Cir. 1986).
Third, if the attorney for the Debtors was to have prepetition fees qualify as an administrative cost pursuant to Section 503, then the only section conceivably available for such entitlement is Section 503(b)(1)(A). In Goodman v. Phillip R. Curtis Enterprises, Inc., 809 F.2d 228, 231 (4th Cir.1987), the Fourth Circuit reversed a District Court which invoked Section 503(b)(4) to pay, as an administrative expense, compensation for professional services rendered by an attorney for the debtor. The Appeals Court based its decision, in part, on the fact that the attorney was the debtor's attorney, not an attorney for a "creditor" as required by Section 503(b)(4), and by reference (b)(3). Debtors' attorney's compensation is available, if at all, exclusively pursuant to Section 503(b)(2), or perhaps alternatively as stated in Goodman, Section 503(b)(1).
*724 Fourth, even if (a) notice of the application is sent to all creditors, (b) an opportunity to object to the fees is accorded to those creditors, and (c) no creditors object to the application for fees, still it is improper to award payment of those fees as a cost of administration in a Chapter 7 case. The Court has an independent obligation to determine the reasonableness of legal fees requested, whether the services performed were actual and necessary, and whether payment of the fees is proper and in accord with the letter and intent of the Bankruptcy Code. Jordan v. Mark IV Hair Styles, Inc., 806 F.2d 695 (6th Cir.1986); In re S.T.N. Enterprises, Inc., 70 B.R. 823, 831 (Bankr.D.Vt.1987); In re Werth, 32 B.R. 442 (Bankr.D.Colo.1983).
While notice to creditors and their consequent failure to oppose the fees is an indication that payment of the fees is not offensive or objectionable to the creditors, it is not dispositive of the issue. The Court, in addition to the notice and hearing provisions, simply must decide the issue of attorney's fees independently and in accord with 11 U.S.C. § 330.
In re Solstice, Inc. dba Pearl Auto Body 87-B-07701-M
Counsel for the Debtor in this case applied for payment of both pre-petition legal fees as well as post-petition fees from the Chapter 7 estate. Counsel provided 5.8 hours of post-petition legal services to the Debtor, including attendance at the Section 341 meeting. Again, no objections to the fee application were filed after notice was sent to creditors. For the reasons set forth above, the application is DENIED as to the request for pre-petition fees.
With regard to the request for fees incurred for post-petition legal services, that also is DENIED.
Clear and specific provision is made in 11 U.S.C. § 503(b)(2) to pay debtor's counsel, as a cost of administration, for services rendered to a debtor post-petition. It is tailored to allow payment to debtor's counsel, but only within the scheme and safeguards embodied in Sections 327 through 331 of the Code. This is the exclusive avenue available for debtor's counsel to be paid from the assets of debtor's Chapter 7 estate. The language of the statute thus, by its direct and particular treatment of debtor's attorney's fees compels that result. See, Stettner v. International Printing Pressmen & A.U., 278 F. Supp. 675 (E.D.Tenn.1967).
Finally, with regard to the counsel who applied for these fees, as well as all practicing attorneys representing debtors, they must devise ways to obtain payment prior to the filing of the petition in a Chapter 7 bankruptcy case or make suitable alternative arrangements for financing post-petition services. While Chapters 11, 12, and 13 allow for estate payment of certain qualified professional fees, it is incumbent for Chapter 7 debtor's counsel to not rely on estate assets to pay pre-petition or post-petition attorney's fees.
For the reasons set forth above, the Court denies each respective Debtor's counsel's Motion for Approval of Administrative Claim and for payment of legal fees from assets of the Debtor's estate. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1877904/ | 285 So. 2d 122 (1973)
In re Ronald Faires McCAY, alias,
v.
STATE.
Ex parte Ronald Faires McCay.
SC 560.
Supreme Court of Alabama.
November 8, 1973.
J. Louis Wilkinson, Birmingham, for petitioner.
No brief for the State.
BLOODWORTH, Justice.
Petition of Ronald Faires McCay for Certiorari to the Court of Criminal Appeals to review and revise the judgment and decision of that Court in McCay, alias v. State, 51 Ala.App. , 285 So. 2d 117.
Writ denied.
HEFLIN, C. J., and COLEMAN, McCALL and JONES, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3107970/ | Opinion issued March 20, 2014
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-14-00212-CV
———————————
IN RE MARTIN APPARATUS, INC., Relator
Original Proceeding on Petition for Writ of Mandamus
MEMORANDUM OPINION*
On March 13, 2014, relator Martin Apparatus, Inc. filed a petition for a writ
of mandamus and request for emergency relief. We deny relator’s petition for writ
of mandamus. All outstanding motions are dismissed as moot.
*
The underlying case is Robert Valdez v. Martin Apparatus, Inc., in the 151st
District Court of Harris County, Cause No. 2013-04483.
PER CURIAM
Panel consists of Chief Justice Radack and Justices Massengale and Huddle.
2 | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1644406/ | 888 F. Supp. 87 (1995)
Cherie LUNA, Plaintiff,
v.
WALGREENS, Defendant.
No. 95 C 0183.
United States District Court, N.D. Illinois, Eastern Division.
May 30, 1995.
Richard S. Mittelman, Morgan, Mittelman & Rapin, Lake Zurich, IL, for plaintiff.
Debra L. Duzinskas, Carol Berlin Manzoni, Ross & Hardies, P.C., Chicago, IL, for defendant.
MEMORANDUM OPINION AND ORDER
ASPEN, Chief Judge:
Plaintiff brings this two count complaint, alleging violations of the Americans with Disabilities Act and the Illinois Human Rights Act. Presently before the court is defendant's motion to dismiss the retaliation claim in Count I of the complaint, which we have converted to a motion for summary judgment.[1] For the reasons set forth below, defendant's motion is granted.
I. Background
Plaintiff Cherie Luna began working at defendant Walgreens, Inc. in 1982. In her complaint, she alleges that she was discharged in July, 1992, due to a medical condition called urethra stricture. This condition *88 makes it difficult for Luna to urinate freely, such that it takes her fifteen to thirty minutes to empty her bladder. Following her termination, Luna filed a charge with the Equal Employment Opportunity Commission ("EEOC"). In her EEOC charge, Luna checked the box marked "DISABILITY" as the basis for the alleged discrimination. She did not check the box marked "RETALIATION." In the charge, she explained the "particulars" of the alleged discrimination as follows:
I. I had been employed by the above-named Respondent since November, 1982. On July 31, 1992, I was terminated.
II. Respondent's reason for my termination was that he could no longer deal with my disability.
III. I believe that I have been discriminated against because of my disability in violation of the Americans with Disability [sic] Act.
Luna provided no further allegations or elaboration in her charge to the EEOC.
After receiving a right to sue letter, Luna filed the present action. In Count I, she asserts that she was terminated due to her disability and Walgreens' refusal to make reasonable accommodations for her, and "because of her insistence on the exercise of her rights protected by" the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. Interpreting the latter language as a retaliation claim, Walgreens moved to dismiss, asserting that a claim of retaliation had not been presented in the EEOC charge. In support, it attached a copy of the charge to its motion to dismiss. Noting that the charge had not been attached to the complaint, and that it was only referred to in passing in the text of the complaint, we questioned whether the issue was appropriately raised in a motion to dismiss. In an overabundance of caution, we converted defendant's motion to a motion for summary judgment pursuant to Fed.R.Civ.P. 12(b), and provided both parties an opportunity, as required by that rule, to supplement the materials they had already provided the court. The parties have rested on their previous filings, and we therefore reach the merits of the summary judgment motion.
II. Summary Judgment Standard
Under the Federal Rules of Civil Procedure, summary judgment is appropriate if "there is no genuine issue as to any material fact, and.... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). This standard places the initial burden on the moving party to identify "those portions of `the pleading, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986) (quoting Rule 56(c)). Once the moving party has done this, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(c). In deciding a motion for summary judgment, the court must read all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986); Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir.1991).
III. Discussion
Filing of a charge of discrimination with the EEOC is a condition precedent to filing a lawsuit in federal court. 42 U.S.C. § 12117(a). There are two reasons for this requirement: "it gives the employer some warning of the conduct about which the employee is aggrieved, and it affords the agency and the employer an opportunity to attempt conciliation without resort to the courts." Rush v. McDonald's Corp., 966 F.2d 1104, 1110 (7th Cir.1992) (citing Babrocky v. Jewel Food Co., 773 F.2d 857, 863 (7th Cir.1985)) (construing Title VII requirement). As a result, "the scope of the subsequent judicial proceedings is limited by the nature of the charges filed with the EEOC." Rush, 966 F.2d at 1110. More specifically, claims of discrimination that are cognizable are only those that are "like or reasonably related to the allegations of the charge and growing out of such allegations." Babrocky, 773 F.2d at 864 (internal quotations omitted).
As discussed above, the only box Luna marked on the EEOC charge was disability; the retaliation box was not checked. Luna *89 argues, however, that we should look beyond the box checked and consider the textural statements in her EEOC charge. While we have no quarrel with this assertion, see, e.g., Jenkins v. Blue Cross Mut. Hosp. Ins., Inc., 538 F.2d 164, 168 (7th Cir.), cert. denied, 429 U.S. 986, 97 S. Ct. 506, 50 L. Ed. 2d 598 (1976), it is of no assistance to Luna in the present action. In Steffen v. Meridian Life Ins. Co., 859 F.2d 534 (7th Cir.1988), cert. denied, 491 U.S. 907, 109 S. Ct. 3191, 105 L. Ed. 2d 699 (1989), the court faced a situation similar to that presented here. The plaintiff, Steffen, had filed an EEOC charge, in which he marked the "age" box and asserted that he had been terminated and replaced by a younger man due to his age. He did not mark "retaliation" as a basis for his claim, nor did he mention retaliation in the text of the charge. He filed a complaint in federal court alleging, inter alia, retaliatory discharge. The district court granted summary judgment to the defendant on that claim, and the Seventh Circuit affirmed, noting that "[t]here is no mention of retaliation or any other words to that effect [in the EEOC charge]." Id. at 544.
The same is true here. It is undisputed that Luna did not check the box marked "retaliation." Instead, Luna claims that her statement that she was terminated because her employer "could no longer deal with my disability" is sufficient to bring retaliation within the scope of the EEOC charge. This statement, however, is merely indicative of discrimination; even under a generous reading, it does not suggest retaliation. See id. at 544-45 (plaintiff's contention that retaliation could be inferred from his EEOC allegation regarding employer's "pretextural" reasons for termination "miss[ed] the mark by a wide margin;" such allegations went to claim of discrimination, rather than retaliation). In short, we conclude that Luna's retaliation claim "injects an entirely new theory of liability into the case[,] alleging unlawful activity of a much different nature than the [disability] discrimination alleged in the charge." Id. at 545 (collecting cases).[2] Accordingly, defendants are entitled to summary judgment on the retaliation claim.[3]
IV. Conclusion
For the reasons set forth above, defendant's motion with respect to Count I is granted, and Count II is voluntarily dismissed. It is so ordered.
NOTES
[1] Walgreens also asserted that Luna's Illinois Human Rights Act claim should be dismissed. Luna, apparently conceding that Walgreens' motion with respect to Count II is well taken, has voluntarily dismissed that claim.
[2] Luna's reliance upon EEOC v. St. Anne's Hosp. of Chicago, 664 F.2d 128 (7th Cir.1981), is misplaced. In St. Anne's, the EEOC informed the defendant that retaliation was an issue in the case and actually investigated a claim of retaliation, facts not present in this case. Id. at 130-31. Indeed, Steffen expressly distinguishes St. Anne's on those grounds. Steffen, 859 F.2d at 545 n. 2.
[3] Luna also quixotically suggests that she is not asserting a separate claim for retaliation. In her complaint, however, she expressly alleges a violation of Section 503(a) of the ADA, which deals solely with retaliation. See 42 U.S.C. § 12203(a). Furthermore, the language of her complaint suggests that she is seeking relief based upon both discrimination and retaliation. In any event, for the reasons discussed above, to the extent that Luna is alleging retaliation, that claim is dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1912594/ | 816 So.2d 88 (1999)
STATE
v.
Michael Grady SHAVER.
CR-98-1332.
Court of Criminal Appeals of Alabama.
October 29, 1999.
Bill Pryor, atty. gen., and Andy Scott Poole, asst. atty. gen., for appellant.
John T. Kirk, Montgomery, for appellee.
On Application for Rehearing
FRY, Judge.
This Court's opinion of September 17, 1999, is withdrawn, and the following opinion is substituted therefor.
On March 5, 1999, the Montgomery County Grand Jury indicted Michael Shaver for driving under the influence of alcohol (DUI), in violation of § 32-5A-191(a), Ala.Code 1975, after having been convicted of DUI on three prior occasions, a violation of § 32-5A-191(h), Ala.Code 1975. On March 15, 1999, Shaver waived arraignment and pleaded not guilty. (C.R. 8.) On April 2, 1999, Shaver filed a motion to *89 dismiss the indictment, claiming that the circuit court "lack[ed] jurisdiction over the person and the charged offense by subject matter." (C.R.11). On April 9, 1999, a hearing was held before the circuit court. Shaver argued, based on the Alabama Supreme Court's holding in Ex parte Parker, 740 So.2d 432 (Ala.1999), that § 32-5A-191(h), Ala.Code 1975, did not create a substantive felony offense, and that pursuant to § 12-12-51, Ala.Code 1975,[1] jurisdiction over his offense rested in the district court. Ex parte Parker held that the prior DUI convictions could be used only for enhancement purposes in the prosecution of a fourth or subsequent DUI offense. The State argued that the circuit court had jurisdiction based on the Supreme Court's holding in Johnston v. State, 740 So.2d 438 (Ala.1999), which, by upholding the trial court's judgment, implicitly approved of prosecuting a fourth or subsequent DUI offense in the circuit court. Additionally, the State moved to amend the indictment to remove the language indicating that the defendant had prior DUI convictions, to conform with the holding in Ex parte Parker. The circuit court dismissed the indictment, stating: "Based on [Ex parte Parker], this Court is without jurisdiction to hear said case." (C.R.I.) From that order, the State appeals.
The State contends that the trial court abused its discretion by dismissing the indictment against Shaver because, it says, if the circuit court was without jurisdiction to hear the case, it should have transferred the case to district court for disposition, rather than dismiss the indictment. (State's brief at pp. 5-7.)
Shaver's indictment charged him with driving under the influence of alcohol, a violation of § 32-5A-191(a), Ala.Code 1975,[2] after having been convicted of three prior DUI offenses, a violation of § 32-5A-191(h), Ala.Code 1975. Section 32-5A-191(h), Ala.Code 1975, provides:
"On a fourth or subsequent conviction, a person convicted of violating this section shall be guilty of a Class C felony and punished by a fine of not less than four thousand one hundred dollars ($4,100) nor more than ten thousand one hundred dollars ($10,100) and by imprisonment of not less than one year and one day nor more than 10 years....
"Any law to the contrary notwithstanding, the Alabama habitual felony offender law shall not apply to a conviction of a felony pursuant to this subsection, and a conviction of a felony pursuant to this subsection shall not be a felony conviction for purposes of the *90 enhancement of punishment pursuant to Alabama's habitual felony offender law."
(Emphasis added.) Since the enactment of § 32-5A-191(h), Ala.Code 1975 (formerly § 32-5A-191(f), Ala.Code 1975), which established a felony punishment for persons convicted of a fourth or subsequent DUI offense, a great deal of confusion has arisen as to how to treat prosecutions of persons who are being charged with a fourth or subsequent DUI offense.
In order to better understand the problem, a brief history of the procedures used in the municipal, district, and circuit courts for a defendant who has committed a fourth or subsequent DUI offense follows.
When a law enforcement officer issues a ticket for a DUI offense, the person is charged with the misdemeanor violation of DUI. See § 32-5A-191(a). Typically, between the time the ticket is issued and comes to trial in the municipal or district court (see § 12-12-51, establishing the jurisdiction of the municipal or district court for misdemeanor prosecutions for traffic offenses), the state, county, or municipal officer runs a driving history on the person to determine if the person has previously been convicted of DUI. If the charged offense is not the person's fourth or subsequent DUI offense, the municipal or district court allow the person either to waive an attorney and trial and to plead guilty to the offense, or to request an attorney, in which event the case is set for trial. If the present DUI charge may result in a fourth or subsequent DUI conviction, then the municipal or district court typically transfers the case to the district attorney's office for presentation to a grand jury. The return of an indictment invokes the jurisdiction of the circuit court so that the felony punishment mandated in § 32-5A-191(h) could be imposed; disposition of the case occurred in circuit court.[3] If the circuit court concludes before trial that the defendant does not have three or more prior DUI convictions that could be used as enhancement to invoke the felony punishment,[4] circuit courts dispose of the indictment in different ways. If the defendant is willing to plead guilty, some circuit courts in the interest of judicial economy accept a misdemeanor plea and impose the appropriate sentence. See Casey v. State, 740 So.2d 1136 (Ala.Cr.App.1998). See also § 32-5A-191(e), (f), and (g), Ala.Code 1975. Other circuit courts dismiss the indictment, on the basis that it was fatally defective. Still others transfer the case to the lower court for disposition.[5] If the circuit court determines that the defendant has three or more prior DUI convictions that could be used as enhancement to invoke the felony punishment, the circuit court either allows the defendant to plead guilty to the charged DUI and imposes the felony punishment or, if the defendant desires a trial, the circuit court, sitting either with or without a jury, conducts a trial. If the defendant is convicted, the circuit court imposes the felony punishment.
*91 One of the questions that arose from this procedure of obtaining an indictment and trying fourth or subsequent DUI offenses in circuit court was whether the prior DUI convictions should be included in the indictment as elements of the offense and then proven at any trial of the case. This Court answered this question affirmatively in State v. Parker, 740 So.2d 421 (Ala.Cr.App.1997). The Supreme Court, however, reversed this Court's determination that § 32-5A-191(h) created a substantive felony offense; it held that § 32-5A-191(h) was an enhancement provision, applicable only to punishment. Ex parte Parker, supra. In Ex parte Parker, 740 So.2d at 433 the Supreme Court specifically addressed the following issue:
"[W]hether § 32-5A-191(h) states a substantive offense, of which the three prior convictions referred to in that subsection are elements, or whether the prior offenses referred to in that subsection are properly to be considered only for the purposes of determining whether upon conviction a defendant shall receive an enhanced sentence."
Our Supreme Court held:
"Section 32-5A-191, plainly read, compels the conclusion that the provisions of the present subsection (h) were intended to declare certain DUI convictions to be felony convictions and to prescribe punishment, rather than to define the substantive elements of a separate offense. Furthermore, the substantive elements of the offense dealt with by § 32-5A-191 are set out in subsection (a)....
". . .
"... Subsection (h), while increasing the severity of the punishment, does not alter the substantive offense set out in subsection (a)."
Ex parte Parker, 740 So.2d at 434-35.
While the Supreme Court's determination that prior DUI convictions were not elements of a substantive offense set out in § 32-5A-191(h), and, therefore, that they should not be listed in the indictment or evidence of them admitted into evidence at trial but should be used for enhancement purposes only, resolved the main issue presented in Ex parte Parker, its holding seemed to create a situation where a defendant could be tried for the misdemeanor offense of DUI in violation of § 32-5A-191 an offense within the original jurisdiction of the municipal or district court but, if convicted, could be sentenced for a felonyan offense within the jurisdiction of the circuit court.[6] However, in Ex parte Formby, 750 So.2d 587, 589 (Ala.1999), the Supreme Court clarified its holding in Ex parte Parker, by stating that "a fourth or subsequent DUI conviction is a felony conviction, rather than a misdemeanor conviction," that "the offense charged ... is a felony," and "[p]rosecutions for felony DUI offenses ... should continue to be in circuit court."
Accordingly, it appears to this Court that in cases where the charged DUI would be a fourth or subsequent offense, the State should implement a procedure like the one used in Ex parte Formby. The prosecutor should seek an indictment from a grand jury to invoke the jurisdiction of the circuit court, and the case should be tried in circuit court. We remind the state, however, that the indictment should charge a felony in violation of § 32-5A-191(h), but not list the prior DUI convictions, and the state shall *92 not refer to the prior DUI convictions at trial.
As the Supreme Court noted in Ex parte Formby, the indictment, in and of itself, acts as notice to the defendant that the State is invoking the circuit court's jurisdiction to impose, upon conviction for a violation of § 32-5A-191(a), the felony punishment mandated by § 32-5A-191(h).
Based on the above analysis, the order of the trial court dismissing the indictment is hereby reversed and the case remanded to the circuit court for further proceedings consistent with this opinion.
OPINION OF SEPTEMBER 17, 1999, WITHDRAWN; OPINION SUBSTITUTED; APPLICATIONS FOR REHEARING OVERRULED AND RULE 39(k) MOTIONS DENIED; REVERSED AND REMANDED.
LONG, P.J., and McMILLAN, COBB, and BASCHAB, JJ., concur.
NOTES
[1] Section 12-12-51, Ala.Code 1975, provides: "The district court shall have exclusive original jurisdiction of misdemeanor prosecutions for traffic infractions, except ordinance infractions prosecuted in municipal courts."
[2] Section 32-5A-191, Ala.Code 1975, provides:
"(a) A person shall not drive or be in actual physical control of any vehicle while:
"(1) There is 0.08 percent or more by weight of alcohol in his or her blood;
"(2) Under the influence of alcohol;
"(3) Under the influence of a controlled substance to a degree which renders him or her incapable of safely driving;
"(4) Under the combined influence of alcohol and a controlled substance to a degree which renders him or her incapable of safely driving; or
"(5) Under the influence of any substance which impairs the mental or physical faculties of such person to a degree which renders him or her incapable of safely driving."
A violation of § 32-5A-191(a), is a misdemeanor. King v. Wooldridge, 547 So.2d 576 (Ala.Cr.App.1988), rev'd on other grounds, 547 So.2d 579 (Ala.1989).
[3] Section 12-11-30, Ala.Code 1975, provides: "The circuit court shall have exclusive original jurisdiction of all felony prosecutions and of misdemeanor or ordinance violations which are lesser included offenses within a felony charge or which arise from the same incident as a felony charge."
[4] Before a 1997 amendment to what is now § 32-5A-191(h), the fourth or subsequent conviction had to occur within five years. In many cases, the indicted DUI offense would not be tried within the five-year range. In that event, § 32-5A-191(h) was not applicable.
[5] See Wright v. State, 494 So.2d 177 (Ala.Cr. App.1986) (holding that the district court has original jurisdiction of misdemeanor prosecutions for traffic offenses even where an indictment has been returned).
[6] Presiding Judge Long in his dissent to this Court's opinion in State v. Parker, supra, noted that treatment of § 32-5A-191(h) as a sentence enhancement provision created the problem of whether the district court or circuit court had jurisdiction over the case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2359152/ | 690 F.Supp. 1149 (1988)
Anthony DIRIENZO, III
v.
UNITED STATES of America.
No. Civ. N-85-200 (PCD).
United States District Court, D. Connecticut.
July 12, 1988.
*1150 *1151 Mark D. Arons, Ginsberg, Ginsburg & Alderman, West Haven, Conn., for plaintiff.
Frank H. Santoro, Asst. U.S. Atty., New Haven, Conn., for defendant.
RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
DORSEY, District Judge.
Plaintiff brings this action against the United States pursuant to the Federal Tort Claims Act, 28 U.S.C. § 1346(b) and § 2680(h), alleging negligence, false arrest, and false imprisonment by agents of the Federal Bureau of Investigation.[1] Defendant and plaintiff move for summary judgment.
Facts
Plaintiff is a former New Haven police officer and former Deputy United States Marshal. His lawsuit arises from an unfortunate case of mistaken identity, the outlines of which are not in dispute. On September 9, 1981, a branch of the Chemical Bank in New York City was robbed by a man carrying a handgun. Earlier that day, another robbery attempt at a New York City branch of CitiBank, apparently by the same man, had been foiled by bank employees. Bank surveillance photographs of the Chemical Bank robbery were distributed by the FBI in a flyer describing the robbery. In mid-1982, an informant tentatively identified plaintiff from the flyer as the person depicted in the bank photographs. In January 1983, FBI Special Agent Ford Cole showed the bank photographs to three members of the New Haven police force who had worked with plaintiff.[2] All three identified plaintiff as *1152 the bank robber in the photographs. Plaintiff's Exhibit ("P.Ex.") E, J, K. Two also stated that plaintiff owned a handgun. P.Ex. E, K. On January 28, 1983, on the basis of these identifications, FBI Special Agent James Pitman executed a criminal complaint in the Southern District of New York charging plaintiff with a violation of 18 U.S.C. § 2113(d) in the Chemical Bank robbery and seeking a warrant for his arrest. P.Ex. A. A warrant for plaintiff's arrest was issued the same day by a federal magistrate. Defendant's Exhibit ("D.Ex.") 4. On February 8, 1983, while vacationing in Florida with his wife, plaintiff was arrested by local police and Special Agent Flynn of the FBI pursuant to the warrant. P.Ex. C. He was held overnight, then ordered to appear in the Southern District of New York for arraignment. On March 2, 1983, he was indicted for the bank robbery by a grand jury sitting in the Southern District.
From the beginning, plaintiff denied the charge. Fingerprints taken from a newspaper handled by the bank robber did not match those of plaintiff. P.Ex. B-1, B-2, U. On March 30, 1983, a witness to the CitiBank robbery attempt viewed a photo array including plaintiff's photograph, but did not identify him as the robber. P.Ex. R. Plaintiff volunteered to undergo two polygraph tests. The first was inconclusive, but the second indicated no deception in his denial of involvement. P.Ex. F. Thereupon, the United States Attorney for the Southern District of New York formally declined to prosecute and the case was nolled on May 9, 1983. P.Ex. G. In September 1983, another person, then incarcerated on state charges, confessed to the robberies. P.Ex. H.
Discussion
A. Summary Judgment Standard
Fed.R.Civ.P. 56(c) provides, in part, that summary judgment shall be rendered only when a review of the entire record demonstrates "that there is no genuine issue as to any material fact." The burden falls on the moving party to establish that no relevant facts are in dispute. Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir.1975); accord Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 [90 S.Ct. 1598, 1608, 26 L.Ed.2d 142] ... (1970). Moreover, in determining whether a genuine issue has been raised, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 [82 S.Ct. 993, 994, 8 L.Ed.2d 176] ... (1962) (per curiam); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980). Therefore, not only must there be no genuine issue as to the evidentiary facts, but there must also be no controversy regarding the inferences to be drawn from them. Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 313 (2d Cir.1981), accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242 [106 S.Ct. 2505, 2513, 91 L.Ed.2d 202] ... (1986).
Properly employed, summary judgment allows the court to dispose of meritless claims before becoming entrenched in a frivolous and costly trial. Knight v. U.S. Fire Ins. Co., 804 F.2d 9 (2d Cir.1986), cert. denied, [___] U.S. [___], 107 S.Ct. 1570 [94 L.Ed.2d 762] ... (1987). It must, however, be used selectively to avoid trial by affidavit. Judge v. Buffalo, 524 F.2d 1321 (2d Cir.1975). Hence, the fundamental maxim remains that on a motion for summary judgment a court "cannot try issues of fact; it can only determine whether there are issues to be tried." Heyman, 524 F.2d at 1319-20. As long as the plaintiff has adduced sufficient facts to substantiate the elements of his claim, summary judgment is inappropriate. Celotex Corp. v. Catrett, 477 U.S. 317 [106 S.Ct. 2548, 2554, 91 L.Ed.2d 265] ... (1986).
Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57-58 (2d Cir.1987).
B. Federal Tort Claims Act
The Federal Tort Claims Act, 28 U.S.C. § 1346(b), generally authorizes suits against the United States for damages
*1153 for injury or loss of property, or personal injury ... caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.
This broad waiver of sovereign immunity is subject to the limitations contained in §§ 2671-2680. Thus, 28 U.S.C. § 2674 specifies the scope of the government's liability with regard to acts or omissions of its employees:
The United States shall be liable, respecting the provisions of this title relating to tort claims, in the same manner and to the same extent as a private individual under like circumstances
....
The waiver of sovereign immunity expressly extends to suits "with regard to acts or omissions of investigative or law enforcement officers of the United States Government ... [on] any claim arising ... out of assault, battery, false imprisonment, false arrest, abuse of process, or malicious prosecution." 28 U.S.C. § 2680(h)(1974 amendment). However, where acts or omissions of law enforcement officers cause unjustified arrest, prosecution, or imprisonment, the Federal Tort Claims Act limits the government's liability to instances where the officers act tortiously. Arnsberg v. United States, 757 F.2d 971, 978 (9th Cir.1985); cf. Caban v. United States, 728 F.2d 68, 73-74 (2d Cir.1984) (government not liable for false imprisonment where INS agent was privileged to detain plaintiff).
"The reference in § 1346(b) to `the "law of the place" means the "whole law" of the state where the incident took place.'" Caban, 728 F.2d at 72, quoting Lambertson v. United States, 528 F.2d 441, 443 (2d Cir.), cert. denied, 426 U.S. 921, 96 S.Ct. 2627, 49 L.Ed.2d 374 (1976). Thus, the court looks to whatever law, including federal law, the state courts would apply in like circumstances involving a private defendant. Caban, 728 F.2d at 72. While the second amended complaint does not set forth separately labeled theories or causes of action, plaintiff alleges that he was falsely arrested and imprisoned in Florida, Second Amended Complaint, ¶ 5, and that his arrest and prosecution for the bank robbery was caused by the negligence of law enforcement officers employed by the FBI. Id., ¶ 10. The acts and omissions of which plaintiff complains took place in Florida, New York, and Connecticut.
1. False Arrest/False Imprisonment
Plaintiff was arrested in Florida by FBI Agent Flynn with the assistance of local police, pursuant to a warrant issued by a federal magistrate in the Southern District of New York. He was held overnight in a Dade County jail. Since plaintiff's arrest and imprisonment occurred in Florida, the tort law of that state governs his claim in respect of the arrest.[3]See Caban, 728 F.2d at 72; Benjamin v. United States, 554 F.Supp. 82, 85 (E.D.N.Y. 1982).
Under Florida law, the causes of action for false arrest and false imprisonment share identical elements. Weissman v. K-Mart Corp., 396 So.2d 1164, 1165 n. 1 (Fla.App.1981). However, under Florida law, like that of most jurisdictions, the arrest and detention of an innocent person carries no tort liability where the arrest and imprisonment was otherwise privileged or justified by law. Fisher v. Payne, 93 Fla. 1085, 113 So. 378, 380 (1927); Johnson v. Weiner, 155 Fla. 169, 19 So.2d 699, 799 (1944); see, e.g., Restatement (2d) Torts, § 122-124 (1965); accord Broughton v. State, 37 N.Y.2d 451, 373 N.Y.S.2d 87, 335 *1154 N.E.2d 310, 314, cert. denied, 423 U.S. 929, 96 S.Ct. 277, 46 L.Ed.2d 257 (1975); Zanghi v. Incorporated Village, 752 F.2d 42 (2d Cir.1985) (finding of probable cause defeats false imprisonment claim under New York law). It is well settled that an arrest made pursuant to a valid warrant issued by a court of competent jurisdiction is privileged and cannot support an action for false arrest. Johnson, 19 So.2d at 700; accord Restatement (2d) Torts, § 35, comment a (1965); Benjamin, 554 F.Supp. at 85 (applying New York law under Federal Tort Claims Act); Clewley v. Brown Thomson, Inc., 120 Conn. 440, 444, 181 A. 531 (1935).
Applying these principles to the undisputed facts, it is clear that plaintiff's arrest and imprisonment were not tortious. The arrest was made pursuant to an arrest warrant issued by a federal magistrate with subject matter jurisdiction over the offense charged. The process was facially valid and plaintiff was the individual named in the warrant. Plaintiff does not argue otherwise.
However, despite the existence of a valid warrant, plaintiff maintains that his arrest was unreasonable because the FBI agents negligently failed to investigate further. He argues that, had the agents shown photographs of him to witnesses present at the robbery, considered his law enforcement background, or compared his fingerprints to those on the newspaper, exculpatory information would have surfaced and the agents would not have sought his arrest. However, the possibility and feasibility of further investigation is legally irrelevant to a claim for false arrest, where the arrest is made pursuant to a valid warrant.[4]See Benjamin, 554 F.Supp. at 86-87. Even if information was thus negligently omitted from the criminal complaint and warrant application, as plaintiff argues, no action for false arrest would lie. Only a knowing, intentional, or reckless omission or fabrication of material information in the application would invalidate the warrant and generate tort liability for the subsequent arrest. See, e.g., Rosario v. Amalgamated Ladies' Garment Cutters' Union, 605 F.2d 1228, 1248 (2d Cir.1979), cert. denied, 446 U.S. 919, 100 S.Ct. 1853, 64 L.Ed.2d 273 (1980); Boose v. City of Rochester, 71 A.D.2d 59, 421 N.Y.S. 2d 740, 746 (1979); cf. Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978). Plaintiff does not allege that any omission from the warrant application was intentional or even reckless on the part of the agents, nor is there support for such a claim in the record. Accordingly, because the arrest was made pursuant to a valid warrant naming the plaintiff, there can be no liability for false arrest or imprisonment as a matter of law.
2. Negligence, Abuse of Process and Malicious Prosecution
Wholly apart from any claim for false arrest, plaintiff argues that the government may be held liable for the alleged negligent acts and omissions of the FBI agents in instituting and continuing his criminal prosecution. Thus, plaintiff maintains that there can be no grant of summary judgment where there is a genuine issue as to whether the agents' conduct of the investigation was reasonable under all the circumstances.
The actions and omissions in the conduct of the investigation, other than plaintiff's arrest itself, were centered in New York. The robbery occurred in that state; Agent Pitman executed a criminal complaint against plaintiff there; and the entire course of plaintiff's subsequent prosecution occurred in the United States District Court for the Southern District of New York. Accordingly, the law of New York governs the question of whether the government may be held liable for the agents' alleged negligence in conducting the investigation. Carlson v. Green, 446 U.S. 14, 23, 100 S.Ct. 1468, 1474, 64 L.Ed.2d *1155 15 (1980); see, e.g., Deary v. Evans, 570 F.Supp. 189, 200-01 (D.V.I.1983) (applying Virgin Islands law to abuse of process and malicious prosecution claims), rev'd on other grounds, 746 F.2d 185 (3d Cir.1984). Defendant is liable for the acts of the agents only if New York would impose such liability upon a private person in like circumstancesthat is, only if the agents' actions were tortious under New York law. § 2674; Arnsberg, 757 F.2d at 978, 980 (court should confine inquiry to whether agents acted tortiously); cf. Caban, 728 F.2d at 72.
At the outset, plaintiff's contention that the agents' conduct is to be judged according to ordinary negligence principles must be rejected. Cf. Caban at 72 n. 2 (rejecting plaintiff's application of negligence concepts to his detention by INS agent). The gravamen of plaintiff's claim is that the agents instituted and continued a criminal prosecution against him, an innocent person. However, neither New York nor the common law imposes liability upon even a private person for mere negligence in instituting or continuing a criminal prosecution for a crime which has actually occurred.[5]Howell v. Davis, 58 A.D.2d 852, 396 N.Y.S.2d 866, 867-68 (1977) (requirements of malicious prosecution or abuse of process cannot be bypassed by pleading prima facie tort), aff'd, 43 N.Y.2d 874, 403 N.Y.S.2d 496, 374 N.E.2d 393 (1978); see Benjamin, 554 F.Supp. at 86 (where innocent person is arrested on valid warrant naming him, action for malicious prosecution is only remedy available under New York law); cf. Feinberg v. Sak's & Co., 83 A.D.2d 952, 443 N.Y.S.2d 26, 27 (1981) (analysis limited to false arrest and malicious prosecution); Lawrence v. Police Dept. of the City of Syracuse, 81 A.D.2d 1006, 440 N.Y.S.2d 105, aff'd, 55 N.Y.2d 737, 431 N.Y.S.2d 639, 431 N.E.2d 639 (1981); Rosario, 605 F.2d at 1248 (defendant's liability based on knowledge of lack of probable cause); Boose, 421 N.Y.2d at 747 (action for malicious prosecution available to test error of arresting officer); see generally Broughton, 335 N.E.2d at 310 (distinguishing false arrest from malicious prosecution or abuse of process).
To recover on a claim of malicious prosecution under New York law, plaintiff must establish (1) that defendant either commenced or continued a criminal proceeding against him; (2) that the proceeding terminated in his favor; (3) that there was no probable cause for the criminal proceeding; and (4) that the criminal proceeding was instituted with actual malice. Martin v. City of Albany, 42 N.Y.2d 13, 16, 364 N.E.2d 1304, 1307, 396 N.Y.S.2d 612, 614 (1977); Russo v. State of New York, 672 F.2d 1014, 1018 (2d Cir.1982); cf. Restatement (2d) Torts, § 653 (1976) (purpose other than that of bringing offender to justice). In an action for malicious prosecution, plaintiff has the burden of pleading and proving want of probable cause. See, e.g., Broughton, 335 N.E.2d at 314; Restatement (2d) Torts, § 672(1)(c) (1976). Defendant maintains that summary judgment must be granted because at all times up until the prosecution of plaintiff was withdrawn, the agents had probable cause to believe he committed the robbery.
Where the underlying facts are not in dispute, whether the set of facts within the knowledge of the agents constituted probable cause is a question of law. Restatement (2d) Torts, § 673(1)(c) (1976); see Munoz v. City of New York, 18 N.Y.2d 6, 271 N.Y.S.2d 645, 218 N.E.2d 527, 530 (1966) (where no dispute about the facts which led to the prosecution or the inferences to be drawn by a reasonable person from them, probable cause may be decided as matter of law.); Muller v. Wachtel, 345 F.Supp. 160, 162 (S.D.N.Y.1972). Probable cause exists where "facts and circumstances within the officer's knowledge and of which they had reasonably trustworthy information *1156 are sufficient in themselves to warrant a man of reasonable caution in the belief that" an offense has been committed by the person under inquiry. Brinegar v. United States, 338 U.S. 160, 175-76, 69 S.Ct. 1302, 1310-11, 93 L.Ed. 1879 (1949); see also Illinois v. Gates, 462 U.S. 213, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983). Probable cause is evaluated in light of the collective knowledge of the law enforcement agency rather than the knowledge of a particular agent. United States v. Rosario, 543 F.2d 6, 8 (2d Cir.1976).
Here, there is no dispute as to the information actually in the possession of the agents when the prosecution was instituted. Plaintiff disputes only their failure to investigate further to obtain additional information which, he claims, was readily available. When the criminal complaint was filed, the information known to the agents was that a bank robbery had been committed in New York City by an armed gunman; that three New Haven police officers familiar with the plaintiff had identified him as shown in the bank photographs of the robbery; and that, according to plaintiff's former roommate, plaintiff was living in New York City at the time of the robbery, owned a handgun, and had an arrest record. P.Ex. A, E.J.K. The agents were justified in acting upon this information, even if some of it later turned out to be false. Munoz, 18 N.Y.2d 6, 271 N.Y.S. 2d 645, 218 N.E.2d at 530. Moreover, as plaintiff conceded, see P.Ex. E, he strongly resembles the person depicted in the bank photographs. P.Ex. S, T.
Plaintiff further argues that witnesses to the robbery gave conflicting descriptions which did not match plaintiff's physical appearance. The descriptions, however, suggest a strong resemblance between plaintiff and the man who robbed Chemical Bank. They did not eliminate him as a suspect. At his arrest, plaintiff was described by Agent Flynn as a 6" tall, white male; 190 lbs.; with brown hair, and brown eyes. He was then thirty-one. P.Ex. C. In photographs taken at that time, he wears a mustache. P.Ex. T. The Chemical Bank robber was described by several witnesses as a white male in the height range from 5'7" to 5'10" tall, between 140 and 170 lbs., of slim build, with brown hair and eyes. See P.Ex. M, N, O, P, Q. Witness' estimates of the robber's age range from twenty-five to thirty-five years, centering on thirty years. P.Ex. M, Q. The bank photographs clearly show the robber wearing a mustache. P.Ex. S.
The information available to the agents at plaintiff's arrest was sufficient to justify a man of reasonable caution in believing that plaintiff had committed the robbery. That information, as a matter of law, constituted probable cause to believe that plaintiff had committed the robbery. Therefore, no action for malicious prosecution will lie.[6]Zanghi, 752 F.2d at 45; compare Deary, 570 F.Supp. at 196, 200 (finding probable cause and granting summary judgment on malicious prosecution claim where arresting officers identified plaintiff from bank photographs), rev'd, 746 F.2d 185, 190 (3d Cir.1984) (holding that in a § 1983 action issue of probable cause is for the jury); Miss Universe, Inc. v. Patricelli, 753 F.2d 235 (2d Cir.1985); cf. United States v. Hayes, 553 F.2d 824, 826 (2d Cir.) (finding of probable cause based on identification *1157 from bank photographs), cert. denied, 434 U.S. 867, 98 S.Ct. 204, 54 L.Ed.2d 143 (1977).
Plaintiff contends essentially that the agents failed to discover information which might have exculpated him. For example, the New Haven police officers were not shown photographs of plaintiff for comparison with the bank photographs. The witnesses to the robbery were not shown a photo array including plaintiff's picture nor was a line-up arranged. Plaintiff maintains that the procedure by which the bank photographs were shown to the officers was suggestive and in contravention of the FBI's own procedures. In addition, plaintiff's fingerprints did not match those on the newspaper allegedly handled by the bank robber. Plaintiff also argues that the agents should have investigated his character and law enforcement background.
Once probable cause was established, the agents' authority to act is established and their conduct cannot be measured by an affirmative duty to exhaust all possible avenues of investigation. While a line-up or photo array identification procedure might have been used to corroborate probable cause, such a procedure was not necessary to create probable cause initially nor was the procedure used unnecessarily suggestive. In fact, the bank photographs were more reliable evidence of the robber's identity than were the memories of witnesses, more than a year after the event. A photograph comparison can, of itself, establish probable cause for an arrest. See Hayes, 553 F.2d at 826. Here, there could have been no in-person comparison between plaintiff's person and the bank photographs before his arrest because plaintiff's whereabouts were unknown. The photographs were shown to three police officers who knew him, at least one of whom knew him well, and all three independently identified the bank robber as plaintiff. P.Ex. E, F, K. Thus, the identification of plaintiff was sufficiently reliable and credible to establish probable cause for his prosecution.[7]
Even if the agents had performed additional investigation, probable cause would not have been vitiated. That plaintiff's fingerprints did not match the print found on the newspaper is of limited relevance to a probable cause determination because there was no reason to believe that only the bank robber had handled the newspaper. Indeed, the prints did not match those of the person who later confessed to the robberies. See D. Ex. 1. Also, the available information available about plaintiff's character and reputation was mixed, at best. For example, Officer Zarnowski advised that plaintiff was a drug user and prone to threaten others with firearms. P.Ex. E. In addition, Commander Maher reported that in 1982 plaintiff had been arrested by the New Haven police for impersonation of a police officer. P.Ex. K. Consideration of this information would not have altered the probable cause picture significantly. The conduct of the agents is to be judged on relation to the information known to them when they acted. None of the facts later developed were necessarily, reasonably known to the agents, nor reasonably apparent or ascertainable by them at that time. Nor were the facts on which probable cause was premised reasonably or apparently suspect at that time. The fact that later developed facts or avenues of investigation, not reasonably apparent when the agents acted, counter the evidence on which they acted cannot be a foundation for liability for acts which were justified by the facts known when the agents acted.
Plaintiff maintains that, even if there was probable cause to institute the prosecution, there was no probable cause to continue the prosecution after further information and the opportunity to investigate *1158 became available. Continued prosecution after facts sufficient to exonerate the accused have been provided may give rise to an action for malicious prosecution under New York law. Benjamin, 554 F.Supp. at 86; Feinberg, 443 N.Y.S.2d at 27; Oakley v. City of Rochester, 71 A.D.2d 15, 421 N.Y.S.2d 472, 474 (1979), aff'd, 51 N.Y.2d 908, 434 N.Y.S.2d 977, 415 N.E.2d 966 (1980). In March 1983, a witness to the bank robbery was shown a photo array of six persons, including plaintiff. The witness initially selected two of the persons, one the plaintiff, as possible suspects; subsequently, the witness selected the other person as the robber. See P.Ex. R. Plaintiff argues that this identification was sufficient to exonerate him and to vitiate the probable cause which existed for his arrest. While that process raised doubt as to plaintiff's identification, it did not destroy the probable cause based on the information provided by the New Haven officers.
Even if the information had completely exculpated plaintiff, however, plaintiff could not prevail on his claim of malicious continuation of the prosecution. The prosecution of plaintiff was initiated by the FBI agents, as discussed above, upon probable cause and, therefore, nontortious. After his arrest, the prosecution was under the control not of the FBI agents but of the United States Attorney for the Southern District of New York. In order for there to be liability for malicious continuation of the prosecution once control has passed into the hands of the prosecuting attorney the defendant (i.e., the FBI agents) must be shown to have taken an active part in the proceedings:
[T]he defendant must take an active part in [the] prosecution after learning that there is no probable cause for believing the accused guilty. It is not enough that he appears as a witness against the accused either under subpoena or voluntarily, and thereby aids in the prosecution of the charges which he knows to be groundless. His share in continuing the prosecution must be active, as by insisting upon or urging further prosecution. The fact that he initiated the proceedings does not make him liable [for continuation of the prosecution] merely because he intentionally refrains from informing a public prosecutor, into whose control the prosecution has passed, of subsequently discovered facts that clearly indicate the innocence of the accused, even though they have the effect of convincing him that this is the fact.
Restatement (2d) Torts, § 655, comment c (1977). See, e.g., Whittaker v. Duke, 473 F.Supp. 908, 911 (S.D.N.Y.1979) (applying New Jersey law).
Here, plaintiff does not claim that the FBI agents actively procured or pressed his continued prosecution upon the United States Attorney, nor does anything in the record suggest that they did so. Indeed, the FBI administered two polygraph tests to plaintiff at his own request, in aid of his attempt to prove his innocence. See P.Ex. F. The decision to continue and then to decline prosecution of plaintiff was made by the Assistant United States Attorney assigned to the case, approved by his superior.[8] P.Ex. G.
There is nothing to suggest that this decision was resisted by any FBI agent. Plaintiff has presented nothing to rebut the inference that control of the prosecution of plaintiff after his arrest passed wholly into the hands of the United States Attorney's Office and that any decision to continue his prosecution was made independently by that office. As plaintiff is unable, as a matter of law, to make out a necessary element of the cause of action, i.e., that the *1159 agents had a positive role in the continued prosecution, no liability may be imposed upon defendant by reason of the continued prosecution. See Oakley, 421 N.Y.S.2d at 474 (verdict on malicious prosecution set aside where no proof of lack of probable cause after arrest, where arrest made on probable cause).
3. Abuse of Process
Plaintiff argues that his second amended complaint also states a claim for abuse of process. As plaintiff acknowledges, the necessary element of abuse of process is the use of legal process, civil or criminal, primarily to accomplish a purpose for which it is not designed. Restatement (2d) Torts, § 682 (1977). Plaintiff's second amended complaint is utterly devoid of any allegation of malice or improper purpose on the part of the FBI agents. Rather, it alleges that the agents arrested and prosecuted him negligently and without probable cause. However, probable cause has been found to have existed throughout plaintiff's prosecution. In addition, plaintiff has adduced no evidence from which any inference of improper purpose could reasonably be drawn. The actions taken by the agents appear to have been solely in furtherance of the investigation of the robbery. Even assuming the facts as alleged by plaintiff, there was no abuse of process as a matter of law. See Howell, 396 N.Y.S.2d at 868.
Conclusion
Plaintiff's claim clearly demonstrates a lack of any impropriety on his part leading to what turned out to be a case of mistaken identity. The unfortunate quality of this event in plaintiff's life is more manifest, in retrospect, from the fact that when additional, relevant facts came to light, facts which were not actually nor reasonably apparent earlier, plaintiff's identification was truely mistaken. Fair play concepts suggest that one adversely impacted by actions of others which he did not actively cause and could not have prevented should not go uncompensated. Yet, imposition of liability for compensation is not merely a matter of fair play, it requires that a claim conform to established legal principles. In any society, interrelation of people precipitates friction and detriment, not all of which is compensable. Where one such as plaintiff has suffered detriment and is unable to assert a claim which conforms with established legal principles for liability, he is the innocent victim of the effects of necessary and lawful conduct. That is a price of living in a society. It is unfortunate, but a necessary price if society is to live by established law as opposed to a general concept that every detriment entitles one to compensation.
Plaintiff was arrested on a valid warrant and the prosecution was based on probable cause. As a matter of law, he has not made out a claim for false arrest, malicious prosecution, or abuse of process. He has shown that facts learned subsequent to his arrest, not reasonably known prior thereto, raised doubts as to the propriety of his arrest and prosecution, but this showing does not vitiate the factual and lawful basis on which the agents acted and thus it cannot form a basis for the imposition of liability as claimed herein. Accordingly, defendant's motion for summary judgment is granted and the complaint is dismissed in its entirety.[9]
For the reasons stated above, plaintiff's motion for summary judgment is denied.
SO ORDERED.
NOTES
[1] Plaintiff's Second Amended Complaint also alleges violations of the fourth and fourteenth amendments to the constitution. However, plaintiff does not press these alleged constitutional violations as independent grounds for relief. See Birnbaum v. United States, 588 F.2d 319, 327-28 (2d Cir.1978) (violation of federal constitutional right not a separate ground for relief under Federal Tort Claims Act); cf. Carlson v. Green, 446 U.S. 14, 20, 23, 100 S.Ct. 1468, 1472, 1474, 64 L.Ed.2d 15 (1980) (victim of intentional misconduct by federal officials may bring Federal Tort Claims Act action against United States, as well as Bivens action against officials alleged to have infringed constitutional rights, but only if state in which the misconduct occurred would permit a cause of action for that misconduct).
[2] These officers included Commander of Detectives John Maher and Officer Michael Zarnowski. Zarnowski reported that he had been plaintiff's roommate for four months in 1981 and that plaintiff had lived in New York City in the period 1980-81. Plaintiff's Exhibit E.
[3] Federal agents making arrests have privileges and duties different from those of private individuals. Thus, because the "circumstances" of an arrest made by an FBI agent acting pursuant to a warrant are not "like" those of a citizen's arrest within the meaning of § 2674, the government's liability is governed by the Florida law of arrests pursuant to a warrant and not the Florida law of citizens' arrests. 28 U.S.C. § 2674; see Arnsberg, 757 F.2d at 978-79 (adopting reasoning of Caban, 728 F.2d at 73-74).
[4] The arresting officer need not inquire into the merits of a facially valid arrest warrant before execution. Indeed, once probable cause for the arrest has been established by a judicial officer and an arrest warrant has been issued, the warrant compels arrest and a law enforcement officer ignores this command at his peril. See Fed. R. Crim. P. 4(d)(3); Benjamin, 554 F.Supp. at 86.
[5] The government accepts the applicability of negligence principles, but argues that the agent's duty of care is to be measured by reference to federal law governing arrests and prosecution on probable cause. See Defendant's Memorandum at 6-7. However, both sides appear to agree that the absence of probable cause is essential to plaintiff's claim. See Plaintiff's Memorandum at 8, 15. Thus, the result under that analysis would be indentical to that reached below.
[6] Probable cause is based on the facts known to the agents at the time of the complaint. However, under New York law, the magistrate's finding of probable cause in issuing the warrant creates a presumption that probable cause existed. See Broughton, 335 N.E.2d at 313, 314-15; McSorley v. Consolidated Rail Corp., 581 F.Supp. 642, 643 (S.D.N.Y.1984); Hamid v. Jamil, 580 F.Supp. 855 (E.D.N.Y.1984); cf. Russo, 672 F.2d at 1018. Plaintiff's subsequent indictment by the grand jury creates a similar presumption that probable cause existed at the time of the indictment. Broughton, 335 N.E.2d at 315; McSorley, 581 F.Supp. at 643. The presumptions of probable cause generated by the issuance of the warrant and the indictment are rebuttable only where the plaintiff establishes fraud, perjury or the misrepresentation or falsification of evidence. See McSorley, 581 F.2d at 643-44. As there is no evidence of such conduct in the procurement of either the warrant or the indictment, the effect of the presumption under New York law is thus an alternative ground for summary judgment in defendant's favor on this claim, since the evidence on which each were based is not different from the information on which the agents acted.
[7] Arguably, the use of the bank photographs was not in accordance with FBI guidelines for such photographs. See P.Ex. L, ¶¶ 6-4.2. However, the guidelines are not mandatory. They do not expressly cover the viewing of bank photographs by law enforcement officers who may have knowledge of a suspect, a situation which differs in many respects from that where such photographs are viewed by witnesses to the crime. Compliance with such internal investigative guidelines is not a requirement for the existence of probable cause and the procedure followed was not unreasonable under the circumstances.
[8] Plaintiff may not rely upon the acts or omissions of the prosecuting attorney to hold the government liable for malicious prosecution. The United States Attorney and his assistants are not "law enforcement agents" for whose intentional torts the government is liable under 28 U.S.C. § 2680(h). See Gray v. Bell, 542 F.Supp. 927, 933 (D.D.C.1982), aff'd, 712 F.2d 490 (D.C.Cir.1983); United States v. Rubin, 573 F.Supp. 1123, 1124-25 (D.Colo.1983). Moreover, as a matter of New York law the public prosecutor's decision whether or not to proceed with prosecution is absolutely privileged from civil liability. See Caminito v. City of New York, 256 N.Y.S.2d 670, 680, (N.Y.Sup.1965) (police officer, but not District Attorney, liable for malicious prosecution).
[9] It is unnecessary to reach defendant's claims that it is entitled to assert the qualified immunity of the FBI agents as a defense to liability under the Federal Tort Claims Act, that service of the complaint was defective, or that the previous dismissal of plaintiff's complaint was improvidently reopened. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1137327/ | 647 So.2d 461 (1994)
Brenda Gale Horton Harvill EBEY, Plaintiff-Appellee,
v.
Randall Lee HARVILL, Defendant-Appellant.
No. 26,373-CA.
Court of Appeal of Louisiana, Second Circuit.
December 7, 1994.
*462 Fischer & McMahon by Timothy R. Fischer, Shreveport, for appellant.
Daye, Bowie & Beresko by Alfred R. Beresko, Shreveport, for appellee.
Before SEXTON, LINDSAY and HIGHTOWER, JJ.
HIGHTOWER, Judge.
In this paternity action, Randall Lee Harvill appeals a judgment declaring him the biological father of Nicole McDonald and ordering the payment of child support to the minor's mother, Brenda Gale Harvill Ebey, plaintiff-appellee. We vacate the adjudication and remand for further proceedings.
BACKGROUND
Plaintiff gave birth to Nicole on September 12, 1980. Although the mother had been engaged in an illicit relationship with Harvill near the time of conception, she continued her marriage with Ronald L. McDonald until April 30, 1981. On that date, their divorce judgment awarded custody of the infant to Brenda and ordered McDonald, the legal father[1]*463 who apparently believed himself to be the biological parent, to pay $150 per month in child support. That decree also granted him visitation rights.
Brenda married Harvill shortly thereafter; however, that union terminated on May 16, 1991. In petitioning for her second divorce, plaintiff asserted that "[n]o children were born of the marriage" between her and appellant. Nonetheless, the subsequent adjudication remained silent concerning any paternity issue, while simply discontinuing the marriage and restoring appellee's use of her maiden name.
On April 8, 1992, plaintiff (who later married Doug Ebey) filed the instant paternity action to establish Harvill as Nicole's biological father and secure child support. Appellant asserted various exceptions, including res judicata and the failure to join McDonald as an indispensable party. The trial judge later overruled the res judicata objection, but deemed the presumed father an indispensable party to any proceedings beyond the ordering of a blood test.[2] Even so, while plaintiff never amended the petition to add her first husband, the matter proceeded to judgment.
The evidence at trial consisted of testimony by Brenda and Harvill, along with blood test results showing a strong probability of his genetic link with the minor. At the conclusion of proceedings, the district judge decreed appellant to be the biological father and ordered him to pay $295 per month in child support, retroactive to the date of judicial demand. This appeal ensued.
DISCUSSION
Res Judicata
In his first assignment of error, appellant contends his plea of res judicata should have been sustained. We disagree.
LSA-R.S. 13:4231 provides the general principles concerning the concept of res judicata in Louisiana civil actions filed on or after January 1, 1991.[3] Exceptions to the doctrine are provided in LSA-R.S. 13:4232. Of particular importance here, LSA-R.S. 13:4232(B) provides that "the judgment [in a divorce action] has the effect of res judicata only as to causes of action actually adjudicated." Thus, in domestic proceedings, the legislature has chosen to retain the otherwise repealed civilian theory of res judicata. Cf. Sewell v. Argonaut Southwest Ins. Co., 362 So.2d 758 (La.1978), explaining that only matters "actually litigated and finally adjudged" may not be contradicted later.
The party urging res judicata must prove each of its essential elements by a preponderance of the evidence. Greer v. State, 616 So.2d 811 (La.App. 2d Cir.1993). Any doubt as to the applicability of the doctrine results in the action being maintained. Id.; State Dept. of Social Services v. Matthews, 615 So.2d 1112 (La.App. 5th Cir.1993).
*464 An identification of issues actually litigated shall be determined not solely from the pleadings but also by examining the entire record in the first suit. Lamana v. LeBlanc, 526 So.2d 1107 (La.1988); Greer, supra; State, Dept. of Social Services, supra. Furthermore, an issue presented by pleadings in a cause, but eliminated from the ultimate judgment, cannot, without more, be invoked in support of a plea of res judicata. Lamana, supra; Greer, supra. Where the court remains silent on an issue so presented in an earlier case, only matters explored by the evidence will be considered "actually litigated and finally adjudged." See R.G. Claitor's Realty v. Juban, 391 So.2d 394 (La. 1980); Sewell, supra.
Here, plaintiff's earlier petition for divorce from Harvill directly asserted: "No children were born of petitioner's marriage to defendant." Thus, although the ensuing uncontested judgment is silent regarding children, appellant contends that the mother's written denial of any offspring from the union serves to bar, on res judicata grounds, the subsequent claim of paternity. The argument lacks merit, however.
With respect to the earlier divorce proceedings, the record before us contains only the petition and judgment. Hence, in the absence of a showing that evidence came forth at that juncture concerning paternity, Harvill has not established an actual adjudication of the issue as required by LSA-R.S. 13:4232(B). Nor are we convinced that a paternity determination would have been essential to the final judgment in the prior proceedings. Cf. State, Dept. of Social Services, supra (previous divorce judgment, stating no children had been born of the marriage, inadequate to sustain res judicata exception on issue of paternity); Lyons v. Fontenot, 344 So.2d 1068 (La.App. 3d Cir. 1977) (earlier divorce judgment, granting custody and child support as to one child only, did not substantiate res judicata plea in paternity action by a second minor).
The present litigation concerns a minor's filiation with her biological parent. The concept of res judicata should be rejected when doubts exist as to whether a plaintiff's substantive rights actually have been previously addressed and finally resolved. Mavromatis v. Lou-Mar, Inc., 93-0379, 93-1212 (La.App. 4th Cir. 2/11/94), 632 So.2d 828.[4]
Indispensable Party
Appellant additionally asserts that the judgment should be vacated as a consequence of the failure to add an indispensable party, viz., the legally recognized and presumed father of the minor. We agree.
Indispensable parties to an action are those whose interests in the subject matter are so interrelated, and would be so directly affected by the judgment, that a complete and equitable adjudication of the controversy cannot be made unless they are joined. LSA-C.C.P. Art. 641. Any judgment rendered without the presence of such a party is a nullity. Ebey v. So. Health Benefit Found., 377 So.2d 421 (La.App. 2d Cir.1979). Furthermore, the failure to join an indispensable party may be noticed by an appellate court on its own motion. LSA-C.C.P. Arts. 645, 927.
A party should be deemed indispensable only when it is necessary to protect substantial rights. State, Dept. of Hwys. v. Lamar Advertising Co., Inc., 279 So.2d 671 (La.1973). Still, when an action seeks to declare another man the biological father of a presumed parent's legitimate child, equity demands that the presumed father be made a party to the action. Finnerty v. Boyett, 469 *465 So.2d 287 (La.App. 2d Cir.1985). The supreme court's recognition of dual paternity in Smith v. Cole, 553 So.2d 847 (La.1989), concerned only a biological father's exception of no cause of action and did not address whether the legal father must be joined. Instead, that opinion expressly pretermitted any discussion of the rights and obligations of the legal father. Further, we continue in the view that any finding of dual paternity necessarily affects the presumed father's substantial rights and interest. Finnerty, supra. See also Nelson v. Burkeen Constr. Co., 605 So.2d 681 (La.App. 2d Cir.1992); Candler v. Candler, 556 So.2d 261 (La.App. 2d Cir.1990). Consequently, McDonald must be made a party to the present proceedings and allowed to protect his rights.[5]
We accordingly vacate the judgment and remand the case for amendment of the petition to join the indispensable party, and for further evidence.
Other Assignment of Error
Harvill also complains of the trial court's failure, when calculating the biological father's alimentary obligation, to consider the child support order rendered against McDonald in the 1981 divorce decree. We decline, however, to now address that subject. The issue, which is inextricably intertwined with the rights of the presumptive father, should be reevaluated in light of his entry into the suit and any claims arising therefrom.
CONCLUSION
For these reasons, although concluding that the trial court correctly overruled defendant's exception of res judicata, we vacate the challenged judgment due to the absence of an indispensable party. The case is remanded to the trial court for the joinder of Ronald L. McDonald and receipt of further evidence. Additionally, in the course of appropriate proceedings, the trial court should allow any party to assert legal rights or claims which may arise as a result of the addition of the presumptive father. Costs of this appeal are assessed equally to appellant and appellee.
REVERSED AND REMANDED.
NOTES
[1] The husband of the mother is presumed to be the father of all children born or conceived during the marriage, unless he files an action for disavowal within 180 days after he has learned or should have learned of the birth of the child. LSA-C.C. Arts. 184, 189. Although suspicious that the child could be Harvill's, McDonald never brought such an action.
[2] Appellee, in brief, contends that the trial court failed to rule on either exception. However, the supplemental transcript in the record shows that, at a hearing on August 22, 1993, the district judge issued a reasoned decision on both objections.
[3] Acts 1990, No. 521 effected a substantial change in the defense of res judicata in Louisiana. LSA-R.S. 13:4231 now provides:
Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment;
(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action;
(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.
[4] We also observe that plaintiff individually filed the present action, but eventually substituted herself as natural tutrix, after so qualifying. Arguably, this reflects that the plaintiff parties are different in the two proceedings, and provides another basis for overruling the res judicata plea. See Succession of Lassiter, 612 So.2d 941 (La. App. 4th Cir.1993). But cf. O'Bannon v. Azar, 506 So.2d 522 (La.App. 1st Cir.1987), writ denied, 511 So.2d 1158 (La.1987), rejecting the notion that an identity of parties did not exist where a minor's filiation and child support rights had been asserted first by the mother, in her own name, and then later in an action by a tutor. See also State, Dept. of Social Serv. v. Coleman, 616 So.2d 844 (La.App. 3d Cir.1993). Of course, Brenda's earlier divorce petition did not allege, but instead disclaimed, paternity with respect to the second husband.
[5] Although plaintiff failed to amend her petition appropriately, she now argues that defendant somehow waived the addition of the legal father by not reurging, before trial, the previously sustained exception. We fail to appreciate, however, any manner in which Harvill could waive McDonald's right to be joined in the litigation. Furthermore, as previously mentioned, this court can notice the absence of an indispensable party on its own motion. LSA-C.C.P. Art. 645. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1620355/ | 447 F.Supp. 741 (1978)
HALL COUNTY HISTORICAL SOCIETY, INC. and W. L. Norton Agency, Inc., Plaintiffs,
v.
GEORGIA DEPARTMENT OF TRANSPORTATION, Thomas D. Moreland, Individually and as Commissioner of Georgia Department of Transportation, Brock Adams, Individually and as Secretary of the United States Department of Transportation, and United States Department of Transportation, Defendants.
Civ. No. C77-100G.
United States District Court, N. D. Georgia, Gainesville Division.
March 7, 1978.
*742 *743 *744 Furman Smith, Jr., Atlanta, Ga., David A. Fox, Harmon T. Smith, Jr., Gainesville, Ga., for plaintiffs.
Stanley F. Birch, Jr., Gainesville, Ga., for plaintiff-intervenor W. L. Norton Agency, Inc.
Arthur K. Bolton, Atty. Gen., Roland F. Matson, Asst. Atty. Gen., Atlanta, Ga., for defendants.
Robert J. Castellani, First Asst. U. S. Atty., Atlanta, Ga., for Federal defendants.
ORDER
O'KELLEY, District Judge.
This is a civil action for declaratory as well as preliminary and permanent injunctive relief pursuant to (1) the National Environmental Policy Act of 1962, 42 U.S.C. § 4331 et seq. [hereinafter "NEPA"]; (2) section 4(f) of the Transportation Act, 23 U.S.C. § 138 [hereinafter "section 4(f)"]; (3) the Federal-Aid Highways Act, 23 U.S.C. § 128; (4) the National Historic Preservation Act, 16 U.S.C. § 470 et seq.; and (5) applicable Georgia law. In two counts, plaintiff Hall County Historical Society [hereinafter the "Historical Society"] seeks (1) to enjoin the defendants from proceeding with a portion of a federal-aid highway project in Gainesville, Georgia, [hereinafter "the project"] known as "the Green Street extension," and (2) both a judgment declaring the federal defendant's delegation of its NEPA responsibilities to defendant Georgia Department of Transportation [hereinafter "GDOT"] illegal and void and an injunction restraining such illegal delegation of NEPA responsibilities unless and until the GDOT repudiates and rescinds a certain "Memorandum of Understanding." Plaintiff-intervenor, the W. L. Norton Agency, Inc. [hereinafter the "Norton Agency"], seeks relief substantially similar to that sought in count one of plaintiff's complaint and, in addition, specific performance of an alleged agreement with defendant GDOT or, in the alternative, damages and other appropriate relief from defendant GDOT as a result of defendant GDOT's alleged breach of said agreement. Subject matter jurisdiction is predicated upon 28 U.S.C. §§ 1331, 1343, 1361, 5 U.S.C. § 701 et seq., and upon principles of ancillary jurisdiction. This action is presently before the court on (1) the defendants' motions to dismiss the action under rule 12(b) of the Federal Rules of Civil Procedure for lack of standing, lack of subject matter jurisdiction, and laches; (2) the plaintiff's and the plaintiff-intervenor's requests for preliminary injunctive relief pursuant to rule 65 of the Federal Rules of Civil Procedure; and (3) the motion of defendant Thomas D. Moreland to dismiss him as an individual defendant.
I.
STATEMENT OF THE CASE
The Project
This action arises from a highway project funded and developed under the Federal-aid highway program for the improvement of approximately .877 miles of U.S. Route 129 within the City of Gainesville, Georgia. *745 Under the Federal-aid highway program the federal government generally does not build highways. Rather, it administers a grant-in-aid program to assist the states which are responsible for highway design and construction. Consequently, each step in the development of a particular project normally consists of a state request for approval and a federal response thereto, which is governed by compliance with the applicable statutory and regulatory requirements. Thus, the project in question logically involves the actions of both state defendants, the Georgia Department of Transportation and its Commissioner, Thomas D. Moreland, and federal defendants, the United States Department of Transportation and its Secretary, Brock Adams.
As originally conceived in 1965, the Gainesville project was designed primarily to create a Central Business District bypass for the purpose of improving traffic flow and reducing congestion in the City of Gainesville by diverting traffic from the Central Business District portion of U.S. 129 to an upgraded and widened Sycamore Street. As proposed at a public location hearing held on July 14, 1966, the Gainesville project was to extend 0.76 miles along Sycamore Street from Summit Street to North Green Street.
In 1972 an environmental review of the Gainesville project, as originally proposed, was undertaken in accordance with the NEPA resulting in Federal Highway Administration approval of a document referred to as "Negative Declaration." The "Negative Declaration" was prepared to evidence and support a determination that although the Gainesville project might be considered "a major federal action," it would not have a "significant effect" upon the quality of the human environment.
On January 17, 1973, following appropriate notices in the local Gainesville newspaper, The Times, and in local radio station broadcasts, "a design public hearing" was held in accordance with 23 U.S.C. § 128. Although the notices for the hearing itself described the Gainesville project as extending along Sycamore Street from Summit Street to North Green Street, with a transition area on North Green Street ending 500 feet to the north on Green Street, the Negative Declaration, copies of which were made available at the hearing, made no reference to such a "Green Street extension" for transition lanes and showed the project as terminating at the intersection of Sycamore Street and North Green Street. However, the uncontradicted testimony of Mr. Hal Rives, State Highway Engineer for defendant GDOT, indicates that the possible effects of the Green Street transition lanes were specifically discussed by several individuals who attended the hearing. Subsequently, a design study report on the Gainesville project prepared by the GDOT together with a transcript and certification of the design public hearing and request for design approval were submitted by the GDOT to the Federal Highway Administration. The Federal Highway Administration approved the design on April 9, 1973, and notice of design approval was then published in The Times.
Finally, in 1977, pursuant to the requirements of 23 C.F.R. § 771.11(h), the GDOT conducted a reevaluation of the project as it was altered from the original proposals to determine whether the alterations would result in any substantial changes in the potential social, economic, or environmental effects of the project. The update included a discussion of air and noise quality, traffic projections, historic preservation, and concluded that the project modifications would not result in any significant changes in the project's effects on the environment. The defendants allege that the Federal Highway Administration reviewed the GDOT environmental update and adopted it on June 24, 1977. A $1,198,000 contract for the project was awarded on August 9, 1977, and actual construction began on September 26, 1977.
The Green Street Historic District
The Green Street Historic District [hereinafter "the District"] is a distinct section of the City of Gainesville located along both *746 sides of Green Street from 380 Green Street to the Glenwood Road intersection. The buildings in the District are predominantly Victorian and Neo-classical Revival residences dating from the late 19th and early 20th centuries. Although some of the residences have been adapted to commercial or multi-family uses, the District as a whole has maintained its authentic character and thus continues to be a significant visual and cultural amenity of Hall County and North Georgia. In order to preserve the historic character of the District, a special zoning classification was created by the City of Gainesville, and on August 15, 1975, the District was listed on the National Register of Historic Places. Notice of the listing was published in the February 10, 1976, issue of the Federal Register. The protection of the District has been an ongoing project of the plaintiff, Historical Society.
The Intervention
Pursuant to rule 65(a)(2) of the Federal Rules of Civil Procedure, trial of the action on its merits was advanced and consolidated with the evidentiary hearing on plaintiff's request for preliminary injunctive relief held on December 29, 1977. In the course of the December 29, 1977, hearing, the court stated that the evidence appeared to indicate that a certain city lot occupied by the Norton Agency was situated within the District. Because the project plans at that time called for a physical taking of a portion of the Norton Agency property, this statement from the bench prompted the GDOT to revise the project plans, deleting any physical use of the Norton property, in order to assure that project construction would be terminated outside the boundaries of the District. The Norton Agency apparently received notice from the GDOT of these revisions in the project plans on January 3, 1978. Subsequently, on January 18, 1978, alleging that it had secured an agreement with the GDOT to obtain an earlier alteration of the project plans to provide for a left turn access into its property in consideration for its conveyance to the GDOT of a parcel of said property, and that defendant GDOT has wrongfully attempted to rescind this agreement, the Norton Agency filed an application to intervene in the case sub judice as a party plaintiff pursuant to rule 24(a)(2) of the Federal Rules of Civil Procedure. Based upon the allegations in the proposed complaint of the Norton Agency, the court determined that the Norton Agency had an interest relating to this action, that disposition of this action may impair its ability to protect its interest "as a practical matter," and that its interest was not adequately represented by plaintiff Historical Society, and, therefore, granted the Norton Agency's application for intervention on February 8, 1978. In a subsequent evidentiary hearing held on February 15, 1978, at the court's request, for the limited purpose of clarifying the record with respect to compliance with the National Historic Preservation Act, the intervenor was also permitted to present evidence bearing on issues arising under the NEPA and section 4(f), to the extent that the intervenor's unique interests thereunder were not adequately represented by plaintiff Historical Society in the December 29, 1977, hearing.[1]
*747 II.
STANDING
Because the defendants herein have challenged the plaintiff's standing to bring the present action and because the plaintiff does not rely upon a specific statutory provision to invoke the judicial power, the court must determine whether the plaintiff itself has sustained or is in immediate danger of sustaining some direct, concrete injury. Linda R. S. v. Richard D., 410 U.S. 614, 93 S.Ct. 1146, 35 L.Ed.2d 536 (1973); Ex parte Levitt, 302 U.S. 633, 58 S.Ct. 1, 82 L.Ed. 493 (1937). The plaintiff alleges that, because it has devoted substantial efforts to the protection and preservation of the District by opposing previous attempts by the City of Gainesville to widen Green Street, and by assisting in the preparation of the nomination of the District to the National Register of Historic Places, and because it has an ongoing interest in the District and in historical preservation in Hall County and throughout North Georgia in general, it has been injured and continues to be injured by (1) the defendants' failure to fully consider the adverse environmental effects the project will have on the District as required by various federal statutes and (2) by the federal defendants' alleged illegal delegation of their statutory duties under the NEPA to the GDOT by and through a so-called "Memorandum of Understanding." Defendants argue, however, that the plaintiff has no standing to bring an action on either of these counts because the injuries it alleges amount to no more than potential non-economic injuries of an abstract nature that would be shared by all citizens of the City of Gainesville and North Georgia, citing Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 94 S.Ct. 2925, 41 L.Ed.2d 706 (1974). The court disagrees. Standing is no longer confined to those who show economic harm, nor is it necessarily to be denied because the alleged injury is commonly shared. See United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973); Data Processing Service Organizations v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970). Accordingly, in view of plaintiff's allegations in paragraph 4 of the complaint that several of its members reside or own property in the District, the court concludes that the plaintiff has alleged an immediate threat of sufficient individualized harm to itself and its members, albeit merely aesthetic or environmental, to have standing to challenge the defendants' compliance with the various federal statutory requirements in the course of the planning and the development of the project, and the Green Street extension thereof, as set forth in count one of the complaint. Id. Contrariwise, by plaintiff's own admission the alleged "Memorandum of Understanding" between officials of the GDOT and the Georgia Department of Natural Resources regarding procedures for the nomination of sites for inclusion in the National Register of Historic Places postdated the nomination process which applied to the District.[2] Accordingly, the court concludes that regardless of the admirable work done by plaintiff Historical Society to promote historic preservation in North Georgia, it has failed to allege sufficient individualized harm to itself or its members to have standing to challenge the legality of the abovementioned "Memorandum of Understanding." See, e. g., Reservists Committee to Stop the War, supra; Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972). For the above reasons, count two of plaintiff's complaint is hereby dismissed as non-justiciable.
III.
JURISDICTION
In support of its motion to dismiss for lack of subject matter jurisdiction, defendant GDOT argues, first, that the plaintiff *748 has failed to meet its burden to show by a preponderance of the evidence that it does not appear "to a legal certainty" that the amount in controversy herein is less than $10,000, citing Opelika Nursing Home, Inc. v. Richardson, 448 F.2d 658 (5th Cir. 1971). Because it is well settled that in injunction actions the amount in controversy is not the amount a plaintiff might recover at law but, rather, is the value of the rights to be protected, and because the rights being protected herein generally concern allegations of threatened non-economic injuries of an aesthetic or environmental character not readily capable of a dollar valuation, the court concludes that there is a substantial probability that the amount in controversy herein exceeds the jurisdictional amount required under 28 U.S.C. § 1331(a). See, e. g., Scherr v. Volpe, 336 F.Supp. 882 (W.D.Wis. 1971), aff'd, 466 F.2d 1027 (7th Cir. 1972).
Second, defendant GDOT submits that 5 U.S.C. § 702 et seq. is not a valid basis of jurisdiction herein because plaintiff has failed to allege or demonstrate individual injury, citing West Virginia Highlands Conservancy v. Island Creek Coal Co., 441 F.2d 232 (4th Cir. 1971). However, as discussed supra, the court has concluded that the plaintiff has set forth sufficient allegations of individualized harm to itself and its members to have standing to assert the claims stated in count one of the complaint. Accordingly, without reaching the merits of each of the jurisdictional allegations herein, the court simply concludes that it has sufficient jurisdiction over the plaintiff's action under 28 U.S.C. § 1331 and 5 U.S.C. § 701 et seq. and, therefore, over the plaintiff-intervenor's claim for breach of an alleged agreement with defendant GDOT under principles of ancillary jurisdiction.
IV.
LACHES
Arguing that plaintiff's rights under the various federal statutes asserted as a basis for relief in count one of plaintiff's complaint became fully enforceable several years prior to December 5, 1977, the date on which this action was brought, defendants submit that this action is barred under the equitable doctrine of laches, which has long been applied in the environmental context. See, e. g., Clark v. Volpe, 342 F.Supp. 1324 (E.D.La.), aff'd, 461 F.2d 1266 (5th Cir. 1972). Before the doctrine of laches can be invoked, it is well established that the defendant has the burden of showing (1) that the plaintiff delayed in asserting its rights; (2) that the delay was not excusable; and (3) that the defendants are unduly prejudiced thereby. Watz v. Zapata Off-Shore Co., 500 F.2d 628 (5th Cir. 1974). Applying this test to the case sub judice in view of the additional standards which have been grafted upon the test in the context of environmental litigation, it is clear that the defendants cannot meet their burden with respect to the second and third elements. When plaintiff's officers became aware of the plans for the Green Street extension late in 1975, the plaintiff's past president promptly communicated its objections to both the state and federal defendants. Once the unique historic character of the District and its National Register listing were brought to the attention of the defendants, plaintiff became entitled to presume that the defendants would comply with the law. See Steubing v. Brinegar, 511 F.2d 489 (2d Cir. 1975). Similarly, within 30 days after the construction contract was awarded, plaintiff retained an attorney who notified the defendants of plaintiff's intention to seek an injunction should defendants elect to proceed with the Green Street extension. Plaintiff apparently filed suit only when it became evident that its continuing negotiations with the defendants would not be successful, but well before any work was scheduled to commence on "the Green Street extension" the only portion of the project in dispute herein. Because the work on the Green Street extension of the Gainesville project has not yet begun, the court believes that the present costs of altering or abandoning "the Green Street extension" would not outweigh the public interest in, and the potential public benefits of, injunctive relief pending compliance with any statutes *749 which may have been violated. See Ecology Center of Louisiana, Inc. v. Coleman, 515 F.2d 860 (5th Cir. 1975); Save the Courthouse Committee v. Lynn, 408 F.Supp. 1323 (S.D.N.Y.1975). Therefore, for the above reasons, the court concludes that this action is not barred by the doctrine of laches.
V.
THE MERITS
The National Environmental Policy Act [NEPA]
NEPA, 42 U.S.C. § 4332 et seq. requires all federal agencies to file a detailed Environmental Impact Statement [hereinafter "EIS"] with respect to every major federal action "significantly affecting the quality of the human environment." In the case sub judice plaintiff and plaintiff-intervenor have challenged the defendants' decision not to file an EIS in connection with the project and, therefore, are disputing the adequacy of the environmental review undertaken by defendant GDOT with respect to the project, as evidenced by and embodied in the "Negative Declaration" and update thereto, both of which received Federal Highway Administration approval. It is well settled that the standard for judicial review of an agency's threshold decision not to file an EIS is one of reasonableness. See, e. g., Save Our Ten Acres v. Kreger, 472 F.2d 463 (5th Cir. 1973). Thus, although the plaintiffs have been somewhat successful in questioning the probity and adequacy of the defendants' initial study of the environmental impact of the project, after hearing direct evidence on the potential environmental impact of the project, the court concludes that the plaintiffs have failed to meet their burden of showing that the agency decision not to file an EIS was unreasonable. See Hiram Clarke Civic Club v. Lynn, 476 F.2d 421 (5th Cir. 1973). In the December, 1977, and February, 1978, hearings plaintiffs raised no adverse environmental factors that were not considered, albeit superficially, by the defendants before they found that the project would produce no significant environmental impact. Finally, the court finds that the plaintiffs' claims that the "Negative Declaration" failed to consider the total length of the highway project between "logical termini" express little more than unsubstantiated allegations of segmentation. In his testimony Mr. Hal Rives, Assistant State Highway Engineer for the GDOT, stated unequivocally that GDOT has no plans to widen Green Street through the District. Because plaintiffs have produced no evidence to the contrary, the court concludes that plaintiffs' segmentation arguments must be rejected outright. Accordingly, plaintiffs' requests for injunctive relief under the NEPA should be and are hereby denied.
Section 4(f) of the Transportation Act
Section 4(f) of the Transportation Act, 23 U.S.C. § 138, provides, in pertinent part, that:
the Secretary shall not approve any program or project which requires the use of . . . any land from an historic site of national, State, or local significance . . . unless (1) there is no feasible and prudent alternative to the use of such land, and (2) such program includes all possible planning to minimize harm to such . . . historic site resulting from such use. (Emphasis added.)
Both plaintiff and plaintiff-intervenor maintain that the project has used and will "use" land within the District and, therefore, because no section 4(f) statement has been prepared by defendants herein, that section 4(f) has been violated. Specifically, plaintiff-intervenor contends that because defendant GDOT has taken a parcel of the Norton Agency city lot situated within the District in exchange for a binding promise to provide a left turn access lane to the Norton property in the course of construction of the project, and because plaintiff-intervenor is entitled to specific performance of its agreement with defendant GDOT there has been and will be a physical "use" of District land. The court disagrees. First, assuming arguendo, that the plaintiff can prove the existence of the alleged *750 agreement with defendant GDOT, because of the strong public policy vesting full control and supervision of state highways with defendant GDOT, the court concludes that in the absence of allegations of arbitrary and capricious abuse of this discretion by defendant GDOT, the plaintiff-intervenor is not entitled to specific performance. See Pittman v. City of Jesup, 232 Ga. 635, 208 S.E.2d 456 (1974). See generally Ga.Code Ann. § 95A-302(a), 95A-618-22. Similarly, although the court finds that the Norton Agency city lot is situated within the District, because the map attached to the District nomination to the National Register of Historic Places is somewhat misleading with respect to the Norton Agency property, and because the record clearly indicates that the defendants have acted in good faith to avoid any physical use of District land by making all necessary revisions in the project plans, the court concludes that plaintiffs have failed to carry their burden of showing that there has been or will be a physical use of District land.
The absence of any physical "use" of District land notwithstanding, the plaintiff and plaintiff-intervenor argue that the project will have certain alleged secondary effects upon the District constituting a "constructive use" of District land, citing Brooks v. Volpe, 460 F.2d 1193 (9th Cir. 1972). See also Stop H-3 Assoc. v. Coleman, 533 F.2d 434 (9th Cir. 1976). But see id. at 446 (Wallace, J., dissenting). In the court's view, however, these decisions from the Court of Appeals for the Ninth Circuit cited by plaintiff are clearly distinguishable from the case sub judice in that the projects being challenged in those cases were shown to have a direct and significant impact on section 4(f) lands. Similarly, although the Court of Appeals for the Fifth Circuit has cited these Ninth Circuit decisions in dicta, it has not adopted a "constructive use" interpretation of section 4(f). See Louisiana Environmental Society v. Coleman, 537 F.2d 79 (5th Cir. 1976). Finally, assuming arguendo, that section 4(f) should be construed to apply to circumstances where there is a "constructive use" as well as an actual physical use of land from any historic site, the burden is upon the plaintiff to establish by a preponderance of the evidence that the project has or will involve a "constructive use" of District land. See Arkansas Community for Reform Now [ACORN] v. Brinegar, 398 F.Supp. 685 (E.D.Ark.1975), aff'd, 531 F.2d 864 (8th Cir. 1976). Although plaintiff-intervenor presented expert testimony to support its allegations that the project would have an adverse economic impact on the Norton Agency property, all such testimony was predicated upon the assumption that the project would result in an increased traffic volume on Green Street. Yet not one scintilla of evidence was offered to support this assumption. Moreover, the court is unconvinced that there was any Congressional purpose behind the enactment of section 4(f) to protect commercial property from potential economic decline. It is manifest that section 4(f) was designed "to preserve the natural beauty of the countryside and public park and recreation lands, wildlife and waterfall refuges, and historic sites." For the above reasons, the court concludes that the plaintiff and the plaintiff-intervenor have failed to meet their burden of showing any "use" of District land in the case sub judice. Accordingly, the plaintiffs' requests for injunctive relief under section 4(f) should be and are hereby denied.
The Federal Aid to Highways Act 23 U.S.C. § 128
The plaintiffs argue that a new design public hearing is required with respect to "the Green Street extension" pursuant to 23 C.F.R. § 790.6(c), which provides that:
The opportunity for another public hearing shall be afforded in any case where proposed locations or designs are so changed from those presented in the notices . . . or at a public hearing as to have a substantially different, social, economic, or environmental effect . ..
The court concludes, however, that defendants have shown that the Green Street portion of the project was included in the descriptions of the project used in all public *751 notices in connection with the January 17, 1973, design hearing and that the possible effects of widening a portion of Green Street were specifically discussed at that hearing. Therefore, plaintiffs' requests for injunctive relief under 23 U.S.C. § 128 should be and are hereby denied.
The National Historic Preservation Act
In pertinent part, 16 U.S.C. § 470f provides:
The head of any Federal agency having direct or indirect jurisdiction over a proposed Federal or federally assisted undertaking in any State . . . shall, prior to the approval of the expenditure of any Federal funds on the undertaking . . take into account the effect of the undertaking on any district, site, building, structure or object that is included in or eligible for inclusion in the National Register. The head of any such Federal agency shall afford the Advisory Council on Historic Preservation . . . a reasonable opportunity to comment with regard to such undertaking.
Pursuant to this Congressional mandate, in consultation with various federal agencies, the Advisory Council on Historic Preservation has established procedures regarding the preservation and enhancement of non-federally owned historic and cultural properties to be followed by all federal agencies in the execution of any agency "undertaking." See 36 C.F.R. § 800.3-.10.[3] Plaintiffs contend (1) that the state determination that the project had no effect upon the District, and the Federal Highway Administration's concurrence in this determination of no effect, were unreasonable and (2) that the Federal Highway Administration, in effect, simply "rubber stamped" the state's determination in the case sub judice. Without finding that the evidence adduced at the December, 1977, and February, 1978, hearings shows that the joint state-federal determination of no effect was unreasonable, the court concludes that the record discloses an improper delegation of Federal Highway Administration responsibilities under the National Historic Preservation Act and the regulations promulgated thereunder. In the case sub judice Federal Highway Administration officials failed to undertake any independent studies, reports, or evaluations of the project's potential environmental effects. Nor was any independent effort made to even properly identify properties located within the area of the project's potential environmental impact that are included in or eligible for inclusion in the National Register. In short, the record demonstrates little more than blind reliance by Federal Highway Administration officials upon the state's determination and findings.[4] If Congress had intended that federal agencies be bound by the conclusions of the state authorities, they would have clearly provided for such delegation. While joint participation by federal and state officials may, under the proper circumstances, *752 be totally consistent with the Congressional intent behind 16 U.S.C. § 470f, the court holds that this statute requires that the determinations of effect, adverse effect, or no effect by the appropriate federal agency official be an independent one, and not simply a "rubber stamp" of the state's work. For the above reasons, the plaintiffs' requests for injunctive relief predicated upon noncompliance with the National Historic Preservation Act should be and are hereby granted.
VI.
THE RELIEF
Pending Federal Highway Administration compliance with 16 U.S.C. § 470f and the applicable regulations thereunder at 36 C.F.R. § 800.3-.10, the defendant Federal Highway Administration, its employees, agents, and all others in active concert with it, are hereby enjoined from disbursing federal funds for the construction of that portion of the project known as "the Green Street extension." The court holds, however, that the defendant Federal Highway Administration may disburse such funds as are reasonably necessary to complete the project in accordance with current project plans up to the intersection of Green Street and Sycamore Street and including such funds as may reasonably be necessary to allow a viable connection of the Sycamore Street portion of the project with Green Street. Because to allow defendant GDOT to complete construction of that portion of the project known as "the Green Street extension" without the use of federal funds would, in effect, result in a defeat of Congressional intent and of the policies behind the National Historic Preservation Act, the court concludes that unless and until defendant GDOT withdraws all requests for disbursement of further federal funds for the project construction and immediately and forthwith reimburses the federal government for all funds previously disbursed for the project construction, defendant GDOT, its employees, agents, and all others acting in concert with it, are hereby enjoined from construction of that portion of the project known as "the Green Street extension," pending the Federal Highway Administration's compliance with the National Historic Preservation Act. See Ely v. Velde, 497 F.2d 252 (4th Cir. 1974); San Antonio Conservation Society v. Texas Highway Department, 446 F.2d 1013 (5th Cir. 1971). In the present case compliance with the National Historic Preservation Act shall include, in addition to compliance with the statute and the applicable regulations as interpreted in this order, immediate reference of this matter to the Advisory Council for Historic Preservation for their review and consideration. Pending final resolution of plaintiff-intervenor's ancillary claim for breach of the alleged agreement with defendant GDOT, and pending final court approval of any subsequent compliance with the National Historic Preservation Act as defined in this order, this court shall retain supervisory jurisdiction over the parties until otherwise ordered. Subject to court approval, defendant GDOT may undertake such construction on Green Street as is reasonably necessary to connect the Sycamore Street portion of the project with Green Street.
In summary, defendants' motions to dismiss are hereby granted with respect to count two of plaintiff Historical Society's complaint but are hereby denied in all other respects. Because the motion of defendant Thomas D. Moreland to dismiss this action against him as it is brought against him in his individual capacity, rather than as the Commissioner of the Georgia Department of Transportation, appears meritorious and is unopposed, it should be and is hereby granted. Plaintiffs' requests for injunctive relief predicated upon noncompliance with the National Historic Preservation Act are hereby granted but are hereby denied in all other respects.
IT IS SO ORDERED this 7th day of March, 1978.
NOTES
[1] Although an intervenor as of right is entitled to fully litigate the merits by pleading and setting forth additional claims and defenses where they arise from the same transaction(s) as the main claim(s) or are ancillary thereto, it is also well settled that an intervenor in equitable proceedings is bound by all prior orders and decrees as though he had been a party from the inception of the suit. See, e. g., Galbreath v. Metropolitan Trust Co. of California, 134 F.2d 569 (10th Cir. 1943); Moore v. Tangipahoa Parish School Board, 298 F.Supp. 288 (E.D.La. 1969). Accordingly, because prior to granting the application for intervention the court had announced that the subsequent hearing was for the limited purpose of clarifying the record with respect to compliance with the National Historic Preservation Act, the court precluded the intervenor from reopening the evidence with regard to any matters where its interests were "adequately represented" by the plaintiff in the December 29, 1977, hearing. This restriction comports with the Advisory Committee Note to the 1966 amendment of rule 24(a) of the Federal Rules of Civil Procedure, which states: "An intervention of right under the amended rule may be subject to appropriate conditions or restrictions responsive among other things to the requirements of efficient conduct of the proceedings."
[2] The Green Street Historic District was listed on the National Register on August 15, 1975, and the "Memorandum of Understanding" was not executed until February 12, 1976.
[3] In view of the language of 16 U.S.C. § 470f providing that "[t]he head of any such Federal agency shall afford the Advisory Council . . a reasonable opportunity to comment [emphasis added]," the court notes that it has some concern about the propriety of these regulations insofar as the Advisory Council has apparently stated, in advance, that it does not wish to have the opportunity to comment upon all undertakings having "no effect" upon properties included in the National Register when the determination of no effect is to be made by the federal agency rather than the Advisory Council.
[4] Specifically, the court finds that Mr. Herschel Bryant, Georgia Division Administrator for the Federal Highway Administration, delegated his statutory responsibilities under 16 U.S.C. § 470f and 36 C.F.R. § 800.3-.10 to members of his staff and principally, Mr. Thomas Bryan; that neither Mr. Bryan nor any other members of Mr. Bryant's staff ever attempted to identify those National Register properties located within the area of the project's potential environmental impact; that neither Mr. Bryan nor any other member of Mr. Bryant's staff made any written reports, studies, or evaluations of the project's impact on those National Register properties identified by the state authorities to be located within the project's potential environmental impact; and that Mr. Bryant and his staff, without the benefit of any independent reports, studies, or evaluations, in all respects relied upon the state's work in concurring with the state "determination of no effect" made by various agents of defendant GDOT and Mr. David Sherman, the Historic Preservation officer for the state of Georgia. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/327691/ | 516 F.2d 498
22 Wage & Hour Cas. (BN 437, 77 Lab.Cas. P 33,276
John T. DUNLOP, Secretary of Labor, United States Departmentof Labor, Plaintiff-Appellant,v.INDUSTRIAL AMERICA CORPORATION et al., Defendants-Appellees.
No. 74-2370.
United States Court of Appeals,Fifth Circuit.
July 28, 1975.
William J. Kilberg, Sol., Carin A. Clauss, Associate Sol., U. S. Dept. of Labor, Washington, D. C., Beverley R. Worrell, Reg. Sol., Edwin G. Salyers, Atty., Atlanta, Ga., Donald S. Shire, Jacob I. Karro, Attys., U. S. Dept. of Labor, Washington, D. C., for plaintiff-appellant.
Norman F. Burke, Orlando, Fla., for defendants-appellees.
Appeal from the United States District Court for the Middle District of Florida.
Before GODBOLD, Circuit Judge, SKELTON, Associate Judge,* and GEE, Circuit Judge.
GODBOLD, Circuit Judge.
1
The Secretary of Labor brought this action against defendant-appellee Industrial America Corporation (Industrial) to enforce various provisions of the Fair Labor Standards Act, Act of June 25, 1938, 52 Stat. 1060, as amended, 29 U.S.C. § 201 et seq. (1970). The trial court held that Industrial was not covered by the act and the Secretary has appealed. We affirm.
2
The precise question before us is: Is a business which consumes gasoline and oil in the process of providing services to its customers the "ultimate consumer" of those goods for purposes of 29 U.S.C. § 203(i)?
3
Industrial is a garbage removal service. Its business is wholly intrastate. All of its customers are located in the state where it disposes of the garbage in local state-run landfills. Its only tie to interstate commerce is that it has four employees who use gasoline and oil products that have moved in interstate commerce in operating and maintaining the company's trucks.1
4
Coverage of the act extends to every enterprise which has employees who engage in commerce or the production of goods for commerce. Being an enterprise engaged in commerce includes having employees "handling, selling, or otherwise working on goods that have been moved in . . . commerce," 29 U.S.C. § 203(s) (1970).2 But under the act's precise definition the term goods "does not include goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof."
5
At first blush this definition would seem to resolve the matter. Industrial consumes the gasoline not only in an economic but in a physical sense as well, so no one else can claim physical possession after it. But the Secretary suggests policy reasons why Congress must have meant to include virtually every business which would be the practical effect of its approach and cites legislative and administrative history that is not inconsistent with its position. Two circuits have accepted this view and held that businesses are not the ultimate consumers of goods they consume in providing services to their customers. Brennan v. State of Iowa, 494 F.2d 100 (CA8, 1974), cert. denied --- U.S. ---, 95 S.Ct. 2422, --- L.Ed.2d --- (order of June 9, 1975); Brennan v. Dillion, 483 F.2d 1334 (CA10, 1974). Both courts applied what they called an "economic benefits" test to determine whether the business or its customer was the real beneficiary of the consumption of the goods or bore the cost of them.3 This approach necessarily read out of the act the "actual physical possession" language in the definition of goods in § 203(i).4
6
We think the clear and precise words of Congress should not be so easily disregarded in the absence of unequivocal legislative history to the contrary. The legislative history in fact points the other way, consistent with the definition in § 203(i). We think the words should therefore be followed until Congress changes them.
7
At the outset, we note that the word consumer is not being used in its popular sense of a private, domestic (as opposed to business or commercial) user of goods. The definition excludes from the scope of ultimate consumer three categories of business enterprises. Had Congress meant to exclude all businesses from the definition of consumer, it surely could have done so much more directly. Moreover, not even all of these three categories are excluded. With respect to any given good, "ultimate consumer" does not include a "producer, manufacturer, or processor thereof " (emphasis added). Thus a manufacturer of one good can be the ultimate consumer of another. A fortiori other business enterprises, such as retail and service businesses, among others, can also be ultimate consumers of goods for the purposes of the act.5 Cf., Dillion, supra, 483 F.2d at 1337.
8
To understand the scope of the act we must look to the various amendments to see how they varied the original act. As first passed the act reached only employees "engaged in commerce or the production of goods for commerce." These terms have two significant meanings. First, the act's reach was defined in terms of employees rather than employers. Second, the "engaged in commerce" language was far short of the reach of federal power under the Commerce Clause. Despite clear constitutional power, see 1961 U.S.Code Cong. & Admin.News at p. 1663, Congress rejected broader formulations based on "affecting commerce" or competition with goods produced in interstate commerce. See Kirschbaum v. Walling, 316 U.S. 517, 522-523, 62 S.Ct. 1116, 86 L.Ed. 1638, 1647 (1942).
9
Congress substantially expanded coverage under the act in 1961 in two ways. First, it shifted the basis of coverage from employees to employers. Under the new approach an employer was covered if two or more of its employees were engaged in commerce or the production of goods for commerce. Once the employer was covered all of its employees received the benefits of the act, not just those employees who were themselves engaged in commerce or the production of goods for commerce. The constitutionality of this "enterprise coverage" was considered and approved in Maryland v. Wirtz, 392 U.S. 183, 188-193, 88 S.Ct. 2017, 20 L.Ed.2d 1020, 1026-1029 (1968).
10
Second, Congress reached further than it had before under the Commerce Clause by including as an "enterprise engaged in commerce" one which had employees "handling, selling, or otherwise working on goods that have been moved in or produced for commerce . . . ." § 203(s) (emphasis added). This change extended coverage to businesses with employees engaged in handling or utilizing goods after they had ceased the interstate portion of their movement. This approach reached those nearer the end of the chain of distribution, e. g., retail and service establishments whose businesses were otherwise local in character. This so-called retrospective approach was very much at issue in the congressional debates because of the possible constitutional problems. See S.Rept.No.145, 87th Cong., 1st Sess., 1961 U.S.Code Cong. & Admin.News pp. 1620, 1621-1624, 1662-1665, and the Minority Views of Senators Goldwater and Dirksen, id., at 1671-1672, 1689-1693, and 1695-1696. See also the debates in Congress, 107 Cong.Rec. 5841-5843, 6234-6237, and 6240-6241. The constitutionality of federal regulation of commerce based on the use or handling of goods after they have completed their interstate movement was not reached in Maryland v. Wirtz,6 supra. The lower courts that have considered it have held it to be within the Commerce Clause.7 Because of our resolution of this case, we do not reach this constitutional issue.
11
The principal purpose of extending the reach of the act to those handling goods after their interstate movement had ended was to reach the massive retail industry. See S.Rept.No.145, 87th Cong., 1st Sess., 1961 U.S.Code Cong. & Admin.News pp. 1620, 1623, 1624, 1626-1627, 1662-1664. The 1961 expansion to this industry contained two additional volume-of-business requirements. One required that a business have annual gross sales exceeding $1 million. The other required that a business purchase for resale at least $250,000 in goods "that move or have moved across State lines." § 203(s)(1) (1964); see 75 Stat. 66. Though arguably redundant, the goods "for resale" requirement shows that Congress meant to base coverage on goods still in commerce, even if only intrastate, and not in the hands of ultimate consumers. In considering constitutionality Congress centered its attention on retailers "that purchase or receive goods for resale which move or have moved across State lines," 1961 U.S.Code Cong. & Admin.News at pp. 1662-1663. This provision was "to make doubly certain that coverage of retail and service enterprises remains well within the framework of the present law . . . " (emphasis added). 1961 U.S.Code Cong. & Admin.News at p. 1624. In specifically incorporating the term goods into its new coverage provisions Congress must therefore have specifically intended to include that definition with all its limitations.
12
When Congress again enacted significant amendments in 1966, it did not intend the kind of drastically different results here contended for by the Secretary. The definition of enterprise in § 203(s) was reorganized and the $250,000 volume of goods purchased for resale requirement was deleted. But nothing in the legislative history suggests that Congress thought it was doing anything more than varying the volume requirement. The expansion of coverage of retail employees was significant, but the impact on employees in "miscellaneous services" was expected to be slight. S.Rept.No.1487, 89th Cong., 2d Sess., 1966 U.S.Code Cong. & Admin.News pp. 3002, 3004, 3007, 3013. Thus it was not coincidence or oversight that left the basic definition of goods intact. Congress wanted to reach enterprises still in the stream of commerce, not local enterprises whose only connection with commerce was as consumers of interstate products.
13
We think Congress did not intend by such indirect means and with no clear statement of legislative intent to expand coverage of the Fair Labor Standards Act to every enterprise in the nation doing business of $250,000 a year, which would be the practical result of the approach the Secretary here contends for. Congress recently said it thought that was the effect of its prior amendments, and amended the act to achieve that result.8 But that amendment is prospective only, and Congress' failure to make clear its intentions in 1961 and 1966, if such they were, do not enable us to achieve what Congress itself did not do until 1974. We therefore hold that prior to its amendment in 1974 the Fair Labor Standards Act did not reach enterprises which provided only services to its customers and did not pass on any goods obtained from interstate commerce.9
14
Affirmed.
*
Of the U. S. Court of Claims, sitting by designation
1
The Secretary belatedly noted that the trucks are also goods obtained from interstate commerce, although below he rested on the use of gasoline, oil and other lubricants as the sole tie to interstate commerce. Whether considered in terms of the gasoline or the trucks, however, our analysis is the same
2
This section has since been amended. See footnote 7, infra
3
In each case the court dealt with both goods physically transferred to the customer and goods which were never out of the possession of the business's employees. The case before us could be distinguished on the absence of the former type of goods. However, both courts clearly rejected any such distinction and used an economic rather than physical test that would produce the same results in a case such as that before us
4
A different problem was presented in Brennan v. State of Indiana, --- F.2d --- (CA7, 1975). The Seventh Circuit held that state-run schools and hospitals whose employees handled food and supplies used but not paid for by students and patients were not "ultimate consumers." Non-purchasing students and patients were said to be ultimate consumers. That court was not presented with the "actual physical possession" issue
5
The purpose of putting this exclusion into the crucial definition of goods is to insure that it runs throughout the entire act. It cuts off coverage of the excluded parties as "producers" under the broad definition of that term in § 203(j) and it cuts off liability under the "hot goods" provision of § 215(a). If Congress had wanted to exclude only private, domestic "household" consumers from those two provisions it could have done so in those provisions themselves, or it could have more neatly tailored the definition of goods. As it now stands, the definition of goods is not only not inconsistent with a holding that certain businesses can be ultimate consumers but requires such a holding
The Secretary attempts to refute the obvious meaning of the "ultimate consumer" language by illustrating how it must include a private individual who buys a pair of shoes and carries them across state lines, thus subjecting himself to § 215(a) penalties but for the "ultimate consumer" language, and a domestic servant who prepares a salesman's clothes for an interstate business trip, which would render her a "producer" under § 203(j) but for the same language. This is unpersuasive, for it in no way proves or even suggests that Congress intended to exclude only these non-commercial individuals and did not also intend to exclude many small businesses whose only connection with interstate commerce was as consumers of goods produced in interstate commerce.
6
There is a hint in Maryland v. Wirtz that the Court did not think there was an extension of coverage based on the handling of goods that had previously moved in interstate commerce, 392 U.S. at 188, 88 S.Ct. 2017, 20 L.Ed.2d at 1026. At the least, we think it clear that Congress did intend a significant extension of coverage by the "had been moved" language
7
Wirtz v. Mayer Construction Co., 291 F.Supp. 514, 517-519 (D.C.N.J., 1968); Wirtz v. Edisto Farms Dairy, 242 F.Supp. 1 (D.C.S.C., 1965)
8
Fair Labor Standards Amendments of 1974, P.L. 93-259, 88 Stat. 59. This latest amendment leaves the definition of goods intact but circumvents it by a broader definition of "enterprise engaged in commerce." The new definition includes enterprises with "employees handling, selling, or otherwise working on goods or materials that have been moved in . . . commerce . . . " (emphasis added). See S.Rept. 93-690, 93d Cong., 2d Sess., p. 17 (1974)
9
Compare, e. g., the construction and cleaning industries, referred to in the statute, §§ 203(s)(2) and (3), both of which pass on some physical product, e. g., building materials, and hangers and protective covers, respectively | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1698236/ | 626 So. 2d 93 (1993)
Dennis COWART, Plaintiff-Appellant,
v.
James E. LEE, Superintendent and Concordia Parish School Board, Defendant-Appellee.
No. 93-270.
Court of Appeal of Louisiana, Third Circuit.
November 3, 1993.
Paul Henry Kidd, Monroe, for Dennis Cowart.
Robert Lloyd Hammonds, Baton Rouge, Norman Magee, Ferriday, for James E. Lee, et al.
Before DOMENGEAUX, C.J., and LABORDE and COOKS, JJ.
LABORDE, Judge.
In this case, plaintiff Dennis Cowart appeals the trial court's decision granting defendants' exception of no cause of action. We reverse the decision of the trial court.
FACTS
Plaintiff Dennis Cowart (Cowart), before having his employment terminated by newly appointed Concordia Parish School Board (School Board) superintendent James E. Lee (Lee), was employed by the School Board as its business manager and purchasing agent, a non-tenured position.
According to plaintiff's petition, in exchange for the school board's offering Lee his position, Lee had to agree to fire Cowart from his position and shuffle a host of other employees. According to Cowart's petition, these moves had nothing to do with effective and/or efficient reorganization, or with a reduction in force, but instead were motivated solely by pure political patronage considerations.
Cowart was dismissed from his position on January 7, 1992 as a result of those changes. On February 7, 1992, Cowart filed suit seeking to be reinstated with back pay to his former position. The sole basis of his complaint *94 resides in LSA-R.S. 17:81.5. Cowart alleges the School Board's dismissal without notice or hearing, coupled with its failure to adopt rules and policies for the dismissal of non-tenured employees pursuant to LSA-R.S. 17:81.5 (requiring the invitation of non-tenured employees like plaintiff to participate in the policy or rule-making), violated his statutory and constitutional rights. Cowart requested an injunction; in the alternative, he sought monetary damages.
The School Board and Lee jointly filed a peremptory exception of no cause of action, arguing that Cowart was an "at will" employee who could be terminated at any time or without cause. According to defendants, LSA-R.S. 17:81.5 does not create property rights giving rise to procedural due process safeguards or require non-tenured employees to have notice and a hearing before their dismissal; therefore, plaintiff could be fired "at will," and was.
The trial court rendered judgment on September 17, 1992, maintaining the exception of no cause of action. After giving Cowart fifteen days to amend his petition, the trial court dismissed his suit on November 12, 1992.
ASSIGNMENT OF ERROR
At issue is whether a school board that disregards the clear mandate of LSA-R.S. 17:81.5 to enact standards for dismissing school personnel can refuse to do so, then terminate an employee protected by the provision on a strictly political basis.
Cowart alleges the trial court erred in granting the exception of no cause of action.
When it can reasonably do so, the court should maintain a petition against a peremptory exception so as to afford the litigant an opportunity to present his evidence. Teachers' Retirement System v. Louisiana State Employees' Retirement System, supra [456 So. 2d 594 (La.1984)]; Henson v. St. Paul Fire and Marine Insurance Co., 363 So. 2d 711 (La.1978). The purpose of an exception of no cause of action is to determine the sufficiency in law of the petition and is triable on the face of the papers; for the purpose of determining the issues raised by this exception, the well pleaded facts in the petition and any annexed documents must be accepted as true. Mayer v. Valentine Sugars, Inc., 444 So. 2d 618 (La.1984); Darville v. Texaco, Inc., 447 So. 2d 473 (La.1984); Eschete v. City of New Orleans, 258 La. 133, 245 So. 2d 383 (1971).
Kuebler v. Martin, 578 So. 2d 113, 114 (La. 1991).
La.C.C. art. 2747 provides:
A man is at liberty to dismiss a hired servant attached to his person or family, without assigning any reason for so doing. The servant is also free to depart without assigning any cause.
Under a limited duration contract the parties have agreed to be bound for a certain period during which the employee is not free to depart without assigning cause nor is the employer free to dismiss the employee without assigning any reason for doing so. See Brodhead v. Board of Trustees for State Colleges and Universities, 588 So. 2d 748 (La. App. 1 Cir.1991), writ denied, 590 So. 2d 597 (La.1992). When an employee's job is for an indefinite term, however, the employment is terminable at will of either employer or employee, and the employer is at liberty to dismiss the employee at any time for any reason without incurring liability for the discharge. Thebner v. Xerox Corp., 480 So. 2d 454, 457 (La.App. 3d Cir.1985) (and cites therein), writs denied, 484 So. 2d 139 (La. 1986).
Cowart initially asserts that no public employees may be fired "at will," but we are unable to accept as true this categorical statement.
Absent any specific statutory requirement or contractual agreement regulating the employment relationship of the parties, termination is at the will of either party, and in the case of a governmental entity, termination is at the will of the appointing officer, provided no restraints are placed on his power.
Jackson v. East Baton Rouge Parish Indigent Defenders Board, 353 So. 2d 344 (La. App. 1st Cir.1977), writ denied, 354 So. 2d 1385 (1978). Similarly, the United States *95 Supreme Court stated in Vitarelli v. Seaton, 359 U.S. 535, 79 S. Ct. 968, 3 L. Ed. 2d 1012 (1959) that "in the absence of legislation to the contrary, governmental employment may be terminated at the will of the appointing officer". A mere subjective expectancy of continued employment, without more does not create a property interest which would be protected by procedural due process. See, e.g., Perry v. Sinderman, 408 U.S. 593, 92 S. Ct. 2694, 33 L. Ed. 2d 570 (1972).
Nonetheless, accepting as true the allegations contained in Cowart's petition, we reverse the judgment by the trial court granting defendants' exception. La.R.S. 17:81.5 provides:
§ 81.5. School employees; procedure for dismissal
Not later than January 1, 1988, each city and parish school board shall develop and adopt rules and policies which it shall use in dismissing school employees who have not attained tenure in accordance with applicable provisions of law and whose dismissal is not a result of a reduction in force, as provided for in R.S. 17:81.4. The school board shall provide a procedure by which any employee, whose dismissal is governed by this Section, may participate in the development of the rules and policies. Such rules and policies shall be made available for public inspection within ten days after they are finally adopted.
Cowart argues that defendants' failure to adopt rules and policies mandated by this provision, combined with political chicanery he alleges to have occurred, entitle him to reinstatement to his position as business manager and purchasing agent. We agree.
The rules required by LSA-R.S. 17:81.5 imposed legislative restraints upon the school board designed to purge parochial politics from school employment, first, by requiring that rules be adopted to provide objective criteria for determining whether an employee is to be dismissed from school employment and, second, by ensuring the participation of those most directly affected by the rules and policies before their enactment. In Wilhelm v. Vermilion Parish School Board, 598 So. 2d 699 (La.App. 3 Cir.1992) this court held that non-tenured teachers not protected by the teacher tenure statutes of LSA-R.S. 17:442-443 do not have a protected property interest in their employment which entitles them to procedural due process under LSA-R.S. 17:81.5:
Appellant further argues the legislature, in enacting La.R.S. 17:81.5 intended to afford non-tenured teachers with rights consistent with due process requirements, and as a result, this statute gives her a Constitutional protected interest in continued employment. We disagree. The legislature has provided for the termination of non-tenured as well as tenured teachers in La.R.S. 17:442 and La.R.S. 17:443 respectively. That the legislature has provided for the termination of tenured and non-tenured teachers elsewhere in the revised statutes indicates "school employees" as written in La.R.S. 17:81.5 refers to those school employees who are not teachers.
In contrast with Wilhelm, here we are concerned with a school employee who is not a teacher, and in contrast with Jackson, supra, there is a specific statutory requirement regulating the employment relationship of the employee. That requirement is embodied in LSA-R.S. 17:81.5.
We are unable to accept defendants' argument that, because there is no requirement that the rules or policies enacted pursuant to LSA-R.S. 17:81.5 necessarily impose more than a minimal threshold for terminating employment of nontenured employees, non-tenured employees are entitled to no protection as a consequence of the school board's not having adopted any guidelines. The Louisiana Constitution provides for the creation and recognition of parish school boards, but does so subject to the power of the legislature to enact laws affecting them. La. Const. art. 8. In enacting LSA-R.S. 17:81.5, the people of this state, represented by the Legislature, purposefully sought to remove nontenured school employees from the category of "at will" employees, and in doing so, limited the authority of school boards and their superintendents to hire and fire nontenured, nonteaching personnel without regard to the rights of employees so affected. Cf. Johnson v. Board of Elem. & Secondary Educ., 414 So. 2d 352 (La.1982) (law purporting *96 to grant B.E.S.E. board power to dismiss tenured teachers declared unconstitutional usurpation of teachers' rights and school boards' authority).
Defendants cannot now claim, in light of the allegations made and accepted as true, that nontenured nonteaching school personnel cannot avail themselves of the rights they, and through them, the taxpayer, were given by express statute, solely as a consequence of the school board's apparent disregard for the legislation. In the absence of some properly perfected rules and policies, and by "properly" we mean promulgated in accordance with LSA-R.S. 17:81.5, the supervisor and school board exceeded their authority when they terminated the employment of a nontenured employee in the absence of some demonstrable compelling need.
Because LSA-R.S. 17:81.5 affords non-tenured employees a protected property interest in their employment which entitles them to procedural due process, and through them, the tax paying public whose children are deserving of and legally entitled to the remedy sought by plaintiff, we reverse the judgment of the lower court and remand for further proceedings.[1]
DECREE
For the reasons assigned above, the judgment appealed from is reversed. Costs of this appeal assessed against appellees.
REVERSED AND REMANDED.
DOMENGEAUX, C.J., concurs for the reason that plaintiff was discharged without following the mandate of R.S. 17:81.5.
NOTES
[1] Although plaintiff may well have acted within his rights in seeking to enjoin a public entity from taking unlawful action in direct violation of LSA-R.S. 17:81.5, which specifically prescribes the terms under which a school board may exercise its discretion, see generally La. Associated Gen. Contr. v. Calcasieu, 586 So. 2d 1354 (La. 1991) and cites therein contained, the instant appeal is limited to the trial court's disposition of the exception filed by defendants. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2609308/ | 60 Cal. 2d 303 (1963)
384 P.2d 155
32 Cal. Rptr. 827
LOVI CAMPBELL et al., Plaintiffs and Appellants,
v.
ALLSTATE INSURANCE COMPANY, Defendant and Respondent.
Docket No. S.F. 21322.
Supreme Court of California. In Bank.
August 15, 1963.
*304 Athearn & Athearn, Forden Athearn and Barry M. Wally for Plaintiffs and Appellants.
Walcom & Harmon and Leo J. Walcom for Defendant and Respondent.
GIBSON, C.J.
Plaintiffs brought this action to compel defendant insurer to pay a default judgment they had obtained against its insured, Marvin Hammer. The court, sitting without a jury, denied recovery, and plaintiffs have appealed.
In November 1954 plaintiffs stopped their automobile at a stoplight and were struck from the rear by an automobile driven by Hammer. The police report of the accident states that Hammer was cited for following too closely and for driving with an expired license, that he admitted he had been drinking, and that he refused to give a written statement. He told plaintiffs that he was insured and that "everything would be taken care of."
On the day of the accident Hammer notified defendant by telegram that he had been involved in a collision and that his car had been towed to a certain garage. The telegram contained Hammer's address and policy number, and defendant thereafter tried to contact him at his home and business addresses without success. Messages for him were left with his daughter and estranged wife, but he did not reply. Defendant wrote Hammer two letters stating that a serious personal injury had resulted from the accident, that under a cooperation clause in the policy he was required to give defendant a statement as to his version of the accident, and that *305 defendant was not waiving any of its rights under the policy. The first letter was apparently returned to defendant. Defendant got a signed return receipt for the second letter, but Hammer did not reply.
Plaintiffs filed an action against Hammer for damages resulting from injuries sustained in the accident and notified defendant. They, too, had difficulty in locating Hammer, and their investigation indicated that he had left the state and resided for short periods in Oregon and Illinois. In 1958 plaintiffs learned that Hammer had returned to California and by a "fortuitous circumstance" located him in Salinas. He was served with process in March of that year, and plaintiffs forwarded a copy of the summons and complaint to defendant. Hammer did not communicate with defendant or answer the complaint, and a default judgment was secured which awarded damages of $33,329.91 to one of the plaintiffs and $2,500 to the other.
The policy, under which the insurance for liability to any one person is limited to $10,000, provides that in the event of an accident written notice containing all particulars shall be given "by or for the insured" to defendant as soon as practicable, that, if claim is made or suit is brought against the insured, he shall forward the summons, and that the insured shall cooperate with defendant, disclosing all pertinent facts, and upon defendant's request shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses, and conducting suits. The policy also provides that no action will lie against defendant until all of its terms are complied with. These provisions are made conditions of the coverage for personal injury and property damage liability.
The evidence is clearly sufficient to support the finding of the trial court that Hammer breached the contract of insurance by failing to cooperate with defendant. Plaintiffs contend, however, that the record does not support the further finding that defendant was prejudiced by the breach.
The right of an injured party to sue an insurer on the policy after obtaining judgment against the insured is established by statute. (Ins. Code, § 11580.) [1] An insurer may assert defenses based upon a breach by the insured of a condition of the policy such as a cooperation clause, but the breach cannot be a valid defense unless the insurer was substantially prejudiced thereby. (Hynding v. Home Acc. Ins. Co. (1932) 214 Cal. 743, 746 et seq. [7 P.2d 999, 85 A.L.R. *306 13]; Wormington v. Associated Indem. Corp., 13 Cal. App. 2d 321, 325 [56 P.2d 1254]; Norton v. Central Surety & Ins. Co., 9 Cal. App. 2d 598, 601 [51 P.2d 113]; Panhans v. Associated Indemnity Corp., 8 Cal. App. 2d 532, 533 et seq. [47 P.2d 791]; see Jensen v. Eureka Casualty Co., 10 Cal. App. 2d 706, 708 [52 P.2d 540]; 29A Am.Jur. 584.) Similarly, it has been held that prejudice must be shown with respect to breach of a notice clause. (Abrams v. American Fidelity & Cas. Co., 32 Cal. 2d 233, 237, 239 [195 P.2d 797]; Reed v. Pacific Indemnity Co., 101 Cal. App. 2d 151, 161 [225 P.2d 255]; Gibson v. Colonial Ins. Co., 92 Cal. App. 2d 33, 35-36 [206 P.2d 387]; see National Auto. & Cas. Ins. Co. v. Brown, 197 Cal. App. 2d 605, 608 [17 Cal. Rptr. 347].) We are satisfied that the requirement of prejudice set forth in these decisions is proper. The cases of Valladao v. Fireman's Fund Indem. Co., 13 Cal. 2d 322, 331 [89 P.2d 643], and Purefoy v. Pacific Automobile Indem. Exchange, 5 Cal. 2d 81, 87 [53 P.2d 155], relied upon by defendant, are not contrary to the views expressed herein. In each of those cases the court found that prejudice had been established by the facts proved and that it was therefore unnecessary to determine whether a showing of prejudice should be required.
[2] The burden of proving that a breach of a cooperation clause resulted in prejudice is on the insurer. (Norton v. Central Surety & Ins. Co., 9 Cal. App. 2d 598, 601 [51 P.2d 113]; Panhans v. Associated Indemnity Corp., 8 Cal. App. 2d 532, 533-535 [47 P.2d 791]; Griffin v. Fidelity & Casualty Co. of New York (5th Cir.) 273 F.2d 45, 48; Western Casualty & Surety Co. v. Weimar (9th Cir.) 96 F.2d 635, 636; Jameson v. Farmers Mutual Automobile Ins. Co., 181 Kan. 120 [309 P.2d 394, 400]; Allen v. Cheatum, 351 Mich. 585 [88 N.W.2d 306, 311]; see 29A Am.Jur. 584; Note 60 A.L.R. 2d 1146, 1154.) [3] The only evidence introduced by defendant to show prejudice was the testimony of defendant's regional claim manager that a report by the insured is required to guard against false claims, verify that there has been an accident, and determine liability. Defendant had access to the police report and also knew the location of Hammer's automobile. This gave defendant sufficient opportunity to verify that there had been an accident. The facts indicate that plaintiffs were innocent of fault, that Hammer was negligent, and that defendant would have been liable on its policy even if Hammer had cooperated with it. The evidence is not sufficient to show prejudice and the finding that defendant *307 was prejudiced is without support unless, as urged by defendant, a presumption of prejudice arises from a violation of the cooperation clause.
[4] In reaching its decision, the trial court properly determined that it was bound by Margellini v. Pacific Automobile Ins. Co., 33 Cal. App. 2d 93, 99-100 [91 P.2d 136], where it was reasoned that prejudice "must be presumed" as a matter of law from the breach of a cooperation clause by conduct similar to that involved here. We have concluded, however, that this reasoning is unsound and that Margellini should be disapproved. No statutory basis for the presumption of prejudice has been cited or found, and presumptions should not be created judicially unless there are compelling reasons for doing so. Although it may be difficult for an insurer to prove prejudice in some situations, it ordinarily would be at least as difficult for the injured person to prove a lack of prejudice, which involves proof of a negative. The presumption would not be in keeping with the public policy of this state to provide compensation for those negligently injured in automobile accidents through no fault of their own (Inter-insurance Exchange v. Ohio Cas. Ins. Co., 58 Cal. 2d 142, 153-154 [23 Cal. Rptr. 592, 373 P.2d 640]; Wildman v. Government Employees Ins. Co., 48 Cal. 2d 31, 39 [307 P.2d 359]), and we are of the view that a judicially created presumption of prejudice, whether conclusive or rebuttable, is unwarranted (in accord: Allen v. Cheatum, supra, 351 Mich. 585 [88 N.W.2d 306, 311-312]).
Margellini v. Pacific Automobile Ins. Co., 33 Cal. App. 2d 93, is disapproved insofar as it is inconsistent with the views we have expressed regarding the impropriety of a presumption of prejudice. Statements contrary to our views appearing in Wasson v. Atlantic National Ins. Co., 207 Cal. App. 2d 464, 467 [24 Cal. Rptr. 665], National Auto. & Cas. Ins. Co. v. Brown, 197 Cal. App. 2d 605, 609-610 [17 Cal. Rptr. 347], Security Ins. Co. v. Snyder-Lynch Motors, Inc., 183 Cal. App. 2d 574, 581 [7 Cal. Rptr. 28], and Gibson v. Colonial Ins. Co., 92 Cal. App. 2d 33, 36 [206 P.2d 387], are also disapproved.
The judgment is reversed.
Traynor, J., Schauer, J., McComb, J., Peters, J., Tobriner, J., and Peek, J., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2626349/ | 108 P.3d 1052 (2004)
2005 OK CR 6
Jimmie Ray SLAUGHTER, Appellant
v.
STATE of Oklahoma, Appellee.
No. PCD-2005-77.
Court of Criminal Appeals of Oklahoma.
March 10, 2005.
*1053 Steven M. Presson, Robert W. Jackson, Jackson & Presson, Norman, OK, attorneys for petitioner on appeal.
Seth S. Branham, Assistant Attorney General, Oklahoma City, OK, attorney for the State on appeal.
OPINION DENYING THIRD APPLICATION FOR POST-CONVICTION AND OTHER RELIEF
LUMPKIN, V.P.J.
¶ 1 Petitioner Jimmie Ray Slaughter was convicted of two counts of First Degree Murder in the District Court of Oklahoma County, Case Number CF-1992-82. He was sentenced to death.[1] Petitioner appealed to this Court in Case No. F-1994-1312. We affirmed his convictions and sentences. Slaughter v. State, 1997 OK CR 78, 950 P.2d 839. Rehearing was denied on February 23, 1998. The United States Supreme Court denied certiorari review on October 5, 1998. Slaughter v. Oklahoma, 525 U.S. 886, 119 S. Ct. 199, 142 L. Ed. 2d 163 (1998).
¶ 2 Petitioner filed his first post-conviction application, but we denied relief. Slaughter v. State, 1998 OK CR 63, 969 P.2d 990. The Federal District Court and 10th Circuit Court of Appeals denied habeas relief, and the U.S. Supreme Court denied certiorari. Slaughter v. Mullin, 541 U.S. 947, 124 S. Ct. 1681, 158 L. Ed. 2d 374 (2004).
¶ 3 In March of 2004, Petitioner filed his second application for post-conviction relief. We denied relief in January of 2005. Slaughter v. State, 2005 OK CR 2, 105 P.3d 832.[2] Petitioner then filed this, his third application for post-conviction relief, on January 27, 2005, raising essentially the same issues raised in his second application for post-conviction relief.
*1054 ¶ 4 As we have repeatedly stated in our opinions, Oklahoma's Post-Conviction Procedure Act is not designed or intended to provide applicants repeated appeals of issues that have previously been raised on appeal or could have been raised but were not.[3] Our focus is limited to outcome determinative errors and factual innocence claims. See 22 O.S.2001, § 1089(C)(2).
¶ 5 Nevertheless, a repeating theme in Petitioner's third post-conviction application concerns the somewhat conspiratorial allegation that this Court has relied on procedural bars and has not conducted "merits review" of the claims Petitioner has raised on appeal.[4] Petitioner steadfastly maintains he has made a "clear and convincing showing of actual innocence." However, we continue to find his statements regarding the strength of those innocence claims to be exaggerated and insufficient to merit post-conviction relief.
¶ 6 Be that as it may, this Court's rules and cases do not impede the raising of factual innocence claims at any stage of an appeal. We fully recognize innocence claims are the Post-Conviction Procedure Act's foundation. But in this case we continue to find the evidence presented at trial and on appeal does not support or make a clear and convincing showing of factual innocence.
¶ 7 In proposition one, Petitioner claims "newly discovered" DNA evidence, "new developments" in the field of comparative bullet lead analysis, and "new evidence" of brain fingerprinting demonstrate (1) he is not guilty of murder, (2) no reasonable fact finder could have convicted him of the crimes, and (3) there is now insufficient evidence to support the convictions. We note these claims were previously raised in Petitioner's second post-conviction application.
¶ 8 Regarding brain fingerprinting, we disposed of that claim in our second post-conviction opinion by noting Petitioner never provided the "comprehensive report" regarding the nature of the brain fingerprinting test conducted, the manner in which it was administered, and the results.[5] We thus found the claim was not backed up with sufficient information for us to act upon.
¶ 9 Nothing has changed. The instant post-conviction application omits the same information. Thus, we reject the assertion that brain fingerprinting "evidence" (which he has yet to provide) is entitled to any weight or may have somehow tipped the scales if it had been presented to his jury.[6]
¶ 10 Regarding the "recent DNA testing," we noted in our second post-conviction opinion that Petitioner had failed to timely present supporting documentation regarding that claim, that DNA testing could have been raised as error in prior appeals but was not,[7] and that the so-called "Vicki Mosley" hair was "only one circumstantial, theoretical piece of the puzzle" in a strong evidentiary case of guilt. That being so, we found the post-conviction record lacked sufficient evidence to support a conclusion of factual innocence.
¶ 11 Again, nothing has changed. Petitioner raises the same issue and makes the same arguments regarding the crime scene hair.[8]
*1055 ¶ 12 We acknowledge Miotyping Technologies's lab report indicates Ms. Mosley was excluded as the source of one crime scene hair through mitochondrial DNA testing. But this evidence is far from exculpatory.[9] The trial testimony was that the hair was consistent with Ms. Mosley's hair, not that it was in fact Ms. Mosley's hair. Petitioner's complaint is with the State's arguments and inferences drawn from the evidence, not the evidence itself.
¶ 13 Regarding comparative bullet analysis, our second post-conviction opinion noted the issue was untimely as the research behind this claim was published in July of 2002, nearly two years before Petitioner's instant filing.[10]
¶ 14 Moreover, while it appears comparative bullet lead analysis is coming under fire from some in the scientific community, the bullets fragments here were not identified by that method only. Prior to the lead analysis testimony, the State's firearms experts testified the bullets found at the crime scene were .22 caliber long rifle subsonic bullets with hollow points and no copper wash. One expert testified there were only two brands of that bullet marketed in the U.S. during the relevant time period, the Eley brand from England and RWS made in Germany. Petitioner was in possession of both brands, including the rare Eley brand.[11]
¶ 15 Thus the distinctiveness of these particular bullets is strong evidence of guilt, even if the unobjected-to (and somewhat invited) lead analysis testimony was flawed. This proposition does not warrant post-conviction relief.
¶ 16 In proposition two, Petitioner claims ineffective assistance of his direct appeal counsel resulted in Petitioner's DNA claim being delayed. He claims his counsel should have had the "single hair used to convict" Petitioner DNA tested by mitochondrial procedures during the pendency of his direct appeal.
¶ 17 This claim fails for two reasons. First, we have already found the testing done on the hair, which showed it was not Vicki Mosley's hair, was far from exculpatory. The evidence of guilt remains strong, even without this hair.
¶ 18 Secondly, Petitioner notes he was not considered a candidate for DNA testing because the DNA results alone would not have been exculpatory. Petitioner claims he did not become a viable candidate for the testing until after brain fingerprinting tests were conducted. That being so, his direct appeal counsel cannot be said to have been ineffective for failing to obtain DNA testing, when those efforts would have been fruitless and the results alone would not be exculpatory.
¶ 19 Petitioner has thus failed to show errors by direct appeal counsel that were so serious as to deprive him of effective assistance of counsel. Strickland v. Washington, 466 U.S. 668, 687, 104 S. Ct. 2052, 2064, 80 L. Ed. 2d 674 (1984). Furthermore, we find no miscarriage of justice or substantial violation of a constitutional or statutory right. 20 O.S.2001, § 3001.1.
¶ 20 In proposition three, Petitioner raises the familiar claim that Oklahoma's post-conviction statute, 22 O.S.Supp.2004, § 1089, is unconstitutional under the state and federal constitutions because it prohibits "merits review" of "actual innocence" evidence, thereby depriving inmates of due process of law and resulting in cruel and unusual punishment. Then, in proposition four, Petitioner takes issue with Rule 9.7(G)(3), Rules of the Oklahoma Court of Criminal Appeals, Title 22, Ch. 18, App. (2004), which requires a Petitioner to file subsequent post-conviction *1056 applications "within sixty (60) days from the date the previously unavailable legal or factual basis serving as the basis for a new issue is announced or discovered." Petitioner claims this rule is unconstitutional because, again, it bars review of his actual innocence claims.
¶ 21 However, we reject both propositions, as we find no actual innocence claims in Petitioner's post-conviction filings that have been barred from review. Given the prosecution's accomplice and alternative theories, along with the strong evidence of guilt admitted at trial, it is a gross overstatement to claim that the DNA results from one crime scene hair, the conceivable flaws in comparative bullet lead analysis, and uncorroborated and likely inadmissible brain fingerprinting tests rise to the level of actual innocence claims.[12]
DECISION
¶ 22 After carefully reviewing Petitioner's third application for post-conviction relief, motion for evidentiary hearing, motion for discovery, and motion for stay of execution, we find relief is not warranted, and therefore said application and motions are HEREBY DENIED.
CHAPEL, P.J., and JOHNSON, J.,: concur.
NOTES
[1] Petitioner was also convicted of five counts of perjury.
[2] Petitioner's execution date is currently set for March 15, 2005. A clemency hearing was held on February 15, 2005, and Petitioner was denied relief.
[3] We do not repeat those cases here, as the principles are sufficiently set forth in the opinion rendered just last month in Petitioner's second application for post-conviction relief.
[4] This argument loses strength when considering Petitioner's conviction by a jury of his peers and his various appellate claims that have been rejected seven times by four separate courts.
[5] We also found the issue could have been previously raised in the direct appeal and insufficient evidence to support a conclusion that brain fingerprinting, based solely upon the MERMER effect, would survive a Daubert analysis.
[6] Moreover, the significance of the uncorroborated brain fingerprinting results has been overstated, as the prosecution also theorized that Petitioner acted with an accomplice.
[7] Petitioner now admits this type of testing became available in 1996.
[8] Petitioner argues this hair, a single strand found on a sheet at the crime scene, was used extensively to connect him to the murders. He points to the prosecutor's closing arguments speculating Ms. Mosley, Petitioner's then co-worker, was the source of that hair. (The State's theory was that Petitioner or an accomplice planted or left the hair at the scene. A State expert found the crime scene hair and Ms. Mosley's hair to be microscopically similar.) But because hair comparison evidence has been discredited and Ms. Mosley has been excluded as the donor as per DNA testing, Petitioner claims the strength of the evidence has been compromised.
[9] Petitioner conveniently ignores other strong evidence admitted at trial. See, e.g. Slaughter, 1997 OK CR 78, ¶¶ 147-159, 950 P.2d at 876-879. This would include Cecilia Johnson's actions in mailing Negroid hairs to Petitioner for purpose of planting at the crime scene.
[10] Rule 9.7(B), Rules of the Oklahoma Court of Criminal Appeals, Title 22, Ch. 18, App. (2004).
[11] Eley's bullets comprised .0125-.0116% of the ammunition sold in the U.S. in 1990-91. The RWS bullets were excluded as the bullets found at the crime scene.
[12] Moreover, we find the sixty days provided in Rule 9.7(G) to be a reasonable time period. The rule addresses post-conviction applicants filing subsequent applications. It is wholly reasonable to require these subsequent applicants to notify the Court of "previously unavailable legal or factual" grounds "serving as the basis for a new issue" within sixty days that they are announced or discovered. Once a timely application is filed, an extension of time to further develop the application with added materials pertaining to the timely raised issue can be submitted to the Court. The Court will then determine the merits of the need for additional time on a case-by-case basis. | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1001115/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 99-2207
DORIS PREVETTE,
Plaintiff - Appellant,
versus
KENNETH S. APFEL, COMMISSIONER OF SOCIAL SECURITY,
Defendant - Appellee.
Appeal from the United States District Court for the Western Dis-
trict of North Carolina, at Statesville. Lacy H. Thornburg, Dis-
trict Judge. (CA-97-83-5-T)
Submitted: February 29, 2000 Decided: March 14, 2000
Before MICHAEL and TRAXLER, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
J. Kevin Morton, Winston-Salem, North Carolina, for Appellant.
Mark T. Calloway, United States Attorney, Joseph L. Brinkley,
Assistant United States Attorney, Charlotte, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Doris Prevette appeals the district court’s order adopting the
magistrate judge’s report and recommendation granting the Commis-
sioner’s motion for summary judgment in Prevette’s action for sup-
plemental security income benefits and affirming the Commissioner’s
determination that Prevette is not disabled. See Prevette v.
Apfel, No. CA-97-83-5-T (W.D.N.C. Aug. 9, 1999). We have reviewed
the record and the district court’s opinion and find no reversible
err. We conclude the Commissioner’s decision is supported by sub-
stantial evidence. See Richardson v. Perales, 402 U.S. 389, 401
(1971). Accordingly, we affirm. We dispense with oral argument
because the facts and legal contentions are adequately presented in
the materials before the court and argument would not aid the
decisional process.
AFFIRMED
2 | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2131201/ | 914 F.Supp. 133 (1996)
Jacqueline PRUETT, Plaintiff,
v.
Joyce DUMAS, Bill Weeks, Dan Camp, Debra Hicks, and Catherine Jones, Individually, and in Their Official Capacities as Members of the Board of Trustees of the Starkville School District, Defendants.
No. 1:95CV83-S-D.
United States District Court, N.D. Mississippi, Eastern Division.
January 31, 1996.
*134 *135 George C. McKee, Miss. State, MS, for Plaintiff.
Dolton W. McAlpin, Starkville, MS, for Defendants.
OPINION
SENTER, Chief Judge.
First year librarian Jacqueline Pruett brought this § 1983 action seeking damages from the Board of Trustees of the Starkville, Mississippi, School District for its refusal to renew her contract. Ms. Pruett alleges that the school board's action violated both her substantive and due process rights under the Fifth and Fourteenth Amendments to the U.S. Constitution. As both parties have agreed that there are no genuine issues of material fact, the instant case is appropriately postured for a judgment as a matter of law. See Fed.R.Civ.P. 56(c).
Facts
The plaintiff, Ms. Pruett, was a certified professional teacher under a one-year contract with the Starkville school district. She was specifically employed as the school librarian at Ward Elementary. On February 4, 1994, Ms. Pruett volunteered to temporarily teach the "alternative class," (comprised of students with discipline problems), because the regular teacher was going to be late that morning. Shortly after arriving in the classroom, a fourth grade student began to act unruly and disrupt the morning's activities. The incident which ultimately gave rise to the case sub judice occurred when the child rapidly moved behind Ms. Pruett while she was writing on the chalkboard with her back to the class. When she turned around and discovered the child standing inches from her face, she was startled and slapped the student with her open palm.
This episode resulted in the suspension of Ms. Pruett's employment for the duration of the school year. In the letter Ms. Pruett received notifying her of the suspension, the district superintendent labeled her slap of the student "unprofessional conduct as well as brutal treatment of a pupil." The letter also informed Ms. Pruett of her right to a hearing before the school board, which she requested and received. At the hearing, Ms. Pruett presented numerous witnesses and had the opportunity to introduce all exculpatory evidence. Despite Ms. Pruett's explanation of the incident, the school board determined that although Ms. Pruett's action was an uncontrollable reflex, the child's sudden movement was nonthreatening. Additionally, the board found that the blow to the child's cheek was substantial, and caused him to cry in the classroom and later report to the principal's office crying. The members concluded that the slap of a student is unacceptable under any circumstances and was particularly so in this instance due to the child's age. Thus, the board voted to uphold the suspension.
Pursuant to Miss.Code Ann. § 37-9-101 et seq., Ms. Pruett appealed the board's decision to the Chancery Court of Oktibbeha County, Mississippi. Prior to the chancellor's issuance of an opinion, the statutory period for extending school employment contracts arrived on April 1. Both the district superintendent and the school board agreed that because Ms. Pruett had not completed the school year, they were bound by policy not to offer her a new contract. Ms. Pruett was again notified that, similar to the suspension procedure, she had the right under the *136 School Employment Procedures Act to request a hearing and contest the nonrenewal. However, Ms. Pruett chose not to appeal the district's decision, thereby effectively waiving her right to an appeal under state law.
A few months later, the chancellor issued an opinion in which he reversed the board's initial decision and overturned Ms. Pruett's suspension. The court found that because the slap was unintentional, it could not be labeled "brutal treatment." Thus, the chancellor held that the board's decision to suspend Ms. Pruett was arbitrary and capricious, and he ordered the district to pay her $5,885.10 in withheld wages.
Shortly after the Chancellor's decision applying state law, Ms. Pruett filed the instant action in federal court.
DISCUSSION
Ms. Pruett has asserted that the nonrenewal of her employment contract violated her due process rights under the Fifth and Fourteenth Amendments to the United States Constitution. However, she did not allege any action by the federal government. The Fifth Amendment restricts the powers of the federal government and does not apply to state actions. Harrington v. Lauer, 888 F.Supp. 616, 619 (D.N.J.1995). The Fourteenth Amendment applies to actions by the state. San Francisco Arts & Athletics, Inc. v. U.S. Olympic Committee, 483 U.S. 522, 543 n. 21, 107 S.Ct. 2971, 2984 n. 21, 97 L.Ed.2d 427 (1987). Thus, the Fifth Amendment is an inappropriate vehicle for seeking redress of plaintiff's alleged injuries, and summary judgment is granted in favor of defendants as to that portion of this claim.
Although plaintiff's complaint and brief are less than precise as to the exact nature of the instant action, it seems that Pruett's claim does not directly relate to her suspension, but rather to the nonrenewal of her contract.[1] Although such a conclusion is contrary to the defendants' assertions, Mrs. Pruett's fundamental contention is that she was "wrongfully terminated." In other words, her argument appears to be grounded in the assertion that the Board's decision not to renew her contract was based on her suspension, and since the suspension was found to be wrongful, then the nonrenewal of her contract therefore must also be wrongful.[2] However, the issue before this court does not involve whether the school board properly complied with state law in deciding not to renew Pruett's contract. Pruett did not choose to appeal the board's refusal to rehire her,[3] and this court's function is not to place itself in the role of the Chancellor and determine whether the board was correct. Staheli v. University of Mississippi, 854 F.2d 121, 124 n. 2 (5th Cir.1988).
Coupled with the fact that the court's jurisdiction in the instant case is premised upon 42 U.S.C. § 1983, the defendants have claimed they are shielded from liability based *137 on qualified immunity. Therefore, the court's focus at this juncture is limited to the narrow issue of whether the school board infringed upon Pruett's constitutional liberties. Siegert v. Gilley, 500 U.S. 226, 231, 111 S.Ct. 1789, 1792-93, 114 L.Ed.2d 277 (1991); Mount Healthy City Board of Ed. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d. 471 (1977). In this regard, Pruett alleges that the Board's refusal to rehire her deprived her of the protections of two Constitutional guarantees: the right to both substantive and procedural due process. However, Ms. Pruett failed to address the more fundamental concern of whether the board deprived her of a constitutionally protected interest.
The Due Process Clause of the Fourteenth Amendment provides that "[n]o State shall ... deprive any person of life, liberty, or property, without due process of law." U.S. Const.Amend XIV. It is evident from this clear language that the threshold requirement of any due process claim, be it substantive or procedural, is a showing that the government deprived the plaintiff of a liberty or property interest. See Moore v. Mississippi Valley State University, 871 F.2d 545, 548 (5th Cir.1989); Brennan v. Stewart, 834 F.2d 1248, 1257 (5th Cir.1988). Absent such a demonstration, no right to due process can accrue.
PROPERTY INTEREST
A property interest in continued employment with the Starkville School District could only arise if Ms. Pruett had a legitimate claim of entitlement to her teaching job, a claim that would limit the employer's ability to refuse to renew her employment. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). State law determines whether such a property interest exists. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 538-39, 105 S.Ct. 1487, 1491-92, 84 L.Ed.2d 494 (1985).
The Mississippi statutes relevant to this question provide that the school administrators do not need to demonstrate good cause in justifying a decision not to renew a teacher's contract.[4] Miss.Code Ann. § 37-9-101, et seq; Mississippi Employment Sec. Com'n. v. Philadelphia Mun. Separate School Dist., 437 So.2d 388, 396-97 (Miss. 1983). Such decisions constitute a subjective determination made by the superintendent and are ultimately approved by the school board. See Mississippi Employment Sec. Com'n., 437 So.2d at 392-94, n. 4. In Olim v. Wakinekona, the U.S. Supreme Court held that when the receipt of a benefit is conditioned upon the discretionary decision of an administrator, there is no legitimate claim of entitlement to the benefit. Olim v. Wakinekona, 461 U.S. 238, 103 S.Ct. 1741, 75 L.Ed.2d 813 (1983); see Wicks v. Mississippi Valley State Univ., 536 So.2d 20, 23 (Miss. 1988). Olim would be inapplicable to Ms. Pruett's situation if her contract provided for continued employment and if she could have only been terminated for good cause. See also Cleveland Bd. of Educ., 470 U.S. at 538-39, 105 S.Ct. at 1491-92 (1985). However, as evinced above, the relevant contract in this instance was not so restrictive. Therefore, because the legislature had expressly disavowed any implication that the applicable statutes had created a tenure system, and the board's representations and conduct had provided Pruett no basis to justify a belief that her contract would be renewed, Pruett did not possess a property interest in continued employment.
It is true that a property interest existed during the span of Pruett's contract period, and therefore, any dismissal or termination of her contract would have triggered all the protections inherent within the Due Process *138 clause. McDonald v. Mims, 577 F.2d 951, 952 (5th Cir.1978); Harris v. Canton Pub. School Bd. of Ed., 655 So.2d 898, 902 (Miss. 1995). However, the instant case does not involve a dismissal, but is instead founded upon the nonrenewal of a contract. Pruett only possessed a property interest in the continuation of her employment for the specified contractual period. After Pruett's contract had expired, she did have certain procedural rights, but she did not have a protected property interest in her teaching position. Housley v. North Panola Consol. School Dist., 656 F.Supp. 1087, 1090-91 (N.D.Miss. 1987). Therefore, as Pruett cannot demonstrate the existence of an entitlement to continued employment, she must present proof that the school board deprived her of a constitutionally protected liberty interest to maintain her cause of action.
LIBERTY INTEREST
A constitutional deprivation of liberty occurs when there is some injury to employment or employment opportunities in addition to damage to reputation and a subsequent denial of procedural due process to redress that injury. Although Pruett's brief failed to address the liberty or property interest prong of due process analysis, the possible liberty interests which are implicated in Ms. Pruett's circumstance include harm to her reputation, harm to her above mentioned expectation of continued employment, and harm to her opportunity to obtain future employment. However, none of these interests assert a cognizable claim in this instance.
The court has demonstrated above that Pruett did not have a sufficient interest in her continued employment to allow her alleged injury to constitute the deprivation of a protected interest. Secondly, mere allegations of damage to one's reputation or the impairment of future employment prospects fail to state a claim of denial of a constitutional right. Texas v. Thompson, 70 F.3d 390, 392 (5th Cir.1995) (citing Siegert, 500 U.S. at 233-34, 111 S.Ct. at 1793-94). Thus, Ms. Pruett has failed to assert a liberty interest, and her alleged injuries cannot gain redress under the Fourteenth Amendment.
In the alternative, assuming that Pruett could demonstrate the deprivation of a sufficient interest to implicate constitutional safeguards, the Supreme Court has identified three categories of § 1983 claims that may be brought against the state pursuant to the Due Process Clause. Curro v. Watson, 884 F.Supp. 708, 716 (E.D.N.Y.1995) (citing Zinermon v. Burch, 494 U.S. 113, 125, 110 S.Ct. 975, 983, 108 L.Ed.2d 100 (1990)). Ms. Pruett's cause of action does not fall within the first of these examples, as she does not assert a violation of any of the rights protected by the Bill of Rights (e.g., she does not allege that her contract was not renewed due to the exercise of her free speech rights). See Zinermon, 494 U.S. at 113, 110 S.Ct. at 976-77.
"Second, the Due Process Clause contains a substantive component that bars certain arbitrary, wrongful government actions `regardless of the fairness of the procedures used to implement them.'" Id. (quoting Daniels v. Williams, 474 U.S. 327, 331, 106 S.Ct. 662, 664, 88 L.Ed.2d 662 (1986)). Again however, Ms. Pruett cannot assert a right vouchsafed to her by the Fourteenth Amendment. For plaintiff's claim to fall with the aegis of substantive due process protection, the court would have to find that the board's action was not rationally related to some legitimate governmental interest. However, the decision not to rehire Ms. Pruett complied fully with the legitimate purposes of the applicable Mississippi statutes. The statutory provisions do not require a superintendent and school board to justify their employment decisions with a showing of cause. This allows the school district to extend or not extend contracts with only the best interests of the educational system in mind, independent of any concerns regarding the creation of tenure for a particular employee. Therefore, as the legitimate end of the statute was to provide the districts the freedom to determine what employees were necessary to serve best the students in their care, the court finds that a rational relationship exists between this goal and the nonrenewal of Ms. Pruett's one year contract.
*139 Lastly, a § 1983 action also may be brought for a violation of procedural due process. In this third category however, "the deprivation by state action of a constitutionally protected interest in `life, liberty or property' is not in itself unconstitutional; what is unconstitutional is the deprivation of such an interest without due process of law." Zinermon, 494 U.S. at 125, 110 S.Ct. at 983 (emphasis in original) (quoting Parratt v. Taylor, 451 U.S. 527, 535, 101 S.Ct. 1908, 1913, 68 L.Ed.2d 420 (1981)). Such protection necessarily presupposes that a public employer has unconstitutionally deprived its employee of due process if it discharges her under stigmatizing circumstances without giving the employee an opportunity to clear her name. Arrington v. County of Dallas, 970 F.2d 1441, 1447 (5th Cir.1992). In order to maintain a cause of action in such a circumstance, a plaintiff must prove:
(1) that she was a public employee; (2) that she was discharged; (3) that stigmatizing charges were made against her in connection with his discharge; (4) that the charges were false; (5) that the charges were made public; (6) that she requested a name-clearing hearing; and (7) that the hearing was denied.
Arrington, 970 F.2d at 1447.
Without discussing the merits of the initial five elements of this standard, it is clear from the record that this aspect of Pruett's claim must fail. The circumstances of Pruett's nonrenewal simply do not satisfy the final two requirements of the Fifth Circuit's test. It is an uncontested fact that Pruett was offered a hearing at the time the board approved the decision not to renew her contract. It is also uncontested that Pruett failed to avail herself of this "name-clearing" opportunity. In applying these circumstances to the Arrington standard, not only did Pruett not request a hearing, but when the board offered her the opportunity of an appeal, she refused. Id. See In re Selcraig, 705 F.2d 789, 796 (5th Cir.1983) (state need only inform allegedly stigmatized employee that opportunity to clear name exists upon request).
Therefore, Pruett has not satisfied the threshold requirements of a due process violation, nor has she properly rebutted defendant's claim of qualified immunity, in that she failed to establish a deprivation of either a property or a liberty interest. Moreover, even when the court provides Pruett the benefit of assuming that she was deprived of certain liberty interests, her particular injuries only implicate procedural guarantees (which the school board satisfied), and do not properly give rise to substantive due process rights. In re Selcraig, 705 F.2d at 796. It is clear then that Pruett's alleged injuries did not represent deprivations of a protected interest, and alternatively, any potential harm was remedied through the board's provision of all of the process and constitutional protections mandated in such a circumstance.
It should be noted that the court empathizes with Ms. Pruett due to the circumstances she has been forced to endure as a result of this incident. There is no evidence that she was not, and is not, a fine educator. Nor is it alleged that she did not sincerely care about those children in her charge. However, it must be reiterated that every alleged wrong does not have a federal remedy, and more specifically, every unfortunate nonrenewal of an employment contract does not give rise to a claim under the U.S. Constitution. Absent evidence that a state actor deprived a plaintiff of a constitutionally protected interest, no federal cause of action can be maintained.
The court therefore holds that for the above stated reasons, Ms. Pruett has failed to state a claim upon which relief can be granted, and the entry of judgment as a matter of law in favor of the defendants is warranted.
An ORDER in accordance with this opinion shall be filed contemporaneously herewith.
FINAL JUDGMENT
Pursuant to an opinion filed contemporaneously herewith, it is ORDERED:
The defendants' motion for summary judgment is well taken, and all claims are dismissed with prejudice.
SO ORDERED.
NOTES
[1] Pursuant to the doctrine of res judicata, any claim founded upon the initial suspension of Ms. Pruett's employment would be precluded by the decision and remedy previously afforded by the Chancellor. See McIntosh v. Johnson, 649 So.2d 190, 192-93 (Miss.1995).
[2] Ms. Pruett further contends that the board knew when it upheld the suspension that her noncompletion of the school year would provide it the basis to refuse to renew her contract. Thus, she avers that her suspension constituted a "de facto termination." Accordingly, she asserts that at the time of her suspension, the board should have afforded her notice of the fact that her contract would not be renewed. However, the court refuses to accept Ms. Pruett's de facto termination argument. In addition to the fact that she failed to cite any case law applicable to this issue, the relevant Mississippi statute requires that notice of a nonrenewal decision is to be given within the same time period that the superintendent provides notice of contract extensions. Miss.Code Ann. § 37-9-105. The statute does not require the provision of notice at that imprecise moment when the board may speculate that a particular teacher's contract will not be renewed. The school district complied with the statute's mandates, thereby providing Ms. Pruett the process she was owed. A contrary holding in accordance with the plaintiff's proposed rule would balance the law of procedural due process on a board member's abilities at conjecture and prophesy as to future employment decisions. This the court cannot do.
[3] The fact that Pruett failed to take advantage of the hearing that the board offered her does not in and of itself foreclose her federal claim. The Fifth Circuit has held that "the exhaustion of available state administrative remedies is not a prerequisite to commencement of an action in federal court under § 1983." Brantley v. Surles, 718 F.2d 1354, 1360 (5th Cir.1983).
[4] The grounds for nonrenewal and the procedures to be followed are outlined in the School Employment Procedures Law, sections 37-9-101 et seq., which states:
It is the intent of the legislature to establish procedures for providing public school employees notice of the reasons for not offering an employee a renewal of his contract, to provide an opportunity for the employee to present matters in extenuation or exculpation to enable the Board to determine whether the recommendation of non-employment is a proper employment decision and not contrary to law, and not to establish a system of tenure or require that all decisions of nonreemployment be based upon cause with respect to employment in the school district. [Emphasis added]. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2235835/ | 929 N.E.2d 785 (2010)
WIGGINS
v.
STATE.
Supreme Court of Indiana.
February 25, 2010.
Transfer denied. All Justices concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2127076/ | 311 F.Supp. 1184 (1970)
CROMPTON-RICHMOND CO., Inc., Factors, Plaintiff,
v.
UNITED STATES of America, Defendant.
UNITED STATES of America, Defendant and Third Party Plaintiff,
v.
Bernard MONDRY, Anne Mondry, Vincent De Sousa and Philip Pushkin, Third-Party Defendants.
No. 66 Civ. 3632.
United States District Court, S. D. New York.
April 24, 1970.
Whitney North Seymour, Jr., U. S. Atty. for the Southern District of New York, for the United States; by Richard M. Hall, Asst. U. S. Atty., New York City.
Schwab & Goldberg, New York City, for third-party defendant De Sousa; David E. Schwab, II, and Richard Dannay, New York City, of counsel.
MANSFIELD, District Judge.
Vincent De Sousa, a third-party defendant, moves for summary judgment pursuant to Rule 56, F.R.Civ.P., claiming that a tax penalty against him has been *1185 abated and the Internal Revenue Service ("IRS") cannot therefore reinstate it against him. For the reasons stated below the motion is denied.
In April, 1964, the IRS assessed the penalty tax in question against Crompton-Richmond Co., Inc. ("Crompton-Richmond"), pursuant to 26 U.S.C. § 6672,[1] based on the failure of a bankrupt, Dynamic Techniques, Inc., to pay withholding income and employment taxes during the period from January 29, 1963, through March 31, 1963. Crompton-Richmond paid the assessment in May, 1965, and on October 31, 1966, instituted the present suit for a refund, claiming that it is not liable for Dynamic's failure to collect and pay the withholding taxes.
At the time when it assessed the full penalty tax against Crompton-Richmond the IRS believed that there were several other persons responsible for the bankrupt's dereliction, including Vincent De Sousa, Bernard Mondry, Anne Mondry and Philip Pushkin. Although each of these persons could have likewise been assessed the penalty tax under the terms of § 6672, IRS policy and practice has been to collect the 100% penalty assessment only once. However, when Crompton-Richmond sued for a refund and contested its liability, the Government, pursuant to a motion granted by Judge Frankel on August 7, 1967, Crompton-Richmond Co., Factors v. United States, 273 F.Supp. 219 (S.D.N.Y.1967), filed a third-party claim herein against De Sousa, the Mondrys and Pushkin, apparently for the purpose of protecting itself against the possibility that Crompton-Richmond might prevail. The third-party defendants then appeared and have since defended the third-party action against them.
On November 7, 1967, the District Director of the IRS for Brooklyn, who had the obligation to collect the penalty, requested an adjustment from the North Atlantic Region Service Center of the IRS to abate the assessment against De Sousa because Crompton-Richmond had already paid the penalty. His request was based on the already-mentioned IRS policy and practice to the effect that while the IRS has the power to assess the same tax penalty against several parties whose obligations the IRS considers to be like joint and several liability, see Kelly v. Lethert, 362 F.2d 629, 635 (8th Cir. 1966); cf. Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289 (1931); Crompton-Richmond Co., Factors v. United States, supra, payment of the assessment by one party abates the obligation of all the others. On September 25, 1968, the District Director's request was rejected for the reason that an abatement could properly be granted only upon expiration of the statutory period for commencement of a refund suit or, if a refund suit is filed, upon final adjudication of the action. Since Crompton-Richmond's refund suit was still pending, the assessment against De Sousa could not be abated.
In the meantime, on September 9, 1968, the District Director, not having received a reply to his first request, addressed a second Request for Adjustment to the Service Center. On April 24, 1969, the latter notified De Sousa that the $8,703.83 assessment against him had been abated. It is clear that the District Director's second request and the Regional Service Center's issuance of the abatement represented plain ordinary clerical or bookkeeping errors arising out of the failure of some IRS office personnel to appreciate that there was a pending *1186 refund suit. When the IRS discovered the error, it immediately reversed its decision to abate and notified De Sousa of the reinstatement of the assessment on June 9, 1969.
The issue presented is under what circumstances the IRS may reinstate an assessment which has been mistakenly abated, once the running of the statute of limitations precludes a new assessment for the same tax liability.[2]
Title 26 U.S.C. § 6404 authorizes the IRS to abate an unpaid assessment whenever it
"(a) * * *
"(1) is excessive in amount, or
"(2) is assessed after the expiration of the period of limitation properly applicable thereto, or
"(3) is erroneously or illegally assessed [or] * * *
"(c) * * * the Secretary or his delegate determines under uniform rules prescribed by the Secretary or his delegate that the administration and collection costs involved would not warrant collection of the amount due."
An assessment abated under (a) (1), supra, is thereby cancelled and cannot be resurrected if the IRS later decides that its decision was incorrect. United States v. Turk, 290 F.Supp. 588 (N.D.Ohio 1968); Carlin v. United States, 100 F. Supp. 451, 121 Ct.Cl. 643 (1951); McCutchen v. Commissioner, 16 B.T.A. 569 (1929); Carney Coal Co. v. Commissioner, 10 B.T.A. 1397 (1928). On the other hand, the IRS can revive an assessment abated under (c), supra, because the abatement of an uncollectible tax, according to IRS regulations, is not deemed to have cancelled the tax. In effect the IRS excuses its collector's obligation (in this case the Brooklyn District Director) to account for the tax liability, but does not excuse the taxpayer's liability. Since the assessment is thus not eliminated, the IRS can revive it if the abatement has been erroneously made. Kroyer v. United States, 55 F.2d 495, 73 Ct.Cl. 591 (1932); Carlin v. United States, supra; Sugar Run Coal Mining Co. v. United States, 21 F.Supp. 10 (E.D.Pa.1937).
The Government suggests that the situation here is most closely analogous to an abatement of an uncollectible tax (part (c), supra) because the IRS could not "collect" from De Sousa if Crompton-Richmond proved unsuccessful in its suit for refund. De Sousa, on the other hand, argues that the assessment is properly characterized as "excessive" (part (a) (1)), because the Government may collect the penalty only once, even though it can hold various parties liable for its payment. See Kelly v. Lethert, supra; cf. Crompton-Richmond Co., Factors v. United States, supra. Since Crompton-Richmond has already paid the total penalty, argues De Sousa, payment by him would be "excessive."
We lean toward acceptance of the Government's characterization of the assessment rather than that urged by De Sousa. But even if we accepted the latter the assessment would not become "excessive" until the tax was finally and irrevocably paid. As long as Crompton-Richmond's refund suit is still pending, there is the possibility that a refund will be granted, which would have the effect of cancelling or nullifying the effectiveness of the payment. Thus, regardless whether De Sousa's or the Government's analysis is adopted,[3] the abatement could be cancelled *1187 and the assessment reinstated against De Sousa.
In any event, the motion fails for still another reason. A distinction must be drawn between a substantive reconsideration of the taxpayer's liability by the IRS and a clerical error committed by the IRS that has the same effect. Whenever an abatement is issued because of a mistake of fact or bookkeeping error, the assessment can be reinstated, at least so long as this does not prejudice the taxpayer. The situation here parallels that in Kroyer v. United States, 55 F.2d 495, 73 Ct.Cl. 591 (1932), where, because of bookkeeping errors that occurred as a result of confusion arising from two additional tax assessments and the taxpayer's transfer of his residence to another tax collection district, the Commissioner mistakenly abated a valid assessment and accepted payment by a surety upon an invalid one. In holding that the Government was not bound by the abatement the court stated:
"A fortiori we think it would follow that the government was not bound by some action of one of its officers resulting from a mistake of fact which, when such action was corrected, left the whole matter in such a situation that the party complaining had received no injury and been done no injustice." (55 F.2d at 499)
The situation here, on the other hand, is distinguishable in significant respects from cases cited by De Sousa, where the IRS issued an abatement only after review of additional assessments upon the merits and after re-evaluation of the tax-payer's liability, rather than because of clerical errors or mistakes of fact. See Carney Coal Co. v. Commissioner, 10 B.T.A. 1397 (1928). In this latter situation the Commissioner is understandably precluded from cancelling an abatement and reinstating an assessment merely because, upon further consideration, he has decided to change his position.
The abatement issued here by the Regional Director was not in response to any protest by De Sousa and was not made after reconsideration of his liability. The error was administrative rather than substantive. The Government is not bound by such errors of its agents, at least in the absence of any showing of prejudice to the taxpayer, and no such prejudice is shown here. Kroyer v. United States, supra 55 F.2d at 499.
The motion is denied.
It is so ordered.
NOTES
[1] 26 U.S.C. § 6672 provides:
"Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 for any offense to which this section is applicable."
[2] If the statute of limitations has not run, the IRS may simply make a new assessment of the tax liability that had been abated. Berry v. Westover, 70 F.Supp. 537 (S.D.Calif.1947); Sokolow, Exr. v. Commissioner, 22 B.T.A. 349 (Ct.Cl. 1931).
[3] The form submitted by the District Director in which he sought an abatement does not help identify the statutory authority upon which the Regional Center acted. Written in the broadest of language, it simply notes that the penalty was paid by Crompton-Richmond and that an abatement was therefore proper as to De Sousa's liability. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2031609/ | 99 Ill. 2d 401 (1984)
459 N.E.2d 963
DENNIS BERRY, Appellee,
v.
THE INDUSTRIAL COMMISSION et al., (A.O. Smith Corporation, Appellant).
No. 58332.
Supreme Court of Illinois.
Opinion filed January 20, 1984.
*402 *403 Eric Robertson and Edward C. Fitzhenry, Jr., of Lueders, Robertson & Konzen, of Granite City, for appellant.
Andrew T. Nalefski, of Lakin & Herndon, P.C., of East Alton, for appellee.
Judgment reversed.
CHIEF JUSTICE RYAN delivered the opinion of the court:
In this workers' compensation case, an arbitrator found that claimant, Dennis Berry, suffered accidental injuries while employed by the A.O. Smith Corporation and awarded him medical payments, a sum representing 44 weeks of temporary total disability, and compensation for permanent loss of 5% of the man under the Workers' Compensation Act (Ill. Rev. Stat. 1979, ch. 48, par. 138.1 et seq.). On review, without taking additional evidence, the Industrial Commission reversed the arbitrator's award, finding that the claimant had failed to prove that the accident caused any temporary or permanent disability, or need for medical care. The circuit court of Madison County set aside the Commission's decision as against the manifest weight of the evidence and ordered that the claimant "have judgment against the [employer] in the amounts stated in the arbitrator's decision, together with all taxable interest, costs and fees." The employer appealed under our Rule 302(a) (87 Ill.2d R. 302(a)).
The claimant was involved in an automobile accident in September 1978. In that accident he suffered injuries *404 to his back. He received treatment for those back injuries from Dr. Robert Bolton and had consulted Dr. Bolton for those injuries as late as November 21, 1979. Claimant had obtained pain pills for those problems from the employer's dispensary on December 13, 1979, approximately three weeks before his industrial accident.
The claimant testified that on January 2, 1980, while at work, he felt a "pop" and pain in his back after lifting one of the 28-pound bars which he routinely lifted on his job. He received pain pills for this from the employer's dispensary on the day of the accident. The employer's operation shut down at the close of work that day and did not reopen. The claimant consulted his physician, Dr. Bolton, on January 4, 1980. Dr. Bolton testified that on that date, the claimant complained that the weather was aggravating his back, however, claimant denied making such a statement. The claimant also denied that his back problems before the industrial accident included his lower back.
Dr. Bolton testified, however, that the lower back was injured by the automobile accident. Dr. Bolton recalled finding muscle spasms in the lumbar-spine area during the January 4, 1980, consultation, but conceded that this finding was not noted on claimant's chart despite his custom of noting significant, objective findings, such as spasms. He did not X ray claimant's lumbar spine until February 1, 1980. Dr. Bolton stated it was his considered medical opinion that the industrial accident could have aggravated the preexisting injury, rendering the claimant unable to work. He also was of the opinion that the industrial accident would be a cause of permanent injury, osteoarthritis, in the "distant future." He conceded that there were no objective findings to support this conclusion. He admitted that he had previously, before the industrial accident, predicted that claimant would in the future suffer from osteoarthritis as a result of the automobile *405 accident.
Dr. Charles I. Mannis testified for the employer based upon his single examination of the claimant on April 12, 1980. He found no muscle spasms. Dr. Mannis took an X ray of claimant's back which revealed a congenital deformity of the lumbar spine. He found no reason to limit the claimant's work. Dr. Mannis testified that the prior back injuries could be the cause of the post-January 2, 1980, pain complained of by the claimant. He conceded that the industrial accident might also be a cause. It was Dr. Mannis' opinion that there was no objective evidence to support an opinion that claimant suffered a permanent injury.
In its order setting aside the decision of the Commission, the circuit court commented that the arbitrator was in a significantly better position to view witnesses, to weigh the testimony, and to determine the weight to be given to the evidence than was the Commission. This comment ignores the fact that it is the peculiar province of the Industrial Commission to determine the credibility of witnesses, to weigh the testimony, and to determine the weight to be given to the evidence. Regardless of whether or not the Commission hears testimony in addition to that heard by the arbitrator, it exercises original jurisdiction and is in no way bound by the arbitrator's findings. Seiber v. Industrial Com. (1980), 82 Ill. 2d 87, 97; Orr v. Industrial Com. (1970), 47 Ill. 2d 242, 243.
Claimant argues that there is in fact no testimony contradicting Dr. Bolton's statement that the industrial accident aggravated claimant's preexisting back condition. It is his contention that Dr. Mannis' testimony does not contradict this opinion. Therefore, since the evidence on this issue is uncontradicted, claimant argues, the decision of the Commission must be set aside. We do not view the evidence in this light. Dr. Mannis testified that the automobile accident may have caused the problems *406 which claimant now complains of. Also, Dr. Mannis found no reason to limit the claimant's work. In addition to this contradictory testimony, there were several matters relating to claimant's and Dr. Bolton's testimony that could be viewed by the Commission as detracting from its credibility. The Commission made specific findings of fact. Its findings as to Dr. Bolton's testimony highlight the parts of that testimony which cast doubts on the conclusions the doctor reached. As to Dr. Bolton's testimony, the Commission found:
"Petitioner testified that on January 4, 1980 he saw Dr. Bolton, who had previously treated him for back injuries sustained in a car accident. Although Dr. Bolton testified he found muscle spasm on January 4, he had no written record of any findings on that date, and although he said it was his custom to note any significant changes or findings or problems in his records, he did not record any results for straight leg raising, reflex, neurological, and sensory tests, because they were negative. On January 4, 1980 Dr. Bolton only took x-rays of Petitioner's thoracic spine, which was one of the areas involved in the earlier auto accident, and treated Petitioner for scoliosis. He did not take x-rays of the lumbar spine, which Petitioner claims he injured, until February 1. Dr. Bolton also said he performed no neurological examinations of Petitioner subsequent to January 4, 1980, and his records contained no notations of changes or problems found in his monthly reevaluation examinations, and while he testified that Petitioner had been and remained unable to work, and had sustained permanent disability because in 10 years he would develop osteoarthritis, he had no objective findings to support these conclusions. Based on the above, the Commission finds Dr. Bolton's records show no change in Petitioner's preexisting back conditions as a result of the accident on January 2, 1980."
Resolving conflicts in the evidence, drawing inferences from the testimony, and determining the credibility of witnesses and the weight to be given their testimony are matters within the province of the Industrial Commission. The *407 Commission is entitled to draw reasonable inferences from both direct, and circumstantial, evidence. A court will not disregard those permissible inferences merely because other inferences might have been drawn. (Long v. Industrial Com. (1979), 76 Ill. 2d 561.) In Long, this court stated:
"Cases involving aggravation of a preexisting condition concern primarily medical questions and not legal ones. Therefore, a finding of fact by the Commission on this issue, based on any medical testimony or on inferences to be drawn from medical testimony, should be given substantial deference because of the expertise acquired by the Commission in this area. (See 1 A. Larson, Workmen's Compensation sec. 12.20, at 3-316 to 3-329 (1978).)" Long v. Industrial Com. (1979), 76 Ill. 2d 561, 565-66.
We conclude that the evidence and the legitimate inferences that can be drawn from the evidence support the decision of the Industrial Commission, and that its decision is not contrary to the manifest weight of the evidence. The circuit court erred in setting aside the decision of the Industrial Commission. We therefore reverse the judgment of the circuit court of Madison County.
Judgment reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1904657/ | 401 B.R. 377 (2009)
In re Larry Gene ENGLUND and Marianne Englund, Debtors.
Larry Gene Englund and Marianne Englund, Debtors-Appellants,
v.
SBS Financial Services, Inc., Creditor-Appellee.
No. 08-6049.
United States Bankruptcy Appellate Panel of the Eighth Circuit.
Submitted: January 30, 2009.
Filed: February 19, 2009.
Patrick T. Dougherty, Sioux Falls, SD, for appellant.
Before MAHONEY, SCHERMER, and VENTERS, Bankruptcy Judges.
PER CURIAM.
This an appeal of the bankruptcy court's order denying the Debtors' motion for contempt against creditor SBS Financial Services, Inc. for alleged violations of the discharge injunction. The motion was denied on purely procedural grounds; the bankruptcy court concluded that the Debtors were required to file an adversary proceeding under Federal Rule of Bankruptcy Procedure 7001instead of a motionbecause they sought to recover monetary damages from SBS Financial. We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158(b).
*378 Federal Rule of Bankruptcy Procedure 9020 specifically states that motions for contempt are governed by Rule 9014the rule under which contested motions are brought. The fact that a motion for contempt seeks monetary damages does not transform the action into one that must be pursued as an adversary proceeding.[1] Federal Rule of Bankruptcy Procedure 9014 provides essentially the same due process requirements for contested matters that are applicable to adversary proceedings and should alleviate any concerns the bankruptcy court might have for the creditor's due process protections.
Accordingly, the bankruptcy court's order is reversed and the matter is remanded for further proceedings.
NOTES
[1] See, e.g., In re Zumbrun, 88 B.R. 250, 252 (9th Cir. BAP 1988); In re Bock, 297 B.R. 22, 32 (Bankr.W.D.N.C.2002). See also Budget Service Co. v. Better Homes of Virginia, 804 F.2d 289, 291 (4th Cir. 1986) (granting motion for monetary sanctions for violation of automatic stay). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2181798/ | 50 F. Supp. 356 (1943)
LYNCH
v.
ROGAN.
No. 2484.
District Court, S. D. California, Central Division.
May 21, 1943.
Earl E. Moss, of Los Angeles, Cal., for plaintiff.
Leo V. Silverstein, U. S. Atty., E. H. Mitchell, Asst. U. S. Atty., and Eugene Harpole, Sp. Atty., Bureau of Internal Revenue, all of Los Angeles, Cal., for defendant.
O'CONNOR, District Judge.
This is an action by E. A. Lynch as trustee of the estate of American Realty and Development Company, a corporation, bankrupt, to recover $395.24 representing overpaid income taxes for the year 1936.
The name of the bankrupt, American Realty and Development Company, was previously the American Recovery Company, which duly and legally changed its name to that of American Realty and Development Company.
On March 15, 1937 the plaintiff filed a federal income tax return for the year 1936, disclosing income taxes to be due for said year in the amount of $2,197.31, which sum has been duly assessed by the Commissioner of Internal Revenue. That of the said sum reported to be due as income taxes for the year 1936, the sum of $1,647.76 has been paid in three installments, the last of which was on September 15, 1937. On September 28, 1938, the plaintiff filed its voluntary petition in bankruptcy and was adjudicated a bankrupt. The plaintiff has been the duly appointed, qualified and acting trustee of the estate of American Realty & Development Company since October 14, 1938.
The Referee in Bankruptcy determined that the plaintiff overpaid its income taxes for the year 1936. Not until June 7, 1940 did the plaintiff file its claim for refund of $395.24 of the income taxes paid for the year 1936. On January 10, 1942, the claim for refund was rejected. The plaintiff was authorized by the Referee in Bankruptcy to commence and maintain this action on August 15, 1942. The government asserts the statute of limitations in defense of its rejection of the plaintiff's claim for refund. Therefore, the sole issue in controversy is whether the plaintiff can maintain this action.
Section 322(b) (1), Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Code, § 322(b), *357 provides: "Unless a claim for credit or refund is filed by the taxpayer within three years from the time the return was filed by the taxpayer or within two years from the time the tax was paid, no credit or refund shall be allowed or made after the expiration of whichever of such periods expires the later. If no return is filed by the taxpayer, then no credit or refund shall be allowed or made after two years from the time the tax was paid, unless before the expiration of such period a claim therefor is filed by the taxpayer." In its reply brief the "plaintiff concedes that the various decisions cited by the government correctly construe Section 322(b) of the Revenue Act of 1936, concerning the period of limitation within which a claim for refund may be filed, and unless Section 11, sub. e of the Bankruptcy Act extends the time for the filing of such a claim, plaintiff's complaint does not state a cause of action."
Section 11, sub. e of the Chandler Act, 11 U.S.C.A. § 29, sub. e states: "A receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as the Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitation fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy. Where, by any agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for presenting or filing any claim, proof of claim, proof of loss, demand, notice, or the like, or where in any proceeding, judicial or otherwise, a period of limitation is fixed, either in such proceeding or by applicable Federal or State law, for taking any action, filing any claim or pleading, or doing any act, and where in any such case such period had not expired at the date of the filing of the petition in bankruptcy, the receiver or trustee of the bankrupt may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the bankrupt, within a period of sixty days subsequent to the date of adjudication or within such further period as may be permitted by the agreement, or in the proceeding or by applicable Federal or State law, as the case may be."
Application of sections 11, sub. e supra, 11 U.S.C.A. § 29, sub. e, and 322(b) (1) of the Revenue Act to the facts clearly discloses a limitation upon any action by the plaintiff for refund in the following manner: Pursuant to sec. 322(b) (1), Revenue Act of 1936, the plaintiff was allowed until March 15, 1940 in which to file its claim for refund. The claim was not filed until June 7, 1940. Therefore any rights under this statute were barred.
The intervening adjudication in bankruptcy on September 28, 1938, as contended by the plaintiff, extended the period in which to file the claim until September 28, 1940 pursuant to sec. 11, sub. e of the Chandler Act, 11 U.S.C.A. § 29, sub. e. An examination of the language of this statute does not justify the plaintiff's position. The statute permits the receiver or trustee to "institute proceedings" within the time allowed. Did the filing of the claim for refund constitute the institution of a proceeding within the contemplation of sec. 11, sub. e supra? Mr. Collier in his work on Bankruptcy states with reference to section 11, subdivision e: "Subdivision e operates as a statute of limitations on suits brought in behalf of the estate by the receiver or trustee. The language of the subdivision clearly indicates that it has reference to suits initated subsequent to the time of bankruptcy * * *." 1 Collier on Bankruptcy, 1186, 14th Ed. 2 Bouv. Law Dict., Rawle's Third Rev., p. 2730. The article assumes without expressly declaring that the action authorized by this subdivision of the act contemplated legal proceedings rather than mere formalities of filing a claim for refund. Provision for the action taken by the plaintiff in filing its claim for refund is prescribed in the second sentence of section 11, subdivision e, which is inapplicable under the facts. The failure to file the claim prior to March 15, 1940 precluded the plaintiff from thereafter asserting any right to a refund. "No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, * * * until a claim for refund or credit has been duly filed with the Commissioner * * *" 26 U.S.C.A. Int.Rev.Code, § 3772. The filing of the claim for refund is a condition precedent to maintaining a suit or proceeding. Bryan v. United States, 10 Cir., 99 F.2d 549, certiorari denied 305 U.S. 661, 59 S. Ct. 364, 83 L. Ed. 429. "Application for refund of alleged excessive tax is condition precedent to jurisdiction of court. Red Wing Malting Co. v. Willcuts, [8 Cir.], 15 F.2d 626, 49 A.L.R. 459, certiorari denied 273 U.S. 763, 47 S. Ct. 476, 71 *358 L.Ed. 879, * * *." 26 U.S.C.A. Int. Rev.Code, § 3772, Note 125.
In view of the conclusion heretofore reached and the authorities cited the plaintiff has failed to state a cause of action cognizable in this court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1549000/ | 161 B.R. 794 (1993)
In re Stephen B. SAULS, Jr. and Theresa Sauls, Debtors.
Bankruptcy No. 93-43446-H5-13.
United States Bankruptcy Court, S.D. Texas, Houston Division.
December 21, 1993.
*795 Mary A. Daffin, Houston, TX, for Mellon Mortg. Co., creditor.
Hallie W. Gill, Houston, TX, for debtors.
ORDER DENYING CONFIRMATION OF DEBTOR'S CHAPTER 13 PLAN
KAREN KENNEDY BROWN, Bankruptcy Judge.
Before the Court are debtor's plan and objections to confirmation of the plan filed by creditor, Mellon Mortgage Company. This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§ 1334, and 157(b)(2)(A) and (L). This is a core proceeding.
Mellon Mortgage Company (the "mortgage company") holds a secured claim against the debtor of $8,169.52 in arrearage. The debtor does not dispute this amount and allocates $8170.00 to the mortgage company in the Amended Chapter 13 Plan filed on October 13, 1993. At issue is the appropriate rate of postpetition interest to be paid on the claimed arrearage over the term of the plan.
The debtor's plan proposes a rate of 8.0%. The mortgage company claims that the appropriate rate is the contract rate of 10.5% as provided in the note and deed of trust. In support of this contention the mortgage company cites 11 U.S.C. § 1322(b)(2) which provides, in pertinent part, that a Chapter 13 plan may "modify the rights of holders of secured claims, other than a claim secured only by an interest in real property that is the debtor's principal residence" (emphasis added). This provision contrasts with 11 U.S.C. § 1322(b)(5) which allows for the curing of defaults on claims on which the last payment is due after the date on which the final payment under the plan is due. At issue is whether a mortgagee's post-petition interest rate is simply an aspect of debtor's permitted "cure" or a "right" of the mortgagee which cannot be modified.
In Nobelman v. American Savings Bank, ___ U.S. ___, 113 S.Ct. 2106, 124 L.Ed.2d 228 (1993), the Supreme Court determined that,
The bank's rights . . . are reflected in the relevant mortgage instruments, which are enforceable under Texas law. They include the right to repayment of the principal in monthly installments over a fixed term at specified adjustable rates of interest, the right to retain the lien until the debt is paid off, the right to accelerate the loan upon default and to proceed against petitioner's residence by foreclosure and public sale, and the right to bring an action to recover any deficiency remaining after foreclosure . . . These are the rights that were "bargained for by the mortgagor and the mortgagee," . . . and are rights protected from modification by § 1322(b)(2).
Nobelman, ___ U.S. at ___, 113 S.Ct. at 2110.
The Supreme Court acknowledged that the lender's powers to enforce its rights is checked by the Bankruptcy Code's automatic stay provision. ___ U.S. at ___, 113 S.Ct. at 2110. The Court further stated that section 1322(b)(5)'s limitations on the lender's rights are independent of the debtor's plan and a debtor's plan cannot significantly modify contractual rights. Id.
*796 The Trustee suggests that a mortgage company is only entitled to the present value of its claim under section 1325(a)(5) and cites to Rake v. Wade, ___ U.S. ___, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993) as supporting payment of present value for an oversecured creditor. In fact, the Rake opinion specifically states that it expresses no view on the appropriate rate of interest that debtors must pay on arrearages cured pursuant to section 1322(b)(5). ___ U.S. at ___ n. 8, 113 S.Ct. at 2192 n. 8. Therefore, although the language at footnote 9 of that opinion suggests that the rights of the mortgagee may be affected by the cure permitted debtor, the opinion clearly states that it does not address the appropriate interest rate to be paid on arrearages.
The trustee further implies that the provisions of section 1325(a)(5) and its legislative history override the provisions of section 1322(b)(2) but these provisions are not in conflict. Section 1325(a)(5) simply provides that the value to be provided on a secured claim under the plan is not less than the allowed amount of such claim, while section 1322(a)(5) provides further protection for the claim of the mortgagee. While the market rate of interest no doubt provides for the present value of the allowed amount of a secured claim this analysis does not end or limit the Court's inquiry into the rights of the mortgagee which may not be modified under section 1322(b)(2) and the appropriate interest rate to be paid on arrearages under the plan.
The Court concludes that the appropriate rate of interest to be paid on a mortgagee's arrearages under a chapter 13 plan is the non-default contract rate unless the particular facts of a case show some other rate to be appropriate.
Applying the rule in Nobelman to the facts of the instant case, the Court DENIES confirmation of the debtors' plan; it is further ORDERED that the debtors shall file an amended plan providing for the payment of the contract rate of 10.5% on the arrearage within 20 days. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2594008/ | 843 F.Supp. 1451 (1994)
Jeff A. SMITH
v.
BALLY'S HOLIDAY, Great American Finance Company, and Mutual Acceptance Finance Company.
No. 1:93-cv-1247-RCF.
United States District Court, N.D. Georgia, Atlanta Division.
February 16, 1994.
*1452 Don Miller Jones, Office of Don M. Jones, Loganville, GA, for plaintiff.
Forrest W. Hunter, Charles Herrick Morgan, Alston & Bird, Atlanta, GA, for defendants.
ORDER
RICHARD C. FREEMAN, Senior District Judge.
This action is before the court on plaintiff's motion to remand [# 2-1]. Defendants oppose the motion.
Background
This action, which essentially sounds in tort, was removed on the basis of diversity jurisdiction (28 U.S.C. § 1332) by defendants from the Superior Court of Gwinnett County, Georgia. Plaintiff now moves the court to remand this action back to the state court, due to defendants' alleged failure to remove the action in a timely manner. Plaintiff asserts that defendants should have known from the face of the complaint that plaintiff seeks damages, compensatory plus punitive, in excess of $50,000.00, the jurisdictional requirement set by the § 1332.[1]
According to 28 U.S.C. § 1446(b), the statute authorizing removal, "The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant ... of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based ..." It is this thirty-day limitation upon which plaintiff's argument rests.
Defendants, on the other hand, base their argument in part upon the second paragraph of § 1446(b), which states: "If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant ... of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable ..." Defendants argue that they had no way of knowing from the face of the complaint that plaintiff sought damages in excess of $50,000.00. They contend that they were unaware of the amount of damages sought until plaintiff's counsel contacted opposing counsel via telephone and informed defense counsel that damages would be sought "in the six-figure range." See Exhibit A to Notice of Removal, Affidavit of Charles H. Morgan, at ¶ 5. Soon thereafter, defendants filed their notice of removal.
The court disagrees with plaintiff's contention that removal was untimely. However, it does find that defendants' notice of removal was filed prematurely, and thus remands this case to the state court.
Discussion
A. Were Defendants Untimely in Filing Their Notice of Removal?
The court cannot agree that defendants "should have known" from the face of *1453 the complaint that plaintiff's claim satisfied the jurisdictional amount. Though the test for jurisdictional amounts is one of liberality, Burns v. Anderson, 502 F.2d 970, 971 (5th Cir.1974),[2] a defendant should not be required to read between the lines to discern dollar figures plaintiff has not seen fit to specify in his or her complaint. On this point, the court finds the case of Gaitor v. Peninsular and Occidental Steamship Co., 287 F.2d 252 (5th Cir.1961), controlling. In Gaitor, the plaintiff sought damages "no more specific than in excess of $5,000.00.'" Id., at 253. The former Fifth Circuit found this language to constitute "nebulous mathematical phraseology," which was deemed too indefinite to support diversity jurisdiction. See id., at 254-55. Specifically, court held: "We cannot construe the complaint's words `in excess of $5,000.00' as `exceeding the sum or value of $10,000.00' [the pre-amendment jurisdictional amount] in the words of 28 U.S.C. § 1332, which proscription is mandatory as a limitation on federal jurisdiction in diversity cases." Id. at 254. Therefore, the Gaitor court concluded that "even though the complaint here might show diversity of citizenship authorizing removal ..., the amount in controversy being open was ground for remand." Id. at 254-55 (emphasis added).[3]
The court finds little in the instant case to distinguish Gaitor. Indeed, but for the fact that punitive damages are claimed by plaintiff in this action, the cases are identical on their operative facts.[4] The punitive damages claimed by plaintiff are even more "nebulous" than his alleged compensatory damages, inasmuch as he does not allege any dollar amount whatsoever in the complaint. Just as the uncertain nature of the compensatory damages requested in Gaitor justified remand, the uncertain nature of punitive damages can be fatal to jurisdiction. See Lindsey v. Alabama Tel. Co., 576 F.2d 593, 595 (5th Cir.1978) (even though plaintiff specified $1 million in punitive damages to be divided among the class members, there was "no way to ascertain the number of class members, and thus no way to determine if the amount in controversy requirement was satisfied" as to each class member). Such is the case here. Thus, the court cannot agree that defendants should have known from the face of plaintiff's complaint that the instant action was removable.[5] The court must therefore determine whether, if at any time, defendants received satisfactory notice that plaintiff was claiming damages in excess of $50,000.00, and therefore that the action was removable.
B. Were Defendants Premature in Filing Their Notice of Removal?
As previously noted, when an action is not immediately removable at the time of filing of the complaint, such as in the case at bar, a defendant has 30 days from the date of *1454 receipt of a copy of "an amended pleading, motion, order or other paper" that indicates the action has become removable. 28 U.S.C. § 1446(b) (emphasis added). Both defendants and plaintiff alike concede that defendants have received no amended pleading, motion, order or any other written vehicle communicating the nature of plaintiff's damage claims. See Motion for Remand, at 3; Brief in Opposition, at 9. Instead, defendants admit that the "notice of removability" i.e., that damages would be sought "in the six figure range" came via oral communication between counsel for the opposing litigants. The question before the court is whether an oral notice of this type triggers the second paragraph of § 1446(b).
The court is aware of, and defendants have cited, no binding precedent that allows an oral communication to satisfy the statute. The court has found, however, numerous district court opinions (and one non-binding circuit court opinion) indicating that the "the plain purpose of [the second paragraph of § 1446(b)] is to permit the removal period to begin only after the defendant is able to ascertain intelligently that the requisites of removability are present." First National Bank v. Johnson & Johnson, 455 F.Supp. 361, 362 n. 2 (E.D.Ark.1978). Accord Heniford v. American Motors Sales Corp., 471 F.Supp. 328, 334 (D.S.C.1979), dismissed without opinion, 622 F.2d 584 (4th Cir.1980) (same); Mike Silverman & Assoc. v. Drai, 659 F.Supp. 741, 746 (C.D.Cal.1987) (same); De Bry v. Transamerica Corp., 601 F.2d 480, 489 (10th Cir.1979) (same); Perimeter Lighting, Inc. v. Karlton, 456 F.Supp. 355, 358 (N.D.Ga.1978) (O'Kelley, C.J.) (same). A defendant can "intelligently ascertain" notice of the requisites of removability from either formal or informal communications. See, e.g., Hessler v. Armstrong World Industries, Inc., 684 F.Supp. 393, 394-95 (D.C.Del.1988) ("clear purpose of § 1446(b) `is to commence the running of the thirty-day period once the defendant receives actual notice that the case has become removable, which may be communicated in a formal or informal manner'") (quoting 14A Wright, Miller, et al. Federal Practice and Procedure § 3732, at 520); Decubas v. Norfolk Southern Corp., 683 F.Supp. 259, 262 (M.D.Ga.1988) (same).
A review of the caselaw developed under the second paragraph of § 1446(b) indicates a wide spectrum of opinion on how "formal" or "informal" the notice must be in order to satisfy the statute. For example, some courts have held that oral statements in deposition testimony that illuminate the removability of the action do trigger the running of the statute. See, e.g., Brooks v. Solomon Co., 542 F.Supp. 1229, 1230 (N.D.Ala.1982); Fuqua v. Gulf, C. & S.F.R.R., 206 F.Supp. 814, 816 (E.D.Okla.1962); Gilardi v. Atchison, T. & S.F.R.R., 189 F.Supp. 82, 84 (N.D.Ill.1960). See also, Hessler, 684 F.Supp. at 394-95 (in-court statements by plaintiff's counsel constitute "other paper" within the meaning of the statute); Heniford, 471 F.Supp. at 334 (same); First National Bank, 455 F.Supp. at 362 (plaintiff's motion to dismiss non-diverse defendant granted in open court sufficient to trigger statute); Drai, 659 F.Supp. at 746 (telephone call from plaintiff's counsel to defense counsel informing latter of dismissal of non-diverse defendant sufficient under statute).
On the other hand, some courts have been less willing to broadly construe § 1446(b)'s notice requirements. See, e.g., Gottlieb v. Firestone Steel Products Co., 524 F.Supp. 1137, 1139 (E.D.Pa.1981) ("The `plain language' of the statute ... defies an interpretation that the `other paper' requirement can be met by reference to conversations between counsel which purportedly discussed plaintiff's apparent de facto dismissal of the non-diverse [defendants]."); Bonnell v. Seaboard Air Line Ry., 202 F.Supp. 53, 55 (N.D.Fla.1962) ("mere [letter] correspondence" does not constitute "other paper," nor does deposition testimony that establishes plaintiff's damages at "30% disability," because latter form of notice would require defendants "to translate percentage disability into a substantially larger dollars and cents claim," and would "require the court to assume too much in order to confer jurisdiction."); Pepsico, Inc. v. Wendy's Int'l, Inc., 118 F.R.D. 38, 42 (S.D.N.Y.1987) (notice received from source other than papers or proceedings in the case at bar not sufficient under statute); Gruner v. Blakeman, 517 F.Supp. 357, 361 (D.Conn.1981) (notice received *1455 from court order in litigation external to case not sufficient under the statute); Avco Corp. v. Local 1010 of the International Union, 287 F.Supp. 132-33 (D.Conn.1968) (same).
Having considered the aforementioned decisions and the facts of the instant case, the court finds that oral communication between counsel, not reduced to writing (or not capable of immediate reduction to writing), and not of a nature any more specific than that damages would be sought "in the six-figure range," does not satisfy the language of § 1446(b). Several reasons contribute to the court's decision.
First, the bulk of the cases that broadly construe the second paragraph of § 1446(b) to include oral statements involve oral statements that were reduced to writing at the time of making. Depositions and statements in open court, of course, are recorded by a court reporter and made into a transcript. The only decision the court can locate which did not involve such simultaneous reduction of the communication in question, but wherein a court did find § 1446(b) triggered, was Mike Silverman, supra. As previously noted, the district court in that case held that informing opposing counsel via telephone that a non-diverse defendant had already been dismissed allowed removal and distinguished the case from Gottlieb, supra, wherein the telephone conversation concerned a dismissal that had not yet occurred, thereby preventing removal. See Mike Silverman, 659 F.Supp. at 746 and n. 10 (distinguishing Gottlieb).
This case is more like Gottlieb than Mike Silverman, because the damage demand in this case (i.e., "in the six-figure range") was uncertain in nature. In Mike Silverman, the import of the communication, i.e., whether the non-diverse defendant was dismissed, could be objectively, independently verified. In fact, whether the phone conversation had occurred or not, the dismissal in Mike Silverman should have been recorded on the docket, or in some other fashion, thus triggering the statute anyway. Such was not the case in Gottlieb, and such is not the case here.
In addition, this court agrees with the district court in Gottlieb that the plain language of the statute does not leave room to "wiggle" oral communications into its meaning. On the range of communications considered "formal" to "informal," an amended complaint specifying exact damages is the zenith and an unrecorded phone call is the nadir. Especially given the nebulous context of the non-recorded phone call at issue in this case, the court is unwilling to torture the meaning of the second paragraph of § 1446(b) to include communications of this sort.
Furthermore, the court agrees with the Gottlieb court that:
The removal statute is designed to provide a "uniform and definite" time for a defendant to remove an action. [cit. omitted]. Defendants should not be required to "guess" when a case becomes removable. To hold otherwise would require defendants to resolve questions as to removability in favor of early, and perhaps unwarranted, removal. Such a situation would create havoc on the dockets of both state and federal courts....
Gottlieb, 524 F.Supp. at 1140-41. The court finds that this action has been removed in just such an early, unwarranted fashion.
Finally, this court finds an additional policy reason for remanding this case. Even if the language in the statute could accommodate an expansive interpretation to include oral communications between counsel, the court believes a contrary decision would set the stage, and the precedent, for future affidavit battles over the contents of a phone call. There is little danger that oral statements in open court or in a deposition will be mistranscribed, and any mistake therein is likely to be immediately addressed. Given the nature of settlement negotiations (a likely setting for telephonic conversations between counsel), and the natural combative tendencies of litigation counsel in general, there can be no assurance whatsoever that even a sworn affidavit by an officer of the court will be free of "spin doctoring" upon the contents of the purported conversation. For this reason, the court finds it a better practice to interpret § 1446(b) as requiring either writings or oral communications with very little *1456 possibility of lasting misinterpretation (i.e., an oral communication that is either transcribed or otherwise simultaneously reduced to a physical format).[6]
C. Summary
In light of the foregoing, the court finds that neither paragraph of § 1446(b) has been triggered. That is, the complaint did not belie jurisdiction on its face, and no copy of an amended pleading, motion, order, or other paper revealing removability has been received by defendants. The court therefore concludes that removal was premature, thus necessitating remand to state court.[7]
Conclusion
Accordingly, plaintiff's motion to remand [# 2-1] is GRANTED. The Clerk is DIRECTED to REMAND this action to the Superior Court of Gwinnett County, and to CLOSE this action.
SO ORDERED.
NOTES
[1] Plaintiff's complaint seeks compensatory damages "in excess of $14,000.00," and punitive damages of an unspecified amount. Complaint, ¶¶ 5-6.
[2] All decisions of the former Fifth Circuit decided prior to October 1, 1981 are binding precedent for the Eleventh Circuit. Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc).
[3] The Gaitor court went on to note that a defendant need not always be victimized by "nebulous mathematical phraseology" in a complaint because the removal statute also permits removal after it is shown "by amended pleading, motion, order or other paper" that removal is proper. Id. at 255. This provision of the statute forms the next step in the court's inquiry. See infra, pp. 1453-1454.
[4] Punitive damages and compensatory damages may be aggregated for the purpose of satisfying the jurisdictional amount, so long as punitive damages are recoverable on the complaint. Bell v. Preferred Life Assur. Soc. of Montgomery, Al., 320 U.S. 238, 239-240, 64 S.Ct. 5, 6, 88 L.Ed. 15 (1943). In Georgia, whose law controls this action, punitive damages are recoverable "in such tort actions in which it is proven by clear and convincing evidence that the defendant's actions showed willful misconduct, malice, fraud, wantonness, oppression, or that entire want of care which would raise the presumption of conscious indifference to consequences." O.C.G.A. § 51-12-5.1(b). Most punitive damages are capped at an award of $250,000.00. See O.C.G.A. § 51-12-5.1(g).
[5] The court also rejects plaintiff's argument that defendants had a duty to investigate the damages that might be claimed by plaintiff. See Chapman v. Powermatic, Inc., 969 F.2d 160, 163-64 (5th Cir.1992) (finding no affirmative duty to investigate). This case is not one in which the facts as pleaded belie a high level of damages. Cf. Turner v. Wilson Foods, Inc., 711 F.Supp. 624, 626 (N.D.Ga.1989) (Hall, J.) (complaint alleging severe burns and other injuries placed defendants on notice that damages would exceed the jurisdictional amount).
[6] The court notes additionally that the time limits in the statute, while not jurisdictional in nature, are mandatory, and are to be construed against conferring federal jurisdiction. Holiday v. Travelers Ins. Co., 666 F.Supp. 1286, 1290 (W.D.Ark. 1987) (citing Wright, Miller et al., supra, at 527).
[7] Defendants implicitly complain that if the court orders remand until such time as plaintiff chooses to put his demands in writing, then too much jurisdictional power would be placed in the hands of plaintiff. Even if such is the case, the vagaries of our system allow a plaintiff to choose his or her forum until such time as a federal statute compels a contrary venue. The court would not be surprised to see this case back in federal court especially if a carefully drafted, specific interrogatory to plaintiff regarding the amount of punitive damages sought (which would constitute "other paper" for the purposes of § 1446(b)) is propounded and answered. Until the statute is satisfied, however, defendants must meet plaintiff in state court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2596390/ | 795 F. Supp. 391 (1992)
UNITED STATES of America, Plaintiff,
v.
CERTAIN ACCOUNTS, TOGETHER WITH ALL MONIES ON DEPOSIT THEREIN, et al., Defendants.
No. 91-1018-CIV.
United States District Court, S.D. Florida.
February 21, 1992.
*392 Kathy Stark, Asst. U.S. Atty., Miami, Fla., for plaintiff.
Brian S. Keif, Guy R. Strafer, Ana Barnett, Henry Bolz, Alan Fine, Donald Bierman, Barry D. Hunter, George Volsky, Stephen Gillman, Jose A. Casal, Miami, Fla., Jack Blumefeld, Coral Gables, Fla., for defendants.
OMNIBUS ORDER ON CLAIMANTS' MOTIONS TO DISMISS
JAMES LAWRENCE KING, District Judge.
THIS CAUSE comes before the Court on several Claimants' Motions to Dismiss the government's Verified Complaint. The Court, having reviewed the motions, memoranda, and affidavits submitted in support of and in opposition to Claimants' motions, and having heard the oral argument of counsel, rules as follows:
I. ALLEGATIONS OF THE VERIFIED COMPLAINT
By this action, the government seeks to forfeit all monies on deposit in thirty-one bank accounts as funds involved in or traceable to money laundering, pursuant to 18 U.S.C.A. § 981 (Supp.1991). The suit stems from the arrest of an individual named Zapata, who "attempted to assault" a U.S. Customs Special Agent with a machine gun. Compl. at ¶ 5. Zapata apparently was a "smurf," meaning that he would go from bank to bank and conduct multiple cash transactions in amounts just below the reporting threshold of 31 U.S.C. *393 § 5322.[1] At the time of his arrest, Zapata possessed receipts for approximately one million dollars in money orders, and two overnight letter invoices allegedly used to ship the money orders for deposit into various bank accounts. He also possessed a handwritten list of bank accounts into which he had deposited "a substantial sum" of money orders. Id. The Complaint does not allege that the cash itself was proceeds of any illegal activity, such as narcotics trafficking. The Complaint does not state that Zapata was convicted of any money laundering offense.
The Complaint alleges that "some of the money orders" for which Zapata had receipts at the time of his arrest were subsequently deposited into accounts in New York and Florida. Id. Several of the banking institutions in New York who sold money orders to Zapata have indicated that these money orders were subsequently deposited into certain accounts in Florida. Id. The accounts that received money order deposits hereinafter will be referred to as "direct recipient accounts."[2] The government seeks to forfeit the entire balance of the Florida direct recipient accounts as currency or proceeds traceable thereto utilized in a financial transaction which was designed to evade federal reporting requirements.[3] The Complaint separately identifies these four defendant accounts by bank, account number, and owner. Id. at ¶ 11 (I-IV).[4] As to each of these accounts, the government alleges that money orders purchased in New York on or about March 5, 1991 were shipped via overnight carrier to Miami, and negotiated into the direct recipient accounts on or about March 15, 1991. Id.
The government also seeks forfeiture of some twenty-seven Florida indirect recipient accounts.[5] The Complaint alleges that checks drawn on New York direct accounts were negotiated into each of the arrested indirect accounts. There exists a wide disparity between indirect accounts as to the amount and frequency of these suspect transactions. For example, an account containing $159,277.66 maintained in the name of "Cutlery Foundation" received sixteen deposits from seven direct accounts, totalling in excess of $62,000.00; in contrast, an account containing $49,037.78 maintained in the name of Arie Eidelman received a single check for $1,500.00. Most of the remaining accounts fall between these two extremes, having received several checks drawn on New York direct accounts. The indirect accounts were identified by U.S. Customs Agents and other law enforcement personnel, who reviewed bank records prepared by "forensic accountants." Compl. at ¶ 12. The Complaint alleges that checks written against the direct accounts were signed by the accountholder in blank, and then transported to unknown individuals in Medellin, Colombia and Caracas, Venezuela. Id. at ¶ 10. Certain checks were subsequently made out to various indirect accountholder payees, and then deposited into the Florida accounts at issue. Id.
II. ANALYSIS
To date, nine Claimants have filed motions to dismiss.[6] Each of the motions *394 challenges the sufficiency of the Complaint under the Supplemental Rules of Certain Admiralty and Maritime Claims ("Supplemental Rules"). The gravamen of Claimants' arguments is that the Verified Complaint fails to satisfy the heightened pleading requirements established by the Supplemental Rules. This claim is much more than a quibble over a technical defect in the pleadings cured easily by later amendment. The filing of a Complaint in a civil forfeiture action has far-reaching consequences for those who claim ownership of defendant property. The property in the usual case is immediately seized and held pending resolution on the merits, solely on the basis of the Complaint's allegations. Moreover, the filing of the Complaint also necessarily exposes any potential claimant to the extensive discovery allowed by the Federal Rules of Civil Procedure. The importance of this stage of forfeiture litigation demands a thorough review of the complaint by the district court.
A. PLEADING REQUIREMENTS UNDER THE SUPPLEMENTAL RULES
The government has brought this action under the Supplemental Rules. In civil forfeiture actions, the Federal Rules of Civil Procedure apply, "except to the extent that they are inconsistent with these Supplemental Rules." Fed.R.Civ.P.Supp. A. Therefore, the government must comply with the more stringent pleading requirements of Supplemental Rule E(2), rather than the liberal provisions of Fed. R.Civ.P. 8. See United States v. Real Property on Lake Forest Circle, 870 F.2d 586, 588 n. 3 (11th Cir.1989). Supplemental Rule E(2) provides:
[T]he complaint shall state the circumstances from which the claim arises with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading.
The particularity requirement is imposed because of the drastic nature of forfeiture actions. See 12 C. Wright & A. Miller, Federal Practice and Procedure, § 3242 (1973). The government may not seize and continue to hold property upon conclusory allegations that the defendant property is forfeitable. See United States v. $38,000.00 in United States Currency, 816 F.2d 1538, 1548 (11th Cir.1987) (hereinafter "$38,000.00"). The language and intent of the Supplemental Rules compel an exposition of those facts known to the government that support its claim that property is subject to forfeiture.
B. BURDENS AT TRIAL AND MONEY LAUNDERING FORFEITURE
In evaluating the factual sufficiency of a forfeiture complaint under Rule E(2), the Court must focus upon (1) the government's initial burden at trial, which inquiry in turn depends upon (2) the statutory forfeiture scheme.
First, in forfeiture actions, the government need not establish at trial that property is subject to forfeiture by a preponderance of the evidence; it may meet its burden by showing that probable cause exists to believe the property is subject to forfeiture. See United States v. Four Parcels of Real Property in Greene and Tuscaloosa Counties, 941 F.2d 1428, 1438-39 (11th Cir.1991) (reh'g en banc) (hereinafter "Four Parcels")[7]. The burden then shifts to the claimant to show by a preponderance of the evidence that the property is not forfeit. Id. at 1438. On the basis of the government's initial burden, the Eleventh Circuit has interpreted Rule E(2) to require that a "forfeiture complaint must allege sufficient facts to provide a reasonable belief that the property is subject to *395 forfeiture: in particular, that the government has probable cause to believe that a substantial connection exists between the property to be forfeited and [the underlying criminal activity]." Id. at 1442 n. 28 (quoting $38,000.00, 816 F.2d at 1548). Probable cause in this context is defined as "reasonable grounds for belief supported by less than prima facie proof but more than mere suspicion." United States v. Four Million, Two Hundred Fifty-Five Thousand, 762 F.2d 895, 903 (11th Cir. 1985), cert. denied, 474 U.S. 1056, 106 S. Ct. 795, 88 L. Ed. 2d 772 (1986).
The second step in this inquiry requires an analysis of the government's theory of forfeiture. The precise question is whether, under the relevant forfeiture statute, the complaint alleges sufficient facts to give rise to a reasonable belief that the government can establish probable cause at trial.
In many civil forfeiture actions in this district, this inquiry is not complex. Property involved in narcotics trafficking, for example, is subject to forfeiture if it facilitates such illegal activity, or constitutes proceeds traceable to the exchange of controlled substances. See 21 U.S.C. § 881(a)(6) & (a)(7). Under § 881, the requisite "substantial connection" is usually plain. The government need only allege facts that support a reasonable belief that the property was used in the drug transaction, or purchased with funds derived therefrom.
In this instant case, however, the government seeks forfeiture under the Money Laundering Control Act of 1986, 18 U.S.C. § 981. The Act provides in relevant part:
[T]he following property is subject to forfeiture to the United States:
(A) Any property, real or personal, involved in a transaction or attempted transaction in violation of section 5313(a) or 5324 of title 31 or of section 1956 or 1957 of this title, or any property traceable to such property.
18 U.S.C. § 981(a)(1)(A) (emphasis added). It is clear from the text that the government must allege a violation of one of the referenced statutes.[8] The type of necessary "substantial connection" between the illegal activity and the property to be forfeited is less clear. In the paradigmatic case, those funds directly involved in a "structured" transaction carried out by a convicted "smurf" certainly would be subject to forfeiture under this statute. There is no doubt that the money order purchased for $9,999.00 in cash by a convicted "smurf" is forfeit to the government. The pleading requirements in a case against these funds are obvious.
The difficulty comes where, as here, the government seeks forfeiture of funds in an account into which tainted funds have been negotiated, without stating any facts concerning the balance of the account. There exists a real possibility that unknowing and factually innocent accountholders who have received an allegedly tainted deposit may be deprived of the use of the funds until such time as they can assert the innocent owner defense contained in 18 U.S.C. § 981(a)(2). In keeping with the civil forfeiture fiction that the suit is against the property qua property and not the claimant the action may proceed for months or perhaps years with no showing that the accountholder had any knowledge of the money laundering. Therefore, the district court has an obligation to scrutinize at the outset the government's complaint against the funds at issue. Indeed, the Supplemental Rules demand no less.
C. RELEVANT CASELAW UNDER 18 U.S.C. § 981
There exists a relative paucity of decisional law on the precise question before the Court.[9] Research has disclosed only *396 two courts that have allowed suits brought under § 981 to proceed against all of the funds in accounts receiving tainted deposits.
The case of United States v. All Monies ($477,048.62) in Account No. XX-XXXX-X, 754 F. Supp. 1467 (D.Haw.1991) (hereinafter "$477,048") was one of some twenty-six civil forfeiture cases in the District of Hawaii arising from a criminal investigation of a large money laundering ring. The claimant in $477,048, Henry Lelouch, owned a money exchange in Peru allegedly used by certain indicted or convicted money launderers. Lelouch also owned the defendant property involved in the case, funds in a bank account in Florida. Importantly, Lelouch conceded that the government had established probable cause as to more than $240,000 of the account under § 981(a)(1). It was thus established that the account had been used for money laundering; the issue on summary judgment was whether probable cause existed to forfeit the potentially legitimate remainder of the account. The court held that the entire balance was forfeit to the government.
The court in that case first noted that § 981 does not expressly provide for a "facilitation" theory of forfeiture. Id. at 1472. Relying on a sentence in the legislative history of the statute,[10] the court construed the term "property ... involved in" illegal money laundering transactions to imply a facilitation theory in the statute. Id. at 1473. While the legislative history cited may not be dispositive, the court's subsequent analysis is compelling. The account, the court recognized, provided "a repository for the drug proceeds in which the legitimate money could provide a `cover' for those proceeds thus making it more difficult to trace the proceeds." Id. at 1475-76. Thus, since "facilitation" has been defined in the forfeiture context as making the underlying criminal activity less difficult or "more or less free from obstruction or hindrance," United States v. Schifferli, 895 F.2d 987, 990 (4th Cir.1990), the legitimate funds "facilitated" the crime of money laundering.
The Eastern District of New York recently reached the same conclusion in United States v. Certain Funds on Deposit in Account No. XX-X-XXXXX, 769 F. Supp. 80 (E.D.N.Y.1991) ("Certain Funds on Deposit"). In that case, certain claimants were alleged to have fraudulently disbursed to themselves funds from a federally insured credit union controlled by these claimants, and then to have cleared these amounts through accounts they owned in other banks. The Court ruled that the whole balance of the accounts was subject to forfeiture *397 under § 981, not just the proceeds of the initial fraudulent activity. Id. at 84. The court found that § 981 implicitly authorized forfeiture under a facilitation theory, reasoning that "[c]riminal activity such as money laundering largely depends upon the use of legitimate monies to advance or facilitate the scheme. It is precisely the commingling of tainted funds with legitimate money that facilitates the laundering and enables it to continue." Id. at 84-85.
The foregoing statutory construction is based on a sound understanding of the crime that Congress sought to deter by enacting § 981. "Innocent" funds are typically a prerequisite to the successful completion of money laundering, the essence of which is the purposeful mixture of tainted money with funds otherwise above suspicion. The more innocent the funds appear to be, the more difficult the crime becomes to detect. Therefore, funds are not immune from forfeiture solely because they are derived from legitimate sources; if such funds are used to effectuate money laundering, they are forfeitable under § 981, just as an otherwise legitimate dwelling would be under § 881 if used for drug-related activity.
D. APPLICATION TO THIS CASE
The Court now turns to the sufficiency of the complaint in this case under the Supplemental Rules and § 981. The Court will deny the motions to dismiss as to the Direct Accounts, but grant the motions as to the Indirect Accounts.
1. Direct Recipient Accounts
This Court's construction of § 981 simplifies the pleading requirements as to the whole balance of the funds contained in the direct recipient accounts. The government need only plead with particularity that the initial funds negotiated into these accounts were either "involved in" or "traceable to" the crime of money laundering. If the government meets this burden, a reasonable belief that the remainder of the accounts is subject to forfeiture is created by operation of § 981 facilitation theory. Stated differently, nothing further need be alleged against the balance of the account. The focus is solely on the alleged taint of the funds deposited.
The Court finds that the Complaint against the direct recipient accounts is adequate under the Supplemental Rules. In this case, Zapata was arrested after he attempted to assault a U.S. Customs Special Agent with a machine gun. At the time of his arrest, he possessed a handwritten list of bank accounts into which he had deposited approximately one million dollars in money orders. Several money order receipts have been traced to the Florida direct recipient accounts, indicating that the money orders were sent to Florida and then negotiated into the defendant accounts herein. Taking these allegations as true, as the Court must, the Complaint alleges sufficient facts to give rise to a reasonable belief that the government can establish probable cause at trial as to forfeiture of the money order amounts.
The complaint therefore comports with the requirements of Supplemental Rule E(2) with regard to the whole of the direct recipient accounts.
2. Indirect Recipient Accounts
The Complaint alleges that checks written against some of the direct recipient accounts were signed by the accountholder in blank, and transported to unknown individuals in Medellin, Colombia and Caracas, Venezuela. Id. at ¶ 10. Certain checks were subsequently made out to various indirect accountholder payees, and then deposited into the Florida accounts at issue. Id.
Under the foregoing construction of § 981, a syllogism can be created that would subject the whole of the indirect accounts to forfeiture. First, as noted above, the entire balance of the direct accounts, is allegedly property "involved in" the crime of money laundering. Second, any check written on the direct accounts is property "traceable to" property "involved in" money laundering. Therefore, the tainted checks from the direct accounts deposited in the Florida indirect accounts would subject the balance of the indirect *398 accounts to forfeiture. The logical import is that no separate showing of "taint" would be required to plead a case against the indirect defendant accounts. Like a contagious disease, each direct account could contaminate any account that had dealings with it. The indirect accounts could then conceivably pass on the infection to other accounts, and so forth ad infinitum. The outer limits of this theory would be bounded only by Plaintiff's imagination.
This Court rejects such a theory. The government's argument here would stretch facilitation theory itself something of a bootstrap to the breaking point. As the account in question becomes more distant from the initial illegal transaction, so too does probable cause to forfeit become more attenuated. This Court holds that the government must allege facts other than a mere tracing of checks written against a suspect account. Under the Supplemental Rules, therefore, additional facts that give rise to the requisite "reasonable belief" that that there is a "substantial connection" to money laundering must be plead with particularity.[11] A contrary rule would yield untenable results.[12]
The government here fails to allege such additional facts. There has been no allegation that the indirect accounts were used for money laundering. By contrast, there was no question that the accounts in both $477,048 and Certain Funds on Deposit had been used for money laundering. Indeed, in the former case, the government showed that $2.5 million of tainted money had been laundered through the account although only one-fifth of that amount was seized. See $477,048, 754 F.Supp. at 1476. In Certain Funds on Deposit, the government alleged that the claimants themselves transferred the tainted funds into the accounts for purposes of money laundering. See 769 F.Supp. at 82. Without the benefit of the syllogism urged by the government, the Complaint does no more than detail transfers by check of funds from certain accounts to others, and states that the matter has been investigated by Customs agents and forensic accountants.[13] The allegations would then closely resemble the § 881 complaint dismissed as insufficient by the Eleventh Circuit in $38,000, 816 F.2d *399 at 1548 (conclusory allegations that merely tracked statutory language held inadequate as "completely devoid of factual support" and unsupported by "even a whiff of evidence").
The Complaint will therefore be dismissed as to the entire balance of all of the indirect accounts; the government will have leave to amend the complaint, see Four Parcels, 941 F.2d at 1434; $38,000, 816 F.2d at 1548, to allege additional facts against the defendant funds that would give rise to a reasonable belief that they are subject to forfeiture.
III. MISJOINDER
The Court raises the following matter sua sponte. The government has joined thirty-one accounts by this action. Federal Rule of Civil Procedure 20(a) provides in relevant part:
All persons (and any ... property subject to admiralty process in rem) may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.
These actions should have been filed separately. If the actions involved a common question of law or fact, see Mosley v. General Motors Corp., 497 F.2d 1330, 1333-34 (8th Cir.1974), they could have been consolidated for joint hearing on such common issues. See Fed.R.Civ.P. 42(a); Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d 1492 (11th Cir.1985). The suits would still have retained their separate identities, see McKenzie v. United States, 678 F.2d 571 (5th Cir.1982), but those issues common to all could have been resolved by a single division. After disposition of the common issues, the actions would then proceed to trial as the distinct and separate cases they in fact are.
In this unified case, once the Court has ruled on the instant motions to dismiss, issues necessarily particular to each claimant and account will either predominate over or entirely supplant any remaining common questions. Defendants' continuing presence in one action thus constitutes misjoinder under Fed.R.Civ.P. 21. At trial, the government must show probable cause to forfeit each account, and many claimants will invoke the innocent owner defense set out in § 981(b). Proof of these matters is specific to each individual case. A resolution of a unified case on the merits, involving some thirty-one Claimants, each defending on the basis of facts relevant only to their own property, would be unwieldly and unnecessarily complex. Sound judicial administration compels the division of this single suit into separate cases. This case, 91-1018-CIV-KING, shall proceed solely against the direct recipient account maintained by Elnore Resources, with a style so reflecting. All other causes of action for forfeiture the government wishes to bring against any other accounts involved herein shall be brought in separate, individual complaints.
Accordingly, after a careful review of the record, and the Court being otherwise fully advised, it is
ORDERED and ADJUDGED that the Motions to Dismiss of the Claimants to the DIRECT RECIPIENT ACCOUNTS be, and the same hereby are, DENIED, provided however that consistent with Section III of this Order, each of these cases is DISMISSED without prejudice to refile as separate actions, and further provided that the case 91-1018-CIV-KING shall proceed solely against the direct recipient account maintained by Elnore Resources, with a style so reflecting. The stay of discovery relating to these accounts is hereby DISSOLVED. It is further
ORDERED and ADJUDGED that the Motions to Dismiss of the Claimants to the INDIRECT RECIPIENT ACCOUNTS be, and the same hereby are, GRANTED. Discovery as to each of these accounts is STAYED until a responsive pleading is filed by the Claimant. It is further
ORDERED and ADJUDGED that this Court's Order dated June 26, 1991 denying the Motion to Dismiss of Claimant Cecilia *400 Patricia Luna be, and the same hereby is, VACATED. It is further
ORDERED and ADJUDGED that the government shall REFILE separate Verified Complaints for each account or accounts owned by each Claimant within thirty (30) days of the date of this Order, except that the case 91-1018-CIV-KING shall proceed solely against the direct recipient account maintained by Elnore Resources, with a style so reflecting. It is further
ORDERED and ADJUDGED that all other pending motions are DENIED without prejudice to renew them in the refiled cases.
DONE and ORDERED in chambers at the United States District Courthouse, Federal Courthouse Square, Miami, Florida, this 21st day of February, 1992.
NOTES
[1] See generally Welling, Smurfs, Money Laundering, and the Federal Criminal Law: the Crime of Structuring Transactions, 41 Fla.L.Rev. 287 (1989).
[2] The Verified Complaint refers to these accounts as "primary accounts."
[3] A forfeiture action against the New York direct accounts has been filed in the United States District Court for the Eastern District of New York, case number CV-91-0881, March 13, 1991.
[4] The four Florida direct accounts are maintained in the name of the following claimants: Elnore Resources, Benwood Trading Company, Recreaciones La Vega, C.A., and Brickell Bay International Services.
[5] The Verified Complaint refers to these accounts as "secondary accounts." The indirect accounts are identified by Claimant, bank, and account number in paragraph 12(a aa) of the Complaint.
[6] Motions to Dismiss have been filed by the following Claimants: Armor Financial, Cecilia Patricia Luna, Max Rausch and Lucy Restrepo de Rausch, Guillermo Arenas, Luis Carlos Alvarado Mazo, Hernando Macias Gutierrez, Federico Molina, Recreaciones, and Elnore Resources.
[7] Four Parcels was decided under 21 U.S.C. § 881, the narcotics trafficking forfeiture statute. As discussed infra, the government brings this action under the Money Laundering Control Act of 1986, 18 U.S.C. § 981. The statutes incorporate by reference 19 U.S.C. § 1615, which governs the burdens of proof for forfeiture under the customs laws. See 21 U.S.C. § 881(d) and 18 U.S.C. § 981(d). Section 1615 provides in relevant part: "In all suits or actions ... where the property is claimed by any persons, the burden of proof shall lie upon such claimant; ... provided, That probable cause shall first be shown for institution of such suit to be judged by the court...."
[8] The referenced sections contain substantive money laundering prohibitions. 31 U.S.C. § 5313 imposes reporting requirements on financial institutions; 31 U.S.C. § 5324 prohibits the "structuring" of transactions to evade reporting requirements; 18 U.S.C. § 1956 prohibits certain forms of money laundering and provides criminal penalties; 18 U.S.C. 1957 prohibits engaging in monetary transactions in property derived from specified unlawful activity.
[9] By contrast, there is a wealth of caselaw construing the forfeiture statute for narcotics trafficking, 21 U.S.C. § 881. While cases under that statute are analogous to the instant matter in many respects, they do not resolve the issue in this case. Because § 881(a)(7) expressly provides for forfeiture based on a "facilitation" theory, and by its terms allows forfeiture of entire parcels of land used in part in drug related activity, it is easier to state a claim against the whole of property allegedly involved in a drug transaction. See, e.g., United States v. Real Property and Residence at 3097 S.W. 111th Avenue, 921 F.2d 1551 (11th Cir.1991) (where drug transaction occurred in driveway, complaint that so alleged held sufficient under § 881(a)(7) to subject entire dwelling to forfeiture).
[10] The legislative history relied upon in $477,048 states:
[T]he term "property involved" is intended to include the money or other property being laundered (the corpus), any commissions or fees paid to the launderer, and any property used to facilitate the laundering offense.
134 Cong.Rec. § 17365 (daily ed. Nov. 10, 1988) (emphasis added).
The court's reading of the legislative history is bolstered by the sweeping changes made by the 1988 amendments, enacted under the short title of the "Money Laundering Prosecution Improvements Act." When first enacted in 1986, § 981 only authorized the forfeiture of the gross receipts a person obtained as a violation of the referenced substantive money laundering prohibitions. See 18 U.S.C.A. § 981 (Historical and Statutory Notes). "The term gross receipts meant profits or commissions earned from the money laundering activity, not the corpus of the money laundered." Smith, 1 Prosecution and Defense of Forfeiture Cases ¶ 5.01 n. 17 (1991). Therefore, the 1988 amendments reflect a clear congressional intent to expand the scope of this forfeiture provision. Caution is always warranted in construing a statute based on a single reference to a word such as "facilitate" in the legislative history. However, the court's interpretation in $477,048 accords with the intent of the 1988 amendments.
[11] This holding does not mean that money launderers may insulate themselves from the forfeiture laws by adding more layers to their financial network. The Court simply holds that the government must provide some reasonable basis to conclude that probable cause can be shown as to each layer at trial, without sole reliance on the fact of transfer from one account to another.
[12] At oral argument on the instant motions, the Court discussed with counsel the logical conclusion of the government's argument by use of a hypothetical example. If a direct accountholder were to write a check to pay bills from Florida Power & Light, or the University of Florida, or made unsolicited donations to the officers of the Miami police force, each of these "claimants'" accounts would be subject to arrest and forfeiture. The government cited as safeguards against this result (1) plaintiff's discretion in bringing suit and (2) the innocent owner defense.
These limitations alone are inadequate. The Supplemental Rules guarantee protection above and beyond plaintiff's good judgment, however well intentioned it may be.
[13] The only other relevant allegation is the transfer of some checks written in blank against the direct accounts, transported to Venezuela or Colombia, and deposited into the indirect accounts. This allegation is entirely general; it does not specify the individual indirect accounts which received such checks. Thus, the Complaint fails to link these checks to specific indirect accounts, a fatal defect under the explicit particularity requirement and intent of Supplemental Rule E(2).
The Complaint states that the indirect accounts were identified after an investigation by Customs Agents and "forensic accountants." This allegation must be supported with specific facts in order to sustain a reasonable belief that the accounts are subject to forfeiture. In this case, the Verification by Customs Service Special Agent Rose McNamara in its entirety states: "Pursuant to Title 28 United States Code Section 1746, I declare under penalty of perjury, that I, Rose McNamara, of the U.S. Customs Service, have read the foregoing Complaint for Forfeiture and state that the contents are true to the best of my knowledge and belief." Affidavits of law enforcement officials investigating the underlying criminal activity may be incorporated to support allegations in complaints for forfeiture. See United States v. Eighty-Eight (88) Designated Accounts, 740 F. Supp. 842, 847 (S.D.Fla. 1990). However, in this case, the McNamara Affidavit is merely conclusory. No specific supporting facts are set out therein. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1548177/ | 992 A.2d 885 (2010)
BANK OF AMERICA
v.
FISH.
No. 552 WAL (2009).
Supreme Court of Pennsylvania.
April 14, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1428645/ | 46 Cal.2d 291 (1956)
MONA FLOY WILLSON, Petitioner,
v.
SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent.
L. A. No. 23924.
Supreme Court of California. In Bank.
Feb. 24, 1956.
Edgar B. Hervey and James Edgar Hervey for Appellant.
James Don Keller, District Attorney (San Diego), and Luther L. Leeger, Deputy District Attorney, for Respondent.
TRAYNOR, J.
By information petitioner Mona Willson was charged with one count of occupying premises for the purpose of horse-race bookmaking and one count of recording a bet on a horse race. (Pen. Code, 337a, subds. 2, 4.) Her motion to set aside the information on the ground that there is no reasonable or probable cause to believe she committed the offenses charged was denied (see Pen. Code, 995), and she now seeks prohibition to prevent further proceedings against her. (See Pen. Code, 999a.)
Petitioner contends that her commitment was based entirely on incompetent evidence and that the peremptory writ should therefore issue. (See Rogers v. Superior Court, ante, pp. 3, 6, 7 [291 P.2d 929].)
At the preliminary hearing, San Diego Chief of Police Adam Jansen testified that on May 25th or 26th, 1955, a man stopped him in the hallway of the police station. The man appeared to know Chief Jansen, but Chief Jansen did not know him and did not find out who he was or where he lived. The man told him that "there was a considerably large book making operation in progress in the Monte Carlo bar. ... He said he had been in the place; that he had observed it, and he described what the operation was." Part of the information given concerned a waitress named Mona. The man said that she would generally be found near the telephone, that she occasionally answered it, and that she took bets from customers in the place. "He said that the girl Mona used food checks, restaurant checks. I gathered it was the customary tab that the waitress would make out when you were served food from the way he described it. She wrote the wagers on these slips, and that she had two pockets in her___he didn't say uniform, he said she had two pockets, one, I don't know which one, one contained money and the *293 other one contained betting slips. ..." Chief Jansen also testified that he later secured other information indicating that bookmaking activities were going on at the Monte Carlo bar, but the record does not indicate what the source of this information was.
The substance of the information stated above was communicated to other police officers including Officer Marilyn Sunday, who, in the company of three other officers, went to the Monte Carlo bar during the afternoon of June 10th. The purpose of the visit was to secure evidence of bookmaking, and if such evidence was found, to make arrests. On entering the bar, Officer Sunday observed petitioner standing at the far end of the bar. She was wearing a belt with a metal plate that had the name "Mona" written on it. Officer Sunday testified that "She was standing facing the bar, and I approached her at that point. When I came up to [petitioner], I observed on the bar a telephone, a small scratch pad and a pencil. I stated to her--I noticed first that she had something in her hand, appeared to be papers. I asked her if I may see what was in her hand. And as I said that, these papers that were in her hand, she attempted to crumple them, and extended her hand to the back and to the side of her." Officer Sunday took the papers from her hand and then searched petitioner's pockets. Three slips of paper were taken from petitioner's hand and another from her left pocket, and approximately $270 in cash was found in her other pocket. Officer Sunday then asked petitioner to come with her, and she and another officer took petitioner to the police station. The officers were not in uniform and did not identify themselves as such or inform petitioner expressly that she was being arrested, and they did not have a search warrant or a warrant for petitioner's arrest. There was evidence that the slips were registered bets on horses running in races on the day that they were seized.
Section 835 of the Penal Code provides that "An arrest is made by an actual restraint of the person of the defendant, or by his submission to the custody of an officer. The defendant must not be subjected to any more restraint than is necessary for his arrest and detention." Section 841 provides that "The person making the arrest must inform the person to be arrested of the intention to arrest him, of the cause of the arrest, and the authority to make it, except when the person to be arrested is actually engaged in the commission of or an attempt to commit an offense, or is *294 pursued immediately after its commission, or after an escape." [1] Since petitioner was taken into custody while apparently engaged in the commission of an offense, there is evidence that the requirements of these sections were met. [2] Moreover, since petitioner was arrested in a public bar, but made no outcry or objection, it may be inferred that she realized that Officer Sunday was a police officer and that her purpose was to make an arrest. Under these circumstances, it is immaterial that petitioner was not expressly informed of Officer Sunday's authority and purpose. (See People v. Martin, 45 Cal.2d 755, 762-763 [290 P.2d 855], and cases cited.) [3] Furthermore, if before the search and seizure, Officer Sunday was justified in making an arrest, it is also immaterial that the search and seizure preceded rather than followed the arrest. (People v. Simon, 45 Cal.2d 645, 648-649 [290 P.2d 531].)
Defendant contends, however, that before the search and the arrest, Officer Sunday had no reasonable cause to believe she had committed or was committing a felony (Pen. Code, 836, subd. 3) and that the search and seizure were therefore unlawful. (See People v. Brown, 45 Cal.2d 640, 642-645 [290 P.2d 528]; People v. Simon, supra, 45 Cal.2d 645, 647- 648; People v. Boyles, 45 Cal.2d 652, 655 [290 P.2d 535].)
In People v. Boyles, 45 Cal.2d 652, 656 [290 P.2d 535], we held that "reasonable cause to justify an arrest may consist of information obtained from others and is not limited to evidence that would be admissible at the trial on the issue of guilt." Accordingly, the question presented is whether the information given by the unidentified man to the chief of police and passed on to Officer Sunday was sufficient in the light of the other evidence to constitute reasonable cause to believe that defendant was guilty of a felony. [4] Although information provided by an anonymous informer is relevant on the issue of reasonable cause, in the absence of some pressing emergency (see People v. Kilvington, 104 Cal. 86, 92-93 [37 P. 799, 43 Am.St.Rep. 73]), an arrest may not be based solely on such information. (United States v. Kind, 87 F.2d 315, 316; United States v. Blich, 45 F.2d 627, 629; United States v. Keown, 19 F.Supp. 639, 646; State v. Arregui, 44 Idaho 43 [254 P. 788, 793- 794, 52 A.L.R. 463]; Hill v. State, 151 Miss. 518 [118 So. 539, 540]; Smith v. State, 169 Tenn. 633 [90 S.W.2d 523, 524]), and evidence must be presented to the court that would justify the conclusion that reliance on the information was reasonable. (See People *295 v. Boyles, supra, 45 Cal.2d 652, 656 [290 P.2d 535].) In some cases the identity of, or past experience with, the informer may provide such evidence (see Aitken v. White, 93 Cal.App.2d 134, 145 [208 P.2d 788]), [fn. *] and in others it may be supplied by similar information from other sources or by the personal observations of the police. In the present case the identity of the informer was unknown, the San Diego police had had no previous experience with him indicating that his information was reliable, and the source and character of the other information with respect to bookmaking at the Monte Carlo bar was not sufficiently revealed to permit its evaluation. We must consider, therefore, whether the evidence observed by Officer Sunday in the bar before the search was sufficient to justify her reliance on the information that she had received.
[5] Petitioner was found in the bar near the telephone where the informer had stated she would generally be. Since such innocent conduct could be known, however, to anyone who frequented the bar, it is doubtful whether its verification alone would justify reasonable reliance on the additional information charging petitioner with bookmaking. In addition, however, Officer Sunday observed petitioner standing by a scratch pad and a pencil with slips of paper in her hand. Contrary to Chief Jansen's assumption, the pad was not a pad of ordinary printed checks given to customers, but was a pad of plain scratch paper, and although such a pad would be commonplace equipment in an office (see People v. Sanders, ante, p. 247 [294 P.2d 10]), it is not ordinarily part of the equipment of a bar. Moreover, when Officer Sunday asked to see what was in petitioner's hand, she attempted to conceal and dispose of it. Although petitioner's conduct observed by Officer Sunday in the bar would not of itself constitute reasonable cause to believe she was committing a felony, it was sufficient to justify Officer Sunday's reliance on the information given her of petitioner's bookmaking. Under these circumstances the evidence before the magistrate was sufficient to justify the conclusion that a violation of Penal Code, section *296 337a, had been committed, that Officer Sunday had reasonable cause before the search and seizure to believe that petitioner was guilty thereof, and that therefore the search, seizure, and arrest were lawful. (See Husty v. United States, 282 U.S. 694, 701 [51 S.Ct. 240, 75 L.Ed. 629, 74 A.L.R. 1407]; United States v. One 1941 Oldsmobile Sedan, 158 F.2d 818, 820; Wisniewski v. United States, 47 F.2d 825, 826; Hawthorne v. State, 110 Tex.Crim. 646 [10 S.W.2d 724, 725].)
The alternative writ of prohibition is discharged and the peremptory writ is denied.
Gibson, C.J., Schauer, J., and McComb, J., concurred.
Shenk, J., and Spence, J., concurred in the judgment.
CARTER, J.
I dissent.
For the reasons stated in my dissenting opinion in People v. Martin, Crim 5758, ante, p. 106 [293 P.2d 52], I am of the opinion that the search and seizure in the case at bar was unreasonable and therefore illegal and that the evidence obtained thereby was inadmissible. Since the evidence so obtained was the only evidence which tended to support the charge against petitioner, it should follow that there was no reasonable or probable cause to believe that she had committed the offenses charged in the information and a writ of prohibition should issue to prevent further proceedings against her. *297
NOTES
[fn. *] *. Since in the present case Chief Jansen did not know the identity of the informer, no question is presented as to when, if ever, a claim of privilege not to reveal the identity of an informer may defeat the right to rely on his information in making an arrest or search. (See Scher v. United States, 305 U.S. 251, 253-254 [59 S.Ct. 174, 83 L.Ed. 151]; United States v. One 1941 Oldsmobile Sedan, 158 F.2d 818, 820; Hill v. State, supra, 151 Miss. 518 [118 So. 539, 540]; Smith v. State, supra, 169 Tenn. 633 [90 S.W.2d 523, 524].) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1522758/ | 156 B.R. 660 (1993)
In re Richard K. LOKEN and Shelly R. Fox-Loken, Debtors.
Fred LONG, Trustee, Plaintiff,
v.
JOE ROMANIA CHEVROLET, INC., Defendant.
Bankruptcy No. 691-65371-H13, Adv. No. 693-6038-H.
United States Bankruptcy Court, D. Oregon.
July 9, 1993.
*661 Eric R.T. Roost, Eugene, OR, for plaintiff.
Ronald Walro, Eugene, OR, for defendant.
MEMORANDUM OPINION
POLLY S. HIGDON, Bankruptcy Judge.
In this adversary proceeding the trustee seeks to avoid as a preferential transfer the defendant's security interest in the debtors' motor vehicle.
The parties stipulated to the facts. The debtors filed their Chapter 13 petition on December 10, 1991. On October 19, 1991, within the 90 day preference period, debtor, Shelley Fox-Loken, purchased a car from the defendant, signing a promissory note, granting it a purchase money security interest in, and taking possession of, the vehicle. The defendant's application for notation of its security interest on the vehicle's title was not received by the Oregon Motor Vehicles Division until 12 days after the debtor took possession. The 10th and 11th days were not weekends or holidays.
The trustee alleges that defendant's security interest in the vehicle is an avoidable preferential transfer not subject to the exception contained in 11 U.S.C. § 547(c)(3)(B)[1] because perfection occurred more than 10 days after the debtor took possession of the vehicle.
Although the parties have presented only the § 547(c)(3)(B) issue to the court, the court believes a prior inquiry must be made. That inquiry is whether there was a transfer, within the meaning of § 547(e)(1)(B), for or on account of an antecedent debt.[2] If there were no such transfer *662 there is, by definition, no avoidable preference and one does not reach any § 547(c) issues. The answer to this court's inquiry requires an analysis of the interplay between state and federal bankruptcy law.
"Transfer" is defined broadly in § 101(54) to include the act of granting a security interest. For purposes of § 547, § 547(e)(2) states when a transfer is made. Under that statute, to determine when a transfer is made one must determine when a transfer is perfected.[3] Section 547(e)(1) describes when a transfer is perfected. Section 547(e)(1)(B) states:
(B) a transfer of a fixture or property other than real property is perfected when a creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee.
(emphasis added). Under § 547(e)(1)(B), the court must look to state law to determine precisely when a contract creditor cannot acquire a judicial lien superior to the transferee's interest. In re Hesser, 984 F.2d 345, 348 (10th Cir.1993); see also In re Busenlehner, 918 F.2d 928, 930 (11th Cir. 1990), reh'g den., 924 F.2d 1067, cert. den., ___ U.S. ___, 111 S.Ct. 2251, 114 L.Ed.2d 492 (1991). After the date of perfection is determined, the time of transfer must be ascertained and must fit within the ten day grace period provided in § 547(e)(2). Hesser, 984 F.2d at 348.
Under Oregon law, the exclusive means for perfecting a security interest in a motor vehicle, other than one held in inventory, is by filing an application for notation of the security interest on the vehicle's certificate of title pursuant to O.R.S. 803.097(1).[4] O.R.S. 803.097(3) provides that the security interest is perfected as of the date marked by the division on the application. However, O.R.S. 803.100 provides that "rights and remedies of all persons in vehicles subject to security interests established under ORS 803.097 shall be determined by the provisions of the Uniform Commercial Code." The Uniform Commercial Code as adopted in O.R.S. 79.3010(2) provides in relevant part:
If the secured party files with respect to a purchase money security interest before or within 20 days after the debtor receives possession of the collateral, the secured party takes priority over the rights of a . . . lien creditor which arise between the time the security interest attaches and the time of filing.
O.R.S. 79.3010(2) (emphasis added). This type of priority provision is commonly known as a "relation-back" provision. Such provision, if applicable, is interpreted by the courts to effectively deem a security interest perfected on the date, in the words of this statute, "the security interest attaches". See 2 J. White & R. Summers, Uniform Commercial Code § 25-3 at 420 (3d Ed.1988); In re Duncombe, 143 B.R. 243, 246 (Bankr.C.D.Cal.1992); In re Walker, 67 B.R. 811, 814 n. 6 (Bankr.C.D.Cal. 1986), aff'd, 861 F.2d 597 (9th Cir.1988). If the language of O.R.S. 79.3010(2), as incorporated by O.R.S. 803.097, is so interpreted, on its face Oregon law appears to provide two, conflicting, dates for the perfection of security interests in vehicles. A closer examination reveals that they are *663 not contradictory. They may be interpreted so as to give meaning to each. See Federal Power Com'n v. Panhandle Eastern Pipe Line Co., 337 U.S. 498, 514, 69 S.Ct. 1251, 1260, 93 L.Ed. 1499 (1949) (whenever possible, all sections of relevant applicable statutes must be reconciled so as to produce a symmetrical whole). O.R.S. 79.3010(2) applies only to the priorities between purchase money security interest holders and lien creditors. Its purpose is to protect the purchase money security interest holder who reasonably perfects its interest from the rights of lien creditors which may arise between the date of attachment and perfection. O.R.S. 803.097, on the other hand indicates, for general purposes, the date a security interest in a vehicle is perfected. Application of the priorities established between purchase money security interest holders and lien creditors in O.R.S. 79.3010(2) may result in a "deemed" perfection for the "p.m.s.i. holder" from the date of attachment of its interest. This "deemed" perfection date, however, applies only as to the parties stated. Non-purchase money security interest holders' interests will be perfected when the application is received and marked by the state.
Upon first blush one is tempted to say that O.R.S. 79.3010(2) is not relevant to the analysis required for purposes of determining whether there is an avoidable preference because its literal language does not specify the perfection date for security interests in vehicles. That statute merely provides a grace period which affects the priorities between the lender and an intervening lien creditor. However, the language of this statute is forced into the preferential transfer analysis by Code provision § 547(e)(1)(B) itself, which defines the perfection of a transfer as that point in time when the interests of a lien creditor cannot become superior to that of the security interest holder.
Because the defendant filed its application with the state within 20 days after the debtor received possession of her vehicle and as it holds a purchase money security interest in the vehicle, the language of § 547(e)(1)(B) and O.R.S. 79.3010(2) dictates that its interest was perfected under Oregon law as of the date its security interest attached. As, under Oregon law, the attachment and perfection are deemed to have occurred simultaneously the language of § 547(e)(2)(A) applies. Under that subsection the transfer of the security interest attacked by the trustee as preferential is deemed made at the time it took effect between the transferor and transferee. Under our facts this took place on October 19, 1991. The transfer of the security interest was not a transfer "for or on account of an antecedent debt" because the debt between the parties also arose on October 19, 1991.[5]
Three appeals courts have addressed the appropriate timing and method of the perfection of a purchase money security interest provided for in § 547. In In re Hamilton, 892 F.2d 1230 (5th Cir.1990), the Fifth Circuit held that the ten day requirement of the § 547(c)(3)(B) affirmative defense prevailed over a similar Texas 20 day "reach-back" period for purchase money security interests.[6] The court, without analysis, ruled that under the supremacy clause federal bankruptcy law prevailed over state law.
In In re Busenlehner, 918 F.2d 928 (11th Cir.1990), the Eleventh Circuit, addressing the identical issue with similar Georgia law before it, held that because the Bankruptcy Code adopts state law under § 547(e)(1)(B) the date of perfection for preference actions is the date the security documents *664 were executed. Each court stated that legislative history supported its position.
In 1993 the Tenth Circuit Court of Appeals took up the issue. In In re Hesser, 984 F.2d 345 (10th Cir.1993), the court had before it timing issues under both §§ 547(b)(2) and 547(e). It followed Busenlehner, agreeing that the Code adopts state law to determine the date of perfection of a security interest.[7]
The most thorough analysis, both of the legislative history and language of § 547(e)(1)(B), appears in In re Burnette, 14 B.R. 795 (Bankr.E.D.Tenn.1981). There Judge Kelley reaches two conclusions. First, Congress intended the ten day "grace period" for perfection provided in § 547(e)(2)(A) and § 547(c)(3)(B) to provide uniformity. It did not intend for state grace periods to be relevant under the statute. Second, the language of § 547(e)((1)(B) cannot reasonably be interpreted to accomplish that intent. This court agrees with both of these conclusions. Accordingly, the trustee may take nothing; the court will dismiss the case.
This memorandum opinion contains the court's findings of fact and conclusions of law and pursuant to Bankruptcy Rule 9014, which incorporates Rule 7052, they will not be separately stated.
ORDER DISMISSING COMPLAINT
This matter having come before the court upon the stipulated facts of the parties, the court having entered its memorandum opinion on July 9, 1993 and based thereon;
IT IS HEREBY ORDERED that the plaintiff is not entitled to relief under 11 U.S.C. § 547 and shall take nothing by the complaint herein; and
IT IS FURTHER ORDERED that this adversary proceeding is dismissed.
NOTES
[1] Unless otherwise indicated, all statutory references hereinafter are to the Bankruptcy Code, 11 U.S.C. § 101 et seq.
11 U.S.C. § 547(c)(3) states:
(c) The trustee may not avoid under this section a transfer
* * * * * *
(3) that creates a security interest in property acquired by the debtor
(A) to the extent such security interest secures new value that was
(i) given at or after the signing of a security agreement that contains a description of such property as collateral;
(ii) given by or on behalf of the secured party under such agreement;
(iii) given to enable the debtor to acquire such property; and
(iv) in fact used by the debtor to acquire such property; and
(B) that is perfected on or before 10 days after the debtor receives possession of such property;
(emphasis added).
[2] 11 U.S.C. § 547(b) provides:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property (1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 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
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
(emphasis added).
[3] 11 U.S.C. § 547(e)(2) states:
(e)(2) For the purposes of this section, except as provided in paragraph (3) of this subsection, a transfer is made
(A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within 10 days after, such time;
(B) at the time such transfer is perfected, if such transfer is perfected after such 10 days; or
(C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of
(i) the commencement of the case; or
(ii) 10 days after such transfer takes effect between the transferor and the transferee.
[4] O.R.S. 79.3020(3)(b) directs that the Oregon Vehicle Code, O.R.S. Chapters 801 through 822, generally governs perfection of security interests in motor vehicles.
[5] The court notes that under these facts and O.R.S. 79.3010(2) the language of § 547(c)(3)(B) would also protect the defendant. If the defendant had not held a purchase money security interest the provisions of O.R.S. 79.3010(2) would not apply. Therefore any perfection of its security interest would necessarily have occurred after the debt arose between the parties. Under these circumstances a § 547(b)(2) issue would not arise. The case would be decided under § 547(c)(3).
[6] In Hamilton it was unclear under the facts stated whether the creditor's security interest attached when the loan was made. The court was not asked to address whether there was an antecedent debt under § 547(b).
[7] In footnote 3, it attempts, unsuccessfully and disingenuously, to distinguish Hamilton. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1099578/ | 97 So. 2d 872 (1957)
CITY OF SARASOTA, Petitioner,
v.
Kate COLBERT, Respondent.
No. 100.
District Court of Appeal of Florida. Second District.
October 23, 1957.
*873 Worth Dexter, Jr., of Dexter, Conlee, & Bissell, Sarasota, for petitioner.
P.T. Paderewski of Rosin & Paderewski, Sarasota, for respondent.
PLEUS, Judge.
The matter is before us on a petition for a common law writ of certiorari.
Action was filed by respondent as plaintiff against petitioner as defendant seeking to recover on account of negligence causing an accident at a mobile home park operated and controlled by defendant. Answer was filed denying negligence and setting up contributory negligence of plaintiff.
Plaintiff then propounded to defendant a series of written interrogatories seeking to ascertain, inter alia, whether defendant has caused an investigation to be made of the accident; if so whether defendant's investigators made written reports to defendant; and if so to furnish copies of such reports to plaintiff.
Objections were duly filed, defendant contending primarily that plaintiff was seeking the "work product" of defendant.
The objections to the above mentioned interrogatories were overruled but the court in its order specifically exempted the defendant from furnishing plaintiff copies of investigator's reports "which are the work product of Defendant's counsel".
Having grave doubts as to exact meaning and extent of said order, defendant moved to clarify the same and as a result a clarifying order was entered limiting the work product to items obtained after a written claim notice had been served upon the defendant-city pursuant to the provisions of § 196 of the Charter of the City of Sarasota.[1]
*874 Our jurisdiction on common law certiorari is predicated upon prior decisions of the Supreme Court under which we hold that we do have such jurisdiction.[2]
The sole question is whether the court erred in limiting the "work product"[3] disclosure to items obtained only after the notice of claim had been filed; and thus requiring the defendant-city to disclose all such items obtained prior to the filing of such notice of claim.
We know of no reason for drawing such an arbitrary date line in a situation such as this. To do so would be to penalize the diligence of the city in promptly investigating a potential claim even though the notice of claim had not been filed with it. The fact that the charter provision above quoted makes it the duty upon receiving a notice of claim to investigate and lay the matter before the governing authority for action does not deprive the city of its right to investigate prior to formal notice of claim; and upon such investigation to then claim, within the definable area, as part of its work product the items obtained by such prompt investigation.
The purpose of the provision with reference to notifying a municipality is to give it an opportunity to investigate the matter, allow its governing body to determine the question of liability and, if desired or justified, to settle the matter and thus avoid litigation. Olivier v. City of St. Petersburg, Fla. 1953, 65 So. 2d 71.
If sustained, the action of the court below would penalize the diligence of the municipality and allow a plaintiff to take advantage of plaintiff's own delay in filing the claim notice at the last moment with the investigation by the city having taken place in the meantime.
Nor do we have any doubt that a municipality can have a "work product" the same as any other litigant. See City of Lake Worth v. First National Bank in Palm Beach, Fla. 1957, 93 So. 2d 49.
The petition for writ of certiorari is granted and the clarifying order is quashed with directions to the court below to enter its order on defendant's motion to clarify in accordance with the views herein expressed.
Petition for writ of certiorari granted.
KANNER, C.J., and ALLEN, J., concur.
NOTES
[1] Chapter 23529, Laws of Florida, Special Acts, 1945. Section 196 thereof reads as follows:
"No suit shall be maintained against the City for damages arising out of its failure to keep in proper condition any sidewalk, pavement, viaduct, bridge, street, waterworks, electric light plant, municipal docks and terminals, or other public place, neither shall any suit be maintained against the City arising out of any other tortious action or actions sounding in tort, unless it shall be made to appear that written notice of such damage was within thirty days after the receiving of the injury given to the City Attorney with such reasonable specifications as to time and place and witnesses as would enable the proper City officials to investigate the matter. It shall be the duty of the City Attorney, upon receiving such notice, to thus investigate the matter and lay the facts supported by the evidence before the City Commission in a written report, and the City Commission shall have the right to investigate the matter and it may make such reasonable settlement of any such damages as may be agreed upon by the City Commission."
[2] Kilgore v. Bird, 1942, 149 Fla. 570, 6 So. 2d 541; Atlantic Coast Line R. Co. v. Allen, Fla. 1949, 40 So. 2d 115.
[3] See Hickman v. Taylor, 329 U.S. 495, 67 S. Ct. 385, 91 L. Ed. 451 (1946); Atlantic Coast Line R. Co. v. Allen, footnote 2; Miami Transit Co. v. Hurns, Fla. 1950, 46 So. 2d 390; Lang v. Harris, Fla. 1951, 54 So. 2d 120; Seaboard Air Line R. Co. v. Timmons, Fla. 1952, 61 So. 2d 426. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3100652/ | In
The
Court
of Appeals
Sixth
Appellate District of Texas at Texarkana
______________________________
No. 06-09-00152-CR
______________________________
BILLY R. BELGARD,
Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 188th
Judicial District Court
Gregg County, Texas
Trial Court
No. 37,946-A
Before Morriss, C.J.,
Carter and Moseley, JJ.
Memorandum Opinion by Justice Moseley
MEMORANDUM
OPINION
A
jury convicted Billy R. Belgard of one count of aggravated sexual assault of a
child and one count of indecency with a child and assessed his punishment at
fifty-four years’ imprisonment for the first count and twenty years’
imprisonment for the second count.[1] Belgard filed his notice of appeal August 5,
2009.
This
Court has now been informed that Belgard has died.
The
death of an appellant during the pendency of his appeal deprives this Court of
jurisdiction. Tex. R. App. P. 7.1(a)(2); Whitmire v. State, 943 S.W.2d 894 (Tex. Crim. App. 1997); Rheinlander v. State, 918 S.W.2d 527,
528 (Tex. Crim. App. 1996).
Accordingly,
we permanently abate this appeal.
Bailey
C. Moseley
Justice
Date Submitted: February
22, 2010
Date Decided: February
23, 2010
Do Not Publish
[1]This
appeal is a companion appeal to cause number 06-09-00151-CR, in which Belgard
was convicted of two counts of aggravated sexual assault of a child and was
sentenced to life imprisonment. | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2900747/ | Becker v. State
COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
JAMES BRENNAN,)
No. 08-03-00118-CR
)
Appellant,)
Appeal from
)
v.)
168th District Court
)
THE STATE OF TEXAS,)
of El Paso County, Texas
)
Appellee.)
(TC# 20010D00479)
MEMORANDUM OPINION
James Brennan appeals from his conviction for possession of a controlled substance. We
dismiss the appeal on our own motion pursuant to Tex.R.App.P. 25.2(d). Further, we deny as moot
a motion to dismiss this appeal pursuant to Tex.R.App.P. 42.2(a).
On March 25, 2003, the Clerk's Office informed Appellant that his notice of appeal failed
to comply with Tex.R.App.P. 25.2(d) because it did not contain the trial court's certification of the
defendant's right to appeal. The letter further notified Appellant that his appeal would be dismissed
if he failed to file an amended notice of appeal correcting the defect. Appellant has not amended his
notice of appeal. Instead, Appellant's attorney has filed a motion to dismiss the appeal pursuant to
Tex.R.App.P. 42.2(a) which provides that:
(a) At any time before the appellate court's decision, the appellate court may dismiss
the appeal if the party that appealed withdraws its notice of appeal--by filing a written
withdrawal in duplicate with the appellate clerk, who must immediately send the
duplicate copy to the trial court clerk. An appellant must personally sign the written
withdrawal.
Appellant has not signed the motion to dismiss as required by the rule because counsel has
been unable to locate him. The motion states that counsel initially filed the notice of appeal with the
intention of challenging a denial of a pretrial motion to suppress. Counsel has since learned that no
hearing was held on the motion to suppress and there is no adverse ruling to appeal. Without
Appellant's signature or a statement made in open court by Appellant that he no longer desires to
appeal, we are unable to grant the motion to dismiss pursuant to Rule 42.2(a). Rather than denying
the motion outright, we will deny it as moot because there is an independent ground for dismissal
of the appeal. Appellant's failure to comply with our request that he amend his notice of appeal to
include the trial court's certification of the defendant's right to appeal requires dismissal of the
appeal pursuant to Rule 25.2(d). See Tex.R.App.P. 25.2(d). The appeal is hereby dismissed.
June 26, 2003
ANN CRAWFORD McCLURE, Justice
Before Panel No. 2
Barajas, C.J., McClure, and Chew, JJ.
(Do Not Publish) | 01-03-2023 | 09-09-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1144647/ | 55 Cal. 2d 64 (1960)
THE PEOPLE, Respondent,
v.
JOSEPH BROWN, Appellant.
Crim. No. 6655.
Supreme Court of California. In Bank.
Dec. 22, 1960.
Gerald L. Rosen, under appointment by the Supreme Court, for Appellant.
Stanley Mosk, Attorney General, and William E. James, Assistant Attorney General, for Respondent.
THE COURT.
The trial court, sitting without a jury, found defendant guilty of offering to sell narcotics in violation of section 11500 (now renumbered and hereafter called 11501) of the Health and Safety Code. It also found that he was previously convicted of attempted robbery, denied his motion for new trial, and sentenced him to imprisonment in the state penitentiary for the term prescribed by law. Defendant appeals.
The public defender represented defendant at the trial, but did not undertake to do so on appeal. (See Gov. Code, 27706.) Defendant requested the District Court of Appeal, Second District, Division Three, in which the appeal was pending, to appoint an attorney to represent him, claiming that he was without funds to employ counsel. The court made an independent investigation of the record, determined that representation by counsel would be of no benefit to defendant or to the court, and denied the request. (See People v. Hyde, 51 Cal. 2d 152, 154 [331 P.2d 42].) Defendant prepared and filed a brief in propria persona. The court affirmed the judgment. (People v. Brown, (Cal.App.) 3 Cal. Rptr. 203.) We granted defendant's petition for hearing in this court and appointed counsel to represent him.
Officer Walton, an undercover narcotics agent, had arranged to buy heroin from an unidentified person and was awaiting delivery when defendant walked up to him and asked if he were a policeman. He replied that he was not. When defendant then asked him what he was waiting for, he replied that he was expecting a delivery of heroin. Defendant then left.
While sitting in a bar the following afternoon, Officer Walton saw defendant on the street and called to him, and defendant entered the bar. Officer Walton testified: "I told him that I would like to know who put the jacket on me, meaning who said that I was a policeman; and the defendant stated that he couldn't tell me that, but that he didn't think I was a policeman because I didn't look the type and I told him that I wanted to get some stuff, meaning heroin; and he stated that he could get it for me but if I turned him in, well, the people around that area would know who burned him--meaning had *66 him arrested." Officer Walton told defendant that he did not want to get burned again, meaning that he did not want to part with his money without receiving narcotics in return. Defendant answered that if Officer Walton wanted "it," he would have to take some risks. Officer Walton then gave defendant $9.00 and defendant left. Officer Walton waited for some time, but defendant did not return.
He saw defendant again three or four days later and asked him why he had not returned to the bar. Defendant answered "that he had it and he was on his way back but the police rousted him and he had to get rid of it." He again encountered defendant about a week and a half later and called to him "[t]hat was a pretty dirty deal you pulled on me the other day." Defendant replied that he would speak to him later. He did not see defendant again until his arrest. Defendant did not deliver heroin or any other substance to Officer Walton in return for the $9.00.
In his briefs filed in the District Court of Appeal, defendant contends that a specific intent to sell narcotics is an essential element of the crime of offering to sell narcotics under section 11501 of the Health and Safety Code [fn. 1] and that this intent cannot be inferred from the making of the offer alone. He asserts that the making of such an offer is equally attributable to an intent to obtain money by false pretenses. His counsel makes the additional contention that by proscribing offers to sell the Legislature in effect proscribed one form of attempts to sell and that therefore we must look to the law of attempts to determine whether an oral offer to sell constitutes an attempt to sell. He asserts that the oral offer and the taking of the money were only preparation to making a sale *67 and that neither was a direct, unequivocal act toward a sale. (See People v. Gallardo, 41 Cal. 2d 57, 66 [257 P.2d 29], and cases cited.) Since in his view such an act is an essential element of the corpus delicti of an offer to sell within the meaning of section 11501, it cannot be proved by defendant's extrajudicial admission standing alone that "he had it and he was on his way back but the police rousted him and he had to get rid of it." (See People v. Duncan, 51 Cal. 2d 523, 528 [334 P.2d 858]; People v. McMonigle, 29 Cal. 2d 730, 738 [177 P.2d 745].)
Both defendant's and his counsel's contentions are consistent with the position taken by the Subcommittee on Narcotics of the Assembly Interim Committee of the Judiciary in 1953 when it proposed the adoption of two new sections of the Health and Safety Code, only one of which was enacted. Section 11503 makes it a crime to offer to sell a narcotic and then deliver a substitute. [fn. 2]proposed section 11509 ( 10 of Assembly Bill No. 2243, 1953 Session) would have made it a crime to offer to sell a narcotic coupled with the acceptance of money, even though there was no delivery of anything. [fn. 3]
In recommending the passage of section 11503, the subcommittee stated: "[This section] will be entirely new law. This will cover the individual who agrees to sell, furnish, transport, or give away any narcotic, and then delivers some other liquid, substance, or material. These individuals are known to be in a position to violate the law; but, for some reason, they may feel that they are dealing with a law enforcement officer and thus deliver tobacco, water, or some other *68 substance with the result that they have had the intent to commit the crime but are testing out the officer. At the present time nothing can be done to that person, except to charge [him] with 'bunco.' Under this statute, it provides a penalty of not more than one year in the county jail or in the state prison for 10 years." The subcommittee thus made clear its view that section 11501 did not encompass an offer to sell a narcotic and subsequent delivery of a substitute. A fortiori it would not encompass an offer to sell a narcotic and subsequent failure to deliver anything, which proposed section 11509 envisaged.
Whether the subcommittee's view was based on the theory that an offer alone to sell a narcotic is insufficient evidence of a specific intent to make such a sale or on the theory that offer means attempt and that some additional act is required to constitute an attempt does not appear. [1] In any event, the subcommittee's interpretation of the existing statute is not conclusive. Even if it is assumed that by enacting section 11503 the Legislature impliedly excluded the conduct therein proscribed from the more inclusive language of section 11501, it did not affect the scope of section 11501 in relation to defendant's conduct in this case.
[2] We agree with defendant's contention that a specific intent to sell a narcotic is an essential element of the crime of offering to make such a sale under section 11501. (See Pen. Code, 20; Matter of Yun Quong, 159 Cal. 508, 514-515 [114 P. 835, Ann.Cas. 1912C 969]; People v. Winston, 46 Cal. 2d 151, 158 [293 P.2d 40]; People v. Vogel, 46 Cal. 2d 798, 801 [299 P.2d 850].) [3] In view, however, of defendant's subsequent admission that "he had [the stuff] and he was on his way back but the police rousted him and he had to get rid of it," and the absence of any compelling evidence that defendant's offer was false, the trial court could reasonably conclude that defendant meant what he said when he stated to the officer that for $9.00 "he would get it for me. ... He would get the stuff for me." [4] Moreover, there is nothing in section 11501 to support the contention that an offer to sell means an attempt to sell, for it proscribes both "offers to transport, import into this State, sell, furnish, administer, or give away" and "attempts to import into this State or transport any narcotic. ..." By thus distinguishing between offers and attempts the Legislature made clear that the requirement of a direct, unequivocal act toward a sale necessary for an attempt to make a sale is not an implied element of an offer to sell. *69
The judgment and the order denying the motion for new trial are affirmed.
TRAYNOR, J.
I concur in the judgment. It is my opinion, however, that the holding in People v. Hyde, 51 Cal. 2d 152, 154 [331 P.2d 42], should be expanded to require the appointment of counsel on appeal for all indigent defendants convicted of felonies. [fn. 1]*70
The question calls for resolution even though we appointed counsel to represent defendant in this court. The question cannot remain in abeyance. This very case illustrates the recurring practice of the District Court of Appeal, Second District, Division Three, of referring the question of the appointment of counsel to the local bar association committee (see People v. Logan, 137 Cal. App. 2d 331, 332 [290 P.2d 11]) and the consequent countervailing practice of this court to then grant a hearing, even on its own motion, whenever there has been no appointment of counsel. There would be no end to such wasteful procedure were the question deemed moot each time this court granted a hearing and appointed counsel. The question should be settled in the interest of effective appellate court administration. (See Almassy v. Los Angeles County Civil Service Com., 34 Cal. 2d 387, 390 [210 P.2d 503]; Walling v. Mutual Wholesale Food & Supply Co., 141 F.2d 331, 334-335; People ex rel. Wallace v. Labrenz, 411 Ill. 618 [104 N.E.2d 769, 772]; State ex rel. Smith v. Smith, 197 Ore. 96 [252 P.2d 550, 563]; 103 U. of Pa. L. Rev. 772, 783, 787-793; 132 A.L.R. 1185, 1186.)
In Griffin v. Illinois, 351 U.S. 12 [76 S. Ct. 585, 100 L. Ed. 891, 55 A.L.R. 2d 1055], the Supreme Court of the United States held that a state may not deny to a defendant, on the sole ground that he cannot pay for it, a stenographic transcript of the trial proceedings when it is essential to effective appellate review. The court declared that although there is no constitutional right to appeal, "that is not to say that a State that does grant appellate review can do so in a way that discriminates against some convicted defendants on account of their poverty. Appellate review has now become an integral part of the Illinois trial system for finally adjudicating the guilt or innocence of a defendant. Consequently at all stages of the proceedings the Due Process and Equal Protection clauses protect persons like petitioners from invidious discriminations." (Id at p. 18.)
Although this holding establishes only the right to a transcript, it indicates the Supreme Court's concern to protect indigent defendants against discriminatory consequences of *71 their poverty. Denial of counsel on appeal would seem to be a discrimination at least as invidious as that condemned in Griffin v. Illinois, supra. (See State v. Delaney, 221 Ore. 620 [332 P.2d 71, 74-81]; The effect of Griffin v. Illinois on the States' Administration of the Criminal Law, 25 U. of Chi. L. Rev. 161, 170-171; Appointment of Counsel for Indigent Defendants in Criminal Appeals, 1959 Duke L.J. 484, 488-489.) We need not determine this constitutional question, however, for there are adequate independent grounds for the conclusion that appellate courts must appoint counsel on appeal for all indigent defendants convicted of felonies.
Appointment of counsel is essential to minimize hazards of affirming an erroneous judgment, particularly in view of rule 33 of the Rules on Appeal. This rule defines "normal record" on appeal and "additional record." If the defendant wants the record on appeal to include matters that are part of the "additional record," he must file "with his notice of appeal an application describing the material which he desires to have included and the points on which he intends to rely which make it proper to include it." It is unreasonable to expect the average indigent defendant without counsel to obtain an adequate record on appeal. He would ordinarily be incarcerated, without access to the trial court's files, and cut off from consultation with his trial defense counsel, the trial judge, the prosecutor, and other witnesses to the trial. He would probably be without access to law books and unable to designate points that make it proper to include an additional record. He would probably be unaware of rule 33, or so unfamiliar with it that he would fail to realize that the normal record does not include rulings on motions, the voir dire examination of jurors, the opening statements and arguments to the jury, comments on the evidence by the trial judge, instructions given or refused, and rulings on the admissibility of exhibits. He would not be alert, as would an attorney, to possible reversible errors therein even when they amounted to a denial of constitutional rights. (See People v. Barrett, 207 Cal. 47, 49 [276 P. 1003] [manner in which the trial judge conducted the voir dire examination of the jurors amounted to a denial of the constitutional right to trial by jury].)
Even a court cannot make an adequate review on less than the whole record. A fortiori, an attorney called upon by a local bar association and unknown to defendant or trial counsel cannot evaluate the merits of an appeal on less than *72 the whole record. It is unpredictable how far an appellate court would advance toward a determination of the merits of an appeal by ordering the preparation and transmission to it of the whole record. In any event, it would then vitiate rule 33, designed to avoid preparation and review of nonessential parts of the record.
An appellate court can no more appropriately judge whether there is error requiring reversal without the benefit of counsel than a trial court can decide the issues at the trial without benefit of counsel. (See Kopasz v. Kopasz, 34 Cal. 2d 423, 425 [210 P.2d 846].) How then can it determine that there is no error requiring appointment of counsel? How can it undertake to dispense with counsel for indigents when it is not free to dispense with counsel for those who can afford them? A court does not suddenly become omniscient when the appellant proves impecunious. Thus in People v. Tahtinen, 50 Cal. 2d 127 [323 P.2d 442], this court was divided on the merits, yet the attorney to whom the record was referred by the local bar association committee at the instigation of the District Court of Appeal thought there was no reasonable basis for an appeal, and that court accordingly denied defendant's request for appointment of counsel. In the present case that court rejected the attorney's recommendation for appointment of counsel, declaring that the appeal was "without a semblance of merit." ((Cal.App.) 3 Cal. Rptr. 203, 205.) Yet this court, after ordering a hearing and appointing counsel, now finds that there are substantial legal issues demanding careful research and analysis that demonstrate the risk of fallibility of judgment without benefit of counsel's advocacy.
Moreover, appointment of counsel promotes effective appellate court administration. Denied counsel, defendants frequently file briefs in propria persona raising issues of little or no merit that still require the attorney general's answer and the court's consideration. Often when a District Court of Appeal affirms the judgment, a defendant files a petition for hearing in this court that does not comply with rules 28 and 29, which presuppose an orderly presentation of the case before the District Court of Appeal. When a defendant is incapable of making such a presentation, this court has a correspondingly heavy burden in reviewing his petition.
The court as well as defendant is more likely to benefit from oral argument, as well as from briefs presented by counsel rather than by defendant in propria persona. Moreover, *73 the first alternative also avoids possible complications of habeas corpus and the transportation of defendant under guard. There is no reason to forego these advantages of argument by counsel, particularly when the defendant might be driven to the second alternative to secure his right to oral argument on appeal implicit in rules 22 and 28(f) of the Rules on Appeal. (Metropolitan Water Dist. v. Adams, 19 Cal. 2d 463, 467-468 [122 P.2d 257]; see Pen. Code, 1253; Witkin, New California Rules on Appeal, 17 So. Cal. L. Rev. 232, 243-244.)
The problem is not averted merely because Government Code, section 27706, makes it the duty of the public defender to prosecute appeals "where, in his opinion, the appeal will or might reasonably be expected to result in the reversal or modification of the judgment of conviction." Comparable discretion vested in federal district judges is subject to appellate review, and counsel must be appointed to assist the defendant in showing that his appeal has merit. (Johnson v. United States, 352 U.S. 565, 566 [77 S. Ct. 550, 1 L. Ed. 2d 593]; see also Eskridge v. Washington State Board of Prison Terms & Paroles, 357 U.S. 214 [78 S. Ct. 1061, 2 L. Ed. 2d 1269]; Farley v. United States, 354 U.S. 521, 522-523 [77 S. Ct. 1371, 1 L. Ed. 2d 1529]; see also People v. Kalan, 2 N.Y.2d 278 [140 N.E.2d 357, 358]; State ex rel. White v. Hilgemann, 218 Ind. 572 [34 N.E.2d 129, 131].) Moreover, it sometimes happens that defendants who were able to retain counsel at the trial are indigent at the time of appeal. It would be capricious to make a defendant's right to appointment of counsel on appeal depend on the chance that he was represented by the public defender at the trial.
In the interest, therefore, of orderly as well as just review an appellate court should appoint counsel upon the request of an indigent defendant convicted of a felony. Any implications to the contrary in People v. Hyde, 51 Cal. 2d 152, 154 [331 P.2d 42]; People v. Logan, 137 Cal. App. 2d 331, 332-333 [290 P.2d 11]; People v. McGrory, 137 Cal. App. 2d 723, 724 [291 P.2d 43]; People v. Hamm, 145 Cal. App. 2d 242, 244 [302 P.2d 345]; and People v. Slater, 152 Cal. App. 2d 814, 815-816 [313 P.2d 111], should be disapproved.
Of course appointed counsel should not present frivolous appeals. (See Ellis v. United States, 356 U.S. 674, 675 [78 S. Ct. 974, 2 L. Ed. 2d 1060], discussed in Ehrenhaft, Indigent Appellants in the Federal Courts, 46 A.B.A.J. 646, 647; State ex rel. White v. Hilgemann, 218 Ind. 572, 578-579 [34 N.E.2d *74 129].) It is for counsel to make a reasonable investigation, ordinarily involving consultation with the defendant, to insure consideration of meritorious grounds of appeal. (See United States v. Sevilla, 174 F.2d 879, 880.) Should he then conclude that the appeal is frivolous, he should so advise the court and the defendant. He need not proceed with the appeal; should the defendant insist on proceeding with it, the court need not appoint new counsel. (People v. Tabb, 156 Cal. App. 2d 467, 471- 472 [319 P.2d 656].)
The reasons for appointment of counsel on appeal from judgments of conviction do not extend to habeas corpus or other collateral attacks on final judgments of conviction unless the defendant presents a prima facie case for relief. "This procedural requirement does not place upon an indigent prisoner who seeks to raise questions of the denial of fundamental rights in propria persona any burden of complying with technicalities; it simply demands of him a measure of frankness in disclosing his factual situation." (In re Swain, 34 Cal. 2d 300, 304 [209 P.2d 793].) Our reluctance to consider even constitutional questions on habeas corpus if they could have been raised on appeal (see In re Dixon, 41 Cal. 2d 756, 759-761 [264 P.2d 513]) makes it all the more important to afford defendants a fair opportunity to challenge their convictions on appeal.
Appointment of counsel on appeal should reduce applications for post-conviction remedies in the federal courts as well as our own. [fn. 2] As the report of July 5, 1960, of the Habeas Corpus Committee of the National Association of Attorneys General points out, the states can largely obviate review of their decisions in criminal cases by federal district courts on habeas corpus petitions by providing adequate state remedies.
This discussion is limited to felonies because of the substantially less serious nature of misdemeanors and their correspondingly lighter penalties. (See Pen. Code, 17-19b.) The misdemeanant suffers no loss of civil rights. (See Pen. Code, 2600-2601.) He is entitled to bail as a matter of right after conviction pending appeal. (Pen. Code, 1272.) Any incarceration is likely to be brief. Frequently a misdemeanant is penalized only by fine, often payable in installments. (See Pen. Code, 1205.) The court may grant probation summarily (Pen. Code, 1203b) to the misdemeanant or permit him to *75 serve time on weekends or at times when he is not working. With earning capacity thus maintained he may be able to employ counsel. Most misdemeanants are willing to forfeit bail or pay the fines and find it unnecessary to employ counsel or request trial. There is hence not the urgency for making appointment of counsel on appeal for indigent misdemeanants mandatory instead of discretionary.
Peters, J., and Dooling, J., concurred.
SCHAUER, J.
I concur only in the judgment. I am impelled to point out that the discussion, in the opinion by the court (ante, pp. 67-68), of purported interpretation of section 11501 of the Health and Safety Code by the 1953 proposal of legislation, expression of views by an assembly subcommittee, and adoption of section 11503 (former 11502, enacted in 1953) by the Legislature, is neither necessary nor appropriate. The argument concerning these matters was not advanced either by defendant in propria persona or by counsel appointed for him, but originated in this court. The notion that these matters which occurred in 1953 could evidence what the Legislature meant when it created the crime of offering to sell a contraband narcotic in 1909 [fn. 1] appears to me so obviously lacking in merit as not to warrant inclusion in an appellate opinion; rather, such notion appears to be stated for no other purpose than to refute it.
The contention made by counsel appointed for defendant by this court--that the word "offer" in section 11501 means "attempt" as defined by the law of crimes--is in effect a more sophisticated version of the argument advanced by defendant in pro. per. before the District Court of Appeal, Second District, Division Three. That court, speaking through Presiding Justice Shinn (People v. Brown (1960, Cal.App.), 3 Cal. Rptr. 203, 204, 205), stated defendant's contention as made in pro. per. as follows: "that the word 'offer' should be construed to mean 'bring, bear, or carry,' and since it was not even shown there was a narcotic in existence which could have been the subject of an offer, commission of the *76 charged offense was not proved." Without in so many words rejecting defendant's contention as to the meaning of "offer," the District Court of Appeal correctly held that "Appellant's [defendant's] statement that he had 'it' was sufficient as proof that the heroin was in his possession and that he had the ability to perform his promise."
Now this court, after lengthy consideration of this simple case, comes to the same conclusion as to the sufficiency of the evidence--the only possible conclusion under any normal theory of appellate review. The only contribution to the law in the opinion by the court is the decision that the Legislature, when it proscribed both "offers" and "attempts," referred to two different sorts of criminal conduct.
In the circumstances it is obvious that the District Court of Appeal properly determined, on the basis of its own examination of the record, that "representation by counsel would be of no benefit to the appellant or to the court" and correctly held that "There is no merit in the appeal." (People v. Brown (1960, Cal.App.), supra, 3 Cal. Rptr. 203, 204.)
It seems proper to note that the majority "By the Court" opinion states (ante, p. 65) 'that "Defendant requested the District Court of Appeal, Second District, Division Three, in which the appeal was pending, to appoint an attorney to represent him, claiming that he was without funds to employ counsel. The court made an independent investigation of the record, determined that representation by counsel would be of no benefit to defendant or to the court, and denied the request. (See People v. Hyde, 51 Cal. 2d 152, 154 [331 P.2d 42].) ... We granted defendant's petition for hearing in this court and appointed counsel to represent him."
It appears proper to note also that the concurring opinion of Mr. Justice Traynor states (ante, pp. 69-70), "I concur in the judgment. It is my opinion, however, that the holding in People v. Hyde, 51 Cal. 2d 152, 154 [331 P.2d 42], should be expanded to require the appointment of counsel on appeal for all indigent defendants convicted of felonies."
"The question calls for resolution even though we appointed counsel to represent defendant in this court. The question cannot remain in abeyance. This very case illustrates the recurring practice of the District Court of Appeal, Second District, Division Three, of referring the question of the appointment of counsel to the local bar association committee (see People v. Logan, 137 Cal. App. 2d 331, 332 [290 P.2d 11]) and the consequent countervailing practice of this court to *77 then grant a hearing, even on its own motion, whenever there has been no appointment of counsel. There would be no end to such wasteful procedure were the question deemed moot each time this court granted a hearing and appointed counsel. The question should be settled in the interest of effective appellate court administration."
It seems appropriate further to note that the question was settled by the holding in People v. Hyde (1958), 51 Cal. 2d 152, 154 [1] [331 P.2d 42], and that the District Court of Appeal in the present case complied with that holding.
From what has been quoted above from the opinions of the majority and of Justice Traynor it appears proper to infer that the granting of a hearing in the case at bench was influenced at least in part by the view of the specially concurring justice. If such inference is properly drawn it seems obviously appropriate to observe that although counsel appointed by this court performed his duties faithfully and ably, the appointment of an attorney for the defendant has not aided such defendant or furthered the proper administration of justice. The only thing which the granting of a hearing accomplished has been a delay in final determination of this case and additional expense to the state.
McComb, J., concurred.
"If such a person has been previously convicted of any offense described in this division or has been previously convicted of any offense under the laws of any other state or of the United States which if committed in this State would have been punishable as an offense described in this division, the previous conviction shall be charged in the indictment or information and if found to be true by the jury, upon a jury trial, or if found to be true by the court, upon a court trial, or is admitted by the defendant, he shall be imprisoned in the state prison from 10 years to life."
State practice varies. Two states require the appointment of counsel on appeal in all felony cases. (Indiana: State ex rel. White v. Higelmann, 218 Ind. 572, 578 [34 N.E.2d 129]; State ex rel. Grecco v. Allen Circuit Court, 238 Ind. 571, 575 [153 N.E.2d 914]; Wisconsin: Wis. Stat. Ann. 957.26 (3), [if the court is satisfied that "review is sought in good faith and upon reasonable grounds"].) In New York the appointment of counsel on appeals turns upon whether the indigent defendant has a copy of the trial minutes. If he does, no counsel is appointed (People v. Breslin, 4 N.Y.2d 73, 86-87 [149 N.E.2d 85]); otherwise appointment is mandatory (People v. Kalan, 2 N.Y.3d 278, 280 [140 N.E.2d 357]; (People v. Pitts, 6 N.Y.2d 288, 292-293 [160 N.E.2d 523]). Wyoming places discretion in the Supreme Court to appoint counsel for indigent defendants "in any criminal matter or proceeding before said Supreme Court." (Wyo. Stats. 1957, 7-8.) Several states appoint counsel at the trial who has discretion to appeal at public expense. (Connecticut: State v. Klein, 95 Conn. 451, 453 [112 A. 524] [public defender]; State v. Zukauskas, 132 Conn. 450, 451-452 note [45 A.2d 289]; Iowa: Iowa Code Ann. tit. 36 775.5 (1959 Pocket Part), Tomlinson v. Monroe County, 134 Iowa 608, 610 [112 N.W. 100]; Michigan: Mich. Stat. Ann. 28.1254; Minnesota: Minn. Stat. Ann. 611.07(2) (1959 Pocket Part) [Review must be sought "in good faith and upon reasonable grounds." The provision may apply only when trial counsel was appointed by the court, cf. State v. Coursolle, 255 Minn. 384, 390 [97 N.W.2d 472]]; Mississippi: Miss. Code Ann. 1942 2505 [capital cases only]; Nevada: Nev. Rev. Stat. 117.065(2), 7.260; Pennsylvania:penn. Stat. Ann. tit. 19 1232.) Other states require appointment of counsel on appeal only in capital cases. (Alabama: Ala. Code tit. 15 382 (5) (1955 Pocket Part), [applied but not discussed in Monk v. State, 258 Ala. 603 [64 So. 2d 588]]; Florida: Fla. Stat. Ann. 909.21 (1959 Pocket Part), [applied, State ex rel. Shargaa v. Culver, Fla., 113 So. 2d 383 ]; Georgia: Ga. Code Ann. 27-3002 (1958 Pocket Part); Illinois: Ill. Rev. Stat. 1959, ch. 38 730a; Kansas: Gen. Stat. of Kan. 62-1304 (1959 Supp.) (first degree murder only); Nebraska: Rev. Stat. of Neb. 1943 29-1803, 29-1804 (1959 Cum. Supp.); North Carolina: Gen. Stat. of No. Car. 15-181; Oklahoma: Noel v. State, 17 Okla. Crim. 308, 318-322 [188 P. 688]; Oregon: Ore. Rev. Stat. 138.420 (1959 Replacement); cf. Anonymous, 76 Me. 207 (1st case, 1884).) Three states refuse to appoint counsel on appeal. (Rhode Island: State v. Hudson, 55 R.I. 141, 153 [179 A. 130, 100 A.L.R. 313], followed, Lee v. Kindelan, 80 R.I. 212, 217-218 [95 A.2d 51], cert. den., 345 U.S. 1000 [73 S. Ct. 1146, 97 L.Ed 1406]; Tennessee: State ex rel. Fisher v. Bomar, 201 Tenn. 579, 581 [300 S.W.2d 927]; Texas: Spalding v. State, 137 Tex. Crim. 329, 334 [127 S.W.2d 457]; cf. State v. Singletary, 187 S. C. 19, 28 [196 S.E. 527].)
NOTES
[fn. 1] 1. Section 11501 provides: "Except as otherwise provided in this division, every person who transports, imports into this State, sells, furnishes, administers or gives away, or offers to transport, import into this State, sell, furnish, administer, or give away, or attempts to import into this State or transport any narcotic other than marijuana except upon the written prescription of a physician, dentist, chiropodist, or veterinarian licensed to practice in this State shall be punished by imprisonment in the county jail for not more than one year, or in the state prison from five years to life.
[fn. 2] 2. Section 11503 provides that "Every person who agrees, consents, or in any manner offers to unlawfully sell, furnish, transport, administer, or give any narcotic to any person, or offers, arranges, or negotiates to have any narcotic unlawfully sold, delivered, transported, furnished, administered, or given to any person and then sells, delivers, furnishes, transports, administers, or gives, or offers, arranges, or negotiates to have sold, delivered, transported, furnished, administered, or given to any person any other liquid, substance, or material in lieu of any narcotic shall be punished by imprisonment in the county jail for not more than one year, or in the state prison for not more than 10 years."
[fn. 3] 3. Proposed section 11509, as amended March 9, 1953, read: "Every person who agrees, consents, or in any manner offers, to sell, deliver, furnish, transport, administer, or give, or arranges or negotiates to have sold, delivered, furnished, transported, administered, or given to any person any narcotic in violation of any provision of this division and accepts any money, thing of value, or other consideration in full or partial payment is guilty of a felony, and upon conviction thereof shall be confined in the county jail for not less than 60 days nor more than one year, or in the state prison for not more than 5 years."
[fn. 1] 1. The problem has attracted nation-wide attention. The subcommittee to study defender systems of the Association of the Bar of the City of New York and the National Legal Aid Association concluded in their report, Equal Justice for the Accused 61 (Doubleday, 1959) that "[i]n addition to affording early representation, any defender system should make provision for the continuance of representation through appeal in appropriate cases. An appeal when grounds exist is an inseparable part of the process through which the individual's guilt or innocence of the charges brought against him by the state is established. Counsel is needed to assist with the determination of whether an appeal should be taken and, if an appeal is taken, to prepare and present it."
[fn. 2] 2. In the two-week period from July 25, 1960, to August 5, 1960, this court denied seven petitions for habeas corpus from the same prisoner, who had taken his appeal in propria persona.
[fn. 1] 1. By a 1909 amendment of section 8 of the 1907 Poison Act the Legislature for the first time made it unlawful to "offer to sell, furnish or give away" narcotics except under certain conditions. (Stats. 1909, ch. 279, 4.) Since then each of the series of acts which have denounced narcotics offenses has contained a provision similar to that of such amended section 8 or the comparable provision of the here pertinent section 11501 of the Health and Safety Code. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1827071/ | 691 So. 2d 1349 (1997)
The LAWLY BROOKE BURNS TRUST
v.
R K R, INC.
No. 96 CA 1231.
Court of Appeal of Louisiana, First Circuit.
March 27, 1997.
*1350 Manuel A. Fernandez, G. Frederick Seemann, New Orleans, for Plaintiff/Appellant Frank M. Burns, Jr.
Craig T. Robichaux, Mandeville, for Defendants/Appellees R K R, Inc., Robenia B. Daniels and Eunice H. Burns.
Before WATKINS, GONZALES and KUHN, JJ.
KUHN, Judge.
This appeal arises from two consolidated suits. One of the suits involves a claim by the representatives of a trust, which owns one-third of the shares of a corporation, for an accounting and damages resulting from alleged breaches of fiduciary duty by an officer of the corporation. In the other suit, the corporate officer, in his capacity as representative of another shareholder trust, seeks to have the corporation liquidated.
I. FACTS AND PROCEDURAL BACKGROUND
During 1980, R K R, Inc. ("R K R") was formed by Frank Burns, Sr., and his wife, Eunice Burns. R K R was established to own and manage various properties and interests for the benefit of trusts formed for each of the Burns' grandchildren. Mr. and Mrs. Burns have three children, Frank M. Burns, Jr. ("Burns, Jr."), Robinea[1] B. Daniels, and Kay H. Hyde, Mrs. Burns' daughter from a prior marriage. Burns, Jr., has one child, Lawly Brooke Burns; Daniels has one child, Molly Daniels; and Hyde has two children, Lynn Hyde and Amy Kaye Hyde. Sixty shares of stock were distributed by R K R when it was formed. The Lawly Brooke Burns Trust owns twenty shares, The Molly Daniels Trust owns twenty shares, The Laura Lynn Hyde Trust owns ten shares, and The Amy Kaye Hyde Trust owns ten shares.
A. The Suit for an Accounting and Damages
On December 6, 1991, Robinea B. Daniels and Eunice H. Burns, in their capacity as cotrustees of the Molly Daniels Irrevocable Inter Vivos Trust (collectively referred to as "the Molly Daniels plaintiffs"), filed suit against R K R and Burns, Jr. In the petition, the Molly Daniels plaintiffs assert: 1) Burns, *1351 Jr., has failed to account for monies received by him on behalf of R K R, and 2) R K R is entitled to an accounting from Burns, Jr., and a judgment in its favor against Burns, Jr., for all sums determined to be due as a result of the accounting.
B. The Suit for Liquidation
On April 7, 1993, Burns, Jr., in his capacity as trustee of The Lawly Brooke Burns Trust, filed suit against R K R, requesting dissolution of the corporation. Although the liquidation suit was initially consolidated with three other suits, it was later severed from those suits and consolidated with the suit for an accounting and damages.[2]
C. Proceedings Below
A hearing on the merits of these consolidated suits was held on June 28, 1995. Regarding the suit for an accounting and damages, the trial court determined that Burns, Jr., as an officer of R K R, violated the fiduciary duties he owed to R K R and its shareholders with respect to a number of transactions. These transactions involved investments of R K R funds, timber and land sales, credit transactions and various cash draws.[3] The court determined the damages resulting from Burns, Jr.'s breaches of fiduciary duty to be $516,893.26 and awarded judgment in favor of Robenia[4] B. Daniels and Eunice H. Burns, as Co-Trustees of The Molly Daniels Irrevocable Inter Vivos Trust, as shareholders of R K R, and against Burns, Jr., in that amount. In the other suit, the trial court found insufficient grounds for ordering an involuntary liquidation, and signed a judgment rejecting The Lawly Brooke Burns Trust's claim for involuntary liquidation of RKR.
Burns, Jr. has appealed, contending he is aggrieved by the judgment rendered in favor of the Molly Daniels plaintiffs.
D. Assignments of Error
On appeal, Burns, Jr., asserts the following assignments of error and/or issues for review by this court:
1. The lower court's issuance of a judgment in favor of the individual stockholders was a violation of Louisiana law permitting derivative action lawsuits. Palowsky v. Premier Bancorp, 597 So. 2d 543 (La.App. 1st Cir.1992).
2. Considering the facts that form the record of this proceeding, the defendant Frank Burns did not violate any duty to the corporation as set out in LSA R.S. 12:84 and LSA R.S. 12:91.
3. The claims brought by plaintiffs were personal rather than secondary actions on behalf of the corporation and were, in truth and fact, for the wrongrul [sic] distribution of corporate assets, which said action is preempted by a period of two years. LSA R.S. 12:92.
II. ANALYSIS
A. Prescription/Peremption
La. C.C. art. 3499 provides, "Unless otherwise provided by legislation, a personal action is subject to a liberative prescription of ten years."
La. R.S. 12:91 provides, in pertinent part:
Officers and directors shall be deemed to stand in a fiduciary relation to the corporation and its shareholders, and shall discharge the duties of their respective positions in good faith, and with that diligence, *1352 care, judgment and skill which ordinarily prudent men would exercise under similar circumstances in like positions.
La. R.S. 12:92 D states:
If any dividend shall be paid in violation of this Chapter, or if any other unlawful distribution, payment or return of assets be made to the shareholders, ... the directors who knowingly, or without the exercise of reasonable care and inquiry, voted in favor thereof shall be liable jointly and severally to the corporation, or to creditors of the corporation, or to both, in an amount equal to the amount of the unlawful distribution. An action to enforce such liability must be brought within two years from the date on which the distribution was made, and this time limit shall not be subject to suspension on any ground, nor to interruption except by timely suit. (Emphasis added.)
Appellant asserts plaintiffs' claims are barred by the two year prescriptive/peremptive period set forth in La. R.S. 12:92 D.[5] We find no merit in this argument.
A cause of action under La. R.S. 12:92 D against the directors of a corporation arising from an unlawful distribution of corporate assets is time barred after two years. However, any other breach of fiduciary duties by the directors, gives rise to a cause of action under La. R.S. 12:91, which is subject to a ten year prescriptive period. See Mary v. Lupin Foundation, 609 So. 2d 184, 188-189 (La.1992).[6] Actions based on breaches of fiduciary duties constitute personal actions subject to a liberative prescription period of ten years. La. C.C. art. 3499; Levy v. Billeaud, 443 So. 2d 539, 545 (La. 1983)[7]. Spruiell v. Ludwig, 568 So. 2d 133, 138 (La.App. 5th Cir.1990), writ denied, 573 So. 2d 1117 (La.1991).[8]
The two-year time limitation set forth in Subsection D of La. R.S. 12:92 is only applicable to actions based on the type of conduct described in the first sentence of that subsection. To impose liability pursuant to 12:92 D, there must be: 1) the payment of a "dividend" in violation of the Business Corporation Law Chapter or an "unlawful distribution, payment or return;" 2) of "assets;" 3) to the "shareholders;" 4) resulting from a "vote" in favor thereof by the "directors;" 5) which vote was made "without the exercise of reasonable care and inquiry." See Mary v. Lupin Foundation, 609 So.2d at 189.
In the present case, the record establishes Burns, Jr.'s involvement in the transactions challenged by the Molly Daniels plaintiffs was not in the capacity of director of R K R. According to a February 7, 1992 consent judgment (entered into by Robenia B. Daniels and Burns, Jr., pursuant to a related proceeding), "Robenia B. Daniels, Laura Kay Hyde and Michael B. Hyde are the only directors of R K R, Inc. and they have been the only directors of RKR, Inc. since its incorporation." We also note that the initial report of R K R, dated December 3, 1980, lists its first directors as Michael Hyde, Kay H. Hyde, and Robena Daniels. Subsequent annual reports to the Secretary of State identify Burns, Jr., as Secretary-Treasurer and/or President of R K R, or as C.E.O.
*1353 Additionally, there is no evidence of the requisite "vote" approving the transactions in question. We note the fact that formal corporate action is required for a cause of action to fall within the ambit of § 92 D conforms with the relative short (two-year) time limitation provided in that subsection. Where the action of directors is a matter of corporate record, the two-year time limitation is presumed fair because the corporate records provide sufficient notice to shareholders of the action taken by the directors. However, when the directors act without formal corporate action to deprive the corporation of its assets, the shareholders may be unable to discover a misappropriation within a two-year period. See Mary v. Lupin Foundation, 609 So.2d at 189.
Because the transactions in dispute do not involve an unlawful payment or distribution resulting from a "vote" in favor thereof by the "directors" of R K R, we conclude that the two-year prescriptive period set forth by La. R.S. 92 D is not applicable to this case. Rather, we find the ten-year prescriptive period is applicable to the Molly Daniels plaintiffs' claims that Burns, Jr., has breached the fiduciary duty he owed to the corporation and its shareholders while acting as an officer of the corporation. Appellant does not urge that any of the Molly Daniels plaintiffs' claims are barred pursuant to a ten-year prescriptive period. Accordingly, we find no merit in the exception of prescription.
B. Shareholder's Derivative or Secondary Action
Appellant asserts the trial court erred in issuing a judgment in favor of the Molly Daniels plaintiffs in their personal capacity rather than in favor of the corporation. He asserts that a "shareholder cannot initiate or maintain a personal action against the officers and directors of the corporation directly for an alleged breach of fiduciary duty even though [the shareholder] allege[s] that the actions of officers and/or directors adversely affected the value of their stock."[9] He further contends the plaintiffs did not comply with the requirements for asserting a shareholders' derivative or secondary action set forth in La. C.C.P. art. 596.[10]
Under La. R.S. 12:91, officers and directors of a corporation stand in a fiduciary relation to the corporation's shareholders as well as to the corporation itself. Nevertheless, it is well established that a shareholder of a corporation does not generally have a right to sue personally for alleged losses sustained by the corporation due to mismanagement and/or a breach of fiduciary duties. Palowsky v. Premier Bancorp, Inc., 597 So. 2d 543, 545 (La.App. 1st Cir.1992), and cases cited therein. A shareholder may only sue to recover losses to a corporation resulting from mismanagement and breaches of fiduciary duties secondarily through a shareholder's derivative suit. Id. Therein, the shareholder is only a nominal plaintiff and the recovery is for the corporation. Dennis v. Copelin, 94-2002, p. 8 (La.App. 4th Cir. 2/1/96); 669 So. 2d 556, 560, writ denied, 96-1012 (La.6/21/96); 675 So. 2d 1079.
If the breach of fiduciary duty causes a direct loss to the shareholder or causes damage affecting the shareholder personally, a shareholder may have the right to pursue a claim individually for breach of fiduciary duty to the corporation under La. R.S. 12:91. However, in situations where the alleged loss to the individual shareholder is the same loss that would be suffered by other shareholders (such as a decline in the value of stock), the loss is considered to be indirect. Maestri v. Destrehan Veterinary Hosp., Inc., 94-1030 (La.App. 5th Cir. 3/28/95); 653 So. 2d 1241, 1244; writ denied, 95-1534 (La.9/29/95); 660 So. 2d 879. Palowsky v. Premier Bancorp, Inc., 597 So.2d at 545. Where the shareholder, but not the corporation, suffers a loss, that loss is considered a direct loss to the shareholder, and the shareholder may have a right to sue individually. Id.
*1354 In the present case, we agree with appellant's assertion that the Molly Daniels plaintiffs do not have the right to sue personally for alleged losses sustained by R K R due to mismanagement and/or a breach of fiduciary duties. The alleged losses involve direct losses to R K R and indirect losses to the shareholder trusts. While the Molly Daniels plaintiffs do not have a legally recognized right to recover for these losses individually, they do have the right to bring a secondary or derivative action on behalf of R K R to enforce R K R's rights against individual defendants.
A shareholder's secondary or derivative suit may be brought either as a class action pursuant to the provisions of La. C.C.P. arts. 591-597[11] or, if it is not impracticable for all shareholders or members of a corporation to be joined in the suit, a secondary action may be brought under La. C.C.P. art. 611. Palowsky v. Premier Bancorp, Inc., 597 So.2d at 546, n. 2.
La. C.C.P. art. 591 establishes as a prerequisite for a class action that the persons constituting the class are "so numerous as to make it impracticable for all of them to join or be joined as parties." Since R K R's stocks are owned by only four shareholders, there would be no merit in the position that this suit should be advanced as a class action. Moreover, plaintiffs have not categorized the present proceeding as a class action and have not moved for certification as such.
The other procedural basis for urging a secondary action is La. C.C.P. art. 611 which provides:
When it is not impracticable for all of the shareholders or members of a corporation or unincorporated association to join or to be joined as parties to a secondary action to enforce a right of the corporation or unincorporated association which it refuses to enforce, all of the shareholders or members who refuse or fail to join as plaintiffs in such an action shall be joined as defendants.
In all other respects, such an action is governed by the provisions of Articles 593 through 596.
Only one of the four shareholder trusts, the Molly Daniels Trust, is a party to the suit for accounting and damages.[12] The record does not establish a refusal by the other shareholders to join in the suit. However, since the other shareholder trusts failed to join the suit, the Molly Daniels plaintiffs would be required to name them as parties in order to comply with La. C.C.P. art. 611.[13]
Since the Molly Daniels plaintiffs failed to comply with the mandatory joinder provisions of La. C.C.P. art. 611, the trial court should not have adjudicated the merits of the suit for accounting and damages. Accordingly, the judgment in favor of Robenia B. Daniels and Eunice H. Burns, as co-trustees of the Molly Daniels Irrevocable Inter Vivos Trust as shareholders of R K R, Inc., and against Frank M. Burns, Jr., in the amount of $516,893.26, is hereby vacated.
La. C.C.P. art. 2164 provides, in pertinent part, "The appellate court shall render any judgment which is just, legal, and proper upon the record on appeal." Based on this provision, we conclude this matter should be remanded to the trial court to allow the Molly Daniels plaintiffs the opportunity to name the other shareholders of R K R as parties to the secondary action seeking an accounting and damages.
On remand, we instruct the trial court to: 1) allow the Molly Daniels plaintiffs the opportunity to amend their petition to comply with La. C.C.P. art. 611; 2) hold a hearing to allow the introduction of additional evidence if additional parties are named in this suit; and 3) reconsider the merits of this suit based on the evidence previously admitted during the June 28, 1995 hearing, and any additional evidence admitted upon remand.
*1355 C. Transactions in Dispute
Although we do not reach the issues raised by appellant regarding whether he breached his fiduciary duties to R K R and its shareholders, we note appellant specifically challenges the amount of damages awarded by the trial court regarding several transactions. One contention is that the trial court allowed double recovery by the Molly Daniels plaintiffs. The trial court assessed damages of $156,276.00 pertaining to a timber sales transaction, and damages of $183,606.30 pertaining to cash draws from the corporation. Appellant asserts the $183,606.30 sum is comprised of the $156,276.00 amount and an amount of $27,329.53, which the R K R books presently show he owes. Thus, he contends the $156,276.00 amount was assessed against him twice, resulting in a double recovery for the Molly Daniels plaintiffs. We note that if we were to reach the merits of this case, the evidence in the record does not clearly establish whether the assessment of damages regarding these transactions was proper. Accordingly, we direct the trial court to allow the introduction of additional evidence regarding these transactions.
III. CONCLUSION
For the above reasons, the judgment of the trial court in favor of Robenia B. Daniels and Eunice H. Burns as Co-Trustees of the Molly Daniels Irrevocable Inter Vivos Trust as shareholders of R K R, Inc., and against Frank M. Burns, Jr., in the amount of $516,893.26 is vacated. The matter is remanded to the trial court for the purposes of 1) allowing the Molly Daniels plaintiffs the opportunity to amend their petition to comply with La. C.C.P. art. 611; 2) holding a hearing to allow the introduction of additional evidence; and 3) reconsidering the merits of this suit based on the evidence previously admitted during the June 28, 1995 hearing, and any additional evidence admitted upon remand. Assessment of costs is to await final disposition of this matter.
VACATED AND REMANDED.
NOTES
[1] We note the record includes various spellings of this name, including Robinea, Robenia, and Robena.
[2] Another suit bearing the caption of "Frank M. Burns, Jr., Cathy G. Burns, Brooke Burns and FMB Properties, Inc. versus No. 92-10134, Robenia Burns Daniels and Kay Hestret Hyde" was initially consolidated with these cases, but was severed prior to trial.
[3] In reasons for judgment, the trial court found Burns, Jr., breached his fiduciary duties to R K R and its stockholders by:
(a) his failure to obtain corporate approval for the investment of RKR funds in businesses and enterprises, in some of which he held an interest; (b) the investment of funds without interest and without collateral; (c) the writing off of those debts as uncollectible; (d) his drawing funds from RKR for himself and his wife without appropriate showing on the books of RKR as to why they would be entitled to such funds; (e) the favoring of one stockholder over the others in his directing the payments of funds into the Lawly Brooke Burns Trust; and (f) his failure to account for sums received by RKR for sale of land and timber rights.
[4] We note the judgment uses the spelling of "Robenia" rather than "Robinea," the spelling set forth in the petition.
[5] Appellant asserts the trial court has not considered an exception of prescription filed on November 14, 1995. He contends the issue of prescription was timely raised because the exception of prescription was filed prior to submission of the case. La. C.C.P. art. 929. Because the trial court did not expressly rule on appellant's exception of prescription, the record does not establish whether the trial court considered the merits of the exception. Appellee does not contest that the exception was timely filed in the proceedings below. Therefore, we address the merits of the exception.
[6] In Mary v. Lupin Foundation, 609 So. 2d 184, the court interpreted La. R.S. 12:226, governing the relation of directors and officers to the corporation and its members and the liability of officers and directors of a nonprofit corporation. We note the language of La. R.S. 12:226 A is very similar to the language of La. R.S. 12:91; likewise, the language of 12:226 D parallels the language of La. R.S. 12:92 D.
[7] In Levy v. Billeaud, the court cited former La. C.C. art. 3544, which provided: "In general, all personal actions, except those before enumerated, are prescribed by ten years."
[8] In Spruiell, the court found the ten year prescriptive period was applicable to claims for breach of fiduciary duty brought pursuant to a shareholder derivative action.
[9] We note that Burns, Jr., did not raise a formal exception of no right of action. However, this court may, on its own motion, notice the right or interest in the plaintiff to institute a suit. La. C.C.P. art. 927.
[10] La. C.C.P. art. 596 sets forth the requirements for maintaining a "petition in a class action brought by a shareholder or member of a corporation... because it [the corporation] refuses to enforce a right which it may enforce...."
[11] La. C.C.P. art. 596 deals specifically with derivative actions.
[12] While the Lawly Brooke Burns Trust is a party in the consolidated suit seeking liquidation of R K R, it is not a party to the suit for accounting and damages.
[13] We also note that the nonjoinder of a party may be noticed by an appellate court of its own motion pursuant to La. C.C.P. arts. 645 and 927. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2438193/ | 874 S.W.2d 166 (1994)
George O. JACOBS, Appellant,
v.
Thomas A. ADAMS, III, Appellee.
No. B14-92-01085-CV.
Court of Appeals of Texas, Houston (14th Dist.).
March 10, 1994.
Rehearing Overruled March 31, 1994.
*167 Rodney Merwin, Houston, for appellant.
David E. Jenkins, Houston, John W. Mara, Katy, Nancy L. Cummings, Houston, Jerold W. Gardner, Katy, for appellee.
Before SEARS, LEE and MORSE (Sitting by Appointment), JJ.
OPINION
SEARS, Justice.
This case involves the trial court's application of the Texas Turnover Statute.[1] The trial court found that Appellant possessed nonexempt property subject to the statute and ordered Appellant to turn the property over to a receiver. We affirm.
Appellant, an attorney, was sanctioned by a U.S. District Court on June 4, 1986 and on September 17, 1986, for Rule 11 violations. On September 29, 1986, the U.S. District Court signed an order requiring Appellant to pay Appellee five thousand eighty-eight dollars, ($5,088.00), upon entry of a final judgment. A final judgment in the underlying suit was entered on July 3, 1990, from which no appeal was taken.
On October 2, 1990, Appellee sent Appellant interrogatories in aid of judgment. Appellant refused to answer, and on April 10, 1991, a U.S. District Court magistrate ordered him to respond. The interrogatories were answered on May 15, 1991. Appellant admitted in his answers to owning accounts receivable, but refused to disclose the amounts, sources or locations. Appellee attempted, but could not serve a writ of execution upon Appellant, because the assets, (accounts receivable), were not subject to ordinary legal process. Therefore, on January 7, 1992, Appellee filed an application for turnover relief in state district court. The state court signed a series of orders requiring Appellant to appear and show cause why he should not be ordered to turn over the nonexempt property. Appellant failed to present any evidence to the court to show that all or part of the accounts receivable were exempt from execution. Upon conclusion of the evidence and argument, a turnover order was signed on June 11, 1992, from which Appellant brings two points of error.
In his first point of error, Appellant contends that the trial court erred in denying his motion for new trial. He contends the evidence is insufficient to prove that he possesses nonexempt assets. A trial court has wide discretion in denying a motion for new trial, and its decision will not be disturbed on appeal absent a showing of abuse of discretion. Lone Star Ford, Inc. v. McCormick, 838 S.W.2d 734, 738 (Tex.App.Houston [1st Dist.] 1992, writ denied). Further, a court's decision whether to issue a turnover order is also reviewed under an abuse of discretion standard. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex.1991).
A court will sign a turnover order if a creditor establishes that a judgment debtor owns nonexempt property which cannot be readily attached by ordinary legal process. TEX.CIV.PRAC. & REM.CODE ANN. § 31.002 (Vernon 1986); Associated Ready Mix, Inc. v. Douglas, 843 S.W.2d 758, 762 (Tex.App. Waco 1992, no writ). The court will then order the debtor to turn over his nonexempt property, or appoint a receiver to take possession of the nonexempt property. If a party claims that property is exempt, it is that party's burden to prove that it is exempt. Rucker v. Rucker, 810 S.W.2d 793, *168 795-796 (Tex.App.Houston [14th Dist.] 1991, writ denied).
In this case, Appellee introduced evidence that Appellant, an attorney, possessed property in the form of accounts receivable, which Appellee could not readily attach. This Court has previously held that an attorney's accounts receivable are not exempt from the Texas Turnover Statute. Ross v. 3D Tower Ltd., 824 S.W.2d 270, 272-273 (Tex.App. Houston [14th Dist.] 1992, writ denied), and Brink v. Ayre, 855 S.W.2d 44 (Tex.App. Houston [14th Dist.] 1993, no writ). Appellant offered no evidence to establish that his property was exempt. We hold that the trial court did not abuse its discretion in denying Appellant's motion for new trial. Appellant's first point of error is overruled.
In his second point, Appellant contends that the trial court erred in denying his motion for new trial because he was entitled to a jury determination on the value of the property. "A timely request for a jury plus a timely payment of the jury fee are essential to preserving the right to trial by jury." Whiteford v. Baugher, 818 S.W.2d 423, 425 (Tex.App.Houston [1st Dist.] 1991, writ denied); Tex.R.Civ.P. 216. Appellant did not comply with the rule, and failed to cite this Court to any place in the record to substantiate this claim. Accordingly, Appellant's second point of error is overruled.
Finally, we address the issue of damages for delay raised by Appellee in his prayer for relief. This Court may assess damages against Appellant for bringing a frivolous appeal. See, Tex.R.App.P. 84. Before we may assess damages, we must determine that the appeal was taken for delay only and without sufficient cause. Jones v. Colley, 820 S.W.2d 863, 867 (Tex.App.Texarkana 1991, writ denied), and Eustice v. Grandy's, 827 S.W.2d 12, 15 (Tex.App.Dallas 1992, no writ). In making these findings, this Court must review the case from Appellant's point of view and decide whether he had any reasonable grounds to believe the case would be reversed. Carlyle Real Estate Ltd. Partnership-X v. Leibman, 782 S.W.2d 230, 234 (Tex.App.Houston [1st Dist.] 1989, no writ).
We have reviewed the record and relevant law, and have determined that Appellant had no reasonable basis to believe that this case would be reversed on appeal. These sanctions have been pending since 1986. Appellant has consistently defied the orders of the courts. Appellant had to be ordered to answer post-judgment interrogatories. He introduced no evidence at the hearing or the motion for new trial to establish that his property was exempt. He tendered a firm check in the amount of five thousand dollars to the receiver, which the receiver claims "bounced." In the motion for new trial, Appellant admitted that Appellee had attempted to collect the judgment amicably, but that he refused to pay voluntarily, and told Appellee that they would have to "take it through the courts." We find that Appellant's appeal is for delay tactics only and is without merit. Accordingly, we assess damages at 10% of the amount of damages awarded to Appellee. Such damages are to continue at a ten percent (10%) rate of interest until paid in full.
The judgment of the trial court is affirmed as reformed.
NOTES
[1] TEX.CIV.PRAC. & REM.CODE ANN. § 31.002 (Vernon 1986). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1525157/ | 883 S.W.2d 171 (1994)
Cordus JACKSON, Jr., Petitioner,
v.
Gary THWEATT, Respondent.
FEDERAL DEBT MANAGEMENT, INC., Petitioner,
v.
Lee WEATHERLY, Respondent.
Nos. D-3057, D-3437.
Supreme Court of Texas.
March 9, 1994.
Rehearing Overruled April 20, 1994.
*172 John Gregory Hale, Houston, Don Busby, Temple, Steven T. Polino and James Masek, Dallas, for petitioners.
Jon H. Burrows, Jack R. Crews, Temple and Robert H. Renneker, Dallas, for respondents.
Chief Justice PHILLIPS delivered the opinion of the Court in which all Justices join. Justice ENOCH not sitting.
Under 12 U.S.C. § 1821(d)(14), the FDIC has six years to bring suit on delinquent notes acquired from a failed bank. The issue presented in these consolidated cases is whether purchasers of such notes from the FDIC obtain the benefit of this federal limitations period. Because we conclude that they do, we affirm the judgment of the court of appeals in Jackson v. Thweatt, 838 S.W.2d 725, and reverse the judgment of the court of appeals in Federal Debt Management, Inc. v. Weatherly, 842 S.W.2d 774. Both causes are remanded to the trial court for further proceedings.
I
Jackson v. Thweatt
Cordus Jackson Jr. executed a promissory note to the People's National Bank of Lampasas in January 1984, which he failed to pay when it became due on May 3, 1984. The Federal Deposit Insurance Corporation ("FDIC") became the owner and holder of the note on April 18, 1985, when it was appointed receiver for the bank. On December 28, 1988, the FDIC sold the note to Gary Thweatt.
Thweatt sued Jackson on the note on April 15, 1991. The trial court granted Jackson's subsequent motion for summary judgment based on the four-year limitations period set forth in Tex.Civ.Prac. & Rem.Code § 16.004. The court of appeals reversed, concluding that, because Thweatt acquired the note from the FDIC, the suit was governed by the six-year limitation period set forth in 12 U.S.C. § 1821(d)(14). 838 S.W.2d at 728. As this limitation period did not begin running until April 18, 1985, when the FDIC was appointed *173 receiver, Thweatt's suit was held to be timely.
Federal Debt Management, Inc. v. Weatherly
Lee Weatherly defaulted on three promissory notes payable to Heritage National Bank maturing between September and November, 1986. The FDIC acquired the Weatherly notes on September 25, 1986, when it was appointed receiver for the bank. On October 27, 1989, it sold the notes to Federal Debt Management, Inc.[1] Federal Debt Management sued Weatherly on the notes on April 15, 1991. As in Thweatt, the trial court granted summary judgment for the defendant based on the Texas four-year statute of limitations. The court of appeals affirmed, concluding that the six-year limitations period under 12 U.S.C. § 1821(d)(14) did not apply to actions filed by assignees of the FDIC. 842 S.W.2d at 779.
The courts of appeals in Thweatt and Weatherly thus reached opposite conclusions on this important issue. We granted both applications for writ of error to resolve this conflict.
II
12 U.S.C. § 1821(d)(14) provides as follows:
(A) In General
Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation[2] as conservator or receiver shall be
(i) in the case of any contract claim, the longer of
(I) the 6-year period beginning on the date the claim accrues; or
(II) the period applicable under State law....
(B) Determination of the date on which a claim accrues
For purposes of subparagraph (A), the date on which the statute of limitation begins to run on any claim described in such subparagraph shall be the later of
(i) the date of appointment of the Corporation as conservator or receiver; or
(ii) the date on which the cause of action accrues.
This provision was enacted in 1989 as part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub.L. No. 101-73, § 212(d)(14), 103 Stat. 183, 232-33 (1989).[3]
Jackson and Weatherly do not dispute that the collection suits against them would be timely if governed by section 1821(d)(14). They argue, however, that this provision applies only to actions brought by the FDIC, not to actions brought by the FDIC's successors in interest. Additionally, Jackson argues that section 1821(d)(14) does not apply *174 retroactively to claims arising before FIRREA's enactment.
A
Section 1821(d)(14) expressly refers only to actions "brought by the [FDIC]."[4] The court of appeals in Weatherly, as well as the dissent in Thweatt, concluded that the language of this statute is plain and, regardless of policy considerations, could not be construed as applying to actions brought by assignees of the FDIC. We conclude, however, that the FDIC's successors in interest are entitled to the benefits of section 1821(d)(14) pursuant to the common law maxim that "[a]n assignee stands in the shoes of his assignor." FDIC v. Bledsoe, 989 F.2d 805, 810 (5th Cir.1993); see also 6A C.J.S. Assignments, §§ 76-77 (1975).
The Uniform Commercial Code incorporates this rule with regard to promissory notes:
(a) Transfer of an instrument vests in the transferee such rights as the transferor has therein, except that a transferee who has himself been a party to any fraud or illegality affecting the instrument or who as a prior holder had notice of a defense or claim against it cannot improve his position by taking from a later holder in due course.
Tex.Bus. & Com.Code § 3.201(a) (Tex.UCC) (Vernon 1968). The policy underlying this rule "is to assure the holder in due course a free market for the paper." § 3.201 comment 3. This policy is particularly compelling with regard to notes acquired by the FDIC from an insolvent banking institution and sold to third parties pursuant to a purchase and assumption transaction. One of FIRREA's purposes was to "provide funds from public and private sources to deal expeditiously with failed depository institutions." Pub.L. No. 101-73, § 101(8). If the FDIC's statute of limitations did not enure to the benefit of its transferees, the market value of notes and other assets in the hands of the FDIC would be diminished, hindering this statutory purpose. As noted in Fall v. Keasler, 1991 WL 340182, at *4 (N.D.Cal. Dec. 18, 1991):
To hold that assignees are relegated to the state statute of limitations would serve only to shrink the private market for the assets of failed banks. It would require the FDIC to hold onto and prosecute all notes for which the state statute of limitations has expired because such obligations would be worthless to anyone else. This runs contrary to the policy of allowing the FDIC to rid the federal system of failed bank assets. The FDIC can only make full use of the market in discharging its statutory responsibilities if the market purchasers have the same rights to pursue actions against recalcitrant debtors as does the FDIC.
See also Brian J. Woram, FIRREA's Statutes of Limitations: Their Availability to Purchasers From the FDIC, 110 Banking L.J. 292 (1993) (concluding that FIRREA limitations should be extended to subsequent purchasers); James J. Boteler, Comment, Protecting the American Taxpayers: Assigning the FDIC's Six Year Statute of Limitations to Third Party Purchasers, 24 Tex. Tech L.Rev. 1169, 1200 (1993) (same).
Because of this strong policy rationale, and in accordance with the principle that an assignee receives the full rights of the assignor, most courts have interpreted section 1821(d)(14), as well as the predecessor limitations provision in 28 U.S.C. § 2415(a), as extending to purchasers from the FDIC. See Jon Luce Builder, Inc. v. First Gibraltar Bank, F.S.B., 849 S.W.2d 451, 455 (Tex. App.-Austin 1993, writ denied); Pineda v. PMI Mortgage Ins. Co., 843 S.W.2d 660, 669 (Tex.App.-Corpus Christi 1992), writ denied, 851 S.W.2d 191 (Tex.1993); Bledsoe, *175 989 F.2d at 810; Fall v. Keasler, 1991 WL 340182, at *2-3; Mountain States Financial Resources v. Agrawal, 777 F. Supp. 1550, 1552 (W.D.Okl.1991), White v. Moriarty, 15 Cal. App. 4th 1290, 19 Cal. Rptr. 2d 200, 204 (1993); Martin v. Pioneer Title Co., 1993 WL 381101, at *2-3 (Idaho 4th Dist.Ct.1993); Cadle Co. II, Inc. v. Lewis, 254 Kan. 158, 864 P.2d 718 (1993); Central States Resources Corp. v. First Nat. Bank in Morrill, 243 Neb. 538, 501 N.W.2d 271, 278 (1993). But see Tivoli Ventures, Inc. v. Tallman, 852 P.2d 1310, 1313 (Colo.App.1992).
This reading does not contravene the plain language of the statute. Although section 1821(d)(14) does not expressly create a special limitations rule for transferees, it unquestionably does so for the FDIC. The FDIC, as possessor of this right, may transfer it incident to the asset to which the limitations period relates. Thus, while the statute alone might not vest any rights in transferees, the statute combined with the common law of assignment does. As the Fifth Circuit noted in Bledsoe, "[a]s the statute at hand is silent as to the rights of assignees, we turn to the common law to fill the gap." 989 F.2d at 810.
An analogy may be drawn to the FDIC's special rights under 12 U.S.C. § 1823(e). This provision essentially codifies the holding of D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942), in which the Supreme Court ruled that unrecorded agreements that tend to mislead banking examiners cannot be raised as a defense against the FDIC. See Kilpatrick v. Riddle, 907 F.2d 1523, 1526 (5th Cir.1990); FDIC v. Newhart, 892 F.2d 47, 49 (8th Cir. 1989); see also Peter G. Weinstock and Christopher T. Klimko, Banking Law, 45 Sw.L.J. 1, 12 (1991). Although section 1823(e) also expressly applies only to the FDIC, its protection has generally been extended to purchasers of assets from the FDIC. See, e.g., Victor Hotel Corp. v. F.C.A. Mortgage Corp., 928 F.2d 1077, 1083 (11th Cir.1991); FDIC v. Newhart, 892 F.2d 47, 50 (8th Cir.1989); Fleet Bank of Maine v. Steeves, 785 F. Supp. 209, 213-15 (D.Me. 1992); CMF Virginia Land, L.P. v. Brinson, 806 F. Supp. 90, 93 (E.D.Va.1992); Alarcon v. Williams, 772 F. Supp. 334, 342 (E.D.Mich. 1991); B.L. Nelson and Assocs. v. Sunbelt Sav., 733 F. Supp. 1106, 1112 (N.D.Tex.1990). This extension is likewise founded on the policy that, for assets to be marketable in the hands of the FDIC, its protections must be available to purchasers. See Newhart, 892 F.2d at 49-50; Brinson, 806 F.Supp. at 93; Alarcon, 772 F.Supp. at 343-44.
Jackson and Weatherly would dismiss this analogy because section 1823(e) is merely a statutory parallel of the common law D'Oench Duhme doctrine. Courts are free to extend a common law right, they contend, but not one that arises by statute, such as limitations. If Congress had intended subsequent purchasers to benefit from section 1821(d)(14), the argument goes, Congress would have expressly said so.
The cases cited above, however, have extended not only the common law D'Oench Duhme doctrine, but its statutory counterpart as well. Further, the fact that the federal limitations rule arises purely by statute does not preclude courts from looking to federal common law in interpreting and applying that rule. Congress could have expressly made section 1821(d)(14) applicable to the FDIC's successors in interest, but one could just as easily argue that "Congress knew of the extensive body of case law extending the FDIC's benefits (like federal holder in due course, D'Oench Duhme and Section 1823(e)), and therefore thought it unnecessary to restate the federal common law." Woram, supra at 304. In Bledsoe, the court noted that
[i]t is an axiomatic principle of statutory construction that in effectuating Congress' intent courts are to fill the inevitable statutory gaps by reference to the principles of common law.
989 F.2d at 810. Similarly, the Supreme Court has directed federal courts "to fill the interstices of federal legislation `according to their own standards'" in areas affecting nationwide federal programs. United States v. Kimbell Foods, Inc., 440 U.S. 715, 727, 99 S. Ct. 1448, 1458, 59 L. Ed. 2d 711 (1979) (quoting Clearfield Trust Co. v. United States, 318 U.S. 363, 367, 63 S. Ct. 573, 575, 87 L. Ed. 838 (1943)). Federal banking law undoubtedly constitutes such a program. See Woram, supra at 308.
*176 B
Jackson and Weatherly also argue that statutes of limitations do not confer a "right" transferrable to assignees. In City of Dallas v. Etheridge, 152 Tex. 9, 253 S.W.2d 640, 643 (1953), we stated that "statutes of limitations do not affect the substantive rights of parties; they merely bar the remedy by which one party seeks to enforce his substantive rights." In the present case, however, the FDIC's successors in interest are not asserting the FIRREA limitations provision to avoid an obligation, but rather to enforce obligations that would otherwise be barred under state law. In this context, FIRREA does create a right transferable to subsequent purchasers. See Woram, supra at 306; Boteler, supra at 1178.
Alternatively, Jackson and Weatherly contend that the FIRREA limitations provision is a right "personal" to the FDIC, and thus non-transferable according to the general rule as stated in Corpus Juris Secundum:
Unless a contrary intention is manifest or inferable, an assignment ordinarily carries with it all rights, remedies, and benefits which are incidental to the thing assigned, except those which are personal to the assignor and for his benefit only.
6A C.J.S. Assignments, § 76 (1975) (emphasis added). Jackson and Weatherly basically argue that the FIRREA limitations provision is personal to the FDIC simply because it is the only party expressly named in the statute. An examination of the cases cited in Corpus Juris Secundum in support of the quoted rule, however, reveals that rights "personal" to the assignor are those which, although relating to the property assigned, constitute accrued causes of action that may be asserted independently of ownership of the property. See Breidecker v. General Chem. Co., 47 F.2d 52 (7th Cir.1931) (conveyance of land held not to constitute an assignment of the grantor's cause of action for damages previously sustained for trespass upon the land conveyed); Huston v. Ohio & Colorado Smelting & Ref. Co., 63 Colo. 152, 165 P. 251 (1917) (assignment of stock held not to transfer assignor's cause of action for fraud in connection with the stock's purchase). The extended limitations period afforded by FIRREA, which confers no benefit independent of the asset to which it relates, does not fall into this category.
For the foregoing reasons, we conclude that, pursuant to federal common law, the limitations provision of 12 U.S.C. § 1821(d)(14) applies to actions brought by purchasers of assets from the FDIC.
III
Jackson further argues that section 1821(d)(14) cannot apply retroactively to claims arising before FIRREA's enactment on August 9, 1989.
The statute contains no express provision dictating either prospective or retroactive application, and the legislative history on this issue is sparse and inconclusive.[5] The United *177 States Supreme Court has provided conflicting guidance as to retroactive operation of a statute where the intent of Congress is not manifest. In Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208, 109 S. Ct. 468, 471, 102 L. Ed. 2d 493 (1988), the Court stated that "[C]ongressional enactments ... will not be construed to have retroactive effect unless their language requires this result." Conversely, the Court stated in Bradley v. School Bd. of Richmond, 416 U.S. 696, 711, 94 S. Ct. 2006, 2016, 40 L. Ed. 2d 476 (1974), that
a court is to apply the law in effect at the time it renders its decision, unless doing so would result in manifest injustice or there is statutory direction or legislative history to the contrary.
Despite this tension,[6] it has generally been held that procedural rules apply retroactively. See United States v. Fernandez-Toledo, 749 F.2d 703, 705 (11th Cir.1985); Fust v. Arnar-Stone Labs, Inc., 736 F.2d 1098, 1100 (5th Cir.1984). In accordance with this principle, most courts have concluded that section 1821(d)(14) applies retroactively to causes of action in existence when the statute was passed in August 1989. See FDIC v. Belli, 981 F.2d 838, 842 (5th Cir.1993); FDIC v. New Hampshire Ins. Co., 953 F.2d 478, 487 (9th Cir.1991); RTC v. Foley, 829 F. Supp. 352, 353 (D.N.M.1993); RTC v. Greenwood, 798 F. Supp. 1391, 1397 (D.Minn.1992); FDIC v. Schoenberger, 781 F. Supp. 1155, 1158 (E.D.La.1992); FDIC v. Bancinsure, Inc., 770 F. Supp. 496, 499 (D.Minn.1991); RTC v. Krantz, 757 F. Supp. 915, 922 (N.D.Ill.1991); FDIC v. Howse, 736 F. Supp. 1437, 1446 (S.D.Tex.1990); Central States Resources Corp. v. First Nat. Bank in Morrill, 243 Neb. 538, 501 N.W.2d 271, 277 (1993). But see FDIC v. Cherry, Bekaert & Holland, 742 F. Supp. 612, 616 (M.D.Fla.1990).
Retroactive application of section 1821(d)(14) is especially appropriate since it does not create an entirely new limitations scheme, but rather merely clarifies and amends the existing law under 28 U.S.C. § 2415(a).[7]See Howse, 736 F.Supp. at 1446; Schoenberger, 781 F.Supp. at 1158. Retroactive application thus creates no manifest injustice. For these reasons, we agree with the majority of courts that have applied section 1821(d)(14) retroactively.
Jackson further argues that, even if section 1821(d)(14) is generally accorded retroactive application, its enactment cannot revive a claim already stale under state limitations. Jackson apparently contends as follows: the Texas four year statute of limitations commenced on May 3, 1984, when Jackson defaulted on his promissory note. Although this state limitations provision was superseded by 28 U.S.C. § 2415(a) while the note was held by the FDIC, it once again became applicable when Thweatt acquired the note on December 28, 1988. Recovery on the note was thus barred as soon as it was acquired by Thweatt, as this occurred more than four years after the original default. Because the claim was barred under state law when FIRREA was passed in 1989, it cannot be revived by that legislation, even assuming retroactive application.
Jackson correctly identifies the well-settled rule that a special federal limitations provision will not revive a claim already barred under state law. See Belli, 981 F.2d at 842; FDIC v. Former Officers and Directors of Metropolitan Bank, 884 F.2d 1304, 1309 n. 4 (9th Cir.1989); Hinkson, 848 F.2d at 434; FDIC v. Consol. Mortgage and Fin. Corp., 805 F.2d 14, 17 n. 4 (1st Cir.1986). For example, if the FDIC is appointed receiver of a Texas bank five years after the default of an outstanding loan, suit is barred by the four-year Texas statute of limitations even though the federal limitations period is six years.
This rule does not apply here, however, as the claim against Jackson was not stale when the FDIC was appointed receiver in 1985, less than a year after Jackson's default. The FDIC thus obtained the benefits of the six year limitation period under 28 U.S.C. *178 § 2415(a), the forerunner of section 1821(d)(14). The claim in the hands of the FDIC was therefore not barred when FIRREA was passed in August 1989, as this was less than six years after the initial default. The FDIC thus would have obtained the retroactive benefits of FIRREA. Thweatt, as assignee, likewise succeeds to those rights.
To summarize, we hold that section 1821(d)(14) applies to actions brought by purchasers of assets from the FDIC to recover on those purchased assets, and that it applies retroactively to claims in existence on August 9, 1989. Section 1821(d)(14) thus governs the collection actions against Jackson and Weatherly. Because these actions were filed within six years after appointment of the FDIC as receiver, they were timely. The judgment of the court of appeals in Jackson v. Thweatt is affirmed, and the judgment of the court of appeals in Federal Debt Management, Inc. v. Weatherly is reversed. Both causes are remanded to the trial court for further proceedings.
NOTES
[1] Federal Debt Management is a Texas corporation engaged in the business of purchasing notes from the FDIC and the Resolution Trust Corporation.
[2] "Corporation" in this statute refers to the FDIC. 12 U.S.C. § 1811.
[3] Before 1989, claims brought by the FDIC were governed by 28 U.S.C. § 2415(a), the limitations period applicable to the federal government generally. That section provides in relevant part as follows:
(a) Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues....
26 U.S.C. § 2415(a). Courts construing this provision have split as to when the six year limitations period begins to run. Compare, e.g., FDIC v. Hinkson, 848 F.2d 432, 434-35 (3rd Cir.1988) (limitations does not begin to run until the FDIC acquires the claim), with FDIC v. Belli, 981 F.2d 838, 840 (5th Cir.1993) (limitations begins to run when the claim could have first been sued upon, even if the FDIC had not yet acquired the cause of action). FIRREA resolved this issue by providing that limitations begins to run, at the earliest, when the FDIC acquires the claim. § 1821(d)(14)(B). Also, FIRREA allows the FDIC to take advantage of state limitations if it is longer than six years, whereas courts construing section 2415(a) concluded that it completely superseded state limitations. See, e.g., Hinkson, 848 F.2d at 434.
[4] Although the language of the statute is actually limited to "actions brought by the [FDIC] as conservator or receiver," it is made expressly applicable to the FDIC in its corporate capacity pursuant to 12 U.S.C. § 1823(d)(3)(A), which provides:
IN GENERAL.With respect to any asset acquired or liability assumed pursuant to this section, the Corporation shall have all of the rights, powers, privileges, and authorities of the Corporation as receiver under sections 1821 and 1825(b) of this title.
See FDIC v. Howse, 736 F. Supp. 1437, 1445 (S.D.Tex.1990).
[5] Representative Solomon Ortiz commented as follows during floor debates:
I seek to clarify the intent and effect of prospective application of the proposed bill. I understand this bill would redefine and augment the powers of the Federal Deposit Insurance Corporation when that Corporation serves as receiver for a failed financial institution. The powers set forth in this bill are, in many respects, new, and there is no intent that such powers be applied to receiverships that have been established prior to the enactment of this bill.
135 Cong.Rec. H5003 (daily ed. Aug. 3, 1989). Henry B. Gonzalez, one of FIRREA's sponsors, stated that "as far as I know, there is no retroactive language in any part of the bill that would have any impact one way or the other on pending litigation." 135 Cong.Rec. H2748 (daily ed. June 15, 1989). Representative Ortiz, however, was not on a major committee overseeing FIRREA, and Representative Gonzalez's comment was in response to a specific question unrelated to limitations. See Jett Hanna, Statute of Limitations Issues in FDIC and RTC Claims Against Attorneys Representing Failed Financial Institutions, 12 Rev.Litig. 619, 640-41 (1993).
Senator Donald Riegle, referring specifically to the limitations provisions, commented that these limitations periods will significantly increase the amount of money that can be recovered by the Federal Government through litigation, and help ensure the accountability of the persons responsible for the massive losses the Government has suffered through the failures of insured institutions. The provisions should be construed to maximize potential recoveries by the Federal Government by preserving to the greatest extent permissible by law claims that would otherwise have been lost due to the expiration of hitherto applicable limitations periods.
135 Cong.Rec. S10,205 (daily ed. Aug. 4, 1989). This legislative history has been referred to as "fragmentary and contradictory." Hanna, supra at 640.
[6] The Supreme Court noted the "apparent tension" between Bradley and Bowen in Kaiser Aluminum & Chem. Corp. v. Bonjomo, 494 U.S. 827, 837, 110 S. Ct. 1570, 1577, 108 L. Ed. 2d 842 (1990), but found it unnecessary to resolve the conflict in that case.
[7] As discussed at note 3, supra, section 1821(d)(14) expressly resolves the conflict under section 2415(a) concerning when the six year limitations period begins to run, and also grants the FDIC the benefit of the state statute of limitations if longer than six years. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/327187/ | 515 F.2d 317
UNITED STATES of America, Plaintiff-Appellee,v.Louis SAN MARTIN, Defendant-Appellant.
No. 74-2601.
United States Court of Appeals,Fifth Circuit.
June 26, 1975.
Abel H. Rigau, Donald G. Doddington, Tampa, Fla., for defendant-appellant.
John L. Briggs, U. S. Atty., D. Frank Winkles, Asst. U. S. Atty., Jacksonville, Fla., Claude Tison, Jr., Asst. U. S. Atty., Tampa, Fla., Ernst D. Mueller, Asst. U. S. Atty., Jacksonville, Fla., for plaintiff-appellee.
Appeal from the United States District Court for the Middle District of Florida.
Before TUTTLE, COLEMAN and SIMPSON, Circuit Judges.
SIMPSON, Circuit Judge:
1
The controlling question raised by this appeal is the sufficiency of the evidence to support a conviction for obstruction of a federal criminal investigation in violation of Title 18, U.S.C., § 1510.1 We find the challenge to be meritorious and reverse.
2
Appellant Louis San Martin was indicted and tried with Fernando Vergara for attempting to rob a federally insured bank and for assaulting a bank employee in the course of that attempt, in violation of Title 18, U.S.C., § 2113(a) and (d).2 San Martin was also indicted for obstruction of a criminal investigation into the whereabouts of two witnesses in the robbery case, Debbie del Castillo, later his wife, and Bridgette del Castillo, Debbie's six-year old daughter. At a trial of the combined charges, a jury acquitted San Martin and Vergara on the two bank-related offenses but convicted San Martin for the § 1510 violation. This appeal followed.
3
Viewed in the light most favorable to the government, Glasser v. United States, 1942, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680, 704, the salient facts are as follows. Debbie del Castillo, then living with appellant, appeared under subpoena before a federal grand jury on August 14, 1973. Despite a second grand jury subpoena for Debbie and her young daughter, Bridgette, issued after San Martin's indictment,3 the F.B.I. was unable to locate the two del Castillo females in order to serve the subpoenas. The F.B.I. began investigating a possible violation of Title 18, U.S.C., § 1503, impeding or interfering with a witness.
4
As part of its investigation, the F.B.I. contacted Pauline Hollis, Debbie's mother, who last saw her daughter on September 24, 1973, two weeks after Debbie and San Martin were married on September 8. In attempting to locate Debbie, the F.B.I. remained in active contact with Mrs. Hollis and, less frequently, with Debbie's two sisters, Linda Shattles and Judy Leugers, but without result.
5
Mrs. Hollis, increasingly concerned by Debbie's absence, sought out the appellant and told him she wanted to hear from her daughter. He told her she might get a letter. Thereafter, she told the appellant's father, Jimmy San Martin, Sr., that she wanted to write Debbie. In his son's presence, the father told her to bring letters for delivery to him, which she did. In her mailbox she thereafter found a total of five letters from Debbie unstamped and without postmark, at least one of which was responsive to her letters. In sum, this evidence showed that Mrs. Hollis was aware that the appellant and his father knew the whereabouts of Debbie and Bridgette, or at least were in contact with them.
6
There was also evidence from which the jury could find that Louis San Martin knew that the F.B.I. was looking for his wife.
7
The incident giving rise to this obstruction prosecution occurred on October 18, 1973. At 10:00 A.M. on that day Linda Shattles and Judy Leugers visited Jimmy San Martin, Sr., and told him that their mother was upset, needed to have some word from Debbie, and needed to find out where she was. They were ushered out and shortly thereafter arranged to meet with the F.B.I. In the early afternoon, an F.B.I. agent served defendant's father with a grand jury subpoena. Mrs. Hollis testified that at 2 or 3 P.M., she received the following telephone call from the appellant:
8
"Pauline, this is Lulu."
9
"Yes?"
10
"Where are your daughters, Linda and Judy? " (or, "your other daughters, Linda and your other daughter." )
11
"Well, I don't know."
12
"Well, they have caused my father to get a subpoena and you've seen 'em for the last time." (Emphasis added).
13
Mrs. Hollis assured herself of the safety of her daughters and then reported the incident to the F.B.I.
14
This telephone call from defendant was the basis of Count Three of the indictment upon which Louis San Martin was convicted. It charged that he
15
by means of intimidation and threats of force, wilfully did endeavor to obstruct, delay, and prevent Pauline Hollis from communicating information relating to a violation of a criminal statute of the United States, that is, Title 18, United States Code, Section 1503, to Special Agents of the Federal Bureau of Investigation, duly authorized by said Department to conduct and engage in investigations of violations of said statute and who were then conducting and engaging in such investigation, as Louis San Martin well knew; all in violation of Title 18, United States Code, Section 1510.
16
Title 18, U.S.C., § 1510 "was designed to deter the coercion of potential witnesses by the subjects of federal criminal investigations prior to the initiation of judicial proceedings". United States v. Cameron, 5 Cir. 1972, 460 F.2d 1394, 1401. See 1967 U.S. Code Congressional and Administrative News, pp. 1760-63. The statute was intended to close a loophole in former laws which protected witnesses only during the pendency of a proceeding. See 1967 U.S. Code Congressional and Administrative News, p. 1760; Title 18, U.S.C. §§ 1503 and 1505.
17
A literal reading of the provision of the statute under consideration indicates that it is aimed at deterring interference with future communication of information. It does not prohibit the making of a threat, as opposed to the infliction of bodily injury, in retaliation for having communicated information to a criminal investigator, at least where such a threat cannot be interpreted as having been intended to interfere with future communication of additional information or with continued cooperation. The legislative history also recognizes that the rubric that criminal statutes are to be strictly construed applies equally to obstruction of justice and criminal investigation statutes, see 1967 U.S. Code Congressional and Administrative News, p. 1761, citing Haili v. United States, 9 Cir. 1958, 260 F.2d 744, and supports our reading of the statute.
18
The jury was accordingly instructed on the three essential elements of the offense: (1) an act by the defendant of wilfully endeavoring, by means of intimidation and threats of force, to prevent the communication of information relating to a violation of the federal criminal laws; (2) the action must have been taken to prevent the communication from being made to an individual authorized to conduct or engage in investigations of such violations; and (3) the knowledge by the defendant that the recipient or intended recipient of the information was a criminal investigator, as defined. See United States v. Williams, 8 Cir. 1973, 470 F.2d 1339, cert. denied, 411 U.S. 936, 93 S.Ct. 1912, 36 L.Ed.2d 396; United States v. Cameron, 5 Cir. 1972, 460 F.2d 1394; United States v. Kozak, 3 Cir. 1971, 438 F.2d 1062, cert. denied, 402 U.S. 996, 91 S.Ct. 2180, 29 L.Ed.2d 162.
19
In order to prove the defendant's motive in making the threat, the second and sole element of concern on this appeal, the government had to prove that San Martin knew or reasonably believed that Pauline Hollis had information which she had given or would give to F.B.I. agents and that he called and threatened her in response to that belief, in order to prevent, obstruct, or delay further communications. See Kozak, supra.
20
The government argues that the threat was made in an effort to prevent Pauline Hollis from communicating with the F.B.I. and presents in the alternative the theories, (1) that the jury could conclude that San Martin believed Pauline Hollis herself and her daughters had already communicated with the F.B.I. as to information in the possession of the appellant and his father, since Louis San Martin called her, and that the purpose of the threat was to forestall communication of further information; or (2) that the jury could conclude that Louis San Martin believed that the subpoena was connected with information furnished only by the daughters and that the telephone call was specifically intended to make certain that Mrs. Hollis would not communicate the information possessed by her.
21
In support of its first theory, the government views as self-evident the proposition that the appellant believed there was a causal connection between the subpoena, the visit of the daughters, and Pauline Hollis, or he would not have called her, in spite of the fact that in the call he attributed the issuance of the subpoena to Judy and Linda only. While this appears tenuous in view of the language of the threat, we accept for present purposes the proposition that "Lulu" wanted to kill either Pauline or her daughters, or both,4 because he attributed the subpoena of his father to information Mrs. Hollis provided, or that the jury could so infer.
22
The government, however, urges that this inference supports a further inference that San Martin wished to prevent further communications by Mrs. Hollis, prompting the threatening telephone call. It is at precisely this point that the fragile structure of the government's case falls of its own weight. The only evidence the appellant reasonably could believe that Mrs. Hollis possessed and which he could have been endeavoring to suppress had already been communicated to the F.B.I., "causing" the issuance of the subpoena of Jimmy, Sr. There is no evidence in the record from which a jury could conclude that the appellant knew or reasonably believed that Mrs. Hollis had any additional information not already communicated to the F.B.I., other than the threat itself. There is thus no basis whatever in the record for the jury to infer that the purpose of the call was to deter future communications. Even accepting the doubtful causal connection asserted by the government, the language used and the circumstances surrounding its use may be viewed as no more nor less than a threat of retaliation for damage resulting from past communication, a promise that "I'll get you for that." Such an act, however despicable or deplorable, is outside the scope of § 1510.
23
The government's alternative theory, that San Martin believed the daughters had spoken with the F.B.I. and was trying to forestall Pauline Hollis from communicating with them as well, is refuted by a simple examination of the threatening statement. It stretches the imagination beyond permissible limits to suggest that threatened retaliation for past communications of the daughters constituted a veiled threat to block future communication by the mother, especially where the defendant could not have believed the mother had information which Judy and Linda had not already conveyed. The damage, if it is viewed as damage, was already accomplished. In this connection we observe that there was no indication of an intent to persuade the mother or daughters to recant and no hint of physical harm conditioned upon future action or inaction. At the risk of laboring the obvious we repeat that the threat was simply an expression of intent to inflict harm because of past actions. There is no evidentiary foundation for an inference that the appellant was threatening the mother as to any future giving of information to the F.B.I. The government failed to prove a case under the statute, as construed by this and other courts.5 See Cameron, supra, Williams, supra, Kozak, supra.
24
The appellant's conviction is reversed with directions to dismiss the indictment.
25
Reversed.
1
Section 1510 provides:
(a) Whoever willfully endeavors by means of bribery, misrepresentation, intimidation, or force or threats thereof to obstruct, delay, or prevent the communication of information relating to a violation of any criminal statute of the United States by any person to a criminal investigator; or
Whoever injures any person in his person or property on account of the giving by such person or by any other person of any such information to any criminal investigator
Shall be fined not more than $5,000, or imprisoned not more than five years, or both.
(b) As used in this section, the term "criminal investigator" means any individual duly authorized by a department, agency, or armed force of the United States to conduct or engage in investigations of or prosecutions for violations of the criminal laws of the United States.
2
Frank Mendez, also charged with San Martin and Vergara, was never apprehended
3
Bridgette had written defendant's nickname, Lulu, on a rock she had given him which was used to simulate a bomb in the robbery attempt
4
The words, "You'll never see them again" are susceptible to the meaning that she would disappear, that the daughters would, or that all three would
5
For another chapter in Louis San Martin's recent difficulties with the Federal Bureau of Investigation, see United States v. Louis San Martin, 5 Cir. 1974, 505 F.2d 918 | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1915507/ | 167 B.R. 186 (1994)
In re Lawrence L. MAYER, Debtor.
Alfred NADEL and Ruth Nadel, Appellants,
v.
Lawrence L. MAYER, Appellee.
BAP No. SC-93-2088-SRO. Bankruptcy No. 93-02230-A7.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted March 24, 1994.
Decided May 13, 1994.
*187 Charles D. Richmond, La Jolla, CA, for appellants.
Laura K. Kail, Solana Beach, CA, for appellee.
Before SULLIVAN[1], RUSSELL and OLLASON, Bankruptcy Judges.
OPINION
SULLIVAN, Bankruptcy Judge:
Alfred and Ruth Nadel, creditors with a judgment lien against the debtor's home, filed an objection to the debtor's claim of homestead exemption. The bankruptcy court determined that the debtor was entitled to a homestead exemption in the amount available when the Nadels' lien attached to the property. The Nadels appeal. We AFFIRM in part and VACATE in part the bankruptcy court's decision and REMAND for further proceedings consistent with this Opinion.
I. FACTS
The underlying facts are not disputed, and are set forth in the bankruptcy court's decision which was reported in In re Mayer, 156 B.R. 54 (Bankr.S.D.Cal.1993). On November 6, 1989, Alfred and Ruth Nadel (Nadels), obtained a judgment against the debtor, Lawrence L. Mayer (Mayer). The judgment was for the sum of $40,052.62. On December 19, 1989, the Nadels recorded an abstract of the judgment against real property owned by Mayer and located at 1597 Casa Real Lane in San Marcos, California (the property). Mayer was renting the property to a tenant when the judgment lien attached, and he lived in another rental. Mayer moved back to the property in July 1992, and it became his principal residence at that time.
The Nadels tried to force a sale of the property and Mayer filed Chapter 7[2] on March 3, 1993. In his bankruptcy schedules, Mayer claimed a homestead exemption of $100,000 in the property under Calif.Civ.Proc.Code §§ 704.710 and 704.730(a)(3)(C). The unrefuted affidavit of Mayer states that he is over 55, is married, and that his household has an annual gross income of less than $20,000.
The Nadels objected to Mayer's homestead exemption on the grounds that Mayer did not reside in the house at the time the Nadels' judgment lien attached to the property. Alternatively, the Nadels argued that Mayer is limited to the $45,000 exemption which was applicable on the date the judgment lien attached. The Nadels also filed a motion for relief from the stay to allow them to complete their execution sale.
The court heard both the motion for relief from the stay and the objection to exemption on May 18, 1993. The bankruptcy schedules indicated that the property was worth $140,000 and that there was a consensual first mortgage of approximately $71,000 secured by the property. No evidence to the contrary was presented. During the hearing, the judge asked if Mayer had taken any *188 steps to avoid the Nadels' lien. Mayer's counsel said he had not, and that would require a subsequent filing to remove.
At the conclusion of the hearing, the judge denied the motion for relief from the stay because of the exemption claim. That order is not part of this appeal. The court took the question of the exemption under submission and issued a memorandum decision on June 29, 1993.
The decision concluded that:
1) absent the bankruptcy, the homestead exemption claimed would be ineffective against the preexisting judgment lien,
2) Section 522(f)(1) permits the debtor to avoid a judgment lien to the extent the property could have been exempted in the absence of the lien on the date of bankruptcy, and
3) that the amount of the homestead exemption must be limited to the amount allowed on the date the judicial lien attached.
The court instructed Mayer's counsel to submit an order in conformance with the opinion. The form of the order was approved by the Nadels. The order simply referred to the court's memorandum decision and ordered that the "debtor is entitled to a homestead exemption in the amount available when objectors' lien attached in 1989." The order was entered on August 30, 1993.
The Nadels filed a notice of appeal on August 30, 1993. They claim that the bankruptcy judge exceeded her authority by applying § 522(f)(1) sua sponte to the objection for exemption, and that they have been denied due process because the order will preclude them from litigating Mayer's ability to avoid their lien if Mayer were to file such a motion. They also claim to have been prejudiced by the failure of Mayer to file a motion to avoid their lien. They request that the order be reversed and that Mayer be barred from filing a motion to avoid their lien.
II. ISSUES
A) Is the debtor entitled to a homestead exemption in the property?
B) If so, what is the amount of the exemption?
III. STANDARD OF REVIEW
The determination of a homestead exemption based on undisputed facts is a legal conclusion interpreting statutory construction which is reviewed de novo. In re Morgan, 149 B.R. 147, 150 (9th Cir. BAP 1993).
IV. DISCUSSION
Exemptions are determined as of the date the bankruptcy petition was filed. In re Herman, 120 B.R. 127, 130 (9th Cir. BAP 1990), Owen v. Owen, 500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991), § 522(b)(2)(A).
Mayer relied on Cal.Civ.Proc.Code §§ 704.710 and 704.730(a)(3)(C) to claim a homestead exemption of $100,000 in the property. Those statutes provide:
§ 704.710. Definitions . . . (c) "Homestead" means the principal dwelling (1) in which the judgment debtor or the judgment debtor's spouse resided on the date the judgment creditor's lien attached to the dwelling, and (2) in which the judgment debtor or the judgment debtor's spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead. Where exempt proceeds from the sale or damage or destruction of a homestead are used toward the acquisition of a dwelling within the six-month period provided by Section 704.720, "homestead" also means the dwelling so acquired if it is the principal dwelling in which the judgment debtor or the judgment debtor's spouse resided continuously from the date of acquisition until the date of the court determination that the dwelling is a homestead, whether or not an abstract or certified copy of a judgment was recorded to create a judgment lien before the dwelling was acquired.
§ 704.730. Amount of homestead exemption
(a) The amount of the homestead exemption is one of the following:
. . . . .
(3) One hundred thousand dollars ($100,000) if the judgment debtor or *189 spouse of the judgment debtor who resides in the homestead is at the time of the attempted sale of the homestead any one of the following:
. . . . .
(C) A person 55 years of age or older with a gross annual income of not more than fifteen thousand dollars ($15,000) or, if the judgment debtor is married, a gross annual income, including the gross annual income of the judgment debtor's spouse, of not more than twenty thousand dollars ($20,000) and the sale is an involuntary sale.
Cal.Civ.Proc.Code §§ 704.710 & 704.730(a)(3)(C) (West 1987 & Supp.1994).
Mayer fulfilled all the requirements for the homestead exemption which he claimed. He lived on the property on the date he filed bankruptcy, he was over 55, married, and his household income was under $20,000. Therefore, on the date the petition was filed, he qualified for a homestead exemption in the property in the amount of $100,000 under Cal.Civ.Proc.Code § 704.730(a)(3)(C).
The Nadels' judgment lien is not relevant in determining whether Mayer is entitled to the homestead exemption listed in his schedules. The filing of the petition constitutes an attempt by the trustee to levy on the property. It is this hypothetical levy the court must focus on in analyzing Mayer's entitlement to a homestead exemption. See, Morgan, 149 B.R. at 153. The existence of the Nadels' judgment lien may impact a trustee's decision to abandon or sell property of the estate, but it does not affect the exemption that Mayer is entitled to claim.
At oral argument, the parties reported that a hearing on Mayer's motion to avoid the lien would be heard the following month. In deciding whether to avoid the lien, the bankruptcy court will decide the extent to which the judgment lien impairs the exemption that Mayer would otherwise be entitled to claim. Owen v. Owen, 500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991); In re Chabot, 992 F.2d 891 (9th Cir.1993).
It is unfortunate that Mayer's entitlement to a homestead exemption and his ability to avoid the Nadels' judgment lien are on separate tracks. However, the sole issue before this court is whether Mayer is entitled to the homestead exemption that he claimed in his bankruptcy schedules. We find that he is.
V. CONCLUSION
Mayer is entitled to the homestead exemption of $100,000 claimed in his bankruptcy schedules. The Nadels' objection to the exemption should be overruled. The bankruptcy court's order is AFFIRMED to the extent it determined that Mayer is entitled to a homestead exemption in the property, VACATED to the extent it determined that Mayer was not entitled to the amount of the homestead exemption he claimed, and REMANDED for further proceedings in connection with Mayer's motion to avoid the Nadels' judgment lien.
NOTES
[1] Honorable Donal D. Sullivan, Chief Bankruptcy Judge for the District of Oregon, sitting by designation.
[2] Unless otherwise indicated, all Chapter and Section references are to the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2614332/ | 51 Cal.2d 152 (1958)
THE PEOPLE, Respondent,
v.
JACK HYDE, Appellant.
Crim. No. 6194.
Supreme Court of California. In Bank.
Oct. 28, 1958.
Albert Simon, under appointment by the Supreme Court, for Appellant.
Edmund G. Brown, Attorney General, Albert Bianchi and Elizabeth Miller, Deputy Attorneys General, for Respondent.
THE COURT.
Defendant was charged with burglary in Count I and with receiving stolen property in Count II. He pleaded not guilty to both counts but admitted two prior convictions of robbery in California in 1947 and 1952. The jury found him guilty of receiving stolen goods and acquitted him on the burglary count. His motions for a new trial and for probation were denied. He appeals from the judgment sentencing him to the state prison for the term prescribed by law and from the order denying his motion for a new trial.
The public defender represented defendant at the trial but *154 did not undertake the prosecution of his appeal. (See Gov. Code, 27706.) Defendant requested the District Court of Appeal, Second District, Division Three, in which the appeal was pending, to appoint an attorney to represent him, claiming that he was without funds to employ counsel. That court referred the request to the Los Angeles Bar Association Committee on Criminal Appeals, which in turn referred the matter to one of its attorney members. This attorney made a written report to the court setting forth that he had examined the record and that in his opinion it disclosed no meritorious ground of appeal. The court so advised the defendant and extended his time to file a brief. Defendant prepared and filed a brief in propria persona. The District Court of Appeal made an independent examination of the record and affirmed the judgment. ((Cal.App.) 317 P.2d 73.)
This court ordered a hearing on its own motion in this case to consider the question of the appointment of counsel on appeal for an indigent defendant who has been convicted of a crime.
[1] It is our opinion that appellate courts, upon application of an indigent defendant who has been convicted of a crime, should either (1) appoint an attorney to represent him on appeal or (2) make an independent investigation of the record and determine whether it would be of advantage to the defendant or helpful to the appellate court to have counsel appointed. This investigation should be made solely by the justices of the appellate courts. After such investigation, appellate courts should appoint counsel if in their opinion it would be helpful to the defendant or the court, and should deny the appointment of counsel only if in their judgment such appointment would be of no value to either the defendant or the court.
After a hearing was ordered by this court in this case, counsel was appointed for defendant and briefs were submitted. At the trial Officers Johnson and Atkisson testified that they were in a patrol car at about 11 p. m. on August 16, 1956. They observed two cars, one closely following the other, force a pedestrian in a crosswalk to stop to avoid being hit. The officers followed the two cars and signalled defendant to the side of the road. Officer Johnson stepped out of the patrol car, and Officer Atkisson pursued the other car. Defendant stepped out of his car leaving the door open. Officer Johnson flashed his light into the back seat of the car and saw six gunny sacks and a camera protruding from one of the *155 sacks. He asked defendant, "What do you have in the gunny sack?" Defendant replied that he was moving and that the sacks contained personal belongings. Officer Johnson then stated that they looked like cameras and defendant said that they were cameras, that he was a camera salesman. Officer Johnson then stated that it seemed very odd that a man in the camera business would be carrying cameras around in a gunny sack in the back end of his car. Defendant replied, "Well, there is no use in talking about it here." Then Officer Johnson told defendant that he thought he was a burglar because a few nights ago a Hollywood camera store had been burglarized and $20,000 worth of camera equipment had been taken. Officer Johnson then placed defendant under arrest on a charge of burglary.
Officer Johnson called to Officer Atkisson that he thought he had a burglar. Both officers flashed their lights through the window on the six gunny sacks. Officer Atkisson asked defendant, "What are you doing with these articles in your car?" Defendant replied, "I have nothing to say. Take me to the station." Defendant and his car were then taken to the police station. Enroute Officer Johnson asked defendant where he had obtained the cameras. Defendant replied, "A fellow had given them to me." When Officer Johnson asked "Who?", defendant said, "Well, I would be a raving idiot to tell you who. I don't want to talk to you. I want to talk to someone higher up who could do something good." At the station the camera equipment was examined and listed by serial number and description. Officer Johnson identified a Revere stereo camera, a Reflecta camera, and a Dittar camera as part of the contents of the gunny sacks taken from defendant's car.
David Kaner testified that he owned a camera shop in Hollywood and that it was locked at the close of business on August 10, 1956. When he arrived at his store on the morning of August 11, 1956, he found that a hole had been broken through the wall near the rear of the store and camera equipment valued at $13,500 had been taken. He identified the Revere, Reflecta and Dittar cameras as part of the equipment taken from his store. The three cameras were admitted into evidence without objection.
Officer Northrup testified that he questioned defendant at the station regarding the cameras and the burglary and that defendant replied: "I cannot tell you anything about the *156 burglary except that I did not pull it. All I was doing was delivering that stuff for somebody else. I was going to get a couple bills for my end of it. I cannot tell you who I picked it up from or who I was going to deliver it to."
Joe Larios testified on behalf of the defendant. He stated that he asked defendant to deliver some gunny sacks and that defendant was to receive $10. In the evening on August 16, 1956, defendant parked his car next to the hotel where Larios was staying. Larios loaded the gunny sacks while defendant got a pack of cigarettes. Larios was loading the last two sacks when defendant returned. Defendant asked him what was in the sacks, and Larios replied that they contained cameras. Larios instructed the defendant to deliver the cameras to a Red Cole at a certain bar. Larios testified that he had obtained the camera equipment about three days before from a Tom McGowan. Larios knew the cameras were stolen but he did not disclose this fact to defendant.
Defendant's testimony was similar to that of Larios, including the fact that he was to receive $10 for the delivery. He also testified that he was unable to locate Red Cole at the bar and was later stopped by the officers. He denied that he said the gunny sacks contained personal belongings or that he was a salesman. He also denied that he told Officer Northrup that he was to receive "two bills" for making the delivery. He admitted that "two bills" meant $200. He testified that Larios had a typewriter shop.
[2] Defendant contends that the evidence is insufficient to establish knowledge that the cameras were stolen. Such knowledge, however, may be inferred from defendant's false and evasive replies concerning the cameras to Officers Johnson and Atkisson, and from the circumstances that Larios was not a camera dealer, that the equipment was transported in gunny sacks, that the equipment was not to be delivered to a camera dealer but to some one called "Red" at a bar, and that defendant said he was to receive "two bills" for his end of it. (People v. Malouf, 135 Cal.App.2d 697, 706-707 [287 P.2d 834]; People v. Boyden, 116 Cal.App.2d 278, 288 [253 P.2d 773]; People v. Juehling, 10 Cal.App.2d 527, 531 [52 P.2d 520].) The weight to be given defendant's and Larios' testimony was a matter for the jury, and it was not bound to believe Larios' testimony that he did not tell defendant that the cameras were stolen. (People v. Gould, 111 Cal.App.2d 1, 6 [243 P.2d 809]; People v. Toliver, 90 Cal.App.2d 58, 61 *157 [202 P.2d 301].) The evidence is therefore sufficient to support a finding that defendant knew that the cameras were stolen.
[3] Defendant contends that the cameras were acquired by an illegal search and seizure and were improperly admitted into evidence. Defendant was represented by counsel during the trial and no objection was made to the admission of the cameras into evidence. Failure to object to the introduction of the evidence at the trial on the ground that it was acquired by an unlawful search precludes raising the issue on appeal, where, as here, the trial occurred after the decision in People v. Cahan, 44 Cal.2d 434 [282 P.2d 905, 50 A.L.R.2d 513]. (People v. Kitchens, 46 Cal.2d 260, 262-263 [294 P.2d 17]; People v. Williams, 148 Cal.App.2d 525, 532 [307 P.2d 48]; People v. Shannon, 147 Cal.App.2d 300, 303 [305 P.2d 101].) [4a] In any event, observing the items through the open car door and through the window did not constitute an unreasonable search. (People v. Martin, 45 Cal.2d 755, 762 [290 P.2d 855].) Thereafter the cameras were properly seized as an incident to a lawful arrest. (People v. Boyles, 45 Cal.2d 652, 655 [290 P.2d 535]; People v. Coleman, 134 Cal.App.2d 594, 599 [286 P.2d 582].) [5] Defendant's contention that the arrest was for a minor traffic violation unrelated to the search and seizure of the cameras is not supported in the record, for it shows that the defendant was arrested on a charge of burglary. The arrest on that charge was justified by the evidence that Officer Johnson saw one of the cameras protruding from one of the sacks, that defendant admitted they were cameras, that Officer Johnson knew of the recent burglary of a camera store, that the cameras were in gunny sacks, and that defendant gave false and evasive answers to Officer Johnson concerning the cameras. [4b] The cameras were therefore properly admitted into evidence.
[6] In his brief in propria persona, filed before the appointment of counsel, defendant contends that the testimony of the officers cannot support a conviction on the ground that it is uncorroborated, citing People v. Reingold, 87 Cal.App.2d 382, 392 [197 P.2d 175]. That case was concerned with corroboration of testimony by an accomplice as required by section 1111 of the Penal Code. The officers were not accomplices of the defendant and their testimony need not be corroborated.
[7] Defendant also contends in his brief in propria persona that he was denied due process of law by virtue of beatings *158 administered by the police. There is no merit in this contention. The officers denied beating defendant. Moreover, defendant does not contend that he was coerced to make any confession or admission, and in fact he testified that he made no confession or admission as a result of the alleged police brutality.
The judgment and order are affirmed.
Schauer, J., concurred in the judgment.
Spence, J., did not participate herein. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4561339/ | Filed 8/7/20 Certified for Publication 8/28/20 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
In re A.C., a Person Coming B302248
Under the Juvenile Court Law.
______________________________ (Los Angeles County
LOS ANGELES COUNTY Super. Ct. No. 19CCJP05493)
DEPARTMENT OF CHILDREN
AND FAMILY SERVICES,
Plaintiff and Respondent,
v.
C.L.,
Defendant and Appellant.
APPEAL from orders of the Superior Court of Los Angeles
County, Thomas E. Grodin, Judge. Affirmed.
Johanna R. Shargel, under appointment by the Court of
Appeal, for Defendant and Appellant.
Mary C. Wickham, County Counsel, Kristine P. Miles,
Assistant County Counsel, and Kim Nemoy, Principal Deputy
County Counsel, for Plaintiff and Respondent.
____________________
The juvenile court found placing 12-year-old Daughter out
of state with her father would be detrimental to the child’s
emotional well-being. We affirm.
I
This dependency case started shortly after Daughter’s half
brother was born in August 2019. Both the half brother and
Mother tested positive for amphetamine at the hospital. Within
two weeks, the Department of Children and Family Services filed
a juvenile dependency petition under section 300 of the Welfare
and Institutions Code. All statutory references are to this code.
The Department alleged Mother’s substance abuse
endangered Daughter and her half brother and rendered Mother
incapable of caring for them. Accordingly, the Department
sought to remove the children from Mother and place them with
their maternal grandmother. At the time, Daughter lived with
Mother, an uncle, and other family members.
When the Department filed its petition, Daughter did not
know her father. Daughter had not lived with him since she was
a toddler. Mother said she and Father separated due to domestic
violence. Father said he left because he and Mother were no
longer getting along. He denied physically harming Mother.
After leaving Mother and Daughter, Father had little contact
with them and did not pay child support. Mother said Father
stopped all contact years ago after she asked him for financial
help buying a Christmas present for Daughter.
Mother and Daughter appeared before the juvenile court in
August 2019. The court found a prima facie case for detaining
Daughter and her half brother from Mother under section 300.
The court ordered a multidisciplinary assessment of Daughter
and ordered the Department to locate Father.
2
After locating Father, the Department interviewed him,
Mother, Daughter, and others. Daughter also saw a therapist.
She asked to speak with her father, and a social worker
facilitated the call.
The Department’s 2019 reports described the situation in
the following terms.
Father lives in Washington State with his wife and seven-
year-old son. He is self-employed and financially stable. Father
wants a relationship with Daughter. According to Father’s wife,
Mother did not allow Father to see Daughter.
Daughter does not want to live with Father. She wants to
visit him, but only on holidays or in the summer. Daughter sees
Father as a stranger who could have reached out to her over the
years but did not. She is uncomfortable being on her own with
Father. Not knowing his family well also makes her
uncomfortable.
Daughter is “strongly attached” to her half brother, enjoys
caring for him, and does not want to leave him. She also has a
“strong bond” with her maternal grandparents.
Daughter has many school friends and does not want to
leave them. She enjoys school, has an A average, and is “very
involved in achieving good grades.”
Daughter is mature, insightful, and articulate. She is “able
to express her wants and her needs.” She can “advocate for
herself.”
Daughter and her half brother both are “thriving and
developing as expected in an encouraging environment” with
their maternal grandparents. Their grandmother facilitates
daily visits with Mother and “demonstrated insight into the
importance of children’s needs such as a stable home and
3
supporting visits with [Mother].” Mother and her family are
“very loving” toward Daughter.
Daughter fears leaving her mother, family, friends, school,
and her life. She misses Mother significantly. She fears being
placed with Father and “appeared anxious and troubled when
[she] addressed the possibility of being placed with bio father.”
Daughter “has not been able to sleep due to being worried and
anxious of possibly having to go reside with her estranged
father.”
The therapist who saw Daughter is concerned for
Daughter’s mental health. She concludes removing Daughter
from her grandparents’ home would “pose a considerable
emotional strain for her” and would affect her academic stability.
Further, placement with Father “without a proper reintegration
process would be detrimental to her [ ] mental health and
stability.”
A multidisciplinary assessment team agreed placing
Daughter with Father “would cause emotional detriment” to
Daughter. The team concludes Daughter’s “social-emotional
needs are vulnerable.” She is “at high risk of emotional
deterioration.” Daughter would benefit from continued mental
health treatment.
The Department recommended reunification services and
visitation for Father to build his relationship with Daughter. It
also recommended an evaluation of Father’s home under the
Interstate Compact on the Placement of Children. (See generally
In re Suhey G. (2013) 221 Cal. App. 4th 732, 742–743.) The
Department concluded releasing Daughter to Father would be
emotionally detrimental to her.
4
Shortly before the disposition hearing, Father had a call
with the multidisciplinary assessment team. On the call, Father
acknowledged Daughter’s need gradually to bond with him, and
her need “to feel safe and secure that she will be reunifying with
[Mother] so that [she] can continue to thrive.” Father said he
wanted Daughter to feel safe and protected, to stay with Mother,
and to talk with him on the phone.
At the disposition hearing, Father’s counsel switched
position and argued Father was entitled to custody of Daughter
under section 361.2, subdivision (a). Counsel maintained Father
is nonoffending and has a good home; Daughter has a half sibling
in Washington; and Daughter recently visited with his family and
reported no concerns. According to Father, Mother kept
Daughter from him. Father never sought court involvement
before due to his immigration status. He now wants to make up
for lost time.
Daughter’s counsel asked that Daughter not be released to
Father. Citing the therapist’s report, counsel argued that release
would be detrimental to Daughter’s emotional well-being.
The juvenile court ultimately declared Daughter and her
half brother dependents under section 300 and ordered them
removed from Mother. The court also found it would be
detrimental to place Daughter with Father. The hearing also
addressed issues relating to the father of Daughter’s half brother
that are not relevant to this appeal.
Only Father appealed. The sole question is the propriety of
the juvenile court’s dispositional order denying placement of
Daughter with Father.
5
II
The dispositional order was proper. Substantial evidence
supports the juvenile court’s detriment finding.
Section 361.2, subdivision (a) requires a court ordering
removal of a child first to determine whether there is a
noncustodial parent who wants to assume custody. The court
shall place the child with that parent, unless that placement
would be detrimental to the child’s safety, protection, or physical
or emotional well-being. (§ 361.2, subd. (a).)
Only clear and convincing evidence can establish the
necessary detriment. (In re Luke M. (2003) 107 Cal. App. 4th
1412, 1426 (Luke M.).) In making this finding, the court weighs
all relevant factors to determine if the child will suffer net harm.
(Id. at p. 1425.)
Our role is limited because our review of the juvenile
court’s detriment finding is deferential. (See In re K.B. (2015)
239 Cal. App. 4th 972, 979.) We review the entire record in the
light most favorable to the court’s order to see whether
substantial evidence supports the finding. (Luke M., supra, 107
Cal.App.4th at p. 1426.)
A
Father argues we must reverse the juvenile court because
its detriment finding hinged entirely on one fact—the absence of
a father-daughter relationship—which is a legally insufficient
basis for rejecting placement with a noncustodial parent.
This is not a fair reading of the record. The juvenile court
read and considered the Department’s reports. The basis for its
finding was Daughter would experience something akin to
trauma should she be placed with Father. The court noted one of
the Department’s reports contained “very clear” information “that
6
it would be very, almost traumatic, for [Daughter] to have to face
that kind of move, at her age.” After making this finding, the
court observed, “there is almost no relationship between the
father and the child.”
The absence of a relationship between Father and
Daughter was a factor in the court’s decision, as is permissible.
(See In re Abram L. (2013) 219 Cal. App. 4th 452, 464 (Abram L.).)
Father correctly argues Daughter’s wishes are not
dispositive. The juvenile court acknowledged this point. The
child’s wishes are, however, relevant. (In re Adam H. (2019) 43
Cal. App. 5th 27, 33 (Adam H.).) The court was right to consider
this factor.
B
Father’s reply brief makes a different argument: that
appellate courts have rejected the combination of factors at play
here as insufficient to establish detriment under section 361.2.
This argument is incorrect.
The evidence shows Daughter is strongly attached to her
mother, half brother, and maternal family. They are loving.
Daughter is thriving in her grandmother’s home. She sees
Mother daily and wants to reunify with her. She has many
friends, enjoys school, and is excelling academically. Daughter
does not want to leave this life and go live with Father. Daughter
actually fears this prospect. He is a stranger to her. She has not
heard from him in over five years. Her anxiety about residing
with Father is consuming. She cannot sleep. Daughter’s
therapist concludes removing Daughter from her half brother and
the only family she has known in this way would be detrimental
to her mental health, affect her academic stability, and cause
“considerable emotional strain.” Daughter’s attorney agreed.
7
This evidence amply supports the juvenile court’s finding
Daughter would suffer emotionally if placed with Father.
Father cites no analogous case. His authorities are
consistent with our analysis here, as a brief review of them will
demonstrate.
The adolescent John in In re John M. (2006) 141
Cal. App. 4th 1564 was not clear about whether he wanted to live
with his father in Tennessee. (Id. at pp. 1568, 1570.) No
therapist recommended against the move. No evidence showed
John was strongly attached to his baby sister or his extended
family. (Id. at pp. 1568–1570.) In re John M. is no support for
reversing the juvenile court here.
The same holds for In re Patrick S. (2013) 218 Cal. App. 4th
1254 (Patrick S.). In that case, the boy P.S. and his mother left
P.S.’s father, a Naval officer, when the boy was 11 months old.
(Id. at pp. 1256–1257.) They moved from state to state, were
homeless at times, and lacked a familial safety net. (Ibid.) The
father searched for P.S. for years and paid child support every
month for 11 years without knowing where his son was. (Id. at p.
1263.) In the interim, P.S. attended 13 different schools. (Id. at
p. 1257.) At the time of the dependency proceedings, he was
enrolled in home independent study and was living in a foster
home. (Ibid.) P.S. had behavioral issues and no friends. (Id. at
pp. 1257, 1259.) Before the disposition hearing, P.S. visited his
father’s home in Washington for several weeks and made some
friends during the visit. (Id. at p. 1258.) P.S. was able to
converse freely with his father after the visit. (Ibid.) At various
points leading up to the disposition hearing, P.S. had differing
perspectives about his father, saying he preferred living with
him, was resigned to living with him, did not want to live with
8
him, and had anxiety about living with him. (Id. at pp. 1258,
1260.) To ease the transition and support his son, Father
researched schooling options for P.S. in Washington, arranged
individual and family therapy, joined a parenting class, and set
up an internship with an architect for P.S., consistent with the
boy’s interests. (Id. at p. 1260.) The father also offered to
facilitate contact and visitation with P.S.’s mother. (Ibid.) In re
Patrick S. obviously is distinguishable.
In re C.M. (2014) 232 Cal. App. 4th 1394 likewise involved
an essentially different situation. C.M. lived with her mother,
half sibling, and maternal grandparents. (Id. at pp. 1396–1397.)
Her father provided financial support and maintained a
relationship with C.M. (Id. at p. 1396.) He talked to her on the
phone frequently and saw her on weekends and some holidays.
(Id at p. 1397.) C.M. enjoyed these visits. (Ibid.) C.M.’s mother,
on the other hand, was verbally and physically abusive. (Ibid.)
When her mother went to jail after a violent episode, C.M. stayed
with her maternal grandparents. (Ibid.) They were in denial
about the mother’s problems. (Ibid.) While C.M.’s attorney wrote
C.M. was terrified of being released to her father, C.M.
maintained she wanted unmonitored weekend visits with him.
(Id. at p. 1398.) She did not want to live with him, and she did
not want a new home or a new school. (Ibid.) She also wanted to
remain with her half sibling and grandparents. (Id. at p. 1402.)
The opinion says nothing about the strength of these family
bonds and notes the father offered to have C.M.’s sibling placed
in his home as well. (Id. at p. 1404.)
There are many distinctions between this case and C.M.’s
situation. C.M.’s father had an ongoing relationship with his
daughter. No mental health provider opined the girl would suffer
9
emotionally if she were placed with him. The prospect of living
with him did not cause C.M. acute suffering. The father lived in
the same state, so visitations with the girl’s mother and other
family would not require flying across the country. In re C.M. is
consistent with our analysis.
Other cases Father cites are further afield.
The juvenile court in In re Marquis D. (1995) 38
Cal. App. 4th 1813 failed to apply section 361.2, subdivision (a)
and did not adequately explore whether placing the children with
their father would be detrimental. (Id. at pp. 1816, 1825.) The
same is true of Adam H., supra, 43 Cal.App.5th at pp. 32–33, and
Abram L., supra, 219 Cal.App.4th at p. 461. In re Karla C. (2010)
186 Cal. App. 4th 1236 is not instructive either. The pertinent
portion of the opinion is unpublished. (Id. at p. 1260.)
C
Father contends the juvenile court’s order should be
reversed because he is a safe, fit, and nonoffending parent who
wants custody of his daughter. Citing Patrick S., supra, 218
Cal.App.4th at p. 1265, Father argues the standard of detriment
is “very high” when the noncustodial parent is competent.
Without discussing what this standard means, Father implies it
was not met here.
Contrary to Father’s arguments, the court’s inquiry
properly is more comprehensive than simply whether a child will
be physically safe with a noncustodial parent or whether that
parent has behaved badly. (See Luke M., supra, 107 Cal.App.4th
at pp. 1423, 1425.) A court properly may decline placement with
a safe and nonoffending parent if that placement would be
detrimental to the child’s emotional well-being. (Id. at p. 1425;
§ 361.2, subd. (a); see also In re C.C. (2009) 172 Cal. App. 4th 1481,
10
1490–1491 [court has broad discretion to evaluate child’s
emotional well-being; finding a placement would impair the
child’s emotional security may suffice in appropriate cases].)
There is substantial evidence Daughter would suffer
significant emotional harm if she were forced to live with Father.
DISPOSITION
We affirm.
WILEY, J.
We concur:
BIGELOW, P. J.
GRIMES, J.
11
Filed 8/28/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
In re A.C., a Person Coming B302248
Under the Juvenile Court Law.
______________________________ (Los Angeles County
LOS ANGELES COUNTY Super. Ct. No.
DEPARTMENT OF CHILDREN 19CCJP05493)
AND FAMILY SERVICES,
ORDER CERTIFYING
Plaintiff and Respondent, OPINION FOR
PUBLICATION
v.
[No change in judgment]
C.L.,
Defendant and Appellant.
THE COURT:
The opinion filed in the above-entitled matter on August 7,
2020 was not certified for publication in the Official Reports. For
good cause, it now appears that the opinion should be published
in the Official Reports. It is so ordered.
____________________________________________________________
BIGELOW, P. J. GRIMES, J. WILEY, J. | 01-03-2023 | 08-28-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/2615197/ | 137 Ariz. 46 (1983)
668 P.2d 889
ELCO VETERINARY SUPPLY, Petitioner Employer, Aetna Casualty & Surety Company, Petitioner Carrier,
v.
The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, James Shaff, Respondent Employee.
No. 1 CA-IC 2834.
Court of Appeals of Arizona, Division 1, Department C.
April 26, 1983.
Rehearing Denied June 15, 1983.
Review Granted July 12, 1983.
Jones, Teilborg, Sanders, Haga & Parks by Calvin Harris, Phoenix, for petitioner employer and petitioner carrier.
*47 James A. Overholt, Chief Counsel, The Indus. Com'n of Arizona, Phoenix, for respondent.
Fresquez & Fresquez by Joseph E. Fresquez, Flagstaff, for respondent employee.
OPINION
JACOBSON, Presiding Judge.
The sole issue in this review of an Industrial Commission award is whether the administrative law judge used the proper period to establish the average monthly wage of an injured claimant whose salary was based in part on sales commissions.
In April 1979, the claimant-employee, James Shaff, began work for the petitioner employer, Elco Veterinary Supply, as a warehouseman, route salesman, truck driver, and deliveryman. He hurt his back on the job on November 15, 1979, but continued working until January 30, 1980, when the back pain became disabling.
The claimant was paid a salary of $800 per month plus commissions. The commissions varied each month depending upon his sales success. The following chart shows the claimant's monthly commissions:
DATE COMMISSIONS
05/15/79 $ 47.49
06/15/79 135.51
07/15/79 79.04
08/15/79 54.92
09/14/79 70.94
10/15/79 99.81
11/15/79 153.09
12/15/79 198.99
01/15/80 267.24
The petitioner carrier issued a notice of claim status establishing a $882.03 average monthly wage for the claimant. This was calculated by using the claimant's total earnings from the date he began employment until the date of injury. The Industrial Commission thereafter independently established the same average monthly wage. See A.R.S. § 23-1061(F). The claimant protested, and hearings were held.
At the scheduled hearing, only the claimant appeared. He testified that his ability to earn commissions was progressive. As he learned to perform his job more efficiently, he earned higher commissions. For this reason, he disagreed that an average of his total earnings before the injury accurately reflected his earning capacity. The administrative law judge issued an award establishing a $1,067.24 average monthly wage. This was based on the claimant's actual earnings between December 15, 1979 and January 15, 1980, the last period for which he received commissions. In the decision upon review, the administrative law judge amended the average monthly wage determination, by establishing a $953.09 average monthly wage based on the claimant's actual earnings the month before the injury, October 15, 1979 to November 15, 1979. This special action followed to challenge this average monthly wage determination.
On appeal, the petitioners first argue that the administrative law judge was required to use an expanded wage base in this case. They rely on cases such as Powell v. Industrial Commission, 104 Ariz. 257, 451 P.2d 37 (1969); Pettis v. Industrial Commission, 91 Ariz. 298, 372 P.2d 72 (1962); Steward v. Industrial Commission, 69 Ariz. 159, 211 P.2d 217 (1949), which interpret A.R.S. § 23-1041(D) to apply only if the claimant worked less than 30 days for the employer before injury.[1] They acknowledge, however, contrary authority. See, e.g., Kurtz v. Matich, 96 Ariz. 41, 391 P.2d 594 (1964).
We recently commented on these confusing interpretations of A.R.S. § 23-1041(D) in Davis v. Industrial Commission, 134 Ariz. 293, 655 P.2d 1345 (1982). We noted that some cases have interpreted A.R.S. § 23-1041(D) to apply only to a claimant who has worked for less than one month. However, Davis rejected this approach and test because of its inconsistency with the statute's history and the plain meaning of its terms. Under the Davis test, the wages earned during the 30 days *48 preceding the injury are the presumptive average monthly wage, but the administrative law judge has broad discretion to use an expanded wage base when the presumptive wage base does not realistically reflect earning capacity. Because we believe this is the correct test, we reject the petitioners' first argument which would apply A.R.S. § 23-1041(D) only to the employee who has worked less than 30 days.
The petitioners next argue that the administrative law judge had the discretion to use an expanded wage base in this case. The claimant answers by arguing that this discretion applies only if the employment is seasonal. He also argues that his variable commissions are analogous to routine wage increases, which he contends would normally be reflected in an increased average monthly wage.
We reject both of the claimant's arguments. Seasonal employment is but one justification for using an expanded wage base. See Davis v. Industrial Commission, supra. Other justifications include, but are not limited to, intermittent employment and inflated wages received during the month before the injury. Id. Furthermore, the claimant's variable commissions are not analogous to a routine hourly wage increase. The hourly wage increase is fixed, whereas the commissions received are variable. We therefore agree with petitioners that the administrative law judge had discretion in this case to use an expanded wage base.
The petitioners lastly argue that the administrative law judge did not properly exercise his discretion in using the expanded wage base in this case because the respondent employee had earned his highest commission in the month prior to the injury, and therefore the 30 day period utilized does not realistically reflect the claimant's true earning capacity. We disagree. The evidence that the claimant's sales ability was progressive would support the inference that his earnings the month before the injury realistically reflected his earning capacity at the time of his injury. Because we must affirm an award supported by any reasonable evidence, see, e.g., Salt River Project v. Industrial Commission, 128 Ariz. 541, 627 P.2d 692 (1981), we must affirm this award.
In this context, the petitioners also argue that the administrative law judge erroneously allowed evidence and considered the claimant's commissions earned after the industrial injury. We agree that wages earned after the industrial injury cannot be considered as part of the wage base for calculating the average monthly wage. See Davis v. Industrial Commission, supra. However, evidence of the commissions earned after the injury were relevant here in determining whether the claimant's sales ability was progressive, and whether the 30 day period prior to injury realistically reflected his earning capacity at the time of injury. See, e.g., Reader v. General Motors Corporation, 107 Ariz. 149, 483 P.2d 1388 (1971). The post-injury commissions were relevant to these issues.
For the foregoing reasons, the award is affirmed.
BROOKS and OGG, JJ., concur.
NOTES
[1] Section 1041(D) defines the term "monthly wage" to mean the average wage paid to the claimant during and over the month in which the employee is killed or injured. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1412889/ | 825 F. Supp. 328 (1993)
Daniel A. GEORGE, Plaintiff,
and
Ernest R. Cooper, Intervenor Plaintiff,
v.
LOCAL UNION NO. 639, INTERNATIONAL BROTHERHOOD of TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN and HELPERS of AMERICA, AFLCIO, et al., Defendants.
Civ. A. No. 89-0916-LFO.
United States District Court, District of Columbia.
June 8, 1993.
*329 Daniel A. George, pro se.
Jonathan Gans Axelrod, John Robert Mooney, Kathleen A. Murray, and Helen Debra Lerner, Bens, Axelrod, Osborne, Mooney & Green, P.C., Washington, DC, for Local Union 639.
MEMORANDUM
OBERDORFER, District Judge.
This suit arises out of a long and bitter dispute between plaintiff, Daniel George, and Local Union No. 639, International Brotherhood of Teamsters (the "Union"), of which he was formerly president. On June 28, 1990, summary judgment was entered for defendants on all but plaintiff's First Amendment claim. Plaintiff then filed two additional amended complaints, alleging Union misconduct subsequent to the filing of the initial complaint. In particular, plaintiff claims that he was improperly issued a withdrawal card from the Union when his unit was terminated from Union representation and that the Union manipulated the rules of its referral hall to deny plaintiff access to Union employment. On August 23, 1991, defendants filed a motion for partial summary judgment on the remaining First Amendment claim from George's original complaint and the new issues raised in the third amended complaint. On September 16, 1991, plaintiff George filed a cross-motion for summary judgment. On November 22, 1991, defendants were granted leave to conduct further discovery on plaintiff's First Amendment claim, and on January 8, 1992, defendants filed a supplemental memorandum in support of their motion for summary judgment. For the reasons stated below, an accompanying Order grants defendants' motion for summary judgment and denies plaintiff's cross-motion for summary judgment.
I.
In the remaining count of his original complaint, George claims that the Union, and particularly Phillip Feaster, its current president (who unseated George as Union president), systematically denied George the right to speak at Union meetings. Specifically, George contends that Feaster adjourned the February 19, 1989 membership meeting rather than allow him to speak, in violation of the Bylaws of Local 639 and § 101(a)(2) of the Landrum-Griffin Act, 29 U.S.C. § 411(a)(2). *330 Defendants counter that George was out of order, making adjournment of the meeting both necessary and proper. The facts are as follows.
On February 19, 1989, the Union held a meeting for its members employed by Ryder/Jacobs (George's unit). Feaster chaired the meeting from a dais on a stage facing approximately twenty members seated below. Feaster spoke for nearly thirty minutes. When he finished speaking, Feaster recognized George, who was seated in the second row of the hall on the center aisle. George rose and began to speak, apparently challenging what Feaster had just said. At some point during his remarks, George began turning from side to side to address his comments to the membership. The parties dispute whether George actually turned his back on the Chair, but they agree that he did turn from side to side. Feaster advised George several times to direct his comments to the Chair. George responded that his comments were not addressed to Feaster, but to the general membership. After George ignored Feaster's warnings that he would adjourn the meeting if George did not address his comments to the Chair, the meeting was adjourned.
Defendants claim that adjournment was necessitated by George's repeated failure to follow the Rules of Order, resulting in the Chair's loss of control over the meeting. George claims that he "turned his body and face to his right and left in order to insure that members to his left and rear could hear what was being said, as well as to accommodate Feaster." Plaintiff's Mem., at 2. George claims that Feaster ordered him to address the Chair only when his remarks became critical of Feaster's leadership. George argues that no Rule of Order requires that a speaker face the Chair and, even if there is such a Rule, it was discriminatorily applied and did not warrant Feaster's adjournment of the meeting.
Title I of the Landrum-Griffin Act protects the rights of union members within a union. In particular, it guarantees the members' right to free speech:
Every member of any labor organization shall have the right to meet and assemble freely with other members; and to express any views, arguments or opinions; and to express at meetings of the labor organization his views ... upon any business properly before the meeting, subject to the organization's established and reasonable rules pertaining to the conduct of meetings: Provided, That nothing herein shall be construed to impair the right of a labor organization to adopt and enforce reasonable rules as to the responsibility of every member toward the organization as an institution and to his refraining from conduct that would interfere with its performance of its legal or contractual obligations.
29 U.S.C. § 411(a)(2); see also International Organization of Masters, Mates & Pilots v. Brown, 498 U.S. 466, 111 S. Ct. 880, 112 L. Ed. 2d 991 (1991); Carothers v. Presser, 818 F.2d 926, 929 (D.C.Cir.1987).
Section 23 of Local 639's Bylaws contain Rules of Order for the conduct of union meetings. The Rules of Order state in relevant part:
Rule 2. The Chairman of the meeting shall enforce these rules and regulations and may direct that members be removed from the meeting for violation of these rules.
* * * * * *
Rule 6. When a member wishes the floor, he shall rise and respectfully address the Chair, and if recognized by the Chair, he shall state his name.
* * * * * *
Rule 8. Every member, while speaking, shall adhere to the question under debate and avoid all invective and indecorous language, but all member[s shall] have the right to express their views, arguments and opinions upon candidates and upon any business properly before the meeting.
Rule 9. No member shall interrupt another member while speaking except for a point of order ... and the Chair shall decide the point without debate.
* * * * * *
Rule 11. If any member shall feel himself aggrieved by a decision of the Chair, he *331 may appeal from the decision of the Chair to the meeting without debate immediately after the Chair has decided against him.
* * * * * *
Rule 22. A motion to adjourn shall always be in order except: (1) when a member has the floor; (2) when members are voting; (3) when a motion is pending.
* * * * * *
Rule 27. Any question on procedure and debate, not provided for herein, shall be governed by Roberts' [sic] Rules of Order, Revised.
Defendants' Motion, Attachment 3, at 34-37 (Local Union 639 Bylaws).
Section 7 of Robert's Rules of Order provides:
Speakers must address their remarks to the presiding officer, be courteous in their language and deportment, and avoid personalities, never alluding to the officers or other members by name, where possible to avoid it, nor to the motives of members.
Defendants claim that plaintiff violated this provision of Robert's Rules and Rule 6 of the Union Bylaws when he addressed the membership instead of the presiding officer. For this violation he could have been removed from the meeting pursuant to Rule 2 of the Union Bylaws. Accordingly, it is argued, adjournment was an appropriate alternative and less discriminatory remedy for the violation.
George counters that Rule 6 of the Union Bylaws, which requires that the speaker address the Chair, applies only before a member is recognized, and that Rule 8, which does not require that the speaker address the Chair, governs a member's conduct once he or she has been recognized. In other words, "[o]nce recognized, the Bylaws place no obligation on George to stand in any specific position, face any particular direction or address his remarks to the Chair." Plaintiff's Reply Mem., at 2. Rule 8, however, addresses the content of a member's speech, not a member's posture or mode of presentation. Since Rule 27 expressly adopts Robert's Rules of Order, Revised, plaintiff's contention cannot stand. Feaster was within his authority in requiring George to address the Chair.[1]
George next claims that even if this Rule was reasonably incorporated into the Union Bylaws, it was discriminatorily applied. George argues that the Union had not in the past uniformly required members to face the Chair when speaking. Moreover, plaintiff contends that Feaster would selectively apply Rules of Order to silence individuals who disagreed with him. Plaintiff, however, has not proffered any materially probative evidence that Feaster discriminatorily applied the Rules of Order to silence opposition.
Plaintiff has submitted four affidavits to support his contention. Three of these affidavits are copies of a single form affidavit with the affiant's name and years of Union membership handwritten in the spaces provided. See Plaintiff's Mem., Ex. T-1, T-2 & T-3 (Affidavits of Robert Gross, Danny Jones and James Eader). Paragraph seven of each affidavit recites:
I have attended meetings where Daniel George would attempt to be recognized by the chair, President Feaster would be chairing the meeting, Feaster would not in some instances allow George to have the floor to speak, but would allow other members to speak, or when he did allow George [sic] to speak, Feaster would rule George out of order, in many instances without any apparent or know [sic] reason to me.
Defendants deposed two of these affiants; the third refused to attend his deposition. See Defendants' Notice of Filing (January 21, 1992) (Proposed Deposition of James Eader). Neither deposed affiant could recall any specific instances, other than the February 19, 1989 meeting, when Feaster prevented George from speaking. See Gross Dep. at 14, 19; Jones Dep. at 17. Despite the fact *332 that Gross had attended every "meeting relative to the negotiations and contract offers that were made between Local 639 and Jacobs and Ryder" prior to the February 19, 1989 meeting, Gross Dep. at 20, he could not remember a single meeting where a speaker did not address the Chair. See id. at 19. Gross testified in general terms that Feaster would not allow people who disagreed with him speak, but he did not identify a single incident other than February 19, 1989. Jones testified at his deposition that he attended only "one or two" meetings after Feaster was elected president. Jones Dep. at 8-9. Moreover, he could not remember signing or preparing the affidavit on which his signature appeared. See id. at 6-7. In fact, he had only a vague recollection of the February 19, 1989 meeting. See id. at 9-10.[2]
George also produced an affidavit executed by Daniel O'Shea, who is employed by United Parcel Service (UPS). O'Shea stated that because of his work schedule, he did not attend regular Union meetings; however, he did attend meetings held for UPS members only. At those meetings, he claims that the hall was usually equipped with a microphone placed in the center aisle, but that when members did not use the microphone they were permitted to turn from side to side. He also stated that at one meeting two members in front of him stood up, turned around and addressed him directly. Although both speakers turned their back on the Chair, he claims they were not ruled out of order or required to turn and face forward.
O'Shea's affidavit is of little probative value to the facts and circumstances of this case. As O'Shea notes, his knowledge was of UPS meetings and not Ryder/Jacobs meetings. O'Shea's anecdotal recollections of the practices at UPS meetings are not probative of the practices at Ryder/Jacobs meetings or general Union meetings. Moreover, O'Shea does not indicate whether the two individuals who addressed him were recognized by the Chair or whether they were simply engaged in a personal interchange. Therefore, George has not proffered any materially probative evidence in support of his claim of disparate treatment.
Finally, George claims that even if he was required to address the Chair, Feaster did not follow the appropriate Rules of Order in adjourning the meeting. A motion to adjourn cannot be made when a member has the floor. See Rule 22, supra. Instead, a point of order must be called, enabling the speaker to appeal the Chair's decision to the membership. See Rules 9 & 11, supra. However, as discussed above, George did not properly have the floor because of his refusal to address the Chair. A member speaking out of order may be interrupted and the meeting adjourned without a violation of § 101(a)(2) even if the adjournment was procedurally improper. See Scovile v. Watson, 338 F.2d 678, 680-81 (7th Cir.1964), cert. denied, 380 U.S. 963, 85 S. Ct. 1107, 14 L. Ed. 2d 154 (1965); cf. Finch v. Vernon, 877 F.2d 1497, 1507 (11th Cir.1989) (adjournment of City Council meeting while plaintiff was speaking because meeting had lost all semblance *333 of order did not violate his First Amendment rights).
In addition to the problems with plaintiff's argument addressed above, it appears that he did not appeal his challenge to the adjournment of the February 19, 1989 meeting under the Union's internal procedures. Even if the adjournment was defective, therefore, plaintiff has not shown that he properly exhausted his administrative remedies.
Finally, plaintiff has failed in any event to proffer competent evidence supporting his allegation of a "campaign to silence [him] and to punish him for his dissident views." Second Amended Complaint ¶ 26. Even assuming plaintiff's version of the February 19, 1989 meeting, the challenged behavior is, at worst, episodic and not systematic. George's claim is that defendants engaged in an entire "pattern of conduct," Plaintiff's Mem., at 5, but the only evidence arguably sufficient to survive defendants' motion is of a single "back-turning" incident. Plaintiff fails to offer material evidence creating a genuine issue of fact on his claim that the Union systematically suppressed or punished him for his speech.
Because Feaster was within the scope of his authority when he adjourned the February 19, 1989 meeting and George has failed to proffer any materially probative evidence in support of his claim that Feaster applied the Rules of Order in a discriminatory manner, defendants' motion for summary judgment with respect to George's First Amendment claim will be granted.[3]
II.
In his third amended complaint, George largely repeats the allegations of his original complaint. Relitigation of these claims is barred by the June 28, 1990 Memorandum and Order, which granted defendants' motion for summary judgment on these counts. However, George also includes several additional allegations of events occurring after he filed the original complaint. He claims that the Union improperly issued him a withdrawal card and then manipulated the referral hall rules to prevent him from gaining Union employment and thus from regaining active membership in the Union.
At all relevant times, George was employed by Ryder/Jacobs. The Union and Ryder/Jacobs were parties to a series of collective bargaining agreements, the most recent of which expired in 1985. Thereafter, the Union and Ryder/Jacobs negotiated until at least October 1988, when the events giving rise to this litigation occurred.
In response to charges filed by George, the National Labor Relations Board ruled on April 30, 1990, that Ryder/Jacobs lawfully refused to bargain with the Union because it had a good faith belief that the Union no longer represented a majority of the Ryder/Jacobs employees. See Defendants' Motion, Attachment 2. Subsequently, on June 26, 1990, the National Labor Relations Board, dismissing a second charge filed by George, reacknowledged this determination. See id., Attachment 12.
On February 14, 1991, the Union advised employees of Ryder/Jacobs that the National Labor Relations Board had found that the company no longer was required to bargain with the Union and that, given the Union's lack of representational rights, it was necessary to issue withdrawal cards six months after the members had become unemployed in the Union's jurisdiction. The letter further stated that to be eligible for a withdrawal card a member had to be current in his *334 dues. See id., Attachment 14. Since George was the only member current in his dues, he was sent a withdrawal card with the February 14 letter. See id., Attachment 14. The remaining Ryder/Jacobs employees were suspended.
On February 22, 1991, George returned his withdrawal card to the Union with his dues for March and April. See id., Attachment 17. Both the card and dues were returned to him. See id., Attachment 18. George repeated this exercise on March 8, 1991, March 12, 1991, and again on April 27, 1991. See id., Attachments 22, 24, 33. Each time the Union returned the withdrawal card and the dues to him. See id., Attachment 23, 28. In response to George's final request, Feaster sent George a letter notifying him that his withdrawal card should have been effective earlier, and enclosed a revised withdrawal card. See id., Attachment 1.
Meanwhile, George appealed the decision to issue him a withdrawal card to Joint Council No. 55 on February 21, 1991. At George's request, the Joint Council transferred the appeal to the International Teamsters Union (the "International Union") without a hearing, but the International Union remanded the case with instructions that the Joint Council hold an expeditious hearing. See id., Attachments 16, 20, 26 & 27. The Joint Council conducted a hearing on May 7, 1991, and issued its decision on June 10, 1991. See id., Attachment 15. Based on the panel's determination "that Local Union # 639 did not have a valid or enforceable Labor Agreement with Ryder/Jacobs," it unanimously concluded that the Union "was within [its] rights when [it] issued an Honorable Withdrawal Card to Daniel George on February 14, 1991." Id., Attachment 36.
George appealed the Joint Council's decision to the International Union on June 23, 1991. On November 5, 1991, the International Union affirmed the decision of the Joint Council.
George now challenges the Union's decision, as upheld by the International Union, to issue him a withdrawal card. At issue is defendants' interpretation of Article XVIII, § 6(a) of the Constitution of the International Brotherhood of Teamsters (the "Constitution"), which states in relevant part:
When a member becomes unemployed in the jurisdiction of the Local Union, he shall be issued an honorable withdrawal card upon his request. If no request is made, an honorable withdrawal card must be issued six (6) months after the month in which the member first becomes unemployed, if he is still unemployed at that time. (Emphasis added.)
The Union maintains that because it lost its right to bargain with George's employer, Ryder/Jacobs, George was no longer employed "in the jurisdiction of the Local Union." George argues that the Union's "jurisdiction" extends to all people working "at the craft" and not only to people working "at the craft" in a union workplace and, therefore, the Union did not have the authority to issue him an involuntary withdrawal card.
A union's interpretation of its constitution and rules is entitled to deference, provided that interpretation is fair and reasonable. Pignotti v. Local # 3 Sheet Metal Workers' Int'l Ass'n, 477 F.2d 825, 831 (8th Cir.1973), cert. denied, 414 U.S. 1067, 94 S. Ct. 576, 38 L. Ed. 2d 472 (1974); English v. Cunningham, 282 F.2d 848, 850 (D.C.Cir. 1960). In this case the unanimous conclusion of the Joint Council was that the issuance of the withdrawal card to George was proper because the Union "did not have a valid or enforceable Labor Agreement with Ryder/Jacobs." In other words, the Council, and then the International Union, accepted the Union's argument that George ceased to be "employed in the jurisdiction of the Local Union" when his employer no longer had a contract with the Union.
The parties' dispute presents a difficult issue on which there is scant guidance in legal authority. Article II, § 1(a) of the Constitution defines "jurisdiction" by listing the types of employment capable of being organized by the Union, without reference to the employer or the union status of the workplace. Section 2(a) of that same Article broadly states that "[a]ny person shall be eligible for membership in th[e] organization," *335 without significant restriction.[4] Therefore, there is no language explicitly including the concept of Union representation in the meaning of the term "jurisdiction."
Nevertheless, the Union's interpretation makes some logical sense. Once an employee ceases working for a company under contract with the Union, the Union can no longer represent the employee regarding the terms and conditions of employment. Although the employee may remain in the Local Union's geographical area and may continue to work "at the craft," the employee is no longer under the Union's protective umbrella, and in this sense is no longer employed within its "jurisdiction." Put another way, the Union may have "personal jurisdiction" but not "subject matter jurisdiction" over the employment relationship.
The Union's interpretation finds some indirect support in the language of some cases. See Bright v. Schlinke, 119 L.R.R.M. (BNA) 3463, 3465 (E.D.Tex.1984) (withdrawal card relieves former employees "from the burden of union dues when they had little or no income and when the union could do nothing to save their jobs") (emphasis added); Schmutz Foundry & Machine Co., 251 N.L.R.B. 1494, 1500 (1980), enf'd, 678 F.2d 657 (6th Cir.1982) (an inactive member on withdrawal card may be restored to active status without payment of an initiation fee if he "is later employed on a job where the Union is the collective bargaining agent") (emphasis added). There is also some support for the Union's position in the practice among Teamsters local unions of issuing withdrawal cards when an employment relationship is not covered by a labor contract. See, e.g., Phillips v. Kennedy, 542 F.2d 52, 55 n. 8 (8th Cir.1976); Kehm v. Central Pa. Teamsters Pension Fund, C.A. 85-2241, 1986 WL 7644 (E.D.Pa.1986) (Defendants' Motion, Attachment 45); Harley-Davidson Transportation Co., 273 N.L.R.B. 1531, 1535 (1985); Sinclair & Valentine Co., 238 N.L.R.B. 754, 756 (1978). These cases may be of limited value here, however, because they all appear to have involved the issuance of voluntary withdrawal cards.
Although there is no directly applicable authority supporting the Union's interpretation of Article XVIII, there also appears to be none rejecting it. Plaintiff's strongest argument is that the plain language of Article XVIII requires nothing more than employment "at the craft" for full membership status. However, there is no convincing reason why the term "jurisdiction" could not encompass the deeper meaning (analogous to subject matter jurisdiction) suggested by defendants. The Joint Council and the International Union adopted such an interpretation. The cases do indicate that the purpose of a withdrawal card is to protect employees from the burden of union dues. See, e.g., Bright, 119 L.R.R.M. at 3465. On the other hand, there apparently is no case suggesting that the withdrawal card cannot have a broader function, as urged by the Union.
In light of the lack of clear authority on the question, the reasonableness of the Union's interpretation, and the obligation to defer to that reasonable interpretation, it will be adopted here. Because his employer was no longer under contract with the Union, George was not employed "in the jurisdiction of the Local Union." His withdrawal card therefore was properly issued pursuant to Article XVIII, § 6(a) of the Constitution.
Plaintiff's additional arguments in connection with the Union's issuance of the withdrawal card are without merit. George fails to establish that he was entitled to a hearing before issuance of the withdrawal card. Hearings are unnecessary where, as here, a Union makes only a ministerial or mathematical decision. Galke v. Duffy, 645 F.2d 118, 120 (2d Cir.1981). Plaintiff's challenge to the Joint Council proceeding is also unpersuasive. Plaintiff did not raise the issue of bias before the Council and therefore has waived the argument. In any event, plaintiff's claim of bias is utterly unsupported.
Finally, plaintiff has not established his entitlement to the discovery he requested during the internal Union appeals, nor has he *336 shown that such material was relevant, that it could lead to relevant material or that it would have affected the outcome of the proceedings.
Accordingly, the accompanying Order dismisses plaintiff's withdrawal card claim pursuant to Fed.R.Civ.P. 56.
III.
George's remaining claim is that the Union manipulated the rules of the referral hall to prevent George from regaining active Union membership status.[5] George's claim cannot withstand defendants' motion for summary judgment.
A union "may not apply arbitrary or invidious criteria in referring employees to jobs." International Union of Operating Eng'rs v. NLRB, 701 F.2d 504 (5th Cir.1983). Plaintiff has failed to proffer material evidence in support of such a claim. The record reveals that George began seeking referrals on February 27, 1991. Feaster then determined, and confirmed, that George was not working at Ryder/Jacobs because of an injury. On March 11, 1991, Feaster wrote that it would be irresponsible and imprudent for the Union to refer George for work while he was on worker's compensation status. George did not submit evidence of his medical availability. Nevertheless, in late March the Union referred George for employment, and George worked pursuant to that referral for a number of days in March and April.
George fails to present any evidence, or even to allege, that the Union ever acted on Feaster's statement that George should not be referred because of a known medical problem. Moreover, a decision on the Union's part to refrain from referring an employee with a medical problem would not have been arbitrary or invidious. Indeed, a referral of an employee in the face of reasonable notice of that employee's disability could potentially raise the specter of a breach of the Union's obligations. Cf. Riley v. Tokola Offshore, Inc., 626 F. Supp. 616, 619-20 (C.D.Cal.1985).
George also fails to show that the Union lacked credible evidence of George's medical disqualification from work, and George's failure to respond to discovery requests on the matter further undermines his position. Finally, George does not proffer any evidence showing a genuine issue as to any arbitrary or improper action taken by the Union in connection with use of a "preferred" list of employees.
Accordingly, the accompanying Order grants defendants' motion for summary judgment on the remaining counts.
NOTES
[1] Although there is a dispute as to how far George physically turned away from the Chair, he certainly was not "addressing the presiding officer." Robert's Rules of Order, § 7. In his pleadings George claims that he turned to enable the membership to hear his comments; however, his colloquy with Feaster at the meeting clearly demonstrates that George intended to speak to the membership, not the Chair. See George Dep. at 14, 17.
[2] Jones' deposition testimony was as follows:
Q. Can you tell me what you recall about the February 19th meeting, 1989?
* * * * * *
A. Well, it was short and sweet, seemed like. [Feaster] called the meeting to order.
* * * * * *
A. Mr. Feaster called the meeting to order, and stood up, and I don't remember how he said it. But he said due to the last meeting, we didn't get a vote, or something.
We have to get a vote, or we no longer represent. Or he either said it the other way we no longer represent you because we haven't been voted out.
I just don't remember the way, you know, the way it was put.
Q. Then what happened?
A. Right after that [George] stood up and said, you can't vote on nothing. And all hell broke loose.
Q. Did you stay for the rest of the meeting?
A. I went back in the hallway, and everybody was hollering and screaming. I heard [George] say something. And then Feaster, Mr. Feaster stood up and said, well, this meeting, as far as I am concerned is adjourned.
Q. Were you in the room itself?
A. There is a little hallway, entranceway type thing.
* * * * * *
Q. You really didn't hear much of what happened after you walked out in the hallway?
A. No.
Id. at 9-10.
[3] George also claims that the Union improperly excluded him from a meeting on February 28, 1991. George was initially issued a withdrawal card on February 14, 1991, effective February 1991. George was escorted from the meeting on February 28, 1991, despite the fact that the withdrawal card did not become effective until midnight that night. On March 6, 1991, Feaster sent George a letter notifying George that he was erroneously excluded from the February meeting and inviting him to attend the March meeting. On May 17, 1991, Feaster sent George another letter notifying him that the Union had miscalculated the appropriate date of the withdrawal card and that it should have been effective January 31, 1991. Based on this correction, George was properly excluded from the meeting in February. At any rate, his exclusion from the February meeting does not reflect a deliberate practice of denying George the right to speak at Union meetings.
[4] The first sentence of § 2(a) states in its entirety: "Any person shall be eligible to membership in this organization upon compliance with the requirements of this Constitution and the rulings of the General Executive Board."
[5] The Union operates a "referral hall" so that members and others can obtain work with unionized employers. One seeking work must call the referral hall between 5:00 a.m. and 9:00 a.m. and leave his name, telephone number, social security number and type of work sought. The Union creates a new referral list each day. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1801789/ | 618 So. 2d 537 (1993)
Avel MALDANADO
v.
The STATE of Louisiana, Through the DEPARTMENT OF TRANSPORTATION, et al.
No. 93-C-0418.
Court of Appeal of Louisiana, Fourth Circuit.
April 28, 1993.
Paul V. Cassisa, Jr., Robert A. Knight, Bernard, Cassisa, Saporito & Elliott, New Orleans, for relator, Smith & Wesson Corp.
Thomas W. Mull, Mull & Mull, Covington, for respondent, Avel Maldanado.
Before CIACCIO, WARD and LANDRIEU, JJ.
CIACCIO, Judge.
On the application of relator, Smith & Wesson Corporation, we grant certiorari in order to consider the judgment of the trial court denying relator's motion for summary judgment.
Plaintiff, Avel Maldanado, was arrested by Sergeant Walter Clement of the Louisiana State Police for speeding, driving left of center, resisting arrest by flight, driving with a suspended license and driving while intoxicated. At the time of the arrest, Sergeant Clement handcuffed Maldanado and took him to the Slidell Police Station where the handcuffs were removed. While riding to the police station, Maldanado allegedly complained the handcuffs were fastened too tightly and repeatedly asked Sergeant Clement to remove them but he refused.
Subsequently, Maldanado filed suit against Sergeant Clement, the State of Louisiana through the Department of Transportation, and the manufacturer of the handcuffs, either Smith & Wesson Corporation or Peerless Handcuff Company, alleging that he sustained bilateral carpal tunnel syndrome and nerve damage as a result of the prolonged compression of the handcuffs on his wrists and that the handcuffs were defective in design and/or unreasonably dangerous for the use intended.
Defendant, Smith & Wesson, filed a motion for summary judgment, alleging that plaintiff does not nor will ever know which company manufactured and distributed the handcuffs used by Sergeant Clement during the arrest of plaintiff, and thus there is no genuine issue of material fact as to an essential element of the claim. The trial court denied Smith & Wesson's motion for summary judgment finding that there was still an issue of material fact, "whether or not the officer was using Smith & Wesson or Peerless handcuffs." Smith & Wesson applied for writs, seeking supervisory review of that ruling.
Smith & Wesson contends that the only persons who might know the manufacturer of the handcuffs used during Maldanado's arrest are Sergeant Clement and Maldanado. It further contends that both of these witnesses have admitted under oath that *538 they do not know who manufactured the handcuffs. Sergeant Clement testified at his deposition that he had six pairs of handcuffs, some Smith & Wesson and some Peerless, but that he did not know which pair he used in the arrest of Maldanado. Smith & Wesson concludes that to allow a jury to speculate on this issue, especially when the parties involved did not possess such knowledge, would be a gross injustice to Smith & Wesson Corporation.
In support of its motion for summary judgment, Smith & Wesson relies on the case of Burrell v. Baton Rouge Securities Co., 169 So. 2d 668 (La.App. 1st Cir.1964), wherein the court stated:
The very purpose of a motion for summary judgment is to pierce behind the allegations in the petition which may set up a cause of action but upon which the plaintiff cannot produce any proof whatever in support of same.
In Burrell, supra, plaintiffs alleged that the defendant-lender, Baton Rouge Securities Co., was aware of a fraudulent scheme that was to be perpetuated on them by two other defendants, involving a sale of aluminum siding for plaintiffs' house. They alleged that in furtherance of the fraudulent scheme, the lender financed a loan and had plaintiffs execute a mortgage on their home in the amount of $2856.00. Plaintiffs, however, failed to produce by affidavit or deposition any fact in support of their allegations while the finance company, in support of its motion for summary judgment, submitted an affidavit of an attorney/notary public to the effect that plaintiffs had been fully advised of the effects of the collateral mortgage given by them before executing same.
Smith & Wesson also relies on Fontenot v. Upjohn, Co., 780 F.2d 1190, 1195 (5th Cir.1986) relative to the importance of summary judgments in the conflict of product liability litigation. There the court states:
The crucial question to the court is whether there is a "genuine issue" of fact concerning any initial element of the claim on which judgment is being sought. If the moving party can show that there is no evidence whatsoever to establish one or more essential elements of a claim on which the opposing party has the burden of proof, trial would be a fruitless exercise, baited for an inevitable result, but at a continued expense for the parties, the preemption of a trial date that might have been used for other litigants waiting impatiently in a judicial queue and a burden on the court and the taxpayer.
In the instant case, the depositions of both plaintiff and the arresting officer have been taken, interrogatories, requests for production of documents and requests for admissions have been propounded. More than three years has elapsed since plaintiff filed his suit, and through discovery he has not shown or offered proof as to who the manufacturer and distributor of the handcuffs was or which handcuffs were, in fact, used in his arrest.
In its response to relator's writ application, plaintiff relies on the case of Carroll v. Newtron, 477 So. 2d 719 (La.App. 3rd Cir.1985). In that case an alarm system malfunctioned on the night of a fire. The trial court found that there remained a factual issue as to which, if any, of the instruments incorporated into the alarm system were defective and denied the defendant instrument manufacturers' motion for summary judgment. That case is distinguishable from the present case. In Carroll v. Newtron, supra, there was no dispute as to the identity of the manufacturers of the various components but a material issue of fact as to which of the components, if any, was defective. Unlike the plaintiff in Carroll, plaintiff here has admitted his inability to prove which handcuffs were used at the time of his arrest and thus, unable to ever prove the identity of the manufacturer.
A motion for summary judgment should be granted only if the pleadings, depositions, answers to interrogatories, admissions and affidavits, if any, show there is no genuine issue as to material fact, and that the mover is entitled to judgment as a matter of law. C.C.P. art. 966.
The evidence submitted to the trial court on Smith & Wesson's motion for summary *539 judgment clearly indicates that the identity of the manufacturer of the handcuffs used in the arrest of plaintiff has not and cannot be determined. As it is plaintiff's burden to prove every element of his case, including the identity of the manufacturer of the handcuffs, and in light of his admission that he cannot identify the handcuffs used or the identity of its manufacturer, the trial court erred in not granting relator's motion for summary judgment.
For the above reasons, the judgment of the trial court denying relator's motion for summary judgment is reversed. Summary judgment in favor of Smith & Wesson Corporation is hereby granted, dismissing plaintiff's claims against it.
REVERSED AND REMANDED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4216107/ | COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-17-00260-CV
STEPHEN HARMON APPELLANT
V.
WEATHERFORD INDEPENDENT APPELLEES
SCHOOL DISTRICT, PARKER
COUNTY, PARKER COUNTY
EMERGENCY SERVICES
DISTRICT # 06, PARKER COUNTY
HOSPITAL DISTRICT, AND
WEATHERFORD JUNIOR
COLLEGE DISTRICT
------------
FROM THE 43RD DISTRICT COURT OF PARKER COUNTY
TRIAL COURT NO. CV16-1584
------------
MEMORANDUM OPINION1 AND JUDGMENT
------------
1
See Tex. R. App. P. 47.4.
We have considered appellant’s “Motion to Voluntarily Withdraw/Dismiss
Appeal.” It is the court’s opinion that the motion should be granted; therefore, we
dismiss the appeal. See Tex. R. App. P. 42.1(a)(1), 43.2(f).
PER CURIAM
PANEL: WALKER, MEIER, and GABRIEL, JJ.
DELIVERED: October 26, 2017
2 | 01-03-2023 | 10-31-2017 |
https://www.courtlistener.com/api/rest/v3/opinions/1029546/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-6600
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
BENJAMIN SANJURJO,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Richard L. Williams, Senior
District Judge. (3:98-cr-00338-RLW-2)
Submitted: July 23, 2009 Decided: July 30, 2009
Before WILKINSON and AGEE, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Benjamin Sanjurjo, Appellant Pro Se. Stephen Wiley Miller,
Assistant United States Attorney, Richmond, Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Benjamin Sanjurjo appeals the district court’s order
denying his U.S.C. § 3582(c)(2) (2006) motion for a reduction of
sentence. We have reviewed the record and find no reversible
error. Accordingly, we affirm for the reasons stated by the
district court. United States v. Sanjurjo, No. 3:98-cr-00338-
RLW-2 (E.D. Va. Mar. 12, 2009). We dispense with oral argument
because the facts and legal contentions are adequately presented
in the materials before the court and argument would not aid the
decisional process.
AFFIRMED
2 | 01-03-2023 | 07-05-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/327185/ | 515 F.2d 295
75-1 USTC P 9379
UNITED STATES of America, Plaintiff-Appellant,v.S. Steve SOURAPAS and Crest Beverage Company, Defendants-Appellees.
No. 74-2565.
United States Court of Appeals,Ninth Circuit.
March 27, 1975.As Corrected on Denial of Rehearing and Rehearing En BancJune 3, 1975.
David P. Curnow, Asst. U. S. Atty., San Diego, Cal. (argued), for plaintiff-appellant.
James S. Marinos, San Diego, Cal. (argued), for defendants-appellees.
OPINION
Before CHAMBERS, Chief Judge, VAN OOSTERHOUT,* Circuit Judge, and EAST,** District Judge.
VAN OOSTERHOUT, Circuit Judge:
1
An indictment was returned by the grand jury against Crest Beverage Company (Crest) and S. Steve Sourapas, president of Crest, charging both with attempted income tax evasion and subscribing to false income tax returns. Motion by both of the defendants was filed June 25, 1974, to suppress evidence obtained by Special Agent Saetta derived from examination of defendants' records during the period from November 10 to November 14, 1969 and for the return of any property seized.1 Such motion, after a hearing, was sustained by the trial court on September 2, 1974, solely upon the ground that the special revenue agent had failed to comply with IR-897 publicized by a press release on October 3, 1967, as amended by IR-949 publicized by a press release on November 26, 1968.2 The Government has appealed from such order pursuant to 18 U.S.C. § 3731.
2
The three grounds urged by the defendants in support of their motion to suppress are:
3
1. The records were obtained by fraud, trick and deceit.
4
2. The November 10 examination violated the re-audit provisions of the IRC.
5
3. The November examination was in violation of IRS publicized regulations.
6
The court filed no memorandum opinion or detailed findings of fact but his views are expressed in statements incorporated in the record. The prosecuting attorney, before closing his evidence, made the following inquiry: "But I do have two other witnesses that I would like to call, but I think I might shortcut that if I can determine * * * if the Court's concern is anything other than the press release and regulations procedure which were set up by the IRS." The court responded, "No; that's my concern, and if your other witnesses would just reiterate that in any way, they're not necessary."
7
During the course of the argument the following colloquy took place between the prosecutor and the court:
8
"THE COURT: Let me tell you, Mr. Curnow, the third is the only one I'm interested in.
9
MR. CURNOW: All right, your Honor, and I'm trying to get my record straightened out because I have a feeling as to what may happen.
10
I take it, then, the Court would make a finding that there was no fraud and deceit as that is set forth in the first point in the defense
11
THE COURT: That is my inclination at this time.
12
MR. CURNOW: And I would also take it that the Court may also find there was no violation of reaudit procedures.
13
THE COURT: That's my inclination, but I'm very troubled by the third problem.
14
MR. CURNOW: Your Honor, I hope that the Court's remarks are addressed specifically to the ruling that they failed to comply with the regulation.
15
THE COURT: Oh, surely, absolutely, absolutely, no other way, . . . "
16
The Court's findings on grounds 1 and 2 of the motion are supported by substantial evidence and are not clearly erroneous. Thus, the dispositive issue is whether Special Agent Saetta failed to substantially comply with the publicized IRS procedures and if so, whether the evidence suppressed was wrongfully obtained as to Sourapas and as to Crest.
17
Other revenue agents who made the September examination of Sourapas' and Crest's records referred to in footnote 1 filed an information report which was received by the Los Angeles Intelligence Division. A preliminary criminal investigation was authorized on October 9, 1969. Special Agent Saetta was assigned to make the criminal investigations of Crest and Sourapas. Saetta on November 10 met Sourapas, president and principal owner of Crest, in Crest's office and obtained permission to examine Crest records. The agent introduced himself as a special agent and presented his credentials and advised Sourapas that the function of a special agent was to investigate alleged violations of internal revenue laws, but apparently did not specifically advise that he was there to make a criminal investigation. There is some dispute as to the precise warning that was given. Our examination of the record satisfies us that Saetta did not substantially comply with the publicized IRS regulations heretofore referred to.
18
We will discuss separately the effect of such non-compliance upon the validity of the suppression order as to Sourapas and Crest.
19
We shall first consider the situation with respect to Sourapas. The trial court as a basis for suppressing the evidence relied upon United States v. Leahey, 434 F.2d 7 (1st Cir. 1970) and United States v. Heffner, 420 F.2d 809 (4th Cir. 1969). Said cases point out that an individual has fifth amendment protection against self-incrimination. They acknowledge that the warning required by the IRS regulations where the individual is not taken into custody goes beyond the requirements of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), but hold that the IRS is bound by its own regulations under the facts presented in such cases. The reasoning of the cases just cited supports the trial court's determination upon the record before us, that any information obtained from Sourapas' personal records or answers to questions should be suppressed by reason of Saetta's failure to comply with the regulations. For a good exposition of a contrary result, see United States v. Fukushima, 373 F.Supp. 212 (D.Hawaii 1974).
20
The trial court expressed doubt whether the record reflected any personal records of Sourapas were seized or examined but ordered the suppression and return of any papers or evidence that might have been seized. Saetta testified his examination was confined strictly to corporate records and that he made no investigation of Sourapas' personal records.
21
Neither the motion to suppress nor the order specifically describe any personal records that may have been wrongfully examined. At the criminal trial, in the event the Government offers any personal papers, records or statements, Sourapas can raise the issue that such evidence was wrongfully obtained or seized, or the fruit of the poisoned tree, and can obtain appropriate relief. For reasons hereinafter stated, the suppression order with respect to Sourapas is modified to the extent that the suppression shall not cover corporate records and as so modified, the suppression order as to Sourapas is affirmed.
22
It is firmly established that a corporation has no fifth amendment protection against self-incrimination and that neither the corporation, a corporate officer or any other person can prevent the production for examination of relevant corporate records. Bellis v. United States, 417 U.S. 85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974); United States v. White, 322 U.S. 694, 698, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944).
23
We find nothing specific in the IRS regulations stating that the self-incrimination portion of the regulations are applicable to corporations. Appellants suggest that the use of the word "taxpayer" several times during the course of the regulations requires a construction that the fifth amendment self-incrimination warning be given to a corporation. The second paragraph of footnote 2, supra, reads: "The new procedure goes beyond most legal requirements that are designed to advise persons of their rights." In the third paragraph the taxpayer is described as "he" and "him" and at other places throughout the regulations the personal pronoun is used to describe the taxpayer.
24
An interpretation of the regulation which would require the agent to advise a corporation that it has a right not to incriminate itself would require the agent to state an erroneous view of the law. We believe that a reasonable interpretation of the regulation is that it applies only to individual taxpayers and not to corporations.
25
Individual and not corporate records were involved in Leahey and Heffner, supra. Consequently, such cases lend no support to the suppression of the corporate records. It would be unreasonable to interpret the regulations to pertain to the examination of corporate records in light of the clearly established law that a corporation or officer thereof has no constitutional right to withhold corporate records which might incriminate. In United States v. Habig, 474 F.2d 57 (7th Cir. 1973), Miranda warnings were not given by the special agent who obtained an officer's consent to examine the corporate records. The court recognized that the corporation had fourth amendment protection against unlawful search and seizure under appropriate circumstances. The court held that no fifth amendment rights were violated by obtaining the officer's consent to examine the corporate records absent Miranda warnings. The court held:
26
"In the case before us there was no theft of corporate records nor any other form of trespass on corporate property. The fact that a criminal investigation has been started was concealed from the defendants for a period of time did not make involuntary the otherwise voluntary consent of Schroering to inspection of the corporate records. Schroering was aware of Lawrence's identity as an Internal Revenue agent, and Schroering had no constitutional privilege to refuse the production of corporate records when Lawrence so requested, provided the records requested were relevant to tax matters under investigation. It was his duty to make the records available regardless of whether the investigation had shifted from a civil to a criminal emphasis or whether he might himself be incriminated. Wilson v. United States, supra; see Curcio v. United States, supra; United States v. Sclafani, 265 F.2d 408, 415 (2d Cir.), cert. denied, 360 U.S. 918, 79 S.Ct. 1436, 3 L.Ed.2d 1534 (1959). The same is true with respect to Habig. It is irrelevant that no summons, subpoena, or search warrant was used. If production of the records had been refused, the agents could have obtained them by summons under 26 U.S.C. §§ 7602, 7604. The fact that the agents did not resort to this measure does not mitigate against the consensual production of the records. Greene v. United States, 296 F.2d 841, 843 (2d Cir., 1961)." 474 F.2d at 62.
27
We agree with such holding and determine that the trial court erred in suppressing the corporate records and any information obtained therefrom.
28
Moreover, the earlier examination by the revenue agents referred to in footnote 1 might well constitute an independent source for a subsequent subpoena to produce the corporate records. See Standard Oil Co. v. State of Iowa, 408 F.2d 1171, 1176-77 (8th Cir. 1969).
29
Both individual and corporate taxpayers are entitled to fair treatment by the Internal Revenue Service. Since there are no implications of self-incrimination present where a corporate taxpayer is involved, the suppression order is a harsh weapon to use in the exercise of supervisory authority. In the corporate situation presented here, in event the agent has in fact violated any of the IRS self-imposed regulations, the agency's own disciplinary procedures should be sufficient to protect corporations which come under investigation.
30
The judgment suppressing any evidence that might have been obtained by Agent Saetta from the personal records or statements of Sourapas during the November examination is affirmed except that it is modified to exclude the suppression of corporate records of Crest. The question of whether any evidence offered at the criminal trial is the fruit of the poisoned tree flowing from an examination of Sourapas' individual records is left for determination by the trial court when and if such evidence is presented.
31
The judgment suppressing the corporate records of Crest and any information obtained therefrom is reversed.
32
Modified and affirmed as to Sourapas. Reversed as to Crest.
ORDER ON PETITION FOR REHEARING
PER CURIAM:
33
The motion of the government to correct the opinion herein reported as --- F.2d --- (9th Cir. 1975), is granted. In the opinion the term "Revenue Agent" is used. We think a "Special Agent" is generically within the term "Revenue Agent." But it should now be understood that "Revenue Agent," as it appears in the opinion means "Special Agent." The government feels this is important.
34
The petition of the appellees for a rehearing in banc is first treated as a petition for a rehearing by the panel. As such, the petition is denied by the panel.
35
Secondly, the petition of the appellees for a rehearing is treated as a suggestion for a rehearing in banc.
36
The panel has advised the court in banc (Circuit Judge Wallace not participating) of the panel's vote. No circuit judge has requested a rehearing in banc. Therefore, the suggestion for a rehearing en banc is denied.
*
The Honorable Martin D. Van Oosterhout, Senior Circuit Judge, Eighth Circuit, sitting by designation
**
The Honorable William G. East, Senior District Judge, Oregon, sitting by designation
1
A prior motion filed on April 3, 1974, to suppress fruits of an examination of taxpayers' records by revenue agents on September 4 and 5, 1969, was denied on June 5, 1974, and motion to reconsider said ruling was denied on July 2, 1974. The validity of such rulings is not before us on this appeal
2
The press release covering IR-949, November 26, 1968, reads:
Washington, D. C. Change in the procedure for advising taxpayers of their rights during an investigation conducted by a Special Agent of the IRS Intelligence Division were announced today by the Internal Revenue Service.
The new procedure goes beyond most legal requirements that are designed to advise persons of their rights.
One function of a Special Agent is to investigate possible criminal violations of Internal Revenue laws. At the initial meeting with a taxpayer, a Special Agent is now required to identify himself, describe his function, and advise the taxpayer that anything he says may be used against him. The Special Agent will also tell the taxpayer that he cannot be compelled to incriminate himself by answering any questions or producing any documents, and that he has the right to seek the assistance of an attorney before responding.
Previously, the Special Agent identified himself and described his function at the first meeting with the taxpayer but was not required to give further advice unless the taxpayer was in custody or the investigation proceeded beyond the preliminary stage.
IRS has made no change in its existing instructions that if it becomes necessary to interview a person who is in custody, an Agent must give a comprehensive statement of rights before any interrogation. This statement warns the person in custody that he may remain silent and that anything he says may be used against him.
A person in custody also must be told that he has the right to consult or have present his own counsel before making a statement or answering any questions, and that if he cannot afford counsel he can have one appointed by the U. S. Commissioner. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/2232842/ | 681 N.E.2d 1049 (1997)
288 Ill. App.3d 1080
224 Ill.Dec. 428
ARCH OF ILLINOIS, INC., Plaintiff-Appellant,
v.
S.K. GEORGE PAINTING CONTRACTORS, INC., Defendant and Third-Party Plaintiff-Appellee (The Sherwin-Williams Company, Third-Party Defendant-Appellee).
No. 5-96-0499.
Appellate Court of Illinois, Fifth District.
June 13, 1997.
*1050 James W. Morris, Patricia A. Hoke, Barrett, Twomey, Morris, Broom & Hughes, Carbondale, for Plaintiff-Appellant.
Edward S. Bott, Jr., D. Kimberly Brown, Thompson Coburn, Belleville, for Appellee.
Justice MAAG delivered the opinion of the court:
The plaintiff, Arch of Illinois, Inc. ("Arch"), entered into a contract with S.K. George Painting Contractors, Inc. ("S.K. George"), whereby S.K. George was to apply one coat of primer and one coat of enamel to Arch's preparation plant in Percy, Illinois. The total amount of the contract was $59,000.
After the new paint allegedly started peeling off the surface of the plant, Arch filed suit against S.K. George in Perry County Circuit Court for breach of contract.
S.K. George then filed a third-party complaint against The Sherwin-Williams Company ("Sherwin-Williams") for breach of the implied warranties of fitness for a particular purpose and merchantability, alleging that it had supplied defective paint. Sherwin-Williams subsequently filed a counterclaim against S.K. George, alleging negligence and improper application of the paint by S.K. George. Later, Arch amended its complaint to add Sherwin-Williams as a direct defendant.
During discovery, Arch disclosed the amount of its claimed damages, based upon three bids for the cost of repair. The bids ranged from $120,000 to $248,000 to sandblast the peeling paint, prime the surface, and repaint the preparation plant.
In April 1996, Sherwin-Williams filed a motion in limine to preclude Arch from presenting evidence at trial of the cost to repair. The circuit court granted the motion but certified the following question for our review: "Should evidence of the cost to repair damages be excluded by a motion in limine in an industrial breach of contract case?" Pursuant to Supreme Court Rule 308 (155 Ill.2d R. 308), we allowed the appeal.
Specifically, Arch contends:
1. A motion in limine may not be granted if it would exclude relevant evidence;
2. The cost of repair is relevant evidence in an industrial construction breach of contract case; and
3. A jury must determine both the amount of damages and the method which should be used to measure those damages.
S.K. George did not file a brief on appeal.
It is well settled in Illinois that the measure of damages for a breach of contract when a builder has provided less than full performance or has provided defective performance is generally the cost of correcting the defective condition. Park v. Sohn, 89 Ill.2d 453, 464, 60 Ill.Dec. 609, 615, 433 N.E.2d 651, 657 (1982). However, two exceptions exist. First, if the defects can only be corrected at a cost unreasonably disproportionate to the benefit to the purchaser, or *1051 second, if correcting the defects would entail an unreasonable destruction of the builder's work, then the measure of damages is the amount by which the defects have reduced the value of the property as a whole. Park, 89 Ill.2d at 464, 60 Ill.Dec. at 615, 433 N.E.2d at 657; Wells v. Minor, 219 Ill.App.3d 32, 40, 161 Ill.Dec. 691, 697, 578 N.E.2d 1337, 1343 (1991); Brewer v. Custom Builders Corp., 42 Ill.App.3d 668, 674, 1 Ill.Dec. 377, 382, 356 N.E.2d 565, 570 (1976).
The determination of which measure of damages to apply is usually a question for the jury. The jury should be permitted to hear evidence on both the cost of repairs and the diminution in value. Wells, 219 Ill. App.3d at 40-41, 161 Ill.Dec. at 697, 578 N.E.2d at 1343. Then, the jury should be instructed that the usual measure of damages is the cost of correcting the defects and that the diminution-in-value method applies only if it finds that one of the two exceptions exists. Wells, 219 Ill.App.3d at 41, 161 Ill. Dec. at 697, 578 N.E.2d at 1343.
The defendant argues that diminution of value is the proper method to measure damages here because (1) the plaintiff's estimates to sandblast and repaint the plant are unreasonably disproportionate to the "price of the original contract", and (2) correcting the defects will necessarily involve destroying all of the original paint work. The defendant's argument is misplaced.
First, the defendant would have us compare the cost of correcting the defects to the original contract price. This is not the law. The test calls for the use of the diminution-in-value standard if the cost to correct the defects is unreasonably disproportionate in relation to the benefit to the purchaser. This does not require a comparison to the original contract price, although that figure may be relevant in determining the benefit received by the purchaser.
Second, the defendant suggests that because sandblasting and repainting the plant would entail destroying all of the original work, the diminution-in-value method is proper. We disagree.
Only when correcting the defects would involve the "unreasonable destruction" of a contractor's work will the diminution-in-value standard apply. It is not merely the destruction of the original work that must be considered. Rather, it is unreasonable destruction. Under the defendant's position, the cost-of-repairs method could never be used if the contractor's work was substantially or entirely defective because correcting the defects would almost always entail redoing the faulty, original work.
The correct construction of the rule requires the application of the diminution-in-value method when correcting the defective work would result not only in discarding the defective work but also in destroying, for example, those portions of a building which were largely free of defects.
In J-M Builders & Supplies Corp. v. McIntyre, 56 Ill.App.3d 714, 14 Ill.Dec. 409, 372 N.E.2d 420 (1978), the court was faced with a similar question involving the defective installation of siding on a building. The contractor in that case argued that because correction of the alleged siding defects would necessarily involve the destruction of all of the original siding work performed, the measure of damages should have been the diminution in value of the property. McIntyre, 56 Ill.App.3d at 716, 14 Ill.Dec. at 410, 372 N.E.2d at 421. The court disagreed, stating:
"The correction of the defects here will not involve an unreasonable destruction of plaintiff's work as the record reflects that the necessary corrections could only be made if the siding installed by the plaintiff was removed." McIntyre, 56 Ill.App.3d at 716, 14 Ill.Dec. at 411, 372 N.E.2d at 422.
The same logic applies here. If a paint job is substantially or completely defective and peeling, then completely undoing the faulty work so that the structure can be repainted does not amount to unreasonable destruction of the contractor's work.
We conclude that the circuit court erred in granting the defendant's motion in limine with regard to evidence of the cost of repairs. We express no opinion on whether the facts justify damages for cost of repairs or diminution in value. That is a question for the jury to decide after hearing the evidence and applying the law to the facts.
*1052 The order of the circuit court granting the motion in limine is hereby reversed, and the case is remanded the to the circuit court for further proceedings consistent with this order.
Reversed and remanded.
KUEHN, P.J., and HOPKINS, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1602738/ | 577 So.2d 1037 (1991)
STATE of Louisiana and Aetna Casualty and Surety Co.
v.
UNITED STATES FIDELITY AND GUARANTY COMPANY, et al.
No. 90-CA-1437.
Court of Appeal of Louisiana, Fourth Circuit.
March 28, 1991.
Writ Denied June 14, 1991.
Adams & Reese, Thomas J. Wyllie, Robert E. Couhig, Jr., F. Lee Butler, Donald C. Massey, New Orleans, for plaintiff-appellant Aetna Cas. and Sur. Co.
Michael K. Fitzpatrick, Nancy L. Cromartie, Porteous, Hainkel, Johnson & Sarpy, New Orleans, for defendants-appellees U.S.
*1038 Fidelity and Guar. Co. and Thrasher Waterproofing Corp.
Dermot S. McGlinchey, Paul M. Batiza, Arthur H. Leith, McGlinchey, Stafford, Cellini & Lang, New Orleans, for defendantsappellees Carriere-Stumm, Inc. and Ins. Co. of North America.
W.P. Wray, Jr., Chris P. Pierce, Wray & Kracht, Baton Rouge, for Louisiana Associated General Contractors, Inc.
Before KLEES, CIACCIO and LOBRANO, JJ.
KLEES, Judge.
Plaintiff, Aetna Casualty and Surety Company (Aetna), appeals the granting of a partial summary judgment in favor of defendants Carrier-Stumm, Inc. (Carrier), Insurance Company of North America (I.N. A.), Thrasher Waterproofing Corporation (Thrasher), and United States Fidelity and Guaranty Company (USF & G). After reviewing the facts and the law, we affirm.
On November 12, 1987, plaintiff, State of Louisiana, contracted with Thrasher to perform certain work on the Cabildo. Thrasher in turn subcontracted some of the work to Carrier, who in turn sub-subcontracted with Precision Sheet Metal to do certain work. On May 11, 1988, prior to completion of the work, a fire broke out at the Cabildo. Plaintiff, State of Louisiana, filed suit to recover for damages caused by the fire, claiming that the fire was caused by the work performed by the defendants. Aetna provided insurance to the State and made payments to the State for these damages and then commenced this action in subrogation against defendants alleging their negligence caused the fire. Defendants filed a motion for partial summary judgment alleging that the claims of Aetna had been waived according to the terms of the contract between Thrasher and the State. The trial court granted a partial summary judgment finding that the contract between the State and Thrasher contains an express waiver provision thereby waiving any rights Aetna may have had as the State's subrogated insurer. Plaintiff appeals claiming that the waiver provision in the contract does not apply in this situation because the insurance policy under which damages were paid was not obtained pursuant to the contract and because the waiver does not apply to "non-work" property.
The contract between the State of Louisiana and Thrasher expressly incorporates by reference a number of documents, including AIA document A201, 1976 edition, which is published by the American Institute of Architects. Article 11 of the document deals with insurance arrangements necessary for the construction job. Article 11.3.6 of these General Conditions provides as follows:
11.3.6The owner and contractor waive all rights against (1) each other and the Subcontractors, Sub-subcontractors, agents and employees each of the other, and (2) the Architect and separate contractors, if any, and their subcontractors, sub-subcontractors, agents and employees, for damages caused by fire or other perils to the extent covered by insurance obtained pursuant to this Paragraph 11.3 or any other property insurance applicable to the Work, except such rights as they may have to the proceeds of such insurance held by the Owner as trustee...
Article 11.3.1, which was amended by the Supplemental Conditions, specifically requires the owner to secure insurance coverage for the project and defines the type and amount of insurance the owner is obligated to provide. Aetna provided a builder's risk insurance policy to the State covering the Cabildo for the work to be performed under the contract. Aetna also furnished a fire insurance policy to the State which covered State buildings and their contents in case of fire or other risks.
Aetna claims that damages were paid under the fire policy and not obtained pursuant to article 11.3.1; therefore, the waiver did not apply and they are entitled to be subrogated against the defendant tortfeasors. However, the waiver of claims in Article 11.3.6 is based upon the insurance required by 11.3.1 or any other applicable insurance. As the trial judge stated in his *1039 reasons for judgment, the contract does not limit coverage to one policy or the other. "[T]he court finds that waiver provisions apply irrespective of whether the payments made by Aetna are made under the builders' risk policy or the fire policy." Therefore any rights that Aetna may have had as the subrogated insurer were waived.
While we find no Louisiana cases directly on point, other jurisdictions have addressed this waiver provision in contracts under similar conditions. The cases reflect a clear intention between the parties to shift the risk of loss and any other damage during construction to an insurer in an effort to avoid disputes among the parties which might cause delays in the completion of the construction. Island Villa Developers v. Bonner Roofing and Sheet Metal, 175 Ga.App. 713, 334 S.E.2d 41 (1985); Blue Cross v. McDevitt, 234 Va. 191, 360 S.E.2d 825 (1987); Steamboat Development v. Bacjac Industries, 701 P.2d 127 (Colo.App.1985); U.S.F. & G. v. Farrar, 158 Ariz. 354, 762 P.2d 641 (App.1988); Village of Rosemont v. Lentin Lumber, 144 Ill.App.3d 651, 98 Ill.Dec. 470, 494 N.E.2d 592 (1986).
Aetna further contends that the parties made modifications to the AIA General Conditions in the Supplemental Conditions to the contract which makes the waiver provisions inapplicable. However, Article 11.3.6 remains unchanged by such alterations and the alterations to Article 11.3.1 are immaterial as they only affect the type of insurance the owner was required to obtain.
A motion for summary judgment may be granted if the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to material fact, and that the mover is entitled to judgment as a matter of law. LSA-C.C.P. art. 966. We agree with the trial court that under the contract there was no genuine issue of material fact and that summary judgment was properly entered as a matter of law. The State clearly waived its claims against the defendants. Where the owner may not bring an action against the contractors or subcontractors, neither may the insurer in subrogation, since the rights of the insurer are not superior to those of the owner. Audubon Insurance Co. v. Farr, 453 So.2d 232 (La.1984) Accordingly, the trial court properly granted summary judgment and we affirm.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2594399/ | 935 F.Supp. 523 (1996)
John KAROLIS, Plaintiff,
v.
NEW JERSEY DEPARTMENT OF CORRECTIONS, et al., Defendants.
Civil Action No. 95-2241 (JEI).
United States District Court, D. New Jersey.
July 19, 1996.
*524 Jeffrey E. Fogel, Newark, NJ, for plaintiff.
Deborah T. Poritz, Attorney General of New Jersey by Andrew R. Sapolnick, Deputy Attorney General, Trenton, NJ, for defendant New Jersey Department of Corrections.
AMENDED OPINION
IRENAS, District Judge:
Plaintiff John Karolis ("Karolis"), a New Jersey prison inmate, seeks an injunction declaring that he need not submit to the Mantoux tuberculosis ("TB") test, a subcutaneous injection which plaintiff claims violates the tenets of his Christian Science faith. Because preventing the spread of TB is a compelling state interest that cannot be met by a less restrictive means, the Court finds that neither the First Amendment nor the Religious Freedom Restoration Act ("RFRA"), 42 U.S.C. § 2000bb-1, prevents prison officials from administering the Mantoux test to plaintiff.
I. PROCEDURAL HISTORY
On May 5, 1995, plaintiff sued the New Jersey Department of Corrections ("NJDC") and prison officials J. Russell Knight ("Knight"), Lance D. Meehan ("Meehan"), Robert D. Edmiston ("Edmiston"), Roland L. Hester ("Hester"), and John J. Rafferty ("Rafferty"). Citing RFRA and 42 U.S.C. § 1983, he alleged violation of his rights under the First Amendment Free Exercise Clause, the Fourteenth Amendment Due Process Clause, the New Jersey Constitution, and state regulations governing inmate discipline. Plaintiff also sought state law tort damages for negligent or intentional infliction of emotional distress.
The heart of the demanded relief is an injunction barring state prison officials from administering the Mantoux TB test and from punishing him for his refusal to submit to the test. He also sought compensatory damages, punitive damages, and reasonable attorney fees and costs. By Consent Order dated September 20, 1995, the parties agreed to dismiss the due process claims against NJDC, Edmiston and Meehan and all claims against NJDC for monetary relief.
On April 1, 1996, NJDC moved to dismiss the complaint arguing that it was entitled to Eleventh Amendment immunity. The Court denied the motion, finding that the RFRA clearly expressed a congressional intention to abrogate the states' usual Eleventh Amendment immunity from suit in federal court. Karolis v. New Jersey Department of Corrections, No. 95-2241 (D.N.J. May 6, 1996). The Court ordered the parties to submit affidavits identifying the type, invasiveness, effectiveness, expense, and ease of administration of TB testing currently used in the New Jersey prison system. The Court has received briefs and affidavits from both sides and now considers whether the case warrants summary judgment pursuant to Fed.R.Civ.P. 56.
*525 II. STATEMENT OF FACTS
The plaintiff, currently incarcerated at the Northern State Prison ("Northern State"), has been a Christian Science believer for approximately seventeen years. On May 11, 1993, while incarcerated at Southern State Correctional Facility ("Southern State"), plaintiff refused to submit to the Mantoux test, asserting that his religious beliefs opposed intrusive medical procedures. As required, Karolis signed a form titled "Refusal of Medical Treatment," and received a disciplinary charge for "refusal to cooperate in following a prescribed course of treatment." N.J.A.C. 10A:4-4.1.707. NJDC hearing officer Knight found Karolis guilty and imposed a seven day loss of privileges, despite plaintiff's assertion of his religious beliefs and his rights under N.J.A.C. 10A:16-5.1(a)(2).[1] On May 18, 1993, Karolis was summoned again for the Mantoux test, again refused and was again charged with the same prison infraction for his refusal. On June 15, 1993, NJDC hearing officer Meehan found plaintiff guilty and imposed another seven days loss of privileges.
Karolis appealed both hearing officer decisions to Edmiston, the Southern State Superintendent, citing his religious convictions and N.J.A.C. 10A:16.5.1(a)(2). Hester, Southern State's Assistant Superintendent, who was serving as Edmiston's designate, upheld the disciplinary charges. Plaintiff then appealed to Rafferty, Deputy Director of the Division of Operations of the Department of Corrections, who also upheld the hearing officer decisions and stated that inmates who refuse to submit themselves to the TB test "must be charged with .707 `refusal to cooperate in following a prescribed course of treatment.'" DOC Control Policy at III.B.2.(c).(2).
Plaintiff asserts that he was threatened with solitary confinement, administrative segregation, and loss of commutation time if he again refused the Mantoux test. Apparently succumbing to this threat, plaintiff agreed to the test, which found no evidence of TB.
On March 15, 1995, after plaintiff's transfer to Northern State, he was again asked to submit to the Mantoux test. Plaintiff again refused and was again threatened with solitary confinement and administrative segregation to induce compliance. The record does not indicate whether plaintiff took a TB test in 1995, but he filed this complaint on May 5, 1995.
Under current NJCD policy the Mantoux test is administered annually. Lavietes Aff. at ¶ 3. If a person tests positive or exhibits symptoms of TB (e.g. chronic cough, weight loss, hemoptysis[2]), prison medical personnel will administer a chest x-ray.[3] Lavietes Aff. at ¶ 4. An abnormal chest x-ray may be sufficient for a diagnosis of TB, or it may be confirmed by a sputum culture (saliva specimen) or a urine test. Id. All inmates with a positive Mantoux test and an abnormal chest x-ray are admitted to the St. Francis Medical Center and immediately placed in isolation. DOC Control Policy at III.B.1.(e).[4]
An inmate refusing medical treatment will be directly admitted to any facility which can provide respiratory isolation.[5]Id. This procedure is mandated under Chapter II of the State Sanitary Code. N.J.A.C. 8:57-1.1 to 1.12. If an inmate tests positive on the Mantoux test without a diagnosis of TB, the prison considers preventative therapy with *526 isoniazid. Lavietes Aff. at ¶ 6. The prison does not administer isoniazid therapy to all inmates because it can cause liver dysfunction in older individuals. Id. Inmates who refuse the Mantoux test are charged with a disciplinary infraction. DOC Control Policy at III.B.2.(c).(2). There is no requirement that inmates with a positive reaction submit to preventative isoniazid therapy, nor is there a provision for charges or punishment for refusing to accept the medication. See DOC Control Policy at III.B.1.(d).
Plaintiff argues that there are other, less intrusive, procedures to effectively test for TB which do not violate the tenets of his religion. Plaintiff claims that some or all of the defendants are aware that alternatives exist and have failed to make any effort to accommodate his religious beliefs.
III. DISCUSSION
A. The Religious Freedom Restoration Act
Plaintiff seeks an Order pursuant to RFRA prohibiting defendants from punishing him because he refuses, on religious grounds, to submit to the Mantoux TB test. RFRA was adopted in 1993 in response to the Supreme Court's decision in Employment Division v. Smith, 494 U.S. 872, 110 S.Ct. 1595, 108 L.Ed.2d 876 (1990), which altered the standard of review applied to cases where government activities burdened religious exercise. RFRA was passed to reinstate the compelling interest test for "striking sensible balances between religious liberty and competing prior governmental interest." 42 U.S.C. § 2000bb(a)(5). Section 2000bb-1(c) of RFRA provides that a "person whose religious exercise has been burdened in violation of this section may assert that violation as a claim or defense in a judicial proceeding and obtain appropriate relief against a government." 42 U.S.C. § 2000bb-1(c). RFRA goes on to define "government" as a "branch, department, agency, instrumentality, and official (or other person acting under color of law) of the United States, a State, or a subdivision of a State." 42 U.S.C. § 2000bb-2(1).
RFRA provides in pertinent part that a government shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability. 42 U.S.C. § 2000bb-1(a). However, a government may substantially burden a person's exercise of religion if it demonstrates that application of the burden to the person is: (1) in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest. 42 U.S.C. § 2000bb-1(b).
B. Substantial Burden
A plaintiff alleging a violation of RFRA must demonstrate that his right to the free exercise of religion has been substantially burdened. 42 U.S.C. § 2000bb-1(a). Here, plaintiff claims that the tenets of Christian Science forbid intrusive medical procedures. Christian Science believes in healing through prayer rather than conventional medical care. Janna C. Merrick, Christian Science healing of Minor Children: Spiritual Exemption Statutes, and Fair Notice, Issues in Law & Medicine, Dec. 22, 1994, at 2. It believes that even medicine's diagnostic tools undermine the authority of the Church. Larry May, Challenging Medical Authority: The Refusal of Treatment by Christian Scientists, 25 Hastings Center Report 1 (1995). According to the plaintiff, the Mantoux test is clearly an "intrusive medical procedure" which substantially burdens his religious beliefs.
The Supreme Court has decided that a substantial burden exists where the state "put[s] substantial pressure on an adherent to modify his behavior and to violate his beliefs." Thomas v. Review Bd. of the Indiana Employment Sec. Div., 450 U.S. 707, 718, 101 S.Ct. 1425, 1432, 67 L.Ed.2d 624 (1981); see Sherbert v. Verner, 374 U.S. 398, 404, 83 S.Ct. 1790, 1794, 10 L.Ed.2d 965 (1963) (finding substantial burden where individual is forced to "choose between following the precepts of her religion and forfeiting benefits, on the one hand, and abandoning one of the precepts of her religion ..., on the other hand.") Here the State offers plaintiff the choice of either submitting to the Mantoux *527 test or suffering solitary confinement, administrative segregation, and loss of commutation time. This is precisely the type of choice which Thomas defines as creating a substantial burden on plaintiff's First Amendment free exercise rights.
C. Compelling State Interest
Although plaintiff has demonstrated a substantial burden on his free exercise rights, this showing, standing alone, does not establish a RFRA violation. Any burden which furthers a compelling state interest and is the least restrictive means of furthering that interest will pass constitutional muster. Thus, the Court must determine whether New Jersey has a compelling state interest in administering the Mantoux Test to protect against the spread of TB in its prison system. We are convinced that it does.
A state has a strong interest in responding to the threat of any contagious disease by diagnosing and treating its inmates. Boreland v. Superintendent Vaughn, No. CIV.A. 92-0172, 1993 WL 62707, at *3 9306 (E.D.Pa. March 3, 1993); accord Dunn v. White, 880 F.2d 1188, 1195 (10th Cir.1989), cert. denied, 493 U.S. 1059, 110 S.Ct. 871, 107 L.Ed.2d 954 (1990). In fact, prison officials have an affirmative duty to protect inmates from infectious disease. Jolly v. Coughlin, 76 F.3d 468 (2nd Cir.1996). The Third Circuit Court of Appeals has even allowed prisoners a cause of action for mental anguish suffered as a result of exposure to TB. Plummer v. United States, 580 F.2d 72 (3rd Cir.1978). Other courts also have recognized that exposing inmates to contagious diseases might constitute a violation of their constitutional rights. See e.g., Lareau v. Manson, 507 F.Supp. 1177, 1194 (D.Conn.1980) (failure to screen prisoners for communicable disease violates constitutional rights of other prisoners), aff'd in part and modified on other grounds, 651 F.2d 96, 109 (2d Cir.1981).
TB, which is highly contagious, is spread through a bacterium called tubercle bacillus. Hutchison Aff. at ¶ 3; Shilkret Aff. at ¶ 2. TB is dispersed into the environment by droplet nuclei, which are airborne particles containing the TB bacterium. Id. Uninfected individuals become infected when they inhale the droplet nuclei that remain suspended in the air. When a person inhales the particles, TB bacteria settle in the lungs and multiply. Hutchison Aff. at ¶ 4; Shilkret Aff. at ¶ 3. Once the lungs are infected, the bacteria may move through the blood stream and infect the kidneys, spine, and even the brain. Shilkret Aff. at ¶ 3. The nuclei are transmitted when an infected individual sneezes, coughs, or speaks. Hutchison Aff. at ¶ 3; Shilkret Aff. at ¶ 2.
There are several factors which influence TB's communicability: (1) the concentration of viable organisms in the droplet nuclei; (2) the susceptibility of the potential host; and (3) the length of time an individual is exposed to the contaminated air. Rosemary G. Reilly, Combating The TB Epidemic: The Legality of Coercive Treatment Measures, 27 Colum.J.L. & Soc.Probs. 101, 104 (1993). Infection, however, does not indicate active TB. Id. at 105. Once the bacterium enter the lungs, they are able to multiply until the body's immune system overcomes the infection. Id. The bacterium may remain dormant for a lifetime, and a person who only carries dormant TB cannot spread it to others. However, those who carry TB are at risk of active TB later in life. Austin v. Pa. Dept. of Corrections, No. CIV.A. 90-7497, 1992 WL 277511 at *2 (E.D.Pa. Sept 29, 1992); Shilkret Aff. at ¶ 5.
The likelihood of developing active TB increases if the individual's immune system is weakened. United Hospital Fund, The TB Revival: Individual Rights and Societal Obligations in a Time of AIDS, 5 (1992). In prison, where a higher proportion of people in a closed setting carry HIV, the spread of TB nuclei is more prevalent. Shilkret Aff. at ¶ 5.
Furthermore, TB is now a more serious threat than it was in the past. New strains of TB have emerged that are resistant to standard treatments. Cynthia A. Carlon, TB Control: Will Our Legal System Guard Our Health And Will The ADA Hamper Our Control Efforts?, 13 J.Legal Med. 563, 566 (1992). The new strains, called Multidrug Resistant TB, develop when infected patients *528 begin their medications, killing off the weaker strains of TB, but then fail to continue with their prescribed medications. Id. The multidrug resistant strains are easily spread when the dormant TB becomes active. Id. These new TB strains resulted in 39,000 more TB cases than would have been expected between 1985 and 1991. Id. at 563.
While TB can be transmitted without any intimate or physical contact, limited exposure is usually insufficient for transmission. Reilly, supra at 105. A continuous respiratory exposure to an individual with active TB is necessary for the disease to spread to another individual. Id. Thus, a confined prison setting is precisely the type of environment where TB is likely to spread easily and rapidly. Hutchison Aff. at ¶ 4; Shilkret Aff. at ¶ 5.
The evidence submitted by the defendants verifies the well-documented medical view that TB is a very serious disease that can sometimes be fatal. Dr. Hutchison, Director of Medical Services for the New Jersey Department of Corrections, has indicated that an individual infected with TB in a congregate living arrangement, such as a prison, puts prisoners, custody staff and health employees at risk. Hutchison Aff. at ¶ 4. Mr. Shilkret, the TB Control Program Chief for the New Jersey Department of Health, reached the same conclusion. Shilkret Aff. at ¶ 4. Although Dr. Lavietes, an Associate Professor of Medicine in the pulmonary division of the New Jersey Medical School, has declared that only about eight percent of those who test positive on the Mantoux test develop active TB, this figure is higher in a prison setting, where people live in close quarters and where a higher proportion of the population is HIV positive. Shilkret Aff. at ¶ 5.
Given the increase in the number of reported cases of active TB in recent years, the severity of active TB, the increased risk in a prison setting and the possibility of additional complications where the patient is infected with HIV, the Court concludes that there is a compelling state interest in preventing the spread of TB in its prisons by detection at the earliest possible opportunity. This goal is easily achieved through the administration of the Mantoux test.
D. Least Restrictive Means
Although we have concluded that the defendants' administration of the Mantoux test furthers a compelling state interest, the defendants must still show that the Mantoux test is the least restrictive means of furthering that interest. We conclude that it is. Although Plaintiff argues that subjecting him to an annual x-ray or providing periodic sputum samples would be an alternative and equally effective means of monitoring for TB, we are unpersuaded that monitoring for active TB satisfies the prison's goal of detecting latent TB infections.
The Centers for Disease Control ("CDC") has identified three sequential steps which are necessary for containing and controlling TB: (1) identification of infected individuals; (2) isolation of contagious patients; and (3) treatment through the use of medication. Carlon, supra at 570. Since the Mantoux test is diagnostic, designed only to identify those individuals who are infected with TB, the Court observes that step one of the CDC's process is the only measure at issue here.
The Mantoux test is the most effective method of determining whether a person is infected with TB.[6] Centers for Disease Control, Control of TB in Correctional Facilities: A Guide for Health Workers (1992) at 5; Hutchison Aff. at ¶ 12; Shilkret Aff. at ¶ 10. The test requires an injection of a purified protein derivative (PPD) under the skin of the forearm. CDC Control Guide at 5. The injection sight is examined within forty-eight to seventy-two hours for signs of a reaction. *529 Id. A reaction to PPD manifests itself in the form of hardness (induration). Shilkret Aff. at ¶ 6. Individuals without induration and/or induration measuring less than ten millimeters are considered negative. Id. Individuals with induration measuring ten millimeters or higher are considered positive. Id. However, those who reveal an induration of five millimeters or more are considered positive if they have HIV infection, abnormal chest x-rays and/or contacts with an active case of TB. Id.
A positive reaction to the Mantoux test indicates that the person has been exposed to TB. Hutchison Aff. at ¶ 7; Shilkret Aff. at ¶ 7. Additional medical examinations, including chest x-rays, are required for anyone who tests positive after the Mantoux test. Id.
The plaintiff's expert, Dr. Lavietes, claims that one alternative method used to detect TB is a chest x-ray.[7]Lavietes Aff. at ¶ 7. Mr. Shilkret, however, has indicated that an x-ray will identify only those patients with "active" TB, and that an x-ray is usually administered when patients have already reacted positively to the Mantoux test. Shilkret Aff. at ¶ 8. Furthermore, both Dr. Hutchison and Mr. Shilkret caution that an x-ray alone is no substitute for the Mantoux test. Hutchison Aff. at ¶ 9; Shilkret Aff. at ¶ 8. While the Mantoux test will indicate dormant TB, a chest x-ray will only show signs of active TB. Id. This distinction is critical. By the time an x-ray shows signs of TB, the infected individual may have been spreading the disease to other inmates, whereas a positive Mantoux test would trigger preventative therapy. Hutchison Aff. at ¶ 7.
The proper treatment for a positive reaction to the Mantoux test is isoniazid ("INH") therapy. Hutchison Aff. at ¶ 8; Laveites Aff. at ¶ 6. A possible course of action would be to treat plaintiff as if he had a positive reaction to the Mantoux test and to administer the INH therapy. However, plaintiff is in his sixties and at risk of harmful side effects to such treatment. INH is inappropriate for older individuals because it can cause liver dysfunction. Hutchison Aff. at ¶ 8; Lavietes Aff. at ¶ 6. Dr. Hutchison has recognized that INH therapy would be medically unsound for plaintiff because he is serving a life term, which would require INH therapy every year for six to twelve months. Even one treatment of INH could cause liver damage. Hutchison Aff. at ¶ 11.
Chest x-rays alone are insufficient to serve New Jersey's compelling interest in detecting TB among its inmates at the earliest possible moment. Repeated X-rays are incapable of detecting dormant TB and would unnecessarily expose plaintiff to radiation on a continual basis. Similarly, INH therapy is so invasive that it could unnecessarily cause the plaintiff liver damage. Dr. Hutchison has indicated that the Mantoux test is currently the world-wide standard for screening populations for TB infection. The combination of a positive Mantoux test and a chest x-ray leads to the earliest possible detection and treatment of the individual who, with undetected TB infection, could transmit the disease to others long before the disease reveals itself in an x-ray. Surely the Mantoux test is a less restrictive means of TB detection than using INH therapy to treat an infection that may not even exist.
IV. REFUSAL OF TREATMENT
The plaintiff asserts that punishment for his refusal to submit to the Mantoux does not further a compelling state interest. He argues that even if he were to submit to the test and test positive, he would not be required to take the medication. Accordingly, plaintiff contends that the state has failed to demonstrate how one refusal would affect its ability to conduct an effective TB tracking program. We disagree.
The record shows that inmates who refuse annual TB testing are in violation of NJDC policy and are referred to the Department of Health or NJDC medical staff and counseled on the general reasons for compliance with TB testing. DOC Control Policy at III. B.2.(c). If still not compliant, they must be charged with .707 Refusal to Cooperate in Prescribed Course of Treatment. Id. Inmates who fail to submit to the test at this *530 point may be placed in respiratory isolation at St. Francis Medical Center. Id.
Here, plaintiff appears to seek the result achieved in Jolly v. Coughlin, 76 F.3d 468 (2d Cir.1996). In Jolly, the plaintiff was a Rastafarian incarcerated at the Attica Correctional Facility in New York. Id. at 471. He refused to submit to the Mantoux TB test, claiming that his religious beliefs would not permit administration of the test. Id. The control policy of the New York State Department of Correctional Services required all inmates who refused the screening test to be placed in "medical keeplock," and accordingly, the plaintiff was segregated. Id. However, "medical keeplock" had no actual medical significance. Jolly, 76 F.3d at 471. Those who refused to submit to the Mantoux test for latent TB would continue to share the same breathing space as other inmates. Id. Unlike inmates with "active" TB, the plaintiff was not placed in "respiratory isolation." Id. It was the prison's policy that inmates who took the screening test and were found to carry latent TB would not be placed in either medical keeplock or respiratory isolation. Id. The Court of Appeals found that the prison offered no basis for concluding that the plaintiff's continued confinement in an unisolated yet segregated area would serve the compelling interests in administering an effective TB screening program. Jolly, 76 F.3d at 479.
The Court recognizes two crucial distinctions between Jolly and the instant case. First, in Jolly, the plaintiff was placed in medical keeplock indefinitely. Jolly, 76 F.3d at 472. He remained in medical keeplock for three and one-half years, except for weekly ten-minute showers, and he filed his complaint to seek release, claiming that the conditions of his confinement were causing him to suffer from headaches, hair loss, rashes, and an inability to stand or walk without difficulty. Id. In the instant case, the record shows that plaintiff was not confined to administrative segregation, but did lose privileges twice, for seven days on each occasion. Plaintiff is not seeking an injunction for release from administrative segregation, but rather an injunction which would prevent future segregation.
In Jolly the confinement used to compel compliance offered no medical protection. NJDC, by way of contrast, has clearly indicated that any inmate who persists in refusing the TB screening test will be placed in respiratory isolation. Therefore, although the threat of confinement is calculated to produce compliance with prison policy, it also serves the penological interest of preserving the health of inmates and prison employees.
V. REMAINING CLAIMS
Plaintiff also alleges that defendants have directly infringed his free exercise rights under the First Amendment and have thus violated 42 U.S.C. § 1983. While free exercise claims brought by prison inmates under RFRA are subject to the strict compelling interest test, free exercise claims brought outside RFRA are subject only to a "reasonableness" test. Jolly, 76 F.3d at 475; see O'Lone v. Estate of Shabazz, 482 U.S. 342, 349-50, 107 S.Ct. 2400, 2404-05, 96 L.Ed.2d 282 (1987) (concluding that regulation burdening prison inmate's free exercise right need only be "reasonably related" to legitimate penological interests). If the State meets the RFRA standards in requiring the Mantoux test, then it clearly meets the "reasonably related" standard.
Plaintiff's other claims arise under state law. Since our dismissal of the First Amendment and RFRA claims resolves all matters on which federal jurisdiction is based, we will dismiss the remaining claims without prejudice. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).
VI. CONCLUSION
The purpose of administering the Mantoux test is to detect TB infection. The record before the Court leaves no doubt that TB is a highly contagious disease that is likely to have devastating and far-reaching effects, unless the infection is held in check by an aggressive tracking program. The Center for Disease Control considers the Mantoux test the most effective method of detecting TB in its latent form. We recognize that latent TB does not pose an immediate health risk to anyone. But, an "immediate" health risk should not be confused with "no" health *531 risk. When left untreated, the dormant form of TB can become active, especially in a prison setting where the inmates' immune systems are the natural targets of a host of infections that include venereal disease, HIV and AIDS. What separates TB from other common viruses that proliferate in prisons is that physical contact is not required to contract the infection. A prisoner need only inhale a floating tubercle particle. Accordingly, the New Jersey Department of Corrections has included diagnostic testing via the Mantoux test in its routine program for controlling disease.
It is a well-established principle that federal courts should not second-guess prison regulations that might impinge on an inmates' constitutional rights when the regulations are reasonably related to penological interests. Turner v. Safley, 482 U.S. 78, 89, 107 S.Ct. 2254, 2261, 96 L.Ed.2d 64 (1987); see Jones v. North Carolina Prisoners' Labor Union, Inc., 433 U.S. 119, 128, 97 S.Ct. 2532, 2539, 53 L.Ed.2d 629 (1977) (recognizing that if prison administrators are to make difficult judgements concerning institutional operations, then such a deferential standard is necessary); see also Lewis v. Casey, ___ U.S. ___, ___, 116 S.Ct. 2174, 2185, 135 L.Ed.2d 606 (1996); see also Washington v. Harper, 494 U.S. 210, 223, 110 S.Ct. 1028, 1037, 108 L.Ed.2d 178 (1990) (observing that prison authorities are best equipped to make difficult decisions regarding prison administration).
Here, the NJDC's TB tracking program is designed to preserve the plaintiff's health, as well as the health of other inmates and prison employees. The impact of accommodating plaintiff's right to refuse screening for TB could be devastating to plaintiff as well as innocent third parties. Involuntary medical testing is authorized by statute in many circumstances, "most notably when a person may be driving under the influence of intoxicating drugs or alcohol." Carlon, supra at 577. Public health and safety are the bases for legislation allowing drug and alcohol testing for drivers. Id. Public health is similarly the motivating force behind the TB screening programs. TB infection may not be as immediate or as sensational as an auto accident; it can be just as deadly.
Although Plaintiff has shown that he is substantially burdened by administration of the Mantoux test, the Court finds that New Jersey has a compelling interest in performing the test. When compared with the only effective alternative, the Mantoux test is in fact the least restrictive means of detecting TB. Summary Judgment will be granted to the defendants on all federal claims asserted by plaintiff. An appropriate order will be entered.
NOTES
[1] N.J.A.C. 10A:16-5.1(a)(2) provides that "[t]he express written consent of the inmate shall be required for ... intrusive procedures."
[2] Hemoptysis occurs when an individual evidences blood-stained sputum. It is often associated with infection in the lungs. Dorland's Medical Dictionary 750 (28th ed. 1994).
[3] Dr. Dwight C. Hutchison, Director of Medical Services for the New Jersey Department of Corrections, indicated in his affidavit that an x-ray may only show signs of lung infection. Furthermore, an x-ray will only indicate "active" TB, but not "dormant" TB. Ninety percent of those people who are actually infected with TB carry the "dormant" form. The "dormant" form is likely to become "active" in the future.
[4] On December 1, 1992, the New Jersey Department of Corrections issued a memorandum entitled "Department of Corrections Tuberculosis Control and Surveillance Policy." We will refer to this document as "DOC Control Policy."
[5] Respiratory isolation is achieved in a room equipped with negative air pressure flow. DOC Control Policy at III.B.1.(e).
[6] The Court observes, however, that the Mantoux test results in "false positives" in two percent of the cases, and in "false negatives" in up to ten percent of the cases. However, the "false negatives" occur mainly in individuals with weakened immune systems. This would include those who are HIV-positive or individuals who have developed AIDS. The injection of protein involved in the TB test may not trigger a sufficient immune response to generate a skin reaction. Nonetheless, prisons can obtain medically significant information from the inmates' submission to the test. Jolly, 76 F.3d at 478.
[7] The record indicates that plaintiff does not object to an x-ray. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2591437/ | 21 A.D.2d 73 (1964)
Taca International Airlines, S. A., a Corporation of El Salvador, Appellant,
v.
Rolls-Royce of England, Ltd., et al., Respondents
Appellate Division of the Supreme Court of the State of New York, First Department.
April 9, 1964.
William M. Keegan of counsel (P. G. Pennoyer, Jr., with him on the brief; Bigham, Englar, Jones & Houston, attorneys), for appellant.
Robert Layton of counsel (Thomas F. Cusack with him on the brief; Gilbert, Segall & Young, attorneys), for Rolls-Royce of England, Ltd., respondent.
McNALLY, STEVENS and STEUER, JJ., concur in Per Curiam opinion; VALENTE, J. P., dissents and votes to affirm, in opinion.
Per Curiam.
This action seeks recovery for the loss of plaintiff's aircraft as the result of a crash at Managua, Nicaragua. Plaintiff has sued several defendants, among them Rolls-Royce, Ltd., an English corporation. This defendant has moved to set aside the service on it. Service was purportedly made by service on Rolls-Royce, Inc., and Bruce Thomson. There is no question *74 but that these persons were served, the issue being whether such service reached the moving defendant.
Rolls-Royce, Ltd., manufactures and sells motor cars and airplane engines. It also sells parts and gives service to its customers. These products are sold practically world-wide and customers can get service at many places. Rolls-Royce, Ltd., owns all the stock of Rolls-Royce of Canada, Ltd., a Canadian corporation, and this company owns all the stock of Rolls-Royce, Inc. The business of Rolls-Royce, Inc., is solely in the sale of products manufactured by Rolls-Royce, Ltd., and the servicing of the purchasers of these products. The three mentioned companies have some directors in common, and key executive personnel in Rolls-Royce, Inc., were former executives of either the English or Canadian company and were assigned to their positions by the parent English company. There are frequent conferences among executives of the three companies at which the policies of Rolls-Royce, Inc., are determined. Rolls-Royce, Inc., employees who require technical training are given it by Rolls-Royce, Ltd., in England. All sales literature used by Rolls-Royce, Inc., is written and published by Rolls-Royce, Ltd.
Rolls-Royce, Inc., gets its income in several ways. It owns no automobiles, and when a sale is made to a customer it buys a car from Rolls-Royce, Ltd., in England and imports it. The sale is at a fixed price which is lower than the price to the ultimate purchaser. Rolls-Royce, Ltd., gives a warranty directly to the purchaser which Rolls-Royce, Inc., delivers with the car. Rolls-Royce, Ltd., pays Rolls-Royce, Inc., a fixed annual fee for services rendered to customers in connection with these warranties. As to airplane engines, the compensation for service is paid by Rolls-Royce of Canada and this payment is measured by the price of the spare parts sold by Rolls-Royce, Inc.
All of the net income of Rolls-Royce, Inc., goes to Rolls-Royce of Canada and appears in that company's balance sheet. As affected by the other operations of the Canadian company it then appears in the balance sheet of Rolls-Royce, Ltd.
The question is whether these facts constitute doing business in this State. Each case necessarily depends on its own facts (Chaplin v. Selznick, 293 N.Y. 529, 533). The fact that a corporation has a subsidiary does not in and of itself bring it within the State or make it amenable to process (Compania Mexicana v. Compania Metropolitana, 250 N.Y. 203). It is otherwise where the subsidiary, though nominally independent, actually functions as a department of the parent (Rabinowitz v. Kaiser-Frazer Corp., 198 Misc. 707, affd. 278 App. Div. 584, affd. 302 N.Y. 892). *75 And this is not affected by the fact that the subsidiary is given the appearance of being an independent contractor (Goodman v. Pan American World Airways, 1 Misc 2d 959 [EAGER, J.], affd. 2 A D 2d 707). The facts here are virtually conclusive that any claim of independence on the part of Rolls-Royce, Inc., is illusory. It is clearly a sales agent, despite the forms that would make it appear on the surface to be a purchaser.
We are not unmindful of the decision in Steingold v. Capital Airlines (34 Misc 2d 33, affd. 19 A D 2d 778) where, on similar service, the action was dismissed by this same moving defendant. The decision there was on an entirely different ground, namely, the advisability of entertaining an action by a nonresident against a foreign corporation for an accident occurring outside this State. The court concluded the equities in that case did not warrant exercise of the discretionary power to entertain the action. The question litigated here is entirely different.
The order should be reversed and the motion denied, with costs to the appellant.
VALENTE, J. P. (dissenting).
I am in agreement with the majority as to the unquestioned principle of law that a foreign corporation does not become amenable to suit in the State merely because a wholly owned subsidiary is doing business here. (Simonson v. International Bank, 16 A D 2d 55, 58.) It is only where the subsidary is shown to be an instrumentality used as a subterfuge for the parent corporation to conduct its regular business, that the corporate entities will be pierced and the subsidiary considered an agent of the parent company upon whom service can be made to assert personal jurisdiction over the parent. Moreover, I also agree that the determination as to whether the subsidiary is solely an instrumentality of the parent corporation is a factual question and each case must be decided on its peculiar facts. In the instant case there was a comprehensive hearing before a Special Referee whose findings that Rolls-Royce, Ltd., was not doing business in this State and was not present here were confirmed by Special Term after a painstaking review. I cannot accept the view of the majority which would not only overturn those findings but would, in addition, interpret the facts established before the Referee as demonstrating that any claim of independence between the companies is illusory. Contrary to the majority, I would hold that the proof adequately established that Rolls-Royce, Ltd., *76 with careful deliberation, maintained the complete separateness and independence of its once removed subsidiary in New York, and that it was established that there was no such complete domination as to make the subsidiary an agent or tool of the grandparent company. I, therefore, dissent and would affirm the order vacating the service.
Order, entered on September 30, 1963, reversed, with $20 costs and disbursements to the appellant, and the motion denied, with $10 costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3157681/ | IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
COMMONWEALTH OF PENNSYLVANIA, : No. 564 MAL 2015
:
Respondent :
: Petition for Allowance of Appeal from
: the Order of the Superior Court
v. :
:
:
SANTO BORRERO-BEJERANO, :
:
Petitioner :
ORDER
PER CURIAM
AND NOW, this 24th day of November, 2015, the Petition for Allowance of
Appeal is DENIED. | 01-03-2023 | 11-24-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1877965/ | 285 So. 2d 23 (1973)
STATE of Florida, Petitioner,
v.
Charles Woodrow CHILDERS, Respondent.
No. 43790.
Supreme Court of Florida.
October 22, 1973.
Certiorari denied. 277 So. 2d 594.
CARLTON, C.J., and ADKINS, BOYD and McCAIN, JJ., concur.
DEKLE, J., dissents. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2142115/ | 17 Wis. 2d 26 (1962)
HOLYTZ, by Guardian ad litem, and another, Appellants,
v.
CITY OF MILWAUKEE, Respondent.
Supreme Court of Wisconsin.
May 1, 1962.
June 5, 1962.
*29 For the appellants there were briefs by Habush, Gillick & Habush, attorneys, and Robert L. Habush of counsel, all of Milwaukee, and oral argument by Robert L. Habush.
For the respondent there was a brief by John J. Fleming, city attorney, and Peter M. Stupar, assistant city attorney, attorneys, and Richard F. Maruszewski, assistant city attorney, of counsel, and oral argument by Mr. Stupar and Mr. Maruszewski.
GORDON, J.
The order of the trial court sustaining the respondent's demurrer to the complaint presents an issue with respect to the tort liability of a municipal corporation. The trial court found that on the facts alleged in the complaint the city was entitled to invoke the defense of municipal tort immunity. The appellants urge that the city may not invoke such defense because (a) the drinking fountain and the water-meter pit trapdoor were created and maintained by the city in its proprietary capacity, or (b) the meter contraption constituted a nuisance and at the time the injury occurred the relationship of governor to governed did not exist between Janet Holytz and the city of Milwaukee, or (c) the trapdoor was an "attractive nuisance" that was not created or maintained by the city in a governmental capacity.
Upon the facts of this case, we consider that the trial judge was correct in his conclusion that, based upon the past decisions of this court, no cause of action was asserted in the complaint. However, we are now prepared to disavow those rulings of this court which have created and preserved the doctrine of governmental immunity from tort claims. This makes it unnecessary that we rest this case on the elusive issues mentioned in the foregoing paragraph; the case turns exclusively on our abrogation of the principle of governmental immunity from tort claims.
*30 The defendant urges that we ignore the appellants' challenge to the doctrine of governmental immunity because it was not raised in the trial court. Concededly, the general rule is that this court will not consider on appeal matters which were not presented to the trial court. State ex rel. Mattison v. Baudhuin (1955), 270 Wis. 249, 70 N. W. (2d) 674. In view of the unmistakable rulings of this court in a host of cases, it would have been futile to have expected the trial court to have countermanded the canon of municipal immunity. It is entirely understandable that the issue was not raised in the court below. This court has frequently considered questions on appeal which were not presented in the trial court. Discher v. Industrial Comm. (1960), 10 Wis. (2d) 637, 645, 103 N. W. (2d) 519; General Electric Co. v. Wisconsin E. R. Board (1958), 3 Wis. (2d) 227, 246, 247, 88 N. W. (2d) 691.
The rule of municipal tort immunity is knee-deep in legal esoterica: e.g., governmental function versus proprietary function; relationship of governor to governed. The dogma of the rule is so deeply engrained in our case law that we deem it necessary to consider the historical origins of the rule and some of the critical assaults which have been made upon it.
Historical Background of Tort Immunity.
The rule of sovereign immunity developed in this country from an English doctrine and has been applied in the United States far beyond its original conception. The doctrine expanded to the point where the historical sovereignty of kings was relied upon to support a protective prerogative for municipalities. This, according to Professor Borchard, "is one of the mysteries of legal evolution." Borchard, Government Liability in Tort, 34 Yale Law Journal (1924), 1, 4. It would seem somewhat anomalous that American courts should have adopted the sovereign-immunity theory *31 in the first place since it was based upon the divine right of kings.
The concept of municipal immunity from tort claims stems from the English case of Russell v. Men of Devon (1788), 2 T. R. 667, 100 Eng. Rep. 359. That was a case in which an unincorporated county was relieved of liability for damages which were occasioned by the disrepair of a bridge. One of the grounds advanced in the Men of Devon Case was that immunity was necessary because the community was an unincorporated one and did not have funds to pay for damages. A second reason advanced was "that it is better that an individual should sustain an injury than that the public should suffer an inconvenience." 100 Eng. Rep., page 362. In Maffei v. Town of Kemmerer (1959), 80 Wyo. 33, 42, 338 Pac. (2d) 808, 810, the argument was advanced that the Men of Devon Case in turn relied upon an earlier authority from Brooke's Abridgement. However, most historical analyses of the general thesis of municipal immunity agree that the Men of Devon Case was the judicial parent of the doctrine.
The first case in the United States which adopted the doctrine of the Men of Devon Case was Mower v. Leicester (1812), 9 Mass. 247, in which immunity was granted even though the county was a corporation and had corporate funds. Perhaps the leading case which adopted the rule in the United States is Bailey v. New York (1842), 3 Hill 531.
In Wisconsin, the first case which wholly adopted municipal immunity was Hayes v. Oshkosh (1873), 33 Wis. 314, 318, 14 Am. Rep. 760. That decision justified the rule on the following grounds:
"The grounds of exemption from liability, as stated in the authorities last named, are, that the corporation is engaged in the performance of a public service, in which it has no particular interest, and from which it derives no special *32 benefit or advantage in its corporate capacity, but which it is bound to see performed in pursuance of a duty imposed by law for the general welfare of the inhabitants, or of the community; that the members of the fire department, although appointed by the city corporation, are not, when acting in the discharge of their duties, servants or agents in the employment of the city, for whose conduct the city can be held liable; but they act rather as public officers, or officers of the city charged with a public service, for whose negligence or misconduct in the discharge of official duty no action will lie against the city, unless expressly given; and hence the maxim respondeat superior has no application."
The rules surrounding municipal tort immunity have resulted in some highly artificial judicial distinctions. For example, the municipality may be immune or liable depending upon whether we determine that the particular function involved is "proprietary" or "governmental." Our court held in Christian v. New London (1940), 234 Wis. 123, 290 N.W. 621, that a live wire which carried electricity from a municipal electrical utility to a municipal streetlight was maintained by the city in a proprietary capacity, but a municipal waterworks which supplied water to be used for fire fighting was operating in a governmental capacity. Highway Trailer Co. v. Janesville Electric Co. (1925), 187 Wis. 161, 204 N.W. 773. The operation of a municipal hospital, although generally a proprietary activity, may have some of its operations classed as governmental. Carlson v. Marinette County (1953), 264 Wis. 423, 59 N. W. (2d) 486.
In applying the "governor-to-governed" test we have adopted some additional artificial rules regarding immunity or liability. We have held that this crucial relationship did exist where a plaintiff was using a public toboggan slide and slid into an unprotected quarry, Pohland v. Sheboygan (1947), 251 Wis. 20, 27 N. W. (2d) 736, and where a *33 plaintiff fell into an open sewer ditch which ran through a public park, Erickson v. West Salem (1931), 205 Wis. 107, 236 N.W. 579. However, we have concluded that the relationship did not exist where a plaintiff walking on a public walk was hit by a baseball coming forth from a municipal playground, Robb v. Milwaukee (1942), 241 Wis. 432, 6 N. W. (2d) 222, or where a minor plaintiff was playing on a snow pile created by the city near a river, Flamingo v. Waukesha (1952), 262 Wis. 219, 55 N. W. (2d) 24.
Criticism of the Rule of Tort Immunity.
There are probably few tenets of American jurisprudence which have been so unanimously berated as the governmental-immunity doctrine. This court and the highest courts of numerous other states have been unusually articulate in castigating the existing rule; text writers and law reviews have joined the chorus of denunciators. Some examples of the condemnation are here presented.
In Britten v. Eau Claire (1952), 260 Wis. 382, 386, 51 N. W. (2d) 30, this court stated:
"The doctrine that immunity from liability should be granted to the state and municipalities while engaged in governmental operations rests upon a weak foundation. Its origin seems to be found in the ancient and fallacious notion that the king can do no wrong."
In Smith v. Congregation of St. Rose (1953), 265 Wis. 393, 397, 61 N. W. (2d) 896, we again stated:
". . . this court has long felt that the reasons for granting such immunity to charitable and religious organizations, as well as to municipal corporations, are archaic, . . ."
Some of the judicial expressions in other states which have sharply decried the rule of immunity are as follows:
"This doctrine has been shot to death on so many different battlefields that it would seem utter folly now to *34 resurrect it. . . ." Fowler v. Cleveland (1919), 100 Ohio St. 158, 176, 126 N.E. 72, 77 (concurring opinion, WANAMAKER, J.).
"Little time need be spent in determining whether the strict doctrine of municipal immunity from tort liability should be repudiated. All this is old straw. The question is not `Should we?'; it is `How may the body be interred judicially with nondiscriminatory last rites?' No longer does any eminent scholar or jurist attempt justification thereof." Williams v. Detroit (1961), 364 Mich. 231, 271, 111 N. W. (2d) 1, 10 (separate opinion, BLACK, J.).
"'It is almost incredible that in this modern age of comparative sociological enlightenment, and in a republic, the medieval absolutism supposed to be implicit in the maxim, "the King can do no wrong," should exempt the various branches of the government from liability for their torts, and that the entire burden of damage resulting from the wrongful acts of the government should be imposed upon the single individual who suffers the injury, rather than distributed among the entire community constituting the government, where it could be borne without hardship upon any individual, and where it justly belongs.'" Barker v. Santa Fe (1943), 47 N. M. 85, 88, 136 Pac. (2d) 480, 482.
"We, therefore, feel that the time has arrived to declare this doctrine anachoristic [sic] not only to our system of justice but to our traditional concepts of democratic government." Hargrove v. Cocoa Beach (Fla. 1957), 96 So. (2d) 130, 132.
"After a re-evaluation of the rule of governmental immunity from tort liability we have concluded that it must be discarded as mistaken and unjust." Muskopf v. Corning Hospital Dist. (1961), 55 Cal. (2d) 211, 213, 359 Pac. (2d) 457, 458.
"We conclude that the rule of school district tort immunity is unjust, unsupported by any valid reason, and has no rightful place in modern day society." Molitor v. Kaneland Community Unit Dist. (1959), 18 Ill. (2d) 11, 25, 163 N. E. (2d) 89, 96.
*35 Some of the law-review and text-writers' expressions are as follows:
"If consistency in the law is necessary to give it prestige, as Judge LEARNED HAND has recently remarked, then this branch of the law is greatly in need of reform." Borchard, Government Liability in Tort, 34 Yale Law Journal (1924), 129, 130.
"Legal scholars and commentators since the turn of the century have almost unanimously condemned the confusions and contradictions of municipal tort law." Price and Smith, Municipal Tort Liability: A Continuing Enigma, 6 University of Florida Law Review (1953), 330.
"The municipal corporation today is an active and virile creature capable of inflicting much harm. Its civil responsibility should be coextensive." Harno, Tort Immunity of Municipal Corporations, 4 Illinois Law Quarterly (1921), 28, 42.
"Haven't we waited long enough for the elimination of this absurdity from the law?" Fuller and Casner, Municipal Tort Liability in Operation, 54 Harvard Law Review (1941), 437, 462.
"An overwhelming opinion throughout the world in favor of the assumption of community liability for the torts of public officers may be regarded as representing a growing moral conviction to which the courts should not remain impervious." Comment, Municipal Responsibility for the Torts of Policemen, 42 Yale Law Journal (1932), 241, 244.
"Although the court has been able to make inroads in mitigating the effect of governmental immunities, the present law is still unjust, inequitable, and patently unfair. A person's right to recover for damages inflicted upon him by another's negligence or nuisance should not depend upon such nebulous and vague principles as governmental function and the relationship of governor to governed." Bernstein, Governmental Tort Liability and Immunity in Wisconsin, 1961 Wisconsin Law Review, 486, 497.
*36 The immunization of municipalities from tort liability has been chipped away by a number of statutes in this state. Some examples are secs. 101.01 and 101.06, Stats. (safe-place statute); sec. 345.05 (1) (c), (2) (a) (motor vehicle accidents); sec. 270.58 (judgments against public officers); and sec. 81.15 (highway defects).
Also, the judiciary has engrafted exceptions on the rule of municipal immunity from tort claims. Municipalities are responsible for negligence occurring in the operation of their proprietary activities. Christian v. New London (1940), 234 Wis. 123, 290 N.W. 621, and Erickson v. West Salem (1931), 205 Wis. 107, 236 N.W. 579. Municipalities are also responsible for nuisance whether acting in a governmental or proprietary capacity, as long as the municipality and the injured party did not stand in the relationship of governor to governed. Blake v. Madison (1941), 237 Wis. 498, 297 N.W. 422, and Bernstein v. Milwaukee (1914), 158 Wis. 576, 149 N.W. 382. Furthermore, municipalities are responsible for an "attractive nuisance" created in the exercise of a proprietary activity. Britten v. Eau Claire (1952), 260 Wis. 382, 51 N. W. (2d) 30. ("Attractive nuisance" is considered to be a form of ordinary negligence. Smith v. Jefferson (1959), 8 Wis. (2d) 378, 99 N. W. (2d) 119.)
Is Abrogation Within the Court's Province?
The defendant argues that any change in the municipal-immunity doctrine should be addressed to the legislature. We recognize that earlier decisions of this court contemplated precisely that. See Flamingo v. Waukesha (1952), 262 Wis. 219, 228, 55 N. W. (2d) 24 (concurring opinion); Britten v. Eau Claire (1952), 260 Wis. 382, 386, 51 N. W. (2d) 30.
Not only have we previously expressed the view that any proposed change should be directed toward the legislature, *37 but we also have expressed the view that the legislature's failure to enact a bill which had been introduced constituted ". . . an expression by the legislature that no change should be made." Schwenkhoff v. Farmers Mut. Automobile Ins. Co. (1959), 6 Wis. (2d) 44, 47, 93 N. W. (2d) 867.
We are satisfied that the governmental-immunity doctrine has judicial origins. Upon careful consideration, we are now of the opinion that it is appropriate for this court to abolish this immunity notwithstanding the legislature's failure to adopt corrective enactments.
A comparable problem was presented in connection with the charitable-immunity doctrine. In Smith v. Congregation of St. Rose (1953), 265 Wis. 393, 398, 61 N. W. (2d) 896, it was noted that dissatisfaction with the charitable-immunity doctrine was properly a subject for the legislature. However, in Kojis v. Doctors Hospital (1961), 12 Wis. (2d) 367, 372, 107 N. W. (2d) 131, 107 N. W. (2d) 292, this court concluded that the doctrine with respect to paying hospital patients could be changed by the court as well as by the legislature:
"The defendant insists that if the rule be changed it should be done by the legislature and not by the court. This is upon the theory that questions of public policy are to be determined by the legislature. If that were strictly true then perhaps this court was in error in adopting the doctrine of charitable immunity in the first place. We do not think that is true. We believe the court was justified in acting as it did in 1917 in view of conditions as they then existed. The rule of stare decisis, however desirable from the standpoint of certainty and stability, does not require us to perpetuate a doctrine that should no longer be applicable in view of the changes in present-day charitable hospitals."
In Hernandez v. County of Yuma (Ariz. 1962), 369 Pac. (2d) 271, the supreme court of Arizona studied precisely the same problem and concluded:
*38 "In Lee v. Dunklee this court refused to recede from the doctrine of governmental immunity, stating that the problem was legislative. We now express doubts concerning that statement. Concededly a court adopting a rule of law has the power to abrogate it. When the reason for the rule no longer exists, the court's responsibility does not terminate because the legislature through indifference or otherwise has not acted. Certainly there can be no justification for the extension of a rule universally criticized as an anachronism without rational basis. It requires but a slight appreciation of the facts to realize that if the individual citizen is left to bear almost all the risk of a defective, negligent, perverse, or erroneous administration of the state's functions, an unjust burden will become graver and more frequent as the government's activities are expanded and become more diversified."
The supreme court of New Jersey reached a similar conclusion in McAndrew v. Mularchuk (1960), 33 N. J. 172, 193, 162 Atl. (2d) 820, 832:
"The borough argues that any such change should come about, if at all, by action of the legislature. But the limitation on the normal operation of respondeat superior was originally placed there by the judiciary. Surely it cannot be urged successfully that an outmoded, inequitable, and artificial curtailment of a general rule of action created by the judicial branch of the government cannot or should not be removed by its creator."
As the supreme court of Washington observed in Pierce v. Yakima Valley Memorial Hospital Asso. (1953), 43 Wash. (2d) 162, 178, 260 Pac. (2d) 765, 774, "We closed our courtroom doors without legislative help, and we can likewise open them."
It is also urged that the immunity rule is a part of the common law which has been adopted by this state and can only be changed by the legislature pursuant to sec. 13, art. XIV. The limitation on judicial action implied by this provision of our constitution was examined in Bielski v. Schulze *39 (1962), 16 Wis. (2d) 1, 11, 114 N. W. (2d) 105, as well as in State v. Esser (1962), 16 Wis. (2d) 567, 115 N. W. (2d) 505. The doctrine of governmental immunity having been engrafted upon the law of this state by judicial provision, we deem that it may be changed or abrogated by judicial provision. But cf. Maffei v. Town of Kemmerer (1959), 80 Wyo. 33, 42, 338 Pac. (2d) 808, 810. The supreme court of Florida considered this problem in Hargrove v. Cocoa Beach (Fla. 1957), 96 So. (2d) 130, 132, and stated:
"Assuming that the immunity rule had its inception in the Men of Devon Case, and most legal historians agree that it did, it should be noted that this case was decided in 1788, some twelve years after our Declaration of Independence. Be that as it may, our own feeling is that the courts should be alive to the demands of justice. We can see no necessity for insisting on legislative action in a matter which the courts themselves originated."
Scope of Abrogation.
The issue immediately before the court relates to the liability of a city for torts. Abrogation of immunity necessarily raises various questions as to the breadth of our determination. One state, for example, limited the abrogation to negligent acts of commission. McAndrew v. Mularchuk (1960), 33 N. J. 172, 193, 162 Atl. (2d) 820, 832. In our opinion, this is an unwise limitation, and we consider that the abrogation should apply broadly to torts, whether they be by commission or omission.
Perhaps clarity will be afforded by our expression that henceforward, so far as governmental responsibility for torts is concerned, the rule is liabilitythe exception is immunity. In determining the tort liability of a municipality it is no longer necessary to divide its operations into those which are proprietary and those which are governmental. Our decision does not broaden the government's obligation so as *40 to make it responsible for all harms to others; it is only as to those harms which are torts that governmental bodies are to be liable by reason of this decision.
This decision is not to be interpreted as imposing liability on a governmental body in the exercise of its legislative or judicial or quasi-legislative or quasi-judicial functions. See Hargrove v. Cocoa Beach (Fla. 1957), 96 So. (2d) 130, 133. Also, the instant decision does not create any liability against a county for acts of a sheriff which are within the provisions of sec. 4, art. VI of the Wisconsin constitution.
If the legislature deems it better public policy, it is, of course, free to reinstate immunity. The legislature may also impose ceilings on the amount of damages or set up administrative requirements which may be preliminary to the commencement of judicial proceedings for an alleged tort. See, for example, the notice provisions and the limitation of the amount of damages in sec. 81.15, Stats.
Another problem which we foresee regarding the scope of this decision is the determination of what public bodies are within the scope of the abrogation of the rule. The case at bar relates specifically to a city; however, we consider that abrogation of the doctrine applies to all public bodies within the state: The state, counties, cities, villages, towns, school districts, sewer districts, drainage districts, and any other political subdivisions of the statewhether they be incorporated or not. By reason of the rule of respondeat superior a public body shall be liable for damages for the torts of its officers, agents, and employees occurring in the course of the business of such public body.
So far as the state of Wisconsin and its various arms is concerned, a careful distinction must be made between the abrogation of the immunity doctrine and the right of a private party to sue the state. The difference between governmental *41 immunity from torts and the sovereign immunity of the state from suit was recognized in Apfelbacher v. State (1915), 160 Wis. 565, 152 N.W. 144. The California constitution has a similar provision to that of Wisconsin so far as the right to sue the state. In abrogating the doctrine of governmental immunity from tort liability, the court discussed the distinction between tort immunity and consent on the part of the state to be sued. Muskopf v. Corning Hospital Dist. (1961), 55 Cal. (2d) 211, 216, 359 Pac. (2d) 457, 460.
Henceforward, there will be substantive liability on the part of the state, but the right to sue the state is subject to sec. 27, art. IV of the Wisconsin constitution which provides: "The legislature shall direct by law in what manner and in what courts suits may be brought against the state." The decision in the case at bar removes the state's defense of nonliability for torts, but it has no effect upon the state's sovereign right under the constitution to be sued only upon its consent.
The constitutional provision has been construed to require the passage of necessary legislation before any suit may be commenced against the state. Chicago, M. & St. P. R. Co. v. State (1881), 53 Wis. 509, 10 N.W. 560; Houston v. State (1898), 98 Wis. 481, 74 N.W. 111; Schlesinger v. State (1928), 195 Wis. 366, 218 N.W. 440.
Although the legislature created sec. 285.01, Stats., which authorized the commencement of suits against the state, this section has been construed to apply only to those claims which would render the state a debtor. Houston v. State (1898), 98 Wis. 481, 487, 74 N.W. 111. However, we do not consider the interpretation of sec. 285.01 before us and express no opinion upon the effect of the abolition of tort immunity upon the construction of this section of the statutes. The matter has not been briefed nor argued by counsel, *42 and we will reserve this question for subsequent determination.
Prospective Abrogation.
To enable the various public bodies to make financial arrangements to meet the new liability implicit in this holding, the effective date of the abolition of the rule of governmental immunity for torts shall be July 15, 1962. See sec. 66.18, Stats., regarding liability insurance for both the state and municipalities. The new rule shall not apply to torts occurring before July 15, 1962. However, for the reasons set forth in the supplemental opinion in Kojis v. Doctors Hospital (1961), 12 Wis. (2d) 367, 373, 374, 107 N. W. (2d) 131, 107 N. W. (2d) 292, this decision shall apply to the case at bar.
By the Court.Order reversed. Defendant shall have twenty days from the date the remittitur is filed in the circuit court to serve a responsive pleading.
CURRIE, J. (concurring).
I concur fully in the foregoing opinion by Mr. Justice CORDON. However, I deem it necessary to explain the rationale behind our reversal of position on the effect to be accorded legislative action in defeating bills which would have abrogated a rule of law previously established by this court. Heretofore, this court has adhered to the view that rejection by the legislature of a bill of this character constituted a clear expression of legislative intent that the court-made rule was to be retained. Up to now this court has felt that, under our three-department system of government, comity required that courts yield to any determination of policy falling within the competence of the legislature, and that the court's hands were tied to change a court-made rule which the legislature had plainly indicated was to be retained.
*43 However, we deem that the fallacy in the rationale of our former position is that legislative action defeating a proposed change of a court-made rule is a per se expression of legislative acquiescence in the rule. If there were any way of determining with certitude that all votes cast to defeat a bill of this character were intended as a legislative indorsement on the merits of the correctness of the court-made rule, it would be the duty of this court to yield to this expression of the legislative will. However, there is always present the possibility that some undeterminable number of legislators voted as they did because, inasmuch as the rule sought to be abrogated had been adopted by this court, they deferred to the supposed wisdom of the court, or else determined that the court should correct its own mistakes. Because of this possibility, I have reversed my hitherto held and expressed views, and have come to the conclusion that this court must face up to the responsibility of changing a court-made rule of law, which we deem the interests of justice require be changed, even though the legislature, by positive action short of codification has refused to make the change. The legislature still has the last word and may restore the court-abolished rule if it determines public policy so requires. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2615202/ | 137 Ariz. 48 (1983)
668 P.2d 891
Vivian ARNOLD and Susan L. Cesare, Plaintiffs/Appellants,
v.
Joseph R. CESARE and Title Security Agency of Arizona, an Arizona corporation, as Trustee of Trust Nos. 402 and 403, Defendants/Appellees.
No. 2 CA-CIV 4497.
Court of Appeals of Arizona, Division 2.
March 29, 1983.
Rehearing Denied May 17, 1983.
Review Denied July 6, 1983.
*49 Molloy, Jones, Donahue, Trachta, Childers & Mallamo, P.C. by Michael J. Meehan, Tucson, for plaintiffs/appellants.
Slutes, Browning, Sakrison & Grant, P.C. by William D. Browning, Tucson, for defendants/appellees.
OPINION
HOWARD, Chief Judge.
This is a suit for declaratory judgment and for partition of real property. Appellants contend the trial court erred in refusing the admittance of certain evidence as being violative of the parol evidence rule and in not distributing certain of the realty *50 in kind rather than mandating a sale. We affirm.
Vivian Arnold is Susan Cesare's mother and Susan married Joseph Cesare in 1957. Vivian Arnold is a real estate broker as is Joseph Cesare. They formed a partnership to carry on a real estate business and various properties were acquired in the name of one or more of the parties to this suit.
In 1971 Joseph Cesare withdrew from the business with Vivian Arnold and started his own. This prompted litigation between the former partners with respect to the entitlement to various commissions earned on real estate transactions during the period before 1972. Between 1971 and 1977, other actions were commenced in Pima County Superior Court against Joseph Cesare and Vivian Arnold by John and Raymond Cardi, asserting claims against Vivian Arnold and Joseph Cesare and seeking ownership interest in some of the properties of the parties to this case.
In 1974 Joseph Cesare and Susan Cesare were getting a divorce. Because of all the pending litigation, their community assets were tied up in various claims and disputes at the time. They entered into a separation agreement which was ultimately approved by the court. Paragraph 32 of this agreement pertained to the community property as to which "various claims have been made." Such claims included those of Vivian Arnold involving the dissolution of the partnership as well as the Cardi claims. This paragraph stated in part:
"The parties agree that husband shall have the sole and exclusive right and authority to litigate, compromise, settle or otherwise resolve these various claims and disputes and wife does hereby appoint husband her special attorney in fact to take all such action and to execute any and all instruments on her behalf as may be necessary or convenient to litigate, compromise, settle or otherwise resolve these various claims and disputes as he, in his judgment, may deem fit and proper.
Except as is otherwise provided herein, the parties hereto agree to divide all property or monies ultimately distributed to them as a result of the resolution of the claims and litigation on an equal basis, 50% to wife and 50% to husband. However, it is agreed that all legal fees and expenses incurred in connection with said claims and litigation shall be first deducted and paid prior to any 50%-50% distribution to husband and wife. In addition, the parties further agree that if any taxes or expenses on said property in dispute is [sic] not paid as a result of any settlement or judgment in said litigation, that such taxes and expenses owing at the time of any such settlement or judgment shall also be first deducted and paid prior to any 50%-50% distribution to husband and wife." (Emphasis added)
Two years later, on March 15, 1976, Joseph and Susan entered into a stipulation regarding the original property settlement agreement in which the arrangement as to the payment of fees and division of proceeds was expressly reaffirmed. The only difference was that Joseph should account to Susan for the legal expenses and provide her with evidence of payment of the fees. He complied with the stipulation and sent Susan various receipts and statements of account.
The litigation surrounding the Cesare community assets continued in 1977 when Joseph Cesare, Vivian Arnold and the Cardis began to negotiate an agreement to compromise their differences. A settlement agreement was finally signed by Vivian Arnold, Susan Cesare, Joseph Cesare and the Cardis on May 3, 1977.
Paragraph 21 of the 1977 agreement states:
"The parties hereto all agree to be responsible for their own legal fees which may have been incurred in any of the aforesaid actions or otherwise and none of the parties herein shall have any obligation or responsibility to pay the legal fees of the other."
The 1977 agreement identified various real properties and called for the joint ownership of these properties to be placed in trust and then divided between the parties. In the case of property where one-half was to *51 go to Vivian Arnold, the remaining half was to be divided between Joseph and Susan in accordance with the community property provisions of the original property settlement agreement. Susan's one-fourth of the proceeds of the land sales was largely absorbed by the payment of legal fees and other joint obligations by Joseph in accordance with the parties' contractual agreement. Susan, upset by how things had turned out, sought this declaratory judgment, asking the court to establish her right to receive one-fourth of the land sale proceeds without any deductions for legal costs. Vivian Arnold joined as a plaintiff and also sought partition of certain parcels of real property jointly owned by the parties.
The trial court, sitting without a jury, concluded that the 1977 agreement was unambiguous and that Paragraph 21 allowed Joseph to offset the attorney's fees. The court allowed $66,026.85 as a proper offset for attorney's fees pursuant to the agreement between the parties, one-half of this amount chargeable to Susan's share in the sum of $33,013.42.
In addition, the trial court offset from Susan's share of the land sale proceeds the sum of $13,000, representing one-half of the distribution from the assets of the partnership. This distribution, in the amount of $26,000, had been recovered by Joseph as a community recovery and was used by him to pay joint obligations of the parties as was agreed to in their property settlement agreement.
Susan's share of the distributions would have been $35,400 but for the allowed offsets. The allowed offsets totaled $46,013.42. After they were deducted from Susan's share, she was left with a deficit of $10,613.42. This was the amount the trial court awarded as judgment against Susan and in favor of Joseph, to be satisfied by trust disbursements to Joseph before Susan was entitled to her share of the distribution of the trust proceeds of certain land contracts. The trial court also ordered that four parcels of property be sold and the proceeds be divided between the parties to this suit, 50 per cent to Vivian Arnold and 25 per cent each to Joseph and Susan. Appellants contended that the property known as the Deran property and the property consisting of 100 acres located at Los Reales Road should have been divided in kind rather than sold.
Appellants contend the trial court erred in rejecting an offer of proof and testimony which would have shown that Joseph told Susan before she executed the 1977 agreement that Paragraph 21 did not apply to her and that her share of the property recovered was not subject to any deduction for attorney's fees. We do not agree. There is no legal theory under which such testimony can be used to contradict a clear, unambiguous and specific provision.
There are three situations in which it is said that the parol evidence rule does not apply and that parol evidence is admissible: (1) To show that no contract was in fact made (e.g., because of nondelivery or conditional delivery), or that the contract is voidable for fraud, mistake, duress, undue influence, incapacity or illegality; (2) to demonstrate that the parties intended the writing to be only a partial integration of their agreement, thereby permitting the existence of contradictory collateral agreements to be proved, and (3) to assist in the interpretation of the contract, or to prove the usages and customs in relation to which the parties contracted, thus allowing the addition of consistent terms of performance or the definition of words used in the contract. Pinnacle Peak Developers v. TRW Investment Corp., 129 Ariz. 385, 631 P.2d 540 (App. 1980). There is nothing to interpret in the contract of May 1977. There is nothing that shows that the parties intended the writing to be only a partial integration of their agreement, and there was no evidence of mutual mistake of fact, duress, undue influence, incapacity or illegality. At most, the excluded testimony would have shown, according to appellants, that there was a misrepresentation. However, such evidence is not admissible in a situation such as this to cause the express terms *52 of the agreement to be read just the opposite. Sun Lodge, Inc. v. Ramada Development Co., 124 Ariz. 540, 606 P.2d 30 (App. 1979). The agreement states that all parties are to pay their own legal fees. This provision is consistent with the property settlement agreement of Joseph and Susan which made Susan liable for her share of the attorney's fees. Appellants now want to make the agreement read that all parties except Susan are to pay their own attorney's fees. This is not like Lusk Corporation v. Burgess, 85 Ariz. 90, 332 P.2d 493 (1958). There, the agreement contained a provision stating that the writing covered all the agreements expressed or implied between the parties. The court held that in the case of fraud in the inducement, parol evidence could be admitted in spite of the general provision in the contract concerning prior agreements. Here we do not have an attack on such general contract language but, instead, an attempt to make a provision of a contract dealing with a specific subject matter to read just the opposite. Sun Lodge applies.
Appellants argue that the trial court should have reformed the May 1977 agreement based upon the fraudulent representations of Joseph Cesare. Since this remedy was not sought in the trial court, appellants have waived any right to assert the issue on appeal.
Appellants also argue that the trial court erred in charging Susan with the $13,000 of the distribution from the partnership because there was nothing that showed she ever received such distributions. Appellants' argument is misconceived since the record shows that the $26,000 from the partnership was used by Joseph Cesare to pay joint tax obligations of both Joseph and Susan. Therefore, Susan was in constructive receipt of her share.[1]
A.R.S. § 12-1218(B) states:
"If on the trial of the action, it appears to the court that fair partition of the property cannot be made without depreciating the value thereof, or that for any reason a sale is more beneficial to the parties or any of them, it shall in the first instance, enter a judgment directing that the real property be sold."
Appellants contend that as to the 27-acre parcel known as the Deran property and the 100-acre parcel in the proximity of Jeffrey and Los Reales roads, the court erred in not dividing it in kind. We do not agree. Joseph Cesare testified that the value of the 27 acres, which had frontage on both Camino de Oeste and the Tucson-Ajo Highway, would be destroyed if divided because it might prejudice a pending zoning application. Furthermore, it was his opinion that the value of the property would be diminished because most its value was in the east half which fronted on Camino de Oeste and the Tucson-Ajo Highway. This evidence showed that the property could not be partitioned in kind without depreciating its value.
As for the 100 acres, it was zoned for residential use. Because of a slope ordinance, residential units could be built on approximately 45 acres out of the 100. While the remaining acres could not be built upon, their area could be counted in aggregating the number of units that could be built on the 45 buildable acres. There was testimony that a great deal of engineering work would have to be done on all the property in order to properly divide the property. The trial court found that the parties were unable to deal with each other in their best interests, which was quite evident from the attitude of the parties towards each other at the trial. Furthermore, the trial court found that there was a problem with access to a portion of the property and that partition of the property would destroy the value of the whole.
The findings of the trial court relative to the 100 acres is supported by the evidence and falls within that part of A.R.S. § 12-1218(B) that states that the court can decree *53 a sale if for any reason a sale is more beneficial to the parties or any of them. The court was obviously of the opinion that there might be problems as far as getting the parties to cooperate in the division of property and in providing access to portions of it and it did not err in ordering the sale of the property.
Affirmed.
HATHAWAY and BIRDSALL, JJ., concur.
NOTES
[1] Appellants raised another theory in their reply brief as to why the amount should not have been charged to Susan. It is improper to raise new issues in the reply brief. Cathemer v. Hunter, 27 Ariz. App. 780, 558 P.2d 975 (1976). We decline to consider the new issue. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2615209/ | 668 P.2d 1245 (1983)
64 Or.App. 493
LANGFUS, INC., an Oregon Corporation, Dba Carpet City, Respondent,
v.
Louie QUEIROLO and Harriet Queirolo, Husband and Wife, Defendants-Third Party Plaintiffs-Appellants,
v.
Don Reum and Western Surety Company, Third Party Defendants-Respondents.
No. 216775; A24602.
Court of Appeals of Oregon.
Argued and Submitted May 25, 1983.
Decided September 7, 1983.
Reconsideration Denied November 10, 1983.
Magar E. Magar, Portland, argued the cause and filed the brief for defendants third party plaintiffs-appellants.
Roscoe C. Nelson, Portland, argued the cause for respondent. With him on the brief was Nelson & Nelson, Portland.
John P. Crowell, Portland, argued the cause for third party defendant-respondent Western Surety Co. With him on the brief was Morrison, Dunn, Carney, Allen & Tongue, Portland.
No appearance for third party defendant-respondent Don Reum.
Before RICHARDSON, P.J., and VAN HOOMISSEN and NEWMAN, JJ.
*1246 NEWMAN, Judge.
Plaintiff sued for the balance of the purchase price of carpets. Defendants' answer alleged that plaintiff had obtained the sales contract by fraud. Defendants appeal from a judgment for plaintiff for $1703.89, plus prejudgment interest, plus $1500 attorney fees.
Defendants assign as errors that the trial court, following the jury verdict, included prejudgment interest in plaintiff's judgment, although the verdict omitted it, awarded plaintiff attorney fees of $1500, and instructed the jury that defendants must establish their fraud defense by "clear and convincing evidence." We modify the judgment to eliminate the provision for prejudgment interest and affirm it as modified.
Defendants filed a third-party complaint for indemnity against the contractor who installed the carpets and Western Surety Company (Surety), the surety on the contractor's builder's bond. Defendants obtained a default judgment against the contractor for $1900, but the court granted Surety a summary judgment, from which defendants also appeal. We discuss the judgment for Surety first.
Defendants pleaded that they gave the Builders Board timely notice of their claim 90 days prior to filing their third-party complaint.[1] ORS 701.155, as in effect at the time, required that a claimant give the Board notice 90 days before the commencement of any action on the builder's bond.[2]
Surety moved for summary judgment on March 8, 1982. Attached to its motion was a certification from the Board that its records showed that defendants had not filed a claim against the contractor with it. Defendants did not object that the attachment was in the form of a certification rather than an affidavit, and the trial court considered it. See Flavel v. Pacific Power & Light, 43 Or. App. 917, 920, 607 P.2d 731 (1979), rev. den. 289 Or. 45 (1980). Defendants filed no response to Surety's motion, although they could not rest on the allegations in their pleadings. ORCP 47D; Anderson v. Portland Comm. College, 37 Or. App. 817, 588 P.2d 128 (1978), rev. den. 285 Or. 195 (1979).
The record contains an affidavit of defendants' counsel, dated April 1, 1982, stating that he had sent notice of the claim to the Board on or about August 27, 1981. It also contains a copy of the notice and the certified mail return receipt showing that the board received the letter on September 9, 1981, more than 90 days before defendants filed their third-party complaint against the contractor and Surety. The record, however, does not disclose that defendants filed the affidavit or letter with the trial court, or otherwise brought them to the trial court's attention, before the trial court ruled on Surety's summary judgment motion.
Defendants' counsel wrote to the trial court on April 9, 1982, requesting reconsideration of the summary judgment motion. The trial court denied the request:
*1247 "At the time this matter was heard, you did not wish it on the record and you did not wish to submit anything further. I informed both parties that I would decide within a few hours and both of you were agreeable. The matter is closed." (Emphasis supplied.)
Accordingly, it appears on this record that the sole documentation before the trial court was Surety's motion for summary judgment and the supporting certification from the Board. We find the trial court did not err in granting Surety's motion and dismissing defendants' third-party complaint.
With respect to defendants' appeal from plaintiff's judgment, the carpet contract between plaintiff and defendants provides that past due accounts carry interest at 18 percent per annum. Following the jury verdict for plaintiff of $1,703.89, the court entered judgment against defendants for that sum "together with interest at the rate of 18 percent per annum from November 15, 1980, until paid."
ORCP 61 A(2) provides:
"When a general verdict is found in favor of a party asserting a claim for the recovery of money, the jury shall also assess the amount of recovery. * * *"
In Printing Industry v. Banks, 150 Or. 554, 46 P.2d 596 (1935), the court considered substantially similar language in section 2-405, Oregon Code 1930, and stated that
"* * * in an action for the recovery of money where the verdict contains no reference to interest on the principal sum and the jury has been discharged, the court has no power to render judgment for interest; * * * the only remedy in such a case is a motion for a new trial * * *. 150 Or. at 565, 46 P.2d 596.
See also State Highway Com'n.v. Deal et al., 191 Or. 661, 682-83, 233 P.2d 242 (1951). Although the jury is not required to compute the amount of interest, the verdict must provide for the recovery of interest before the court may include interest in the judgment and compute the specific amount due. Here the verdict did not mention interest. Accordingly, we modify plaintiff's judgment to strike the provision for prejudgment interest.
Defendants argue that the court erred in awarding plaintiff $1,500 as an attorney fee. In the carpet contract defendant agreed to pay a reasonable attorney fee if the contract was referred to an attorney for collection. Before trial, the parties stipulated that the court could set an attorney fee for the prevailing party. After judgment, defendants objected to the amount allowed. At the hearing pursuant to ORCP 68 C(4)(c) plaintiff's attorney submitted his affidavit and other evidence of the time he spent, its necessity and his hourly rate and that the charges were reasonable. The trial court did not err.
The court instructed the jury that defendants must prove the elements of their fraud defense by "clear and convincing evidence." Defendants argue that the instruction contravenes ORS 10.095(5), which provides that the jury "on all proper occasions" is to be instructed in civil cases that the jury's finding "shall be according to the preponderance of the evidence." The Oregon Supreme Court, however, has stated that in actions for common law fraud the proof must be established by "clear and convincing evidence." See Cook v. Michael, 214 Or. 513, 527, 330 P.2d 1026 (1958); See also Mutual of Enumclaw Ins. v. McBride et al., 295 Or. 398, 667 P.2d 494 (1983).
Affirmed as to third party defendant Western Surety Company; plaintiffs' judgment against defendants is modified by striking prejudgment interest and, except as modified, affirmed.
NOTES
[1] Before defendants took a default judgment against the contractor, Surety moved to dismiss defendants' third-party complaint for failure to allege that notice had been given to the Builder's Board pursuant to former ORS 701.155. The motion was granted, and the third-party complaint was "dismissed" without prejudice. Defendants thereafter amended their third-party complaint by alleging notice of claim to the Builder's Board.
[2] ORS 701.155 provided:
"A person having a claim against a builder shall give the board notice of the claim by registered or certified mail 90 days before any action on the bond or deposit is commenced."
On August 17, 1981, ten days prior to the date of defendants' notice, ORS 701.155 was repealed, effective November 1, 1981. Or. Laws 1981, ch. 618, § 18. ORS 701.085 was amended to provide in subsection (5):
"The bond required under this section is for the exclusive purpose of payment of final orders of the board in accordance with this chapter.",
and to provide in subsection (7):
"No suit or action may be commenced against a surety on a bond required under this section until 90 days after the date that the surety is notified by the board under ORS 701.140 that payment is due on the claim."
These amendments, also, did not take effect until November 1, 1981. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1091713/ | 463 So. 2d 138 (1984)
Jessie V.L. LETT, Administratrix of the Estate of Sharon Lett Watts, deceased
v.
Ruby Jo WATTS, Administratrix of the Estate of William Gary Watts, deceased.
83-900.
Supreme Court of Alabama.
December 21, 1984.
Rehearing Denied January 25, 1985.
*139 Ray F. Robbins II, Talladega, for appellant.
James S. Hubbard and William Henry Agee, Anniston, for appellee.
SHORES, Justice.
William Gary Watts and his wife, Sharon Lett Watts, died intestate in an automobile accident on March 6, 1983. There were no children born of their marriage, and neither had any lineal descendants.
The plaintiff, Jessie V.L. Lett, in her capacity as administratrix of the estate of Sharon Lett Watts, filed a complaint against the defendant, Ruby Jo Watts, in her capacity as administratrix of the estate of William Gary Watts, wherein she asked the court to declare that the estate of Sharon Watts was a joint owner of the numerous items of real and personal property which were in the name of Gary Watts and possessed by both Gary and Sharon Watts at the time of their deaths. The plaintiff also asked that a constructive trust be imposed on certain property claimed by the defendant. The plaintiff filed an amendment to her complaint, wherein she added a second count seeking a judgment against the defendant for work and labor done by Sharon Watts for Gary Watts from the date of their marriage on June 29, 1979, until their deaths. The defendant moved to dismiss the second count for failure to comply with the non-claim statute, § 43-2-350(b), Ala.Code 1975. A ruling on the defendant's motion was reserved until after the trial. The case was tried before a judge who, after hearing all of the evidence, entered a judgment, including extensive findings of fact. The pertinent portions of those findings are as follows:
(1) W.T. Watts was the father of Gary Watts and, during his lifetime and until his death on August 12, 1979, operated a business known as "Watts Construction Company," which was a sole proprietorship individually owned by W.T. Watts.
(2) Immediately after the death of his father, Gary Watts took over and continued to operate the business.
(3) Watts Construction Company was a trade name under which Gary Watts did business from August 12, 1979, continuously until the date of his death.
(4) W.T. Watts's account with the Alabama Department of Industrial Relations and the subsequent account number assigned to Gary Watts d/b/a Watts Construction Company indicate that the business operated by Gary Watts was a successor business to that owned by his father, and the records of the Alabama Department of Industrial Relations further indicate that Gary Watts acquired the company as a going business from his father and that it was a sole proprietorship individually owned by Gary Watts during his lifetime.
(5) The records of the Motor Fuels Division of the Alabama Department of Revenue also indicate that the business was a sole proprietorship individually owned by Gary Watts during his lifetime.
(6) All of the work done by Gary Watts under the trade name Watts Construction Company for Alabama Power Company, hereinafter referred to as APCo, was completed pursuant to contracts entered into with APCo by Gary Watts, individually, and APCo looked to him solely for the performance of those contracts, and APCo, for its own business purposes, regarded Watts Construction Company as being a sole proprietorship individually owned by Gary Watts. All business insurance maintained by Watts Construction Company in compliance with contractual responsibilities entered into by Gary Watts with APCo was in the name of Gary Watts solely, and all *140 records related to the insurance noted that the company was a sole proprietorship owned by Gary Watts.
(7) All of the reports filed with the Internal Revenue Service (I.R.S.) by APCo in connection with payments made in accordance with contracts entered into with Gary Watts, d/b/a Watts Construction Company, designated his social security number as the appropriate taxpayer payee who should report the payments to the I.R.S.
(8) Gary Watts inherited from his father the equipment and other personal property necessary to continue the operation of the company, and subsequent to the continuation of the business and from the revenues received from contractual payments by APCo, he acquired other items of equipment and personal property which were being used in the business on the date of his death, so that the equipment and other personal property being used in the business consisted of certain inherited property and also of certain property acquired by purchase, and, in some cases, by the trading in of inherited property on the newly purchased property, as well as by the trading in of subsequently acquired property.
(9) For the calendar years 1979, 1980, and 1981, Gary and Sharon Watts filed jointly with the I.R.S., with each return being duly executed by both. On each return, Gary Watts listed his occupation as "construction" and reported all of the income of Watts Construction Company for the year applicable and listed himself as the "proprietor" of Watts Construction Company and the same "employer identification number" for federal tax reporting purposes as was assigned by the I.R.S. to his father when he operated the business. On each return, Sharon Watts listed her occupation as "housewife."
(10) For calendar years 1979, 1980, and 1981, Gary and Sharon Watts filed returns with the Alabama Department of Revenue, with each return being duly executed by both. On each return, Gary Watts listed his occupation as "construction" and Sharon Watts listed her occupation as "housewife."
(11) On each of the federal returns, Gary Watts paid self-employment taxes based on his net earnings doing business as Watts Construction Company; however, on each return, Sharon Watts neither reported earnings from self-employment, nor paid any self-employment taxes for social security purposes.
(12) Sharon Watts was a cosmetologist from July 1, 1978, until 1982, as reported on an application for employment which she executed with the U.S. Postal Service and which further stated that her "reason for wanting to leave" that employment was "started college."
(13) Sharon Watts was issued a substitute teacher's certificate on December 8, 1982, which was in effect at the time of her death, and she did some substitute teaching pursuant to the certificate.
(14) On the date of her death, Sharon Watts was employed by the U.S. Postal Service as a substitute mail carrier.
(15) During the winter quarter of 1983 and until her death, Sharon Watts was enrolled as a full-time college student, pursuing a degree in elementary education.
(16) Funds held on deposit in a checking account, which were interpleaded into the court and held on deposit by the clerk, were the property of Gary Watts, d/b/a Watts Construction Company.
(17) On the date of her death, Sharon Watts owned a quilt and certain other personal property and personal effects located inside the residence owned by Gary Watts and occupied by the couple.
(18) All other property was owned by Gary Watts, individually.
The trial court then held as follows in its decree:
(1) That Watts Construction Company was a sole proprietorship individually owned by Gary Watts and is now the property of the defendant.
(2) That the quilt and other personal property and effects located inside the residence occupied by the couple and belonging *141 to Sharon Watts are the property of the plaintiff.
(3) That the net proceeds from the checking account of Gary Watts, d/b/a Watts Construction Company, held on deposit by the clerk of the court, are the property of the defendant.
(4) That all other property found to belong to Gary Watts individually is the property of the defendant.
After the trial, the court granted the defendant's motion to strike the plaintiff's second count, and the plaintiff appealed. We affirm.
The plaintiff contends here, as she did at trial, that Gary and Sharon Watts were partners in the business of Watts Construction Company and argues that the trial court erred in its finding that Watts Construction Company was a sole proprietorship individually owned by Gary Watts at the time of his death. We disagree.
There was evidence that both Gary and Sharon Watts worked in the business of Watts Construction Company, that both executed loans to cover the operating expenses of the company, and that both wrote checks on the company account for business and personal purchases. The plaintiff relies on § 10-8-20(4), Ala.Code 1975, which creates a presumption of partnership where a person receives a share of the profits of a business. The plaintiff argues that Sharon Watts shared in the profits of the business by drawing checks on the business account for personal purchases and shared risk of loss by executing loans for business purposes, thereby raising a presumption that the couple were partners, which was not rebutted in the evidence. Again, we disagree.
There is no express partnership agreement, and under the evidence produced at trial, the court was justified in its finding that no partnership existed. The trial court heard all of the evidence, examined the exhibits, and observed the demeanor of the witnesses. It decided that, under the circumstances, it was not the intention of Gary and Sharon Watts to act as a partnership. Where a trial court decides a factual issue on conflicting evidence, this Court will not reverse unless there is no evidence to support the factual determination so made. Burbic Contracting Co. v. Willis, 386 So. 2d 419 (Ala.1980). There was ample evidence introduced at trial to support the trial court's findings and, consequently, there was no error in its determination.
The plaintiff next contends that the trial court erred by excluding the testimony of William David Taylor. Again, we disagree.
During the course of the trial, the testimony of Taylor, a witness for the plaintiff, was excluded as violating § 12-21-163, Ala.Code 1975, commonly known as the Dead Man's Statute. Taylor had filed a claim against the estate of Gary Watts, alleging that he was a partner with Gary Watts in an aviation business and that he owned an interest in certain property belonging to that partnership. The property claimed by Taylor was also claimed by the defendant to be a part of Gary Watt's estate.
The defendant contends that Taylor's claim to this property rendered him incompetent to testify under the statute.
The plaintiff insists that Taylor's claim presented no direct and immediate conflict with the estate of Gary Watts to the extent that he would be rendered incompetent to testify by virtue of a pecuniary interest in the result of the case.
The statute provides in pertinent part as follows:
"[N]o person having a pecuniary interest in the result of the action or proceeding shall be allowed to testify against the party to whom his interest is opposed as to any transaction with, or statement by, the deceased person whose estate is interested in the result of the action or proceeding ... unless called to testify thereto by the party to whom such interest is opposed or unless the testimony of such deceased person in relation to such transaction or statement is introduced in *142 evidence by the party whose interest is opposed to that of the witness...."
Thus, the statute has been construed to prohibit testimony where four facts co-exist: (1) the testimony concerns a transaction with or a statement of a person now deceased; (2) the estate of the deceased will be affected by the outcome of the suit; (3) the witness has a pecuniary interest in the suit; and (4) the interest of the witness is adverse to the decedent or his estate. Staik v. Jefferson Federal Savings and Loan Ass'n of Birmingham, 434 So. 2d 763 (Ala.1983).
There were two estates interested in the result of this case. The estate of Sharon Watts would be increased if the plaintiff were successful, while the estate of Gary Watts would be diminished if that should occur. Taylor's testimony concerned transactions and conversations that he had had with both Gary and Sharon Watts. Taylor had a pecuniary interest in the case by virtue of his claim of ownership to property also claimed by the defendant for the estate of Gary Watts and by the plaintiff for the estate of Sharon Watts. In this respect, his interest was adverse to both estates.
The purpose of the Dead Man's Statute is to prevent testimony by a living witness having a pecuniary interest in an estate as to transactions with or statements made by persons who are no longer alive to contradict such testimony. The purpose of the statute was served in this case by the trial court's proper exclusion of Taylor's testimony.
The plaintiff finally contends that the trial court erred in striking her second count.
On March 12, 1983, letters of administration in the estate of Gary Watts were granted to the defendant. The plaintiff filed her complaint for declaratory judgment on April 21, 1983. The plaintiff filed an amendment to her complaint on December 2, 1983, adding a second count for work and labor done. After the trial, the court granted the defendant's motion to strike the second count as violating the non-claim statute, § 43-2-350, Ala.Code 1975.
The plaintiff insists that this was reversible error because the amendment was merely an assertion of an alternative theory of recovery concerning funds and property against which a timely claim had previously been made in the original complaint. The plaintiff, relying on Barrett v. Fondren, 262 Ala. 537, 80 So. 2d 243 (1955), and Rule 15(c), Alabama Rules of Civil Procedure, argues that the amendment should relate back to the date the original complaint was filed.
The defendant, relying on this Court's holding in Motley v. Battle, 368 So. 2d 20 (Ala.1979), argues that the plaintiff's claim for work and labor cannot be saved by the relation back doctrine of Rule 15(c). We agree.
The non-claim statute, in pertinent part, provides:
"All claims against the estate of a decedent ... whether due or to become due, must be presented within six months after the grant of letters testamentary or of administration; and if not presented within that time, they are forever barred and the payment or allowance thereof is prohibited."
The purpose of the non-claim statute is to expedite the orderly settlement of estates by giving the personal representative notice of "all claims against the estate." In Barrett, supra, this Court held that a civil action filed within six months after the grant of letters of administration was a sufficient presentation of a claim against an estate to give the personal representative such notice.
In the present case, there were no allegations in the action for declaratory judgment and the claim for the imposition of a constructive trust to put the defendant on notice that a claim for work and labor would be made. We hold that the trial court did not err in striking the count for work and labor as being barred by the non-claim statute.
*143 Other errors argued by the plaintiff this Court finds without merit in that there was evidence introduced at trial sufficient to support the trial judge's decision.
AFFIRMED.
TORBERT, C.J., and MADDOX, JONES and BEATTY, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1780478/ | 754 S.W.2d 660 (1988)
Ex parte Roger CANADA.
No. 69704.
Court of Criminal Appeals of Texas, En Banc.
May 11, 1988.
Roger Canada, pro se.
Sam D. Millsap, Jr., Former Dist. Atty. and Charles Estee, Former Asst. Dist. Atty., San Antonio, Robert Huttash, State's Atty., Austin, for the State.
Before the Court en banc.
OPINION
DUNCAN, Judge.
This is a post-conviction application for a writ of habeas corpus transmitted to this Court pursuant to Article 11.07, V.A.C.C.P. The applicant was convicted of the offense of burglary and assessed a punishment of five years in the Texas Department of Corrections. Applicant's conviction was affirmed in an opinion by this Court. Canada v. State, 660 S.W.2d 528 (Tex.Cr.App. 1983), affirming, 636 S.W.2d 632 (Tex.App. San Antonio 1982). In his application for writ of habeas corpus, applicant contends that he is being denied flat time credit for the time he was incarcerated between his arrest on the execution of an arrest warrant for a parole violation and the date on which his parole was formally revoked or continued. A brief recitation of facts is necessary.
I. FACTS
As previously noted, applicant was convicted by a jury of burglary of a habitation and assessed a five year prison sentence on November 14, 1980. In the judgment of conviction the applicant was properly credited for the time he spent in jail prior to his trial. Approximately one year later, on November 16, 1981, applicant was released on parole. Shortly thereafter, an arrest warrant was issued based upon allegations that he had violated the terms of his parole. The Pre-Revocation Warrant of Arrest was *661 executed on March 8, 1982 and he was placed in jail. The applicant thereafter requested a hearing on the revocation charges. After holding a hearing, the applicant's parole was continued and the pre-revocation warrant was withdrawn on May 20, 1982. Thus, the applicant was confined for seventy-four days before he was released.
On July 28, 1983, a second pre-revocation arrest warrant was issued on the basis of several alleged parole violations, to-wit: possession of a firearm, burglary of a habitation, theft, driving without an operator's license and no liability insurance. However, the applicant had already been arrested on July 11, 1983 for some of the criminal offenses that constituted the alleged parole violations. At the conclusion of a requested formal parole revocation hearing on September 19, 1983, the applicant's parole was revoked. Thus, this time the applicant remained in the county jail for approximately fifty-four days.[1]
After returning to the penitentiary, the appellant was convicted for the offense of aggravated assault on a prison guard and assessed on additional five year sentence to be served consecutively. Section 22.02(a)(2), V.A.P.C. The appellant was to begin serving this latter sentence only after completing his initial five year sentence for burglary of a habitation. Article 42.08(b), V.A.C.C.P. At the time the appellant filed his writ of habeas corpus on June 19, 1986, he had arguably discharged his initial five year sentence. The record, however, does not reveal the appellant's status with regards to this initial sentence. Nor does the State argue tht he has discharged his sentence.
According to the Inmate Tracking System Commitment Data form used by the Texas Department of Corrections to determine sentence length, the appellant is being treated as though he had been assessed a single ten year sentence. For purposes of this writ application, it is immaterial whether the appellant is being treated by TDC as having one ten year sentence or two consecutive five year sentences. In either situation, if the appellant were to prevail in his claim to flat time credit he would eventually be discharged that much sooner. For example, if the appellant were to receive any credit for time spent in the county jail pending a formal revocation of his parole on his original burglary conviction, he would have discharged that sentence sooner and consequently begun to serve his five year sentence for assault on a prison guard sooner also.
In summary, the applicant contends that he has been denied flat time credit towards fulfillment of his first five year sentence for these two separate periods of confinement pending the two separate parole revocation hearings. The State contends that a denial of credit for time spent in confinement prior to a parole revocation hearing is appropriate because of Article 42.18, § 15(a), V.A.C.C.P.:[2]
*662 When a person's parole, mandatory supervision, or conditional pardon is revoked, that person may be required to serve the portion remaining of the sentence on which he was released, such portion remaining to be calculated without credit for the time from the date of his release to the date of revocation. When a warrant is issued by the board or the governor charging a violation of release conditions, the sentence time credit shall be suspended until a determination is made by the board or the governor in such case and such suspended time credit may be reinstated by the board should such parole, mandatory supervision, or conditional pardon be continued [emphasis added.]
The State observes that the applicant's parole was continued following the execution of the first arrest warrant. The Board of Pardons and Paroles, vested with the discretion provided in Article 42.18, § 15(a), supra, thereafter refused to credit the applicant with the time spent awaiting the first parole revocation hearing. Likewise, the State argues that Article 42.18, § 15(a), supra, mandatorily denies any time credit for time spent in confinement between the execution of the second arrest warrant and the formal revocation hearing.
The applicant, however, contends that Article 42.18, § 15(a), supra, operates to deny him his due process of law rights of the Fourteenth Amendment to the Federal Constitution and his due course of law rights within the Texas Constitution. That is, by failing to give flat time credit for time spent in confinement following the execution of these two separate parole revocation warrants, the applicant is suffering a deprivation of liberty greater than that for which he was originally sentenced.
This application for writ of habeas corpus was filed and set on December 3, 1986. At that time, the applicant was confined within the Ramsey Two Unit of the Texas Department of Corrections. On September 10, 1987 the applicant was released on mandatory supervision. If the applicant satisfactorily completes the mandatory supervision program he is scheduled to be discharged on June 27, 1992. Our initial inquiry focuses on whether applicant may assert his claim to relief by way of an application for writ of habeas corpus pursuant to Article 11.07, supra.
II. ARTICLE 11.07 WRIT OF HABEAS CORPUS JURISDICTION
An individual under the mandatory supervision of the Board of Pardons and Paroles (hereinafter the Board) has been released from the physical custody of the Texas Department of Corrections, but must serve the remainder of his sentence under the supervision and control of the Board. Article 42.18, § 2(b), supra. The mandatory supervision program is separate and distinct from that of parole. Also, mandatory supervision may not be construed as either a commutation of sentence or any other form of executive clemency. Consequently, the individual placed on mandatory supervision has not yet discharged his original sentence.
While the eligibility for parole and mandatory supervision programs may differ, upon release a prisoner under mandatory supervision shall be deemed as if released on parole. Article 42.18, § 8(c), supra. *663 Accordingly, every prisoner on mandatory supervision remains in the legal custody of the State. Id.; Yarbrough v. State 703 S.W.2d 645 (Tex.Cr.App.1985).
In order to submit an application for a post-conviction writ of habeas corpus pursuant to Article 11.07, §§ 2 and 3, supra, an applicant must at the outset be complaining of a final felony conviction. Ex parte Renier, 734 S.W.2d 349, 351 (Tex.Cr. App.1987). In addition, it must be emphasized that Article 11.07, supra, is concerned with confinement as opposed to restraint. Ex parte Renier, supra.
In Ex parte Renier, id., the applicant was complaining of a void conviction that had been completely discharged by his satisfactorily fulfilling the conditions of his probation. After satisfactorily completing the required time on probation, the trial court permitted the defendant to withdraw his plea of guilty, the indictment was dismissed and the judgment of conviction set aside. This Court held that the defendant had been released from all penalties and disabilities and that there had been no final felony conviction. In addition, we held that the defendant was not in confinement, thereby failing to establish the other prerequisite to relief.
Comparing the Article 11.07, supra, requirements as detailed in Ex parte Renier, supra, to this case, it is quite obvious that the applicant meets the first condition in that his complaint concerns a final conviction for the felony offense of burglary of a habitation. V.T.C.A. Penal Code, § 30.01.
Relative to the second requirement, Article 11.21, supra, in essence equates the term "confined" with not only physical detention but "any coercive measures by threats, menaces or the fear of injury, whereby one person exercises a control over the person of another, and detains him within certain limits." Id. Further, the determination of whether one is confined is to be made on the date the application for writ of habeas corpus is filed. In Ex parte Renier, supra, the Court stated: "[w]e see that before and in Ex parte Guzmon ... [551 S.W.2d 387 (Tex.Cr.App.1977) ] every 11.07 applicant was under some character of confinementat least at the time he filed his application." Id.; see also Jones v. Cunningham, 371 U.S. 236, 83 S. Ct. 373, 9 L. Ed. 2d 285 (1963). At the time of his application the applicant was in physical custody. Under Article 11.21, supra, he is still in confinement. Ex parte Elliott, 746 S.W.2d 762, 763 fn. 1 (Tex.Cr.App., 1988). Consequently, the applicant meets the second criteria necessary to require a review of his application by this Court.
It should be observed that by releasing the applicant under mandatory supervision the contentions raised in his application for writ of habeas corpus have not become moot. In Ex parte Burt, 499 S.W.2d 109 (Tex.Cr.App.1973), we observed that a criminal case is moot "`[o]nly if it is shown that there is no possibility that any collateral legal consequences will be imposed on the basis of the challenged conviction.'" Id., at 110 (citing Sibron v. New York, 392 U.S. 40, 88 S. Ct. 1889, 20 L. Ed. 29 (1968)); see also Ex parte Legg, 571 S.W.2d 930 (Tex. Cr.App.1978); Ex parte Guzman, 551 S.W.2d 387 (Tex.Cr.App.1977); Ex parte Crosley, 548 S.W.2d 409 (Tex.Cr.App.1977); Ex parte Langston, 510 S.W.2d 603 (Tex.Cr. App.1974).
The applicant is not challenging his conviction, but is instead challenging the time necessary to fulfill his sentence, and this Court has previously held that the duration of a prisoner's confinement and applicable time credits is a proper subject for an Article 11.07, supra, writ of habeas corpus. Ex parte Henson, 731 S.W.2d 97 (Tex.Cr. App.1987); Ex parte Peel, 626 S.W.2d 767 (Tex.Cr.App.1982); Ex parte Hurd, 613 S.W.2d 742 (Tex.Cr.App.1981); Ex parte Pizzalota, 610 S.W.2d 486 (Tex.Cr.App. 1981); Ex parte Weaver, 537 S.W.2d 252 (Tex.Cr.App.1976); Ex parte Esquivel, 531 S.W.2d 339 (Tex.Cr.App.1976).
Further, a time credit complaint is not rendered moot if direct or collateral legal consequences may flow from the wrongful denial of earned time credit. Consequently, a time credit complaint may be rendered moot when an inmate is completely discharged from confinement, control or supervision. Yet an individual placed on *664 mandatory supervision must serve a period of time equal to the maximum term for which he was sentenced less calendar time actually served on the sentence before his sentence is considered discharged. Article 42.18, § 8(c), supra. Thus, the contentions raised in applicant's application for writ of habeas corpus requesting credit for additional flat time have a direct impact on the amount of time under which the applicant will be subject to the Board's mandatory supervision. Nor is the applicant's claim rendered moot by the discharge of his initial five year sentence. As previously stated, the denial of earned time credit on the initial sentence would serve to delay his eventual discharge date on that sentence. In doing so, the commencement of the second five year sentence was likewise delayed. Prior convictions which have been discharged may have serious collateral consequences to a criminal defendant, thus the mootness doctrine cannot prohibit a collateral attack. Ex parte Guzman, 551 S.W.2d 387 (Tex.Cr.App.1977). In this case the failure to properly credit flat time on a discharged conviction has a direct bearing on the amount of time to be served pursuant to a consecutive sentence. Clearly, the applicant is suffering collateral consequences from the denial of properly earned time credits on the initial five year sentence.
III. WHETHER FLAT TIME CREDIT MUST BE GIVEN FOR TIME SPENT IN CONFINEMENT FOLLOWING RELEASE ON PAROLE OR MANDATORY SUPERVISION
The applicant is complaining of the denial of flat time credit in two separate instances: (1) the seventy-four day period spent in confinement between the execution of the first pre-revocation warrant and the date on which his parole was continued; and (2) the fifty-four day period between the execution of the second pre-revocation warrant and the date on which his parole was formally revoked.[3] For clarity the latter period of confinement will be considered first.
A. Confinement Between Execution of the Second Pre-Revocation Warrant and the Date on Which Parole was Formally Revoked
As previously noted, the applicant contends that he has been denied flat time credit for the period between the execution of the second pre-revocation warrant and the date on which his parole was formally revoked. The State argues that Article 42.18, § 15(a), supra, requires the denial of any time credit for the period following an inmates release on parole and the date on which his parole is revoked, which necessarily includes any detention which is prior to formal revocation. Despite the State's contentions as to the mandatory nature of Article 42.18, § 15(a), supra, and rather surprisingly, the record reveals that the applicant is not only receiving flat time for the period following arrest on the pre-revocation arrest warrant but good time credit as well.
The Proclamation by the Governor of the State of Texas revoking the applicant's parole specifically orders the proper authorities to transfer the applicant to the Texas Department of Corrections to serve the sentence imposed upon him "and the time during which subject has been at large on parole or administrative release, shall not be considered or credited to subject as time served on sentence [emphasis added]." Consequently, the order revoking applicant's parole expressly gives him the relief he requests. Moreover, the inmate tracking system commitment data form used by TDC indicates that the applicant is being credited with "jail good time" from July 28, 1983, the date on which the applicant was arrested the second time. Thus, in contravention of the admittedly mandatory language of Article 42.18, § 15(a), supra, the applicant is receiving credit on his sentence for the period in which he was confined *665 between the execution of the second warrant and the revocation of his parole. Accordingly, applicant's second complaint is rejected.
B. Confinement Between Execution of the First Pre-Revocation Warrant and the Date on Which Parole Was Continued
As previously noted, the applicant also complains of the denial of flat time credit for the period in which he was confined between the execution of the first pre-revocation warrant and the date on which the pre-revocation warrant was withdrawn because the applicant's parole status was continued. The record before us confirms that the applicant has not been given any credit for this seventy-four day period of confinement. The State contends that the denial of time credit in this instance is proper pursuant to the discretionary authority granted the Board by Article 42.18, § 15(a), V.A.C.C.P.
The allowance or denial of time credits toward the fulfillment of an assessed sentence on constitutional grounds continues to be a source of problems. As a corollary consideration, one should observe that there is no constitutional right to credit for the time served between an arrest and the sentence. Jackson v. State of Alabama, 530 F.2d 1231 (CA5 1976); Gremillion v. Henderson, 425 F.2d 1293 (CA5 1970). But see Parker v. Estelle, 498 F.2d 625, 627 (CA5 1974), cert. denied, 421 U.S. 963, 95 S. Ct. 1951, 44 L. Ed. 2d 450. However, and despite the apparent absence of at least any federal constitutional necessity, Texas has historically and statutorily allowed the trial judge at least the discretion of crediting a defendant's sentence with the time he spent in jail prior to the date he is sentenced. (Prece. to art. 42.02) In 1973 the Legislature amended old Article 42.03, § 2, V.A.C.C.P., and made it mandatory that the trial judge award such time credit to a defendant's sentence. The statute now states:
(a) In all criminal cases the judge of the court in which the defendant was convicted shall give the defendant credit on his sentence for the time that the defendant has spent in jail in said cause, from the time of his arrest and confinement until his sentence by the trial court.
(b) In all felony probation revocations the judge shall enter the restitution or repraration due and owing on the date of the revocation of probation.
In Ex Parte Green, 688 S.W.2d 555 (Tex. Cr.App.1985), the Court observed the change and stated:
In so doing the Legislature recognized that pretrial confinement, though not instigated for purposes of punishment, nevertheless has an incidental punitive effect in that it deprives the detainee of his liberty. To compensate for this deprivation the Legislature provided that whenever that detainee is ultimately assessed a term of imprisonment the convicting court shall grant credit to his sentence for time spent in pretrial detention, even though the detention was not imposed at the time for purposes of punishment [emphasis in original.]
Id., at 557.
Article 42.03, supra, was also amended to require that the trial judge credit a defendant for any time spent in confinement pending appeal. Article 42.03, § 3.
Further, in Guerra v. State, 518 S.W.2d 815 (Tex.Cr.App.1975), this statutory right to time credit was extended to pre-revocation of probation confinement. The basis for this interpretation was that when a defendant is placed on probation the imposition of sentence is suspended, Article 42.12, § 3, supra. It is only after the probation is revoked that the sentence is imposed. Since Article 42.03, § 2, supra, requires the trial judge to credit one's sentence with the time of confinement incurred prior to the sentence it naturally and logically follows that pre-revocation confinement must be allocated to the sentence.
Unlike pre-trial sentence credit and pre-revocation of probation credit there is no mandatory statutory right to time credit for confinement pending a parole revocation hearing. Indeed, Article 42.18, § 15(a), supra, specifically dispenses with such right. The question then is whether *666 the denial of a sentence credit for confinement prior to the Board's decision to continue one on parole is constitutional under the Fourteenth Amendment to the United States Constitution or Article I, § 19, of the Texas Constitution? This precise question has not been addressed previously by this Court.[4]
It appears that there is no federal constitutional right to time credit for any period of confinement pending a parole revocation hearing.[5] That conclusion, however, merely begins the necessary review.
According to Article 42.18, § 15(a), if a parolee's parole is revoked he is not entitled to receive credit on his sentence for any "time from the date of his release [on parole] to the date of revocation." By its language this would necessarily include the time of confinement from his arrest on a pre-revocation warrant until the revocation. However, in the factual situation with which we are presently confronted if a parolee's parole is initially continued and revoked at a later time the Board has the discretion of awarding him a time credit for the period of initial incarceration. In other words, the Board is authorized but not statutorily required to award a parolee this time.
It is particularly important to note that a parolee, although no longer in physical custody is nevertheless in legal constructive custody of the State. Article 11.21, supra. However, when the pre-revocation warrant is executed his practical status is obviously alteredhe is again in the physical custody of the State. Thus, although the parolee's parole status has not changed (he is still on parole), he no longer enjoys the primary benefit of parole, the release from confinement. When the applicant was arrested on the pre-revocation warrant and placed in the Bexar County Jail he was again in the physical custody of the State.
Further, a parolee confined prior to a parole revocation hearing is not entitled to bail. Article 42.18, § 14(a), supra. Whereas, in most instances, one merely charged *667 with an offense or convicted and appealing the conviction is, with few exceptions, constitutionally entitled to make a bail bond and be released from custody. Article I, § 11, Texas Constitution. This observation points out a primary difference between the parolee and the defendant incarcerated prior to trial, or on appeal. In the latter instances the defendant is entitled to either post a reasonable bail and be released from custody, or alternatively, remain in custody and be entitled to credit on any subsequently assessed imprisonment. In the former instance, the parolee, is given neither right.
In summary, any confined individual is entitled to credit on his sentence except the parolee who has his parole continued and is later revoked.
There is also a comparable relationship between a defendant's right of appeal and a parolee's right to a hearing. In Robinson v. Beto, 426 F.2d, 797 (CA5 1970), the Fifth Circuit Court of Appeals, citing North Carolina v. Pearce, 395 U.S. 711, 89 S. Ct. 2072, 23 L. Ed. 2d 656 (1969), and its conclusion that there must not be any penalty imposed on one for exercising a constitutional right of appeal, held that "[d]ue process requires that a State, once it establishes avenue of appellate review, must keep those avenues free of unreasoned distinctions that impede open and equal access to the courts." Id., at 798. In other words, a defendant's right of appeal must remain unfettered. Accordingly, in Robinson the Fifth Circuit struck down the Texas statutory scheme which vested the trial judge with the discretion to credit or deny confinement time credit incurred while a defendant was appealing his case. They reasoned that a defendant who does not appeal his conviction will immediately begin receiving time credit toward a completion of his sentence, whereas the defendant who appeals his conviction is basically at the mercy of the trial judge who had the discretion to grant or deny such time credits. This procedure "impede[s] open and equal access to appellate review since it may deter a defendant from appealing...." Id., at 799.
Robinson v. Beto, supra, was expanded in Pruett v. Texas, 468 F.2d 51 (5th Cir. 1972), aff'd and modified in part, 470 F.2d 1182 (5th Cir.1973), aff'd 414 U.S. 802, 94 S. Ct. 118, 38 L. Ed. 2d 39 (1973), to require that accumulated good time acquired while an appeal is pending be granted to a defendant. In Pruett the Fifth Circuit again relied upon North Carolina v. Pearce, supra, and quoted from it as follows:
Penalizing those who choose to exercise constitutional rights "would be patently unconstitutional." U.S. v. Jackson, 390 U.S. 570 [88 S. Ct. 1209, 20 L. Ed. 2d 138] (1968) And the very threat inherent in the existence of such a punitive policy would, with respect to those still in prison, serve to `chill the exercise of basic constitutional rights' [citations omitted].
Id., at 56.
In Ex Parte Williams, 738 S.W.2d 257 (Tex.Cr.App. 1987) and relying in part upon Morrissey v. Brewer, 408 U.S. 471 (1972), this Court concluded that Article 42.12, § 22, supra, which authorized the Board to automatically and without a hearing revoke the parole of one who was convicted of a felony while on parole, was violative of one's "federal constitutional due process rights." Id., at 261. Consequently, a parolee has an absolute constitutional federal due process right to a revocation hearing, just as a defendant in Texas has an absolute constitutional due process right to an appeal following a conviction.
Comparing the right to a revocation hearing with the right of appeal it is apparent that Article 42.18, § 15, supra, is constitutionally infirm. The denial of time credit to the defendant who is appealing his conviction constitutes an infringement of his constitutional right to freely exercise his right of appeal. Robinson v. Beto, supra. Similarly, the discretionary authority to deny time credit to the parolee awaiting revocation constitutes a "punitive policy...," Pruett v. Texas, supra, 56, that may chill the parolee's decision to exercise his constitutional right to a pre-revocation hearing. This is so because the parolee who waives his right to a hearing and his parole is revoked will immediately begin to *668 accrue time toward the completion of his sentence. Article 42.18, § 15(a), supra.
The unconstitutionality of Article 42.18, § 15(a), supra, is not cured by the fact that a parolee's parole is continued, just as the constitutional infirmities of the statute in Robinson v. Beto, supra, would not have been cured if the defendant enjoyed a successful appeal.
The discretion to grant or deny, and in this case the denial, of time credit to a parolee confined pursuant to a pre-revocation warrant but later has his parole continued only to have it later revoked is violative of the parolee's right of due course of law under Article I, § 19, of the Texas Constitution. To the extent that Article 42.18, § 15(a), supra, vests the Board of Pardons and Paroles the discretion to do otherwise it is unconstitutional. Thus, any time spent in confinement pursuant to the execution of a pre-revocation warrant cannot be denied a parolee.[6]
Accordingly, the applicant is entitled to receive credit off his sentence for the seventy-four calendar days in which he was confined prior to the Board's withdrawal of the pre-revocation warrant and the initial continuation of his parole. A copy of this opinion will be delivered to the Texas Department of Corrections.
TEAGUE, J., concurs.
NOTES
[1] It is not clear from the record whether the applicant was convicted of any of these separate criminal offenses.
[2] Article 42.18, § 15, carried forward the existing language of Article 42.12, § 22, supra, the Code of Criminal Procedure section that preceded it, and was not intended to constitute a substantive change in the law. Acts 1985, 69th Leg., ch. 427, § 2.
As originally adopted in 1965, Article 42.12, § 22, read in relevant part:
When the Governor revokes a prisoner's parole, he may be required to serve the portion remaining of the sentence on which he was released on parole, such portion remaining to be calculated without credit for the time from the date of his release on parole to the date of his arrest or charge of parole violation [emphasis added].
Acts 1965, 59th Leg., Vol. 2, p. 317, ch. 722. Thus the incarcerated parolee awaiting a parole revocation hearing was awarded time credit for any period after his arrest on the parole revocation charges.
This language was carried forward without substantial change from the predecessor of Article 42.12, § 22, Article 781d, § 22. Acts 1957, 55th Leg., p. 466, ch. 226. Similarly, Article 781d, § 22, represented a duplication of the language of its respective predecessor Article 781b, § 20. Acts 1947, 50th Leg., ch. 452.
In 1973, Article 42.12, § 22, supra, was amended in pertinent part to read:
When the Governor revokes a prisoner's parole, he may be required to serve the portion remaining of the sentence on which he was released on parole, such portion remaining to be calculated without credit for the time from the date of his release on parole to the date of his revocation of parole by the Governor on the charge of parole violation. When a warrant is issued by the Board of Pardons and Paroles or the Governor charging a parole violation, the sentence time credit shall be suspended until a determination is made by the Board of Pardons and Paroles or the Governor in such case and such suspended time credit may be re-instated by the Board of Pardons and Paroles should such parole be continued [emphasis added].
The amendment reformed existing law to deny the parolee who was incarcerated pending a parole revocation hearing that flat time credit to which he had previously been entitled. This amendment was proposed for the first time as a Jurisprudence Committee Substitute Bill to SB 335 which had initially proposed to change only the time limit by which time a hearing must be held following arrest from 45 days to 60 days. Unfortunately, the recorded transcripts of that Committee meeting are unintelligible. The House Criminal Jurisprudence Committee did not debate the merits of the amendment. Consequently, the legislative reasons for amending Article 42.12, § 22, supra, in this manner are unknown.
[3] At the outset we emphasize that we are not concerned with any allocation and forfeiture of good time credits as it is well established that good time credit is a privilege and not a right, which may be forfeited by violating TDC rules while in custody, or by violating the guidelines of a conditional release program. Article 6181-1, § 4, V.A.Civ.St.; Ex parte Henderson, 645 S.W.2d 469 (Tex.Cr.App.1983).
[4] In Ex parte Bowens, 581 S.W.2d 185 (Tex.Cr. App.1979), reviewing the predecessor statute, we held that a parolee was entitled not only to flat time but good time credit as well, for any time period in which the parolee was confined pursuant to a pre-revocation parole warrant regardless as to whether parole was continued or revoked.
In Ex parte Bowens, id., we held that the defendant's right to time credits for periods of confinement on parole revocation warrants was rooted in Article I, § 19 of the Texas Constitution:
[Since] ... petitioner did not have his choice of custodian, it is repugnant to Article 1, Section 19 of the Texas Constitution to deny him credit for good conduct while in the federal institution....
We do not feel that Article 42.03, Vernon's Ann.C.C.P., effective August 27, 1973, is controlling, since this provision of the code pertains to the trial court only. After sentence has become final, the defendant is in the custody of the Department of Corrections either through `constructive' or `physical' detention. It is this rationale that compels this Court to require the Department of Corrections to apply `good time' credit equally to both;
Id., at 186 (citing Ex parte Williams, 551 S.W.2d 416 (Tex.Cr.App.1977).
At that time Article 42.12, § 22, required the parolee confined pursuant to a pre-revocation warrant to receive credit for such time. We specifically declined to consider the impact of the revisions of then Article 42.12, § 22, which have refused the allowance of flat time credit as well as good time credit. Id., at 187, fn. 1.
The right to good time credit was dependent upon the existence of a statutory right to "time," without any distinction between flat time or good time. Since good time credit is a privilege and not a right, Ex parte Henderson, supra, due course of law rights are not breached if that privilege is narrowed or deemed forfeited given misconduct. Our question is altogether different. That is, may an inmate's right to calendar time likewise be statutorily narrowed and deemed forfeited given misconduct.
[5] In the only case we could find on the subject, a United States District Court held:
The State contends that if a parole revocation hearing is required, a parolee can endure a reasonable period of confinement awaiting determination of his delinquency without receiving credit for said period of confinement on his sentence. We agree. This action does not reach Constitutional proportions.
Ivy v. State of Alabama, 381 F. Supp. 503 (S.D. Ala.1974).
In United States Ex rel Fitzpatrick v. United States Parole Comm'n, 444 F. Supp. 1302 (M.D. Pa.1978), the district court held that 18 U.S.C. § 4205 required credit for time spent confined following the execution of a pre-revocation arrest warrant. See also Still v. United States Marshall, 780 F.2d 848 (CA 10 1985).
[6] Worth v. Board of Pardons and Paroles, 146 Ariz. 97, 703 P.2d 1246 (App.1985); Hines v. Pennsylvania Board of Probation and Paroles, 491 Pa. 142, 420 A.2d 381 (1980); State v. Velazquez, 122 Ariz. 81, 593 P.2d 304 (1979); Williams v. State 450 P.2d 232 (Okla. 1969); cf. People v. Martinez, 728 P.2d 363 (Colo.App. 1986); Merna v. State, 95 Nev. 144, 591 P.2d 252 (1979); State ex rel Molero v. Blackburn, 379 So. 2d 725 (La. 1979). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1238253/ | 520 S.E.2d 302 (1999)
In the Matter of the Appeal of SOUTHEASTERN BAPTIST THEOLOGICAL SEMINARY, INC. from the denials of exemption of the 1996 Wake County Board of Equalization and Review.
No. COA98-1440.
Court of Appeals of North Carolina.
October 19, 1999.
*303 Wake County Attorney's Office, by Shelley T. Eason, Deputy County Attorney, for Wake County-appellant/appellee.
Kennedy Covington Lobdell & Hickman, L.L.P., by Lacy H. Reaves, Raleigh, and Amy L. Pritchard, Charlotte, for taxpayer-appellee/appellant.
EDMUNDS, Judge.
Southeastern Baptist Theological Seminary (the Seminary), an affiliate of the Southern Baptist Church, is a religious educational institution located in Wake Forest, North Carolina. The Seminary owns approximately 600 acres of land on the site formerly occupied by Wake Forest College. The 600 acres contains the central campus, a golf course, student housing, and several parcels of undeveloped land.
The North Carolina Constitution authorizes the General Assembly to exempt from taxation "property held for educational, scientific, literary, cultural, charitable, or religious purposes." N.C. Const. art. V, § 2(3). In 1995, the Wake County Revenue Director, reviewing all previously exempt educational property in Wake County, determined that four parcels belonging to the Seminary did *304 not fall under the exemption statute, N.C. Gen.Stat. § 105-278.4 (1997), and therefore were subject to taxation. The Seminary appealed the denial of its exemption applications for these four parcels to the Wake County Board of Equalization and Review, which upheld denial. The Seminary then appealed to the North Carolina Property Tax Commission (the Commission), which reversed the County's denial as to three of the four parcels. The County appeals this decision; the Seminary cross-appeals, challenging the constitutionality of the application of the exemption statute.
I. Wake County's Appeal
We note as a preliminary matter that when a matter comes before the Commission, it is the taxpayer's burden to prove that the property is entitled to an exemption. See In re Appeal of Atlantic Coast Conference, 112 N.C.App. 1, 4, 434 S.E.2d 865, 867 (1993), aff'd per curiam, 336 N.C. 69, 441 S.E.2d 550 (1994). "This burden is substantial and often difficult to meet because all property is subject to taxation unless exempted by a statute of statewide origin." Id. (citing N.C. Gen. Stat. § 105-274).
The County contends that the Seminary failed to meet that burden, arguing that "there was insufficient evidence adduced at hearing to support exemption of the subject property under N.C. Gen.Stat. § 105-278.4[ ] as a matter of law...." We disagree.
The exemption statute at issue, section 105-278.4, reads in pertinent part:
(a) Buildings, the land they actually occupy, and additional land reasonably necessary for the convenient use of any such building shall be exempted from taxation if:
(1) Owned by an educational institution (including a university, college, school, seminary, academy, industrial school, public library, museum, and similar institution);
(2) The owner is not organized or operated for profit and no officer, shareholder, member, or employee of the owner or any other person is entitled to receive pecuniary profit from the owner's operations except reasonable compensation for services;
(3) Of a kind commonly employed in the performance of those activities naturally and properly incident to the operation of an educational institution such as the owner; and
(4) Wholly and exclusively used for educational purposes by the owner....
(b) Land (exclusive of improvements); and improvements other than buildings, the land actually occupied by such improvements, and additional land reasonably necessary for the convenient use of any such improvement shall be exempted from taxation if:
(1) Owned by an educational institution that owns real property entitled to exemption under the provisions of subsection (a), above;
(2) Of a kind commonly employed in the performance of those activities naturally and properly incident to the operation of an educational institution such as the owner; and
(3) Wholly and exclusively used for educational purposes by the owner....
(Emphasis added.) Subsection (f) of that section defines an "educational purpose" as
one that has as its objective the education or instruction of human beings; it comprehends the transmission of information and the training or development of the knowledge or skills of individual persons. The operation of a golf course, a tennis court, a sports arena, a similar sport property, or a similar recreational sport property for the use of students or faculty is also an educational purpose, regardless of the extent to which the property is also available to and patronized by the general public.
N.C. Gen.Stat. § 105-278.4(f) (emphasis added). This statute permits consideration of the nature of the particular educational institution in determining whether an educational exemption may be applied. Unimproved land may be educationally exempted if it is for the convenient use of improved land and "[o]f a kind commonly employed in the performance of those activities naturally and properly incident to the operation of an educational *305 institution such as the owner[.]" N.C. Gen.Stat. § 105-278.4(b)(2) (emphasis added). Therefore, the Commission was allowed to consider that the educational uses to which the questioned property was put were uses made by a Seminary.
The County argues that the requirements of section 105-278.4 were not met in that the parcels at issue were not incidental to the operation of the Seminary, nor were they wholly and exclusively used for educational purposes. See Atlantic Coast Conference, 112 N.C.App. 1, 434 S.E.2d 865. The standard of review for a final order of the Commission is governed by N.C. Gen. Stat. § 105-345.2 (1997), which reads in pertinent part:
(b) So far as necessary to the decision and where presented, the court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning and applicability of the terms of any Commission action. The court may affirm or reverse the decision of the Commission, declare the same null and void, or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the appellants have been prejudiced because the Commission's findings, inferences, conclusions or decisions are:
(1) In violation of constitutional provisions; or
(2) In excess of statutory authority or jurisdiction of the Commission; or
(3) Made upon unlawful proceedings; or
(4) Affected by other errors of law; or
(5) Unsupported by competent, material and substantial evidence in view of the entire record as submitted; or
(6) Arbitrary or capricious.
(c) In making the foregoing determinations, the court shall review the whole record or such portions thereof as may be cited by any party and due account shall be taken of the rule of prejudicial error.
We therefore consider the "whole record" generated by the Commission. See In re Appeal of Parsons, 123 N.C.App. 32, 38, 472 S.E.2d 182, 187 (1996) (citing In re McElwee, 304 N.C. 68, 283 S.E.2d 115 (1981)). Because we are reviewing the Commission's finding that the property was "naturally and properly incident to the operation" of the Seminary and "wholly and exclusively used for educational purposes by the owner," N.C. Gen. Stat. § 105-278.4(b), we must specifically determine whether those findings were supported by "competent, material and substantial evidence" in the record, N.C. Gen.Stat. § 104-345.2(b)(5). At the Commission hearing, evidence was presented concerning the present condition, use, and status of the parcels now at issue on appeal:
A. Parcel 2, consisting of 12.72 acres, was undeveloped. It bordered Richland Creek on one side and North Richland Avenue, a road leading to residential areas near the campus, on the other. Lying between the Seminary campus and a residential development, Parcel 2 contained a large gully and a Carolina Power and Light Company easement. At the time of the hearing, Parcel 2 did not adjoin or abut other Seminary property. The Seminary offered testimony that Parcel 2 was used by Seminary students and their families for recreational activities and that the tract served as a buffer from faculty housing.
B. Parcel 3, consisting of 165 acres, bordered Capital Boulevard, the main highway in the area, and projected eastward toward the Seminary campus. There was a cemetery on the parcel, and five acres were used as a biodegradable landfill. The parcel was adjacent to the golf course and an area of student housing, but did not abut any other seminary property.
Garnet Paul Fletcher, vice-president for administration for the Seminary, testified that this sylvan area was "essential" to the atmosphere of the campus because it helped establish the character of the school, allowing the Seminary to "offer an ambience or a setting that is not duplicated anywhere else in North Carolina...." The importance of this property to the campus atmosphere was confirmed by students and family members, who also testified to their recreational use of the parcel. Children of students roamed the property, and families gardened there. It was used for hiking and family outings. Students *306 hunted on the property. It buffered the campus from busy Capital Boulevard and nearby housing developments. On the other hand, the students and family members also testified that they had never attended any organized religious or educational activities on the parcel, nor were there any established hiking paths or picnic areas or any other improvements on the parcel.
Many trees on parcel 3 were damaged by Hurricane Fran. As a result, portions of the parcel were clear cut, and the income derived from the sale of timber was used to repair other damage caused by the hurricane. In 1995, the Seminary contracted to sell fifty-six acres of this tract for commercial development, contingent upon the rezoning of the property. The Seminary sought to have the relevant portion of the tract rezoned for a highway business district, but when all its applications were denied, the sale did not proceed. Vice-president Fletcher testified that had the sale taken place, the Seminary would have used the proceeds to purchase land closer to campus for building additional student housing.
C. Parcel 4 also fronted Capital Boulevard and was split by old Stadium Drive, which at one time had been the main entrance to the campus. While that old entrance road still existed and carried some traffic, the commonly-used entrance at the time of the hearing ran along the side of Parcel 4. The parcel buffered the Seminary campus from commercial development along Capital Boulevard. With the exception of an exempt cemetery, this parcel did not adjoin or abut other Seminary property. The Seminary had sold timber growing on this parcel, but only in order to thin the forest and maintain its natural state, as recommended by the company managing the forest.
D. Maps showing the relationships of these parcels to each other, to the Seminary campus, and to other area features such as highways and housing developments were also introduced.
E. Curtis West, a real-estate appraiser, testified on behalf of the Seminary as to his findings pertaining to the ratio of building space to exempted land for several area educational institutions. He compared the ratio for the Seminary with the average ratio found at the other institutions and concluded that the ratio for the Seminary would be consistent with the average ratio for other schools if the property in dispute were exempted; otherwise, the Seminary's ratio of buildings to exempted land would be low (i.e., the Seminary would have more buildings per unit of exempt land than the average for this area).
F. The County presented Emmett Douglas Curl, revenue director for Wake County, who reviewed the exemption applications and examined the parcels in question. He testified as to the procedures used in Wake County for determining whether a given parcel is exempt from taxation:
[T]o meet the test for exemption as taught in the Institute of Government and the ad valorem tax committee, you must meet two tests. One is ownership and once you meet the ownership test, then you must meet the use test.
And the use test, you go back to the general statutes to find what they say and how they must be used based on the statute that the property is making application under.
With regard to Parcel 3, he observed no evidence of use "nor did we get any information from the individuals in our conversation that the property was in use in any manner." Additionally, "it wasn't close enough to the campus to be used as a buffer and ... there were other buffering properties that would provide for any reasonable buffer for the central campus and its buildings...." As to Parcels 2 and 4, he also saw no evidence of use or improvements. Curl disputed the Seminary's need for these parcels as buffer property, noting that there are 600 feet of woods between the student housing complex and Parcel 3, and that a golf course and power line easement lie between the campus and Parcel 3. Wake Forest High School lies between the campus and Parcel 2. Parcel 4 is over one-half mile away from the closest building owned by the Seminary.
In conducting the whole record test statutorily required of a reviewing court, we "must decide all relevant questions of law de *307 novo, and review the findings, conclusions and decision to determine if they are affected by error or are unsupported ` "by competent, material and substantial evidence in view of the entire record."'" Parsons, 123 N.C.App. at 38-39, 472 S.E.2d at 187 (quoting In re Appeal of Perry-Griffin Foundation, 108 N.C.App. 383, 393, 424 S.E.2d 212, 218 (1993) (quoting N.C. Gen.Stat. § 105-345.2)). "`Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Thompson v. Board of Education, 292 N.C. 406, 414, 233 S.E.2d 538, 544 (1977) (quoting Comr. of Insurance v. Rating Bureau, 292 N.C. 70, 80, 231 S.E.2d 882, 888 (1977)), quoted in Rainbow Springs Partnership v. County of Macon, 79 N.C.App. 335, 341, 339 S.E.2d 681, 685 (1986). A whole record review, while less deferential than an abuse of discretion review, is nevertheless not "a tool of judicial intrusion." In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979), quoted in Rainbow Springs, 79 N.C.App. at 341, 339 S.E.2d at 685. Instead, it "gives a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence." Id. If the whole record supports the Commission's findings, we may not substitute our own judgment for that of the Commission, even in the presence of conflicting views of the evidence. See In re Moses H. Cone Memorial Hospital, 113 N.C.App. 562, 570, 439 S.E.2d 778, 782 (1994), aff'd in part, 340 N.C. 93, 455 S.E.2d 431 (1995).
Few North Carolina appellate opinions deal with the educational exemption, and those few, decided on facts substantially different from the case at bar, provide little guidance. See In re Wake Forest University, 51 N.C.App. 516, 277 S.E.2d 91 (1981) (parking lot shared by Wake Forest University and R.J. Reynolds held sixty-four percent exempt, reflecting the extent it was used exclusively by the University); Atlantic Coast Conference, 112 N.C.App. 1, 434 S.E.2d 865 (property held by the ACC for its administrative offices was held exempt so long as salaries to commissioners and assistants, along with other administrative expenses, were reasonable for a non-profit institution).
However, we do find some guidance in analogous cases. One of the County's arguments in support of its contention that the property should not receive an educational exemption is that the land is undeveloped. In In re Southview Presbyterian Church, 62 N.C.App. 45, 302 S.E.2d 298 (1983), this Court held that a 15.56-acre tract held by the church met the requirements of a religious exemption, even though the tract was undeveloped, because it was used "for neighborhood recreation activities and for Boy Scout and Girl Scout activities such as campouts and athletics." We were "persuaded that such activities qualify as activities that demonstrate and further the beliefs and objectives of Southview Presbyterian Church and that the 15.56 acre tract is reasonably necessary for the convenient use of petitioner's church buildings." Id. at 51, 302 S.E.2d at 301 (internal citation omitted). Similarly, in In re Appeal of Worley, 93 N.C.App. 191, 377 S.E.2d 270 (1989), this Court upheld a religious exemption for a 5.29-acre parcel, which was unimproved and remained a natural area. The parcel at issue was used by church youth groups for recreational churchrelated activities, as well as by church members for hunting deer. This Court stated:
Although we decline to hold that permitting hunting ... was an exempt "religious purpose," we conclude that the other recreational activities that occurred there and the use of the property as a spiritual retreat together constituted sufficient "present use wholly and exclusively for religious purposes" to warrant exemption.
Id. at 196-97, 377 S.E.2d at 273-74. We are aware that Southview Presbyterian Church and Worley address religious exemptions as opposed to the educational exemption with which we are now dealing. Nevertheless, in light of the wording of the statute, which speaks of both improved land and land necessary for convenient use of improved land, we see no reason to exclude land from consideration for an educational exemption merely because it is undeveloped, so long as sufficient competent, material, and substantial evidence is presented to support the exemption.
The County, pointing to the Seminary's attempts to rezone portions of Parcel *308 3 for sale for commercial development, argues that the Seminary was holding the parcel for future sale for profit and that the current possession was not "wholly and exclusively" for educational purposes. We disagree. North Carolina courts have held that future planned use of exempted property does not override the present use. Again, in the absence of North Carolina cases involving future use of property subject to an educational exemption, we review cases involving a religious exemption, while continuing to bear in mind that these exemptions are not necessarily equivalent. In Harrison v. Guilford County, 218 N.C. 718, 12 S.E.2d 269 (1940), our Supreme Court affirmed a religious exemption for a parcel owned and used by a church for outdoor meetings and upon which the church was planning to erect a new church building. In Worley, discussed supra, this Court cited Harrison to support our holding that a lot, currently used for church-related retreats and held for future church-related use, but that had been purchased by the church for the immediate purpose of blocking another buyer, was entitled to a religious exemption. Although we observe that both Harrison and Worley involve exempt property where the future use would also be for an exempt purpose, whereas here the County is contending that the Seminary was holding the land for a future non-exempt purpose, we do not find this distinction controlling. To be eligible for an educational exemption, there is no requirement that the party seeking the exemption have a positive intent to hold or use that property for some exempt purpose ad infinitum. "[P]resent use, not intended use, controls." Worley, 93 N.C.App. at 195, 377 S.E.2d at 273 (citing Southview Presbyterian, 62 N.C.App. at 50-51, 302 S.E.2d at 300-01).
Additionally, the County argues that the Seminary's sale of timber from the land was inconsistent with the educational use of the property. We disagree. The Seminary's stewardship to the land in maintaining a healthy forested state, in removing trees damaged by a hurricane, and in using proceeds from the sale of the removed timber to pay for other repairs caused by that hurricane, does not affect the designation of the land as educational property.
Competent, material, and substantial evidence was presented to establish that the Seminary sought to provide and maintain a relaxed campus atmosphere conducive to study, that the parcels in question were part of the original Wake Forest Campus purchased by the Seminary, that the Seminary is the only Southern Baptist educational institution that maintains a rural campus, that this unique setting is a recruiting tool important to the Seminary in competing among potential students considering a seminary education, and that students use all the disputed parcels for various activities consistent with the educational philosophy of the Seminary. There was further evidence that Capital Boulevard is a major highway, that the Seminary intended to buffer its campus from encroaching urbanization, and that each parcel is situated in such a way as to contribute to the intended buffering effect. We have held that buffering is an appropriate consideration in determining whether an educational exemption applies to a particular parcel. See Worley, 93 N.C.App. 191, 377 S.E.2d 270.
We note also that the Commission stated in its Final Decision that "[e]ven though the land to building ratio analysis is an acceptable appraisal approach, the Commission did not consider said approach in this decision." We similarly do not consider evidence of the Seminary's land to building ratio. Nevertheless, the record in this case contains sufficient evidence to "give[ ] a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence." Rogers, 297 N.C. at 65, 253 S.E.2d at 922. After review of the whole record, we affirm the decision of the Commission.
II. Seminary's Cross-Appeal
On cross-appeal, the Seminary contends that subjecting the three parcels to taxation violates the United States and North Carolina constitutions, arguing that "the rule of uniformity was violated because the exemption statute was applied unequally to the Seminary...." This allegedly unequal treatment was a result of the state's failure "to promulgate any written exemption guidelines *309 or take any other measures to promote the equal application of the educational exemption."
The North Carolina Constitution provides that "[n]o class of property shall be taxed except by uniform rule, and every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government." N.C. Const. art. V, § 2(2) (emphasis added). Additionally, "[e]very exemption shall be on a State-wide basis and shall be made by general law uniformly applicable in every county, city and town, and other unit of local government." N.C. Const. art. V, § 2(3) (emphasis added). However, "occasional inequities resulting from the application of the statute should not defeat the law unless they result from hostile discrimination." Edward Valves, Inc. v. Wake County, 117 N.C.App. 484, 492, 451 S.E.2d 641, 647 (citation omitted), review granted, 340 N.C. 111, 456 S.E.2d 327 (1995), aff'd as modified and remanded, 343 N.C. 426, 471 S.E.2d 342 (1996). Similarly, the United States Supreme Court has stated that a violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution occurs where a lack of uniformity of taxation results from more than "mere errors of judgment by officials" and "amounts to an intentional violation of the essential principle of practical uniformity." Sunday Lake Iron Co. v. Wakefield Township, 247 U.S. 350, 353, 38 S.Ct. 495, 495, 62 L.Ed. 1154, 1156 (1918). Accordingly, the Seminary must establish intentional discrimination against property subject to taxation in order to prevail.
The Seminary relies primarily on this Court's decision in Edward Valves, 117 N.C.App. 484, 451 S.E.2d 641. In that case, Edward Valves, a Wake County corporation that made valves for power plants, sold its assets to another business. Engineering drawings maintained since 1908 were listed as assets at the sale, even though up to that time the drawings had been treated as expenses and thus not listed. Wake County assessed a tax based upon the value of these drawings. We noted that the challenged scheme taxed intangible property only when it was capitalized on the books of the business. Because capitalization of such property did not occur until a business sold its assets, we held that the scheme resulted in discrimination "based upon an improper distinction between taxpayers who owned the same class of property, self-created intangibles that have been sold and similar intangibles that have not been sold." Id. at 492, 451 S.E.2d at 647. Wake County, the only county in the state to implement taxation on this type of property, had no written guidelines to effectuate the even application of the tax. Because the methodology employed by Wake County "singl[ed] out that intangible property for taxation that is in the hands of those businesses which have been the subject of asset sales," it gave "different tax treatment to taxpayers owning identical classes of property." Id. at 491, 451 S.E.2d at 646. The tax was thus held discriminatory and illegal.
In contrast to the facts in Edward Valves, section 105-278.4 exempts like property from taxation so long as the taxpayer meets the burden of establishing the four requirements set out in that statute. A statute does not have to exclude all inequalities to meet constitutional requirements, and in fact the statute now at issue specifically grants some leeway by excluding property that is "reasonably necessary" for use of educational buildings and improvements. Nevertheless, the four requirements of the statute are reasonably objective and do not result in any hostile or systematic discrimination.
The Seminary further contends that the lack of written guidelines violates the rule of uniformity, citing McElwee, 304 N.C. 68, 283 S.E.2d 115. However, that case does not stand for the principle that written guidelines are invariably necessary. In McElwee, which involved a challenge to a county's reappraisal of all real property within its borders, the applicable statute required the county to "develop[ ] and compile[ ] uniform schedules of values, standards, and rules to be used in appraising real property." No such standards or rules appeared on record, and the Court found this failure, along with others noted in the opinion, to be evidence that the county's approach to reappraising property was arbitrary and capricious. By contrast, section 105-278.4 enumerates within the *310 body of the statute the requirements necessary to qualify for the exemption. No additional guidelines need be implemented to qualify property as exempt. Accordingly, McElwee provides no useful guidance to the case at bar.
In conclusion, we hold that the Commission properly exempted the land in question. We further hold that the statute governing determination of exempt property is constitutional under both the United States and North Carolina constitutions.
III. Wake County's Motion to Amend the Record
After oral argument, Wake County moved, pursuant to N.C. R.App. P. 37, to amend the record on appeal to cover events occurring after the Commission issued its Final Decision on 5 May 1998. The Seminary opposes the motion. Because we have held above that the "present use" of the land controls, we deny the motion.
Affirmed.
Judges WYNN and JOHN concur. | 01-03-2023 | 10-30-2013 |
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