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https://www.courtlistener.com/api/rest/v3/opinions/1984225/ | 272 F.Supp. 931 (1967)
Mrs. Barbara Lynn Whitley SINGER, widow of Lester Karl Singer, Jr., Individually and as Administratrix of the Succession of Lester Karl Singer, Jr., and as Next Friend of the Minor, Karl David Singer
v.
Louis R. DORR, d/b/a Dorr Towing Company, Dorr Towing Co., Inc., Federal Barge Lines, Inc., Port City Barge Lines, Inc.
Civ. A. No. 14421.
United States District Court E. D. Louisiana, New Orleans Division.
June 16, 1967.
*932 Charles Kohlmeyer, Jr., Thomas W. Thorne, Jr., Lemle & Kelleher, New Orleans, La., for Federal Barge Lines, Inc. and Port City Barge Lines, Inc.
Patrick L. Burke, James A. George, Faris, Ellis, Cutrone, Gilmore & Lautenschlaeger, New Orleans, La., for Dorr Towing Co., Inc. and Stuyvesant Ins. Co.
HEEBE, District Judge:
This matter raises interesting and novel questions concerning the existence, nature, and extent of the implied warranty of workmanlike service which may be owed by a tug owner to a barge owner. The proceedings out of which those issues now arise were, insofar as is relevant to an understanding and determination of those issues, as follows:
Lester Singer was employed by Dorr Towing, Inc., as a deckhand on Dorr's tug, the "Big Louie II." Port City Barge Lines, Inc., was the owner of the barge PCBL-104, which was leased to Federal Barge Lines. Dorr contracted with Federal to tow the barge from the American Sugar Refinery to Federal's fleet area. On the night of September 23, 1963, the "Big Louie II" had the PCBL-104 in tow, when Singer fell from either the barge or the tug into the Mississippi River and drowned. Singer's widow and child brought a wrongful death claim in negligence under the Jones Act, 46 U.S.C.A. § 688, against Dorr Towing[1] and its insurer and an action in negligence and unseaworthiness[2] under the state wrongful *933 death provisions, Louisiana Civil Code Art. 2315, against the barge interests. The barge interests brought a cross claim[3] against the tug owner, alleging that there was implied in the towage contract an obligation of the tug owner to perform his services in a reasonable and workmanlike manner, and that that obligation had been breached. The barge interests asked for indemnity from the tug owner for all damages for which they were held, together with costs, disbursements and attorneys' fees; further, if the barge interests were not held liable to the plaintiff, they sought recovery of their costs, disbursements and attorneys' fees from Dorr. Dorr responded by filing a cross claim against the barge interests based on the alleged obligation implied by the towage contract that the barge interests furnish a seaworthy barge and the breach of that obligation. A jury trial was sought on all claims except the cross claim of the barge interests.
The trial lasted six days.[4] After the presentation of plaintiff's evidence, the trial judge granted a directed verdict in favor of the defendant barge interests against the plaintiff, and after the presentation of defendant Dorr's evidence, the Court likewise granted a directed verdict in favor of the barge interests on the cross claim of Dorr although there had been evidence presented upon which the jury could have based a finding that the barge was unseaworthy, there was no evidence to *934 support a finding that any such unseaworthiness had been the proximate cause of Singer's death.[5] See Reasons, document #93 of Record.
At the conclusion of all the evidence, the case was submitted to the jury on written interrogatories. The jury found that Dorr Towing was proximately negligent and awarded damages of $70,000.00 plus funeral expenses to the plaintiff, to be reduced 50% for the decedent's proximate contributory negligence. Judgment was thereafter entered on the jury verdict in favor of the plaintiff against defendant Dorr; on the directed verdict in favor of the defendant barge interests against the plaintiff; and on the directed verdict in favor of the barge interests against Dorr on Dorr's cross claim. However, judgment was further entered to the effect that the cross claim of the barge interests against Dorr was moot. Plaintiff then moved for judgment n. o. v. or for a new trial; whereupon Dorr moved, solely in the event plaintiff's motion was granted, to set aside the directed verdict against it, and grant a new trial, on its cross claim against the barge interests. The barge interests moved to strike that portion of the judgment which found that the cross claim of the barge interests against Dorr was moot, and further moved that the Court render a separate finding that Dorr breached its warranty of workmanlike service and enter a separate judgment thereon, awarding the barge interests their attorneys' fees and costs as against Dorr.
Prior to the hearing of any of these motions, the trial judge, our predecessor, Judge Ellis, retired. Later, the plaintiff and Dorr settled their differences, and a satisfaction of judgment was entered. The remaining motion that of the barge interests to amend the judgmentwas brought on for hearing before us. It is, of course, clear that the cross claim of the barge interests against Dorr is not moot, in that it specifically sought costs and attorneys' fees in the event the barge interests were not held liable to plaintiff. Therefore, that portion of the judgment must be stricken. We must now decide whether an implied warranty of workmanlike service in the performance of the towage contract is owed by tugs to barges and, if so, the nature and extent of that warranty, and the remedy for its breach; and lastly, if the law would allow a remedy in the posture of this case, whether the warranty was in fact breached under the facts of this case.
We can find no cases on the question of an award of costs and attorneys' fees to a barge at the expense of a tug. However, our study of the jurisprudence in related areas leads us to the inescapable conclusion that costs and attorneys' fees may properly be awarded. First, and most important, there is an implied warranty of workmanlike service, that is, an implied obligation to tow properly and safely, owed by a tug to a bargethe very nature of the towing agreement necessarily implies an obligation to tow properly and safely, and competency and safety are essential elements of the towing service undertaken. James McWilliams Blue Line v. Esso Standard Oil Co., 245 F.2d 84 (2nd Cir. 1957); Dunbar v. Henry Dubois' Sons Co., 275 F.2d 304 (2nd Cir. 1960), cert. den. 364 U.S. 815, 81 S.Ct. 45, 5 L.Ed.2d 46 (1960). Next, *935 given the existence of this warranty, we can see absolutely no reason for its scope and the measure of its breach being determined by theories conceptually different from those applied to the warranty of workmanlike performance owed by a stevedore to a shipowner. Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956). Both the barge owner and Ryan shipowner turn their vessels over to the complete control of another party (tug owner or stevedore) but nonetheless remain absolutely liable for the condition of their vessels under the non-delegable duty to provide a seaworthy vessel. Thus, assuming the initial seaworthiness of the vessel when control is transferred by the owner, the owner's liability to third persons can depend entirely on the actions of the party to whom control is transferred and who is under the implied obligation of workmanlike service.
The stevedore who breaches his warranty, causing the shipowner to be held liable to an injured longshoreman, must indemnify the shipowner for the damages recovered by the longshoreman. Ryan, supra. Subsequent to Ryan, it was held that this indemnity includes not only the damages recovered by the plaintiff, but also the attorneys' fees incurred by the shipowner in attempting to defend against the plaintiff's claim. See cases cited in Drago v. A/S Inger, 194 F.Supp. 398, 409-410 (E.D.N.Y. 1961). The next development in this area of the law was the allowance of recovery of attorneys' fees where the shipowner successfully defends against the plaintiff's claimif the stevedore breached its warranty, then it is liable for all damages caused by that breach, including attorneys' fees expended in defending unsuccessful claims which were brought as a result of that breach. Caswell v. Koninklyke Nederlandsche Stoomboot Maalschappy, 205 F.Supp. 295 (S.D.Tex.1962), "clear and logical opinion" concurred in and affirmed, sub. nom. Strachan Shipping Co. v. Koninklyke Nederlandsche Stoomboot Maalschappy, 324 F.2d 746 (5th Cir. 1963), cert. den. (3 votes for cert.) 376 U.S. 954, 84 S.Ct. 969, 11 L.Ed.2d 972 (1964), reh. den. 377 U.S. 925, 84 S.Ct. 1219, 12 L.Ed.2d 217 (1964), cited and followed, Massa v. C. A. Venezuelan Navigacion, 332 F.2d 779 (2nd Cir. 1964), cert. den. 379 U.S. 914, 85 S.Ct. 262, 13 L.Ed.2d 186 (1964). For a time this was not the rule in the Eastern District of Virginia, Fox v. SS Moremacwind, 182 F.Supp. 7 (1960); Hill v. American President Lines, Ltd., 194 F.Supp. 885 (1961), but the author of those opinions later stated them to be incorrectly decided, Bielawski v. American Export Lines, 220 F.Supp. 265 (1963) and his change of heart was affirmed, sub. nom. American Export Lines v. Norfolk Ship-building & Drydock Corp., 336 F.2d 525 (4th Cir. 1964).[6]
It appears that none of the tug-barge cases involved attorneys' fees or a successfully defended main claim. However, we can see no reason why, if the implied warranty exists, it should not cover attorneys' fees even where the main claim is successfully defended, just as it does in the shipowner-stevedore cases.[7] The theories behind the indemnity are the same in both cases, and the line-up of the parties almost precisely parallel. In both cases, an injured plaintiff sues a vessel owner who third-parties the person in control of the vessel (the implied obligor). In both cases, the vessel owner is under the nondelegable duty to provide a seaworthy vessel and thus any breach of the implied obligation can result in an action against the "innocent" vessel owner. There is one difference: in the *936 shipowner-stevedore cases, the only permissible action by the injured plaintiff is against the shipownerthe stevedore is protected, at least initially, against any liability other than that provided by the Longshoremen's and Harbor Workers' Compensation Act. Thus, it is certain that an action will be filed against the vessel-owner. However, in the tug-barge situation, the tug owner enjoys no such protection; he may be sued directly by the injured person (indeed, here, he was sued and was cast in judgment), and thus there is no certainty, since there is no necessity, that the injured person will sue the barge owner. If we believed that the Ryan doctrine of implied contractual indemnity was a fiction created solely to help "innocent" shipowners in situations where there is a certainty and necessity that they be sued, since no other suable defendant exists, and where there is no other way to escape the effects of the Halcyon doctrine of no contribution between joint tortfeasors, Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U.S. 282, 72 S.Ct. 277, 96 L.Ed. 318 (1952), then we might reject a theory of implied contractual indemnity, or at least some of its ramifications, as between tugs and barges, since there is no certainty or necessity that the barge be sued. However, we do not believe that the Ryan doctrine rests on such a flimsy base, but rather is founded soundly on an attempt to equitably place the burden of defending and paying claims on the one party of the two who was in control of the vessel and whose action resulted in the claim being brought[8] rather than on the party technically liable. Viewed in this light, we hold that all the ramifications of the Ryan doctrine, as discussed above, are applicable to the tug-barge situation, despite the ability of the plaintiff to sue the tug owner directly.
In the case before us, the barge interests are faced with the assertion of the tug owner that there can be no recovery of attorneys' fees unless the party seeking indemnity tenders the defense of the main claim to the indemnitor. Although it is true that in many of the shipowner-stevedore cases, including Caswell (Strachan), supra, the shipowner does tender the defense, we cannot see that the tender is critical. In Massa v. C. A. Venezuelan Navigacion, supra, 332 F.2d 779, the Second Circuit, in adopting the Fifth Circuit's Strachan doctrine awarding attorneys' fees to the successful-defendant shipowner, does not mention in its opinion tendering the defense, and the rationale of the opinion does not indicate that tender might be critical. It may well be, of course, that if the third-party defendant offers to defend against the plaintiff's claim, and that offer is rejected by the defendant, there can be no recovery of attorneys' fees, since the expense could have been avoided at no cost to the original defendant in those circumstances. See Rederi A/B Dalen v. Maher, 303 F.2d 565, 567 n. 3 (4th Cir. 1962). But the third-party defendant should not be allowed to oppose the claim against him and then later be heard to imply that he would have accepted the defense to plaintiff's claim had it been tenderedfor the third-party defendant to assume the defense, it would have to admit, for purposes of the third-party claim, its liability to defendant.[9] Thus, rather than insist on *937 a formal tender of the defense, we think it fair to consider the third-party claim and request for attorneys' fees as an implied invitation to the third-party defendant to admit its liability on the third-party claim and to offer to defend against the plaintiff's claim, and conclude that the third-party claim, in and of itself, without a formal tender of the defense, is sufficient action by the defendant to permit its recovery of attorneys' fees. Expressed differently, the burden is on the third-party defendant to offer to defend (or to accept a tender of the defense if made) in order to avoid imposition of liability for attorneys' fees, and not on the defendant to tender the defense in order to recover attorneys' fees. Here, not only was there no offer to defend, but Dorr also actively pursued its own cross claim against the barge interests.
We thus conclude that costs and attorneys' fees will be proper in this case if the implied warranty was breached.[10] Here, however, the reservation of that issue to the trial judge, and his retirement prior to a decision thereon, presents an unfortunate problem. In order to save time and expense, we would like to decide this issue at this time, but we are unable to. Here, the difference between this case and the shipowner-stevedore cases, that is, the fact that here the third-party defendant may be sued directly by the plaintiff, discussed supra at p. 936, comes into play. In the Ryan cases, the issue of the breach of the implied warranty may only be determined in the third-party claim, as that is the only claim involving the stevedore. Here, the third-party defendant is also involved in a separate main claim, and it appears, on the surface at least, that the decision of that main claim might decide the issue of the breach of warranty, because under the facts of this case, it may well be that a finding that Dorr's negligence caused Singer's death would automatically demand a finding that the implied warranty was breached. However, it is our reluctant conclusion that we cannot act upon the jury finding of Dorr's negligence. That finding was made in connection with the main claim, which was submitted to the jury. The barge's claim against the tug, a cross claim, was reserved to the judge, and it was contemplated that the judge would determine the issues presented by that claim. We feel that we cannot regard the jury verdict as binding upon us or determinative of the breach of warranty issue for the reason that it would not have been binding upon or determinative of the issue before Judge Ellis. First, the finding *938 of Dorr's negligence made by one trier of fact in resolving plaintiff's claim against Dorr, does not compel a finding of Dorr's negligence by a different trier of fact in resolving the barge's claim against Dorr, even though the evidence is the same. Even though the evidence might have been sufficient to warrant sending the case to the jury on the main claim, and therefore no directed verdict or judgment n. o. v. would be possible, and the jury finding that Dorr's negligence caused Singer's death would stand, it is still possible that the judge, in weighing the evidence to decide the breach of warranty issue, might have come to the conclusion that there should be no recovery by the barge interests, because he could have found, contrary to the jury, that Singer's death was not caused by Dorr's negligence. In the ordinary case, where there is no overlapping of claims or issues, the only action he could take because of disagreement with the jury verdict, would be to grant a new trial. However, here his disagreement with the jury verdict could validly be reflected in his decision of the issue that was reserved to him. Apart from that, even if he had agreed with the jury, he still might have disallowed recovery, if he found the conduct of the barge interests sufficient to preclude recovery, see footnote 8, supra; or if (if such a hypothetical is possible) Dorr's negligence was not related to the towing contract and was thus not a breach of the warranty.
Although the procedure seems wasteful in view of the finding by the jury, it is our opinion that there are no principles embodied in the doctrines of res judicata and collateral estoppel that would enable us to decide this issue by using the jury verdict as a jumping-off point.[11] Accordingly, the only solution, short of a new trial, is that a stenographic transcript of those portions of the trial revelant to this issue be prepared. Upon submission of that transcript to the Court, together with appropriate memoranda and arguments, the Court will be able to decide that issue.
NOTES
[1] Plaintiff's allegations of unseaworthiness against Dorr Towing were dismissed, the exclusive remedy against the employer sounding in negligence, Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964).
[2] The state wrongful death provisions have been held to create a cause of action in unseaworthiness as well as negligence, Grigsby v. Coastal Marine Service of Texas, Inc., 235 F.Supp. 97, 106-108 (W.D.La.1964). The United States Supreme Court has apparently accepted sub silentio the correctness of Grigsby: Jackson v. Lykes Bros. Steamship Co., 386 U.S. 731, 87 S.Ct. 1419, 18 L.Ed. 2d 488 (May 8, 1967), wherein the Court held that a longshoreman's unseaworthiness claim against the shipowner-employer, Reed v. The Yaka, 373 U.S. 410, 83 S.Ct. 1349, 10 L.Ed.2d 448 (1963), could be asserted in in personam as well as in rem actions, was a death case and the only available theory of recovery was unseaworthiness. Since there is no action for wrongful death known to the maritime law in the absence of a statute, it is necessary to recovery in Jackson that the Louisiana wrongful death statute be deemed to include a cause of action in unseaworthiness.
[3] Dorr Towing and the barge interests were all named as defendants, thus any claims between them are properly denominated cross claims, Rule 13(g), F.R. Civ. P. However, because of our use herein of the Ryan analogy, p. 935 infra, for convenience we will often refer to the cross claim of the barge interests against Dorr as though it were a third-party claim, with the barge interests classified as defendant and third-party plaintiff and Dorr as third-party defendant, Rule 14 (a), F.R.Civ.P.
[4] It might have lasted longer, but since the amount of the claim asserted did not exceed the amount of insurance coverage, the trial judge had ordered, Singer v. Dorr, 38 F.R.D. 167 (E.D.La.1965), that the trial of the tug owner's limitation defense, 46 U.S.C.A. § 183, be severed; as expected, that issue became moot when judgment was entered for less than the policy limits. That order was a procedural result of the trial judge's previous holding, in In the Matter of Independent Towing Co., Inc., (ITCO), 242 F.Supp. 950 (E.D.La.1965), that the right of a vessel owner to limit liability was a personal defense not available to the owner's insurers sued pursuant to the Louisiana Direct Action Statute, LSA-Rev. Stat. 22:655. Assuming the validity of that holding, with which we are in complete agreement, a court will be faced with the problem of reconciling a plaintiff's desire to proceed with his direct action against the insurance policy with the vessel owner's right to have the limitation fund protected by insurance so as not to lose both his vessel and insurance, all the while attempting to effect judicial economy. It was the trial judge's, and is our, view that rather than enjoining the filing or prosecution of direct actions pending the determination of the limitation proceedings, the direct actions should proceedin most cases the amount of the judgments awarded will not exceed the policy limits, there will be no need to try the limitation issue, the owner's right to limitation will in no way have been impaired, and the plaintiff will not have been unnecessarily delayed in his pursuit of justice. If the judgments do exceed policy limits, then, prior to execution on the judgments, the limitation issue would be tried, but the shipowner or the limitation fund would be credited with the judgment recovered in the direct actions. If, for some reason, any of the direct action claims cannot be consolidated with the limitation proceeding, the limitation court would, if necessary, be able to enjoin execution on any judgments recovered in, or at any prior time enjoin proceedings in, the unconsolidated direct actions. That this approach is consistent with the Supreme Court's pronouncements in Maryland Casualty Co. v. Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806 (1954), see the opinion of the trial judge herein in Alcoa Steamship Co. v. Charles Ferran & Co., 251 F.Supp. 823 (E.D.La.1966). We believe this approach, rather than an ironclad rule of "no direct actions before limitation" is not only reconcilable with Cushing but provides a useful alternative procedural device which nonetheless protects all the substantive interests the Supreme Court desired to protect and which the Fifth Circuit in Guillot v. Cenac Towing Co., 366 F.2d 898 (5th Cir. 1966), saw need to protect, at 904, without the imposition of unnecessary delays upon plaintiff and without the loss of time brought about by the trial of the limitation issue which will so often become moot.
[5] It may, however, have been the proximate cause of suit being brought against the barge interests.
[6] Fox and Bielawski involved shiprepairers rather than stevedores; see footnote 7, infra.
[7] The reasoning of the shipowner-stevedore cases has also been followed in shipowner-shiprepairer situations, Booth Steamship Co. v. Meier & Oelhaf Co., 262 F.2d 310 (2nd Cir. 1958); Bielawski v. American Export Lines, supra, text accompanying footnote 6.
[8] The barge interests' indemnity claim might be weakened to the extent the finding suggested by footnote 5, supra, might be made. See Weyerhaeuser Steamship Co. v. Nacirema Operating Co., Inc., 355 U.S. 563, 567, 78 S.Ct. 438, 2 L.Ed.2d 491 (1958). But see Crumady v. The Joachim Hendrik Fisser, 358 U.S. 423, 79 S.Ct. 445, 3 L.Ed.2d 413 (1959); Calmar Steamship Corp. v. Nacirema Operating Co., 266 F.2d 79 (4th Cir. 1959); D/S Ove Skou v. Hebert, 365 F.2d 341, 348 (5th Cir. 1966).
[9] In this regard, we must, although agreeing with the result, disagree with the comment of the court in David Crystal, Inc. v. Cunard Steamship Co., Ltd., 339 F.2d 295, 300 (2nd Cir. 1964), that the defendant's "only safe course was to defend against" the plaintiff's claims where the third-party defendant invoked personal defenses against the defendant (third-party plaintiff). That statement implies that if the third-party defendant were to offer to assume the defense, there are instances in which the defendant might have to reject that offer in order to adequately protect himself. This cannot bethe defendant loses nothing when the third-party defendant assumes the defense for, in effect, the third-party defendant thereby admits, just as between himself and the third-party plaintiff, the validity of the impleading claim and that his defenses to it are nonmeritorious, and takes full responsibility for the plaintiff's claim; of course, this "admission" has no effect and is of no assistance or evidentiary value to the plaintiff in his action. Thus, the assumption of the defense by the third-party defendant is a far safer course for a defendant.
[10] It should be pointed out that there can be recovery of only those costs and attorneys' fees incurred in defending against the plaintiff's claim, not those incurred in pursuing the claim for indemnity, and, in this case, not those incurred in defending against Dorr's cross claimthe general rule in indemnity cases is that the right of recovery includes the amount of the judgment against the indemnitee, interest on the judgment, attorneys' fees, costs and expenses, for all these are elements of damages, Holley v. The Manfred Stansfield, 186 F.Supp. 805, 811 (E.D.Va. 1960), but it is also the general rule that the cost of enforcing a legal right (here the contractual right of indemnity) is borne by the right holder, not by the party sought to be held. Caswell v. Koninklyke Nederlandsche Stoomboot Maalschappy, supra, 205 F.Supp. 295 (S.D.Tex.1962). See also Lusich v. Bloomfield Steamship Co., 355 F.2d 770, 776 (5th Cir. 1966).
[11] The complex arrangement of claims among the three parties in this suit must be distinguished from the simple three-party Ryan cases. In the Ryan cases, if the shipowner is held in judgment by the longshoreman and then pursues his right of indemnity against the stevedore, the stevedore is not permitted to relitigate the question of the shipowner's liability to the longshoreman, for the stevedore's liability is to indemnify the shipowner for damages sustained as a result of a breach of warranty. American Export Lines v. Atlantic & Gulf Stevedores, 313 F.2d 414 (4th Cir. 1963). If the shipowner settles with the longshoreman, the stevedore can, beyond denying that the warranty was breached, inquire only into the reasonableness of the settlement. Waterman Steamship Corp. v. Dugan & McNamara, Inc., 364 U.S. 421, 81 S.Ct. 200, 5 L.Ed.2d 169 (1960); California Stevedore & Ballast Co. v. Pan-Atlantic Steamship Corp., 291 F.2d 252 (9th Cir. 1961). [If the stevedore settles with the longshoreman, and the shipowner pursues his indemnity claim for attorneys' fees, then the shipowner must show that a breach of warranty caused injury for which the shipowner was potentially liable. Paliaga v. Luckenbach Steamship Co., 301 F.2d 403 (2nd Cir. 1962); Rederi A/B Dalen v. Maher, 303 F.2d 565, 566-67 (4th Cir. 1962).] These rules hold that the indemnitor cannot relitigate in the indemnity action the liability of the indemnitee, which is determined independently of the indemnitor; in the matter before us, however, the jury verdict for plaintiff against Dorr touches on the liability of the indemnitor, and thus our concern is whether the indemnitor should be estopped from "relitigating" between himself and the indemnitee issues which were determined between himself and the plaintiff, not whether he can relitigate the indemnitee's liability. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1983702/ | 835 F. Supp. 103 (1992)
Nicholas A. ATTICK, Jr. and Dana Investment Corporation, Plaintiffs,
v.
VALERIA ASSOCIATES, L.P.; Mark David Associates; Richard Schlesinger; William D. Weinstein; Leslie Schlesinger; Robert Schwartz; Quest-Co Ltd. a/k/a Questco Ltd.; AcQuest Corp.; Balbec Corp.; Balbec Contracting Corp.; Balbec Roofing Corp.; Balbec Plumbing Corp.; Balbec Painting Corp.; Down To Earth Balbec Corp.; Joan Robey; Martin Cohen; Schlesinger Management Corp.; Gilbert Schlesinger Management Co.; M.D. Leasing Corp.; Buchanan Associates; Marine Midland Bank, N.A.; Friedman Alpren & Green; Chemical Bank, N.A.; Dana Mark David a/k/a Dana Mark David Limited Partnership; First Constitution Bank; "John Doe;" "Jane Doe;" and "John Doe Corp." Defendants.
No. 91 Civ. 3758 (LLS).
United States District Court, S.D. New York.
March 19, 1992.
*104 *105 *106 *107 Martin Nardi Gamliel, Gerard Zwirn, New York City, for plaintiffs.
Dreyer and Traub, New York City (Stuart M. Fischman, Laurence S. Margolin, of counsel), for defendant First Constitution Bank.
Phillips Lytle Hitchcock Blaine & Huber, New York City (William J. Brennan, Edward S. Bloomberg, of counsel), for defendant Marine Midland Bank.
Parker Chapin Flattau & Klimpl, New York City (Lee Stremba, of counsel), for defendant Friedman Alpren & Green.
Chemical Bank Legal Dept., New York City (James Condren, of counsel), for defendant Chemical Bank.
Jackson & Nash, New York City (Ronald J. Herzog, of counsel), for defendants Leslie Schlesinger, Joan Robey and Buchanan Associates.
Alkalay Handler Robbins & Herman, New York City (Peter S. Herman, Craig Brown, of counsel), for defendants Valeria Associates, Richard Schlesinger, William D. Weinstein, Robert Schwartz, Quest-Co, Balbec Corp., Balbec Contracting, Balbec Roofing, Balbec Plumbing, Balbec Painting, Down To Earth Balbec, Martin Cohen, Schlesinger Management, Gilbert Schlesinger Management, M.D. Leasing and Dana Mark David.
OPINION AND ORDER
STANTON, District Judge.
All defendants move to dismiss the complaint. Defendant First Constitution Bank also moves, as an alternative, for summary judgment.
BACKGROUND
According to the complaint[1], Plaintiff Nicholas A. Attick, Jr. ("Attick") is the president *108 of plaintiff Dana Investment Corporation ("Dana") (Complaint ¶ 9).
Defendant Mark David Associates ("M.D.A.") is a general partnership. Its general partners are defendants William D. Weinstein ("Weinstein") and Richard Schlesinger ("Schlesinger") (Id. ¶ 12). (M.D.A., Weinstein, and Schlesinger are collectively "the principals"). Defendants Balbec Corp., Balbec Contracting Corp., Balbec Roofing Corp., Balbec Painting Corp., Balbec Plumbing Corp., Down to Earth Balbec Corp., Schlesinger Management Corp., Quest-Co Ltd. a/k/a Questco Ltd., M.D. Leasing Corp., Gilbert Schlesinger Management Co., Leslie Schlesinger, AcQuest, Joan Robey, and Buchanan Associates (collectively "the affiliates") are allegedly all affiliated with, related to, or controlled by one or more of the principals (¶¶ 13, 15-16, 28, 63). Defendant Robert Schwartz is the chief financial employee or an officer of M.D.A. and some of the affiliates (¶ 18). Defendant Martin Cohen was the sales director of Quest-Co (¶ 29).
Valeria Associates and the Valeria Property
Dana was a contract vendee of real estate in Cortlandt, New York (the "Valeria Property") (¶ 40). On or about December 11, 1987 Attick and M.D.A. entered into a limited partnership agreement (the "Valeria Agreement"), which formed defendant limited partnership Valeria Associates, L.P. ("Valeria"), to acquire, market, and develop the Valeria Property (¶¶ 43-43). M.D.A., the general partner, owned a 47.5% interest in Valeria. Attick, a limited partner, owned a 40% interest. Two limited partners who are not parties to this action each owned a 6.25% interest (¶ 44).
General partner M.D.A. had full responsibility for developing the Valeria Property, subject to certain contractual restrictions on how it was to discharge its duties (¶¶ 45-62). M.D.A. allegedly conspired with the affiliates to divert money from Valeria by having the affiliates submit false and fraudulent invoices to Valeria and causing Valeria to pay them. The conspirators then concealed their acts and Valeria's financial picture from Attick (¶¶ 72-103, 110).
On April 22, 1988 defendant Marine Midland Bank ("Marine") entered into a $27,500,000 construction loan and mortgage agreement with Valeria (¶ 70-71; Complaint Exh. B). Under the agreement, Marine would lend money to Valeria upon presentation of documents verifying expenditures on the Valeria Property. However, Marine allegedly knowingly made disbursements upon presentation of false, fraudulent, and duplicative expenditure documents (¶¶ 99-103).
Valeria had a checking account with defendant Chemical Bank ("Chemical"). Only Schlesinger was permitted to sign checks on Valeria's behalf. Chemical allegedly paid checks signed by Schwartz, Weinstein, and Cohen (¶ 111).
Claim I alleges that Valeria, the principals, the affiliates, Schwartz, Cohen, Marine, and Chemical violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(b) and (c). Claim II alleges that these defendants violated 18 U.S.C. § 1962(d) by conspiring to violate RICO.
Dana Mark David and the Candlewood and Marina Properties
On May 1, 1987 Dana owned real estate in Danbury, Connecticut (the "Candlewood Property") and had a contract to purchase contiguous real estate (the "Marina Property") (Complaint ¶ 127). Dana and M.D.A. executed joint venture and limited partnership agreements (the "D.M.D. LP agreements") and formed defendant Dana Mark David ("D.M.D. LP"), a Connecticut limited partnership, to acquire the Marina Property, and to develop and sell luxury condominium dwelling units (¶¶ 129-130). Schlesinger and Weinstein were D.M.D. LP's general partners, and Dana was its limited partner.
The D.M.D. LP agreement provided that within four months Dana would obtain written commitments for the release of four encumbrances on the Marina Property ("the commitments"). Within 120 days after Dana delivered these commitments to the principals, M.D.A. was to obtain refinancing commitments for at least $8,000,000 (¶¶ 131-32; Exh. C). If M.D.A. did not obtain a refinancing commitment within 120 days, the joint venture and limited partnership would terminate, and the Candlewood and Marina properties *109 would be transferred to Dana (¶ 133; Exh. C).
A rider to the D.M.D. LP agreement provided that if Dana did not obtain the commitments within four months, Dana could either (a) withdraw from D.M.D. LP, and M.D.A. would succeed to its interest or (b) pay to M.D.A. $2,500,000, plus interest from May 1, 1987, plus reasonable costs expended by M.D.A. in its acquisition of the Marina Property. Dana's failure to exercise either option within two days would "constitute an automatic grant to [M.D.A.] of an irrevocable power of attorney, coupled with an interest, to execute whatever documents are necessary to ... transfer the interest of Dana in the Limited Partnership to [M.D.A.]" (Id. Exh. C Rider ¶ 5).
On July 22, 1987 Attick allegedly provided the commitments, by letter mailed to Weinstein (¶ 139). The principals allegedly ignored the letter and their duty to obtain refinancing (¶ 140). On July 8, 1988 Dana informed the principals in writing that the joint venture and limited partnership were terminated because of their failure to obtain refinancing (¶ 141).
On August 13, 1988 and on August 30, 1988, the principals allegedly fraudulently conveyed the Marina Property from D.M.D. LP to M.D.A. in two quitclaim deeds, for no consideration (Id. ¶¶ 143-46; Exh. E and F).
On August 31, 1988 Schlesinger, on behalf of M.D.A., obtained from defendant First Constitution Bank ("FC Bank") a commercial construction loan of $4,600,000, secured by a mortgage on the Marina Property (¶ 148). Schlesinger and Weinstein allegedly falsely and fraudulently represented to FC Bank that M.D.A. had lawful title to the Marina Property (¶ 152). M.D.A. and affiliates Balbec Corp. and Quest-Co Ltd. then submitted false and fraudulent requisitions for disbursements on the loan (¶¶ 155-56).
FC Bank allegedly had a duty to investigate M.D.A.'s title to the Marina Property before issuing the mortgage loan (¶ 159). FC Bank issued the loan although it allegedly knew, or should have known, that M.D.A. had invalid title (¶¶ 161-62). M.D.A. defaulted on the loan, and FC Bank has instituted foreclosure proceedings (¶¶ 163-64).
Claim III alleges that the principals, FC Bank, Balbec Corp., and Quest-Co Ltd. violated RICO, 18 U.S.C. § 1962(b) and (c). Claim IV alleges that the defendants violated 18 U.S.C. § 1962(d) by conspiring to violate RICO. In claims V through XVI, plaintiffs assert state law claims, pendent to claims I, II, III and IV, against all defendants.
DISCUSSION
I. MOTION TO DISMISS AND THE PLEADING REQUIREMENTS
In passing on a motion to dismiss, the allegations in the complaint are liberally construed and considered in the light most favorable to the pleader. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974). "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-02, 2 L. Ed. 2d 80 (1957).
"In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed.R.Civ.P. 9(b). Where scienter is alleged generally, plaintiff must plead particular facts which allow a strong inference of scienter. Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir.1990); Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir.1987), cert. denied, 484 U.S. 1005, 108 S. Ct. 698, 98 L. Ed. 2d 650 (1988). "[P]laintiffs can be required to supply a factual basis for their conclusory allegations regarding [defendants'] knowledge. It is reasonable to require that the plaintiffs specifically plead those events which they assert give rise to a strong inference that defendants had knowledge of the facts...." Ross v. A.H. Robins Co., 607 F.2d 545, 558 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S. Ct. 2175, 64 L. Ed. 2d 802 (1980).
*110 Where fraud allegations are pleaded on information and belief, the factual basis for plaintiffs' information and belief must be pleaded with particularity.
Despite the generally rigid requirement that fraud be pleaded with particularity, allegations may be based on information and belief when facts are peculiarly within the opposing party's knowledge. This exception to the general rule must not be mistaken for license to base claims of fraud on speculation and conclusory allegations. Where pleading is permitted on information and belief, a complaint must adduce specific facts supporting a strong inference of fraud or it will not satisfy even a relaxed pleading standard.
Wexner, 902 F.2d at 172 (citations omitted).
II. STANDING
Defendants argue that plaintiffs Attick and Dana do not have standing to assert the RICO claims (claims I through IV) because only the limited partnerships, Valeria Associates and D.M.D. LP, were directly injured, and plaintiffs, as limited partners, were injured only derivatively.
In Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843, 849 (2d Cir.), cert. denied, 479 U.S. 987, 107 S. Ct. 579, 93 L. Ed. 2d 582 (1986), the Second Circuit held that a shareholder does not have standing to assert a RICO claim where the corporation is directly injured, and the shareholder suffers only from the decrease in the value of his investment. "[P]laintiffs lack standing to sue under RICO.... The legal injury, if any, was to the firm. Any decrease in value of plaintiffs' shares merely reflects the decrease in value of the firm as a result of the alleged illegal conduct." See also Carter v. Berger, 777 F.2d 1173, 1176 (7th Cir.1985) (In RICO cases, "an indirectly injured party should look to the recovery of the directly injured party, not to the wrongdoer, for relief.")
In Klebanow v. New York Produce Exch., 344 F.2d 294, 296 (2d Cir.1965) the Second Circuit construed Section 4 of the Clayton Act, 15 U.S.C. § 15, which authorized suit by "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws." Klebanow found that a limited partner's standing was analogous to a corporate shareholder's standing: "[W]hen business is conducted by a partnership, the statute views the partnership rather than a partner as the person injured."[2]
The RICO statute, 18 U.S.C. § 1964(c), authorizes suit by "[a]ny person injured in his business or property by reason of a violation of section 1962." Because this language tracks Section 4 of the Clayton Act, "rules established in anti-trust cases for identifying the proper plaintiffs should be applied to RICO ... too." Mid-State Fertilizer Co. v. Exchange Nat. Bank, 877 F.2d 1333, 1335 (7th Cir.1989).
Under Klebanow and Rand a limited partner does not have standing to assert RICO claims if the only injury he suffered is the diminution of the value of his investment in the limited partnership. Cf. Abeloff v. Barth, 119 F.R.D. 332, 334 (D.Mass.1988) (claim against general partner for breach of fiduciary duty to limited partnership is claim of partnership entity, not claim of limited partner); Rothstein v. Seidman & Seidman, 410 F. Supp. 244, 250 (S.D.N.Y.1976) (limited partner does not have standing to assert fraud claim against accountant whose negligence harmed limited partnership); Strain v. Seven Hills Assocs., 75 A.D.2d 360, 429 N.Y.S.2d 424, 432 (1st Dept.1980):
[A] limited partner's power to vindicate a wrong done to the limited partnership and to enforce redress for the loss or diminution in value of his interest is no greater than that of a stockholder of a corporation. As a general proposition, where a corporation suffers loss because of the acts of officers, directors, or others which diminish or render valueless the shares of stock of a stockholder, the stockholder does not have a direct cause of action for such damages, but has a derivative cause of action *111 on behalf of the corporation to recover the loss for the benefit of the corporation.
(citations omitted).
Claims I and II allege that the principals and others looted Valeria's funds and wrongfully increased the mortgage lien on its property.[3] Attick, the limited partner, does not have standing to assert these claims, which are therefore dismissed.[4]
However, Dana has standing to assert claims III and IV. Paragraph 133 of the complaint alleges:
The Joint Venture Limited Partnership Agreement further provided that if [M.D.A.] were [sic] unable to obtain a commitment from an institutional lender for the refinancing described above, within the time period described, the joint venture would terminate and the real property would be transferred back to DANA subject to the then outstanding indebtedness and certain cash payments made by [M.D.A.]
Dana alleges that M.D.A. did not obtain the commitment within the time allowed, and therefore, the Candlewood and Marina Properties should have been transferred to Dana. Instead, M.D.A. transferred the Marina property to itself, and encumbered it with a mortgage loan. Dana therefore alleges a direct interest in the Marina Property and a direct injury to that interest.
III. FC BANK'S MOTION TO DISMISS CLAIMS III AND IV
FC Bank argues that claims III and IV against it should be dismissed because of Dana's failure to plead the predicate RICO acts with particularity.
Dana alleges that FC Bank aided and abetted the principals' acts of mail, wire, and bank fraud. Dana must plead wrongdoing by the primary parties, FC Bank's knowledge of the primary violations, and FC Bank's substantial assistance to the primary parties. Cf. IIT Int'l Inv. Trust v. Cornfeld, 619 F.2d 909, 922 (2d Cir.1980) (elements of aiding and abetting securities fraud). FC Bank argues that its knowledge of the alleged fraud is not pleaded with particularity.
Dana alleges that FC Bank knew that the quitclaim deeds conveying the Marina Property from D.M.D. LP to M.D.A. were invalid, unauthorized, and a fraud on the plaintiff (Complaint ¶ 160). The factual basis for this conclusory allegation is that FC Bank received copies of the D.M.D. LP agreements. FC Bank allegedly knew or should have known that under these agreements the principals were not authorized to execute the quitclaim deeds (¶¶ 157-58).
That is insufficient to justify the inference of FC Bank's knowledge. A rider to the D.M.D. LP agreements permitted M.D.A. to execute such quitclaims deed under certain circumstances (Id. Exh. C Rider ¶ 5(c)). No facts are pleaded showing that FC Bank, or any of its agents, knew or should have known that those circumstances had not occurred.
Dana argues that FC Bank owed it a fiduciary duty, and therefore its reckless failure to discover the fraud is sufficient to charge it with knowledge. However, generally a bank does not owe its lenders (or limited partners of its lenders) a fiduciary duty. Aaron Ferer & Sons, Ltd. v. Chase Manhattan Bank, 731 F.2d 112, 122 (2d Cir. 1984); Weinberger v. Kendrick, 698 F.2d 61, 78-79 (2d Cir.1982), cert. denied, 464 U.S. 818, 104 S. Ct. 77, 78 L. Ed. 2d 89 (1983). The bank had no direct dealings with Dana, and Dana has not provided any factual or legal support for its assertion that the bank owed it a fiduciary duty. Therefore, Dana's argument is rejected. See Martin v. EVP Second Corp., 1991 WL 131176, 1991 U.S. Dist. LEXIS 9234 (S.D.N.Y.1991) (claim that defendant breached fiduciary duty to plaintiff dismissed for failure to allege facts supporting conclusory allegation of defendant's fiduciary *112 duty); Boley v. Pineloch Assocs., Ltd., 700 F. Supp. 673, 681 (S.D.N.Y.1988) (same).
The allegations against FC Bank of aiding and abetting bank, mail, and wire fraud all fall for failure to plead FC Bank's scienter. Claims III and IV are dismissed against FC Bank because of Dana's failure to plead that the Bank committed any predicate racketeering acts.
IV. THE MOTION TO DISMISS OF THE PRINCIPALS, BALBEC CORP., AND QUEST-CO LTD.
The principals and affiliates Balbec Corp. and Quest-Co Ltd. argue that claims III and IV against them should be dismissed because they fail to state a RICO claim, and because the fraud allegations are not pleaded with particularity.
1. Pattern of Racketeering Activity
Defendants argue that Dana does not properly plead that they engaged in a pattern of racketeering activity. To plead such a pattern, Dana must allege that each defendant either committed or aided and abetted the commission of at least two RICO predicate acts, and that the alleged predicate acts relate to each other and "amount to, or ... otherwise constitute a threat of, continuing racketeering activity." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 240, 109 S. Ct. 2893, 2901, 106 L. Ed. 2d 195 (1989) (italics in original).
A pattern of racketeering activity is not pleaded against Balbec Corp. and Questco. In paragraph 156 Dana alleges:
Upon information and belief, that defendants BALBEC CORP. and QUESTCO knowingly furnished false and fraudulent invoices for work, labor and services that were never performed or that was [sic] overbilled with knowledge that said invoices would be submitted to defendant FIRST CONSTITUTION BANK for draw-down payment; that at all times mentioned herein BALBEC CORP. and QUESTCO served and acted as a conduit to the "enterprise" to obtain construction loan funds from FIRST CONSTITUTION BANK.
To plead a pattern of bank fraud acts, Dana is required to, but does not, specify two specific false or fraudulent invoices from each affiliate. Moreover, Dana provides no facts upon which its information and belief are based. Therefore, claims III and IV are dismissed against Balbec Corp. and Questco for failure properly to plead that they committed predicate racketeering acts.
The bank fraud allegation against the principals is well pleaded. 18 U.S.C. § 1344 makes it a crime knowingly:
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
Dana alleges that the principals obtained a mortgage from FC Bank by means of the false and fraudulent pretense and representation that M.D.A. had valid title to the Marina Property. Dana alleges, with sufficient particularity, that M.D.A.'s title was fraudulently obtained and a sham.[5] It also alleges with particularity other circumstances of the fraud, including the date and the amount of the loan (Complaint ¶ 148).
The allegation of knowingly transporting across state lines money obtained through fraud, in violation of 18 U.S.C. § 2314, is pleaded properly. Dana alleges (Id. ¶ 154):
On August 31, 1988, by virtue of the fraudulent acts and misrepresentations described above, the defendants obtained the sum of eighty thousand ($80,000.00) dollars from defendant FIRST CONSTITUTION BANK and thereafter, upon information and belief, transported or caused to be transported a portion thereof from the State of Connecticut into the State of New York.
*113 The principals argue that this allegation does not comply with Rule 9(b) because it does not specify which fraudulent acts or which defendants it is referring to, and because it is pleaded on information and belief.
Reading paragraph 154 with the generosity required on a motion to dismiss, the fraudulent acts referred to are the acts of bank fraud alleged in the preceding paragraphs, and the term "defendants" refers to the principals.
Paragraph 154 is only partially pleaded on information and belief. When a violation of 18 U.S.C. § 2314 is pleaded as a RICO predicate act, only those elements of the violation that involve fraud must be pleaded with particularity. The other elements, including the element of interstate transportation which is pleaded on information and belief, are subject to the liberal pleading standards of Fed.R.Civ.P. 8(a). Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 792 n. 7 (3rd Cir.1984), cert. denied, 469 U.S. 1211, 105 S. Ct. 1179, 84 L. Ed. 2d 327 (1985); Construction Technology, Inc. v. Lockformer Co., 704 F. Supp. 1212, 1230 n. 12 (S.D.N.Y.1989). Plaintiff has adequately pleaded a violation of 18 U.S.C. § 2314.[6]
Since the complaint adequately pleads the two RICO predicate acts of bank fraud and interstate transportation of money obtained through fraud, there is no need to consider the alleged defects in the pleading of the mail and wire fraud claims.
Dana alleges that the principals executed two separate but related schemes (the Valeria scheme[7] and the Marina scheme) fraudulently to obtain an interest in real estate, borrow money from a bank against that interest, and divert that money to themselves. This sufficiently alleges a "pattern." under H.J., Inc.
2. Acquiring an Interest in an Enterprise
Claim III alleges violations of 18 U.S.C. § 1962(b) and (c). The principals argue that claim III does not state a claim under § 1962(b), which forbids "any person through a pattern of racketeering activity ... to acquire or maintain, directly or indirectly, any interest in or control of any enterprise. ..."
Dana does not plead that the principals acquired or maintained an interest in an enterprise. In paragraph 128 it alleges that "defendants desired to acquire an interest in the said real property," but that does not state a claim under § 1962(b), because real property is not an enterprise. Furthermore, Dana is required to, but does not, allege a causal connection between defendants' interest in or control of an enterprise and Dana's injuries. See Browning Ave. Realty Corp. v. Rosenshein, 774 F. Supp. 129, 140 (S.D.N.Y. 1991); Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 709 F. Supp. 438, 452 (S.D.N.Y.1989).
Claim III states a claim only under 18 U.S.C. § 1962(c) which forbids "any person employed by or associated with any enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity...."
3. RICO Conspiracy
Claim IV alleges a violation of 18 U.S.C. § 1962(d) which forbids "any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section."
*114 In paragraph 169 of the complaint, Dana alleges:
That since or about 1988 and continuing to 1990, defendants SCHLESINGER, WEINSTEIN, [M.D.A. and D.M.D. LP] and each of them, ... conspired and formed a deliberate illegal and unlawful ... conspiracy to acquire an interest in the Candlewood Lake and Marina Property and thereafter defraud plaintiff of its interest therein by gaining control of said property through a joint venture limited partnership arrangement, by making unauthorized loans and mortgages secured by said property and an illegal and unauthorized transfer of said property to their "enterprise" all through a continuous pattern of racketeering activity.
"Because the core of a RICO civil conspiracy is an agreement to commit predicate acts, a RICO civil conspiracy complaint, at the very least, must allege specifically such an agreement." Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1990). Accord Beverly Hills Design Studio, Inc. v. Morris, 1990 WL 120645, 1990 U.S. Dist LEXIS 6099 (S.D.N.Y.1990) (complaint must allege that each defendant agreed to commit two or more predicate crimes); Morin, 711 F. Supp. 97, at 111 (S.D.N.Y.1989).
The properly pleaded predicate acts are bank fraud and interstate transportation of fraudulently obtained money. Dana therefore must, but does not, allege specifically that each defendant agreed to commit both these acts. The alleged agreement to commit common law fraud cannot be the basis for a RICO conspiracy claim, because common law fraud is not a predicate act. Claim IV fails to state a claim, and is therefore dismissed.
V. THE PENDENT STATE LAW CLAIMS
Claims V, VI, VII, VIII, IX, and XVI assert state law claims pendent to federal claims I and II (the Valeria claims). Because claims I and II were dismissed, these pendent claims are dismissed for lack of an independent basis of subject matter jurisdiction. See 28 U.S.C. § 1367(c)(3). Claim XV is dismissed to the extent that it relates to the Valeria transaction.
The parties have stipulated to dismiss claims X, XI, and XII, against defendant Friedman Alpern & Green, without prejudice.
28 U.S.C. § 1367(a) allows supplemental jurisdiction over pendent state claims which "form part of the same case or controversy" as the federal claims asserted, even if the state claims involve additional parties. Therefore, this court has supplemental jurisdiction over claim XIII (against the principals and FC Bank), claim XIV (against FC Bank), and claim XV (against the principals, Balbec Corp. and Questco), which are part of the same case or controversy as the RICO claim (claim III) which was sustained.
1. Claim XIII Declaratory Judgment and Injunction
In Claim XIII, Dana seeks a declaratory judgment that D.M.D. LP's quitclaim deeds and FC Bank's mortgage on the Marina property are invalid, and an injunction against further transfer of the property and against enforcement or transfer of the mortgage. FC Bank has already commenced foreclosure proceedings on the mortgage in the Connecticut state court. (Complaint § 217).
FC Bank argues that this court cannot enjoin state foreclosure proceedings. See 28 U.S.C. § 2283 (federal court "may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.").
Dana argues that the requested injunction is necessary in aid of this court's jurisdiction and to protect or effectuate this court's judgment because if FC Bank forecloses on the mortgage and this court later finds the mortgage invalid, that judgment would be ineffective.
However, neither of those exceptions apply. The "necessary in aid of its jurisdiction" exception applies when a state court proceeding threatens to dispose of property which is the basis for federal in rem jurisdiction. *115 Consequently, it does not apply to this case, where Dana asserts in personam jurisdiction over FC Bank. See Phillips v. Chas. Schreiner Bank, 894 F.2d 127, 131-32 (5th Cir.1990) (federal court cannot enjoin ongoing state foreclosure proceedings; injunction not necessary in aid of jurisdiction where "lawsuit is ... an ordinary in personam action, and the mere fact that debts secured by real property are at issue ... does not transform it into an in rem proceeding.").
The "protect or effectuate its judgments" exception, also referred to as the "relitigation" exception, applies only to matters already fully adjudicated, and judgments already entered, by a federal court. "[T]his does not permit a federal court to enjoin state proceedings to protect a judgment that the federal court may make in the future but has not yet made." 17 Wright, Miller & Cooper, Federal Practice and Procedure § 4226 at 548-49; Bruce v. Martin, 724 F. Supp. 124, 131 n. 11 (S.D.N.Y.1989).
Accordingly, no injunction can issue. See Ungar v. Mandell, 471 F.2d 1163, 1165 (2d Cir.1972) (no exception to the anti-injunction act applies, and federal court cannot enjoin ongoing state court foreclosure and sale proceedings). Accord, Millonzi v. Bank of Hillside, 605 F. Supp. 140, 143-44 (N.D.Ill.1985). Consequently, Claim XIII is dismissed in part, to the extent that it seeks an injunction against FC Bank.
2. Claim XIV Against FC Bank for Negligence
In claim XIV Dana alleges that FC Bank owed it a duty to investigate the circumstances of the quitclaim deeds before issuing the mortgage loan, and failed to exercise due care in issuing the loan and in allowing disbursements under it (Complaint ¶¶ 227-30).
FC Bank argues that it had no duty to Dana, and that its alleged duty is not pleaded with particularity. However, claim XIV states a claim, does not need to be pleaded with particularity as it does not allege fraud or mistake, and is properly pleaded in accordance with Fed.R.Civ.P. 8(a).
3. Summary Judgment (Claims XIII and XIV)
FC Bank moves for summary judgment dismissing claim XIII, to the extent that it seeks a declaratory judgment that FC Bank's lien on the Marina Property is invalid, and claim XIV. Under Fed.R.Civ.P. 56(c) the party moving for summary judgment must demonstrate the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986).
FC Bank has not established its entitlement to judgment as a matter of law with respect to claim XIII. It argues that it acted as a "bona fide lender for value, without any prior notice whatsoever of any facts or circumstances which would have put a prudent lender ... on notice as to any alleged fraud or as to any other right, title or interest in conflict with [FC Bank's] position as a first mortgagee." (FC Bank's Rule 3(g) Stmnt. ¶ 11). However, FC Bank's submission is insufficient because it fails to set forth the legal elements it must establish to show that its mortgage is valid, and to show that there is no factual dispute with respect to each element.
FC Bank is entitled as a matter of law to summary judgment dismissing claim XIV. The elements of a claim for negligence are a duty to plaintiff and breach of that duty. FC Bank had no direct dealings with Dana, the limited partner of its borrower, and did not owe Dana a duty of care. Cf. National Union Fire Ins. Co. v. Eaton, 701 F. Supp. 1031, 1040 (S.D.N.Y. 1988). In any event, there is no showing that FC Bank's failure to discover the fraud was negligent. In order to defeat FC Bank's motion, Dana was required to, but did not, submit factual or legal support for its allegation that FC Bank owed it a duty and breached that duty. See R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984) (non-movant may not rest upon conclusory allegations or denials to defeat summary judgment motion, but rather must provide "concrete particulars" in the form of supporting facts or arguments in opposition); *116 Markowitz v. Republic Nat. Bank, 651 F.2d 825, 828 (2d Cir.1981) (same).
CONCLUSION
The motions of all parties to dismiss claims I, II, IV, V, VI, VII, VIII, IX, and XVI are granted.
The principals' motion to dismiss claims III and XV is granted in part and denied in part; their motion to dismiss claim XIII is denied.
FC Bank's motion to dismiss claim III is granted; its motion to dismiss claim XIII pursuant to Rules 12(b) and 56(c) is granted in part and denied in part; and its motion for summary judgment dismissing claim XIV is granted.
Balbec Corp. and Questco's motion to dismiss claim III is granted and their motion to dismiss claim XV is granted in part and denied in part. Claim XV is dismissed against all the other affiliates.
Plaintiffs have leave to replead the dismissed claims within 30 days.
NOTES
[1] For the purpose of the motion to dismiss, all factual allegations in the complaint are deemed true.
[2] Klebanow held that a limited partner could therefore bring derivative claims on behalf of a partnership. 344 F.2d at 297-99.
[3] See RICO Specifications ¶ 4.1 at p. 52 ("Plaintiffs ... are the victims of defendants' unlawful conduct in that their investment in VALERIA is now subject to the lien of defendant MARINE MIDLAND BANK, N.A. ...")
[4] Because Attick has no standing to assert claims I and II, it is unnecessary to decide whether those claims should be dismissed under Rules 9(b) or 12(b) or because there is a prior action pending, as defendants urge.
[5] The principals' argument that the allegation is false, that M.D.A.'s title to the Marina Property is valid, and that the quitclaim deeds were permissible under the D.M.D. LP agreements cannot prevail on a motion to dismiss, where the complaint's allegations must be taken as true.
[6] The principals' argument that Dana merely alleges a breach of contract is rejected. While transferring the Marina Property from D.M.D. LP to M.D.A. arguably merely breached defendants' contract with Dana, obtaining a bank loan by misrepresenting that the deeds were valid, and transporting the mortgage funds across state lines go beyond a mere breach.
[7] Although Dana and Attick do not have standing to assert claims involving the Valeria scheme, those claims are considered for the limited purpose of determining whether the principals engaged in a "pattern" of racketeering. Cf. Hunt v. Gouverneur Townhouse Partners 1988 L.P., 1991 WL 253126, 1991 U.S. Dist. LEXIS 16749 (S.D.N.Y. November 18, 1991) (plaintiff injured by at least one predicate act may establish that defendant engaged in a pattern of predicate acts by alleging other predicate acts which he has no standing to assert). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2468444/ | 749 S.W.2d 157 (1988)
Pete SARABIA, d/b/a Pete's Diesel Service, Appellant,
v.
AETNA CASUALTY AND SURETY COMPANY, Appellee.
No. 08-87-00144-CV.
Court of Appeals of Texas, El Paso.
February 24, 1988.
Lawrence L. Barber, Jr., Odessa, for appellant.
W. Stacy Trotter, Shafer, Davis, McCollum, Ashley, O'Leary & Stoker, Odessa, for appellee.
Before OSBORN, C.J., and SCHULTE and FULLER, JJ.
OPINION
FULLER, Justice.
Pete Sarabia, d/b/a Pete's Diesel Service, appeals from a denial of an insurance coverage claim. We affirm the judgment of the trial court.
Point of Error No. One asserts that the trial court erred in granting summary judgment in favor of Appellee, Aetna Casualty and Surety Company.
Pete Sarabia, d/b/a Pete's Diesel Service, owned and operated a garage that repaired diesel truck engines. Appellee, Aetna Casualty and Surety Company, issued to Appellant a comprehensive liability policy which covered certain garage operations. Appellant did a major overhaul on a customer's diesel truck engine. The major overhaul was unsuccessful and the truck was returned to Appellant, and it was determined that Appellant had failed to insert certain parts inside the engine which resulted in damage to the engine. Appellant repaired the engine without charge to the customer and then filed a claim with the Appellee to recover the costs incurred in the re-repair job which was in excess of $15,000.00. Appellee denied the claim contending that the claim was excluded under the policy.
The sole question involved is interpretation of the exclusionary clause in the garage liability coverage which is stated as follows:
This insurance does not apply under the garage liability coverages:
(k) to property damage to work performed by or on behalf of the named insured arising out of the work of any portion thereof, or out of materials, parts or equipment furnished in connection therewith; ....
Was there insurance coverage for damage resulting from Appellant's own defective work? The answer is "no."
It is uniformly held that a liability policy containing such an exclusion does not insure the policyholder against liability to repair or replace his own defective work or product, but it does provide coverage for the insured's liability for damages to other property resulting from the defective condition of the work even though the injury to the work product itself is excluded. Travelers Insurance Company v. Volentine, *158 578 S.W.2d 501 (Tex.Civ.App.-Texarkana 1979, no writ).
The Appellee properly pled the exclusion provision of the policy as a defense; therefore, Appellant had the burden of proving that the loss was not within the exclusion from coverage provision. Sherman v. Provident American Insurance Company, 421 S.W.2d 652 (Tex.1967); Shaver v. National Title & Abstract Co., 361 S.W.2d 867 (Tex.1962). This was a "major overhaul" and no damage was shown to exist after the overhaul other than what Appellant had repaired, replaced or reworked. Therefore, Appellant's claim falls within the exclusionary clause.
Point of Error No. One is overruled.
We affirm the judgment of the trial court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2469644/ | 762 S.W.2d 145 (1988)
R.L. PLEDGER, Petitioner,
v.
Hugo W. SCHOELLKOPF, Jr. and Caroline Rose Hunt, Respondents.
No. C-7086.
Supreme Court of Texas.
December 7, 1988.
Rehearing Denied January 25, 1989.
Mark S. Werbner, Carrington, Coleman, Sloman & Blumenthal, Dallas, for petitioner.
Ernest R. Higginbothan, P. Michael Jung & John H. McDowell, Strasburger & Price, Dallas, for respondents.
PER CURIAM.
This case concerns the questions of whether certain causes of action are individual causes of action or corporate causes of action, and whether a defendant is required to file a plea of verified denial under TEX.R.CIV.P. Rule 93(2) to contest a plaintiff's capacity to bring suit. The trial court rendered judgment against the defendants upon the jury findings of fraud, material misrepresentation, and tortious interference with a business relationship. The court of appeals determined that the claims here belonged to the corporation and that no verified denial was required. 739 S.W.2d 914. We reverse the judgment of the court of appeals and hold that a verified denial should have been filed. We need not reach the question concerning to whom the causes of action belong.
The action before us was originally a cross-claim in a suit brought by MBank of Dallas against all other parties upon a guaranty agreement. Because Hugo Schoellkopf and Caroline Hunt (formerly Caroline Schoellkopf) settled MBank's entire claim, only the cross-claim is before us. The cross-claim is an action by R.L. Pledger against Hunt and Schoellkopf for fraud, tortious interference with a business relationship, and material misrepresentations. The jury found in favor of Pledger on all claims. The court of appeals reversed, holding that the causes of action brought by Pledger belonged to Midway Aircraft Sales, Inc., of which Pledger, Schoellkopf and Hunt are shareholders. Pledger, however, *146 contends that Schoellkopf and Hunt waived their right to complain of his lack of capacity by failing to file a verified denial pursuant to Rule 93(2). That rule provides that "unless the truth of such matters appear of record," a pleading verified by affidavit must be filed where it is alleged "[t]hat the plaintiff is not entitled to recover in the capacity in which he sues, or that the defendant is not liable in the capacity in which he is sued." TEX.R.CIV.P. 93(2). The court of appeals rejected Pledger's argument, holding that Rule 93(2) applies only when a party is seeking recovery in a representative capacity. We hold that Pledger is entitled to recover in this case because of the failure of Schoellkopf and Hunt to comply with Rule 93(2). Schoellkopf and Hunt thereby waive their right to complain.
The court of appeals misconstrues the import of Rule 93(2) in limiting the rule's application to cases in which a plaintiff seeks recovery in a representative capacity. When capacity is contested, Rule 93(2) requires that a verified plea be filed anytime the record does not affirmatively domonstrate the plaintiff's or defendant's right to bring suit or be sued in whatever capacity he is suing. TEX.R.CIV.P. 93(2). Its application is not limited to cases of representative capacity only. The rule means just what it says.
We grant Pledger's application for writ of error and without hearing oral argument, a majority of the court reverses the judgment of the court of appeals. TEX.R. APP.P. 133(b). We remand this cause to the court of appeals for consideration of those points of error, including insufficiency points, not reached because of its holding. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2382680/ | 884 S.W.2d 805 (1994)
SOUTHWEST LIVESTOCK & TRUCKING COMPANY, Appellant,
v.
Jonnye Glee DOOLEY, Appellee.
No. 04-92-00645-CV.
Court of Appeals of Texas, San Antonio.
July 27, 1994.
Rehearing Denied September 7, 1994.
*806 J. Ken Nunley, Nunley & Brant, Boerne, for appellant.
James D. Stewart, James D. Stewart & Associates, Inc., San Antonio, Lavern D. Harris, Harris & Harris, P.C., Kerrville, for appellee.
Before CHAPA, C.J., and RICKHOFF and REEVES, JJ.
OPINION
REEVES, Justice (Retired).[1]
This appeal involves the distribution of property in a divorce. At issue are assets of a corporation, Southwest Livestock Exchange, Inc., in which the husband, Joe Earl Hargrove, is a stockholder. Southwest Livestock Exchange (hereafter "Southwest Livestock" or "Southwest") and Southwest Livestock & Trucking Co. (hereafter "Southwest Trucking") were intervenors in the trial court and are appellants herein.
Jonnye Glee Hargrove filed suit to divorce Joe. She joined Southwest Livestock and *807 Southwest Trucking in the suit, claiming Southwest Livestock was the alter ego of Joe and that the corporate veil should be pierced and the corporate entity disregarded. She sought a disproportionate division of the community estate. She also asked that the community estate be reimbursed for funds and assets of the estate which were expended to enhance Joe's separate property, i.e., Southwest Livestock Exchange and Southwest Trucking. Lastly, she argued that Joe breached a confidential and fiduciary relationship between the parties that was established at the time of their marriage.
Southwest Livestock and Southwest Trucking answered and filed a counterclaim against Jonnye and a cross-claim against Joe. The corporations alleged that assets held in the personal name of Jonnye and Joe were in reality corporate assets. They also argued that Joe and Jonnye owned only 41% of the corporations and were estopped to deny ownership by the corporation. The corporations further alleged that fraud had been committed against Southwest, and that Joe and Jonnye, as officers and directors of Southwest Livestock, breached the fiduciary responsibility entrusted them. The corporations requested that a constructive trust be imposed, and that there be an accounting of the sums taken from Southwest as well as an accounting of the personal assets held by Joe and Jonnye. Finally, the companies sought damages and recovery of attorney fees.[2]
The trial court granted the divorce and denied all relief requested by appellants. Included in the division of the community property were assets funded, at least in part, by appellants.
Appellants assert the trial court erred in:
(1) denying their requested accounting because the evidence shows as a matter of law that Joe and Jonnye breached their fiduciary duty owed to Southwest;
(2) in failing to impose a constructive trust on the assets of the community estate of Joe and Jonnye because the evidence established as a matter of law that such assets were purchased with assets of Southwest Livestock without the consent of the majority of stockholders of Southwest;
(3) in failing to impose constructive trust on the community assets of Joe and Jonnye because the two are estopped from denying that their community estate was acquired with corporate assets of Southwest; and
(4) in awarding certain assets to Jonnye in the property settlement because the evidence conclusively established that such assets were stolen by Jonnye from Southwest Livestock.
Standard of Review
A two step analysis is necessary to overcome an adverse fact finding as a matter of law. First, the record is examined for evidence that supports the fact finder's conclusion, ignoring all evidence to the contrary. Second, if there is no evidence to support the conclusion of the fact finder, then the entire record must be examined to see if the contrary proposition is established as a matter of law. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989).
There is a presumption that the trial court was correct in the division of property, and the court's decision will be accepted by an appellate court unless there is a showing of an abuse of discretion. See Murff v. Murff, 615 S.W.2d 696, 700 (Tex.1981).
If no findings of fact or conclusions of law are filed, it is assumed by the appellate court that the trial court found all the necessary facts to support the judgment.[3]*808 Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex.1989); Cellular Marketing, Inc. v. Houston Cellular Tel. Co., 838 S.W.2d 331, 333 (Tex.App.Houston [14th Dist.] 1992, writ denied). Furthermore, the appellate court will affirm the judgment on any legal theory that finds support in the record. Seaman v. Seaman, 425 S.W.2d 339, 341 (Tex. 1968); Owens v. Travelers Ins. Co., 607 S.W.2d 634, 637 (Tex.Civ.App.Amarillo 1980, writ ref'd n.r.e.).
Jonnye has not challenged any statements in Joe's original brief concerning the facts or the record, and they will be accepted by the court as correct. Tex.R.App.P. 74(f). Even so, we have thoroughly examined the statement of facts.
The Facts
Southwest Livestock was formed in 1967 by Neil, Darrell, and Joe Earl Hargrove. Within a year of its incorporation, Darrell and Joe bought out Neil. A second corporation, Southwest Livestock and Trucking Company, a wholly-owned subsidiary of Southwest Livestock, was formed. Joe was the chief executive of Southwest Livestock; Darrell was the chief executive officer of Southwest Trucking. At this time, Joe was married to Nadine Hargrove. Nadine died, however, and her interest in the corporation passed to the children of Joe and Nadine.
Joe married Jonnye Glee Hargrove. At the time of their marriage Joe owned 25% of Southwest; twenty-five percent was owned by the children of Joe and Nadine, and 50% was owned by Darrell and his wife. Shortly after Joe's marriage to Jonnye, Joe purchased an additional 16% percent of stock in Southwest Livestock from the estate of Nadine, increasing his stock in the corporation to 41 percent. The remaining 9% of the stock is held in trust for the children born of the marriage of Joe and Nadine.
Shortly after the marriage, Jonnye started working in the office of Southwest Livestock. In time she became the office manager. She was elected treasurer and secretary of the corporation, and was a member of its Board of Directors. She also assumed the bookkeeping responsibilities.
Southwest had one checking account which accommodated both the business of the corporation and the personal needs of Joe and Jonnye; each had access to the account. The company maintained an internal accounting system to segregate personal from corporate expenditures, which was to a large measure ignored. Joe was authorized and drew $5,000 a month as salary.
Joe and Jonnye operated a ranch separate and apart from the corporation. Funds of the corporation were used to pay at least some of labor costs of running the ranch. Travel expenses associated with the ranching operation were also charged to the corporation.
Jonnye owned a new Lincoln Continental when she was married. Shortly after the marriage, Jonnye transferred the Lincoln to the corporation. A few months prior to her filing for divorce, Jonnye withdrew from the corporate account approximately $32,000 and purchased a new Cadillac in her name.
There was evidence that various personal expenses of Jonnye and Joe were charged to the corporation. Expenses for the Yacht Club hotel and Bridgepoint Condominiums at South Padre were charged to the corporation as travel and entertainment expenses. Gambling debts incurred by Joe were paid with corporate funds and charged as freight and buying commissions. Incidental expenses like dry cleaning were charged to the corporation and billed as corporate expenses. Jonnye ventured into a small vitamin supplement business which was paid for by the corporation and listed as a corporate veterinarian supplies. The profits, if any, were kept by Jonnye. A short time before Jonnye filed for divorce she wrote herself two checks, one for $21,000 and the other for $25,000. She returned one of the checks when confronted by Joe. An investigation of the corporate books after she left revealed checks written by her in the amount of $94,000. At least some of this money found its way to an insurance company and a stockbrokerage account which was in Jonnye's name. There was uncontroverted testimony that she invested $75,000 of corporate funds to purchase stock in her name at Hondo National Bank.
*809 At trial the parties agreed that the personal assets of Joe and Jonnye were so intermingled with the corporate assets of Southwest Livestock as to make tracing of the personal assets impossible.
There was evidence that Darrell Hargrove, the brother of Joe and the chief operating executive of Southwest Trucking, was unaware of the personal withdrawals made by Joe and Jonnye. He testified, "he runs his operation and I run mine."
The Requested Accounting
A suit for an accounting is generally founded in equity. Palmetto Lumber Co. v. Gibbs, 124 Tex. 615, 80 S.W.2d 742, 748 (1935). The granting of an accounting is within the discretion of the trial court. Gifford v. Gabbard, 305 S.W.2d 668, 672 (Tex. Civ.App.El Paso 1957, no writ). Corporate officers and directors are fiduciaries and transactions in which they receive personal gain in their dealings with the corporation are subject to the closest examination. See Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex.1963).
The relationship of officers and directors to a corporation is a fiduciary one imposing upon them the duty to exercise their powers as officers and directors solely for the benefit of the corporation and its stockholders. Implicit in such duty is that of not exercising their powers as officers and directors to serve their own personal interest at the expense of the corporation and its stockholders.
Canion v. Texas Cycle Supply, Inc., 537 S.W.2d 510, 513 (Tex.Civ.App.Austin 1976, writ ref'd n.r.e.).
When a corporate officer or director diverts assets of the corporation to his own use, he breaches a fiduciary duty of loyalty to the corporation. In such a case, a court in equity may find the officer or director holds the usurped property as a constructive trustee for the corporation. See Dyer v. Shafer, Gilliland, Davis, McCollum & Ashley, Inc., 779 S.W.2d 474, 477 (Tex. App.El Paso 1989, writ denied). Also, the fiduciary has the burden to establish the fairness of the transaction. Chien v. Chen, 759 S.W.2d 484, 495 (Tex.App.Austin 1988, no writ).
The evidence before the trial court clearly declares that Joe and Jonnye ignored their fiduciary responsibilities to the shareholders of Southwest Livestock, a responsibility they both acknowledged. Joe was queried concerning the mischaracterization as corporate expenses of $420,000 in personal expenses. He had no quarrel with the amount, explaining that that was the way they paid their personal obligationsout of the corporate bank account. Jonnye testified that she was just complying with instructions from Joe; but this certainly was not the case when she withdrew funds designated as "gifts," invested in her personal account at Shearson Lehman, and withdrew money for the purchase of a new Cadillac.
We agree with appellants that as a matter of law, Joe and Jonnye breached their fiduciary duties to the corporation and that a substantial amount of property which was divided as community funds was acquired with corporate funds.
The Implied Finding of Alter Ego
But Jonnye contends there is more than ample evidence that the corporate fiction was completely ignored and the trial court's divorce decree should be affirmed under the alter ego theory.
Alter ego applies when there is such a unity between the corporation and an individual that the separateness has ceased to exist and holding only the corporation liable would result in injustice. Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.1986). Because disregarding the corporate fiction is an equitable doctrine, Texas follows a flexible fact-specific approach which focuses on equity. Castleberry, 721 S.W.2d at 273.
In Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571 (Tex.1975), the plaintiff filed suit against Credit Plan of Houston, a subsidiary of Colonel Finance Corporation, because of allegedly unreasonable collection efforts by Credit Plan. Plaintiff joined Colonel Finance as a defendant, alleging it was the alter ego of Colonel Finance. The court held the corporate entity could not be used as a *810 scheme for fraud or to work an injustice. Id. at 575.
In Castleberry, the court quoted Dean Hilderbrand, a leading authority on Texas corporation law: "When this [disregarding the corporate fiction] should be done is a question of fact and common sense. The court must weigh the facts and consequences in each case carefully, and common sense and justice must determine [its] decision." Id. at 273 (ellipsis in original) (quoting Hilderbrand, Texas Corporations § 5, at 42 (1942)).
The legal fiction of the corporate entity may be disregarded when there is such unity that the separateness of the corporation has ceased and adherence to the fiction of the separate existence of the corporation would, under the circumstances, sanction a fraud or promote injustice. Humphrey v. Humphrey, 593 S.W.2d 824, 826 (Tex.Civ.App.Houston [14th Dist.] 1980, writ dism'd).
We realize there is sufficient evidence that both Joe and Jonnye used Southwest Livestock as their personal property, but we question the right of Jonnye, as an officer and director of the corporation, to rely upon the equitable the principle of alter ego.
There is no dispute that the trial court, in allocating the community estate, awarded property acquired by funds which Jonnye wrongly appropriated from the corporation. Joe testified that Jonnye had mischaracterized over $420,000 of personal expenses as corporate expenses.
We conclude Jonnye cannot avail herself of the equitable doctrine of alter ego when she participated in the very act which gave rise to her cause of action, disregarding the corporate structure. Both Joe and Jonnye have personally enriched themselves, to the detriment of the remaining stockholders. This is contrary to the concept which is essential to equitable relief: a person seeking equity must come with clean hands. See Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401 (1960); Lovelace v. Bandera Cemetery Ass'n, 545 S.W.2d 194, 197 n. 3 (Tex.Civ. App.San Antonio 1976, writ ref'd n.r.e.).
We hold, as a matter of law, that both Joe and Jonnye are accountable to the other stockholders, e.g., the children of Joe and his brother Darrell, and that Jonnye's assertion of alter ego must fail.
The Remedy
An equitable accounting is within the sound discretion of the trial court. Gifford v. Gabbard, 305 S.W.2d at 672. An accounting of the community property of Joe and Jonnye, however, is necessary in order to determine the identity of the property or the amount of money owed Southwest Livestock. See Richardson v. First Nat'l Life Ins. Co., 419 S.W.2d 836, 838 (Tex.1967); O'Connor v. O'Connor, 320 S.W.2d 384, 386 (Tex.Civ. App.Dallas 1959, writ dism'd).
We hold that it was an abuse of discretion for the trial court to render a division of the community property without first ordering a complete accounting of the corporate and personal assets involved.
Moreover, in light of the conclusive evidence set out above, the parties are estopped to deny that their community estate was acquired, at least in part, with assets of Southwest Livestock. See Cronen v. City of Pasadena, 835 S.W.2d 206, 211 (Tex.App. Houston [1st Dist.] 1992, no writ.).
It is the decision of this court that this case must be reversed for an accounting in accordance with this opinion.
Appellants also contend the trial court erred in failing to impose a constructive trust. The equitable remedy of a constructive trust is broad and far reaching and is designed to circumvent technical legal principles of title and ownership in order to reach a just result. Peirce v. Sheldon Petroleum Co., 589 S.W.2d 849, 853 (Tex.Civ.App. Amarillo 1979, no writ). In Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256 (1951) the supreme court explained:
In general, whenever the legal title to property, real or personal, has been obtained through actual fraud, misrepresentations, concealments ... or through any other similar means or under any other similar circumstances which render it unconscientious for the holder of legal title to retain and enjoy the beneficial interest, *811 equity impresses a constructive trust on the property thus acquired in favor of the one who is truly and equitably entitled to the same ... and a court of equity has jurisdiction to reach the property either in the hands of the original wrong-doer ...
Id. 237 S.W.2d at 262-63.
A trust beneficiary generally must be able to trace the specific property he seeks to impress with the trust. Peirce, 589 S.W.2d at 853. If this is impossible due to commingling, however, the right to a constructive trust is not defeated if the beneficiary can trace to the commingled fund. Eaton v. Husted, 141 Tex. 349, 172 S.W.2d 493, 498 (1943); Peirce, 589 S.W.2d at 853. If the funds cannot be traced, a cash judgment can be entered to compensate Southwest Livestock.
The judgment is therefore reversed and this cause remanded to the trial court for an accounting of the corporate assets of Southwest Livestock Exchange, Inc. If the trial court deems it necessary to protect the assets of the corporation, a constructive trust may also be imposed. The judgment of divorce is affirmed.
NOTES
[1] Justice Blair Reeves (retired), assigned to this case by the Chief Justice of the Supreme Court of Texas pursuant to TEX.GOV'T CODE ANN. § 74.003(b) (Vernon 1988).
[2] Joe answered and filed a counter-petition which alleged various acts of misconduct on the part of Jonnye, including an allegation that Jonnye had converted property of Southwest. He did not, however, perfect an appeal.
[3] Appellants filed a timely motion for findings of fact and conclusions of law, which was not acted upon by the trial court. Thereafter, a notice of past due findings and conclusions was filed by appellants. TEX.R.CIV.P. 297. Because appellants do not complain of the trial court's failure to make such findings, however, any objection to trial court's failure to file findings and conclusions was waived. See Allright, Inc. v. Pearson, 735 S.W.2d 240 (Tex.1987) (error for court of appeals to consider unassigned points of error); cf. Fleming v. Taylor, 814 S.W.2d 89, 90-91 (Tex. App.Corpus Christi 1991, no writ). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1492785/ | 789 S.W.2d 572 (1989)
Kenneth Ray RANSOM, Appellant,
v.
The STATE of Texas, Appellee.
No. 69339.
Court of Criminal Appeals of Texas, En Banc.
June 14, 1989.
Rehearing Overruled September 20, 1989.
Certiorari Denied June 25, 1990.
*574 Janet Morrow, Catherine Burnett, of counsel on appeal, and Wesley H. Hocker, court appointed on appeal, Houston, for appellant.
John B. Holmes, Jr., Dist. Atty., Kathlyn Giannaula, Brian Rains, Asst. Dist. Attys., Houston, and Robert Huttash, State's Atty., Austin, for the State.
Certiorari Denied June 25, 1990. See 110 S. Ct. 3255.
OPINION
McCORMICK, Presiding Judge.
Appellant, Kenneth Ray Ransom, appeals from his conviction for capital murder where the death penalty was assessed as punishment. On appeal to this Court, appellant raises fourteen points of error. Finding all points of error to be without merit, we accordingly affirm the conviction.
The Sufficiency of Evidence
Appellant claims that the evidence is insufficient to sustain the jury's determination of guilt. Reviewing the evidence in the light most favorable to the verdict, the record reflects the following:
Appellant was with his girl friend, Wanda Phillips, at her home for most of the day on June 30, 1983. After seven o'clock p.m., James Randle, a friend of appellant, came to Phillip's home to talk with him. Appellant and Randle went outsideaway from Wanda and her small daughter. The two *575 talked for about fifteen minutes. Randle left and appellant came back into the home. Later, Randle returned to the home for a second time. The two went outside again to talk for about fifteen minutes. Randle left, but between nine thirty and nine forty-five p.m., he returned to the home and for a third time he and appellant went outside to talk. Both men went into the kitchen after this third discussion. While there, they removed a butcher knife from the dish drainer. Randle told appellant, "Oh man, here's one that we can use." As they started to leave with the knife, Phillips asked appellant where he was going and said that she needed her knife. Appellant responded that they were going to pick up Randle's cousin's paycheck. Randle told her, "Hold on you're going to get your knife back. We'll bring that knife back."
Between nine thirty and ten o'clock p.m. that night, Randle's mother saw Randle with Richard James Wilkerson, Randle's cousin, and "another boy" at her home. Randle's younger brother, Jessie, saw appellant leave with Randle and Wilkerson at some time before midnight. Earlier that day, Randle's mother had borrowed a butcher knife from one of her neighbors but was later unable to find it.
At approximately ten o'clock that night, Wilkerson's sister saw appellant standing outside her home when she unlocked the screendoor to let her brother inside. Wilkerson went into the kitchen and rummaged through the drawer where the family kept the butcher knives. Randle waited in the kitchen doorway. After going through the drawer, Wilkerson went into the bedroom with Randle. The two went outside five or ten minutes after they had arrived at the home. When Wilkerson's sister locked the door behind them she saw appellant speaking with Wilkerson and Randle. The three left together.
Anil Varughese, Rod Harris, Arnold Pequeno and his younger brother, Joerene Pequeno, were employees of the Malibu Grand Prix Race Center in Houston. The race center, which contained numerous video games inside the center and had a racetrack for gocarts outside, was open for business from ten o'clock a.m. until midnight. Richard James Wilkerson had also been employed by the race center but his employment was terminated on June 20, 1983. Wilkerson could not pick up his last paycheck until June 30, 1983the day that appellant told Phillips that he was going to pick up Randle's cousin's paycheck. Before Wilkerson could get the check he had to appear in person at the race center and sign his time card indicating that he had received it. As of two-thirty p.m., on June 30, 1983, Wilkerson had not picked up his check.
Late that night, at three o'clock a.m. on July 1, 1983, appellant with Randle and Wilkerson returned to Phillips' home. Wilkerson was carrying a black satchel. Appellant went into the bathroom and the other two men went into the bedroom. All three men had blood on their clothing. Appellant, while in the bathroom, tended to a severe cut on the inside of his right hand.
Inside the bedroom, Wilkerson poured the contents of the black satchelcurrency, a wallet, a calculator and a watchonto the bed. Some of the money was bloody. The three men counted it together after which Randle gave appellant a share. Phillips estimated appellant's share to be around three hundred and twenty-five dollars. Appellant counted the money, put it into his pocket and began watching television with the two other men. Wilkerson and Randle talked of how they had "slashed" somebody's throat and "put the knife in someone['s] temple." Phillips, while the men watched television, began cleaning her kitchen. She discovered that a billfold, some credit cards and a driver's license had been discarded in the garbage. The driver's license had the name "Roddy Harris" on it. Randle took the billfold, the credit cards and the license away from Phillips and threw them into the dumpster.
When Phillips asked appellant from where the money had come, he replied, "We just went and got some money." Phillips and appellant, that next day, used the money to purchase clothing for themselves.
Early that morning, at around eight o'clock a.m., the bodies of Anil Varughese, *576 Rod Harris, Joerene Pequeno and Arnold Pequeno were discovered at the race center by a friend of Varughese. Anil Varughese's body was discovered in the manager's office. He had been stabbed at least eight timesfive times in the chest and three times in the abdomen. He was eighteen at the time of his death.
The other three bodies were found in one of the race center's bathrooms. Rod Harris' body was found in one of the stalls. He had been stabbed at least seven times in the chest. Joerene Pequeno's body was found in the other stall. He had been stabbed eleven timesonce in the chest, once in the neck, once in the back, and once in the right hand; he had been stabbed seven times in the neck area with one cut severing his jugular vein. Arnold Pequeno's body was in a bathroom corner with his head under one of the urinals. He had been stabbed and cut twenty-two times in the neck, chest, abdomen, back and right hand. One of the cuts to his neck severed his jugular vein. Arnold's watch and class ring were missing along with a black satchel in which he carried his school books. At the time of their deaths, Rod Harris was twenty-two years old, Arnold Pequeno was nineteen and his younger brother, Joerene, was eighteen.
The three victims' blood covered the bathroom floor and was splattered on the walls and ceiling. There was blood not matching that of the victims on the sink's counter, on a paper towel and on the bathroom door. A trail of blood led out of the bathroom, through the race center and into the parking lot area. Analysis revealed that this blood could not have come from any of the victims or from either Randle or Wilkerson. Only appellant's blood was genetically compatible to it.
The fingerprint to appellant's left index finger was lifted from the door to the bathroom stall where Harris' body was found. The print was discovered on the inside of the door at the top. Randle's fingerprint was lifted from the inside of the door to the bathroom stall where Joerene Pequeno's body was found.
Over thirteen hundred dollars was missing from the race center's safe and petty cash drawers. Wilkerson's last paycheck was also missing. His time card had been signed and was found laying on the manager's desk.
The knife that was taken from Phillips' home was discovered in an area near the racetrack. The knife was broken into two pieces.
Late that evening on the day that the bodies were discovered, appellant was with Phillips. The two were watching television. A news story about the murders was broadcast. Upon seeing the story, appellant was visibly upset. At around seven o'clock that evening, appellant told Phillips that he was going to Wharton, Texas. The last time Phillips saw appellant, he was wearing a high school class ring and a watch both of which were identical to the ones that Arnold Pequeno had been wearing before his murder. Phillips had never seen appellant wear the ring or the watch before that day. Also, the calculator that was in the satchel along with the satchel itself were identified at trial as belonging to Arnold Pequeno.
Appellant, before this Court, insists that the above is insufficient to support a jury's determination of guilt beyond a reasonable doubt. Relying upon Garrett v. State, 682 S.W.2d 301 (Tex.Cr.App.1984) cert. denied, 471 U.S. 1009, 105 S. Ct. 1876, 85 L. Ed. 2d 168 (1985), he asserts that the evidence supports a reasonable hypothesis that he did not know in advance that any robbery or killing was contemplated, did not agree to commit the offense and did not participate in it. Appellant directs our attention to that part of the record where he testified that he did not know Randle and Wilkerson went to the race center planning to rob and murder the four young men. He also directs us to that part of the record where Phillips testified that Wilkerson and Randle told her that appellant had no part in the killings and that he merely played video games while they committed all four murders. He insists that these portions support a reasonable hypothesis of his innocence inconsistent with guilt and that *577 therefore his conviction for capital murder can not stand.
The standard of review for sufficiency of the evidence on appeal is the same for direct and circumstantial evidence cases, and that is to view the evidence in the light most favorable to the verdict to determine whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Garrett, 682 S.W.2d at 304; Brandley v. State, 691 S.W.2d 699, 703 (Tex.Cr.App.1985). This is the standard of review enunciated by the Supreme Court in Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979):
"[T]he critical inquiry in review of the sufficiency of the evidence to support a criminal conviction must be not simply to determine whether the jury was properly instructed, but to determine whether the record evidence could reasonably support a finding of guilt beyond a reasonable doubt. But this inquiry does not require a court to `ask itself whether it believes that the evidence at the trial established guilt beyond a reasonable doubt.' Woodby v. INS, 385 U.S. [276] at 282 [87 S. Ct. 483, 486, 17 L. Ed. 2d 362 (1966)] (emphasis added). Instead, the relevant question is whether, after reviewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." 443 U.S. at 318-319, 99 S.Ct. at 2788-2789 (footnote and citations omitted, emphasis in the original).
In Garrett, we stated that "in applying the above standard of review the `exclusion of reasonable hypothesis' test may be used as a means of analyzing the sufficiency of circumstantial evidence cases." 682 S.W.2d at 304. See also Wilson v. State, 654 S.W.2d 465 (Tex.Cr.App.1983); Denby v. State, 654 S.W.2d 457 (Tex.Cr.App.1983); Freeman v. State, 654 S.W.2d 450 (Tex.Cr. App.1983); Carlsen v. State, 654 S.W.2d 444 (Tex.Cr.App.1983) (opinions on rehearing).
In a circumstantial evidence case the State is not required to prove to a moral certainty that the circumstances presented actually exclude every hypothesis that the criminal act may have been committed by another person; it must only exclude every reasonable hypothesis raised by the evidence that would tend to exculpate the accused. Therefore, to satisfy the exclusion of reasonable hypothesis test "it is enough that the conclusion of guilt is warranted by the combined and cumulative force of all the evidence." Brandley, 691 S.W.2d at 703.
Applying the Jackson criteria we find that a rational trier of fact could have found beyond a reasonable doubt that appellant committed the offense with which he was charged.[1] Among the facts the jury could have reasonably considered to determine that appellant was an active participant in the murders are: (1) on the day of the murders, appellant was seen in the company of the two men whom he admitted at trial were responsible for the killings; (2) before the killings, appellant and the other two men had surreptitious meetingstalking out of hearing distance from those that may have been close by; (3) the three men went from home to home in search of knives and Phillips overheard Randle tell appellant, "Here's one we could use"; (4) Randle, with appellant, told Phillips as they left the house that she would get her knife back and appellant told her that they were going to pick up Wilkerson's paycheck, (5) Phillips' knife was found near the scene of the murders, broken into two pieces; (6) appellant's fingerprint was found on the door to the bathroom stall where one of the mutilated bodies was found; (7) blood genetically compatible to that of appellant's was found in the bathroom where the three bodies were found and the blood could not have been that of any of the victims or of the two *578 co-actors; (8) when appellant returned to Phillips' home that night he told her that, "We just went and got some money"; (9) appellant's right hand had been cut and blood covered his clothing; (10) appellant took a share of the money, spending it on clothing for himself; (11) after seeing a televised account of the murders, appellant was visibly upset, later he left Houston; and, (12) appellant was last seen wearing one of the victim's watch and high school class ring. Clearly, the evidence is sufficient under the Jackson standard.
Applying the Garrett test, we find that a reasonable jury could have rejected appellant's version of the facts. Appellant had testified that while Wilkerson murdered Varughese in the manager's office, Randle, a sixteen year-old, murdered all three of the victims in the bathroom. Appellant, therefore, wanted the jury to believe that one teenager, acting alone, could overcome three other young men, killing each with several knife wounds and cutting the jugular veins of two of the victims. The unreasonableness of this hypothesis is exacerbated by the combined and cumulative force of all the other incriminating circumstances listed above.
The totality of the evidence supports the jury's determination of guilt. The jury was reasonable in finding that appellant was an active participant in the murders. Appellant's thirteenth point of error is overruled.
In his fourteenth point of error, appellant complains that the evidence is insufficient to support the jury's determination that he acted deliberately in the killings. We disagree.
Pursuant to Article 37.071(b)(1), V.A.C. C.P., the jury was asked to determine "whether the conduct of [appellant] that caused the death of the deceased was committed deliberately and with the reasonable expectation that the death of the deceased or another would result." The jury answered in the affirmative and that answer is supported by the record.
Appellant secured a murder weapon, traveled across Houston and, as the jury found, was an active participant in the murders of four young men. "To find the act of deliberateness, there must be the moment of deliberation and determination on the part of the actor to kill." Cannon v. State, 691 S.W.2d 664, 677 (Tex.Cr.App. 1985) cert. denied, 474 U.S. 1110, 106 S. Ct. 897, 88 L. Ed. 2d 931 (1986). The repeated stabbings of the victims evidence a deliberate act with a more than reasonable expectation that death would result. See Fearance v. State, 620 S.W.2d 577, 584 (Tex.Cr. App.1980) (opinion on rehearing) cert. denied, 454 U.S. 899, 102 S. Ct. 400, 70 L. Ed. 2d 215 (1981); Granviel v. State, 552 S.W.2d 107, 123 (Tex.Cr.App.1976) cert. denied, 431 U.S. 933, 97 S. Ct. 2642, 53 L. Ed. 2d 250 (1977). Securing the weapon, the surreptitious meetings between appellant and the two other men and traveling across Houston to get to the race center is evidence of both deliberation and determination on the part of appellant. See Ex parte Alexander, 608 S.W.2d 928, 931 (Tex. Cr.App.1980). Appellant's fourteenth point of error is rejected.
The Change of Venue
In his ninth point of error, appellant claims that the trial court should have granted his motion for change of venue due to the pretrial publicity surrounding this case. See Article 31.03, V.A.C.C.P.
The test to be applied in determining whether a motion to change venue should be granted by the trial court is whether outside influences affecting the community climate of opinion as to a defendant are inherently suspect. Beets v. State, 767 S.W.2d 711, 742 (Tex.Cr.App. 1988); Phillips v. State, 701 S.W.2d 875, 879 (Tex.Cr.App.1985) cert. denied, 477 U.S. 909, 106 S. Ct. 3285, 91 L. Ed. 2d 574 (1986). The defendant seeking a change of venue "bears a heavy burden to prove the existence of such prejudice in the community that the likelihood of obtaining a fair and impartial jury is doubtful." Nethery v. State, 692 S.W.2d 686, 694 (Tex.Cr.App. 1985) cert. denied, 474 U.S. 1110, 106 S. Ct. 897, 88 L. Ed. 2d 931 (1986). Ordinarily, a defendant seeking a change of venue must demonstrate an actual, identifiable prejudice *579 attributable to pretrial publicity on the part of the community from which will come the members of the jury. See Beets 767 S.W.2d at 743; Faulder v. State, 745 S.W.2d 327, 338 (Tex.Cr.App.1987).
Merely because a particular case is publicized in the media does not give rise to a prima facie case of prejudice so that a defendant is entitled to a change of venuejurors do not have to be totally ignorant of the facts and issues of a particular case. Murphy v. Florida, 421 U.S. 794, 801, 95 S. Ct. 2031, 2037, 44 L. Ed. 2d 589 (1975); Eckert v. State, 623 S.W.2d 359, 363 (Tex.Cr.App.1981). Rather, for a defendant to prevail in his motion for change of venue, he or she must demonstrate the publicity about the case is pervasive, prejudicial and inflammatory. Phillips, 701 S.W.2d at 879. See also Eckert, 623 S.W.2d at 363-364; McManus v. State, 591 S.W.2d 505, 517-518 (Tex.Cr.App.1979); Freeman v. State, 556 S.W.2d 287, 296-298 (Tex.Cr.App.) cert. denied, 434 U.S. 1088, 98 S. Ct. 1284, 55 L. Ed. 2d 794 (1978).
On appeal, the standard of review for this Court is whether the trial court abused its discretion in refusing to grant the motion for a change of venue. "Absent a showing by the defendant that there exists such prejudice in the community that the likelihood of obtaining a fair trial by an impartial jury is doubtful ... the discretion of the trial court to deny such a motion will not be disturbed on appeal." Beets, 767 S.W.2d at 742.
Appellant in his brief insists that the news coverage of the murders, contained on videotapes that were introduced into evidence at the hearing to change venue, "was substantial and went beyond that designed for informing the public of current events." He states that the "coverage given to the funerals of the two brothers on television in which cameras were focused on sobbing people in the church during the service itself, [was] quite dramatic." He also points out that the other two victims were reported as being fine people. He concludes that these news stories along with the other accounts that described the murders as being "horrible," a "massacre," a "slaughter house," "unexplained brutality" and the "most brutal mass murder in Houston in recent years," were sufficient to show that the trial court abused its discretion when it failed to grant his motion for a change of venue. While we agree that the news coverage of the murders was extensive, we can not agree with appellant that the record before us demonstrates that the trial court abused its discretion in refusing to grant a change of venue.
In the case before us the trial court, at the hearing on appellant's motion to change venue, heard testimony that there was no more news coverage on this case than on any other capital murder case where a number of people have been killed. The judge also heard testimony that the news coverage lasted for only about seven weeks after the murders. There was also testimony that in the trial of the co-actor, Wilkerson, only three of seventy-five to eighty-five jurors were excused due to pretrial publicity. A criminal defense attorney who practices in Houston, called by appellant to testify at the hearing, thought that appellant would be able to get a fair trial in that community.[2] The news coverage[3] of which appellant complains occurred immediately after the murders. Jury selection of this case did not take place until nine months after this coverage. Such delay tends to negate inferences that substantial publicity would affect the community's climate of opinion. Nethery, 692 S.W.2d at 694-695; Adami v. State, 524 S.W.2d 693, *580 704 (Tex.Cr.App.1975). Also, each of the jurors selected for this case had indicated in voir dire that their verdict would not be affected by the pretrial publicity. The testimony given at the hearing to change venue, along with the time interval between the news stories and the trial of appellant, support the trial court's finding that appellant could obtain a fair trial in Harris County. We hold that the trial court did not abuse its discretion when it denied appellant's motion to change venue; accordingly, appellant's point of error number nine is overruled.
In his eighth point of error, appellant asserts that the trial court erred in granting the State's motion to quash a subpoena duces tecum and that such actions effectively denied him his right to compulsory process.
Appellant subpoenaed a scrapbook that the Harris County District Attorney maintained. Appellant wanted to introduce the book into evidence at the hearing on his motion for change of venue. The trial court purported to quash the subpoena. In the hearing, however, the trial court examined the book. He did not allow its admission into evidence at the hearing but did so as a bill of exception. Thus, it is obvious to us that although the trial court ordered the subpoena duces tecum to be quashed, that order was subsequently nullified when the book was allowed into evidence as a bill of exception. Consequently, appellant has not been denied his right to compulsory process. His eighth point of error is overruled.
The Voir Dire
In his tenth point of error, appellant argues that the trial court improperly granted the State's challenge for cause to one of the members of the venire, insisting that she was qualified under Adams v. Texas, 448 U.S. 38, 100 S. Ct. 2521, 65 L. Ed. 2d 581 (1980), to serve as a juror. Under this same point of error, he argues that the trial court judge should have allowed more questioning of the prospective juror before he granted the State's challenge for cause.
As to appellant's Adams argument, we find that the trial court properly granted the State's challenge for cause. The venireman was first examined by the trial court judge who explained the difference between murder and capital murder. He explained that in a capital murder case the only penalty capable of being assessed was either life imprisonment or death. The venireman responded by saying that, "I really don't believe in giving death." The trial court further inquired:
"All right ... that's probably the position that a lot of people have but at the same time there are people who don't believe in it and could never be a party to writing a verdict that would result in the death of another individual. But there are others people who don't believe in it but since it is the law could in a proper case join with eleven other people and write a verdict that would result in the death of a defendant. Where are you in that category? How do you feel there?"
To this, the venireman responded: "I really wouldn't be a part of that. I realize I should but I just in all human I just cannot be responsible for somebody's death." The trial court asked, "Now you don't like death, the penalty of death for a criminal offense, is that so strong that you could never write a death penalty of another person?" The venireman responded, "I'm afraid so." The following colloquy occurred:
"Q. [BY THE COURT]: Would it violate your conscience to be a party to a twelve person jury where you had to write a death penalty?
"A. I really wouldn't want to be a part of it but if I had to I would have to accept it but I really wouldn't want to be a part of it.
"Q. How strong do you not want to be? That's what I need to know.
"A. Very strong but if I was picked I would have to go along with it. But it's against my conscience.
"Q. If you were selected as a juror in this case you would be asked to take an oath to follow the law and if the evidence that was introduced here convinced *581 you beyond a reasonable doubt that the defendant was guilty could you join with other jurors in writing a verdict of guilty?
"A. I guess, I would have to. I really wouldn't want to but I probably would have to.
"Q. If having found a defendant guilty you got additional testimony that would result in your finding that the answer to those two questions should be `yes' when you knew that by answering `yes' that it would result in the death of the defendant you know that you can answer one of them `no' and if you answer one of them `no' he wouldn't get the death penalty. He would get life. Would you be inclined, would you answer this truthfully one of them `no' just to protect and see that the Defendant didn't get death?
"A. I probably would.
"Q. You think that you probably would. Well, you kind of conflict or you give me some problem of concern. You say if I was on the jury and if I had to write a verdict that would result in the death of a defendant I could then on the other hand you say, well if I had the choice of answering the two questions I probably would fabricate one of them and there's nothing wrong in this and I mean that sounds horrible when you use the word fabricate, dishonest, untruthful but we have a right to know and it's something that you have to live with the rest of your life. Talk to me about it. How strong do you feel against the death penalty?
"A. Very strongly. I'm afraid I have to live with that. I prefer life rather than death.... Even though he took someone else's life I still would prefer life rather than death.
"Q. Yes. But if you were selected as a juror and you heard the evidence you understand if the State proves a defendant's guilt beyond a reasonable doubt you've taken an oath to follow the law and to find him guilty.
"A. I don't know how to answer that....
"Q. Well, you answered it two or three different ways for me. I want to know exactly how you feel. As I told you some people think that the death penalty is a proper penalty and they have no problem with it. Other people don't think it's a proper penalty but if it is the law they can follow it. Many other people don't think it'd (sic) a proper penalty and they are so strong in their belief that they could not follow the law. Now where do you fit in those categories?
"A. Like I said before I don't believe in death. I would rather life but if I was on a panel with a bunch of them I might be inclined to go along with them. I still don't believe in death rather life."
The State's attorney was then allowed to examine the perspective juror. He asked, "I guess what I'm asking you to do is asking you if you would violate the law intentionally and intentionally answer one of those questions `no' so that the person would get life rather than the death but at the same time you're able to live with your conscience? Would you do that?" The venireman answered, "Yes.... Like I said before, I don't believe in death so maybe I have to violate the law and say life instead of death." After this exchange the following took place:
"Q. [BY STATE'S ATTORNEY]: Okay, well, you've used the word maybe.
"A. I would.
"Q. The problem comes sometimes where we as lawyers are allowed to give examples in regards to capital murder situation. Where we can ask you to envision a set of facts or a set of circumstances whereby the offense itself is a terrible offense. Where numbers of people are killed, where the individual has taken the witness stand and had confessed and where he says that I will do it again. Now there would be no question in many peoples minds that person is a danger to society but at the same time they also know and you know now that no matter how bad that individual is that if you answer those two issues `yes' he would receive death and that would then be on your conscience. So that I guess what I'm in effect asking you to do, *582 could you ever see yourself in any circumstance being able to answer those two issues `yes' knowing that somebody would receive death knowing that you violated your conscience?
"A. No.
* * * * * *
"Q. Before I quit asking you questions I just want to make sure that you're sure in your own mind so that when you are asked to envision this horrible set of facts and horrible set of circumstances that may involve a number of people being killed ... and set of facts where this individual is just no hope of rehabilitation at all that you're not going to change you mind and say well, maybe in that case I could say yes. Are you sure in your mind that you would always answer one of them `no'?
"A. I'm pretty sure.
"Q. You say I'm pretty sure now?
"A. I'm sure."
The venireman, a nurse, was then examined by the defense attorney who, after presenting a particular set of facts where an individual set fire to the maternity ward of a hospital and said he would kill again, asked the venireman if she could be truthful in her answers and follow the law. She said, "I guess so.... [i]f that's the way I have to go."
The trial court resumed examination asking, "And [if] you were in that trial and the other jurors all eleven of the other jurors wanted to write a penalty of death could you join the other jurors and write a penalty of death." Unequivocally, the prospective juror answered, "No. I'd rather life." She further said, "I would," when asked if she would falsify and answer one of the special issue questions "no" so that appellant would receive a life sentence. Thereafter, the State challenged the venireman for cause and the trial court sustained the challenge.
In the trial court, the proper standard to be used in disqualifying prospective jurors in death penalty cases is whether their views would prevent or substantially impair the performance of their duties as jurors in accordance with the instructions given and the oaths taken. Bell v. State, 724 S.W.2d 780, 794 (Tex.Cr.App.1986) cert. denied, 479 U.S. 1046, 107 S. Ct. 910, 93 L. Ed. 2d 860 (1987); Sharp v. State, 707 S.W.2d 611, 620 (Tex.Cr.App.1986). "[T]his standard ... does not require a juror's bias [or prejudice] be proved with `unmistakable clarity.'" Ellis v. State, 726 S.W.2d 39, 43 (Tex.Cr.App.1986), quoting Wainwright v. Witt, 469 U.S. 412, 105 S. Ct. 844, 83 L. Ed. 2d 841 (1985). On appeal, we recognize that great deference must be given to the trial court judge who is in the best position to see and hear the prospective jurors and to evaluate their responses. As such, we will reverse a trial court's ruling on this issue only when the record shows a clear abuse of discretion on the trial court's part.
No such abuse is demonstrated in the record before us. The prospective juror changed her answers throughout her examinationshe vacillated between being able to follow her oath as a juror and voting "no" on one of the special issues so as to prevent imposition of the death penalty. We find it significant that the last question asked of the venireman was whether she would change her answer to one of the special issues to which she answered in the affirmative. Under such circumstances the trial court is in the best position to evaluate the venireman's answers and to rule accordingly. As stated in Witt:
"[A] trial judge's finding that a particular venireman was not biased and therefore properly seated was a finding of fact subject to [28 U.S.C.] § 2254(d). We noted that the question whether a venireman is biased has traditionally been determined through voir dire culminating in a finding by the trial judge concerning the veniremen's state of mind. We also noted that such a finding is based upon a determination of demeanor and credibility that are peculiarly within the trial judge's province. Such determinations are entitled to deference even on direct review." 469 U.S. at 428, 105 S.Ct. at 854 (footnote omitted).
*583 The trial judge found the venireman unqualified to sit as a juror. The record supports the trial court's finding and, as such, we hold that the trial court did not abuse its discretion when it sustained the State's challenge for cause.
Appellant also argues under this point of error that the trial court judge should have more thoroughly questioned the venireman. He insists that "[r]eversible error occurred in the instant case because the trial judge granted the challenge too quickly," and that "[b]y terminating the education process of the juror where he did, the trial court judge cannot be said to have formed a definite impression" of the venireman's ability to sit as a juror. We note that at no time did appellant advance this argument in the trial courthe did not ask to reexamine the prospective juror after the trial court did so and his initial examination was in no way cut short by the trial court judge. As such, appellant has failed to preserve error, if any, for our review. Tex.R.App.P. 52(a). See also Witt, 469 U.S. at 430-431, 105 S.Ct. at 855-856 (Supreme Court finding noteworthy that the trial court judge was given no indication that elaboration was necessary before he excused a venireman). Appellant's tenth point of error is overruled.
Appellant's point of error number eleven appears to contest the trial court's sustaining the State's challenge for cause to a prospective juror.[4] Appellant admits in his brief, however, that "the last position taken by the prospective juror was that he could not serve and live up to the oath." Nevertheless, appellant asserts that the State's challenge for cause was "suspect" because the venireman was, as appellant puts it, "so intimidated and brow-beaten during the several hours of his examination that he finally gave the answer expected of him." Appellant concludes that we, as a reviewing court, could never be sure of the venireman's ultimate answer and, as such, asks that we overturn his conviction "based on principles of fairness and due process."
After an extensive examination of the prospective juror by both the State and the defense, the trial court judge took over the questioning. The following colloquy took place:
"Q. [BY THE COURT]: Mr. Pravo ... let me tell you something to be sure that you're understanding, will you. I have observed you for the last several hours and I gather you've wrinkled your brow and shook your head and some questions you have unanswered by giving the nod of your head. You've been very reluctant and slow in giving the answers. I get the impression that you've answered sometimes without truly understanding the question. I don't care. You and I talked yesterday. You and I talked earlier today. See I don't represent the State. I don't represent the defendant. I'm merely sitting here to try and help you, if I can, to determine in your mind if you were a juror in this case you could be fair and impartial to both the State and the defendant.
* * * * * *
"You got it now. The ball is in your court. You're going to have to tell me under any circumstances could you join together with eleven other people and write a verdict that would result in the death of an individual?
"A. I don't believe in killing nobody. I don't want to take nobody's life.
"Q. What did I ask you?
"A. You ask[ed] me could I be able to sentence in between eleven people and write the verdict death?
"Q. That's right and what is your answer?
"A. No, sir.
* * * * * *
"Q. And you could never do it?
"A. No, sir.
* * * * * *
*584 "Q. You understand that you told [the State's attorney] this same thing a minute ago?
"A. Yes, sir.
"Q. Then when [the defense attorney] talked to you understand that you told him that you could?
* * * * * *
"A. Well, I was just confused on each. What he was saying the way he was saying it and then he stated the way he stated about the plane.[5] I don't know I just said yes I could you know for what this other guy did on the plane but I mean I don't know. I don't believe I could. [Footnote added.]
"Q. How did he confuse you.
"A. Well, both of them I mean it was a horrible thing that this guy did the way he did it and I just thought that I could give it a thought that I could, you know.
* * * * * *
"Q. Now that you you've had time to think about it, could you do it?
"A. I don't believe.
"Q. Sir?
"A. No, sir.
"Q. Any doubt in your mind?
"A. No, no doubt in my mind. No doubt.
"THE COURT: Okay. I'm going to excuse him for cause."
Initially we hold, as appellant apparently concedes, the record fails to demonstrate that the trial judge abused his discretion in sustaining the State's challenge for cause. Wainwright v. Witt, 469 U.S. at 430-432, 105 S.Ct. at 855-856. In as much as appellant attempts to raise the suspect nature of the State's challenge to this venireman for the first time on appeal, we hold that he has waived any such complaint by not raising it in the trial court. Tex.R.App.P. 52(a). See Phillips v. State, 701 S.W.2d 875, 881 (Tex.Cr.App.1985). Appellant's point of error number eleven is overruled.
The Guilt/Innocence Phase of Trial
Appellant told the jury that he played video games while Wilkerson murdered the manager in his office and Randle killed the three men in the bathroom. On cross-examination, the prosecutor asked appellant why he had "waited until almost a year later to tell these fine twelve people what that story was." Appellant was also asked why, when he had the opportunity, he did not "tell the police."
Appellant, in his first point of error, asserts that the prosecutor was impermissibly allowed by the trial court to use appellant's post-arrest silence against him. He relies upon Sanchez v. State, 707 S.W.2d 575 (Tex.Cr.App.1986) (plurality opinion).
Appellant's only objection to the prosecutor's questioning was, "He's now striking at the Defendant over the advice given by his counsel."[6] No objection was urged in *585 the trial court on the ground now alleged on appeal. Nothing is before us for review. Tex.R.App.P. 52(a). See Nethery v. State, 692 S.W.2d 686, 710 (Tex.Cr.App. 1985) cert. denied, 474 U.S. 1110, 106 S. Ct. 897, 88 L. Ed. 2d 931 (1986); Smith v. State, 683 S.W.2d 393, 407 (Tex.Cr.App.1984).
Appellant, in his second point of error, argues that the prosecutor's questioning acted to also deprive him of due process of law. He contends that use of appellant's silence after being told by his attorney that such silence would not be used against him was fundamentally unfair. This objection was not lodged in the trial court and, as such, nothing is before us for review. Tex. R.App.P. 52(a). See Nethery, 692 S.W.2d at 710. Therefore, appellant's first and second points of error are rejected.
As mentioned above, appellant took the stand and denied conspiring with Randle and Wilkerson to rob and kill the race center employees. On cross-examination, the prosecutor asked, "Would it surprise you to know that they [Wilkerson and Randle] don't agree with your version." Appellant's attorney objected, stating, "I object to that." The trial court sustained the objection, instructed the jury to disregard the question and denied appellant's motion to declare a mistrial. Appellant in his third point of error asserts that the trial court erred in refusing to grant him a mistrial; he relies upon Bruton v. United States, 391 U.S. 123, 88 S. Ct. 1620, 20 L. Ed. 2d 476 (1968).
In Bruton, the Supreme Court held that at a joint trial of a defendant and his co-defendant, any statement made by the co-defendant implicating the defendant could not be used by the government against the defendant when the co-defendant does not testify at trial and is therefore not subject to cross-examination. Such use was said to deny the defendant his Sixth Amendment right to confrontation. Appellant argues that because Wilkerson and Randle were tried apart from him, the prosecutor's question "implicitly contradicted every exculpatory word that had been uttered from the witness stand ... [and] was such that it could not be refuted by the defense." Assuming without deciding that appellant's general objection was sufficient to preserve the issue for our review, we hold that the trial court's instruction to disregard was sufficient to cure any error.
Generally, any error in asking an improper question is cured or rendered harmless by an instruction to disregard. Guzmon v. State, 697 S.W.2d 404, 408 (Tex.Cr.App. 1985) cert. denied, 475 U.S. 1090, 106 S. Ct. 1479, 89 L. Ed. 2d 734 (1986). This Court rarely reverses a conviction due to an improper question being asked by the prosecutor. Gonzales v. State, 685 S.W.2d 47, 49 (Tex.Cr.App.) cert. denied, 472 U.S. 1009, 105 S. Ct. 2704, 86 L. Ed. 2d 720 (1985). "To cause reversal the question must be obviously harmful to the defendant." Id., citing Pearce v. State, 513 S.W.2d 539, 543 (Tex.Cr.App.1974). See also Boyde v. State, 513 S.W.2d 588 (Tex.Cr.App.1974). Here, appellant's specific complaint is that the prosecutor's unanswered question acted to deprive him of his constitutional right to cross-examination. We disagree.
In Griffin v. State, 486 S.W.2d 948 (Tex. Cr.App.1972), the defendant was jointly tried with his co-defendant. The co-defendant's confession was introduced into evidence with those portions implicating the defendant excised. The police officer who took the confession testified at trial. On cross-examination, the co-defendant's counsel attempted to discredit the officer's testimony by implying that the officer had made a deal with the co-defendant so as to procure the confession. On redirect examination, the prosecutor, to substantiate the officer's earlier testimony, read testimony from the co-defendant taken at an examining trial that not only implicated the co-defendant but the defendant as well. In that case we held:
"Immediately this appellant's counsel objected and just as promptly the Court instructed the jury to `disregard the reading a moment ago from ... [the examining trial testimony that] he had in his hand.' Nothing further was said concerning the examining trial testimony. We find these instructions distinguishable from those condemned in Bruton, *586 supra, where the Court held that an instruction to the jury, to disregard that portion of a confession which referred to a co-defendant, was insufficient to remove the harm that it might cause the co-defendant.... The references to [the co-defendant's] confession which appellant complains of here do not refer to the admission of the confession. We hold that the Court's prompt instruction, under the circumstances of the case, sufficient." Griffin, 486 S.W.2d at 950, citing Blassingame v. State, 477 S.W.2d 600 (Tex.Cr.App.1972) and Craig v. State, 480 S.W.2d 680 (Tex.Cr.App.1972).
In the case before us, neither the confession of Randle nor that of Wilkerson was introduced into evidence before the jury. As such there is no direct violation of the Supreme Court's holding in Bruton. The trial court immediately sustained appellant's objection to the prosecutor's question and immediately instructed the jury to disregard same. Given the record before us, we hold that the trial court's instruction to disregard the question asked by the prosecutor was sufficient to cure any error concerning appellant's right to cross-examination. Appellant's third point of error is overruled.
In his fourth point of error, appellant contends that the prosecutor improperly impeached a State's witness without laying the proper predicate for impeachment of one's own witness.
State's witness, Wanda Phillips testified on direct that she had asked appellant how he had cut his hand. She testified that appellant said, "`Oh it ain't bad. It ain't nothing I can't handle' and I said, `How it happen?' He say, `Well, Junior Boy [Randle's nickname] was reaching for a knife and the other guy was grabbing for it and Junior Boy cut him, snatched [the] knife out of his hands and cut him.'" Wanda Phillips testified that this is what appellant had told her on the night after the murders.
On cross-examination, defense counsel elicited the following:
"Q. Do you remember being here this morning?
"A. Yes.
"Q. Do you remember me asking you to come in to the jury room....
"A. Correct, next door.
* * * * * *
"Q. And did [appellant] tell you how he received that cut?
"A. Yes.
"Q. And did he tell you that he received that as a result of trying to stop Junior Boy from stabbing somebody.
* * * * * *
"A. Correct.
"Q. And when I talked to you in the jury room at about 10:30 this morning when I asked you how he received that cut that is what you told me?
"A. Yes.
* * * * * *
"Q. And that's what he told you when he very first came back to your apartment, isn't that correct? When he came back with the other two that night when he went into the bathroom?
"A. Yes.
"Q. Did you also overhear a conversation between, when you were in the front room there, that you later learned to be [Wilkerson] and [Randle] and [appellant]? Did you overhear a conversation wherein they told you (sic) that [appellant] had nothing to do with those killings?
"A. Yes, I did hear it.
"Q. And you testified in both of those trials that on more than one occasion while they were there in that apartment that they told you that you heard them say to you that he didn't have one thing to do with it. That they did it all, isn't that true?
"A. Correct."
On redirect examination, the prosecutor showed Phillips two prior statements she had given to the police on July 2nd, and July 7th, 1983. He asked her where in the statements she had indicated she was told by appellant that he tried to stop Randle from killing somebody. Over appellant's objection that the prosecutor was impeaching *587 his own witness[7], Phillips testified that, "No, I didn't say that in the statement." Later on redirect, the prosecutor asked Phillips to read certain portions from the statement that she had given to police on July 7th. Again over objection that the prosecutor was attempting to impeach his own witness, Phillips read:
"When I asked how Pony had cut his hand he told me that he had a knife in his hand and James [Randle] had asked for it and just then one of the guys who they had killed tried to grab the knife. This is where [appellant's] hand was cut. James got the knife away from him from that man."
After Phillips read from her statement, the prosecutor asked her if that statement were true. She responded that the statement was true. The prosecutor elicited the following:
"Q. Then why did you tell [the defense attorney] all these things that you've told him?
"A. Because I don't want to be bothered with talking to everybody. I don't want to be involved in this stuff and didn't with all these investigators, D.A. and lawyers. It's not me.
* * * * * *
"Q. So what you related to [the defense attorney] in the jury room next door is not the truth?
"A. This is what Pony have (sic) told me since he has been locked up."
Phillips further testified that she had visited appellant in jail but had decided not to see him anymore. He, however, repeatedly telephoned her even after she had the number changed to prevent him from calling.
The prosecutor asked Phillips to read from her statement given to police on July 2nd. Without objection, she read:
"I saw Pony had a cut on his hand.... On his inside of his fingers on one hand. Which one I don't know. James was going around apologizing about cutting him on his hand and Pony told me that he had the knife and the other guy was trying to get the knife. James reached in front and grabbed the knife and pulled it out of Pony's hand and cut Pony's hand."
To impeach a witness means adducing proof that such witness is unworthy of belief or credit. Brown v. State, 475 S.W.2d 938, 952 (Tex.Cr.App.1971) overruled for other reasons in Bradford v. State, 608 S.W.2d 918 (Tex.Cr.App.1980). A mere showing that the State has introduced prior inconsistent statements of witnesses called to testify on its behalf does not automatically constitute impeachment. See, e.g., Jackson v. State, 516 S.W.2d 167, 175-176 (Tex.Cr.App.1974).
In this case, Phillips told the jury that appellant had returned to her apartment with a cut hand and that the hand had been cut, she was told, when appellant attempted to remove the knife from Randle's hand. On cross-examination, defense counsel elicited testimony that the hand was cut when appellant attempted to stop Randle from killing the young men in the bathroom. It was perfectly acceptable for the State on redirect to have Phillips contextualize the testimony she had given on cross-examination. Williams v. State, 604 S.W.2d 146, 149 (Tex.Cr.App.1980); Villarreal v. State, 576 S.W.2d 51, 58 (Tex.Cr. App.1978); Brown, 475 S.W.2d at 952. This is what Phillips did when she related that appellant had told her this while in jail and that he constantly attempted to contact her even after she had changed her phone number. Here, as in Jackson, the State was not attacking the credibility of Phillips. Indeed, the State's case was dependent upon the jury believing this witness. The State did not impeach its own witness. Appellant's fourth point of error is therefore overruled.
In his fifth point of error, appellant asserts that the trial court erred in permitting the prosecutor to read from Phillips' statement wherein she related to police officers that appellant had taken the *588 knife from her home. Again, as in his previous point of error, appellant asserts that the prosecutor's actions constituted improper impeachment of one's own witness. The State in its brief insists that the prosecutor was merely refreshing the memory of the witness and was therefore proper. We find, however, that issue has not been preserved for our review.
Phillips had testified that appellant and Randle had picked up a knife that was in her dish drainer. She, however, could not remember who actually held the knife when one or the other picked it up. The witness was cross-examined and on redirect was told by the prosecutor to "[r]efresh your memory if you would about who had the knife in his hand and who left with that knife in his hand." Referring to her prior statement made to police officers, Phillips testified:
"It saying (sic) the last time that he came over it was about 9:30 p.m. That time Pony [appellant's nickname] went into my kitchen. I heard James say, `Oh man, this is one that we can use.' Then I saw Pony with my butcher knife.... Pony had this knife in his hand."
The witness read this statement without objection. Appellant, however, attempts to rely upon the objection made when the witness was asked, "Does it say anywhere in this statement that the Defendant Kenneth Ransom had gone there and was playing games and had gone to the bathroom when he discovered two people killed and he tries to stop Junior Boy from killing somebody else?" When this question was asked, some six questions before the aggrieved question, appellant made his "improper impeachment" objection. No objection was voiced when the aggrieved statement was read before the jury. Having not properly objected, appellant has not preserved error, if any, for our review. Tex.R.App.P. 52(a). See Marini v. State, 593 S.W.2d 709, 716 (Tex.Cr.App.1980). The fifth point of error is overruled.
In his sixth point of error, appellant asserts that the trial court did not comply with what he calls the "mandatory requirements" of Article 36.27, V.A.C.C.P.
Among the copies of the papers filed in the trial court, there is a document entitled "JUROR'S REQUEST." Signed by the foreman of the jury and addressed to the trial court judge, it reads, "Please supply us with the part of Wanda Phillips (sic) testimony which took place in her bathroom when Ransom was there with the cut hand." The request is dated June 15, 1984, and was filed stamped by the clerk of the court at 5:53 p.m. The copy of the trial court's docket sheet makes no mention of the note. That part of the docket sheet dated June 15, 1984, reads that:
"[a]t 4:40 p.m. the court allowed jury to separate so that they may move their cars. [(This was done with appellant's acquiescence.)] At 5:00 p.m. the jury returned and resumed deliberations. At 6:30 p.m. the jury returned into open court with a verdict on Special Issue # 1: Answer Yes; Special Issue # 2: Answer Yes."
Appellant alleges that the request evidences the trial court's failure to comply with Article 36.27 because the record does not show that the trial court responded to the note in writing and in open court.[8]
Assuming without deciding that Article 36.27 governs the procedure to be followed *589 under the fact situation here presented[9], absent a timely objection concerning noncompliance with Article 36.27, nothing is preserved for our review. Tex.R.App.P. 52(a); Hawkins v. State, 660 S.W.2d 65, 80-81 (Tex.Cr.App.1983); Edwards v. State, 558 S.W.2d 452, 454 (Tex.Cr.App. 1977). Appellant's sixth point of error is overruled.
The Punishment Phase of Trial
In his twelfth point of error, appellant contends that Article 37.071(b)(1), V.A. C.C.P. is unconstitutional. His specific complaint is that Article 37.071 does not permit him to introduce testimony relative to the mitigation of punishment in this case because the State relied upon a party's theory of culpability. We disagree.
The State relied upon a party's theory of culpability in the guilt/innocence phase of trial. In the punishment phase of trial, however, appellant is not restricted in his presentment of mitigating evidence. See Article 37.071, supra. As we discussed in Green v. State, 682 S.W.2d 271 (Tex.Cr. App.1984):
"[T]he special issues themselves clearly focus the jury's attention on the individual defendant, and indeed must do so in order to give the individualize examination required under Lockett v. Ohio, 438 U.S. 586, 98 S. Ct. 2954, 57 L. Ed. 2d 973 (1978) and Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976). While the law of parties can apply to convict an accused of capital murder, the death penalty may be imposed only by examination of the mitigating and aggravating circumstances concerning the individual defendant. This examination is performed in Texas through the special issues." 682 S.W.2d at 287 (emphasis in the original, emphasis added and citations omitted).
See also Lockett v. Ohio, 438 U.S. 586, 98 S. Ct. 2954, 57 L. Ed. 2d 973 (1978); Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976); Woodson v. North Carolina 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976); Quinones v. State, 592 S.W.2d 933, 947 (Tex.Cr.App.) cert. denied, 449 U.S. 893, 101 S. Ct. 256, 66 L. Ed. 2d 121 (1980).
Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929 (1976), expressly upheld the constitutionality of the manner in which mitigating evidence is considered under the special issues submitted to Texas juries per Article 37.071. Complying with Jurek, Lockett and their progeny, this Court has resolutely declared that a defendant in any capital murder case is free to ask the jury to consider whatever evidence of mitigating circumstances the defense can bring before it. See Quinones, 592 S.W.2d at 947. See also Cordova v. State, 733 S.W.2d 175, 189-190 (Tex.Cr.App.1987) cert. denied, 487 U.S. 1240, 108 S. Ct. 2915, 101 L. Ed. 2d 946 (1988); Johnson v. State, 691 S.W.2d 619, 625-626 (Tex.Cr.App.1984) cert. denied, 474 U.S. 865, 106 S. Ct. 184, 88 L. Ed. 2d 152 (1985); Stewart v. State, 686 S.W.2d 118, 121 (Tex.Cr.App.1984) cert. denied, 474 U.S. 866, 106 S. Ct. 190, 88 L. Ed. 2d 159 (1985). As such, because first, the special issues submitted pursuant to Article 37.071 focused the jury's attention on the individual acts of appellant and second, because we have consistently held that a capital murder defendant must be given the utmost latitude in presenting to the jury any evidence that may mitigate his punishment, we hold that appellant was not denied the opportunity to present such evidence in the punishment phase of trial although the State relied on a party's theory of culpability in the guilt/innocence phase of trial. Consequently, Article 37.071 is not unconstitutional as applied to appellant. We overrule appellant's point of error number twelve.
*590 The Record on Appeal
In his point of error number seven, appellant contends that the trial court improperly overruled his objection to the record on appeal. Omitted from the appellate record were complete copies of pages from a scrapbook that the District Attorney maintained. The scrapbook had been introduced into evidence as a bill of exception at the hearing on appellant's motion for a change of venue. It contains numerous pages; most pages contain more than one article cut out from either a newspaper or magazine pertaining to various aspects of criminal law.
After reviewing the record and appellant's objection thereto, we ordered the trial court to supplement the record on appeal with comple copies of those pages of the scrapbook to which appellant had objected on appeal. See Tex.R.App.P. 55(c). The trial court has complied with this order and a complete copy of the scrapbook is now before us. Appellant's point of error number seven is therefore moothe has not been denied his right to a complete record on appeal.
The judgment is affirmed.
CLINTON, J., joins only the judgment of the Court.
DUNCAN, J., not participating.
NOTES
[1] The indictment, in pertinent part, alleged that appellant "while in the course of committing and attempting to commit the robbery of ARNOLD PEQUENO, hereafter styled the Complainant, intentionally cause[d] the death of the Complainant by stabbing and cutting the Complainant with a knife...."
[2] The attorney qualified his remarks, however, by stating that it might take two to three times the normal amount to select a jury.
[3] At the hearing to change venue, appellant introduced videotaped news coverage concerning the murders taken from two Houston television stations. The factual accounts reported in the news coverage are consistent with the testimony given at trial. Appellant is incorrect when he states in his brief that the media gave false accounts indicating that he had confessed to the murders. The account to which appellant refers indicates that appellant was at large when Wilkerson told the media that they had murdered the victims by separating them from each other so as to make it easier to kill them.
[4] Appellant's heading to this point of error reads: "The trial court erred in granting the State's challenge for cause to venireman Provo in that the juror was qualified under Adams v. Texas."
[5] The defense attorney had presented a hypothetical situation to the venireman where a defendant, after he takes out a large insurance policy on his family, blows up a plane on which the family is traveling.
[6] The record reflects the following cross-examination by the prosecutor with appellant's objections thereto:
"Q. Well let me ask you Mr. Ransom, why didn't you tell this story to the police back on July the 1st of 1983?
"[DEFENSE ATTORNEY]: I object to that, Your Honor.
"THE COURT: Be overruled.
"A. I was advised by my attorney ... at the time not to give out any written statements or oral.
"Q. Well, this was on July the 5th now that you turned yourself into the police?
"A. Yes.
"Q. And you and your attorney and your mother and step-father came to the police station?
"A. Yes, sir.
"Q. And you didn't say a word did you?
"A. No.
"[DEFENSE ATTORNEY]: I object to that. He's now striking at the Defendant over the advice given to him by his counsel.
"THE COURT: Be overruled.
* * * * * *
"Q. [Y]ou waited until almost a year later to tell these fine twelve people what that story was.
"[DEFENSE ATTORNEY]: I object again, Your Honor. He's striking at this Defendant over the advice that this lawyer gave to him which is sound legal advice."
[7] The trial of this case occurred prior to adoption of TEX.R.CRIM.EVID. 607, which allows the credibility of a witness to be attacked by any party, including the party calling him or her.
[8] Article 36.27, V.A.C.C.P., in part, provides that:
"When the jury wishes to communicate with the court, it shall so notify the court thereof. Any communication relative to the cause must be written, prepared by the foreman and shall be submitted to the court through the bailiff. The court shall answer any such communication in writing, and before giving such answer to the jury shall use reasonable diligence to secure the presence of the defendant and his counsel or objections and expectations, in the same manner as any other written instructions are submitted to such counsel, before the court gives such answer to the jury, but if he is unable to secure counsel, then he shall proceed to answer the same as he deems proper. The written instruction or answer to the communication shall be read in open court unless expressly waived by the defendant.
"All such proceedings in felony cases shall be part of the record and recorded by the court reporter."
[9] We note that the more specific statute dealing with a juror's request for testimony is provided in Article 36.28 V.A.C.C.P., which, in pertinent part, reads:
"In the trial of a criminal case in a court of record, if the jury disagree as to the statement of any witness they may, upon applying to the court, have read to them from the court reporter's notes that part of such witness testimony or the particular part in dispute, and no other...." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1504667/ | 891 S.W.2d 267 (1994)
Jose MARIN, Jr., Appellant,
v.
The STATE of Texas, Appellee.
No. 1265-93.
Court of Criminal Appeals of Texas, En Banc.
December 14, 1994.
*268 Troy C. Hurley, Temple, for appellant.
Arthur C. Eads, Dist. Atty., and James T. Russell, Asst. Dist. Atty., Belton, Robert Huttash, State's Atty., Austin, for the State.
Before the court en banc.
OPINION ON APPELLANT'S PETITION FOR DISCRETIONARY REVIEW
BAIRD, Judge.
Appellant was convicted of conspiracy to deliver cocaine and sentenced to twenty-five years confinement. Tex.Penal Code Ann. § 15.02; and, Tex.Rev.Civ.Stat.Ann. art. 4476-15, § 4.04(c) (see now, Tex.Health & Safety Code Ann. § 481.112(c)). The Court of Appeals affirmed. Marin v. State, 801 S.W.2d 944 (Tex.App.Austin 1990). However, we vacated the judgment of the Court of Appeals and remanded the case to that Court. Marin v. State, 851 S.W.2d 275 (Tex. Cr.App.1993). The Court of Appeals again affirmed. Marin v. State, 862 S.W.2d 183 (Tex.App.Austin 1993). We granted the instant petition for discretionary review to determine whether an appointed attorney who replaces the originally appointed counsel is entitled to ten days to prepare for trial under Tex.Code Crim.Proc.Ann. art. 1.051(e).[1] We will reverse.
I.
On February 16, 1988, appellant requested the appointment of counsel and the trial judge appointed John Gauntt to represent appellant. Gauntt was subsequently permitted to withdraw and Fancy Jezek was appointed to represent appellant on May 10, 1988. Appellant's trial began on May 16, 1988, six days later.
On direct appeal, appellant contended his conviction should be reversed because Jezek was not afforded ten days to prepare for trial as required by Tex.Code Crim.Proc.Ann. art. 1.051(e). The Court of Appeals held the issue was not preserved for appellate review because appellant made no objection at trial as required by Tex.R.App.P. 52(a). Marin v. State, 801 S.W.2d at 946. However, we held art. 1.051 provided for a waivable right only and Rule 52(a) did not apply to rights which were waivable; thus the failure to comply with art. 1.051(e) could be raised for the first time on appeal. Marin v. State, 851 S.W.2d *269 at 280. Additionally, we held a violation of art. 1.051(e) was not subject to a harm analysis, Id. at 281, and remanded to the Court of Appeals. On remand, the Court of Appeals affirmed, holding art. 1.051(e) does not apply to subsequently appointed counsel. Marin v. State, 862 S.W.2d at 185-186 (citing Henry v. State, 433 S.W.2d 430 (Tex.Cr.App.1968); and, Roney v. State, 632 S.W.2d 598 (Tex.Cr. App.1982)).
The issue on the instant appeal is whether an appointed attorney who replaces the originally appointed counsel is entitled to ten days preparation time under Tex.Code Crim.Proc.Ann. art. 1.051(e). A review of the statute's legislative history as well as the decisional authority interpreting the statute is instructive.
II.
Art. 1.051(e), in relevant part, provides:
An appointed counsel is entitled to 10 days to prepare for a proceeding, but may waive the preparation time with the consent of the defendant in writing or on the record in open court.
The article has a legislative history spanning more than 130 years and six amendments.
The 1857 Code of Criminal Procedure provided:
When the defendant is brought into Court, for the purpose of being arraigned, if it appear that he has no counsel, and is too poor to employ counsel, the Court shall appoint one or more practicing (sic) attorneys to defend him.
Tex.Code Crim.Proc.Ann. art. 466 (Old Code 1856, revised 1879). The Code of Criminal Procedure 1879 revision provided:
When the defendant is brought into court for the purpose of being arraigned, if it appear that he has no counsel and is too poor to employ counsel the court shall appoint one or more practicing attorneys to defend him, and the counsel so appointed shall have at least one day to prepare for trial.
Tex.Code Crim.Proc.Ann. art. 511 (1879).[2]
In 1925, the Legislature created Tex.Code Crim.Proc.Ann. art. 494, which read:
When the accused is brought into court for the purpose of being arraigned, if it appear that he has no counsel and is too poor to employ counsel, the court shall appoint one or more practicing attorneys to defend him. The counsel so appointed shall have at least one day to prepare for trial.
The 1957, the last sentence of art. 494 was changed to provide:
The counsel so appointed shall have at least ten (10) days to prepare for trial, unless such time be waived in writing by said attorney.
Acts 1957, 55th Leg., p. 392, ch. 193, § 1.
The 1959 Legislature again amended the article to provide:
Whenever it is made known to the court at arraignment or any other time that an accused charged with a felony is too poor to employ a counsel, the court shall appoint one (1) or more practicing attorneys to defend him.
The counsel so appointed shall have ten (10) days to prepare for trial, unless such time be waived in writing by said attorneys and the accused.
Acts 1959, 56th Leg., p. 1061, ch. 484, § 1.
The 59th Legislature repealed art. 494 and enacted art. 26.04, which provided:
(a) Whenever the court determines at an arraignment or at any time prior to arraignment that an accused charged with a felony or a misdemeanor punishable by imprisonment is too poor to employ counsel, the court shall appoint one or more practicing attorneys to defend him. In making the determination, the court shall require the accused to file an affidavit, and may call witnesses and hear any relevant testimony or other evidence.
(b) The appointed counsel is entitled to ten days to prepare for trial, but may waive *270 the time by written notice, signed by the counsel and the accused.
Acts 1965, 59th Leg., vol. 2, p. 317, ch. 722. In 1987 the Legislature amended the Code of Criminal Procedure, creating art. 1.051 and restructuring art. 26.04. Today, the former art. 26.04(b) is the first sentence of art. 1.051(e).
Two constants are readily apparent throughout this legislative history: 1) an indigent defendant has a right to court appointed counsel; and, 2) appointed counsel must have a minimum number of days to prepare.
III.
A.
Our relevant precedent interpreting this article has consistently focused on the actual preparation time afforded appointed counsel, not the time of formal appointment, to determine compliance. More than a century ago, the former Court of Appeals held the statute, then art. 511 of the Code of Criminal Procedure, is "intended to secure time for necessary preparation to an intelligent management of the case, to the end that the party being tried shall have a fair trial." Brotherton v. State, 30 White & W. 369, 17 S.W. 932, 933 (1891).
In Meeks v. State, 456 S.W.2d 938, 939 (Tex.Cr.App.1970), we stated: "The purpose of Article 26.04(b) V.A.C.C.P. is clearly to guarantee to an indigent accused that he and his court appointed attorney will have a reasonable time in which they can prepare a defense." In Moore v. State, 493 S.W.2d 844, 845 (Tex.Cr.App.1973), we stated: "The purpose of Article 26.04, supra, is to protect an accused's right to have adequate time to prepare for trial." In Henson v. State, 530 S.W.2d 584 (Tex.Cr.App.1975), we said: "It is the actual preparation time, not the time of formal appointment, that determines whether a defendant has been given the mandatory preparation time for trial provided by the statute." Id., 530 S.W.2d at 585 (citing McBride v. State, 519 S.W.2d 433, 434 (Tex. Cr.App.1974); Davis v. State, 513 S.W.2d 928, 930 (Tex.Cr.App.1974); and, Moore, supra.).[3]
In Ex parte Dowden, 408 S.W.2d 512 (Tex. Cr.App.1966), and in Crothers v. State, 480 S.W.2d 642, 643 (Tex.Cr.App.1972), we held the appointment of an attorney to an indigent accused on the day of trial violated Tex.Code Crim.Proc.Ann. art. 26.04 (Vernon's 1965). In Farmer v. State, 419 S.W.2d 382, 383 (Tex.Cr.App.1967), we held it was error to deny the appointed attorney's request for ten days preparation for trial when he was appointed seven days before trial. And, in Houston v. State, 490 S.W.2d 851, 852 (Tex. Cr.App.1973), we held it was error to force the defendant to trial five days after the appointment of counsel because Tex.Code Crim.Proc.Ann. art. 26.04(b) required ten days preparation time.
B.
By focusing on the actual preparation time, and not the time of formal appointment, Henson, 530 S.W.2d at 585, to determine compliance with art. 1.051(e), we can fairly and effectively address the varied ways attorneys may be appointed. For example, in Meeks, supra, counsel was originally retained three months prior to trial and during that time he actively prepared for trial. However, within ten days of trial, counsel attempted to withdraw because he had not been paid for his services. The trial judge denied the request but appointed counsel to represent the defendant. Id., 456 S.W.2d at 939. We held:
The purpose of Article 26.04(b) V.A.C.C.P. is clearly to guarantee to an indigent accused that he and his court appointed attorney will have a reasonable time in which they can prepare a defense. In the present case, it is clear from the record that appellant's counsel had three months in which to prepare for trial. Appointment of counsel here was to allow payment to the lawyer for his services, and *271 no error is presented by the action of the trial judge.
Id.[4]
Several times we have addressed alleged violations of the statute where the appointed attorney had been forced to trial within ten days of re-indictment. In those cases we found no error because counsel had been appointed, albeit on the original indictment, in excess of ten days. Any difference in the indictments was negligible and in no way affected the defendant's ability to prepare for trial. Guzman v. State, 521 S.W.2d 267, 270 (Tex.Cr.App.1975); and, Hayles v. State, 507 S.W.2d 213, 214-215 (Tex.Cr.App.1974) (trial preparation was not affected by re-indictment). But see, Young v. State, 752 S.W.2d 235 (Tex.App.Fort Worth, 1988) (reversible error when counsel not provided statutory preparation time to prepare for new enhancement allegations).[5]
We have also considered situations where the trial judge appointed more than one attorney to represent the defendant. In Henry v. State, 433 S.W.2d 430 (Tex.Cr.App. 1968), the defendant's first trial ended in a mistrial when the jury failed to reach a verdict. Id., 433 S.W.2d at 432. Two days before re-trial the trial judge appointed additional counsel to assist counsel who represented the defendant at the first trial. The defendant was convicted and, on appeal, contended additional counsel must be afforded the ten days preparation time of art. 26.04. We rejected the defendant's contention:
We decline, however, to reverse on this ground. It is clear that if counsel's appointment has been more than ten days prior to trial, Article 26.04, supra, has no application. [citations omitted]. One of appellant's trial counsel, Mr. Chanon, had been appointed over seven months prior to this second trial and had actively participated in the first trial. The trial judge was under no obligation to appoint more than one counsel, and the fact that he afforded the appellant the assistance of additional counsel under the circumstances here described should not call for reversal... Such was not the legislative intent of Art. 26.04, supra. The fifth ground of error is overruled.
Henry, 433 S.W.2d at 432-33. Further, in Roney v. State, 632 S.W.2d 598 (Tex.Cr.App. 1982), the defendant was represented by three attorneys. Two of those attorneys were appointed in excess of the ten day statutory period for preparation. We held the appointment of a third attorney less than ten days before trial did not violate art. 26.04. Id., 632 S.W.2d at 601.[6]
When the Legislature meets, after a particular statute has been judicially construed, *272 without changing that statute, we presume the Legislature intended the same construction should continue to be applied to that statute. Lewis v. State, 58 Tex. Crim. 351, 127 S.W. 808, 812 (App.1910). Additionally, the Code Construction Act provides: "when examining amendments to existing legislation to determine legislative intent, it is presumed that the legislature was aware of case law affecting or relating to the statute." Tex.Gov't Code Ann. § 311.023(3); and, Grunsfeld v. State, 843 S.W.2d 521, 523 (Tex. Cr.App.1992).
With the foregoing in mind, we now turn to address the issue presented, namely, whether an attorney who is appointed to replace the originally appointed counsel is entitled to ten days actual preparation time under Tex.Code Crim.Proc.Ann. art. 1.051(e).
IV.
A.
The Court of Appeals held art. 1.051(e) was inapplicable to the instant case because appellant's initially appointed counsel, Guantt, was afforded more than ten days actual preparation time. Relying upon Henry, supra, and Roney, supra, the Court of Appeals held art. 1.051(e) did not apply to subsequently appointed counsel. However, for the following reasons, we disagree.
The primary goal of art. 1.051(e) is to ensure the indigent defendant receives appointed counsel who is prepared for the proceeding. For this reason we have focused on the actual preparation time afforded counsel. As long as the defendant was represented by an attorney who was afforded the statutory preparation time, we found compliance with the statute. If the defendant was represented by more than one attorney, we found compliance where at least one of the defendant's attorneys was afforded the statutory preparation time. See, Henry, 433 S.W.2d at 432-33; and, Roney, 632 S.W.2d at 601. However, when the defendant was represented by only one attorney and that attorney was not afforded the statutory preparation time, we have always found no compliance because the minimum statutory preparation time is mandatory. See, Ex parte Dowden, 408 S.W.2d 512 (Tex.Cr.App.1966); Farmer v. State, 419 S.W.2d 382, 383 (Tex.Cr.App. 1967); Crothers v. State, 480 S.W.2d 642, 643 (Tex.Cr.App.1972); and, Houston v. State, 490 S.W.2d 851, 852 (Tex.Cr.App.1973).
B.
In the instant case, Jezek was appointed only six days prior to appellant's trial. Moreover, Jezek was appellant's only counsel at trial. Further, appellant did not waive the statutory minimum preparation time of art. 1.051(e). For these reasons, we hold art. 1.051(e) was violated. Because such violations are not subject to a harm analysis, Marin v. State, 851 S.W.2d at 281, we reverse the judgment of the Court of Appeals and remand this case to the trial court.
McCORMICK, P.J., and WHITE, J., dissent.
CLINTON, J., concurs in the result.
MEYERS, Judge, concurring.
The only question presented on discretionary review in this case is whether the phrase "appointed counsel" in article 1.051(e) of the Code of Criminal Procedure includes an attorney appointed by the court to succeed one whom the court has let withdraw. The relevant facts are not in dispute. Shortly before his trial, the attorney appointed to represent appellant moved to withdraw and asked the court to substitute a different lawyer in his place. This motion was granted, apparently with the appellant's approval. The case was not reset, however, and went to trial only six days after the appointment of appellant's new lawyer. Neither he nor his lawyer objected to this procedure at the time. But on appeal he argued that his conviction should be set aside and a new trial ordered because his attorney did not have ten days to prepare for trial.
The law controlling this issue provides that "[a]n appointed counsel is entitled to 10 days to prepare for a proceeding but may waive the preparation time with the consent of the defendant in writing or on the record in open court." Tex.Code Crim.Pro.Ann. art. 1.051(e) (West Supp.1994). Although no such waiver is reflected in the appellate record, a *273 divided panel of the Austin Court of Appeals affirmed appellant's conviction, holding that article 1.051(e) does not apply to the appointment of substitute counsel. Marin v. State, 862 S.W.2d 183 (Tex.App.Austin 1993).
No one questions the fact that substitute counsel was actually "appointed" within the meaning of article 1.051(e). But Justice Powers, writing for the lower court, reasoned that the Legislature could not have intended to afford substitute attorneys appointed by the court the same preparation time as attorneys first appointed by the court because it would empower the defendant to "extend[] indefinitely the mandatory preparation time required by the statute[.]" Marin, 862 S.W.2d at 185. He argued that the "theory of literalness" relied upon by appellant for the proposition that all appointed attorneys are entitled to ten days of preparation time before trial was necessarily rejected by this Court in past examinations of article 1.051(e). He calls particular attention to Roney v. State, 632 S.W.2d 598 (Tex.Crim.App.1982) and Henry v. State, 433 S.W.2d 430 (Tex. Crim.App.1968), in which we effectively held that only one appointed attorney need be given the full preparation period prescribed by law.
That holding seems to have been original with the Court in Henry, and our entire rationale supporting it was that:
[t]he trial judge was under no obligation to appoint more than one counsel, and the fact that he afforded the appellant the assistance of additional counsel under the circumstances here described should not call for reversal merely because such written waiver was not signed by the appellant and his additional counsel before trial. Such was not the legislative intent of Article 26.04 [the predecessor of article 1.051(e).]
433 S.W.2d at 433. We did not explain in Henry why the described circumstances "should not call for reversal" nor what we imagined the "legislative intent" really to be. Neither did we elaborate our position later in Roney when we relied upon Henry to reach the same result under much the same circumstances. But both opinions were written at a time when we had not yet come to accept that the role of the judiciary in Texas government is to implement the legislative will as the Legislature has expressed it, not as we think it should have been expressed or as the Legislature may have intended to express it. See Boykin, 818 S.W.2d at 785. See also, e.g., Johnson v. State, 871 S.W.2d 744, 749 (Tex.Crim.App.1994); Moore v. State, 868 S.W.2d 787, 791 (Tex.Crim.App. 1994); Hernandez v. State, 861 S.W.2d 908, 909 (Tex.Crim.App.1993); Muller v. State, 829 S.W.2d 805, 808 (Tex.Crim.App.1992).
On its face, the statute plainly and unambiguously provides that "[a]n appointed counsel is entitled to 10 days to prepare[.]" Its language is not susceptible of the interpretation that some appointed lawyers are entitled to 10 days but that others are not. The majority maintains, as did Justice Onion dissenting in the lower court, that Henry and Roney are distinguishable from the instant cause because the issue presented in those cases involved the appointment of additional, not substitute, counsel. Certainly, this difference might be a persuasive basis upon which to discriminate between appointed attorneys who should, as a matter of public policy, be given full preparation time and those who should not. But the statute we are called upon to implement plainly does not express this distinction, even though the distinction could clearly and succinctly have been expressed without any difficulty.
For my own part, I do not know what the Legislature actually intended when it enacted article 1.051(e). But I find no ambiguity or absurdity in the statute's plain language that might require for its resolution an examination of the statute's legislative history. Boykin v. State, 818 S.W.2d 782, 785-86 (Tex.Crim.App.1991). Neither do I know whether the Legislature actually took time before enacting the statute to forecast the cases to which it might apply. But it does not seem to me that the instant cause is so unusual that diligent legislators could not have anticipated it. I therefore see no reason to interpret the controlling law in this case differently than its plain language requires.
Of course, I am willing to accept that the purport of the statute is to assure appointed *274 counsel enough time to prepare for trial, so as to optimize the probability indigent defendants will be represented effectively. Imposing an absolute requirement that all appointed counsel be afforded at least ten days in which to prepare, as the statute evidently does, might have been thought by the Legislature a reasonable means of accomplishing this goal. Supposing the Legislature thought that trial judges should never appoint substitute counsel unless necessary to the effective representation of an indigent defendant, it might well have been the Legislature's deliberate strategy to insist that all such attorneys, whether original or substitute, being thus necessary to the defense, have a minimum period of preparation. Because, from the face of the statute, it appears that this is what the Legislature in fact did, the courts are not at liberty to speculate that our lawmakers might really have had another purpose in mind which the statute on its face does not effectively accomplish or that the means chosen to accomplish it have put too heavy a burden on trial judges. Our job, and the job of judges at all levels, is to implement exactly the will of the Legislature as it is expressed in the written law, except when it would violate the constitution of Texas or of the United States to do so. Garcia v. State, 829 S.W.2d 796, 799-800 (Tex.Crim.App. 1992).
For this reason I think Henry and Roney should be overruled. Although those cases arose in a slightly different factual context, the propositions of law upon which this Court expressly relied apply equally to the factual context presented in the instant cause. This Court did not deny relief to Henry and Roney because they were continuously represented by at least one attorney with more than ten days of preparation time, as the majority suggests. Rather, it is clear from our opinions in both cases that relief was denied upon the ground that the first appointed attorney is the only appointed attorney entitled to ten days of preparation under the statute. I therefore agree with the Court of Appeals that Henry and Roney "implicitly rejected" the reading of article 1.051(e) that substitute appointed counsel have a right to 10 days in which to prepare for "a proceeding."
Although Henry and Roney are distinguishable from the instant cause in exactly the way the majority describes, the majority's distinction is not relevant to the holding in those cases. Because the plain language of article 1.051(e) provides that all appointed attorneys be given at least ten days to prepare for court, I would hold that substitute and additional counsel who have been appointed pursuant to the statute are entitled to as much preparation time as any attorney initially appointed by the court.
I do not mean by this to express any view on the method according to which preparation time should be calculated. In particular I do not suggest that an attorney who has made an appearance for, or otherwise been engaged to represent, an accused prior to the date of his appointment must be given ten additional days to prepare for trial following the date of his appointment. See Henson v. State, 530 S.W.2d 584 (Tex.Crim.App.1975); Meeks v. State, 456 S.W.2d 938 (Tex.Crim. App.1970). Questions of this kind are not before us in the instant cause, and I would imply no opinion concerning them.
Finally, as regards the fear that defendants will somehow seize control of court dockets, forcing interminable delays by substituting counsel repeatedly on the eve of trial, no such dire consequence is likely to follow from the Court's opinion in this case. A trial judge is free under most circumstances to deny outright a request for the substitution of appointed counsel, particularly when such request comes near the date of trial. See Webb v. State, 533 S.W.2d 780, 783-84 (Tex.Crim.App.1976); Gonzales v. State, 532 S.W.2d 343, 345 (Tex.Crim.App. 1976); Gleffe v. State, 501 S.W.2d 672 (Tex. Crim.App.1973). There is nothing in the record of this case to suggest that the judge could not have done so here. Moreover, being at liberty to deny the substitution, he might instead have decided to grant it only upon the condition that substitute counsel and the defendant agree to waive counsel's preparation time in the manner required by law. Burgess v. State, 816 S.W.2d 424, 428-29 (Tex.Crim.App.1991). There is likewise nothing in the record to suggest that he *275 could not have pursued this option in the instant cause. What seems far more likely is that the trial judge in this case was simply unaware of article 1.051(e) or had forgotten its requirements when he granted appellant's motion for substitute counsel without resetting the date of trial. I would not wish to presume, absent persuasive evidence to the contrary, that he deliberately ignored the statute's clear mandate.
Accordingly, although I disagree with the Court's analysis, believing its interpretation of article 1.051(e) to be erroneous, I agree that the judgments of the Third Court of Appeals and of the 27th District Court of Bell County should be reversed, and that this cause should be remanded to the trial court.
NOTES
[1] Appellant's ground for review states:
The Court of Appeals erred in holding that while the provisions of art. 1.051(e) of Vernons Annotated Code of Criminal Procedure is mandatory and that a court appointed attorney is entitled to a full ten (10) days to prepare for trial after appointment, that the statute does not literally mean that a subsequent appointed attorney is entitled to the said ten (10) days; only the original appointed attorney.
[2] All emphasis is supplied unless otherwise indicated.
[3] The courts of appeals have also focused on preparation time when interpreting the statute. Lujan v. State, 626 S.W.2d 854, 863 (Tex.App. San Antonio 1982) ("[I]t is apparent that the ten day preparation period refers to the actual preparation time and not the time of formal appointment."); Sheppard v. State, 634 S.W.2d 953, 955 (Tex.App.Fort Worth 1982); and, Johnson v. State, 653 S.W.2d 324, 328 (Tex.App.San Antonio 1983).
[4] In Johnson v. State, 653 S.W.2d 324 (Tex. App.San Antonio, 1983 (pet. grt'd.), aff'd 760 S.W.2d 277 (Tex.Cr.App.1988), the defendant sought to proceed pro se and retained counsel attempted to withdraw because the defendant asked counsel to engage in unethical conduct. The trial judge permitted the defendant to proceed pro se but required counsel to remain present throughout the trial in an advisory capacity. Id., 653 S.W.2d at 327-328. On appeal, the defendant contended counsel was appointed but was not allowed the mandatory preparation time under art. 26.04. The Court of Appeals rejected the defendant's contention, holding the change in the attorney's status was not a new appointment necessitating ten days preparation. Further, the Court stated:
Assuming arguendo [counsel's] change of status to an advisory capacity amounted to an appointment, there would still be no error presented. It is the actual preparation time and not the time of formal appointment that determines whether defendant has been given the mandatory preparation time for trial provided by article 26.04.
Id., 653 S.W.2d at 328.
[5] Additionally, in Lujan, 626 S.W.2d 854, 862-863 (Tex.App.San Antonio 1982), the Court held appointed counsel was not entitled to additional preparation time when the first trial ended in a mistrial and the trial judge immediately began the re-trial.
[6] Similarly, in Sheppard v. State, 634 S.W.2d 953, 955 (Tex.App.Fort Worth, 1982), the Court found no error despite only nine days having elapsed between formal appointment of defendant's co-counsel and trial because the defendant's other trial counsel had been appointed for more than two months prior to trial. In Oliver v. State, 731 S.W.2d 149, 157 (Tex.App.Fort Worth, 1987), the defendant contended his third appointed counsel was entitled to ten days to prepare. The Court found no error because the defendant had two other counsel, one of whom had been appointed for more than two years prior to trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1509998/ | 633 S.W.2d 497 (1982)
John W. ARNDT, Relator,
v.
Hon. Anthony J. P. FARRIS, Judge, Respondent.
No. C-648.
Supreme Court of Texas.
March 10, 1982.
Daniel R. Rutherford, San Antonio, for relator.
Butler, Binion, Rice, Cook & Knapp, Michael A. Pullara and William N. Blanton, III, Houston, for respondent.
McGEE, Justice.
This is an original mandamus proceeding by relator John W. Arndt (Arndt) seeking an order from this Court to compel the Honorable Anthony J. P. Farris, Judge of the 151st Judicial District in Harris County, Texas, to vacate an Order Imposing Sanctions against Arndt for his failure to appear for a postjudgment deposition pursuant to Rules 621a and 215a of the Texas Rules of Civil Procedure. The deposition was sought by National Supply Company, a Division of Armco Steel Corporation (National Supply), in aid of the enforcement of a judgment it had obtained against Arndt and others, jointly and severally. National Supply is the real party in interest in this proceeding. We hold that the trial court had jurisdiction to make the Order, but we express no opinion as to the propriety of the sanctions imposed. The writ of mandamus is denied.
This dispute arises out of a judgment rendered May 4, 1981 in the 151st Judicial District Court of Harris County awarding damages to National Supply against Arndt. Arndt has appealed that judgment, without filing a supersedeas bond, to the Court of *498 Appeals for the Fourteenth Supreme Judicial District. That appeal is pending.
On June 4, 1981, after Arndt's appeal was filed, National Supply filed in the 151st District Court a notice to take Arndt's deposition and a subpoena duces tecum issued pursuant to Rules 200 and 201(3).[1] A copy of this notice was sent to Mr. Daniel Rutherford, who was Arndt's attorney at trial and who is currently representing Arndt in his appeal and in this proceeding. No notice was attempted to be served on Arndt personally. Mr. Rutherford received a copy of the notice on June 8, directing Arndt to appear on June 20 in the office of National Supply's attorney, Mr. W. N. Blanton, III.
Arndt failed to appear for his deposition on June 20 and his nonappearance was certified by the court reporter. National Supply filed a motion for sanctions on June 23, a copy of which was received by Mr. Rutherford on June 25. The hearing on this motion was passed after Mr. Rutherford wrote a letter to Judge Farris stating he would not be available. A second motion for sanctions was filed on July 15 together with a proposed Order Imposing Sanctions and a notice of hearing to be held on August 3. On July 16, Mr. Rutherford received copies of the second motion, an affidavit in support thereof, the proposed order, and notice of hearing.
A hearing on the second motion for sanctions was held on August 3 before Judge Farris, with both Mr. Blanton and Mr. Rutherford present. Arndt did not attend. Pursuant to that hearing, Judge Farris signed the Order Imposing Sanctions before us now. The Order recites that Mr. Rutherford is Arndt's attorney of record; that he had received the notice of deposition on June 8; that neither Arndt nor Mr. Rutherford communicated to Mr. Blanton or the court any objection to the notice of deposition prior to June 20 or that Arndt could not attend at the designated time or place, and that any objections were thereby waived; that Arndt did not appear for the deposition; and that Arndt had not filed a supersedeas bond in connection with his appeal of the original judgment.
Pursuant to Rules 621a and 215a, the court adjudged Arndt in contempt of court for his failure to appear for the deposition; directed Arndt to pay $500.00 to National Supply's attorney, to cover costs, attorney's fees, and as a fine, no later than August 7, 1981; ordered Arndt to pay an additional $100.00 per day to National Supply's attorney for each day that Arndt failed to pay the original $500.00 after August 7; and ordered Arndt to pay an additional $1000.00 per week to National Supply's attorney for each week, or portion thereof, that Arndt failed to pay the previous amounts after August 14.
The court further ordered, pursuant to Mr. Rutherford's request, that Arndt be confined for a period of 24 hours so that Arndt could obtain review of the Order by way of a writ of habeas corpus. The Order also directs Arndt to appear for a deposition at Mr. Blanton's office on the Saturday following any denial of the writ of habeas corpus. Finally, the order provides Arndt may avoid appearing for the deposition by posting a supersedeas bond in an amount not less than $95,000.00.
Arndt has not paid any of the fines or sanctions imposed by the Order, nor has he appeared for a deposition or posted a supersedeas bond. Although a writ of attachment issued for Arndt's arrest, he was not placed in custody. Arndt did not apply for a writ of habeas corpus, but instead filed this petition for a writ of mandamus.[2]
Arndt primarily contends the trial court did not have jurisdiction to enter any order relating to postjudgment discovery *499 under Rule 621a without the filing of a new petition by National Supply and service of citation pursuant thereto on Arndt. He also contends the sanctions imposed by the Order are not authorized under Rules 621a or 215a, and that they are grossly excessive and constitute an abuse of discretion.
Rule 621a became effective on January 1, 1971 and is set out as follows:
Rule 621a. Discovery in Aid of Enforcement of Judgment.
At any time after rendition of judgment, and so long as said judgment has not been suspended by a supersedeas bond or by order of a proper court and has not become dormant as provided by Article 3773, V.A.T.S., the successful party may, for the purpose of obtaining information to aid in the enforcement of such judgment, initiate and maintain in the trial court in the same suit in which said judgment was rendered any discovery proceeding authorized by these rules for pretrial matters, and the rules governing and related to such pretrial discovery proceedings shall apply in like manner to discovery proceedings after judgment. The rights herein granted to the successful party shall inure to a successor or assignee, in whole or in part, of the successful party. Judicial supervision of such discovery proceedings after judgment shall be the same as that provided by law or these rules for pretrial discovery proceedings insofar as applicable.
No cases have addressed the procedures required to "initiate and maintain" discovery proceedings under this rule. Arndt contends Rule 621a requires the filing of a new petition seeking discovery and the issuance and service of a new citation on the judgment debtor. The basis for Arndt's contention is his assertion that, under Rule 329b(d), the trial court loses all jurisdiction over the case once the judgment became final for purposes of appeal. Thus, he argues a new petition and service of citation are required in order for the trial court to "re-gain" jurisdiction and to give the judgment debtor an opportunity to file an answer stating why such discovery should not take place. Arndt cites Emmons v. Creditor's Financial Services, 492 S.W.2d 363 (Tex.Civ.App. Waco 1973, no writ), as describing the proper procedure to be followed under Rule 621a.
The procedure set out in Emmons is similar to that required under Rule 737. Prior to the adoption of Rule 621a, Rule 737 was the only method for obtaining discovery outside the traditional pretrial procedures. Rule 621a was adopted as a separate and independent rule applicable only to discovery in aid of enforcement of judgments. See 2 McDonald, Texas Civil Practice § 10.02.20 (Supp.1981). Evidently, the creditor in Emmons was proceeding under Rule 621a but was using the procedures established under Rule 737. The procedure described in Emmons was not part of that court's holding and is not authoritative.
While the trial court's power to vacate, modify, correct, or reform a judgment ceases under Rule 329b(d) thirty days after the judgment is signed, the court's power to enforce its judgment is not so limited. See Rule 308. The general rule is that every court having jurisdiction to render a judgment has the inherent power to enforce its judgments. Ex parte Gorena, 595 S.W.2d 841, 844 (Tex.1979). That power is part of the court's jurisdiction, and the court may employ suitable methods to enforce its jurisdiction. See Hunt Production Co. v. Burrage, 104 S.W.2d 84, 86 (Tex.Civ.App. Dallas 1937, writ dism'd). Rule 621a is an aid to the enforcement of the court's judgment, and the trial court has continuing jurisdiction over such matters as set forth in the rule.[3]
Rule 621a does not require a new petition; rather, it provides that "the rules governing and related to ... pretrial discovery proceedings shall apply in like manner to discovery proceedings after judgment." (Emphasis added). In this case, National Supply sought to take the deposition of a party and filed an appropriate *500 notice pursuant to Rules 200 and 201(3). We hold that such was sufficient to "initiate and maintain" the discovery proceeding under Rule 621a. See Chagas v. United States, 369 F.2d 643 (5th Cir. 1966) (proceeding under Fed.R.Civ.P. 30(a)). The judgment debtor is afforded protection from improper discovery through the procedures set out in Rule 186b.
Arndt next contends that service of the notice of deposition on his attorney, rather than on Arndt personally, was insufficient to compel his attendance at the deposition. In many cases the attorney at trial will no longer represent the party after the judgment becomes final, either because no appeal was taken or because another attorney is representing the party on appeal. While service on the judgment debtor's former attorney may not be sufficient, we are presented with a different situation. Mr. Rutherford was Arndt's attorney both at trial and on appeal. There is no doubt that Rutherford was Arndt's attorney of record at the time Rutherford received the notice. Rule 10. See Chagas v. United States, supra; Cerami v. Robinson, 85 F.R.D. 371 (S.D.N.Y.1980).
Arndt also contends that the failure to serve him personally with the motion for sanctions renders the Order Imposing Sanctions void. The motion and the proposed Order were served on Arndt's attorney pursuant to Rule 21a. Furthermore, Mr. Rutherford represented to the court at the hearing that Arndt had actual knowledge of the hearing and of the sanctions which could be imposed. Under such circumstances, Arndt's contention has no merit. See Ex parte Herring, 438 S.W.2d 801 (Tex.1969).
We do not reach Arndt's remaining contentions concerning the nature of the sanctions imposed by the Order. While we are concerned with the assessment of continuing monetary penalties payable to another party, this issue is not properly before us now. Adequate and effective review of discovery sanctions can be obtained by appeal[4] once the sanctions become part of a final judgment.[5]
The writ of mandamus is denied.
NOTES
[1] Unless otherwise indicated, all references to Rules are to the Texas Rules of Civil Procedure.
[2] The record does not indicate clearly why the writ of attachment was not executed. Mr. Rutherford stated in oral arguments that, after requesting Judge Farris to order the confinement of his client, he decided Arndt should not seek habeas review and therefore advised Arndt not to tender himself into custody. Accordingly, we will give no further consideration to Arndt's contentions relating to the confinement part of the Order.
[3] Rule 621a authorizes postjudgment discovery proceedings so long as the judgment has not been suspended by a supersedeas bond or court order and has not become dormant.
[4] Habeas corpus review of a contempt sanction would also be available if the relator was confined pursuant thereto.
[5] An order for sanctions is merely one type of discovery order authorized by Rule 621a. Trial court orders granting or denying particular postjudgment discovery requests are not appealable until a final judgment is rendered disposing of all issues between the parties. See Parks v. Huffington, 616 S.W.2d 641 (Tex.Civ. App. Houston [14th Dist.] 1981, writ ref'd n.r.e.). An order imposing monetary sanctions, however, would be final and appealable when the sanctions are reduced to a judgment and execution is authorized thereon. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1515428/ | 535 S.W.2d 740 (1976)
Leo M. DAVIS, Appellant,
v.
The SMALL BUSINESS INVESTMENT COMPANY OF HOUSTON, Appellee.
No. 8355.
Court of Civil Appeals of Texas, Texarkana.
March 23, 1976.
Rehearing Denied April 20, 1976.
*742 Wm. Andress, Jr., Andress, Woodgate & Lodewick, Dallas, for appellant.
Gerald R. Coplin, Passman, Jones, Andrews, Coplin, Holley & Co., Dallas, for appellee.
CORNELIUS, Justice.
The Small Business Investment Company of Houston (hereinafter referred to as investment company) sought to recover from Computer Forms, Inc. and Leo Davis the principal and interest due by the terms of two promissory notes. The notes, one for $60,000.00 and one for $9,000.00, had been executed by Computer Forms, and were personally guaranteed by Leo Davis. Davis was President and a substantial stockholder of Computer Forms. Davis and Computer Forms filed a counterclaim for damages on the ground that the investment company had breached an agreement to secure additional financing for Computer Forms. At the close of evidence from all parties, the trial court withdrew the case from the jury and rendered judgment for The Small Business Investment Company against Computer Forms and Davis on the notes, and against Computer Forms and Davis on their counterclaim. Only Davis has appealed.
The evidence viewed most favorably to Davis, showed that Computer Forms was a relatively new business which had never earned a profit, but which Davis felt could be salvaged and put into a profitable position if it could secure $100,000.00 financing within a specified time. Davis approached the investment company for the money, telling them the complete story of Computer Forms' condition and need for the financing. He stated that he needed the money within thirty days. The investment company could only supply $60,000.00 of the necessary financing but agreed to obtain the remaining $40,000.00 from other sources. Although Davis testified, and certain preliminary documents indicated, that the intent was to furnish the additional $40,000.00 within thirty days, the letter of commitment on which the counterclaim was based stated the $40,000.00 would be made available within two months. The investment company did advance an additional $9,000.00 but failed to furnish the $40,000.00 as agreed. Nevertheless, Davis obtained the additional $40,000.00 within the sixty day period from West Central Capital Corporation through his own efforts. Certain equipment and machinery had been mortgaged to the investment company to secure the notes. Upon default in payment of the notes, the investment company took possession of the collateral and later sold it for the sum of $16,057.82. Judgment was for The Small Business Investment Company for $99,755.00 principal and interest on its notes, together with attorney's fees and expenses incurred in preserving and storing the collateral. The expenses amounted to $23,060.41. A credit against expenses was allowed for the $16,057.82 received from the sale, leaving $7,002.59 net expenses. The investment company was awarded judgment for 60% of those expenses. Since West Central Capital Corporation also had a security interest in the collateral to secure its $40,000.00 loan, it assumed 40% of the expenses with the corresponding right of reimbursement from Davis.
Davis contends he was entitled to recover damages for the investment company's breach of the agreement to secure the additional financing, and that he produced sufficient evidence supporting his counterclaim to take his case to the jury. He also contends that the trial court erred in allowing the investment company to recover expenses for preserving and storing the collateral, since there was no evidence that the amounts expended therefor were reasonable.
There is a recognized cause of action for breach of an agreement to loan money. Annotation, 36 A.L.R. 1408. If, as he alleged and testified, Davis was a party *743 to the agreement or if it was for his benefit, he could maintain such a cause of action in his own right. But upon the breach of such an agreement, the plaintiff is required to avoid or mitigate his damages by securing the money from other sources if it is available. Western Union Tel. Co. v. Hearne, 7 Tex. Civ. App. 67, 26 S.W. 478 (1894, no writ); Annotation, 36 A.L.R. 1416. Damages will be allowed only to the extent of the excess, if any, in the amount of interest the plaintiff was compelled to pay, unless he can show other damages which were reasonably within the contemplation of the parties at the time the agreement was made. Collins Inv. Co. v. Sallas, 260 S.W. 261 (Tex.Civ.App. Texarkana 1924, writ ref'd); Annotation, 36 A.L.R. 1410 et seq. In this case the written commitment for the loan specified that the additional $40,000.00 was to be furnished within two months. Although obtained from a different source and as a result of Davis' personal efforts, admittedly the money was received within that time, and there was no pleading or evidence of any loss due to excess interest charges. Therefore, neither Computer Forms nor Davis suffered any loss by reason of the investment company's failure to furnish the money, unless some special damages within the contemplation of the parties resulted therefrom. Davis attempted to show such damages by proof that he was forced to put $35,000.00 of his own money into the business. But the very fact that he was compelled to put his own money into the venture even though the additional $40,000.00 was obtained within the time specified shows there was no causally related loss in that regard. The undisputed evidence showed that his contribution would have been necessary even if the investment company had complied fully with its agreement. Davis also contended that Computer Forms suffered a loss of profits because of the breach of the loan agreement, and because the breach forced him to spend time away from the management of the business "hustling money". However, the undisputed evidence revealed that when the agreement for financing was negotiated, Computer Forms was in severe economic difficulty and had never operated at a profit. Davis testified the ". . . current difficulty required a hundred thousand dollars in order to satisfy creditors of that moment, plus additional operating capital that would be needed for it to continue as a going business . . .". He also testified that Computer Forms "never turned a profit" and "never got out of the red ink". There was no evidence tending to show that the company could have ever made a profit. There was no evidence of contracts or sales which could have been anticipated, the cost of doing business, or the estimated profits, if any, which could be expected from any sales which might be made. In short, any award of lost profits here would necessarily be based upon pure speculation. Uncertainty as to the amount of damages is not fatal to recovery, but lack of evidence as to the fact of damage will defeat recovery. Pace Corporation v. Jackson, 155 Tex. 179, 284 S.W.2d 340 (1955). To recover lost profits in a breach of contract case, the plaintiff must adduce evidence from which the jury can reasonably infer that some profit would have been made, as well as evidence from which the jury can reasonably estimate the amount of the loss. Pace Corporation v. Jackson, supra; Southwest Battery Corporation v. Owen, 131 Tex. 423, 115 S.W.2d 1097 (1938); Universal Commodities v. Weed, 449 S.W.2d 106 (Tex.Civ.App. Dallas 1969, writ ref'd n. r. e.); Barbier v. Barry, 345 S.W.2d 557 (Tex.Civ.App. Dallas 1961, no writ); Walter Box Co. v. Blackburn, 157 S.W. 220 (Tex.Civ.App. Austin 1913, no writ); Mutual Film Corporation v. Pastime Theater, 202 S.W. 972 (Tex.Civ.App. Beaumont 1918, no writ); Fraser v. Echo Mining & Smelting Co., 9 Tex. Civ. App. 210, 28 S.W. 714 (Tex.Civ.App.1894, no writ). Upon the record in this case, Davis was not even entitled to nominal damages. Gulf Coast Investment Corporation v. Rothman, 506 S.W.2d 856 (Tex.1974). See also Wafer v. Edwards, 248 S.W.2d 320 (Tex.Civ.App. Fort Worth 1952, no writ). Moreover, if there had been evidence of lost profits, the loss would bear no causal relation to the breach because the money which the investment company agreed to furnish, and on *744 which Computer Forms relied in its attempt to make a profit, was furnished within the time agreed. The trial court correctly rendered judgment against Davis on his counterclaim.
Davis' liability on the notes was undisputed. Judgment for the principal and interest due under their terms was therefore proper. Davis contends, however, that the court's action in awarding the investment company its share of expenses incurred in storing, insuring, and preserving the collateral was error because there was a complete lack of evidence that such expenditures were "reasonable". The common law rule was that expenses for preserving and protecting the collateral could be recovered when proven to be necessary and reasonable. The rule applied even though the mortgage expressly provided for the recovery of all costs and expenses. Haydon v. Newman, 162 S.W.2d 1041 (Tex.Civ.App. Amarillo 1942, no writ). The Texas Business and Commerce Code now provides in Sec. 9.207(b) that:
"Unless otherwise agreed, ...
. . . . .
(1) reasonable expenses (including the cost of any insurance and payment of taxes or other charges) incurred in the custody, preservation, use or operation of the collateral are chargeable to the debtor and are secured by the collateral;"
The security agreement in this case provided as follows:
"Reimbursement of expensesat secured parties option, secured party may... for and in behalf of debtor pay for the repair, maintenance and preservation of collateral, and all sums so expended, including but not limited to attorney's fees, court costs, agent fees or commissions or any other costs or expenses shall bear interest from the date of payment at the rate of ten per cent per annum and shall be payable at the place designated in the above described note and shall be secured by this security agreement."
Thus, the investment company contends that its security agreement "otherwise agreed" for the recovery of expenses, and the requirement of reasonableness does not apply.
Although Sec. 9.207(b) of the Tex.Bus. & Comm.Code Ann. states that "unless otherwise agreed", reasonable expenses may be recovered, it does not appear that the use of those words was intended to authorize the parties to contract for unreasonable or arbitrary charges. A more reasonable construction is that expenses are chargeable unless the parties agree they shall not be chargeable, but in any event, whether authorized by agreement or in the absence of an agreement, the expenses which are allowed may only be such as are "reasonable". See Gilmore, Security Interests In Personal Property, Vol. II, Sec. 42.5, pp. 1137, 1138; Sec. 42.6, p. 1139; Sec. 42.7, p. 1153. This construction is also suggested by Sec. 9.504 of the same code, which provides that upon sale of the collateral the proceeds shall first be applied to "the reasonable expenses of retaking, holding, preparing for sale, selling and the like", and then to the satisfaction of the indebtedness. Moreover, we do not believe the security agreement involved here can be construed to have agreed "otherwise" to Sec. 9.207 with regard to reasonable expenses. It simply agreed that the secured party could be reimbursed for expenses incurred in the repair, maintenance, and preservation of the collateral. In the absence of specific language to the contrary, it must be concluded that the parties contracted with reference to the law as set forth in the Tex. Bus. & Comm.Code Ann., and that the allowable expenses would be limited to those which were reasonable. 13 Tex.Jur.2d, Contracts, Sec. 165, p. 353. Indeed, the pleadings of the investment company alleged it was "compelled to incur reasonable expenses", and sought recovery of them, and the judgment recited that it was entitled to recover its "reasonable and necessary expenses incurred".
Although the import of the investment company's evidence was that the items of expense were necessary, there was no attempt to show that the charges therefor *745 were reasonable. Proof that expenditures were necessary does not furnish evidence that the charges therefor were reasonable. Dallas Railway & Terminal Company v. Gossett, 156 Tex. 252, 294 S.W.2d 377 (1956). In the absence of evidence that the charges were reasonable, the court should not have directed a verdict against Davis for those items of expense. Haydon v. Newman, supra.
The trial court correctly allowed Davis a credit in the amount of the investment company's share of the proceeds received from the sale of the collateral.
The judgment will be reformed to deny The Small Business Investment Company recovery for expenses, and to award it a recovery of $91,151.14 principal and interest (being the balance of principal and interest due on its notes after credit for sale of collateral, calculating interest on the full principal of the notes from dates of execution to January 15, 1975 when the collateral was sold, and interest on the balance after such credit, from January 15, 1975 to April 23, 1975) together with attorney's fees of $9,115.11, the award of principal and interest to bear interest at 10% from April 23, 1975 until paid, and the award of attorney's fees to bear interest at 6% from April 23, 1975 until paid. As reformed, the judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1521144/ | 746 S.W.2d 212 (1988)
Jim David HUFFMAN, Appellant,
v.
The STATE of Texas, Appellee.
No. 69388.
Court of Criminal Appeals of Texas, En Banc.
February 3, 1988.
*213 Sam Ogan, Court appointed, Lubbock, for appellant.
Jim Bob Darnell, Dist. Atty., and Ruth Cantrell, Asst. Dist. Atty., Lubbock, Robert Huttash, State's Atty., Austin, for the State.
Before the court en banc.
OPINION
ONION, Presiding Judge.
This is an appeal from a conviction of capital murder, V.T.C.A., Penal Code, § 19.03(a)(2), in which the death penalty was assessed by the court following affirmative answers by the jury to the two special issues submitted pursuant to Article 37.071(b)(1) and (2), V.A.C.C.P.
Appellant raises eight points of error, two of which challenge the sufficiency of the evidence in some respect. One contends that the evidence fails to show that the murder was committed during the course of a robbery, and another contends the evidence is insufficient to support the jury's affirmative finding as to the issue of future dangerousness.
The record reflects that on February 14, 1984, the deceased, Jeanette Peters, age 48, lived alone in a trailer house on Space 242 in the Camelot Mobile Home Park in Lubbock. She was a LVN nurse who was on a leave of absence because of a back injury. Appellant, age 22, lived with Ann Young, age 31, in a trailer house on Space 239 in the same trailer park as Peters. Peters had befriended appellant and Young and frequently allowed them to use her telephone as they had none. It appears from the evidence that three or four days prior to February 14th Ann Young had taken her clothes and had gone to Stephenville.
Arthur Walsh Carnrick, Peters' Sunday School teacher, testified he talked to Peters between 7 and 7:30 p.m. on February 14th before he left Lubbock for Austin about a church choral group rehearsal which Peters organized, etc., that after his flight arrived in Austin he telephoned Peters between 10:30 and 11:30 p.m. but no one answered. The next morning he called again and became concerned when he still received no answer. He then telephoned Peters' sister, Betty Williams, about 8 a.m. on February 15, 1984. Williams testified she had talked with Peters several times on February 14th, the last time being about 8:15 p.m. and had planned to take Peters to the doctor at 9 a.m. on February 15th.[1] After Carnrick's call she immediately drove to Peters' trailer house, observed that Peters' car was missing, and was unable to get any response within the house by knocking and hollering. The door was locked. Williams drove to a store and called her husband and asked him to call the police. She later met Patrolman Bill Johnson at the trailer house. He had been there earlier, about 7:20 a.m., trying to locate the registered owner of a 1979 Chevrolet which had been involved in a police chase and a D.W.I. arrest and was thought to be stolen. Williams and Officer *214 Johnson went to the rear of the trailer where Williams got a bedroom window open and saw her sister's nude body on the bed. Johnson then popped open the locked front door and went in and established that Peters was dead. Other officers were called. There was a tennis shoe sole imprint on Peters' face. The evidence reflects that Peters' television set, revolver, jewelry and other items were missing. Drawers had been emptied.
Dr. Alberto Gerdets, a pathologist, testified that he performed an autopsy at 1 p.m. on February 15, 1984, and in his opinion Peters had been dead 12 to 18 hours prior to that time. There were multiple contusions on her face and head and tennis shoe sole imprints on both sides of her face. There was a laceration of the right ventricle produced by pressure applied over the heart causing pressure between the spine and the heart. This could have been the cause of death, but in the doctor's opinion the cause of death was asphyxia due to manual strangulation of the neck.
Richard Carstensen, a student who lived at the trailer park, testified that late in the afternoon on February 14, 1984, he took appellant, at his request, to the Strip where appellant purchased a six pack of beer and a bottle of whiskey, and they returned to the trailer park about 7 p.m. He described appellant as being "down" as his girlfriend had gone to Stephenville to see her ex-husband.
Troy Bradshaw, age 16, lived with his father and Tanna Coleman in the trailer on Space 243 in the Camelot Park. He knew appellant, his girlfriend, and Peters, and knew appellant and Ann Young often used Peters' phone. Bradshaw testified appellant taught him how to kick and punch, and that he once saw appellant jump and kick the ceiling with his foot. Appellant also told him how a person could be killed by pressure to the heart through the chest.
Bradshaw revealed that on February 14, 1984, he went to work after school about 5:30 p.m. at Duff's restaurant, and that about 8:30 p.m. he received a telephone call from Ann Young, who had left four days earlier. She wanted Bradshaw to tell appellant she had left Stephenville and was in Graham and that she loved him. Bradshaw got off work about 10:30 p.m. and Richard Davis, a co-worker, took him home. As they were entering the gate to the trailer park, about 10:45 or 11 p.m., Bradshaw saw someone driving Peters' car out of the park. Bradshaw knew that the deceased Peters did not usually go out that late and didn't usually permit anyone to use her car. Davis testified that a man was driving the car they observed.
Bradshaw related that as soon as he got home he went to appellant's trailer to give him Ann Young's message. No one was home. Bradshaw then went to visit his friend, Shane, at another trailer. Twenty minutes later walking to his home Bradshaw saw Peters' car in appellant's driveway. He then saw appellant come out of his trailer and called to him from about 20 yards away. He observed that at the time appellant was wearing tennis shoes. Appellant ignored him and got into the deceased's car and drove out of the park without the car lights being on.
Lubbock Police Detective Aubrey Stark at 1 a.m. on February 15, 1984, observed a 1978 Chevrolet Malibu, license number RYZ 616, weaving from lane to lane and in a near collision with a concrete abutment. The vehicle sped away when he tried to stop it. He radioed for assistance and marked police vehicles responded and a wild chase ensued with the Chevrolet finally being driven onto the Fairgrounds parking lot hitting cement parking cones and going airborne. The Chevrolet finally stopped. As the officers were getting out of the marked units the Chevrolet was driven into both police vehicles and then finally came to a stop. Appellant was the driver of the Chevrolet shown by the evidence to belong to Peters, the deceased. He had to be pulled through a window as the car door could not be opened. Appellant was twice given the Miranda warnings. Stark described appellant as abusive, combative and intoxicated. He observed a television set in the back seat of the car. Other evidence showed that a Sears remote control selector, a revolver, watches, a checkbook, jewelry, *215 sunglasses, etc., all belonging to Peters, were found in the car, as well as a coffee can of dirt and mud and some of appellant's clothes. There was also a partially filled Evans-Williams whiskey bottle.
Officer Terry Sansing, who helped to subdue appellant at the scene, described him as being six foot tall, weighing 180 pounds and as being "stout" in the upper chest and arms.
Appellant was taken to the intoxilizer room at the police department. There, while handcuffed, he bolted out of a chair, kicked Officer Richard Foster in the leg, and fell to the floor and suffered a laceration to his head. When Detective Stark first saw appellant at "the DWI room" he was screaming and thrashing about with a laceration over one eye. After he quieted down he was taken by ambulance to the Lubbock General Hospital about 1:45 or 2 a.m. Stark rode in the ambulance and related that appellant became violent again, kicking and screaming, but understood he was going to the hospital to have his cut treated. After arriving at the hospital, Stark stated appellant "stayed violent" and had to be restrained by leather cuffs on a gurney and was tied with sheets. Appellant still had on his tennis shoes. Stitches were taken on his forehead and then he was examined by Dr. Michael Paul Wenzler, a psychiatrist, sometime between 2 and 3 a.m. Dr. Wenzler testified that at first appellant was uncooperative, but his statements were short and coherent, that he asked to have his restraints loosened. He did not appear to be hallucinating, was not delusional, knew his name, was "oriented as to person," and appeared to understand what was going on around him. According to the doctor appellant's emotions were labile, quite changeable, from angry and struggling to tearfully repeating that no one loved him, and mentioning a girlfriend's name. He expressed a deep sense of sadness. The doctor ordered a blood test which showed "191 milligrams per decileter" or 0.19 percent of blood alcohol. Dr. Wenzler testified appellant was intoxicated, but he did not believe that the use of drugs was involved.
From the hospital appellant was taken to the Sheriff's office where a videotape was made, and appellant was placed in a padded cell at which time he became violent again, kicking, resisting and struggling.
It was shown that appellant's tennis shoes soles matched the prints on the deceased's face, and that blood on the shoes matched the blood of Peters with a high degree of reliability. The blood also matched that found in the trailer and could not have been that of appellant. It was stipulated that at 7 p.m. on February 14th appellant had called the telephone number at the house of Ann Young's grandmother in Stephenville and that the call had been placed from the telephone of the deceased Peters at her trailer house.
The State called Ann Young, who testified she met appellant in August 1983 and moved in with him in September, and in October they moved to the Camelot Trailer Park. Appellant worked and supported her and her two children, but in December she permitted her ex-husband to take the two girls to Stephenville. She described Peters as a loving and caring person, related she used Peters' phone nearly every day as she was looking for work. She left Lubbock on February 9, 1984, to go to Stephenville without a clear idea that she would be returning. She talked to appellant on February 11th and he told her he had sent her a Valentine. On February 14th she went to Graham where her brother lived seeking work. She called Duff's restaurant where appellant worked, but when she couldn't get him she called back and talked to Troy Bradshaw and gave him a message for appellant.
She admitted that sometimes when appellant got drunk that he hit her and once gave her a black eye. He later apologized after these attacks. She did recall that appellant told her he knew how to kill people, how "with his hands he could push in a heart."
After the jury found appellant guilty of capital murder, the State at the penalty stage put on record evidence of appellant's prior burglary conviction, and the testimony of a jailer (David Rowe) that on February *216 16, 1984, at about 4:30 p.m., some 27 hours after his arrest when appellant was being taken to court, he became violent,[2] charged out of his cell and attacked the jailer, ramming his back into the bars and began fighting and swinging, trying to get away, and it took six officers to subdue and handcuff him. The jailer testified that appellant was not intoxicated at the time. He did not believe, based on his experience, that appellant was coming down from a "big drunk" or from drugs. When appellant returned from court he was quiet, but additional security measures were taken thereafter when dealing with him. No further difficulty was experienced with appellant, but the jailer acknowledged alcohol was not available in the jail.
Appellant Huffman testified at the penalty stage of the trial that he was born April 21, 1961 in Arizona, and that he was 23 years old at the time of the trial. He related he was the product of a broken home, and he lived with his mother, grandmothers, uncles and aunts until the age of six years or so when his mother remarried. He then was sent to his father and stepmother in Oklahoma and stayed there until he was about 10 years old when he was returned to his mother, who, after six months, placed him in a foster home. He ran away from a foster home twice, and was then permitted to live with an aunt for eight months and an uncle for three months. Thereafter, when he was 12 or 13 years old, he returned to Oklahoma to live with his father. The family moved to Amarillo when he was 14 or 15 years old. At 17 years of age he was arrested for a burglary he committed with his brother. His probation was revoked because of another burglary and he was sentenced to the penitentiary for four years. He was paroled but the parole was later revoked. After serving three years and one month on the four year sentence he was paroled to Lubbock and a halfway house. Subsequently he met Ann Young and began living with her. They moved to the Camelot Trailer Park because the rent was cheaper. The appellant described the deceased, Peters, who lived there, as a good friend, who took them to the grocery store and helped him with income tax forms, and allowed them to use her telephone. He worked at various jobs, but in December when neither were working he and Ann decided to let Ann's ex-husband take the children. In February 1984 Ann began to miss the children and decided to go to Stephenville to visit them.
Appellant stated that he was depressed on February 14th about Ann's absence, and tried to contact her by telephone around 3 p.m. and got no answer. Shortly thereafter he got Carstensen, a neighbor, to take him to the Strip where he bought some beer and whiskey. After drinking some beer about 4 p.m. he rode his bicycle to the Town Draw where he purchased four hits of acid, "sorta like LSD," from a friend. He returned home, drank beer and about 6:45 p.m. went to Peters' trailer to use the phone. He talked to Ann's grandmother in Stephenville and got the impression Ann was not returning to Lubbock. He went home depressed and took all four hits of acid and then began to drink as much whiskey as he could. The next thing he remembered was waking up in the padded cell in the county jail.
On cross-examination he denied having a drinking problem, admitted that alcohol counseling was one of his burglary probationary conditions and that he did not attend any sessions. Appellant acknowledged he had assaulted Ann "probably twice" when he was drinking; that he had told Ann and Troy Bradshaw that he had heard in the penitentiary how you could kill someone, "You can push their nose, the bone in their nose, up through the brain. You could hit them hard enough in the chest to flood their heart. You can take little sharp objects and stick it up their nose." He denied telling them he could do that.
Dr. Richard Lee Ware, a clinical psychologist, testified he had examined appellant on July 20, 1984, and gave him certain psychological tests. He found appellant's overall verbal IQ to be 76, which was borderline, *217 and found that his visual motor skills IQ to be 89 and that his full scale IQ to be 80. Dr. Ware felt appellant had adequate expression for a person functioning within that range, that appellant had adequate control for his feelings in his normal state, but had some feelings of inadequacy that he compensated for with bravado. Dr. Ware stated individuals like appellant often want to flee from strong confrontation and often escape into use of alcohol or drugs. He had learned the appellant began sniffing glue in the fifth grade and used "pot" while in the seventh grade and "pretty much anything he could get hold of" and that by the ninth grade he increased his alcohol and drug escape by using acid, heroin, cocaine, crystal "and that sort of thing." Dr. Ware, in his opinion, believed that from the acid and whiskey appellant could have suffered a "blackout," that it was possible to remember certain things even during a "blackout," and he concluded appellant would have guilt and remorse if he committed the offense. Dr. Ware did not testify as to future dangerousness.
The State offered rebuttal testimony that after his arrest appellant admitted he had stolen the car but that he would not say where he had taken the car or from whom.
Appellant contends the evidence was insufficient to prove the murder was committed "while in the course of committing the offense of robbery." He argues that murder plus theft does not equal capital murder as alleged; that while unexplained possession of recently stolen property may well give to an inference of theft, it does not give rise to an inference of murder committed in the course of a robbery. Appellant asks, "If a murder takes place and subsequent to the act, property is removed by the assailant, has a capital murder taken place? There is no evidence herein to show that was the case. Nor is there evidence to the contrary. The record is simply silent as to the events leading up to and surrounding the death of the victim."
We do not agree. It is enough even if the State proves that the robbery occurred immediately after the commission of the murder. Lincecum v. State, 736 S.W.2d 673 (Tex.Cr.App.1987); Demouchette v. State, 731 S.W.2d 75 (Tex.Cr.App.1986); Fierro v. State, 706 S.W.2d 310 (Tex.Cr. App.1986); Riles v. State, 595 S.W.2d 858, 862 (Tex.Cr.App.1980).
There was ample evidence, albeit some was circumstantial, that a robbery occurred either during or after the commission of the murder. The victim was found dead, brutally beaten, with a number of items of property missing including her car. The property was found in the deceased's car being driven by appellant shortly after the death under the facts and circumstances shown. The test is "whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 2789, 61 L. Ed. 2d 560 (1979); Houston v. State, 663 S.W.2d 455, 456 (Tex.Cr.App.1984) (Opinion on rehearing). This standard of review is the same whether the case involves direct or circumstantial evidence. Houston, supra, at 456.
The trial court properly charged the jury and we do not find that the appellant complains in this regard. We conclude that the jury's verdict is amply supported by the evidence. The point of error is overruled.
In another point of error appellant contends the trial court erred in overruling his motion for mistrial after the State inquired of Dr. Ware, the defense psychologist, at the penalty stage of the trial whether he knew that appellant had admitted stealing the victim's car.
To better understand the contention we must review what took place both before and after the mistrial motion was made. The evidence at the guilt stage reflected that appellant was arrested after a police chase while driving the deceased's car which contained a number of items taken from her home. At the penalty stage of the trial appellant testified that after he took four hits of acid and drank whiskey he didn't recall anything until he woke up in a padded cell. He didn't recall the chase, the *218 police department, hospital or jail. On cross-examination without objection he was asked:
"Q. Did you ever tell anybody or admit to anybody that Jeanettethat you had stolen Jeanette Peters' car?
"A. No, sir. I did not."
Dr. Ware, a psychologist, was a subsequent defense witness. On direct examination he stated that from his interview he formed the opinion that appellant had suffered a "blackout." On cross-examination Dr. Ware admitted he was not aware Dr. Wenzler, a psychiatrist, had examined appellant at the hospital on the night in question. In response to the prosecutor's questions Dr. Ware stated he was not surprised that Dr. Wenzler found that appellant made short statements which were coherent, knew his name, was not delusional nor hallucinating, etc. The record then reflects:
"Q. Would it surprise you to learn that in the early morning hours of February 15, 1984, that when he was asked if he had stolen the car that he replied yes to the police officers?
"A. No.
"MR. ALEXANDER (defense counsel): Your Honor, I am going to object because I don't believe there had been any testimony whatsoever that that occurred, and Mr. Darnell (D.A.) is interjecting facts that are not in evidence, and it is nothing but inflammatory and prejudicial, and we ask
"THE COURT: Sustained."
Thereafter the court, upon request, instructed the jury to disregard, but denied the motion for mistrial then made. The witness was passed and no further questions were asked by the prosecutor. The defense rested. The district attorney announced he was calling Sgt. Ontiveroz in rebuttal, that the appellant had testified he didn't remember what happened that night and he was entitled to show the jury what statement the appellant had made about stealing the car. Appellant's counsel stated: "Object to it, it was custodial interrogation, no indication of Miranda warnings, no indication that he could understand the Miranda warnings." The objection was overruled. Sgt. Ontiveroz was then called. He testified that he saw appellant in the intoxilizer room at the police department. The record reflects:
"Q. During the course of the questioning of Mr. Huffman about his being arrested for DWI, did you make an inquiry of him as to whether or not the car he was driving was stolen?
"A. Yes, sir, I did.
"Q. What was his reply?
"A. He replied that it was stolen."
Ontiveroz also testified appellant was crying and said that nobody loved him, "Just go ahead and kill me."
The State also called Officer Linda Ewing who related she was present and heard appellant tell Officer Ontiveroz he had stolen the car.
Returning to appellant's contention concerning Dr. Ware's interrogation, it is observed that the general rule is that error in asking an improper question "may be cured or rendered harmless by its withdrawal or an instruction to disregard." Carter v. State, 614 S.W.2d 821, 824 (Tex.Cr.App. 1981). The exception occurs in "extreme cases where ... the question ... is clearly calculated to inflame the minds of the jury and is of such a character so as to suggest the impermissibility of withdrawing the impression produced." Carter, supra, at 824-825. See also Cavender v. State, 547 S.W.2d 601 (Tex.Cr.App.1977).
Even if it can be argued the question to Dr. Ware was an improper one, the objection was sustained and the jury instructed to disregard and the interrogation was terminated. The inquiry then is whether the jury was so affected by the question that they were unable to disregard it in their deliberations as instructed. Appellant relies on Ladd v. State, 629 S.W.2d 139 (Tex. App.Dallas 1982), for the proposition that a question which suggests that the defendant admitted guilt of a crime, where he had denied the crime at trial, is automatically so prejudicial that the jury cannot be expected to disregard the question. In Ladd the question, asked at the guilt stage of the trial, suggested that the defendant had *219 confessed to the very crime for which he was on trial. Here, the jury had already convicted appellant of the crime charged. The question was asked at the penalty stage about the theft of the car not the murder and was directed to a psychological witness on cross-examination. The facts and circumstances of the instant case are distinguishable from Ladd.
Appellant also relies upon Garcia v. State, 626 S.W.2d 46 (Tex.Cr.App.1981), where it was observed that a jury might become incensed by what it believes to be the defendant's perjury during the penalty stage of the trial of a capital case. Appellant appears to suggest the improper question may have led to affirmative findings on the special issues (Article 37.071(b)(1) and (2), V.A.C.C.P.). The comment in Garcia was not necessary to the holding in that case and the facts are clearly distinguishable. Further, two officer witnesses testified in rebuttal to appellant's own testimony on the same subject matter at the penalty stage.
In light of the court's instruction to disregard and other circumstances, we conclude the general rule stated in Carter controls. The exception is not here applicable. See Anderson v. State, 717 S.W.2d 622 (Tex.Cr.App.1986); East v. State, 702 S.W.2d 606 (Tex.Cr.App.1985); Bush v. State, 697 S.W.2d 397 (Tex.Cr.App.1985); Hudson v. State, 675 S.W.2d 507 (Tex.Cr. App.1984); Brasfield v. State, 600 S.W.2d 288 (Tex.Cr.App.1980); Lovel v. State, 538 S.W.2d 630, 632 (Tex.Cr.App.1976).
Appellant also complains that at the penalty stage of the trial the court erred in allowing the State to present evidence of an oral statement made by him while in custody as described above. He contends he was improperly impeached by Officers Ontiveroz and Ewing as to a statement about the victim's car being stolen. As earlier observed, appellant testified at the penalty stage of the trial. In Cisneros v. State, 692 S.W.2d 78, 83 (Tex.Cr.App.1985), this Court wrote:
"It is well established that a defendant who takes the stand as a witness on the trial on the merits may be cross-examined and impeached in the same manner as any other witnesses. McCormick and Ray, Texas Law of Evidence, Vol. I, Chapter 8, § 643, p. 487; 1 Branch's Ann. P.C., 2nd Ed., § 168, p. 170, and cases there cited; 62 Tex.Jur.2d, Witnesses, § 205, p. 130; Shelton v. State, 397 S.W.2d 850 (Tex.Cr.App.1965); Cerda v. State, 33 Tex. Crim. 458, 26 S.W. 992 (1894). See also Davis v. State, 478 S.W.2d 958 (Tex.Cr.App.1972); Dunlap v. State, 440 S.W.2d 672 (Tex.Cr.App. 1969). Thus such a defendant may be contradicted, impeached, discredited, attacked, sustained, bolstered up, made to give evidence against himself, cross-examined as to new matter and treated in every respect as any other witness except when there are overriding constitutional and statutory provisions. Taylor v. State, 612 S.W.2d 566 (Tex.Cr.App. 1981); Williams v. State, 607 S.W.2d 577 (Tex.Cr.App.1980); Myre v. State, 545 S.W.2d 820 (Tex.Cr.App.1977); Sensabaugh v. State, 426 S.W.2d 224 (Tex.Cr. App.1968). See also Valerio v. State, 494 S.W.2d 892 (Tex.Cr.App.1973); Black v. State, 440 S.W.2d 668 (Tex.Cr.App. 1968); Gonzales v. State, 160 Tex. Crim. 548, 272 S.W.2d 524 (1954).
"Once the defendant testifies `[t]he interests of the other party and regard for the function of the courts of justice to ascertain the truth become relevant, and prevail in the balance of considerations determining the scope and limits of the privilege against self-incrimination.' Brown v. United States, 356 U.S. 148, 156, 78 S. Ct. 622, 627, 2 L. Ed. 2d 589 (1958). See also Fitzpatrick v. United States, 178 U.S. 304, 20 S. Ct. 944, 44 L. Ed. 1078 (1900).
"Article 37.071(a), V.A.C.C.P., provides in part:
"`... In the proceeding, evidence may be presented as to any matter that the court deems relevant to sentence. This subsection shall not be construed to authorize the introduction of any evidence secured in violation of the Constitution of the United States *220 or of the State of Texas.' (Emphasis supplied.)
Thus the trial court at the penalty stage of a capital murder trial has wide discretion in admitting or excluding evidence. Smith v. State, 683 S.W.2d 393 (Tex.Cr. App.1984); Smith v. State, 676 S.W.2d 379 (Tex.Cr.App.1984) and cases there cited. This discretion extends only to the question of relevance of the facts sought to be proved, and Article 37.071(a), supra, does not alter the rules of evidence insofar as the manner of proof is concerned. Porter v. State, 578 S.W.2d 742, 748 (Tex.Cr.App.1979); Smith v. State, supra."
Relying upon Spann v. State, 448 S.W.2d 128 (Tex.Cr.App.1969), appellant takes the position that "incriminating statements made by an accused, while under arrest, which would not be admissible as original evidence, may not be used for impeachment." Spann at 129. However, much water passed under the bridge between Spann and the time of appellant's October 1984 trial. Article 38.22, V.A.C.C.P., was amended in 1977[3] and 1981[4] regarding the issue here involved. Section 5 of the statute under the 1977 amendment provided, inter alia, that nothing in the statute precluded the admission "of a voluntary statement, whether or not the result of custodial interrogation, that has a bearing upon the credibility of the accused as a witness, or of any other statement that may be admissible under law."
In Alfaro v. State, 638 S.W.2d 891 (Tex. Cr.App.1982), this Court was confronted with construing Article 38.22, V.A.C.C.P., as it existed prior to the 1981 amendments and resolving the apparent conflict between § 3 and § 5, quoted from above. Section 3 directly related to the admissibility of oral custodial statements for impeachment purposes upon the meeting of certain requirements. The Alfaro Court held that, as amended in 1977, § 3 controlled over § 5, and that an oral statement of a defendant resulting from custodial interrogation was admissible only for impeachment purposes when the statement met the specific requirements of § 3, and that § 5 applied to statements other than oral custodial statements made by the defendant.
Section 3 was amended in 1981. All references to the use of custodial statements for the purpose of impeachment were removed from that section. This in effect resolved the conflict between §§ 3 and 5 addressed in Alfaro. The 1981 amendment left only § 5 as applicable to the use of custodial statements for impeachment purposes. See Roberts v. State, 672 S.W.2d 570 (Tex.App.Ft. Worth 1984); Garrett v. State, 682 S.W.2d 301, 305 (Tex.Cr.App. 1984).
It appears that by virtue of the 1981 amendments Article 38.22, supra, is now consistent with the federal constitutional rule of Harris v. New York, 401 U.S. 222, 91 S. Ct. 643, 28 L. Ed. 2d 1 (1971). In Harris the United States Supreme Court held that prior inconsistent custodial statements could be used to impeach the testimony of an accused even though the statements were inadmissible in the State's case-in-chief because of a failure to comply with Miranda,[5] as long as the evidence satisfied legal standards for trustworthiness.
In the instant case the prior inconsistent statements used for the purpose of impeachment of appellant stemmed from custodial interrogation, but after the giving of Miranda warnings rather than incomplete Miranda warnings as in Harris. Appellant does not contend that his statement was involuntary because of an overbearing of will, coercion or duress. See Mincey v. Arizona, 437 U.S. 385, 98 S. Ct. 2408, 57 L. Ed. 2d 290 (1978). Appellant did not object on this ground and the record does not indicate that appellant's statements were involuntary under "traditional standards for evaluating voluntariness and trustworthiness." *221 Oregon v. Hass, 420 U.S. 714, 95 S. Ct. 1215, 1221, 43 L. Ed. 2d 570 (1975).
In his point of error appellant does claim that the oral statements were made in custody "after requesting counsel." The oral statements in question were made while appellant was in the intoxilizer room at the police station. Appellant does not point to any portion of the record which supports his claim of a request for an attorney at the time and he has not briefed the contention. He did not object on this ground at trial. We have examined this voluminous record and find no support for such claim.[6] Since appellant's only claim of involuntariness seeks to raise the issue of invoking the right to counsel, it is denied. Garrett v. State, supra, at 307; Oregon v. Hass, supra.
The point of error is overruled.
In another point of error appellant urges the trial court erred in overruling his objection to the introduction of a videotape without a showing of a proper predicate.
The videotape was taken of appellant after his arrest at the county jail. When offered at the guilt stage of the trial the court sustained appellant's objection that a proper predicate had not been established for its introduction, but the court stated that it would admit the exhibit and permit its showing without sound (audio) as a silent film or series of photographs since the predicate for that action had been established, that witnesses had testified that the film accurately and correctly depicted appellant's appearance and demeanor at the time it was taken.
In Edwards v. State, 551 S.W.2d 731 (Tex.Cr.App.1977), this Court adopted a seven prong test for the admission of sound recordings. See also Bates v. State, 587 S.W.2d 121, 131 (Tex.Cr.App.1979); Nacol v. State, 590 S.W.2d 481 (Tex.Cr. App.1979). In Roy v. State, 608 S.W.2d 645, 649 (Tex.Cr.App.1980), this Court noting that videotapes are a simultaneous audio and visual recording of events, adopted the Edwards predicate for the admission of videotapes, but added, "Moreover, because of the dual aspect of videotapes they convey a greater indicia of reliability than either film or sound tapes standing alone and at least some of the Edwards elements may also be inferred from the testimony." (Emphasis supplied.)
Only recently in Marras v. State, 741 S.W.2d 395 (Tex.Cr.App.1987), this Court was faced with a contention similar to that advanced by the appellant. There this Court wrote:
"The videotape complained of herein has been reviewed by this Court and contains no audio portion, only video, i.e. motion pictures. Motion pictures are just a collection of photographs and the rules surrounding admission are the same as those for still photographs. Housewright v. State, [154 Tex. Crim. 101], 225 S.W.2d 417 (Tex.Cr.App.1949). Motion pictures are admissible when they are properly authenticated relevant to an issue, and not violative of the rules of evidence for the admissibility of photographs when a verbal description of a scene is admissible, a photograph or video recording of the scene would also be admissible. Wilkerson v. State, 726 S.W.2d 542, 547 (Tex.Cr.App.1986); see Burdine v. State, 719 S.W.2d 309, 316...."[7]
In Williams v. State, 461 S.W.2d 614, 616 (Tex.Cr.App.1970), this Court in discussing the proper predicate for the admission of motion pictures, quoted from Moses, Scientific Proof in Criminal Cases A Texas Lawyer's Guide, Sec. 10.04.
*222 "It is common knowledge that the predicate for the introduction of a photograph requires the proof of (1) its accuracy as a correct representation of the subject at a given time, and (2) its material relevance to a dispute issue ... all that is required of a witness who observed the object or scene depicted with his naked eye is testimony that the photograph truly and accurately represents that object or scene. Like still photographs, motion pictures are admissible in criminal prosecutions where they are properly authenticated, relevant to the issues and not violative of the rules established for the admissibility of photographs." See also Cotlar v. State, 558 S.W.2d 16 (Tex.Cr. App.1977), and Housewright v. State, [154 Tex. Crim. 101], 225 S.W.2d 417, 418 (Tex.Cr.App.1950).
"Before being admitted, photographic evidence must ordinarily be shown, either by direct proof or by admission to be correct. However, the only identification or authentication required is that the offered evidence properly represent the person, object or scene in question. This may be testified to not only by the photographer or a person photographed, but by any other witness who knows the facts, even though the witness did not take the photograph himself or see it taken." 36 Tex.Jur.3rd, Evidence, § 463, pp. 343-345.
"... and motion pictures are admissible in evidence under the same rules that govern the admission of ordinary photographs." 36 Tex.Jur.3rd, Evidence, § 462, pp. 340, 341.
Since the exhibit in the instant case was the visual portion of a videotape only, a silent motion picture, we conclude the rules relaying to admission of ordinary photographs are applicable. In view of the witnesses that testified the scenes depicted were true and accurate representatives of the scenes they witnessed, and since the same were relevant to the issues, we find no error in the admission of the exhibit.
Appellant relies upon Delgado v. State, 691 S.W.2d 722 (Tex.App.San Antonio 1985) (no pet. history). There, as here, the trial court sustained the defense objection to the audio portion of the videotape and only the visual or "video" portion of the film was admitted into evidence. After noting Edwards and Housewright and citing some out-of-state cases, the Court wrote:
"Thus, the admissibility ultimately depends on the testimony of the operation of the video camera. The witness Sherman testified he videotaped appellant; that the videotape machine was operating properly; that the tape did not contain additions, deletions or changes; and that the tape clearly and accurately depicts the events during the videotaping of appellant. We find no reversible error and therefore overrule appellant's two points of error."
Undoubtedly Delgado reached the right result but applied to the admission of a videotape without sound, a stricter test than we apply in such cases. We do not deem Delgado as here controlling. Having read Edwards, the Court of Appeals may have overlooked the fact that with the deletion of the audio or sound portion of the videotape all that was admitted in Delgado was a silent motion picture. Appellant's contention is overruled.
Appellant next contends in his fifth point of error that the prejudicial effect of the videotape without sound outweighed its probative value and the admission thereof constituted "unfair prejudice," resulting in the court abusing its discretion.
In ruling on the admission or exclusion of photographic evidence, the trial court is accorded considerable discretion. 36 Tex.Jur.3rd, Evidence, § 461, p. 337. Further, we observe that in his point of error and argument thereunder appellant's contentions all based on relevancy and the fact that the exhibit introduction into evidence was "inflammatory, prejudicial and harmful" and that witnesses had already verbally described the scene in their testimony. We have examined the record and particularly the pages to which appellant directed our attention. We find no objection on these bases and nothing is presented for review.
*223 Nevertheless, we find that the exhibit was admissible on the issue of demeanor after appellant's arrest. "If a verbal description of the material portrayed is admissible then a photograph reflecting the verbal testimony is also admissible." Wilkerson v. State, 726 S.W.2d 542, 547 (Tex.Cr.App.1986). The fact that witnesses may have testified as to a scene or events and are unimpeached does not prevent the introduction of photographs and motion pictures depicting the same scene or events. This does not constitute bolstering. Marras v. State, supra. In Roy, supra, we explained the "[a]ppellant's position that anytime there is a witness who testifies to a transaction, thereafter all additional evidence constitutes bolstering, would act to exclude the introduction of all tangible and scientific evidence, even when a proper predicate has been laid. This contention finds no support in the case law." Roy, 608 S.W.2d at 649. Appellant's contention is overruled.
Appellant also challenges the sufficiency of the evidence to sustain the jury's affirmative answer to Special Issue No. 2. "whether there is a probability that the defendant would commit criminal acts of violence that would constitute a continuing threat to society." Article 37.071(b)(2), V.A.C.C.P.
It is well settled that in answering special issues under Article 37.071, V.A.C. C.P., including the issue of future dangerousness, the jury may consider all of the evidence admitted at the first or guilt stage of the bifurcated trial. Beltran v. State, 728 S.W.2d 382, 388 (Tex.Cr.App.1987); Bridge v. State, 726 S.W.2d 558, 569 (Tex. Cr.App.1986); Santana v. State, 714 S.W.2d 1, 8 (Tex.Cr.App.1986); Bell v. State, 707 S.W.2d 52 (Tex.Cr.App.1986); Fierro v. State, 706 S.W.2d 310, 319 (Tex.Cr.App. 1986); Garcia v. State, 626 S.W.2d 46 (Tex. Cr.App.1981), and cases there cited. See also Russell v. State, 665 S.W.2d 771, 781 (Tex.Cr.App.1983); Russell v. State, 598 S.W.2d 238, 254 (Tex.Cr.App.1980). It has often been said that the circumstances of the offense, if severe enough, may alone be sufficient to support an affirmative answer to the second special issue under Article 37.071, supra. Beltran v. State, supra; Carter v. State, 717 S.W.2d 60 (Tex.Cr. App.1986); Fierro v. State, supra; Smith v. State, 676 S.W.2d 379, 393 (Tex.Cr.App. 1983); Williams v. State, 668 S.W.2d 692 (Tex.Cr.App.1983); Russell v. State, 665 S.W.2d 771, 781 (Tex.Cr.App.1983); Mitchell v. State, 650 S.W.2d 801, 812 (Tex.Cr. App.1982).
The evidence at the guilt stage of the trial, as earlier described, showed murder committed in the course of robbery. The cause of death of the 48-year-old victim was asphyxia due to manual strangulation to the neck. Circumstantial evidence showed that appellant was the perpetrator. While highly intoxicated, appellant was observed in the victim's car. He led the police on a wild automobile chase, crashed or sideswiped two police vehicles in which officers were riding, resisted arrest, attacked another in the DWI room after the arrest. He continued to kick and scream and had to be restrained. The evidence showed that there was 0.19 per cent alcohol in appellant's blood by the time he reached the hospital.
In Roney v. State, 632 S.W.2d 598, 603 (Tex.Cr.App.1982), this Court wrote:
"Although this was a senseless murder, that fact is true of every murder in the course of a robbery. The facts of this offense, standing alone, do not carry the marks of a `calculated and cold-blooded crime,' such as appeared in O'Bryan v. State, 591 S.W.2d 464, 480 [Tex.Cr. App.1979], where the defendant for months planned the candy poisoning of his own child to collect life insurance. To support a `yes' answer to the second punishment issue, the evidence must show beyond a reasonable doubt that there is a probability appellant would commit criminal acts of violence that would constitute a continuing threat to society. To hold that the facts of this offense, standing alone, would support such a verdict, would mean that virtually every murder in the course of a robbery would warrant the death penalty. Such a construction would destroy the purpose *224 of the punishment stage in capital murder cases, which is to provide a reasonable and controlled decision on whether the death penalty should be imposed, and to guard against its capricious and arbitrary imposition. Jurek v. State, 522 S.W.2d 934 [Tex.Cr.App.1975]; Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929 [1976]."
At the penalty stage of the trial the State offered record evidence of a prior burglary conviction, and the testimony of a jail guard that appellant, 27 hours after his arrest, asking where he was and why he was there, charged out of a cell and attacked the guard by ramming his back into bars and fighting. The guard acknowledged that thereafter appellant presented no further difficulty. The State, with the burden of proof, offered no psychiatric or lay opinions as to future dangerousness and presented no reputation testimony. Such testimony, of course, is not essential to an affirmative finding as to the issue of future dangerousness.
From appellant's testimony and that of Dr. Ware, the psychologist, we learn that appellant was 22 years of age at the time of the offense, had an overall IQ of 80, had come from a broken home, had been passed around to various family members during his formative years, and that on the date in question he had become depressed upon learning that his girlfriend was probably never going to return to him. He related that he took "four hits of acid" and then drank whiskey, that he blacked out and had no recollection of what happened until he awakened in a padded jail cell. Dr. Ware did testify that he learned the appellant had sniffed glue, used marihuana, and in the ninth grade was using LSD, heroin, cocaine, etc. Dr. Ware's testimony did not touch the issue of future dangerousness.
Appellant admitted he had been convicted of burglary at age 17, an offense he committed with his younger brother and in which only a clock was stolen. No violence was indicated in such offense or a subsequent burglary which resulted in the revocation of probation granted in the earlier burglary. His subsequent parole was revoked but the record is silent as to the reason therefor. Appellant testified he did not have any disciplinary problems while in the penitentiary, and this was not disputed by the State. There was no showing of violence in connection with appellant's prior criminal record.
At the guilt stage appellant's girlfriend testified that "sometimes" they would get into fights when appellant was drunk, that he would hit her with his palm, back of hand, but that she would hit back; that after it happened, appellant would apologize and sometimes cry. She did not know of him hurting anyone.
When deciding whether there was sufficient evidence to support a jury's finding that there is a probability the defendant will commit criminal acts of violence that will constitute a continuing threat of violence to society, this Court must view the evidence in the light most favorable to the verdict to determine whether a rational trier of fact could have found the elements of Article 37.071(b)(2), V.A.C.C.P., beyond a reasonable doubt. See Beltran v. State, supra; Santana v. State, supra; Fierro v. State, supra.
"Prior criminal conduct, the age of the defendant and psychiatric evidence are among the various factors relevant in deciding the record punishment issue." Roney v. State, supra, at 661.
Psychiatric testimony, however, is not essential to support an affirmative finding to the issue of future dangerousness. Beltran v. State, supra, at 390; Carter v. State, 717 S.W.2d 60 (Tex.Cr.App.1986); Williams v. State, 668 S.W.2d 692 (Tex.Cr. App.1983); Mitchell v. State, 650 S.W.2d 801 (Tex.Cr.App.1983). See also Brooks v. State, 599 S.W.2d 312 (Tex.Cr.App.1979), cert. den. 453 U.S. 913, 101 S. Ct. 3146, 69 L. Ed. 2d 996 (1981).
Other factors relevant to the issue have been discussed in Brasfield v. State, 600 S.W.2d 288 (Tex.Cr.App.1980); Milton v. State, 599 S.W.2d 824 (Tex.Cr.App.1980); Hovila v. State, 562 S.W.2d 243 (Tex.Cr. App.1978). In Robinson v. State, 548 S.W.2d 63, 64 (Tex.Cr.App.1977), this Court wrote:
*225 "This Court has stated that in determining the likelihood of whether or not a defendant would be a continuing threat to society, the jury could consider whether the defendant had a significant criminal record. It could consider the range and the severity of his prior criminal conduct. It could further look to the age of the defendant and whether or not at the time of the commission of the offense he was acting under duress or under the domination of another. It could also consider whether the defendant was under an extreme form of mental or emotional pressure, something less, perhaps, than insanity but more than the emotions of the average man, however inflamed, could withstand." (Citations omitted.)
In order to determine whether the facts present in the instant case were sufficient we may look to other cases where the State failed to present sufficient evidence. We have, inter alia, examined the cases of Roney v. State, supra; Garcia v. State, 626 S.W.2d 46 (Tex.Cr.App.1982); Wallace v. State, 618 S.W.2d 67 (Tex.Cr.App.1981); Brasfield v. State, supra; Warren v. State, 562 S.W.2d 474 (Tex.Cr.App.1978), as well as Beltran v. State, supra. No two cases are, of course, exactly alike.
According to the State's evidence the instant murder case was clearly senseless and unnecessary as most murders committed in the course of a robbery are. There was no showing that the robbery was long in planning or that murder or violence was originally intended. The appellant was highly intoxicated and emotionally distraught over his girlfriend. The violence shown at the time of appellant's arrest and the few hours thereafter was limited to that time period. Given the circumstances of the offense, as brutal and uncalled for as they were, we cannot say they were inherently sufficient to support the affirmative finding in question standing alone.
At the penalty stage of the trial neither side offered any psychiatric or reputation testimony, although the same was not essential or required. The prior criminal record of the appellant reflected no criminal acts of violence. There was the attack upon the jail guard 27 hours after appellant's arrest, when the guard did not believe that appellant was still intoxicated, but acknowledged that appellant was asking where he was. Thereafter, the appellant presented no disciplinary problem at jail nor does the record reflect any disciplinary problems while appellant was in the penitentiary. There was testimony offered by appellant that early on, while in school, he had used alcohol and various drugs, but after his confinement in the penitentiary there was no showing he continued to use drugs except on the date in question.
In order to support a "yes" answer to the issue of future dangerousness, the evidence must show beyond a reasonable doubt that there is a probability that the defendant would commit criminal acts of violence that would constitute a continuing threat to society. Article 37.071(b)(2), supra; Roney v. State, supra at 603; Beltran v. State, supra at 390.
We find that in viewing the evidence as a whole from both stages of the bifurcated trial, and under the test described in Beltran v. State, supra; Santana v. State, supra; and Fierro v. State, supra, there is insufficient evidence to support the affirmative finding by the jury to the second special issue under Article 37.071(b)(2), supra. Therefore, we will reform the trial judgment to life imprisonment. See Beltran v. State, supra; Wallace v. State, supra; and Roney v. State, supra.
This holding affects only the death penalty and any other points of error relative to the jury's findings on the issue of punishment. As such, appellant's other points of error concerning errors at the penalty stage of the trial are moot. Sanne v. State, 609 S.W.2d 762 (Tex.Cr.App.1980); Beltran v. State, supra, at 390.
The judgment, as reformed, is affirmed.
CLINTON, J., concurs.
W.C. DAVIS, CAMPBELL, WHITE and DUNCAN, JJ., dissent.
NOTES
[1] Williams testified that earlier in the day the deceased Peters had stated she had made a mistake in letting appellant and his girlfriend use her phone so much. The girlfriend had gone to Stephenville and appellant was expecting a call from her at 3 p.m. and wanted Peters to be home when the call came in and Peters had other plans.
[2] Deputy Rowe testified appellant kept shouting and asking where he was and why was he there.
[3] Acts 1977, 65th Leg., p. 935, ch. 348, § 2, eff. Aug. 29, 1977.
[4] Acts 1981, 67th Leg., p. 711, ch. 271, § 1, eff. Sept. 1, 1981, amending § 3 of the statute.
[5] Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966).
[6] The only reference to a request for counsel by appellant we have been able to find is a reference to the fact that in the audio portion of the videotape appellant made such a request during the taping. The audio was not played for the jury and is not in the appellate record. The record shows that the videotape was made at the Sheriff's office after appellant had been to the intoxilizer room at the police station and the hospital.
[7] In Marras the term "video" or "video recording" was used as referring only to the visual or film portion of an exhibit. Care should be taken in interpreting such language for, as recognized in Roy, videotapes are a simultaneous audio and visual recording of events. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1529179/ | 886 S.W.2d 459 (1994)
Vicki SEBESTA, Appellant,
v.
KENT ELECTRONICS CORPORATION, Appellee.
No. 01-94-00413-CV.
Court of Appeals of Texas, Houston (1st Dist.).
October 6, 1994.
Rehearing Overruled November 3, 1994.
*460 Jacqueline A. Armstrong, Houston, for appellant.
Edward L. Friedman, James E. Essig, Houston, for appellees.
Before COHEN, HEDGES and WILSON, JJ.
OPINION
WILSON, Justice.
Appellant, Vicki Sebesta, filed suit against her employer, Kent Electronics, Corp., appellee, claiming the company fired her because of her service on a jury. Three causes of action were asserted: intentional infliction of emotional distress, fraud, and a violation of the Juror Reemployment Act. The trial court granted appellee's partial motion for summary judgment on the intentional infliction of emotional distress and fraud allegations. The resulting interlocutory summary judgment was severed from the Juror Reemployment Act claim, and this appeal taken. We affirm.
Our review of the judgment is limited to the issues presented to the trial court in the motion for summary judgment. Tex. R.Civ.P. 166a(c); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 676 (Tex. 1979); Dickey v. Jansen, 731 S.W.2d 581, 583 (Tex.App.Houston [1st Dist.] 1987, writ ref'd n.r.e.). A summary judgment is not entitled to the same deference given a judgment following a trial on the merits. The movant has the burden of showing there is no genuine issue of material fact, and it is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex.1985). When a defendant moves for summary judgment, as in this case, it must prove that the plaintiff cannot recover, as a matter of law, on any theory pleaded. Delgado v. Burns, 656 S.W.2d 428, 429 (Tex.1983). In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true, and every reasonable inference in favor of the nonmovant will be resolved in its favor. Nixon, 690 S.W.2d at 548-49; Clark v. Pruett, 820 S.W.2d 903, 905 (Tex.App.Houston [1st Dist.] 1991, no writ). We review the evidence in this light.
Fact Summary
Appellant, an employee of Kent Electronics for more than six years, received a notice to attend jury duty. She delayed attending twice before appearing on April 7, 1992. She was selected to serve on a jury in a Harris County civil district court and served for four days.
Her jury service completed, appellant returned to work. When pay day came, she noticed her check was short by two days. Appellant questioned Ms. Shirley Duty, a personnel representative, about this discrepancy, and Duty informed appellant that it was appellee's policy to pay an employee for only two days jury service. Appellee had *461 docked appellant for the other two days pay thereby explaining the short check.
Appellant then contacted the judge in whose court she had served and this judge contacted Mr. Roy Bartolus, an attorney who had represented Kent on some other matters, and suggested that he remind his client of the duties of corporate citizens concerning permitting employees to serve as jurors. It is unclear whether the judge warned appellee through Bartolus to be mindful of the relevant statute, or echoed appellant's personal view of what Kent's extra-statutory duties were, that is to pay appellant while she was absent from work fulfilling her jury obligation.
Appellant arranged a meeting with her immediate supervisor, Mr. William Fountain on April 16, 1992. At this meeting, appellant delivered a letter she wrote stating her pay had been docked for serving on a jury, and she did not understand why her employer would penalize an employee for serving on a jury. She then stated in her letter that:
If in fact your decision is a true reflection of the company's viewpoint on this matter, I can no longer continue my employment with Kent Electronics and wish to offer my resignation effective April 30, 1992.
Fountain responded to this letter by stating, "You can do whatever you want, but I won't be intimidated or threatened by anyone." The two discussed the matter of docking appellant's pay, and Fountain told her that if she wanted to apply sick time or personal time, she should have seen him about doing so. Fountain told her that she had irritated him, and that there must have been a way she could have gotten out of serving on the jury. Appellant explained that she could not get out of jury service, and Fountain agreed to permit her to apply personal leave time to the two days she missed due to jury duty. Appellant then verbally "rescinded" her resignation.
When appellant returned from lunch that day, she had a message from Fountain that she should request in writing the two days vacation (for which she would be paid) be substituted for the two days for which she was not paid. Appellant gave Fountain such a written request. She also delivered a written retraction of her resignation.
Two weeks later, Fountain called appellant into his office and stated he had decided to accept her resignation. Pam Huffman, the director of personnel at Kent, was also present at this meeting. Fountain told appellant she would be paid through April 30, and would receive whatever bonus checks, vacation time and sick time to which she was entitled. Appellant replied that she had rescinded the resignation, and Fountain stated that he had not accepted it.
Appellant was then escorted to her office by Fountain and met by a warehouse employee. The three began packing appellant's belongings in boxes. Then, when everyone was returning from lunch, the three walked through the office and out to appellant's car. Appellant characterizes this as the busiest time of the day. At the car, Fountain stated, "Thank you, and goodbye."
Employment at will doctrine
Subject to certain narrow exceptions, employees in Texas may be terminated at will and without cause. Wornick Co. v. Casas, 856 S.W.2d 732, 735 (Tex.1993) (citing Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 734 (Tex.1985) and East Line & R.R.R. Co. v. Scott, 72 Tex. 70, 10 S.W. 99, 102 (1888)). There are limitations to the at-will doctrine. Winters v. Houston Chronicle Publishing Co., 795 S.W.2d 723, 724 (Tex.1990). One exception, at issue here, is the Juror Reemployment Act, Tex.Civ.Prac. & Rem.Code Ann. § 122.001(a) (Vernon 1986), providing that "a private employer may not terminate the employment of a permanent employee because the employee serves as a juror."[1]
Appellant complains her firing was not a legal at-will, without cause, termination because it disregarded a specific state statute forbidding it. She further states the manner of the firing was in violation of certain common-law principles. In simplest terms, appellant pleads both the means used and the end achieved by Kent are actionable. Our *462 analysis of the case depends on maintaining this distinction between the means used and the ends sought as we evaluate the evidence presented as it relates to both the statutory and common-law causes of action.
Intentional infliction of emotional distress
Recovery for the tort of intentional infliction of emotional distress requires a plaintiff to prove the following elements:
1) the defendant acted intentionally or recklessly;
2) the defendant's conduct was extreme and outrageous;
3) these actions caused the plaintiff severe emotional distress;
4) the emotional distress suffered by the plaintiff was severe.
Twyman v. Twyman, 855 S.W.2d 619, 621 (Tex.1993).
The trial judge signed a partial summary judgment and order of severance saying in part that, "assuming all facts averred by Plaintiff (appellant) are true, Defendant's conduct[2] was not extreme and outrageous as a matter of law." Appellee argues it conclusively proved its conduct was not extreme and outrageous, and that it had not acted intentionally or recklessly in causing appellant's alleged emotional distress. However, we review only the element of whether Kent's conduct could be reasonably construed as extreme and outrageous because the trial court's ruling was so limited. Dyson Descendant Corp. v. Sonat, 861 S.W.2d 942, 944 (Tex.App.Houston [1st Dist.] 1993, no writ); Carlisle v. Phillip Morris, 805 S.W.2d 498, 518 (Tex.App.Austin 1991, writ denied).
"Liability for outrageous conduct should be found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community." Restatement (Second) of Torts § 46 cmt. d (1965) (cited with approval in Twyman, 855 S.W.2d at 621).
The court makes the initial determination whether, as a matter of law, a defendant's conduct may reasonably be regarded as "extreme and outrageous." Wornick Co. v. Casas, 856 S.W.2d 732, 734 (Tex.1993); Restatement (Second) of Torts § 46 cmt. h.
Appellant contends appellee's conduct was "extreme and outrageous" in two distinct ways. First, appellant claims she was fired by appellee in violation of the Juror Reemployment Act. Appellant argues the firing, given the statutory prohibition against such an act, constitutes extreme and outrageous conduct, per se. Second, appellant argues the conduct by which appellee fired appellant was extreme and outrageous. We examine each of these contentions independently.
1. Fact of discharge
Appellant states in her brief that:
Even if Kent Electronics (appellee) had politely explained that they were discharging her because of her failure to avoid serving on the jury, and then threw a going away party giving her a gift for past contributions to the company, their conduct would still have been outrageous. In sum, Vicki Sebesta claims that in addition to being unlawful, the termination in and of itself, was extreme and outrageous.
We hold that a violation of the statute, standing alone and without regard to other conduct, establishes nothing more than a cause of action under that statute. See, e.g., Ugalde v. McKenzie Asphalt Co., 990 F.2d 239, 243 (5th Cir.1993) (applying Texas law) (even illegal conduct may not constitute extreme and outrageous conduct); Prunty v. Arkansas Freightways, Inc., 16 F.3d 649, 654 (5th Cir.1994) ("even though conduct may violate Title VII as sexual harassment, it does not necessarily become intentional infliction of emotional distress under Texas law."). Even when the employer's conduct rises to the level of illegality, except in the most unusual cases it is not the sort of conduct, as deplorable as it may sometimes be, that constitutes extreme and outrageous *463 conduct. Prunty, 16 F.3d at 654 (citing Wilson v. Monarch Paper Co., 939 F.2d 1138, 1143 (5th Cir.1991)).
We find no authority for the proposition that violation of the Juror Reemployment Act in itself is extreme and outrageous conduct as a matter of law. We overrule appellant's first point of error.
2. Manner of termination
Appellant contends in her second point of error that the method in which she was terminated was extreme and outrageous. In Wornick Co. v. Cassas, 856 S.W.2d 732, 733-34 (Tex.1993), the court held that the method of termination employed did not constitute intentional infliction of emotional distress. The method of termination included:
1. an unexpected firing;
2. previous favorable job evaluations;
3. the employee was told to leave the property immediately;
4. the employee was escorted by a security officer;
5. when the employee was speaking with the president of the company, the security guard waited at the door;
6. the employee was lead to believe by the president she was on a leave of absence, rather than being terminated;
7. the security guard told the employee he was called at home by the president to escort her off the premises;
8. the employee was told that the president requested the employee be off the premises in five minutes;
9. two security guards walked the employee with her boxes of belongings to her car;
10. it was not company policy to escort salaried employees off the premises; and
11. the president of the company never met with the employee as promised to discuss her termination.
Id. at 733-34. The court held, that, as a matter of law, this method of termination of an employee was not extreme and outrageous. Id. at 736.
Appellant argues that her case is distinguishable from Wornick because,
1. her salary was docked for serving on a jury, when company policy provided that she could apply personal or vacation days for uncompensated absences;
2. Fountain yelled at her for serving on a jury and not doing something to get out of serving;
3. Fountain deliberately mislead appellant into believing she could apply vacation days to the uncompensated days, while knowing he would terminate her;
4. appellee terminated appellant in violation of the Juror Reemployment Act, despite being cautioned by the judge;
5. appellee violated its own policy of permitting an employee to apply personal or vacation days for uncompensated jury absences;
6. appellee attempted to avoid liability by calling appellant's termination resignation; and
7. an exit parade was arranged for the busiest part of the day.
Appellant argues that these facts show "extreme and outrageous" conduct.
In making the initial determination as to whether appellee's conduct may reasonably be regarded as extreme and outrageous as required by Wornick,[3] 856 S.W.2d at 734, appellee argues that we cannot consider the termination itself as part of the conduct considered even if the termination was in violation of statute. We agree. In this factual context, we find no authority providing any remedy to appellant for the act of termination as distinguished from the manner of termination other than by reference to the statute. The exception to the at-will doctrine created by statute contains its own remedy. To permit the possibility of common-law damages for the act of termination, whether considered by itself or in conjunction with other "conduct," impermissibly enlarges the *464 remedy beyond the limits set by the legislature.
Therefore, in determining whether a defendant's conduct may reasonably be regarded as extreme and outrageous, we are limited to the evidence of the employer's conduct independent of the act of termination whether the firing was in violation of the statute or not.[4] The cause of action for intentional infliction of emotional distress under these facts lies solely with regard to the manner by which Kent conducted itself in effecting the termination.
We are obliged to assume the facts alleged by appellant are true. We find the evidence of Kent's conduct outlined by appellant and taken as true could not be reasonably regarded as "extreme or outrageous." Wornick, 856 S.W.2d at 736. The "exit parade," being yelled at on a single occasion, and the company's attitude as communicated to appellant about jury duty generally and about paying employees while on jury duty is not conduct so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, such as to be utterly intolerable in a civilized community. The parties argued, and tempers briefly flared. Termination of an employee is never pleasant, especially for the employee. Id. (see also pages 735-36 for list of cases with a variety of employers' conduct found to be, and not to be, extreme and outrageous). Accordingly, we overrule appellant's second point of error.
Fraud
A cause of action for fraud requires proof 1) that a defendant made a false representation, 2) knowing it was false, 3) with the intent that the plaintiff rely on the representation, 4) that the plaintiff justifiably relied on the representation, and 5) the plaintiff suffered damage. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex.1990). The trial court granted summary judgment on this cause of action because the facts fail to support a cause of action for fraud in the employment at will context. Appellant argues in her third point of error the court erred in this finding.
We first address the issue of "false representation." The parties dispute the nature of the representation. Appellee characterizes the false representation as one of continued employment that will not support a claim of fraud in light of the principle of employment at will. Appellant characterizes the false representations as:
1. the promise by Fountain that she would be permitted to use vacation days for the two non-compensable absences due to jury duty;
2. assurances by Fountain that the jury duty issue was resolved;
3. actions indicating that her previous retraction of resignation had been accepted, such as planning her schedule well into the future past the date of resignation and discussion with senior executives concerning her future with the company.
The second and third promises are essentially promises of continued employment, and, in the context of employment at will, cannot justifiably be relied upon to support fraud. Berry v. Doctor's Health Facilities, 715 S.W.2d 60, 62 (Tex.App.Dallas 1986, no writ); Collins v. Allied Pharmacy Management, Inc., 871 S.W.2d 929, 937 (Tex.App. Houston [14th Dist.] 1994, no writ).
Appellant argues that because she was fired for serving on a jury, she is no longer in the employment at will context, and this cause of action is actionable as fraud. However, if she was fired for serving on a jury, she is limited to the remedies provided for in the Juror Reemployment Act. As an exception to the employment at will doctrine, the act narrowly prescribes limited recovery.
We next examine the first promise appellant alleges was fraudulent: that she was promised that her vacation time would be applied to her jury service. After she was *465 fired, for whatever reason, appellant was compensated for her accrued vacation time. She was paid for the two vacation days she had previously requested be allocated for jury service. Therefore, under these facts, we are unable to find that this was a false promise, as appellant was paid for the vacation time. We overrule appellant's third point of error.
Finding no reversible error, we affirm the judgment of the trial court.
NOTES
[1] The remedy under the Juror Reemployment Act is limited to reinstatement, six months salary, and attorneys' fees. TEX.CIV.PRAC. & REM.CODE ANN. § 122.002 (Vernon Supp.1994).
[2] Whether or not the termination itself can be considered as part of the "Defendant's conduct" is a critical issue in deciding the case.
[3] See Justice Hecht's concurring opinion in Wornick, 856 S.W.2d at 736, for a chronicle of the difficulties in applying this test.
[4] Considering the alleged unlawful termination as part of the conduct to be measured creates analytical difficulties. In reviewing the evidence, we consider the appellant's facts to be true, but what about the legal conclusions to be drawn from the facts. Can we assume for purposes of review, the firing was in violation of the statute as the appellant desires? What if the facts presented do not set out at least a prima facie showing the statute was violated? | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1531076/ | 681 S.W.2d 828 (1984)
AUTOMARK OF TEXAS, Appellant,
v.
DISCOUNT TROPHIES, Appellee.
No. 05-83-01188-CV.
Court of Appeals of Texas, Dallas.
October 29, 1984.
*829 W. Bruce Monning, Vial, Hamilton, Koch & Knox, Dallas, for appellant.
Billy D. Hullum, Wills Point, for appellee.
Before AKIN, WHITHAM and ROWE, JJ.
ROWE, Justice.
This appeal concerns the oft-litigated question of whether consequential damages for lost profits as found by a jury were proved with sufficient certainty to permit recovery. Each such case must be determined on its own facts. Pace Corporation v. Jackson, 275 S.W.2d 849, 859 (Tex.Civ.App.Austin), aff'd, 155 Tex. 179, 284 S.W.2d 340 (1955). Under the particular facts of this case, we hold that the evidence of record was legally insufficient. Accordingly, we reverse and render a take-nothing judgment as to those two awards totaling $16,500 for consequential damages appearing in the jury verdict.
Discount Trophies is the assumed name under which a nationwide business related to ballroom dance conventions has been conducted by Tom O'Dell since about 1975. This business has included not only making the arrangements for these conventions in over a dozen cities on an annual basis, but also providing travel services for and selling jewelry, t-shirts, and trophies to the convention participants. For a price, O'Dell also personalizes the trophies for dance contest winners by engraving on the trophies inscriptions appropriate to identify the prize. To do this engraving O'Dell had purchased in May of 1980 for a price of $2,000 a trophy typewriter from its manufacturer, Automark of Texas. The typewriter operated satisfactorily, with only minor repairs, for about two years. This lawsuit arose because of a malfunction which occurred in the keyboard of the typewriter in February of 1982, which problem despite three separate attempts at correction by Automark, was never solved to O'Dell's satisfaction.
O'Dell was attending a dance convention in Williamsburg, Virginia, when the keyboard on the trophy typewriter first malfunctioned. A substitute keyboard expedited to Williamsburg also malfunctioned. After a second substitute failed, Automark sent a third substitute, which did not reach O'Dell in time for use at subsequent conventions in New Orleans and Houston. When the third substitute was installed, the entire typewriter "blew up" and was returned to Automark for repairs. O'Dell refused to pay $747.60 for repair charges and chose instead to operate the trophy engraving part of his business by the much slower hand engraving method.
On the issue of consequential damages, O'Dell testified at trial both as the business owner and as a business expert. All of O'Dell's non-expert testimony concerning damages was given from personal and unaided *830 recollection. Despite a timely request by Automark for O'Dell's pertinent business records and despite an admission by O'Dell that such records were available, O'Dell appeared at trial with no objective business data other than a hand-prepared summary itemizing potential engraving sales losses, which summary the trial judge ruled to be inadmissible. Although deprived of any resort to this summary, O'Dell was able nonetheless to recollect approximately: (1) the number of participants at 16 dance conventions while he was without use of the trophy typewriter, (2) the engraving sales actually made at these conventions, and (3) the engraving sales at similar conventions held the previous year. Because of O'Dell's long-time experience in the dance convention field, the trial judge also permitted O'Dell to testify as an expert. The substance of O'Dell's expert testimony was that between seventy to eighty percent of all convention participants acquire engraving services and that sale proceeds for engraving services average between $4 and $5 per person for the total number of all participants at a convention. We observe in passing that all of this expert testimony can be characterized as referring to a loss of sales income rather than to a loss of net profits. We observe, further, that calculations given by O'Dell in dollars are stated invariably not as the individually accurate figures but as merged totals, as percentage estimates, as averages, and as rounded-off even amounts. We find this subjective testimony of O'Dell, standing alone, legally insufficient to support an award of consequential damages for lost profits.
To be recoverable, lost profits must be proved with "reasonable certainty." Southwest Battery Corporation v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098 (1938); Copenhaver v. Berryman, 602 S.W.2d 540, 544 (Tex.Civ.App.Corpus Christi 1980, writ ref'd n.r.e.). Controlling as to proper disposition of this appeal is the complete absence from the record of objective facts, figures, and data without which, in our opinion, it cannot be ascertained with the required degree of certainty that O'Dell's trophy engraving operation, as distinguished from his other dance convention related business, would have continued to be profitable had the trophy typewriter not failed to function. Two critical determinants are missing: (1) nowhere in the record is there objective documentation that prior to the trophy typewriter's malfunctioning the particular business operation in question had an established track record of profitability, and (2) nowhere in the record is there objective documentation that if the trophy engraving sales had continued at their past rate, and if all current overhead and expenses allocable to this particular business operation had been deducted from gross sales income, a net profit would have been obtained had the typewriter not malfunctioned. As a consequence, it is not possible from the record to make a meaningful correlation between the business's profitability with the operational typewriter and the business's loss of profitability attributable to the nonoperational typewriter. Atomic Fuel Extraction Corporation v. Slick's Estate, 386 S.W.2d 180, 189-90 (Tex.Civ. App.1964), writ ref'd n.r.e. per curiam, 403 S.W.2d 784 (Tex.1965); Pederson v. Dillon, 623 S.W.2d 696, 698 (Tex.Civ.App. Houston [1st Dist.] 1981, no writ); Copenhaver, 602 S.W.2d at 544; Van Sickle v. Clark, 510 S.W.2d 664, 668-69 (Tex.Civ. App.Fort Worth 1974, no writ). We agree with Automark's contention that the distinguishing feature between the line of Texas cases permitting recovery for lost profits and the line of cases denying recovery is a reliance upon routinely kept business records which have been produced in courtthat is, upon an evaluation of a business's decreased profitability based upon objective facts, figures, and data and not upon the subjective opinions of interested parties. White v. Southwestern Bell Telephone Company, Inc., 651 S.W.2d 260, 262 (Tex.1983); Village Square, Ltd. v. Barton, 660 S.W.2d 556, 560 (Tex.App. San Antonio 1983, no writ); compare Mesa Agro v. R.C. Dove & Sons, 584 S.W.2d 506, 512 (Tex.Civ.App.El Paso 1979, writ ref'd n.r.e.); Restatement (Second) of Contracts, § 350, illustration 5 at 128 (1979). The *831 record before us places this case in the line where recovery has been denied. Automark's point of error complaining of legally insufficient evidence of lost profits is sustained. The judgment of the trial court is reformed to delete the combined $16,500 award for consequential damages and to provide for total damages in favor of Discount Trophies, of $3,750, including attorney's fees, instead of $20,250. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1683126/ | 495 S.W.2d 878 (1973)
AUSTIN INDEPENDENT SCHOOL DISTRICT et al., Petitioners,
v.
SIERRA CLUB et al., Respondents.
No. B-3856.
Supreme Court of Texas.
May 9, 1973.
*879 J. M. Patterson, Jr., McGinnis, Lochridge & Kilgore, James W. Wilson, Frank W. Elliott, Jr., Don R. Butler, City Atty., Austin, for petitioners.
Robert C. Means and Paul W. Jones, Jr., Austin, for respondents.
WALKER, Justice.
On the controlling question presented by this appeal, we hold that the suit is an ineffectual collateral attack on the judgment of the County Court at Law No. 2 of Travis County in an eminent domain proceeding.
The suit was filed in the 126th District Court of Travis County by Sierra Club, a nonprofit corporation with a special interest in preserving park land, and several individuals who are qualified voters and taxpaying property owners in the City of Austin. These plaintiffs in the trial court are now our respondents. The legal theories urged by them and the relief sought will be noticed later. Petitioners here, who were defendants in the trial court, are the Austin Independent School District and the members of its Board of Trustees, the City of Austin, its City Manager, Mayor and the other members of the City Council. After a trial to the court without a jury, the district court rendered judgment that plaintiffs take nothing. This judgment was reversed by the Court of Civil Appeals, which rendered judgment granting part of the relief sought by plaintiffs. 489 S.W.2d 325. We reverse the judgment of the Court of Civil Appeals and affirm that of the trial court.
By deed dated December 29, 1931, confirmed by another instrument dated July 21, 1932, A. J. Zilker conveyed 324.1 acres of land to the Board of Trustees of the Public Free Schools of the City of Austin. The conveyance was made pursuant to acceptance by the Board of Trustees and by the voters of the City of Austin of a proposal by Zilker to convey the land to the Board if the City would thereafter purchase the same for park purposes and pay the Board $200,000.00 therefor, part in cash and the remainder in fifteen equal annual installments. By deed dated August 1, 1932, the Board conveyed the 324.1 acres to the City for the agreed consideration, which has been paid.
The land conveyed to the City lies on both sides of the Colorado River, and the portion south of the river, consisting of 280.5 acres known as Zilker Park, is not involved in this suit. We are concerned with a tract of 32.26 acres, which is part of the 43.51 acres lying north of the river. The property north of the river is also park land. On June 25, 1971, the City and the District entered into a contract granting the latter an option to purchase the 32.26 acres as a school site for an agreed price of $749,250.00 and the further consideration of the performance by the District of certain obligations set out in the contract. An easement 50 feet in width along the south line of the land was reserved by the City for a public "hike and bike" trail and "greenbelt." The District agreed to construct "substantial, permanent recreational facilities satisfactory" to the City on the land retained by the latter and adjoining the school site on the east. It also agreed to maintain such recreational facilities, easement and adjacent grounds for a period of 25 years, with the City having the exclusive right at all times to use the facilities on its own property and *880 the exclusive right during the summer months to use recreational facilities on the school site. Under the terms of the contract, the District was authorized to institute eminent domain proceedings to acquire the property. There were also stipulations that, for purposes of an eminent domain proceeding, the value of the property was $749,250.00 and its paramount public use was as a school site.
An eminent domain proceeding styled Austin Independent School District v. City of Austin, No. 880, in the County Court at Law No. 2 of Travis County, was instituted by the District to condemn the school site. On November 4, 1971, a public hearing was held by the Board in compliance with Art. 5421q, Vernon's Ann.Tex.Civ.St., and the Board then determined that there was no feasible or prudent alternative to the use or taking of the land in controversy for the purposes set out in the statement for condemnation and that the program or project for which it was to be taken included all reasonable planning to minimize the harm to the land and its locale.[1] The eminent domain proceeding later proceeded to trial, and on November 18, 1971, judgment was rendered vesting title to the 32.26 acres in the District. The record of that proceeding was not introduced in the present case, but the condemnation judgment recites the introduction of evidence that the land "may have been dedicated to use as park land," and that the Board had conducted the hearing and made the determination required by Art. 5421q. There is also a recital that the Council had found as a fact that the land "would be a better public use as a school site than as park land and that the paramount public use was as a school site." The condemnation judgment further recites a finding by the court that the City had consented to the taking and that the paramount public use of the land is for the purposes stated in the condemnation petition.
The judgment of the County Court at Law was not appealed and became final. The present suit, which is an entirely separate proceeding in a different court, was instituted on March 21, 1972. Plaintiffs base their case, in part, on Art. 1019, V.A. T.S., which provides that no park shall be sold until the question of the sale has been submitted to a vote of the qualified voters of the city or town and approved by a majority of the votes cast at the election. They also rely on the charter of the City of Austin, which prohibits the Council from selling or otherwise alienating land dedicated for park purposes unless authorized by the qualified voters at a general or special election. Their third basic contention is that under the provisions of V. T.C.A., Education Code § 23.31, the District has no power to condemn public land.
According to the allegations of the plaintiffs' petition in the trial court: (1) the contract between the City and the District is void because the sale was not authorized by the voters as required by Art. 1019 and the charter; (2) the eminent domain proceeding was a collusive attempt by the District and the City to circumvent the requirements of Art. 1019 and the charter; (3) the County Court at Law could not and should not have entertained the petition in condemnation because the District has no power to condemn public land; and (4) the City and the District were about to make changes in the school site and the adjacent property that would destroy or seriously impair their usefulness as park land. Plaintiffs prayed: (a) for a judgment declaring the contract void; (b) that the judgment of the County Court at Law be set aside and declared void; (c) for a temporary injunction; and (d) for general relief. Defendants answered with general denials.
Apparently no effort was made to obtain a temporary injunction. On April 7, 1972, *881 the parties submitted all issues of law and fact to the court "on the merits of this cause on a hearing on permanent injunction." As we understand the record, plaintiffs at that time abandoned their contention that the eminent domain proceeding was a collusive attempt to circumvent the statute and the charter. There were a number of stipulations, but no evidence was introduced and we do not have a statement of facts. Plaintiffs had previously moved that the case be decided on the pleadings, and it was submitted to the court on their contentions: (1) that the District has no power to condemn park land; and (2) that even if it has that power, Art. 1019 is a limitation on the exercise of the power. The trial court concluded that the District has the power to condemn park land and that its exercise is not affected by either Art. 1019 or the charter. Judgment was accordingly rendered for respondents. The Court of Civil Appeals held to the contrary on both of these questions.
The present suit is necessarily an attack on the judgment of the County Court at Law, which purports to vest title in the District. A declaratory judgment deciding the two questions mentioned above and granting no other relief will avail plaintiffs nothing. The District could still assert its rights under the eminent domain judgment and would be free to proceed with its building program. Plaintiffs wish to preserve the land as a park, and to accomplish this purpose they must destroy, in legal effect, the judgment of the County Court at Law by obtaining a judgment either declaring it void or enjoining the District from exercising rights of ownership.
Our county courts, and in this instance the County Court at Law, are courts of general jurisdiction in eminent domain matters. Plaintiffs' attack on the condemnation judgment is governed, therefore, by established rules applicable to attacks on judgments rendered by courts of general jurisdiction. See Art. 1970-324a, V.A.T. S.; Brunson v. State, Tex., 418 S.W.2d 504; Hopkins v. Cravey, 85 Tex. 189, 19 S.W. 1067; 6 Nichols, Law of Eminent Domain, 3rd ed. 1972, § 26.72.
The question then arises as to whether the attack is direct or collateral. See Hodges, Collateral Attacks on Judgments, 41 Tex. L. Rev. 163, 499; Templeton v. Ferguson, 89 Tex. 47, 33 S.W. 329; Crawford v. McDonald, 88 Tex. 626, 33 S.W. 325; Clayton v. Hurt, 88 Tex. 595, 32 S.W. 876. A direct attack is a proceeding instituted for the purpose of correcting the earlier judgment. It may be brought in the court rendering the judgment or in another court that is authorized to review the judgment on appeal or by writ of error. The purpose of a direct attack is to change the former judgment and secure the entry of a correct judgment in lieu of the earlier incorrect one. This relief may be obtained on the basis of any error that probably caused the rendition of an improper judgment.
It is clear that the present suit is a collateral attack, and plaintiffs make no serious contention to the contrary. The suit was brought in a different court that has no power to review the judgment of the County Court at Law in an eminent domain proceeding, and its purpose is not to set aside the former judgment and secure the entry of a new and correct judgment in the eminent domain proceeding. And yet, as pointed out above, plaintiffs seek to obtain from the district court a judgment depriving the District of rights it apparently is entitled to enjoy under the judgment of the County Court at Law.
The judgment of a court of general jurisdiction is not subject to collateral attack except on the ground that it had no jurisdiction of the person of a party or his property, no jurisdiction of the subject matter, no jurisdiction to enter the particular judgment, or no capacity to act as a court. Plaintiffs recognize these general *882 rules. They say that the judgment of the County Court at Law is void because: (1) there was no statutory authority for the District to condemn public land; and (2) the Council had no power to make stipulations affecting the District's power to take the land when the transfer had not been approved by the voters as required by Art. 1019 and the charter. We do not agree.
Plaintiffs are contending that the judgment is void because of lack of jurisdiction to enter the particular judgment. There are cases in which collateral attacks have been sustained on this theory, but only where the error is quite serious and strikes at the very power of the court to render the judgment. By the express terms of Sec. 23.31, V.T.C.A., Education Code, the District is vested with "power by the exercise of the right of eminent domain to acquire the fee simple title to real property." This authorizes the District to condemn land and to invoke the eminent domain jurisdiction of the County Court at Law, but the statute does not expressly empower the District to condemn property already devoted to a public use. In these circumstances and when the condemnation will practically destroy the use to which the property has been devoted, the power will not ordinarily be implied from a general power conferred by statute. The power will be implied, however, where the necessity is so great as to make the new enterprise of paramount importance to the public and it cannot be practically accomplished in any other way. Sabine & E. T. R. Co. v. Gulf & I Ry. Co. of Tex., 92 Tex. 162, 46 S.W. 784. It is clear then that the question of the District's right to condemn the school site under the facts and circumstances of the case does not go to the jurisdiction of the County Court at Law but was a matter to be resolved by that court in the exercise of its jurisdiction. See also Missouri-Kansas-Texas R. Co. of Tex. v. Jones, Tex.Com.App., 24 S.W.2d 366. If the court incorrectly determined that question, this was merely an error occurring during the trial and does not render the judgment void. See Clayton v. Hurt, 88 Tex. 595, 32 S.W. 876. Cf. Benat v. Dallas County, Tex.Civ.App., 266 S.W. 539 (wr. ref.). See also Norwood v. Gonzales County, 59 Tex. 218, 14 S.W. 1057.
Art. 1019 and the charter limitations on the powers of the Council do not affect the jurisdiction of the County Court at Law. Even if we assume that the Council had no authority to stipulate value and paramount use for purposes of the condemnation proceeding,[2] the condemnation judgment is not rendered void by the fact that it is based, in part, on an unauthorized stipulation.
Although plaintiffs argue to the contrary, defendants did not waive their collateral attack arguments by failing to plead the same in the trial court. These contentions do not constitute an affirmative defense within the meaning of Rule 94, Texas Rules of Civil Procedure.
The judgment of the Court of Civil Appeals is reversed and that of the trial court is affirmed.
POPE, J., not sitting.
NOTES
[1] The parties to the present case stipulated that all requirements of Art. 5421q, V.A.T.S., were duly and lawfully met and fulfilled.
[2] A rather doubtful assumption in view of the opinions, briefs, and applications for writs of error in Kingsville Independent School District v. Crenshaw, Tex.Civ. App., 164 S.W.2d 49 (wr. ref. w. m.), 252 S.W.2d 1022 (wr. ref.). See also City of Tyler v. Smith County, 151 Tex. 80, 246 S.W.2d 601. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1687566/ | 846 F. Supp. 843 (1994)
Bobby Joe JOYCE, Timothy E. Smith, Thomas O'Halloran and Jim Tullah, Plaintiffs,
v.
CITY AND COUNTY OF SAN FRANCISCO, Defendant.
No. C-93-4149 DLJ.
United States District Court, N.D. California.
March 15, 1994.
*844 *845 Bradley S. Phillips, Stephen M. Kristovich, Jeffrey L. Bleich, and Martin D. Bern, of Munger, Tolles & Olson, San Francisco, CA and Marcia Rosen, and Diane T. Chin, of the Lawyers' Committee for Civil Rights of the San Francisco Bay Area, appeared on behalf of plaintiffs.
Linda M. Ross, and Dennis Aftergut, of the San Francisco City Attorneys' Office and Donald J. Putterman, of Farella, Braun & Martel and Henry J. Escher III of Howard, Rice, Nemerovski, Canady, Robertson & Falk, San Francisco, appeared on behalf of defendant.
ORDER
JENSEN, District Judge.
Plaintiffs to this action seek preliminary injunctive relief on behalf of themselves and a class of homeless individuals alleged to be adversely affected by the City and County of San Francisco's (the "City's") "Matrix Program." While encompassing a wide range of services to the City's homeless, the Program simultaneously contemplates a rigorous law enforcement component aimed at those violations of state and municipal law which arguably are committed predominantly by the *846 homeless. Plaintiffs endorse much of the Program, challenging it not in its entirety, but only insofar as it specifically penalizes certain "life sustaining activities" engaged in by the homeless. Plaintiffs' Proposed Order Granting Mot. for Prel.Inj. at 2.
On February 23, 1994, counsel appeared before the Court at a hearing of plaintiffs' motion for preliminary injunctive relief. Appearing for plaintiffs were Bradley S. Phillips, Stephen M. Kristovich, Jeffrey L. Bleich and Martin D. Bern of Munger, Tolles & Olson, and Marcia Rosen and Diane T. Chin of the Lawyer's Committee for Civil Rights of the San Francisco Bay Area. The City was represented by Linda M. Ross and Dennis Aftergut of the San Francisco City Attorneys' Office, and Donald J. Putterman of Farella, Braun & Martel. Having considered the arguments of counsel and the papers submitted, the Court hereby denies the requested injunction.
I. Factual Background and Procedural History
A. Law Enforcement Measures as Part of the Matrix Program
Institution of the Matrix Program followed the issuance of a report in April of 1992 by the San Francisco Mayor's Office of Economic Planning and Development, which attributed to homelessness a $173 million drain on sales in the City. Plaintiffs' Mot. at 8 & n. 6. In August of 1993, the City announced commencement of the Matrix Program, and the San Francisco Police Department began stringently enforcing a number of criminal laws. Plaintiffs' Mot. at 7.
The City describes the Program as "initiated to address citizen complaints about a broad range of offenses occurring on the streets and in parks and neighborhoods.... [The Matrix Program is] a directed effort to end street crimes of all kinds." City's Opp'n at 6.
The program addresses offenses including public drinking and inebriation, obstruction of sidewalks, lodging, camping or sleeping in public parks, littering, public urination and defecation, aggressive panhandling, dumping of refuse, graffiti, vandalism, street prostitution, and street sales of narcotics, among others.
Id.
An illustration of the enforcement efforts characteristic of the Program can be found in a four-page intra-departmental memorandum addressed to the Police Department's Southern Station Personnel. That memorandum, dated August 10, 1993 and signed by acting Police Captain Barry Johnson, defines "Quality of Life" violations and establishes a concomitant enforcement policy. See Plaintiffs' Mot. at 8; Rosen Decl., Exh. 7. Condemning a "type of behavior [which] tends to make San Francisco a less desirable place in which to live, work or visit", the memorandum directs the vigorous enforcement of eighteen specified code sections, including prohibitions against trespassing, public inebriation, urinating or defecating in public, removal and possession of shopping carts, solicitation on or near a highway, erection of tents or structures in parks, obstruction and aggressive panhandling. Rosen Decl., Exh. 7 at 2.
Pursuant to the memorandum,
All station personnel shall, when not otherwise engaged, pay special attention and enforce observed "Quality of Life" violations.... One Officer ... shall, daily, be assigned specifically to enforce all "Quality of Life" violations....
Officers are to stop and advise all individuals pushing shopping carts that said carts are the property of local stores (Grocery/Drug etc.) and that these carts are never sold: Therefore the carts will, in the near future, be confiscated for return to their rightful owner or otherwise disposed of by the police.... Note: This phase of the "Quality of Life" operation will be implemented when appropriate containers, for the contents of the shopping carts, are available....
Id. at 2-3 (emphasis in original).
In a Police Department Bulletin entitled "Update on Matrix Quality of Life Program," dated September 17, 1993, Deputy Chief Thomas Petrini paraphrased General Order D-6, the source of the intended non-discriminatory policy of the Program's enforcement measures:
*847 All persons have the right to use the public streets and places so long as they are riot engaged in specific criminal activity. Factors such as race, sex, sexual preference, age, dress, unusual or disheveled or impoverished appearance do not alone justify enforcement action. Nor can generalized complaints by residents or merchants or others justify detention of any person absent such individualized suspicion.
Petrini Decl., Exh. A at 1-2. The memorandum stated that the "[r]ights of the homeless must be preserved", and included as an attachment a Department Bulletin on "Rights of the Homeless", which stated that:
[All members of the Department] are obligated to treat all persons equally, regardless of their economic or living conditions. The homeless enjoy the same legal and individual rights afforded to others. Members shall at all times respect these rights....
Petrini Decl. at ¶ 2.
The Police Department has, during the pendency of the Matrix Program, conducted continuing education for officers regarding non-discriminatory enforcement of the Program. City's Opp'n at 8. When, in mid-August of 1993, concerns were raised by interests outside the Department about proper enforcement of the ordinances prohibiting lodging and sleeping in public parks, the Department issued a clarification of its policies. See id.; Petrini Decl. at ¶ 3, Exh. B. Again, in mid-November of 1993, inquiries were made of the Police Department concerning the confiscation of grocery store shopping carts. See City's Opp'n at 8; Petrini Decl. at ¶ 5. Police Chief Anthony Ribera responded with the issuance of a Department Bulletin establishing topical guidelines. See Petrini Decl. at Exh. D.
Since implementation of the Matrix Program, the City estimates that "[a]ccording to unverified statistics kept by the Department", City's Opp'n at 6, approximately sixty percent of enforcement actions have involved public inebriation and public drinking, and that other "significant categories" include felony arrests for narcotics and other offenses, and arrests for street sales without a permit. Id. at 7.
Together, enforcement actions concerning camping in the park ..., sleeping in the park during prohibited hours ..., and lodging ... have constituted only approximately 10% of the total.
City's Opp'n at 7.
Plaintiffs, pointing to the discretion inherent in policing the law enforcement measures of the Matrix Program, allege certain actions taken by police to be "calculated to punish the homeless." Plaintiffs' Mot. at 9. As a general practice, the Program is depicted by plaintiffs as "target[ing] hundreds of homeless persons who are guilty of nothing more than sitting on a park bench or on the ground with their possessions, or lying or sleeping on the ground covered by or on top of a blanket or cardboard carton." Id. at 20. On one specific occasion, according to plaintiffs, police "cited and detained more than a dozen homeless people, and confiscated and destroyed their possessions, leaving them without medication, blankets or belongings to cope with the winter cold." Plaintiffs' Mot. at 9; T. Smith Decl. at ¶¶ 5-10; Homeless Decls. at 13, 56, 96.
B. Non-Punitive Aspects of the Matrix Program
The City contests the depiction of Matrix as a singularly focused, punitive effort designed to move "an untidy problem out of sight and out of mind." City's Opp'n at 1. Instead, the City characterizes the Matrix Program as "an interdepartmental effort ... [utilizing] social workers and health workers ... [and] offering shelter, medical care, information about services and general assistance. Many of those on the street refuse those services, as is their right; but Matrix makes the choice available." City's Opp'n at 1.
The operation of the Matrix Program involves the Department of Social Services, the Department of Public Health, the Police Department and the Department of Public Works. City's Opp'n at 2-3. The City claims it has attempted to conjoin its law enforcement efforts with referrals to social service agencies. City's Opp'n at 8. One specific element of the Program seeks to *848 familiarize the homeless with those services and programs available to them. City's Opp'n at 5. This is accomplished by the dispersal of Department of Social Service social workers throughout the City in order to contact homeless persons. Id.
Another element of the Matrix Program the Night Shelter Referral Program attempts to provide temporary housing to those not participating in the longer-term housing program. This effort was begun in December of 1993, and is designed to offer the option of shelter accommodations to those homeless individuals in violation of code sections pertaining to lodging, camping in public parks and sleeping in parks during prohibited hours. Id. at 5-6. The Night Referral Program operates by referring women to a women's shelter at St. Paulus, and by offering to men transportation and a referral slip to the Salvation Army Lifeboat Lodge; both shelters are located within the San Francisco area. By prior arrangement, the Lodge agreed to set aside a certain number of beds for those referred individuals. Id. at 6. The City contends that, of 3,820 referral slips offered to men, only 1,866 were taken, and only 678 actually utilized to obtain a shelter bed reserved for Police referrals. By the City's reckoning, "[t]hese statistics suggest that some homeless men may prefer to sleep outdoors rather than in a shelter." Id.
C. The City's Efforts in Dealing With Homelessness
The City emphasizes its history as one of the largest public providers of assistance to the homeless in the State, asserting that "individuals on general assistance in San Francisco are eligible for larger monthly grants than are available almost anywhere else in California." City's Opp'n at 1. Homeless persons within the City are entitled to a maximum general assistance of $345 per month an amount exceeding the grant provided by any of the surrounding counties. Id. at 4. General assistance recipients are also eligible for up to $109 per month in food stamps. Id. According to the City, some 15,000 City residents are on general assistance, of whom 3,000 claim to be homeless. Id. at 4 n. 1.
The City's Department of Social Services encourages participation in a Modified Payments Program offered by the Tenderloin Housing Clinic. Id. at 4. Through this program, a recipient's general assistance check is paid to the Clinic, which in turn pays the recipient's rent and remits the balance to the recipient. The Clinic then negotiates with landlords of residential hotels to accept general assistance recipients at rents not exceeding $280 per month. Id. at 5.
By its own estimate, the City will spend $46.4 million for services to the homeless for 1993-94. Id. at 1, 4. Of that amount, over $8 million is specifically earmarked to provide housing, and is spent primarily on emergency shelter beds for adults, families, battered women and youths. Id. at 4. An additional $12 million in general assistance grants is provided to those describing themselves as homeless, and free health care is provided by the City to the homeless at a cost of approximately $3 million. Id.
D. Enforcement and Effects of the Matrix Program
The City contends that "few of the Matrix-related offenses involve arrest." City's Opp'n at 7. Those persons found publicly inebriated, according to the City, are taken to the City's detoxification center or district stations until sober. Id. "Most of the other violations result in an admonishment or a citation." Id.
Since its implementation, the Matrix Program has resulted in the issuance of over 3,000 citations to homeless persons. Plaintiffs' Mot. at 8. Plaintiffs contend these citations have resulted in a cost to the City of over $500,000. Id. Citations issued for encampment and sleeping infractions are in the amount of $76, according to Alissa Riker, Director of the Supervised Citation Release Program ("SCRP") with the Center for Juvenile and Criminal Justice. See Riker Decl. at ¶ 1. Those cited must pay or contest the citation within twenty-one days; failure to do so results in a $180 warrant for the individual's arrest, which is issued approximately two months after citation of the infraction. Id. at *849 ¶ 3. Upon the accrual of $1,000 in warrants, which equates roughly to the receipt of six citations, an individual becomes ineligible for citation release and may be placed in custody. Id. The typical practice, however, is that those arrested for Matrix-related offenses are released on their own recognizance or with "credit for time served" on the day following arrest.[1] Plaintiffs characterize the system as one in which "homeless people are cycled through the criminal justice system and released to continue their lives in the same manner, except now doing so as `criminals'." Plaintiffs' Mot. at 9.
According to plaintiffs, the City has conceded the inadequacy of shelter for its homeless. Plaintiffs' Mot. at 9. Plaintiffs have cited as supporting evidence an application made to the State Department of Housing and Community Development in which the City's Director of Homeless Services described an "emergency situation" created by the closure of the Transbay Terminal, which had served as "the largest de facto shelter for homeless individuals." Plaintiffs' Mot. at 9.
Plaintiffs have proffered estimates as to the number of homeless individuals unable to find nightly housing. Plaintiffs cite to a survey conducted by Independent Housing Services, a non-profit agency which among its aims seeks the improvement of access to affordable housing for the homeless. See Plaintiffs' Mot. at 10; Park Decl. at ¶ 2. Begun in July of 1990 and conducted most recently in August of 1993, Park Decl. at ¶¶ 4, 6, the survey tracks the number of homeless individuals turned away each night from shelters in the San Francisco area due to a lack of available bed space. Based on the data of that survey, plaintiffs contend that from January to July of 1993, an average of 500 homeless persons was turned away nightly from homeless shelters. Plaintiffs' Mot. at 10. That number, according to plaintiffs, increased to 600 upon the closing of the Transbay Terminal. Plaintiffs' Mot. at 10.
E. Plaintiffs to the Present Action
The named plaintiffs to this action have been exposed differently to the enforcement of the Matrix Program and to the rigors of a life of homelessness. Plaintiffs assert they are "homeless" individuals since they lack a "fixed, regular, and adequate nighttime residence."[2] Plaintiffs' Mot. at 2. Conversely, the City contests the extent to which each plaintiff is actually homeless, citing the following evidence:
Plaintiff O'Halloran testified that his daughter invited him to live with her, but that he declined because he feels she cannot afford to shelter him. City's Opp'n at 14; O'Halloran Dep., Putterman Decl., Exh. A at 37:8-39:7. O'Halloran has also had housing available to him through the Tenderloin Housing Clinic, but found it unsatisfactory. City's Opp'n at 15; O'Halloran Dep., Putterman Decl., Exh. A at 82:5-85:25; 87:18-89:13. Though willing to share an apartment with a roommate, he claims none of his acquaintances is "suitable." Id. at 86:7-87:17. Finally, O'Halloran claims he refuses to sleep at a drop-in shelter. "These people that you're laying next to, they're not saints. They're all homeless...." Id. at 121:21-122:23.
Plaintiff Joyce receives general assistance payments from the City and presently has *850 housing through the Tenderloin Housing Clinic. Joyce Dep., Putterman Decl., Exh. B at 80:21-25, 55:3-6. According to the City, Joyce "is not on the streets now, and was not on the streets when the Complaint was filed.... In fact, even when he did not receive automatic [general assistance] payments, he was on the streets for at most a few nights." City's Opp'n at 15; Joyce Dep., Putterman Decl., Exh. B at 54:5-60:12, 69:3-70:1, 72:5-75:20, 79:2-80:11.
Plaintiff Smith currently has housing, and receives general assistance and food stamps. City's Opp'n at 15; Smith Dep., Putterman Decl., Exh. D at 7:2-8, 49:17-51:22.
Plaintiff Tullah, a disabled veteran who is confined to a wheelchair, had not yet been deposed by the City as of the date of the hearing. Tullah claims he had been receiving general assistance from the City for approximately nine months, but was thereafter suspended for missing appointments. City's Opp'n at 16; Pl. Resp. to Def. First Set of Interrogs., Nos. 10, 15, Putterman Decl., Exh. E.
On November 23, 1993, these plaintiffs filed a class action complaint seeking injunctive and declaratory relief against the City.
II. Legal Standard
Plaintiffs have at this time moved the Court to preliminarily enjoin the City's enforcement of certain state and municipal criminal measures which partially define the Matrix Program. Given this posture of the litigation, the Court is called upon to decide whether to grant a preliminary injunction in the exercise of its equitable powers. Fed. R.Civ.P. 65. Such relief constitutes an extraordinary use of the Court's powers, and is to be granted sparingly and with the ultimate aim of preserving the status quo pending trial on the merits. See 11 Wright & Miller, Federal Practice and Procedure: Civil § 2942, at 368 (1973); Rizzo v. Goode, 423 U.S. 362, 376-78, 96 S. Ct. 598, 607, 46 L. Ed. 2d 561 (1976); Chalk v. United States Dist. Ct., 840 F.2d 701, 704 (9th Cir.1988).
As the Court is acting in equity, the decision whether to grant preliminary injunctive relief is largely left to its discretion. See Big Country Foods, Inc. v. Board of Education of Anchorage School District, 868 F.2d 1085, 1087 (9th Cir.1989). However, this discretion has been circumscribed by the presence or not of various factors, notably, the likelihood that the moving party will prevail on the merits and the likelihood of harm to the parties from granting or denying the injunctive relief. See Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937 (9th Cir.1987); Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir. 1984). At the extremes, a party seeking injunctive relief must show either (1) a combination of probable success on the merits and the possibility of irreparable harm, or (2) that serious questions are raised and the balance of hardships tips sharply in the moving party's favor. Miss World (UK) Ltd. v. Mrs. America Pageants, Inc., 856 F.2d 1445, 1448 (9th Cir.1988); Rodeo Collection, Ltd. v. West Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987). "These are not two distinct tests, but rather the opposite ends of a single `continuum in which the required showing of harm varies inversely with the required showing of meritoriousness.'" Miss World, 856 F.2d at 1448 (quoting Rodeo Collection, 812 F.2d at 1217).
Inasmuch as an injunction creates its own penal code enforceable by the Court's contempt powers, an additional consideration affecting the Court's determination to grant injunctive relief is whether or not the terms of the injunction can be stated with sufficient clarity to permit the injunction to be fairly enforced. The Federal Rules of Civil Procedure require that "[e]very order granting an injunction ... shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained...." Fed.R.Civ.P. 65(d). This mandate is designed "to prevent uncertainty and confusion on the part of those faced with injunctive orders, and to avoid the possible founding of a contempt citation on a decree too vague to be understood.... [B]asic fairness requires that those enjoined receive explicit notice of precisely what conduct is outlawed." Schmidt v. Lessard, 414 U.S. 473, 476, 94 S. Ct. 713, 715, 38 L. Ed. 2d 661 (1974).
*851 DISCUSSION
The injunction sought by plaintiffs at this juncture of the litigation must be denied for each of two independent reasons. First, the proposed injunction lacks the necessary specificity to be enforceable, and would give rise to enforcement problems sufficiently inherent as to be incurable by modification of the proposal. Second, those legal theories upon which plaintiffs rely are not plainly applicable to the grievances sought to be vindicated, with the effect that the Court cannot find at this time that, upon conducting the required balance of harm and merit, plaintiffs have established a sufficient probability of success on the merits to warrant injunctive relief.
I. Enforceability Problems Inherent in the Proposed Injunction
Plaintiffs urge the Court to implement an injunction under which:
the City shall be preliminarily enjoined from enforcing, or threatening to enforce, statutes and ordinances prohibiting sleeping, "camping" or "lodging" in public parks, or the obstruction of public sidewalks against the plaintiff class of homeless individuals for life-sustaining activities such as sleeping, sitting or remaining in a public place....
Plaintiffs' Proposed Order Granting Mot. for Prel.Inj. at 2.
Those problems invariably arising from attempted compliance with the proposed injunction are apparent on the face of the injunction proposed by plaintiffs. To begin with, the injunction would immunize "life-sustaining activities such as sleeping, sitting or remaining in a public place...." Id. (emphasis added). Given this malleable phraseology, the proposal is fundamentally uncertain as to what conduct would be immunized from governmental prohibition. Although the language of the proposed injunction would clearly include many such activities, plaintiffs understandably exclude a variety of acts from their proffered examples of "life sustaining activities." This exclusion has the effect of removing the reductio ad absurdum of immunizing from punishment such arguably "life-sustaining activities" as urinating and defecating in public and aggressive panhandling, but it is not a limitation called for by the text of the proposed injunction. Cf. Glasheen v. City of Austin, 840 F. Supp. 62 (W.D.Tex.1993) (upholding city ordinance designed to reduce aggressive panhandling); Young v. New York City Transit Authority, 903 F.2d 146 (2nd Cir. 1990) (reversing lower court injunction enjoining defendant from prohibiting panhandling).
The converse of this problemthe proposed injunction's protection of activities which cannot be contended to be life sustainingconstitutes an additional infirmity with the proposed relief. For example, the proposed injunction would enjoin enforcement of laws prohibiting obstruction of public sidewalks by homeless individuals. When asked by the Court about this aspect of the injunction, plaintiffs' counsel suggested that if this is seen to be a problem, the City could enact less restrictive alternatives to the present ordinances, such as a prohibition on "obstructing a sidewalk at a time when people actually want to use the sidewalk.... [A]t 3:00 o'clock in the morning ... no one would conceivably want to use that location." Transcript at 86:18-23. This postulate is not self-evident to the Court; nor can it be taken as axiomatic that preventing other persons from using public sidewalks can be said to be a life sustaining activity.
Responding at the hearing to such concerns, counsel for plaintiffs suggested the proposed injunction could be readily amended, e.g. by striking the "such as" language from the proposed injunction. Even under such an amendment, and assuming plaintiffs would now make a narrowed list of the laws they seek to enjoin, various problems remain which would frustrate or render impossible enforcement of the proposed injunction. The most weighty of these problems is plaintiffs' stated objective to enjoin only that governmental activity directed at "homeless individuals." Id. As that phrase is defined by plaintiffs, classification of a person as "homeless" would require an individualized determination whether that person possessed a "fixed, regular, and adequate nighttime residence." *852 Plaintiffs' Mot. at 2.[3]
By plaintiffs' reasoning, any persons who did not possess such a residence would be immunized from enforcement of camping and lodging prohibitions, while those who did possess such a residence would not. The impossibility of such enforcement is best illustrated by concrete example. When asked by the Court whether, under the proposed injunction, the City would be able to cite plaintiff Joyce for public camping, counsel for plaintiffs answered as follows: such citation might be permissible if Joyce had lodging available that night, but would be otherwise impermissible. See Transcript at 77:3-78:13.
Counsel for plaintiffs suggested at the hearing that enforcement difficulties could be mitigated if police would merely ask questions to determine whether the person is "homeless" before citing him. See Transcript at 81:3-5. This suggestion is no solution; the obvious and inevitable permutations of this contemplated enforcement scenario make it plainly unenforceable.
These various, inherent uncertainties militate strongly against the Court's adoption of the proposed injunction or its proposed amended text. This conclusion follows by mandate of the Federal Rules of Civil Procedure, which provide that "[e]very order granting an injunction ... shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained...." Fed.R.Civ.P. 65(d). Various courts of review, moreover, when confronted by analogous situations in which unenforceable injunctive relief was sought, have acted in accord. See Schmidt, 414 U.S. 473, 94 S. Ct. 713 (vacating order enjoining state officials from enforcing "the present Wisconsin scheme" against those in plaintiff class); DeBremaecker v. Short, 433 F.2d 733 (5th Cir.1970) (finding too unspecific a proposed injunction against police intimidation of citizens "active in peace movement").
Given these definitional difficulties, implementation of the proposed injunction would realistically have the effect of requiring the City to altogether cease enforcing the challenged criminal laws. Plaintiffs have essentially acknowledged this result by their argument that, after enjoining enforcement of the listed criminal laws, the Court should continue on to prescribe a narrower "code of conduct" by which only the "homeless" would be immunized from various police enforcement measures. Responding to a question of the Court, counsel for plaintiffs suggested at the hearing that anyone who placed and used three tents on San Francisco's Civic Plaza for a period of three days would have engaged in unpunishable activity under the proposed injunction. See Transcript at 72:13-73:10. Plaintiffs, in sum, seek an order of this Court which would render the City altogether powerless to enforce its laws under the circumstances now challenged.
The Court cannot at this time sanction such a result. It would at a minimum be inconsistent with the underlying rationale of preliminary injunctive relief aimed at preservation of the status quo. See Chalk, 840 F.2d 701, 704 (9th Cir.1988) (primary purpose of preliminary injunction is to preserve status quo pending determination of action on the merits). A conceivable response to this holding is that the status quo would be maintained by granting the proposed injunction, as it would preserve the ability of the homeless to continue their conduct absent the threat of adverse police activity. Such an argument would be misplaced. The City's homeless have never been altogether immunized from enforcement of the various laws at issue here, whereas the City's prerogative to lawfully enforce the challenged provisions has not been previously disturbed.
Issuance of the proposed injunction would, moreover, necessitate that affirmative steps be taken by police in order to enforce the *853 challenged ordinances, i.e. determining whether the person had a "fixed, regular, and adequate nighttime residence." The requirement of affirmative conduct has been deemed a factor contrary to preservation of the status quo. See Southern Alameda Spanish Speaking Organization v. Union City, 424 F.2d 291, 296 (9th Cir.1970) (affirming denial of injunctive relief where grant of injunction "would require that affirmative steps now be taken in the direction of the ultimate remedy sought by appellants.").
The Court also notes that denial of the injunction at this stage of the litigation is consonant with even those cases said by plaintiffs to be most supportive of their lawsuit. In Pottinger v. Miami, 810 F. Supp. 1551, 1583 (S.D.Fla.1992) (appeal pending), the court expressly denied a proposed injunction until sufficient factual findings could be made so as to enable more precise definition of the plaintiffs' allegations. Similarly, in Church v. City of Huntsville, No. 93-C-1239-S (N.D.Ala. Sept. 23, 1993), a district court preliminarily enjoined a city from certain acts only after entering various findings of fact following trial on the evidentiary issues.
Accordingly, plaintiffs' proposed order granting injunctive relief must be denied at this time.
II. Under the Posited Legal Theories, Plaintiffs Have Not Demonstrated a Clear Probability of Success on the Merits
A. Whether the Eighth Amendment Prohibits Enforcement of Matrix as Punishing "Status"
Plaintiffs contend enforcement of the Matrix Program unconstitutionally punishes an asserted "status" of homelessness. The central thesis is that since plaintiffs are compelled to be on the street involuntarily, enforcement of laws which interfere with their ability to carry out life sustaining activities on the street must be prohibited. This argument, while arguably bolstered by decisions of courts in other jurisdictions, has not been adopted by any case within the Ninth Circuit. Moreover, it is the opinion of this Court that plaintiffs' position, if adopted, would represent an improper reach by this Court into matters appropriately governed by the State of California and the City of San Francisco.
1. Applicability of the Eighth Amendment to the Present Action
As a threshold matter, the City argues the Eighth Amendment is not implicated by those enforcement actions taken by the San Francisco Police Department under the Matrix Program. The City argues that the protections of the Eighth Amendment are invoked only when a party has been convicted of a criminal offense, and is therefore not applicable to the present case since none of the four named plaintiffs has been so convicted. This argument is unavailing.
Application of the Eighth Amendment, which is binding on states by operation of the Fourteenth Amendment, see Robinson v. California, 370 U.S. 660, 665-67, 82 S. Ct. 1417, 1420, 8 L. Ed. 2d 758 (1962), principally limits the types of punishment that can be imposed on those convicted of crimes. Ingraham v. Wright, 430 U.S. 651, 666-68, 97 S. Ct. 1401, 1410, 51 L. Ed. 2d 711 (1977). Although the City claims the protections of the Eighth Amendment are limited "only to `those convicted of crimes'," City's Opp'n at 10 (emphasis in original) (quoting Ingraham, 430 U.S. at 664, 97 S.Ct. at 1409), this proposition is refuted by the express language of Ingraham. In describing the breadth of application of the Eighth Amendment, the Court provided that, in addition to proscribing certain types of punishments to those convicted of crimes, the amendment "imposes substantive limits on what can be made criminal." Ingraham, 430 U.S. at 667, 97 S.Ct. at 1410 (acknowledging "[this] limitation as one to be applied sparingly." Id.). Accordingly, the protections of the Eighth Amendment cannot be deemed wholly inapplicable to the controversy now before the Court.
Separately, it is nevertheless appropriate for the Court to consider that members of the proposed class have actually been criminally convicted of committing Matrix-related infractionsa fact sufficient in itself to invoke consideration of the Eighth Amendment. The City argues the scope of the *854 Court's inquiry is limited to injuries incurred by the four named plaintiffs, and that because none of the named plaintiffs to this action has been so convicted, the Eighth Amendment is entirely inapplicable. As support for this assertion, the City cites to Zepeda v. United States Immigration and Naturalization Service, 753 F.2d 719 (9th Cir. 1983) (vacating class-wide grant of relief by district court after denial of class certification).
This argument is misplaced; it is instead the case that grievances of all proposed class members are properly in the purview of the Court at this time. "[W]hen the determination of the class action issue is delayed, a suit brought under Rule 23 should be treated as a class action ... until there is a determination that the action may not proceed under the rule." 7B Wright, Miller & Kane, Federal Practice and Procedure § 1785, at 106-07 (1986); see also N.Y. State Nat. Organization for Women v. Terry, 697 F. Supp. 1324, 1336 & n. 16 (S.D.N.Y.1988) (permitting class wide relief before class is certified; distinguishing Zepeda as a case in which district court had already denied certification of class). Since a determination has not yet been made whether plaintiffs can proceed as a class, it is appropriate at this stage that the Court consider the injuries alleged to individuals within the entire, proposed class. Since those injuries indisputably include criminal convictions of Matrix-related offenses, the applicability of the Eighth Amendment to this action can be considered to be established.
Finally, even in the event the Court were to restrict its inquiry in the manner the City contends is required, those injuries alleged by the named plaintiffs would suffice to invoke consideration of the Eighth Amendment. "[F]ines ... traditionally have been associated with the criminal process" and subjected to the limitations provided by the Eighth Amendment. Ingraham, 430 U.S. at 664, 97 S.Ct. at 1408. As it is the case that plaintiff O'Halloran has paid a fine imposed by citation, see Plaintiffs' Reply at 6; Bleich Decl., Exh. 2, the City's argument as to the wholesale inapplicability of the Eighth Amendment must be rejected.
2. Whether Homelessness is a "Status," so that Certain Acts of the Homeless are Protected from Penal Enforcement
Two Supreme Court decisions guide a determination of which behavior is to be deemed derivative of one's status, and therefore accorded constitutional protection from criminal prohibition. In Robinson, the Supreme Court held violative of the Eighth Amendment a California statute making it a criminal offense to "be addicted to the use of narcotics." 370 U.S. at 660 & n. 1, 82 S.Ct. at 1417 & n. 1. The Court explained that conviction under the statute was predicated not on the commission of any particular act, but merely on the "`status' of narcotic addiction." Id. at 666, 82 S.Ct. at 1420. Equating narcotic addiction with illness, the Court wrote,
It is unlikely that any State at this moment in history would attempt to make it a criminal offense for a person to be mentally ill, or a leper, or to be afflicted with a venereal disease.... But ... a law which made a criminal offense of such a disease would doubtless be universally thought to be an infliction of cruel and unusual punishment of the Eighth and Fourteenth Amendments.
Id.
Six years later, a plurality of the Court found no Eighth Amendment infirmity in a Texas statute penalizing one for being found in a state of intoxication in a public place. Powell v. Texas, 392 U.S. 514, 88 S. Ct. 2145, 20 L. Ed. 2d 1254 (1968). Writing for the four-Justice plurality, Justice Marshall rejected the appellant's argument that he "was `afflicted with the disease of chronic alcoholism,' [and] that `his appearance in public [while drunk was] ... not of his own volition'." Id. In so holding, the plurality refused to adopt a "constitutional holding that `a person may not be punished if the condition essential to constitute the defined crime is part of the pattern of his disease and is occasioned by a compulsion symptomatic of the disease.'" Id. at 521, 88 S.Ct. at 2149. Distinguishing the Court's decision in Robinson, Justice Marshall wrote,
*855 [A]ppellant was convicted, not for being a chronic alcoholic, but for being in public while drunk on a particular occasion. The State of Texas thus has not sought to punish a mere status, as California did in Robinson.... Rather, it has imposed upon appellant a criminal sanction for public behavior.... This seems a far cry from convicting one for being an addict, being a chronic alcoholic, being `mentally ill, or a leper....'
Id. at 532, 88 S.Ct. at 2154 (quoting Robinson, 370 U.S. at 666, 82 S.Ct. at 1420).
Plaintiffs argue, however, on the basis of Justice White's concurring opinion,[4] that Powell was decided as it was solely because the convicted defendant had not been shown to be on the streets involuntarily. See Plaintiffs' Mot. at 12; Plaintiffs' Reply at 12-14. In casting the fifth vote to uphold the appellant's conviction in Powell, Justice White wrote,
The fact remains that some chronic alcoholics must drink and hence must drink somewhere. Although many chronics have homes, many others do not. For all practical purposes the public streets may be home for these unfortunates, not because their disease compels them to be there, but because, drunk or sober, they have no place else to go and no place else to be when they are drinking. This is more a function of economic station than of disease, although the disease may lead to destitution and perpetuate that condition. For some of these alcoholics I would think a showing could be made that resisting drunkenness is impossible and that avoiding public places when intoxicated is also impossible. As applied to them this statute is in effect a law which bans a single act for which they may not be convicted under the Eighth Amendmentthe act of getting drunk.
392 U.S. at 551, 88 S.Ct. at 2163-64 (emphasis in original; footnote omitted).
Plaintiffs contend on the basis of this concurring opinion that, had the appellant in Powell been homeless, five justices would have voted to reverse his conviction. See Reply at 13. "Powell effectively establishes that a person who is involuntarily in public may not be punished for doing an act or being in a condition that he or she is powerless to avoid." Id.
a. Decisions Striking Vagrancy Statutes
As a threshold matter, plaintiffs' citation to various court decisions striking down statutes criminalizing vagrancy is of indirect assistance to the present analysis. See Plaintiffs' Mot. at 12-14. The statutes found offensive to the Constitution targeted, either explicitly or otherwise, "vagrancy." See, e.g., Wheeler v. Goodman, 306 F. Supp. 58, 62 (W.D.N.C.1969), vacated on other grounds, 401 U.S. 987, 91 S. Ct. 1219, 28 L. Ed. 2d 524 (1971) (statute criminalizing "vagrancy" violative of Eighth Amendment); Goldman v. Knecht, 295 F. Supp. 897 (D.Colo.1969) (statute outlawing "vagrancy" violative of Due Process Clause of Fourteenth Amendment); see also Smith v. Hill, 285 F. Supp. 556, 558 (E.D.N.C.1968).
The present efforts under the Matrix Program are dissimilar from those successfully challenged in the above cases. Matrix targets the commission of discrete acts of conduct, not a person's appearance as a vagrant vel non. To the extent plaintiffs argue that enforcement efforts pursuant to Matrix are, in practice, the equivalents of vagrancy statutes, those authorities discussed below more specifically address that particular contention.
b. Lower Court Applications of Robinson to Police Efforts Adversely Impacting the Homeless
A line of reasoning extending unconstitutional status penalizations to acts of the homeless has been adopted by at least two federal district courts and, most recently, a California court of appeal. In Pottinger v. Miami, 810 F. Supp. 1551, 1561-65 (S.D.Fla. 1992) (appeal pending), a district court extended the protections of the Eighth Amendment to limit the criminal prohibition of "innocent conduct" derivative of a certified class' status as homeless. In Church v. City of Huntsville, No. 93-C-1239-S, slip op. at 2 *856 (N.D.Ala. Sept. 23, 1993), a district court preliminarily enjoined a city from "harassing, intimidating, detaining or arresting members of the defined class, solely because of their status as homeless persons, for walking, talking, sleeping, or gathering in parks or other public places in the City of Huntsville." (emphasis in original).[5] Most recently, in Tobe v. City of Santa Ana, 22 Cal. App. 4th 228, 27 Cal. Rptr. 2d 386 (1994), a California court of appeal held, inter alia, that enforcement of a "camping ordinance" offended the protections of the Eighth Amendment.
The City emphasizes that the Matrix Program is far more comprehensive than those efforts challenged in the above cases, particularly with respect to Matrix's enforcement of numerous prohibitions against acts other than "innocent ones" such as sleeping and eating in public.[6]See City's Opp'n at 1. In any event, this distinction is of little relevance, since plaintiffs seek to enjoin only police activity prohibiting "life-sustaining activities such as sleeping, sitting or remaining in a public place...." See Plaintiffs' Proposed Order at 2.
c. Viability of Depicting Homelessness as Status
In moving the Court to implement the proposed injunctive relief, plaintiffs are unable to demonstrate a substantial likelihood of success on the merits of the underlying suit. The ultimate resolution of this lawsuit will require acceptance or rejection of the reasoning in those cases granting constitutional protection to acts derivative of a "status" of homelessness. The conclusion that such acts are protected appears, for various reasons, sufficiently problematic to discourage this Court from following at this time in its jurisprudential path.
Depicting homelessness as "status" is by no means self-evident, as the appellate court in Tobe suggests,[7] and as the court in Huntsville presumes.[8] That depiction, made upon serious analysis only in Pottinger, is a dubious extension of Robinson and Powell, and of questionable merit in light of concerns implicating federalism and the proper role of the Court in such adjudications.
Insofar as Pottinger attempts to reason from applicable Supreme Court precedent that homelessness equals a "status," and that acts derivative of such status are constitutionally protected, the reasoning of that court cannot be said at this stage of the litigation to be sufficiently persuasive to indicate a likely possibility of success on the merits of the underlying suit. Pottinger explained that,
[while a]n initial reading of Powell suggests that all conduct is outside the rule of Robinson ... [the] plurality was not confronted with a critical distinguishing factor that is unique to the plight of the homeless plaintiffs in this case: that they have no realistic choice but to live in public places.
Id. at 1563. Finding as a matter of fact that being homeless is only "rarely" a choice, id., and that alternative shelter was unavailable, id. at 1564, the court held that: *857 plaintiffs have no choice but to conduct involuntary, life-sustaining activities in public places. The harmless conduct for which they are arrested is inseparable from their involuntary condition of being homeless.
Id. The Court concluded that the City of Miami was liable to a class of homeless plaintiffs for "effectively punish[ing] them for something for which they may not be convicted under the eighth amendment." Id. at 1565.
This Court is unable to conclude at this time that the extension of the Eighth Amendment to the "acts" at issue here is warranted by governing authorities. Plaintiffs argue that the failure of the City to provide sufficient housing compels the conclusion that homelessness on the streets of San Francisco is cognizable as a status. This argument is unavailing at least for the fundamental reason that status cannot be defined as a function of the discretionary acts of others.[9]
On no occasion, moreover, has the Supreme Court invoked the Eighth Amendment in order to protect acts derivative of a person's status. Robinson prohibited penalizing a person based on their status as having been addicted, whereas the plurality in Powell approved a state's prosecution of the act of appearing intoxicated in public. What justified invocation of the Eighth Amendment in one case and not the other was not the difference between drug and alcohol addiction; such distinction is without analytical difference. Rather, the different results were reached because of the distinct targets of the challenged lawsone punished a status, the other an act. Justice Black, concurring in the plurality opinion in Powell, explained,
[In Robinson, we] explicitly limited our holding to the situation where no conduct of any kind is involved.... [A]ny attempt to explain Robinson as based solely on the lack of voluntariness encounters a number of logical difficulties.... 392 U.S. at 542, 88 S.Ct. at 2159 (Black, J., concurring).
Plaintiffs' argument that Powell would have been differently decided had the defendant been homeless does not reflect the holding of the case and is sheer speculation. While language in Justice White's concurrence can be argued to support that contention, such language was dicta. One can only hypothesize that Justice White would actually have cast his vote differently had the defendant been homeless. Nothing underscores this point more vividly than the fact that Justice White was one of two vigorous dissenters in Robinson.
As an analytical matter, more fundamentally, homelessness is not readily classified as a "status." Rather, as expressed for the plurality in Powell by Justice Marshall, there is a "substantial definitional distinction between a `status' ... and a `condition,'...." 392 U.S. at 533, 88 S.Ct. at 2155. While the concept of status might elude perfect definition, certain factors assist in its determination, such as the involuntariness of the acquisition of that quality (including the presence or not of that characteristic at birth), see Robinson, 370 U.S. at 665-69 & n. 9, 82 S.Ct. at 1420-21 & n. 9, and the degree to which an individual has control over that characteristic.
Examples of such "status" characteristics might include age, race, gender, national origin and illness. The reasoning of the Court in including drug addiction as status involved the analogy of drug addiction to a disease or an illness which might be contracted involuntarily. See id. While homelessness can be thrust upon an unwitting recipient, and while a person may be largely incapable of changing that condition, the distinction between the ability to eliminate one's drug addiction as compared to one's homelessness is a distinction in kind as much as in degree. To argue that homelessness is a status and not a condition, moreover, is to deny the efficacy of acts of social intervention to change the condition of those currently homeless.
*858 The Court must approach with hesitation any argument that science or statistics compels a conclusion that a certain condition be defined as a status. The Supreme Court has determined that drug addiction equals a status, and this Court is so bound. But the Supreme Court has not made such a determination with respect to homelessness, and because that situation is not directly analogous to drug addiction, it would be an untoward excursion by this Court into matters of social policy to accord to homelessness the protection of status.
In addition to the fact that homelessness does not analytically fit into a definition of a status under the contours of governing case law, the effects which would ensue from such a determination by this Court would be staggering. Courts seeking analytical consistency with such a holding would be required to provide constitutional protection to any condition over which a showing could be made that the defendant had no control. The natural consequence of such a recognition was clear to Justice White, who wrote that "[i]f it is `cruel and unusual punishment' to convict appellant for addiction [i.e. status], it is difficult to understand why it would be any less offensive ... to convict him for use on the same evidence of use which proved he was an addict. [i.e. acts derivative of status]." Robinson, 370 U.S. at 688, 82 S.Ct. at 1431-32 (dissenting opn.).
Consistent with these concerns is the devastating impact on state and local law enforcement efforts which a declaration of status would effect. As Justice Marshall wrote in Powell, recognition by federal courts of such status would create a "constitutional doctrine of criminal responsibility" in conflict with "essential considerations of federalism. ..." 392 U.S. at 535, 88 S.Ct. at 2155. In the same vein, Justice Black in his concurring opinion in Powell declined to erect the constitutional barrier sought by the defendant, explaining that,
To adopt this position would significantly limit the States in their efforts to deal with a widespread and important social problem and would do so by announcing a revolutionary doctrine of constitutional law that would also tightly restrict state power to deal with a wide variety of other harmful conduct.
Id. at 537, 88 S.Ct. at 2156-57. By parity of reasoning, this Court is convinced that adopting the central thesis of plaintiffs in this case would be an equally revolutionary doctrinal decision and would be an equally inappropriate intrusion into state and local authority.
Although the plaintiffs' Eighth Amendment challenge to the Matrix Program law enforcement activities will appropriately be subject to further scrutiny in this case, on this record the plaintiffs have not demonstrated a probability of success on the merits of this claim.
B. Whether Matrix Violates the Equal Protection Clause
Predicate to an equal protection clause violation is a finding of governmental action, undertaken with an intent to discriminate against a particular individual or class of individuals. See Personnel Administrator of Mass. v. Feeney, 442 U.S. 256, 271-72, 99 S. Ct. 2282, 2292, 60 L. Ed. 2d 870 (1979). Such intent may be evinced by statutory language, see, e.g., Craig v. Boren, 429 U.S. 190, 97 S. Ct. 451, 50 L. Ed. 2d 397 (1976), or in instances where an impact which cannot be explained on a neutral ground unmasks an invidious discrimination. See, e.g., Yick Wo v. Hopkins, 118 U.S. 356, 6 S. Ct. 1064, 30 L. Ed. 220 (1886); Feeney, 442 U.S. at 274-76, 99 S.Ct. at 2294. Under the latter approach, a neutral law found to have a disproportionately adverse effect upon a minority classification will be deemed unconstitutional only if that impact can be traced to a discriminatory purpose. Washington v. Davis, 426 U.S. 229, 96 S. Ct. 2040, 48 L. Ed. 2d 597 (1976); Feeney, 442 U.S. at 272, 99 S.Ct. at 2292 ("When the basic classification is rationally related, uneven effects upon particular groups within a class are ordinarily of no constitutional concern.").
In the present case, plaintiffs have not at this time demonstrated a likelihood of success on the merits of the equal protection claim, since the City's action has not been taken with an evinced intent to discriminate against an identifiable group. As discussed *859 above, various directives issued within the Police Department mandate the non-discriminatory enforcement of Matrix. See, e.g., "Update on Matrix Quality of Life Program," Petrini Decl., Exh. A at 1-2 (providing that "[r]ights of the homeless must be preserved"); Department Bulletin on "Rights of the Homeless", discussed in Petrini Decl. at ¶ 2 (stating that "[all members of the Department] are obligated to treat all persons equally, regardless of their economic or living conditions. The homeless enjoy the same legal and individual rights afforded to others. Members shall at all times respect these rights...."). Further, the Police Department has, during the pendency of the Matrix Program, conducted continuing education for officers regarding non-discriminatory enforcement of the Program. City's Opp'n at 8.
It has not been proven at this time that Matrix was implemented with the aim of discriminating against the homeless. That enforcement of Matrix will, de facto, fall predominantly on the homeless does not in itself effect an equal protection clause violation. See City's Opp'n at 22. Notably, the absence of such a finding of intentional discrimination at this time distinguishes the present case from United States Dept. of Agriculture v. Moreno, 413 U.S. 528, 93 S. Ct. 2821, 37 L. Ed. 2d 782 (1973) (invalidating federal statute that excluded recipients living with unrelated individuals from participation in food stamp program, where legislative history evinced intent to prevent "hippies" and "hippie communities" from participating), City of Cleburne v. Cleburne Living Ctr., Inc., 473 U.S. 432, 437, 105 S. Ct. 3249, 3253, 87 L. Ed. 2d 313 (1985) (overturning city's decision, taken pursuant to zoning ordinance, denying permit for a home for mentally retarded where "motivated primarily by the fact that the residents [were] mentally retarded"), and Parr v. Municipal Court, 3 Cal. 3d 861, 863, 92 Cal. Rptr. 153, 479 P.2d 353, cert. denied, 404 U.S. 869, 92 S. Ct. 46, 30 L. Ed. 2d 113 (1971) (finding unconstitutional a city ordinance enacted with an accompanying declaration condemning "undesirable and unsanitary visitors ... sometimes known as `hippies'"). In each of these cases, either the statutory language or the legislative history underlying the challenged measure revealed an intent to discriminate against a particular group. See City's Opp'n at 22-23.
Even were plaintiffs able at this time to prove an intent to discriminate against the homeless, the challenged sections of the Program might nonetheless survive constitutional scrutiny. Only in cases where the challenged action is aimed at a suspect classification, such as race or gender, or premised upon the exercise of a fundamental right, will the governmental action be subjected to a heightened scrutiny. See Feeney, 442 U.S. at 271-74, 99 S.Ct. at 2292-93.
Counsel for plaintiff proposed at the hearing that this Court should be the first to recognize as a fundamental right the "right to sleep." See Transcript at 35:4-16. This is an invitation the Court, in its exercise of judicial restraint, must decline. Despite the seeming innocence of a right so defined, the natural corollary to recognition of a right is an obligation to enforce it. The discovery of a right to sleep concomitantly requires prohibition of the government's interference with that right. This endeavor, aside from creating a jurisprudential morass, would involve this unelected branch of government in a legislative role for which it is neither fit, nor easily divested once established.
It is accordingly likely that a classification of the homeless would be subjected only to a rational basis review, which the City might well prove in this instance. As the Court has declined to find suspect classifications on the basis of either wealth, Kadrmas v. Dickinson Public Schools, 487 U.S. 450, 108 S. Ct. 2481, 101 L. Ed. 2d 399 (1988), or housing, Lindsey, 405 U.S. 56, 92 S. Ct. 862, the challenged Program would likely be tested only against a rational basis. Moreover, the very fact of a discriminatory purpose may not invalidate a measure otherwise subject to rational basis review. In Parr, a four-three decision adjudicating an equal protection claim on federal constitutional grounds, the dissenting opinion noted:
`the consideration of motive is complicated by the fact that it is altogether possible for a law which is the expression of a forbidden motive to be a good law. What is to *860 be done with a law which, passed with the most questionable of motives, still makes a positive contribution to the public good? ...' ... [E]ven if we assume [the challenged ordinance was motivated by a discriminatory intent], that ordinance by its terms applies to `any person' violating its provisions. In spite of its assuredly improper motives, it is a `good law.'
3 Cal.3d at 872, 92 Cal. Rptr. 153, 479 P.2d 353 (Burke, J., dissenting) (emphasis in original; citations omitted). Because the challenged Program might therefore be determined to be rationally related to assertedly legitimate interests of protecting public safety and health, and preserving parks for their intended purposes, see City's Opp'n at 22, a finding by the Court that plaintiffs had proved a substantial likelihood of success on the merits of the equal protection claim is not proper on this record.
C. Whether the Matrix Program Impermissibly Burdens the Right to Travel
This argument proffered by plaintiffs is essentially a subset of equal protection analysis, in which the right to travel is deemed a fundamental right which a state government may not abridge unless necessary to achieve a compelling state interest. See Shapiro v. Thompson, 394 U.S. 618, 627-35, 89 S. Ct. 1322, 1328-31, 22 L. Ed. 2d 600 (1969). The right to travel has found its strongest expression in the context of attempts by states to discourage the immigration of indigents. The application of strict scrutiny to such laws, however, has been limited to those which are facially discriminatory. See id. (holding unconstitutional statutory provision requiring welfare assistance applicants to reside in state at least one year immediately preceding application for assistance); Edwards v. California, 314 U.S. 160, 62 S. Ct. 164, 86 L. Ed. 119 (1941) (curtailing immigration of new residents); Memorial Hospital v. Maricopa County, 415 U.S. 250, 94 S. Ct. 1076, 39 L. Ed. 2d 306 (1974) (denying medical services to new residents).
The Matrix Program does not facially discriminate between those who are, and those who might be, the City's residents. Accordingly, the application of strict scrutiny to the Program would be unwarranted. See City's Opp'n at 20. Again, plaintiffs cite Pottinger, Huntsville and Tobe in support of their argument; this Court cannot conclude at this time that each case is sufficiently persuasive that it should now be followed.
As Huntsville does not even discuss the right to travel, see Plaintiffs' Mot. at 19-20, it cannot be deemed supporting authority. Pottinger and Tobe, conversely, address the issue squarely, but in a manner which is not necessarily persuasive to the Court. Applying strict scrutiny to the challenged enforcement efforts, the court in Pottinger found the City's arrests violative of the right to travel:
[E]nforcement of the challenged ordinances against homeless individuals significantly burdens their freedom of movement. It has the effect of preventing homeless people from coming into the City. Primarily, however, it has the effect of expelling those already present and of significantly burdening their freedom of movement within the City and the state.
810 F.Supp. at 1581.
These decisions constitute extensions of the right to travel which may well be unwarranted under governing Supreme Court precedent. Initially, to the extent these cases apply strict scrutiny to facially neutral laws impacting intrastate travel, they may be wrongly decided. Assuming the right to travel encompasses protection to intrastate travel,[10] it is nevertheless doubtful that facially neutral laws impacting intrastate travel should be subjected to such strict scrutiny. "Both the United States Supreme Court and [the California Supreme Court] have refused to apply the strict construction test to legislation ... which does not penalize travel and *861 resettlement [through disparate treatment] but merely makes it more difficult for the outsider to establish his residence in the place of his choosing." Associated Home Builders v. Livermore, 18 Cal. 3d 582, 603, 135 Cal. Rptr. 41, 557 P.2d 473 (1976). Insofar as the courts in Pottinger and Tobe invalidate not facially discriminatory measures, but police efforts adversely impacting the homeless, those decisions are not sufficiently persuasive to convince this Court of any likelihood of success on the merits of the right to travel claim.
D. Whether the Matrix Program Violates Plaintiffs' Rights to Due Process of Law
Plaintiffs contend the Matrix Program has been enforced in violation of the due process clauses of the United States and California Constitutions. Since plaintiffs have not specifically identified any authority supporting a broader reading of due process protections on independent state constitutional grounds, see Cal. Const., art. 1, § 7(a), the Fourteenth Amendment to the United States Constitution provides the appropriate analysis. Plaintiffs specifically argue that due process has been violated by employing punitive policing measures against the homeless for sleeping in public parks; plaintiffs also argue that certain state codes are unconstitutionally vague.
1. Punishing the Homeless for Sitting or Sleeping in Parks
Plaintiffs claim that San Francisco Park Code section 3.12 has been applied by police in an unconstitutional manner. That section provides,
No person shall construct or maintain any building, structure, tent or any other thing in any park that may be used for housing accommodations or camping, except by permission from the Recreation and Park Commission.
San Francisco, Cal., Park Code § 3.12 (1981). Plaintiffs contend the Police Department has impermissibly construed this provision to justify citing, arresting, threatening and "moving along" those "persons guilty of nothing more than sitting on park benches with their personal possessions or lying on or under blankets on the ground." Plaintiffs' Mot. at 21-22. Plaintiffs have submitted declarations of various homeless persons supporting the asserted application of the San Francisco Park Code section. See, e.g., Homeless Decls. at 34 (lying down atop blankets eating lunch), 121 ("sleeping on bench"), 125 ("sleeping on boxes").
It appears, if plaintiffs have accurately depicted the manner in which the section is enforced, that the section may have been applied to conduct not covered by the section and may have been enforced unconstitutionally. The City's initial defense, which is wrongly invoked, is that the defendant to this action is not an individual officer, but the City itself, which will not be found liable unless its officers committed an act pursuant to a "formal policy" or a "longstanding practice or custom which constitutes the `standard operating procedure' of the local governmental entity." Gillette v. Delmore, 979 F.2d 1342, 1346 (9th Cir.1992). The City argues that because its police officers were continually educated in the proper enforcement of the camping ordinance, see, e.g., Petrini Decl., Exh. A (instructing police officers that "[t]he mere lying or sleeping on or in a bedroll in and of itself does not constitute a violation"), plaintiffs would be unable to succeed on the merits of this claim. This defense misreads governing law. Where prospective relief only is sought, the Ninth Circuit has provided that the "official policy or custom requirement" does not apply. See Chaloux v. Killeen, 886 F.2d 247, 250-51 (9th Cir.1989); Reply at 27.
Issuance of the remedy sought by plaintiffs would nevertheless be premature at this stage of the litigation. Police have been continually and increasingly educated in proper enforcement of the measures. Moreover, as it appears many of the alleged violations occurred prior to such instructions, it has not been sufficiently demonstrated by plaintiffs that the problematic enforcement continues, such that the continuing injury predicate to issuance of injunctive relief still exists. See Pomerantz v. County of Los Angeles, 674 F.2d 1288 (9th Cir.1982) (finding *862 of mootness generally bars a court from considering claim for injunctive relief).
2. Overbreadth and Vagueness Challenges to Enforcement Measures
Plaintiffs also contend that San Francisco Park Code section 3.12, discussed supra, and California Penal Code Section 647(i)[11] are unconstitutionally overbroad and vague. "[A] court's first task is to determine whether the enactment reaches a substantial amount of constitutionally protected conduct. If it does not, then the overbreadth challenge must fail. The court should then examine the facial vagueness challenge and, assuming the enactment implicates no constitutionally protected conduct, should uphold the challenge only if the enactment is impermissibly vague in all of its applications.... A court should therefore examine the complainant's conduct before analyzing other hypothetical applications of the law." Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 494-95, 102 S. Ct. 1186, 1191, 71 L. Ed. 2d 362 (1982) (emphasis added; footnote omitted).
It is unlikely that the overbreadth and vagueness challenges can be maintained. Overbreadth is a challenge which may be successfully leveled only where First Amendment concerns are at stake. See Schall v. Martin, 467 U.S. 253, 268 n. 18, 104 S. Ct. 2403, 2412 n. 18, 81 L. Ed. 2d 207 (1984) ("[O]utside the limited First Amendment context, a criminal statute may not be attacked as overbroad."). The applicability of the First Amendment to the present case has not been suggested by any of the parties, nor would such an argument strike the Court as a meritorious one. Accordingly, sufficient problems attach to the overbreadth challenge that it cannot support plaintiffs' request for injunctive relief.
The possible success of the vagueness challenge is also in doubt, as it seems readily apparent the measure is not "impermissibly vague in all of its applications...." Village of Hoffman Est., 455 U.S. at 495, 102 S.Ct. at 1191. This likely failing follows from plaintiffs' inability to prove at this stage that police have been granted an excess of discretion pursuant to the statute. Plaintiffs assert vagueness in the San Francisco Park Code prohibition against maintaining "any other thing" that "may be used for ... camping", and in enforcing the Penal Code prohibition against one "who lodges in ... public," Plaintiffs' Mot. at 23-24, claiming "[t]he vagueness of these [Park Code] terms has apparently allowed San Francisco police officers to determine that blankets or possessions in carts are sufficiently connected to `camping' to violate the ordinance." Id. at 23. Plaintiffs have also submitted declarations of homeless persons supporting these assertions, and a concession by Assistant District Attorney Paul Cummins to the effect that the standards for enforcement are vague. See id. at 24.
In consideration of plaintiffs' burden to prove the section "impermissibly vague in all of its applications," Village of Hoffman Est., 455 U.S. at 495, 102 S.Ct. at 1191, it is not clear to the Court that plaintiffs can make this showing with respect to the challenged ordinance. A decision of persuasive authority supports this "common-sense understanding of camping." See United States v. Thomas, 864 F.2d 188, 196 (D.C.Cir.1988) (upholding camping regulations against vagueness challenge). Moreover, numerous directives within the Police Department defend the measures against the charge of problematic enforcement. The City contends that the Police Department's enforcement memoranda limit application of the ordinance to situations where the person has set up living accommodations. See City's Opp'n at 25; Petrini Decl., Exh. C ("indicia of camping may include the accoutrements of a campsite, such as cooking utensils, clothing hung out, groups of sleeping bags and bedding in a cluster, etc.").
*863 Similarly, the challenged Penal Code section cannot be concluded by the Court at this time to be unconstitutionally vague. Read in conjunction with supplemental memoranda, the challenged measures appear, as a constitutional matter, sufficiently specific. Police officers were specifically cautioned in a September 17, 1993 memorandum that "the mere lying or sleeping on or in a bedroll of and in itself does not constitute a violation." See Petrini Decl., Exh. A. While plaintiffs argue the additional memoranda were circulated too late to save the enforcement measures from vagueness, see Reply at 23, and also that they do not eliminate the confusion, it is far from clear that plaintiffs could meet the requisite showing that the measure was impermissibly vague in all its applications. Accordingly, even if the limits of permissible enforcement of these sections have not been perfectly elucidated, preliminary injunctive relief is inappropriate at this stage of the litigation.
E. The Reasonableness of Police Seizures of Property
Plaintiffs contend that under the auspices of "cleaning up the streets," the City has been responsible for the confiscation and destruction of the private property of the homeless in violation of the Fourth Amendment to the United States Constitution, as well as the California Constitution and California Civil Code section 2080. Plaintiffs' Mot. at 24.
Under the Fourth Amendment prohibition of "unreasonable searches and seizures," U.S. Const. amend IV, a seizure has been found to occur whenever "there is some meaningful interference with an individual's possessory interests in that property." Soldal v. Cook County, ___ U.S. ___, ___, 113 S. Ct. 538, 544, 121 L. Ed. 2d 450 (1992). A seizure is deemed unreasonable if the government's legitimate interest in the search or seizure does not outweigh the individual's interest in the property seized.
Under California law,
Any person who finds and takes possession of any ... personal property ... shall, within a reasonable time, inform the owner, if known, and make restitution without compensation, except a reasonable charge for saving and taking care of the property.
Cal.Civ.Code § 2080. Alternatively, a city "may adopt reasonable regulations for the care, restitution, sale, or destruction of unclaimed property in its possession." Cal.Civ. Code § 2080.6.
Police Department General Order No. Q-1, presumably enacted pursuant to Cal.Civ. Code § 2080.6, provides a detailed procedure for the identification and safekeeping of property which comes into the possession of the police. That property which is believed to be abandoned must be "returned to its rightful owner at the district station if the property cannot be connected to a crime and is otherwise legal to possess." "General Order Q-1," Rosen Decl., Exh 10 at 5.
Plaintiffs argue the City has failed to comply with the requirements of Civil Code section 2080 or with General Order Q-1, and that the resulting procedures utilized by police have effected a constitutional violation. In conjunction with their argument, plaintiffs cite numerous supporting declarations. See, e.g. T. Smith Decl. (all personal belongings including medicine confiscated and destroyed).
Initially, the City defends on the basis that there is no reasonable expectation of privacy when property is left unattended in public places, citing United States v. Wider, 951 F.2d 1283 (D.C.Cir.1991) (satchel left on public steps). As plaintiffs correctly argue, however, this is true only where the property is intentionally abandoned. See id. (crack cocaine intentionally abandoned by suspect fleeing from police).
Fourth Amendment protections therefore attach to unattended property, and a constitutional analysis is appropriate in the present case. The City argues that, while the law protects unabandoned property left in public places, see Cal.Civ.Code § 1808; San Francisco Police Code § 1400, neither state nor local laws protect abandoned property. City's Opp'n at 27 (citing Cal.Civ.Code § 2080.7); San Francisco Police Code § 1408. The City argues the distinction between abandoned and unabandoned property involves a "difficult determination", and that *864 in order to insure that unabandoned property is stored and held for possible return to its owner, "the City recently has promulgated policies to address this issue." City's Opp'n at 27. Specifically, the City cites the practice of the Department of Public Works which directs that property of value found in encampment or other public places is to be bagged, tagged and held at a dispatch office for its owner within ninety days. Id.
Given this new procedure, the constitutionality of which is not challenged by plaintiffs, it is clear that the Fourth Amendment argument cannot constitute the basis for injunctive relief at this time. Plaintiffs argue only that the procedure was begun belatedlyon January 3, 1994and seemed "timed to anticipate legal action." Replay at 30 & n. 25. Plaintiffs' unsubstantiated assertion that the injunction should be granted to prevent a "likelihood of recurrence," id. at 30, is speculative. Such a likelihood is sufficiently attenuated that a grant of injunctive relief, though perhaps appropriate before the new procedure was implemented, should not issue at this time. See City of Los Angeles v. Lyons, 461 U.S. 95, 110-12, 103 S. Ct. 1660, 1670, 75 L. Ed. 2d 675 (1983) (equitable relief unavailable where no showing of any real or immediate threat that plaintiff will be wronged again).
CONCLUSION
In common with many communities across the country, the City is faced with a homeless population of tragic dimension. Today, plaintiffs have brought that societal problem before the Court, seeking a legal judgment on the efforts adopted by the City in response to this problem.
The role of the Court is limited structurally by the fact that it may exercise only judicial power, and technically by the fact that plaintiffs seek extraordinary pre-trial relief. The Court does not find that plaintiffs have made a showing at this time that constitutional barriers exist which preclude that effort. Accordingly, the Court's judgment at this stage of the litigation is to permit the City to continue enforcing those aspects of the Matrix Program now challenged by plaintiffs.
The Court therefore concludes that the injunction sought, both as it stands now and as plaintiffs have proposed to modify it, is not sufficiently specific to be enforceable. Further, upon conducting the required balance of harm and merit, the Court finds that plaintiffs have failed to establish a sufficient probability of success on the merits to warrant injunctive relief. Accordingly, plaintiffs' motion for a preliminary injunction is DENIED.
IT IS SO ORDERED.
NOTES
[1] According to Riker, seventeen homeless persons were held in custody as a result of high bail amounts accruing from Matrix-identified infraction warrants. Riker Decl. at ¶ 4. In each instance, the individual was released after being sentenced to "credit for time served." Id.
[2] This definition is borrowed from Congressional legislation commonly referred to as the Stewart B. McKinney Homeless Assistance Act. See 42 U.S.C. § 11301 et seq. The Act defines a "homeless individual" to include:
(1) an individual who lacks a fixed, regular, and adequate nighttime residence; and
(2) an individual who has a primary nighttime residence that is
(A) a supervised publicly or privately operated shelter designed to provide temporary living accommodations (including welfare hotels, congregate shelters, and transitional housing for the mentally ill);
(B) an institution that provides a temporary residence for individuals intended to be institutionalized; or
(C) a public or private place not designated for, or ordinarily used as, a regular sleeping accommodation for human beings.
[3] The McKinney Act, which provides this definition, has among its aims the federal funding of various programs of assistance to the homeless. The Act's terms and definitions were not intended by Congress to apply in circumstances not considered by Congress, nor does this Court find Congress' definition an appropriate one under which to view the present claims. As counsel for plaintiffs contended at the hearing, a person living in a housing clinic would generally be considered "homeless" for purposes of the McKinney Act since many clinics are "inadequate." See Transcript at 21:3-23:7.
[4] Justice White voted to affirm the conviction on the basis that the appellant had failed to prove he had been in public involuntarily. See 392 U.S. at 553-55, 88 S.Ct. at 2165.
[5] In preliminary findings, the court found the "unannounced, but nonetheless official, policy of the City of Huntsville to isolate homeless citizens from the established residential areas ... [and] `show these folks where the city limits are....,' i.e., to remove this class of citizens from Huntsville." Huntsville, Prelim. Fdgs. at ¶ 5 (N.D.Ala. Sept. 23, 1993).
[6] For example, the programs operated by Miami and San Francisco are not, as plaintiffs suggest, "virtually identical." In Pottinger, the court found the Eighth Amendment violated when the City punished "sleeping, eating and other innocent conduct." Id. at 1565. The court emphasized that "plaintiffs [had] not argued that the City should not be able to arrest them for public drunkenness or any type of conduct that might be harmful to themselves or to others." Id. Similarly, the court in Tobe was exclusively concerned with a "camping ordinance" limiting the permissible uses of public streets and areas. In contrast to these measures, the Matrix Program is addressed in large part at prohibiting such conduct which is unmistakably "harmful" to plaintiffs or others. See supra at 846-47.
[7] In Tobe, the court engaged in an abbreviated policy analysis yielding the conclusion that homelessness is a status; the court's citations to Robinson and Powell were no more than ornamental.
[8] Neither the preliminary injunction nor the preliminary findings issued by the court in Huntsville cites to a single case or engages in any analysis with respect to the legal issues presented.
[9] As the Supreme Court has declined to find any "constitutional guarantee of access to dwellings of a particular quality," Lindsey v. Normet, 405 U.S. 56, 74, 92 S. Ct. 862, 874, 31 L. Ed. 2d 36 (1972), the housing provided to the City's homeless is a matter for the discretion of the City and State.
[10] The Supreme Court has not directly addressed whether the right to travel includes intrastate travel. See Pottinger 810 F.Supp. at 1579. The Court has suggested, however, that such a broad reading is permissible. See Kolender v. Lawson, 461 U.S. 352, 355-56, 103 S. Ct. 1855, 1857, 75 L. Ed. 2d 903 (1983) (law prohibiting wandering the streets at night without identification implicated "consideration of the constitutional right to freedom of movement."). Moreover, the federal circuit courts of appeals have uniformly held that the right encompasses intrastate travel. See Plaintiffs' Mot. at 19 n. 10.
[11] That section provides:
Every person who commits any of the following acts is guilty of disorderly conduct, a misdemeanor: ... Who lodges in any building, structure, vehicle, or place, whether public or private, without the permission of the owner or person entitled to the possession or in control thereof.
Cal. Penal Code § 647(i). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1772208/ | 624 S.W.2d 602 (1981)
HANEY ELECTRIC COMPANY and Marion Willard Stewart, Appellants,
v.
Thomas M. HURST, Cheryl Hurst, and Howard Lane, Appellees.
No. 20725.
Court of Civil Appeals of Texas, Dallas.
August 17, 1981.
Rehearing Denied September 24, 1981.
*604 Richard Gary Thomas, Donald F. Lively, Maxwell, Bennett, Thomas, Carlton & Maxwell, Dallas, for appellants.
Charles H. Clark, Tyler, Morton A. Rudberg, Carter, Jones, Magee, Rudberg, Moss & Mayes, Dallas, for appellee.
Before GUITTARD, C. J., and CARVER and STEPHENS, JJ.
GUITTARD, Chief Justice.
This case arose from a three-vehicle collision on LBJ Freeway in Dallas in which one driver was killed and another seriously injured. Separate suits against the driver of the third vehicle and its corporate owner were consolidated and tried before a jury, which attributed the negligence 30% to the deceased driver, 30% to the injured driver, and 40% to the driver of defendants' vehicle. Judgment was rendered for each claimant for 70% of the damage, and defendants appeal. We reverse and remand for a new trial because of the exclusion of certain evidence, and we hold that each plaintiff's damages must be assessed by comparing it with the negligence attributed to the defendants, without considering the negligence attributed to the other plaintiff.
1. Res Gestae
Defendants' first point complains of the exclusion of an alleged res gestae statement of the driver of a fourth vehicle to the effect that his vehicle was also involved in the collision. We hold that the ruling was error and was probably prejudicial to defendants in that the excluded testimony tended to corroborate defendants' theory of how the collision occurred.
Plaintiffs' evidence tended to show that only three vehicles were involved in the collision. According to plaintiffs, all three were traveling in an easterly direction and in the same lane of traffic, with a Datsun stationwagon driven by the decedent Evelyn Lane in the lead. Mrs. Lane apparently drove over some metallic debris which became lodged under her car and affected her steering. According to plaintiffs, she brought the Datsun to a complete stop. Immediately to her rear was a United States postal truck driven by plaintiff Thomas Hurst. According to Hurst, he observed Mrs. Lane's difficulty and brought his truck to a stop twenty-five to thirty feet behind the Datsun. Then, according to plaintiffs' witnesses, a tractor-trailer truck operated by defendant Marion Stewart and owned by defendant Haney Electric Company struck the postal truck in the rear and knocked it violently against the Datsun. There was evidence that Hurst's postal truck brust into flame upon impact from the Haney truck and that massive damage was caused to the rear of the Datsun. Mrs. Lane suffered fatal burns, as well as other injuries, and Hurst also suffered burns.
Defendant Stewart testified that he was traveling in the second lane from the center strip, and the other vehicles, including the Datsun, the postal truck, and a light-colored *605 pickup truck, were traveling in the third lane. Stewart said that the Datsun suddenly slowed and began weaving, and then the postal truck closed in and "ran into the back of the Datsun with a fairly heavy force." After the impact, the two vehicles looked like their bumpers had locked because they stayed close together and remained in alignment. Immediately after the first impact, according to Stewart, the light-colored pickup looked like it hit the postal truck or "came extremely close to it." The Datsun and the postal truck then moved quickly into the second lane, and Stewart, who had started to pull over to the left, applied his brakes, but was unable to stop. His truck struck the postal truck heavily from the rear and then came to a stop in the first lane, next to the center strip. He got out of his truck and went to the Datsun, which was on fire, and attempted to open the door, but was unable to do so. Stewart testified that the light-colored pickup was parked near the scene after the impact.
The excluded testimony was that of defendants' witness, Joseph Horn. Horn testified without objection that he was traveling in the first lane. He said that the vehicle immediately in front of him in the third lane was a pickup truck and ahead of that was a postal truck. He did not see what was in front of the postal truck. He saw an impact between the pickup and the postal truck, and he immediately swerved to the right and stopped on the shoulder. He did not see the impact between the Haney truck and the other vehicles. He helped the postal driver out of his truck, and he also talked to the driver of the pickup, whom he described as "a young boy about twenty-two, twenty-three years old" and "very scared."
Defendants' counsel then attempted to elicit testimony from Horn concerning statements made to him at the scene by the driver of the pickup. Plaintiffs objected to the questions as leading and also on the ground of hearsay. The record does not show clearly whether the hearsay objection was sustained. The judge instructed counsel not to lead the witness and suggested that he "repropound the question to him and get it clearer." Counsel's last attempt to elicit the testimony from the witness on the stand was leading, and the objection on that ground was sustained. The examination then proceeded on other matters and the witness was excused. Later, before defendants' closed their case, they offered the following from Horn's deposition:
QUESTION: Now you said something just a little bit ago about a boy in a pickup truck. Did you talk to somebody who was involved in the accident?
ANSWER: Yes, right after the accident I ran up to the back of the postal truck and that's beforeI got there quick enough to where the fire really hadn't developed fully yet. And this boy, he was a tall slim boy I guess, say, twenty-one, twenty-two, twenty-three years old, and had on a white T-shirt. And he was shaking like a leaf. And I said, Well, what happened to you? You know, he was scared to death, I ain't kidding you. He was in worse shape than anybody. I said, What happened to you? And he said, Lord, I just barely got through there and got out of there. And I said, Well, where was you? And he said, I was right behind the Postal truck. And I said, Well, what did it do to you? Did it hurt you any? And he says, No, he says, I just barely clipped it. He said, When I saw the lights come on, he zipped to the right too and he just glanced off the back of the postal truck. And he told me all that happened to his truck was just a small little crease in the left front fender.
Plaintiff's counsel objected on the grounds that the testimony did not meet the res gestae test, that the answer was not responsive, and that the offer was an attempt to impeach defendants' own witness. The court then denied defendants' offer of the deposition testimony.
We conclude that the testimony was within the hearsay exception relating to spontaneous declarations made under the influence of an exciting event, as formulated by the supreme court in Truck Insurance *606 Exchange v. Michling, 364 S.W.2d 172, 173-75 (Tex.1963). Plaintiffs contend that the requirements of the rule are not met because defendants never established the exciting event by independent proof, as required by Michling. In this connection, plaintiffs insist that the exciting event in question was the alleged collision between the light-colored pickup and the postal truck, and since this event is not established by independent evidence, the alleged res gestae statement is not admissible to prove it.
We do not take such a narrow view of the exception. The reason for requiring an exciting event is to establish trustworthiness on the theory that nervous excitement excludes reasoned reflection and indicates that the utterance is a spontaneous and sincere response to the actual sensation and perceptions already produced by the external shock. Michling, supra at 173, quoting J. Wigmore, Evidence § 1747 (3d ed. 1940). The evidence here establishes beyond question an exciting event, which may or may not have included a collision between the light-colored pickup and the postal truck. Other evidence establishes a collision involving at least three vehicles resulting in fire and serious personal injuries. Horn's testimony, as well as Stewart's, tends to show that the light-colored pickup was traveling immediately behind the postal truck. Stewart testified that the pickup either struck the postal truck or narrowly missed it by swerving suddenly to the right, and Horn testified that he saw an impact between them. Thus, if the collision between the other vehicles did not provide the requisite excitement, Horn's testimony concerning the impact between the pickup and the postal truck is sufficient independent proof to establish the necessary exciting event.
Plaintiffs also argue that defendants never made a proper offer of Horn's testimony. We agree that the court properly sustained plaintiffs' objection to the leading questions when Horn was on the stand. The deposition testimony, however, presents a different question. That testimony was independently offered at the close of defendants' evidence. In it the witness definitely related the young man's statements without any prompting by counsel. Though perhaps not admissible for impeachment, the deposition was not offered for that purpose. Contradiction of the deposition by what the witness said on the stand does not deprive the deposition of probative value because the inconsistency is a matter of credibility to be determined by the trier of the facts. St. John v. Fitzgerald, 281 S.W.2d 201, 207 (Tex.Civ.App.Eastland 1955, no writ); Lynch Oil Co. v. Shepard, 242 S.W.2d 217, 218 (Tex.Civ.App.Eastland 1951, writ ref'd). Consequently, we hold that the deposition testimony was admissible.
We recognize that the relevant testimony of the witness Horn in the deposition was not strictly responsive to the preceding question and that plaintiff objected to it on that ground at the trial. We hold, however, that unresponsive testimony is not inadmissible on that ground alone. Adams v. State, 156 Tex. Crim. 63, 225 S.W.2d 568, 570 (1949); Jones v. State, 76 Tex. Crim. 398, 174 S.W. 1071, 1075 (1915); Dallas Transit Co. v. Hammer, 390 S.W.2d 823, 828 (Tex.Civ. App.Dallas 1965) rev'd on other grounds, 400 S.W.2d 885 (Tex.1966); Oliver v. Williams, 381 S.W.2d 703, 709 (Tex.Civ.App. Corpus Christi 1964, no writ); 1 C. McCormick & R. Ray, Texas Law of Evidence § 582 (2d ed. 1956); 3 J. Wigmore, Evidence § 785 (Chadbourn rev. 1970).
In the course of a trial, unresponsive testimony may create problems because unresponsive statements are frequently inadmissible for other reasons and may be heard by the court or jury before either counsel has an opportunity to object. Unresponsive statements interfere with orderly development of the evidence by counsel and, if continued, may prolong the trial unduly. Consequently, the judge may properly admonish the witness to confine his testimony to the matters inquired about by counsel. In this context, if testimony otherwise admissible is excluded as unresponsive, counsel may elicit the same evidence by a proper question at a suitable time. The same considerations *607 do not apply to an unresponsive statement in an oral deposition. Presumably, each counsel will have the deposition before him at the trial and may make a timely objection to any testimony that is otherwise inadmissible. Counsel offering the testimony may choose a time suitable to his own plan of presenting evidence. Consequently, if the testimony is otherwise admissible, the fact that it was not elicited in response to a direct question is not reason to exclude it. Even if counsel have agreed that objections may be reserved until trial, as they did here, unresponsiveness of deposition testimony is not in itself a valid objection, according to the authorities above cited.[1]
In the present case, the question was closely related, at least in subject matter, to the testimony that followed. The question was whether the witness had talked to someone at the scene. The witness construed this question as asking for the content of the conversation, as witnesses are prone to do in such situations. After the witness had recited the conversation, no useful purpose would have been served by requiring counsel to ask, "What did the young may say?" Plaintiffs' real objection to the statement was the hearsay objection which was properly interposed at the trial, although, for reasons already stated, we hold that the objection was not well taken.
Plaintiffs further assert that no harm is established by exclusion of this testimony because it would have been merely cumulative of Horn's own testimony before the jury. We do not consider this testimony as cumulative. Horn was permitted to testify at the trial that he was behind both the postal truck and the light-colored pickup and saw an impact between them, but this testimony alone appears to have had little weight, since plaintiffs took the position in the trial, as they do here, that there was no independent evidence of that impact. Stewart, who was in the cab of the Haney truck, was not certain whether the pickup had struck the postal truck or narrowly missed it. Certainly, the young driver himself was in the best position to determine whether or not his vehicle had come in contact with the postal truck, and thus his statement would have provided corroboration for Horn's testimony on this important point.
Neither can we agree with plaintiffs' theory that the error was harmless because any impact between the light-colored pickup and the postal truck could not have materially affected the collision between defendants' truck and the other vehicles. In this connection we note the testimony of defendants' expert witness to the effect that in reaching his opinion concerning the circumstances of the collision, he relied on statements that there was a light-colored or white vehicle that struck the right rear of the postal truck. He further stated that he found a white streak of paint and a dent in the right rear bumper of the postal truck that was not the result of the collision with the Haney truck, but rather came from a different angle. He could not say how long the paint or the dent had been on the vehicle. He further testified that the Datsun and the postal truck would be expected to continue straight ahead following their impact in the absence of any other forces, but if the right rear of the postal truck were struck by another vehicle, the vehicles would swerve or veer to the left and end up in the second lane. His inspection of the physical damage to the postal truck and the Haney truck indicated that *608 something had caused the postal truck to go over from the third to the second lane. From this testimony it appears that evidence that the right rear of the postal truck had been struck by a vehicle other than the Haney truck was a key item of defendants' proof, and, consequently, the excluded statement of the young driver of the pickup could well have made a difference in which testimony the jury accepted. Perhaps a "glancing blow" by the pickup against the back of the postal truck would not have been sufficient to propel both the postal truck and the Datsun into the second lane, but that would have been a matter for the jury to determine. Without this evidence, the jury would have been likely to conclude that no factual basis existed for the opinion expressed by defendants' expert. Since the jury apparently rejected defendants' theory of how the collision occurred, we can only conclude that there is a probability, although not a certainty, that exclusion of this evidence resulted in an improper verdict and judgment. Consequently, the judgment must be reversed and the cause must be remanded for a new trial.
2. The Gasoline Can
Defendants also complain of the court's exclusion of evidence concerning the gasoline can found in the rear of the Datsun. We hold that exclusion of this evidence was error because it bears directly on the issue of causation.
Evidence before the jury established that a fire occurred, although there was a dispute as to whether it resulted from the collision of the Haney truck with the other vehicles or an earlier collision between the postal truck and the Datsun. The autopsy report introduced by plaintiffs showed that Mrs. Lane died as a result of "thermal burns," although it also showed other injuries, including broken ribs. A substantial portion of Hurst's injuries, also, was the result of burns. Before trial, the court sustained a motion in limine requesting that defendants be instructed not to offer any evidence before the jury on a gasoline can found inside Mrs. Lane's car. All of this evidence was presented to the court and excluded; consequently, it appears in the record in the form of a bill of exception.
According to the testimony of defendants' expert witnesses and photographs offered by defendants, Mrs. Lane was carrying a can containing 1.5 to 3.5 gallons of gasoline. The damaged gasoline can was actually found in the car by one of these witnesses. The experts testified that their examination of the damaged vehicles showed that the fire began in the passenger compartment of the Datsun. The only possible source of the fire, they said, was the gasoline in the can because the fuel tank of the Datsun was not damaged or ruptured and the fire damage to the postal truck came from fire outside of the truck. Defendants' expert Friedberg testified that even a slight impact to the rear of the Datsun could have caused an explosion of the gasoline in the can. Defendants' other expert, Lynch, testified that such an explosion could have resulted in a fire totally demolishing the passenger compartment in less than two minutes and, in his opinion, gasoline from the can produced an internal and extremely rapid fire inside the vehicle.
We need not consider whether, as defendants insist, Mrs. Lane would have died of burns even if the Haney truck had not collided with the postal truck. It is enough to hold, as we do, that this evidence concerning the gasoline can was relevent on the issue of the proximate cause of Mrs. Lane's death and plaintiff Hurst's burn injuries because it was one of the links in the chain of causation. It may be true, as plaintiffs argue, that regardless of the source of the fire, evidence that the doors of the Datsun were jammed so as to frustrate attempts to rescue Mrs. Lane before the fire reached her supplies the necessary causal link between Stewart's negligence and Mrs. Lane's death. This, however, was a matter for the jury to determine. The particular chain of events leading to her death was material in establishing that causal relation and, consequently, defendants were entitled to present this evidence to the jury.
*609 Neither are we impressed by plaintiffs' arguments that other witnesses present at the scene and called by defendants gave testimony inconsistent with the opinion of defendants' experts. To resolve conflicts and inconsistencies in the testimony of a witness or between witnesses is in the province of the jury. Biggers v. Continental Bus System, Inc., 157 Tex. 351, 303 S.W.2d 359, 365 (1957). Thus the jury may accept a part of the testimony of any witness without accepting it all. Clodfelter v. Martin, 562 S.W.2d 491, 493 (Tex.Civ.App. Corpus Christi 1977, no writ); Williford v. Masten, 521 S.W.2d 878, 890 (Tex.Civ.App. Amarillo 1975, writ ref'd n.r.e.); City of Center v. Roberts, 469 S.W.2d 27, 30 (Tex. Civ.App.Tyler 1971, writ ref'd n.r.e.). Likewise, a party is not bound by the testimony of his own witnesses in the sense that he may not introduce and rely on contrary testimony. Englebrecht v. W. D. Brannan & Sons, Inc., 501 S.W.2d 707, 711 (Tex.Civ. App.Amarillo 1973, no writ); Texas Employers Insurance Ass'n v. Cecil, 285 S.W.2d 462, 465 (Tex.Civ.App.Eastland 1955, writ ref'd n.r.e.). Therefore, defendants were free to present to the jury any theory of the facts which the evidence would support, but, because of the erroneous exclusion of this relevant evidence, they were unable to present their theory to the jury. Under these circumstances, the error cannot be regarded as harmless. Consequently, on this ground also the judgment must be reversed.
3. General Negligence and Proximate Cause Issue
Defendants complain that special issue number one as submitted to the jury is "so general that it deprived defendants of the right to have the case decided on the basis of special issues." We hold that the generality of the issue is not in itself ground for reversal, but such generality raises problems that may be avoided by a more specific submission.
The issue and the jury's answers are as follows:
Did the negligence, if any, of any of the following persons proximately cause the occurrence in question? Answer "Yes" or "No" opposite each name:
A. Marion Willard Stewart Yes
B. Thomas Monroe Hurst Yes
C. Evelyn Lane Yes
In your determination of Special Issue No. 1 as regards the conduct of Marion Willard Stewart you shall consider only the following elements, if any, as those terms as have been defined herein; proper lookout, excessive speed, failure to make timely application of brakes and failure to turn left or failure to turn right.
In your determination of Special Issue No. 1 as regards the conduct of Thomas Monroe Hurst you shall consider only the following elements, if any, as those terms have been defined herein; proper lookout, excessive speed, failure to timely apply brakes, failure to turn left or failure to turn right, and failure to maintain assured cleared distance.
In your determination of Special Issue No. 1 as regards the conduct of Evelyn Lane you shall consider only the following elements, if any, as those terms have been defined herein; proper lookout, failure to timely apply brakes, failure to signal, failure to turn left or failure to turn right, excessive speed, and failure to remove her vehicle from the freeway.
Defendants objected to the issue on the ground that "it is a general and global charge and it is insufficient to provide the jury with guidance in answering their questions." On appeal defendants present more detailed objections. They urge that submission of the two separate controlling issues of negligence and proximate cause in one issue was error. They argue that it is prejudicially multifarious because it is ambiguous in that the jury is not advised that they must find both negligence and proximate cause in order to establish actionable or contributory negligence on the part of any of the persons named in the issue. Thus, the defendants argue, the jury could, in effect, answer the issue "yes" with respect *610 to one party if they found that certain conduct of that party was negligence but not a proximate cause and that other conduct of the same party was a proximate cause but not negligence. More serious, in our view, is defendants' contention that the issue prevents them from making a proper presentation to the appellate court because any combination of the elements included in the instructions may have formed the basis of the jury's finding, and the court has no way of identifying the particular finding so as to determine whether exclusion of certain evidence, such as that concerning the gas can, was harmful. Similarly, defendants point out that they have no basis to contend that there is insufficient evidence to find defendant Stewart guilty of excessive speed because the generality of the issue prevents them from discovering whether or not the finding of Stewart's negligence rests on that or some other ground.
We need not determine whether any of these objections to the issue would have been well taken if urged in the trial court because the objection made was not sufficient to embrace them. We recognize, however, that generality of the issue is no longer reversible error in itself. Mobil Chemical Co. v. Bell, 517 S.W.2d 245, 255 (Tex.1974); Members Mutual Insurance Co. v. Muckelroy, 523 S.W.2d 77, 81-82 (Tex. Civ.App.Houston [1st Dist.] 1975, writ ref'd n.r.e.); Shasteen v. Mid-Continent Refrigerator Co., 517 S.W.2d 437 (Tex.Civ. App.Dallas 1974, writ ref'd n.r.e.). Nevertheless, such a broad issue entails certain risks of prejudice, including some of those now pointed out by defendants. Also, if any of the elements of negligence included in the limiting instructions is without support in the evidence or if an affirmative finding in accordance with any of those instructions would be contrary to the great weight and preponderance of the evidence, the appellate court would be unable to say that inclusion of that element in the charge was harmless because of the jury's findings on other elements, since it would be impossible to determine what the jury had found on other elements. For this reason a reversal may be required if any element of negligence is improperly submitted or improperly included in the instructions, or if any affirmative finding on any element would be against the great weight and preponderance of the evidence, provided a proper objection is made in the trial court.
Although approving broad form submissions in Mobil Chemical, supra, the supreme court has never disapproved separate submissions of specific acts of negligence. That form of submission has the advantage of obviating many claims of error because the particular findings made by the jury can be identified and many errors may be disregarded as immaterial in view of particular findings.
In light of the supreme court's opinion in Brown v. American Transfer & Storage Co., 601 S.W.2d 931, 936-38 (Tex.1980) we do not specifically direct the form of the issue for the trial court to submit on another trial. We suggest, however, that in a case such as this, the sample charges in Texas Pattern Jury Charges, 1973 Cumulative Supplement 8-22, provide acceptable methods of submission under the 1973 amendment to the Texas Rules of Civil Procedure and involve none of the difficulties above pointed out.
4. Severance of Third-Party Claim
This litigation began as two separate suits by Hurst and Mrs. Lane's survivors. On September 13, 1979, almost a year after Hurst's suit was filed, the court granted defendants leave to file a third-party action for indemnity and contribution against Mrs. Lane's estate. No third-party action was filed until May 16, 1980, when defendants finally succeeded in obtaining the appointment of a temporary administrator. Meanwhile, the two suits had been consolidated and set for trial on April 28, 1980. Defendants moved for a continuance so that the third-party claim could be presented in the same suit, and plaintiffs moved to sever the third-party action. When the case was reached for trial on May 27, the court granted the motion to sever, overruled the *611 motion for continuance, and proceeded to trial. Defendants contend that this action was an abuse of discretion because Mrs. Lane's administrator was an indispensible party under rules 39 and 41 of the Texas Rules of Civil Procedure. They point out that the percentages of fault attributable by the jury to Mrs. Lane, Hurst and Stewart would affect the amount of contribution obtainable from Mrs. Lane's estate, and contend that it would be unjust to have such percentages determined by two different juries.
We do not agree that Mrs. Lane's administrator was an indispensable party in the sense that plaintiff Hurst was required to join him and that without his presence no valid judgment could be rendered between the original parties. See Clear Lake City Water Authority v. Clear Lakes Utilities Co., 549 S.W.2d 385, 390 (Tex.1977); Cooper v. Texas Gulf Industries, Inc., 513 S.W.2d 200, 204 (Tex.1974). The burden of bringing in the temporary administrator was on defendants, and their right to bring him in depends on their diligence. In view of our reversal on other grounds, we need not determine whether under the circumstances of the present case defendants have shown such diligence that the trial court abused its discretion in severing the third-party action and overruling defendants' motion for continuance. We are of the opinion, however, that when the case goes back for another trial, the court should consider a motion, if timely filed, to consolidate the third-party action with the present suit. Some of the considerations affecting such a consolidation are discussed in Dorsaneo and Robertson, Comparative Negligence in Texas, 10 Tex.Tech L.Rev. 933, 937-943, 957-959 (1979).
5. Mrs. Lane's Negligence in Carrying the Gasoline Can
Shortly before the trial defendants filed a pleading alleging that Mrs. Lane was negligent in carrying the gasoline can in her car. Plaintiffs' exceptions to the allegations were sustained, and defendants now complain of this ruling. Although we have held that evidence concerning the gasoline can was relevant on the issue of causation, we agree with plaintiffs that the negligence alleged is a circumstance enhancing damages rather than a circumstance causing the accident and, therefore, may not properly be relied on as a ground of contributory negligence. Kerby v. Abilene Christian College, 503 S.W.2d 526 (Tex. 1973). Consequently, we hold that the trial court did not err in sustaining plaintiffs' exceptions to these allegations.
6. Percentage of Negligence
Defendants contend that they are entitled to judgment that plaintiffs take nothing because the combined percentage of plaintiffs' negligence, as found by the jury, is more than the negligence of defendants. The jury attributed the negligence 30% to Mrs. Lane, 30% to plaintiff Hurst and 40% to defendant Stewart. The court rendered judgment for each plaintiff for 70% of his damages found by the jury on the theory that the comparative negligence scheme formulated by article 2212a of the Texas Revised Civil Statutes (Vernon Supp.1981) requires that each plaintiff's recovery should be diminished only by the percentage of negligence attributed to that plaintiff.
We do not agree that defendants are entitled to a take-nothing judgment. Neither do we agree that each plaintiff is entitled to 70% of his damages as found by the jury, since the jury also found that only 40% of the negligence should be attributed to defendant Stewart. Rather, we conclude that each plaintiff's claim must be considered as if it were a separate suit and the damages awarded in proportion to the amount of negligence of each plaintiff as compared to the negligence of the defendants, without considering the negligence of the other plaintiff.
This result, in our view, is required by Section 1 of article 2212a, which provides as follows:
Section 1. Contributory negligence shall not bar recovery in an action by any person or party or the legal representative of any person or party to recover *612 damages for negligence resulting in death or injury to persons or property if such negligence is not greater than the negligence of the person or party or persons or parties against whom recovery is sought, but any damages allowed shall be diminished in proportion to the amount of negligence attributed to the person or party recovering. Tex.Rev.Civ.Stat.Ann. art. 2212a (Vernon Supp.1981).
Since defendant Stewart and his employer must be considered only one party for the purpose of the statute, and no claim for contribution is before us, the statute allows recovery by each claimant against the single defendant notwithstanding contributory negligence "if such negligence is not greater than the negligence of the person or party ... against whom recovery is sought." Contributory negligence is not a complete bar to each plaintiff's recovery in this case because the negligence attributed to neither Mrs. Lane nor plaintiff Hurst has been found to be greater than the negligence of defendant Stewart. If this result did not follow, then the substantive rights of the parties would be materially affected by consolidation of multiple claims into one suit. We do not interpret the statute as permitting a defendant to obtain consolidation of several claims and then avoid liability on the ground that the combined negligence of all plaintiffs is greater than his own negligence. Whether multiple claims should be tried in one suit or several should be determined by considerations of judicial economy and convenience of the parties rather than by the potential effect on substantive rights.
For similar reasons, neither do we agree that the defendants here are liable for 70% of the damages to each plaintiff. By the reasoning adopted above, the claim of each plaintiff must be considered as if it were presented in a separate suit. Otherwise, the plaintiffs would be permitted to enhance their damages by the procedural device of joining their claims in the same suit.
There is nothing in the statute requiring that the percentages of negligence relevant to each plaintiff's claim as found by the jury must aggregate 100%. The scheme of the statute is to compare each plaintiff's negligence to the negligence of the party or parties from whom he seeks recovery, and if the plaintiff's negligence is not greater than theirs, the statute requires the recovery to be "diminished in proportion to the amount of negligence attributed to the person or party recovering" (Emphasis added) rather than according to the "percentage" of negligence. We interpret this provision to mean that the recovery is diminished in the proportion that plaintiff's negligence bears to the combined negligence of plaintiff and the party or parties against whom he seeks recovery. In this case the proportion by which each plaintiff's recovery is diminished is 30/70ths; consequently, each plaintiff is entitled to recover 40/70ths of his damages. These fractions may be stated as percentages, if necessary, of the total negligence relevant to each plaintiff's recovery, which, in either instance, should not include the negligence of the other plaintiff, from whom no recovery is sought.
The soundness of this approach is demonstrated by considering the implications of both plaintiffs' and defendants' theories, had the jury's findings been different. For example, if the jury had attributed the fault 5% to Hurst, 50% to Mrs. Lane, and 45% to Stewart, then, according to defendants' theory, Hurst would not be entitled to recover any amount, notwithstanding the finding that Stewart's fault was nine times that of Hurst. Elementary fairness, as well as the obvious intent of article 2212a, requires that these findings should entitle Hurst to recover 9/10ths of his damages. On the other hand, if the jury had attributed the fault 10% to Hurst, 80% to Mrs. Lane, and 10% to Stewart, then, according to plaintiffs' theory, Hurst would be entitled to recover 90% of his damages, even though he and Stewart were equally negligent. In our view, such findings would entitle Hurst to recover 50% of his damages. Since neither plaintiff is "a person or party ... against whom recovery is sought," the negligence of one plaintiff is attributable neither to the other plaintiff nor to the defendant *613 in determining the recovery of the other plaintiff.
Defendants' theory assumes that the same 40% of the total negligence would have been attributed to defendant Stewart if only the negligence of one plaintiff had been submitted to the jury. On the other hand, plaintiffs' theory assumes that the same 30% of the total negligence would have been attributed to each plaintiff if only that plaintiff's negligence had been submitted. It is more reasonable to assume, as we do, that the jury's findings represent the proportions of negligence of each plaintiff as compared to that of the defendants, and that these proportions would have been substantially the same, if submitted to the same jury, whether or not the negligence of the other plaintiff had been submitted.[2]
Our holding is in accordance with Professor Dorsaneo's recommendation for the analogous case (which may be presented at another trial of this suit) in which the named defendants seek contribution from a third party not named as a defendant in the primary suit. Professor Dorsaneo recommends that under those circumstances the percentage of negligence of the third-party defendant should be submitted to the jury, but should be used only to compute the contribution shares. According to this recommendation, the plaintiff's recovery would be determined by comparing his percentage of negligence with that of the named defendants, even though the combined percentages of the plaintiff and the named defendants aggregate less than 100%. Dorsaneo and Robertson, Comparative Negligence in Texas, 10 Tex.Tech L. Rev. 9, §§ 959-63 (1979).[3]
Professor Dorsaneo's recommendation will simplify the problem that will arise if defendant's third-party action against Mrs. Lane's administrator is consolidated before the case is tried again. According to this recommendation, each plaintiff's recovery from the named defendants will be the same when the third person whose negligence is submitted is a third-party defendant against whom the named defendants assert a claim for contribution as it will be when the third person is a plaintiff in the same suit. In either event, presumably, the same result will be reached as if each plaintiff's suit were separately presented to the same jury. See Board of County Comm'rs. v. Ridenour, 623 P.2d 1174, 1191 (Wyo.1981). This solution is fully supported by the general scheme as well as the literal language of article 2212a.
Reversed and remanded.
NOTES
[1] We have not overlooked rule 214 of the Texas Rules of Civil Procedure, which provides: "If any deposition shall contain any testimony not pertinent to the direct and cross-questions propounded, such matter shall be deemed surplusage, and may be stricken out by the court upon objection thereto." In our opinion, this rule does not authorize exclusion of deposition testimony that is relevant to the direct and cross-questions propounded on the ground that it is not directly responsive to the immediately preceding question. Rather, it provides a procedure for striking improper unresponsive statements without affecting admissibility of the deposition in other respects. Here the conversation related by the witness was clearly relevant to the incident inquired about in the deposition, and plaintiffs' counsel had ample opportunity to cross examine.
[2] The case might have been submitted to the jury as if the two suits had not been consolidated, with instructions that the negligence of each plaintiff and that of defendants should aggregate 100% without considering any negligence of the other plaintiffs. Although this method would obviate any of the assumptions above mentioned, it seems unnecessarily complex and confusing. Since neither party contends that the case should have been submitted in that manner, we need not decide whether that would be a preferable method.
[3] Professor Robertson disagrees with this solution on the ground that a defendant ought not to be able to reduce the plaintiff's recovery by requiring the jury to consider the fault of an insolvent tortfeasor whom plaintiff has elected not to sue. Id. at 963-965. It is not clear, however, that the plaintiff's recovery would be so reduced, because there is no reason to assume that the percentage of plaintiff's negligence found by the jury would be constant regardless of the number of alleged tortfeasors whose negligence may be submitted, as pointed out above, and as these authors recognize elsewhere in their article. Id. at 940, n.33. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1773058/ | 386 S.W.2d 180 (1964)
ATOMIC FUEL EXTRACTION CORPORATION, Appellant,
v.
ESTATE of Tom SLICK et al., Appellees.
No. 14282.
Court of Civil Appeals of Texas, San Antonio.
December 30, 1964.
Rehearing Denied January 27, 1965.
*182 Sears & Burns, Houston, W. R. Smith, San Antonio, Haskell, Helmick, Carpenter & Evans, John H. Tippit, Denver, Colo., for appellant.
Carl Wright Johnson, Nat L. Hardy, San Antonio, Holland & Hart, Denver, Colo., Stahl & Sohn, Cox, Smith & Smith, San Antonio, for appellees.
POPE, Justice.
Plaintiff, Atomic Fuel Extraction Corporation, sued Transworld Resources Corporation, Nuclear Resources, Inc., and Tom Slick, who died after suit was filed. The parties will be called Atomic, Transworld, Nuclear, and Slick, respectively. Atomic during 1957 owned a milling contract issued by the Atomic Energy Commission, which would terminate if $2,000,000 was not made available to assure construction of the mill. Atomic charges that the three defendants agreed to furnish the funds but failed to do so. It asserted damages of more than four million dollars under four alternative causes of action: breach of contract, breach of an agent's fiduciary duty, fraud, and tortious interference with a contract. After a lengthy trial, the court granted all defendants' motions for instructed verdict.
Atomic had contracts with both Transworld and Nuclear but it seeks to reach Slick by invoking the doctrine that those corporate entities should be disregarded. In order, we shall discuss our conclusions that Atomic raised fact issues which prevented an instructed verdict for either Transworld or Nuclear, but that Atomic only proved nominal damages against them; that Atomic failed to prove grounds to disregard the corporate entities with whom it chose to contract, and that the instructed verdict for Slick was proper since Atomic's actions, save the one on contract, are barred by the two-year statute of limitations.
We shall discuss the contractual origin of this controversy. Atomic, during 1956, obtained a contract from the Atomic Energy Commission which entitled it to construct a uranium mill in Colorado. The contract would terminate unless Atomic began the mill construction by June 1, 1957. Atomic was able to get an extension of time, but the extension provided for an automatic termination on October 1, 1957, in these words: "* * * unless by said date the Contractor (Atomic) has in its possession and available for the performance of this contract Two Million Dollars ($2,000,000) in cash in excess of its current liabilities, and the Commission has by the same date received clear and convincing written proof thereof, which proof shall be in the form of a contractual agreement between Atomic Fuel Extraction Corporation and the party or parties providing such money."
John Black, an officer and the moving force in Atomic, in July of 1957, wrote Slick Oil Company in San Antonio in an effort to interest that firm in Atomic's uranium venture and to obtain the necessary finances for the mill. This letter resulted in a conference in Denver on July 16, between Black and other officers of Atomic and James V. McGoodwin and others from San Antonio. This conference led to the execution of what is called a letter of agreement dated July 18, 1957. This document is not the basis of the action on contract, but it led up to the actual contracts, called the August 13 letter agreement and the August 16 merger agreement. On August 13, 1957, Transworld submitted a letter agreement *183 to Atomic. It was signed by McGoodwin for Transworld, and was signed and accepted by all of the directors for Atomic. Since this is one of the two documents upon which Atomic grounds its contract action, we shall set forth its relevant portions:
"Informal discussions with the Atomic Energy Commission indicate that performance of the management contract, as discussed in the letter of Agreement, will not satisfy the Atomic Energy Commission requirements under your contract with that agency for a mill operation. Furthermore, the ore supply for the proposed mill is not certain due to the questionable validity of your contract with Beaver Mesa Company concerning certain uranium lode mining claims.
"Notwithstanding these difficulties, Transworld is willing to undertake the construction and operation of a uranium mill under your contract with the Atomic Energy Commission on the following terms and conditions:
1. Atomic Fuel either will be merged into a corporation designated by Transworld or will transfer all of its assets and liabilities to the designated corporation, the alternative to be at the option of Transworld. In either event the consideration will be delivery of at least 25% of the then issued and outstanding stock of the designated corporation to the stockholders of Atomic Fuel or to it, depending on the alternative followed.
2. (Omitted.)
3. Transworld is satisfied that Atomic Fuel has a good possessory title to its mining claims, a list of which will be supplied to Holland & Hart, attorneys, by August 23, 1957, with the exception of the Echo-Hatch group as to which there is a dispute regarding ownership.
4. The liabilities and debts of Atomic Fuel do not exceed $300,000.00, based upon a thorough audit of the books of Atomic Fuel by Peat, Marwick, Mitchell & Co.
5. Transworld is able to obtain an ore supply of a quantity and quality sufficient to meet the production commitments to the Atomic Energy Commission in the mill contract referred to above.
6. The ore supply is amenable to processing by the method contemplated by Transworld.
7. (Omitted.)
8. The officers and directors of Atomic Fuel cooperate fully with Transworld and the designated corporation to secure the approval of the stockholders of Atomic Fuel for all necessary corporate action.
9. All of the foregoing matters, with the exception of 2(d), must be accomplished not later than September 20, 1957."
Investigations disclosed that the AEC would not approve a mere assignment of Atomic's milling contract to another firm. The AEC required a merger. Because Transworld owned mineral interests other than uranium and related ores, and it was intended to keep the Atomic venture separate, it was determined that a new corporation would be formed which would merge with Atomic. On August 16 Nuclear Resources was incorporated in Colorado, and on that date Nuclear and Atomic executed the merger agreement. It detailed the method of the merger and imposed a condition precedent upon Atomic in these words: "subject to the conditions hereinafter contained, the merger provided for herein will become effective as of the close of business on September 20, 1957." Nuclear would be the surviving corporation, would exchange its stock for Atomic's in the proportion provided, *184 would become vested with Atomic's assets, and charged with its debts. Article VII of the merger agreement stated, among other things, that the merger "shall be effective only if the following conditions are met:
"(2) Nuclear is satisfied that the conditions stated in a certain Letter of Intent dated August 13, 1957, from Transworld Resources Corporation to Atomic have been met.
"(3) * * * Despite approval of the merger by the stockholders, the merger may, by action of the Board of Directors of Nuclear, be abandoned at any time prior to the actual filing of this agreement with the Secretary of State of Colorado, and any decision so to abandon the merger shall rest solely in the discretion of the said Board of Directors."
The next day, August 17, Atomic's Board of Directors ratified both the August 13 letter agreement and the August 16 merger agreement. On August 21, Atomic and Transworld agreed to some changes in the August 13 letter agreement. The changes substituted Nuclear for Transworld, extended the dead-line for compliance with the conditions precedent, from September 20 to September 25, and added this paragraph:
"9. The plan under which Nuclear acquires the assets and liabilities of Atomic Fuel shall be mutually satisfactory to legal counsel for this corporation (Atomic), Nuclear and Transworld and further that said plan can be legally and effectively carried out within the time permitted by the Atomic Energy Commission and the provisions of Contract No. AT(05-1)-698."
On September 25, 1957, the stockholders of Atomic met and approved the merger with Nuclear. The next day this telegram was sent to the AEC:
"Transworld Resources, Inc. hereby commits Two Million Five Hundred Thousand Dollars for the construction of the Bedrock, Colorado mill subject only and solely to the completion of the ore purchase negotiations now in progress to fulfill the AEC contracts for said mill and the conditions relating to the extension of that contract AT(05-1) 698. Copy to J. V. McGoodwin.
Tom Slick, Chairman of the Board Transworld Resources, Inc."
The AEC did not regard this as a compliance with its requirement that $2,000,000 in cash must be furnished. On September 30, the day before the terminal date of the AEC milling contract, Slick, McGoodwin and others met with representatives of the AEC in Washington and were told that the only way Atomic's AEC contract could be preserved was "to come up with two million dollars in cash in excess of current liabilities like the contract called for." Slick was trying to get an extension of time to October 30. On October 1, this telegram was sent by C. V. Wood, President of Transworld Resources, Inc., to J. V. McGoodwin, President, Nuclear Resources, Inc.:
"Pursuant to action of the Board of Directors of this company taken in response to a proposal from you, we hereby commit to you two and one half million dollars to comply with the provisions of the financial requirement of the modification to contract AT-05-1968. You are hereby authorized to expend such fund in accordance with said contract as now or hereafter modified by the Atomic Energy Commission and whether the mill shall be built at Bedrock, Colorado or elsewhere but for no other purpose if the proposed merger with Atomic Fuels has not yet been completed you are authorized at your discretion to commit to Atomic Fuels such funds as may be necessary under said contract as now or hereafter amended amounts expended hereunder shall be repayable on or before April First 1962, together *185 with interest at the rate of six per cent per year and security shall be arranged by incumberance on the mill sight and townsight and improvements thereon. And by assignment to this company of the proceeds to be derived from the sale of uranium concentrates under the terms of said contract. We hereby agree to renegotiate the security to be guaranteed hereunder upon completion of the final financing of this project to the end that the financial interest finally concerned shall be adequately secured."
The AEC decided this still did not meet their requirements and terminated the milling contract as of October 1, 1957. Atomic asserted damages for defendants' breach of the August 13 letter agreement in failing to provide the necessary finances for construction of the mill and for breach of the August 16 merger agreement. Defendants contend that the instructed verdict should be upheld because Atomic failed to meet the several conditions precedent stated in the August 13 letter agreement. Among those conditions was the one that Transworld must be "satisfied" that Atomic has a good possessory title to its mining claims. Others were that the ore supply must be sufficient, must be amenable to processing by the methods contemplated by defendants, and Atomic's debts must not exceed $300,000. Nuclear, by its merger agreement, was to be satisfied about all of these conditions.
Atomic rightly urges that a jury issue was raised on its compliance with these conditions precedent. It presented evidence which a jury could believe that showed (1) that defendants were in fact satisfied and said so, (2) that defendants' claimed dissatisfaction was not in good faith, and (3) that defendants prevented Atomic's compliance. Black testified that on September 25, 1957, just after Atomic's stockholders had approved the merger, he, a Mr. Turner and McGoodwin, President of Nuclear, conferred in a hotel room. We find this question and answer:
"Q Was anything said by anyone else concerning ore or ore supply for the mill on that occasion?
"A Yes, sir, there was. Mr. Turner had his brief case there, and he removed some fifteen copies of an ore commitment contract that I had prepared for him to take around and get signed, and handed them or laid them on the bed in front of Mr. McGoodwin and said, `Here are fifteen more ore commitments from miners in this area.' And Mr. McGoodwin said `We won't need those. We have plenty of ore available.' And he handed them back to Turner."
This is some evidence of an admission of satisfaction prior to October 1, 1957, which defendants later denied.
Whether the defendants' dissatisfaction about the conditions was feigned or in good faith is a fact issue. Coker v. Wesco Materials Corporation, Tex.Civ. App., 368 S.W.2d 883, 13 Tex.Jur.2d, Contracts, § 301. As stated in 5 Williston on Contracts (3rd Ed.) § 675A: "It has been questioned whether an agreement in which the promise of one party is conditional on his own or the other party's satisfaction contains the elements of a contract whether the agreement is not illusory in character because conditioned upon the whim or caprice of the party to be satisfied. Since, however, such a promise is generally considered as requiring a performance which shall be satisfactory to him in the exercise of an honest judgment, such contracts have been almost universally upheld." The decision must be made in good faith. Golden State Mutual Life Ins. Co. v. Kelley, Tex.Civ.App., 380 S.W.2d 139, 141; 3A Corbin on Contracts, § 465; 86 A.L.R. 2d 205; 44 A.L.R. 2d 1125.
One situation which occasioned the condition precedent that Transworld and Nuclear *186 must be "satisfied" was that Atomic, prior to its contracts with defendants, had fallen into a dispute with Beaver Mesa, Inc., about some mining claims and ore deposits. Of course, defendants had to know whether there was adequate ore available for a uranium mill if they were to finance it. Defendants, at the trial, contended that this dispute with Beaver Mesa was not finally settled by the September 25 deadline, and that the availability of mining claims and ore deposits was not assured to their satisfaction. Atomic meets this contention by proof that defendants thrust them out of the settlement negotiations with Beaver Mesa and prevented their efforts to reach a settlement.
Atomic presented proof that defendants were primarily interested in re-negotiating the Atomic-Beaver Mesa contract so they could obtain the economic advantages of the depletion allowance. Instead of ore delivered to the mill, defendants wanted ore in place. To achieve this, as well as the settlement of the dispute with Atomic, McGoodwin took over the negotiations with Beaver Mesa. Black testified that during September of 1957 McGoodwin and his attorneys conducted conferences with Beaver Mesa. McGoodwin reported to him that defendants "were trying to get to buy the ore in the ground and then contract with Simpson Mining Company to mine it and so that they could take advantage of this depletion situation and he further discussed the fact that the only thing that seemed to be left to determine was the costs mining costs. They had agreed on everything else in principle but the mining costs."
Black testified that he and another director of Atomic both offered to assist McGoodwin in these negotiations, but "Their reply was that they didn't want him to monkey with it." Black's testimony is borne out by documentary evidence. On September 24, defendants' attorney handed Black a copy of a memo which summarized the terms of the settlement and at that time told Black "the negotiations with Beaver Mesa had been finalized and that all that was necessary was to reduce it to a formal contract." Black's testimony that the final settlement contract was never signed is the fact which defendants say was conclusive proof of non-compliance with the conditions about adequate mining claims. The memo is in evidence. It shows, as Black testified, a settlement of the dispute and a revised method of acquisition of the ore in place. The memo was prepared by Beaver Mesa's attorney and then forwarded to Nuclear's attorney for his preparation of the formal contract, which was never done. The memo was not a contract, nor was it offered as such. It was, however, evidence which supported Black's testimony that Atomic was excluded from these settlement negotiations, that defendants preempted the field, and succeeded in changing the original agreement on terms more satisfactory to Nuclear. This bears out Black's testimony that Nuclear's real concern was in purchasing ore in place and not the claimed dispute between Atomic and Beaver Mesa. In our opinion, this proof is sufficient to raise a fact issue about defendants' prevention of compliance with the condition precedent it now insists upon. "The principle that prevention by one party excuses performance by the other, both of a condition and of a promise, may be laid down broadly for all cases." 5 Williston on Contracts (3rd Ed.), § 677.
Another condition precedent required by paragraph 4 of the August 13 letter agreement was that Atomic's debts must "not exceed $300,000, based upon a thorough audit of the books of Atomic Fuel by Peat, Marwick, Mitchell & Co." That accounting firm made the audit and then expressed no opinion. The report was, "Because we have not been able to satisfy ourselves as to the correctness of substantial amounts relating to assets and liabilities of the corporation as of June 30, 1957, we are not in a position to express an opinion on the accompanying balance sheet." This was not a compliance with the condition precedent. *187 Atomic offered evidence, however, to raise a fact issue on whether defendant Nuclear, by its acts and conduct, waived this condition.
Performance of conditions precedent can be waived. The waiver may be by words or deeds or both. "It is immaterial how the promisor manifests his intention to fulfil the prior duty without the performance of the condition thereof. Whether he speaks of waiver or uses other words in this connection is of no consequence, if the undertaking to perform is made plain." Restatement, Contracts, § 88, Comment c.; Equitable Life Assurance Society v. Ellis, 105 Tex. 526, 147 S.W. 1152; Bankers Life & Loan Ass'n of Dallas v. Ashford, Tex.Civ.App., 139 S.W.2d 858; Childress v. Cook, 5 Cir., 245 F.2d 798.
There is evidence that defendants waived the condition precedent about Atomic's debts. On September 25, 1957, the contract terminated if the condition was not met. On that date Slick, as chairman of Transworld's Board, sent the telegram to AEC committing two and a half million dollars "subject only and solely to the completion of the ore purchase negotiations." Atomic's debts were not mentioned. McGoodwin, Slick and others were in Washington on September 30 and October 1, 1957, arguing to the AEC that the contract with Atomic was in force and they were seeking an extension of the AEC milling contract. Still treating the contract with Atomic as in force, on October 1, the President of Transworld unconditionally committed two and a half million dollars to Nuclear for the mill construction. In December, 1957, McGoodwin, as President of Nuclear, still regarded the merger deal as pending, the September deadline having long since passed. He sent Black this telegram:
"Nuclear Resources herewith commits to conclude its pending merger deal with Atomic Fuels immediately on conclusion of a satisfactory extension of Atomic Fuels' mill contract from the A.E.C. which as a minimum would restore the time schedule which according to the A.E.C. letter of July 9, 1957 date applied on October 1. Responsible reserve studies and financial commitments should assure prompt and successful culmination of the project."
If the contract had terminated, how could the merger still be pending? As late as June, 1958, McGoodwin was in correspondence with other prospective investors and still taking the position that the merger was planned. On September 11, 1958, McGoodwin sent Black a telegram with respect to a proposed merger of Atomic with another company, and in it he wrote, "said merger will not affect the proposed merger with Nuclear Resources." For months after the deadline for compliance with the condition, Nuclear still recognized its contract with Atomic. It never raised the point about Atomic's excessive debts either with Atomic, other investors, or the AEC. There was evidence of waiver of the condition precedent about Atomic's debts.
We come now to defendants' contention that it reserved sole right to abandon the merger as provided in the August 16 merger agreement. The contract provided: "Despite approval of the merger by the stockholder, the merger may, by action of the Board of Directors of Nuclear, be abandoned at any time prior to the actual filing of this agreement with the Secretary of the State of Colorado, and any decision so to abandon the merger shall rest solely in the discretion of the said Board of Directors." Defendants argue that the agreement was never filed with the Secretary of the State of Colorado and until it was, they could abandon it. This provision, while granting much to Nuclear's discretion or judgment , had other requirements. The power to abandon was upon (1) action of the Board of Directors, (2) a decision, (3) exercise of discretion. All of the evidence is that there was never any action of the Board of Directors nor a decision by them with respect to abandonment *188 of the merger. There was never a meeting after its first organization meeting.
Nuclear's president, McGoodwin, pursued a course prior to and following the September 25 deadline which excluded any idea of abandonment. On September 26, the day after the deadline, McGoodwin was still trying to raise the money. The following day he was in conference with the AEC Operations Office in Grand Junction, when he argued that the money had been raised. McGoodwin told the AEC officials that "Completion of the statutory merger was wholly within the control of Nuclear Resources, Inc., and could be accomplished at any time deemed feasible." McGoodwin flew to Washington, and on September 30, after conferences with Slick and the AEC, informed Black of Atomic that financial arrangements had been completed. Eight days later he assured Black that the AEC contract would be extended, though the October 1 deadline had already passed. For months thereafter Nuclear's officers and stockholders diligently sought to save the contract. During that time there was no indication to Atomic that any decision had been made or action taken to abandon the merger. We mention this, not on the point of waiver but as evidence from which a fact finder could infer that the Nuclear decision to abandon was never made. We conclude that there is no basis for an instructed verdict for Transworld and Nuclear on the claimed grounds that Atomic failed to meet the conditions stated in the two contracts. These were issues of fact.
All defendants claim, however, that Atomic failed in its proof on the element of damages since it only proved speculative lost profits for a new and unestablished business. Atomic alleged as to each of the alternative causes that it lost sales of uranium concentrates amounting to $9,289,212, and of vanadium concentrates amounting to $6,006,500, a total of $15,295,712. It claimed one-fourth of that amount under the terms of the merger agreement.
Since the decision in Southwest Battery Corporation v. Owen, 131 Tex. 423, 115 S.W.2d 1097, Texas has permitted recovery of lost profits to a business that can prove it is established and making profits at the time a contract is breached or a tort committed. That case explains that pre-existing profits, together with other facts and circumstances, may supply the reasonable certainly required both as to the fact of damages and the amount. The success of an enterprise, measured in profits, is dependent upon a multitude of risks, chances and circumstances; and without some history of profits there is inadequate data upon which to prove the fact of damages with the certainty required. A new and unestablished business without a profit record leaves too much to conjecture and speculation.
Atomic meets this weakness of proof by argument that profits were within the contemplation of the parties. Hadley v. Baxendale, 9 Exch. 341; McGuire v. Osage Oil Corporation, Tex.Com.App., 55 S.W.2d 535. That too is a rule of certainty which a claimant must meet, but it is in addition to the one that applies to future profits of a new and unestablished business. In our opinion, profits were surely contemplated by all the parties, but the argument misses the point. See United Iron Works v. Twin City Ice & Creamery Co., 317 Mo. 125, 295 S.W. 109, 113.
In Southwest Battery Corporation v. Owen, supra, because there was an established business, future profits were allowed. In those Texas cases which have permitted recovery, there was some data and history of profits from an established business. Pace Corporation v. Jackson, 155 Tex. 179, 284 S.W.2d 340; City of San Antonio v. Royal, Tex., 16 S.W. 1101; National Bank of Cleburne v. M. M. Pittman Roller Mill (Tex.Com.App.1924), 265 S.W. 1024, 36 A.L.R. 1405; Berne v. Keith, Tex.Civ.App., 361 S.W.2d 592, 599; Adams v. Hood County Sand & Gravel Company, Tex.Civ. App., 354 S.W.2d 593; Richker v. Georgandis, *189 Tex.Civ.App., 323 S.W.2d 90; Rios v. Lowenfield, Tex.Civ.App., 289 S.W.2d 332; Schoenberg v. Forrest, Tex.Civ.App., 253 S.W.2d 331, 334; Schoenberg v. Forrest, Tex.Civ.App., 228 S.W.2d 556; Gregory v. Reynolds, Tex.Civ.App., 219 S.W.2d 107; International Union of Operating Engineers, etc. v. Cox, Tex.Civ.App., 212 S.W.2d 1000, 1003; Joyce v. Anderson-Bledsoe Stave Co., Tex.Civ.App., 173 S.W.2d 315; Purvis & Bertram v. Shaw, Tex.Civ.App., 164 S.W.2d 416; Payne Advertising Agency v. Wilhelm, Tex.Civ.App., 145 S.W.2d 641; Belcher v. Bullion, Tex.Civ.App., 121 S.W.2d 483; Graham Hotel Co. v. Garrett, Tex.Civ.App., 33 S.W.2d 522; McArthur v. Day, Tex.Civ.App., 19 S.W.2d 134; Big Four Ice & Cold Storage Co. v. Williams, Tex.Civ.App., 9 S.W.2d 177; Bagby v. Hodge, Tex.Civ. App., 297 S.W. 882; Settegast v. Foley Bros. Dry Goods Co., Tex.Civ.App., 297 S.W. 676; Merchants Life Ins. Co. v. Griswold, Tex.Civ.App., 212 S.W. 807, 812; Grand Prairie Gravel Co. v. Joe B. Wills Co., Tex.Civ.App., 188 S.W. 680; American Const. Co. v. Caswell, Tex. Civ.App., 141 S.W. 1013; American Const. Co. v. Davis, Tex.Civ.App., 141 S.W. 1019.
In sharp contrast with those precedents are those which have consistently denied future profits when the business was new and unestablished. Wissman v. Boucher, 150 Tex. 326, 240 S.W.2d 278, 281; National Bank of Cleburne v. M. M. Pittman Roller Mill, supra; Edwards. v. Ward Associates, Inc., Tex.Civ.App., 367 S.W.2d 390, 395; Barbier v. Barry, Tex. Civ.App., 345 S.W.2d 557, 563; Harrison-Daniels Co. v. Aughtry, Tex.Civ.App., 309 S.W.2d 879; Williams v. Saunders, Tex. Civ.App., 243 S.W.2d 596, 600; Silberstein v. Laibovitz, Tex.Civ.App., 200 S.W.2d 647, 650; Page v. Hancock, Tex.Civ.App., 200 S.W.2d 421, 423; C.V. Hill & Co. v. Parker, Tex.Civ.App., 145 S.W.2d 330; Central Freight Lines v. York, Tex.Civ.App., 135 S.W.2d 186; First Nat. Bank of Quinlan v. Donohoe, Tex.Civ.App., 293 S.W. 217; Texas Power & Light Co. v. Roberts, Tex. Civ.App., 187 S.W. 225; 1 A.L.R. 156; Walter Box Co. v. Blackburn, Tex.Civ. App., 157 S.W. 220; Fraser v. Echo Mining & Smelting Co., 9 Tex. Civ. App. 210, 28 S.W. 714. The denial of damages for lost profits to a new and unestablished business is the general rule. 15 Am.Jur., Damages, § 157; 25 C.J.S. Damages § 42; McCormick, Damages, § 29; 1 Sutherland, Damages, § 67; 17 Tex.Jur.2d, Damages, § 148; 64 Harv.L.Rev. 317.
An established business should be one that is in actual operation long enough to give it permanency and recognition. It should be one that has earned a profit which can reasonably be ascertained and approximated. Carolene Sales Co. v. Canyon Milk Products Co., 122 Wash. 220, 210 P. 366, 367; Outcault Adv. Co. v. Citizens' Nat. Bank, 118 Kan. 328, 234 P. 988, 41 A.L.R. 194. A business in successful operation, if changed into a different form or line of business, may become a new and unestablished venture. Harrison-Daniels Co. v. Aughtry, supra; Silberstein v. Laibovitz, supra. Proof of an operation of a business at a loss fails to meet the test. Silberstein v. Laibovitz, supra; Walter Box Co. v. Blackburn, supra.
Atomic has not brought itself within the category of an established business. The venture in question is uranium and vanadium milling, admittedly a speculative one. Neither Atomic nor any of the defendants have ever previously had any experience in this industry. Plaintiff has never milled a ton of uranium or vanadium ore. There was no market for vanadium. Atomic has never made a profit during any year of its existence. With debts around $300,000, its income from all sources in 1957 was $6,874.42; in 1958 was $1,624.14, and in 1959 was $60.00. Although more than twenty firms had been approached, none of them were interested in Atomic's AEC milling contract. Atomic's expert metallurgist testified that during the period of the incidents involved in this suit, the uranium industry was declining, the "bloom *190 is off the rose," mills were "shutting down" or "selling the ore allocation to other mills." The AEC was unfriendly to Atomic, was not in favor of additional mills in the area, was "leveling off" in its uranium procurement during 1957, and informed Atomic in July of 1957, that there was no present need for the additional mill. The Atomic AEC contract was called, according to Atomic's expert, the first "poor contract" because the fringe benefits included in prior milling agreements were omitted. After November, 1958, the AEC began making purchases on a limited basis. Three mills were already serving the same area. The trial court properly regarded this venture as a new and unestablished business which was unable to prove that it had earned profits or ever would. While Atomic's AEC contract required $2,000,000 cash deposited by October 1, 1957, as evidence of its good faith to move forward, that sum did not represent the cost of a mill. That was about one-half of its cost. Atomic was unable to prove loss of profits with that measure of certainty which is required.
Atomic may be able to prove a breach of the contracts, and if so it would be entitled to nominal damages for breach of its rights. 17 Tex.Jur.2d, Damages, § 4; 25 C.J.S. Damages §§ 11, 12; McCormick, Damages, § 24. This defeats the instructed verdict in favor of the defendants. Wilson v. Hart, Tex.Civ.App., 332 S.W.2d 107; Hutchinson v. Texas Aluminum Co., Tex. Civ.App., 330 S.W.2d 895; Collier v. Bankston-Hall Motors, Inc., Tex.Civ.App., 267 S.W.2d 898; Monzingo v. Jones, Tex.Civ. App., 34 S.W.2d 662. It is suggested that Atomic should have asked the court to award nominal damages, and failing to do so, it can not assert error on appeal for that denial. Atomic has not yet been in a position to so move the court. Its right even to nominal damages is still undecided. Wafer v. Edwards, Tex.Civ.App., 248 S.W.2d 320. The court could neither grant nor deny nominal damages until Atomic's right to them has been established or defeated. The judgment in favor of Transworld and Nuclear will be reversed and remanded for determination of Atomic's right, that is, whether defendants breached the contract. 4 Tex.Jur.2d, Appeal & Error, § 869.
Atomic also contends that Tom Slick was the alter ego of Transworld and Nuclear and is liable on the contract. The evidence showed that Slick wholly owned Transworld. He furnished money as loans to Transworld in the sum of $474,762.36 between 1957 and 1959. It had no income and its assets were speculative mining claims valued by the evidence anywhere from nothing to seven million dollars. Nuclear was an outgrowth of the uranium milling venture and it too was wholly owned and financed by Tom Slick. It had no bank account and no financial records for 1957. Both Transworld and Nuclear's board of directors consisted of persons closely associated with Tom Slick. Neither corporation held stockholders' meetings. Transworld held three, and Nuclear only one directors' meeting during 1957. Following the AEC's decision to terminate the milling contract, but not before, Slick wrote letters and began negotiations with the AEC in an effort to salvage the contract. He wrote letters to others also and spoke of "our company," "a business venture which I have." McGoodwin, who was Vice-President of Transworld and President of Nuclear, was also an attorney for Slick. There were other facts which showed that both Transworld and Nuclear were dependent upon Slick for funds with which to operate.
In our opinion, however, the court properly instructed a verdict for defendant Slick. Atomic was never confused about the parties with whom it contracted. When it made its contracts with Transworld and Nuclear, it then knew about Slick, his position with respect to the two corporations, and that he was not a promisor. Atomic initiated negotiations with Slick Oil Company and knew McGoodwin represented Slick. It knew Slick was an officer of and wholly owned both corporations, and that *191 they depended upon him for their operating expenses. In the case of Nuclear, it was Atomic's plan, as well as that of Transworld, to create it as a new company. Certainly nobody was mistaken about its finances or its purpose. Black, the representative for Atomic, in all these transactions admitted he knew Nuclear had no assets "didn't have a dime." Slick signed no agreements. He sent two telegrams to the AEC prior to October 1, 1957, and signed both as a corporate officer. At Atomic's stockholders' meeting to approve the merger with Nuclear, Slick's name was not mentioned as the one who was furnishing the finances.
Black, the attorney, director, secretary and dominating officer for Atomic, as well as the other officers and stockholders of Atomic, throughout all of the transactions with Transworld and Nucelar, had full information about Slick and knew that he was not a party to any contract with Atomic. No questions were raised and nobody asked Slick to bind himself personally. Atomic, with full knowledge, chose to deal with and continued to deal with the corporations to the exclusion of Slick. It was fully aware of the risks. Hanson v. Bradley, 298 Mass. 371, 10 N.E.2d 259, states the law which the trial court correctly applied:
"The right and the duty of courts to look beyond the corporate forms are exercised only for the defeat of fraud or wrong, or the remedying of injustice. In the present case we have a corporation formed without substantial capital, relying on borrowing money to make valuable a hotel that it was buying on credit. The plaintiff dealt with that corporation. There is nothing to show that he was deceived. The fair inference is that he knew the worthlessness of the corporation with which he contracted, and knew that his contract was of no value unless the corporation could borrow money * *.
"The plaintiff was not wronged by the fact that the corporation was organized with a trifling capital and could not live except upon borrowed money; nor by the fact that the lenders insisted on security. He knew the essential facts and accepted the situation."
The Texas decisions follow the same rule. Pace Corporation v. Jackson, 155 Tex. 179, 284 S.W.2d 340; Staacke v. Routledge, 111 Tex. 489, 241 S.W. 994; Noblitt v. Barker, Tex.Civ.App., 97 S.W.2d 1010; Seymour Opera-House Co. v. Wooldridge, Tex.Civ.App., 31 S.W. 234, 235. Accord, Farrier v. Hopkins, 131 Tex. 75, 112 S.W.2d 182.
Atomic's other actions are barred by limitations. The pleadings and Black's testimony state that defendants defrauded Atomic "in the inception of the contract," that is, back in August of 1957. Atomic asked for damages for fraud and not rescission of the contract, and the actions are governed by the two-year statute of limitations. Lacy v. Carson Manor Hotel, Inc., Tex.Civ.App., 297 S.W.2d 367. The amended petition which asserted fraud was not filed until February 6, 1963. With that date in mind, we shall review the admitted evidence. Everyone knew what in fact had been done and had not been done with respect to the AEC's requirements by October 1, 1957. By October 4, it was known that the AEC did not regard Transworld's commitment as a compliance. In November, 1957, Black saw and talked to Slick for the first time and Black testified that Slick told him that he never intended to put up the money personally. Black testified "That is the first time I ever understood that he was not going to put it up right from the beginning of my negotiations." From that time on Black had knowledge. By January, 1958, Atomic knew that the contract would not be reinstated. Efforts to reinstate the contract or obtain a new contract were unavailing and Atomic knew this by May 2, 1958. *192 Anything that happened thereafter did not alter the fact of Black's knowledge, stated by Slick himself, that he had never intended personally to supply the cash to finance the mill. As early as 1958, Atomic had knowledge of facts that would cause a reasonably prudent person to make inquiry which would lead to a discovery of the claimed fraud. Wise v. Anderson, 163 Tex. 608, 359 S.W.2d 876. Such knowledge is in law knowledge of the fraud itself. More than five years later, Atomic asserted its tort actions. They are now barred.
The judgment must be reversed and the cause of action asserted against Transworld and Nuclear for breach of contract is remanded. The judgment in favor of Slick is affirmed. Costs are adjudged against Transworld and Nuclear. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4561169/ | United States Court of Appeals
For the Eighth Circuit
___________________________
No. 19-1541
___________________________
United States of America
lllllllllllllllllllllPlaintiff - Appellee
v.
Devon Northon Golding, M.D.
lllllllllllllllllllllDefendant - Appellant
____________
Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
____________
Submitted: June 16, 2020
Filed: August 28, 2020
____________
Before LOKEN, ARNOLD, and GRASZ, Circuit Judges.
____________
GRASZ, Circuit Judge.
Devon Golding, M.D., was convicted of one count of conspiracy to commit an
offense against the United States in violation of 18 U.S.C. § 371, and four counts of
health care fraud in violation of 18 U.S.C. § 1347(a)(1). The district court1 sentenced
1
The Honorable Audrey G. Fleissig, United States District Judge for the
Eastern District of Missouri.
Dr. Golding to six months of imprisonment and two years of supervised release. On
appeal, Dr. Golding challenges the district court’s denial of his motion for judgment
of acquittal as to all counts. We affirm.
I. Background
Dr. Golding operated a family medical practice in St. Louis, Missouri called
National Medical, Inc. from 1996 to 2013. Beginning in 2009, he was also involved
in a medical testing laboratory, Allegiance Medical Services, Ltd. (“Allegiance”),
which operated out of the lower level of National Medical’s building, which Dr.
Golding owned. Between 2009 and 2012 Dr. Golding referred samples from his
patients to be tested at Allegiance, where he served for a period of time as the medical
director of the lab. During this time, Dr. Golding sporadically received checks from
Allegiance totaling almost $30,000, allegedly for rent, utilities, medical equipment,
and his salary for serving as the medical director. However, after the co-owner of
Allegiance, Anthony Camillo, approached the government with information about the
operations of the lab, it became clear that the payments Dr. Golding received were in
fact offered in exchange for his continued referral of samples to the lab which would
be submitted to Medicare or Medicaid for reimbursement.
Dr. Golding’s connection to Allegiance was also part of a larger scheme
involving several other defendants. In July of 2017, an indictment was issued
charging Dr. Golding and three other defendants with one count of conspiracy2 to
violate the Anti-Kickback Statute and defraud a health care benefit program in
2
The indictment included three unlawful objectives: violation of the Anti-
Kickback Statute under 42 U.S.C. § 1320a-7b(b)(1) and (2); defrauding a health care
benefit program in violation of 18 U.S.C. § 1347(a); and making false statements in
violation of 18 U.S.C. § 1001. However, the instructions given to the jury included
only the first two unlawful objectives: violating the Anti-Kickback Statute and
defrauding a health care benefit program.
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violation of 18 U.S.C. § 371, and four counts of health care fraud in violation of 18
U.S.C. § 1347(a). The indictment also included twenty-six additional counts
charging several of the other defendants with related crimes. A few months after the
indictment, Dr. Golding filed a motion to sever his trial from the other defendants,
claiming he may be prejudiced if a joint trial were held.
The district court agreed to sever the trial of Counts 1–6, involving Dr. Golding
and others, from Counts 7–24 and 25–31, which did not involve Dr. Golding. In the
following months, each of Dr. Golding’s co-defendants pled guilty to some portion
of Counts 1–6. But Dr. Golding proceeded to a five-day jury trial, resulting in a
guilty verdict on all five counts.3
At the close of the government’s case-in-chief and again at the close of the
evidence, Dr. Golding moved for a judgment of acquittal, which the district court
denied. The district court determined the government had made “a submissible case
on each of the[] counts and presented sufficient evidence from which a jury could
determine that the defendant is guilty beyond a reasonable doubt.” On appeal, Dr.
Golding’s argument is that the government failed to prove he received any actual
kickback as a part of the scheme, and therefore no reasonable jury could have
convicted him on any count.
II. Analysis
“We review de novo the denial of a motion for judgment of acquittal.” United
States v. Cook, 603 F.3d 434, 437 (8th Cir. 2010). “We apply the same standard of
review to the district court’s ruling on a motion for judgment of acquittal as we do to
a sufficiency of the evidence challenge.” Id. Accordingly, we must “view the
3
Count 2 of the indictment was applicable only to Defendant Kazim A. Meo.
Dr. Golding was charged with and convicted under Counts 1, 3, 4, 5, and 6.
-3-
evidence in the light most favorable to the government, resolving evidentiary
conflicts in favor of the government, and accepting all reasonable inferences drawn
from the evidence that support the jury’s verdict.” Id. We will uphold the conviction
“unless no reasonable jury could find the defendant guilty.” United States v.
Mendoza-Larios, 416 F.3d 872, 873 (8th Cir. 2005).
A. Conspiracy Against the United States
To convict a defendant of conspiring to commit an offense against the United
States under 18 U.S.C. § 371, the government must prove beyond a reasonable doubt
“(1) an agreement between two or more persons to pursue an unlawful objective; (2)
the defendant’s knowledge of the unlawful objective and voluntary agreement to join
the conspiracy; and (3) an overt act by one or more of the members of the conspiracy
in furtherance of the objective of the conspiracy.” United States v. Mauskar, 557
F.3d 219, 229 (5th Cir. 2009) (quoting United States v. Williams, 507 F.3d 905, 910
n.4 (5th Cir. 2007)). The “unlawful objective[s]” at issue here are violating the Anti-
Kickback Statute, 42 U.S.C. § 1320a-7b(b), and defrauding a health care benefit
program, 18 U.S.C. § 1347(a).
On appeal, Dr. Golding’s only argument is that, even taken in the light most
favorable to the jury verdict, “no actual kickbacks can be proven by the Government
given the evidence in this case.” Instead, Dr. Golding claims all of the payments he
received from Allegiance were “for a legitimate purpose.” But Count 1 did not
charge Dr. Golding with substantively violating the Anti-Kickback Statute or
committing health care fraud, rather it charged him with conspiring to commit said
crimes under 18 U.S.C. § 371. Because a conviction under § 371 does not require the
successful completion of the “unlawful objective[s],” here either receiving illegal
kickbacks or defrauding a health care benefit program, Dr. Golding’s sole argument
on appeal, that he did not receive a kickback, is unavailing. See Iannelli v. United
States, 420 U.S. 770, 777–78 (1975) (“Conspiracy is an inchoate offense, the essence
-4-
of which is an agreement to commit an unlawful act. . . . [A] conspiracy poses
distinct dangers quite apart from those of the substantive offense.”). And at no point
does Dr. Golding argue that either the existence of the conspiracy itself or his
involvement in it was insufficiently proven. But even if he had, there was abundant
evidence that he actively participated in the conspiracy and knew it was wrong.
The government presented evidence establishing Dr. Golding entered an
agreement with Camillo, the part-owner and manager of Allegiance, and eventually
others, to create a medical testing lab that made money through illegal kickbacks.
Camillo had approached the government with information regarding Dr. Golding and
testified extensively at trial after entering a proffer arrangement and cooperation
agreement. During the trial testimony, Camillo explained how in 2009 he and Dr.
Golding agreed to open Allegiance in the basement of the building Dr. Golding
owned. Camillo and Dr. Golding created a business plan by which Dr. Golding could
be “involved” in three different ways with the lab while maintaining its independence
to test samples from other medical providers. One plan provision involved Dr.
Golding’s attorney serving as part-owner rather than Dr. Golding himself — although
Camillo “knew that his attorney would probably be sharing those benefits with [Dr.
Golding].” The second two sources of involvement for Dr. Golding would be
payment of a medical director fee ($1,000 per month) and rent for the space ($2,000
per month). In exchange, Allegiance would receive Dr. Golding’s “goodwill,” that
is, Dr. Golding agreed to send his patients to Allegiance for their services. This
“goodwill” or referral of specimens was a condition of the partnership.
The government offered into evidence photocopies of the 22 checks Dr.
Golding received from Allegiance from 2009 to 2012. Several of these checks were
signed by Camillo with a memo line indicating they were payment for Dr. Golding’s
medical director duties. Camillo testified that Dr. Golding ceased performing any of
his director duties around the time the first of these checks was made out — but the
payments continued. According to Camillo, these payments were made “for [Dr.
-5-
Golding’s] goodwill and [his] sending patients to the laboratory.” Camillo also
explicitly testified he was aware, as early as November of 2009, that federal law
prohibited “a provider such as Dr. Golding” from being able to “solicit or receive
payment in return for referring his business to a Medicare facility or service.”
Nonetheless, Camillo testified that claims from Allegiance were submitted to both
Medicare and Medicaid by Allegiance. Camillo testified Dr. Golding was paid $20
for every specimen sent to Allegiance, including referrals for which Allegiance
“actually received reimbursement” from Medicare or Medicaid.
In light of this evidence, we will not disturb the jury’s determination that Dr.
Golding was guilty of the conspiracy charge.
B. Health Care Fraud
We next consider Dr. Golding’s argument that his convictions for committing
health care fraud should be reversed. Dr. Golding argues once again the government
failed to prove he actually received kickback payments. This argument misses the
mark because his conviction for health care fraud did not depend on his receipt of
kickbacks, but instead on the kickbacks Allegiance paid to other co-conspirators.
And once again, Dr. Golding does not argue there is insufficient evidence to prove
those transactions occurred.
To convict a defendant of health care fraud under 18 U.S.C. § 1347(a), the
government must prove beyond a reasonable doubt (1) the defendant knowingly
executed a scheme to defraud Medicare or Medicaid, (2) with the intent to defraud,
(3) in connection with payment for health care benefits or services, and (4) the
Medicare Program and Medicaid Program are public health care plans, affecting
commerce, under which health care benefits or services were provided to individuals.
18 U.S.C. § 1347(a). And even if Dr. Golding’s conduct did not itself satisfy each of
-6-
these four elements, his appeal fails due to the rule regarding co-conspirator liability.
See Pinkerton v. United States, 328 U.S. 640, 647 (1946).
Under the Pinkerton doctrine, “each member of a conspiracy may be held
criminally liable for any substantive crime committed by a co-conspirator in the
course and in furtherance of the conspiracy, even though those members did not
participate or agree to the specific criminal act.” United States v. Jenkins-Watts, 574
F.3d 950, 959 (8th Cir. 2009) (quoting United States v. Hayes, 391 F.3d 958, 962 (8th
Cir. 2004)). Because the jury found Dr. Golding to be a member of the conspiracy
involving Allegiance and the services of that lab, he may be held “criminally liable”
for the actions his co-conspirators took in furtherance of the medical testing
conspiracy. Therefore, Dr. Golding can be held liable for substantive violations of
§ 1347(a) based on the actions of his co-conspirators, including Camillo.
The evidence presented at trial establishes that Camillo, the part-owner and
manager of Allegiance, committed substantive offenses of health care fraud by
knowingly submitting or causing to be submitted reimbursement claims to Medicare
for services provided by Allegiance, which were tied to illegal kickbacks. These
submissions occurred in August and September 2012, when Dr. Golding was part of
the conspiracy. Therefore, the jury was reasonable in finding substantive violations
of § 1347(a) committed by members of the conspiracy. And, as a co-conspirator, Dr.
Golding was properly held liable for these substantive crimes committed by Camillo
in furtherance of the scheme. See Pinkerton, 328 U.S. at 647.
III. Conclusion
For the foregoing reasons, we affirm the judgment of the district court.
______________________________
-7- | 01-03-2023 | 08-28-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/1556825/ | 876 F.Supp. 4 (1995)
UNITED STATES of America
v.
Darius HART, Defendant.
Cr. A. No. 93-380.
United States District Court, District of Columbia.
February 10, 1995.
Lloyd Elsten; Billy L. Ponds; Thomas Walsh Farquhar; and Ernest Wendell McIntosh, Jr., Eaton, McClellan & Allen, Washington, DC, for defendants.
Stevan Eaton Bunnell and Teresa Ann Howie, U.S. Attorney's Office, Washington, DC, for the U.S.
*5 MEMORANDUM OPINION IN AID OF SENTENCING
SPORKIN, District Judge.
On May 20, 1994 the defendant, Darius Hart pled guilty to distribution of 50 grams or more of cocaine base, 21 U.S.C. § 841(a)(1) and 841(b)(1)(A). This Court sentenced the defendant to 78 months in prison on November 7, 1994.
The statutory minimum penalty for the offense the defendant pled guilty to is 10 years. 21 U.S.C. § 841(b)(1)(A). The Court found that the statutory minimum did not apply to Mr. Hart because he was entitled to the recently enacted "safety valve" provision, which applies to offenses under 21 U.S.C. § 841. See 18 U.S.C. § 3553(f)(1)-(5). The safety valve requires that Court apply the applicable guideline sentence rather than the statutory minimum if the defendant meets five criteria. Those criteria are:
1) the defendant does not have more than 1 criminal history point, as determined under the sentencing guidelines;
2) the defendant did not use violence or credible threats of violence or possess a firearm or other dangerous weapon (or induce another participant to do so) in connection with the offense;
3) the offense did not result in death or serious bodily injury to any person;
4) the defendant was not an organizer, leader, manager, or supervisor of others in the offense, as determined under the sentencing guidelines and was not engaged in a continuing criminal enterprise, as defined in 21 U.S.C. § 848; and
5) not later than the time of the sentencing hearing, the defendant has truthfully provided to the Government all information and evidence the defendant has concerning the offense of offenses that were part of the same course of conduct or of a common scheme or plan, but the fact that the defendant has no relevant or useful other information to provide or that the Government is already aware of the information shall not preclude a determination by the court that the defendant has complied with this requirement.
18 U.S.C. § 3553(f)(1)-(5).
The government argued that the defendant was not entitled to this "safety valve" provision because he did not meet criteria 2, 3, and 5. The Court found otherwise. The Court found that Ryan A. Newman, one of two other defendants, was responsible for the gun in question. His fingerprints were on it and he had pled guilty to carrying a firearm during distribution of cocaine base, 18 U.S.C. § 924(c). An "organizer or leader" is a defendant who receives an upward adjustment of his offense level for an aggravating role, according to the Commentary to the Sentencing Guidelines. U.S.S.G. § 5C1.2 (Comment 5) (1994). The defendant meets criteria number 2 because the court finds the defendant did not play an aggravating role. Indeed, the Probation Office in its presentence report did not propose such an adjustment.[1] The Court found that Mr. Hart had satisfied criteria number 5 during his plea hearing by candidly explaining to the Court his role in the offenses.
The presentence report found that the defendant's offense level was 32 and his criminal history category was 1. The defendant objected to his offense level on the ground that there was an improper two point upward adjustment for possession of a gun. Sentencing Guidelines § 2D1.1(b)(1). The Court decided to exclude the two point adjustment because the government had failed to connect the defendant with the weapon.[2]
Given an offense level of 30 and a criminal history category of 1, the Sentencing Guidelines range for the defendant is 97 to 121 months. U.S.S.G. Sentencing Table (1994). The Court found, however, that the defendant was entitled to a downward departure to 78 months.
It was the Court's finding that imposing a 97 month sentence on Mr. Hart *6 would create a severe inequity given the circumstances surrounding his co-defendant, Mr. Newman. The government's agreement with defendant Newman was to allow him to plead guilty to a charge carrying a statutory maximum of 60 months. Although Mr. Newman initially agreed to cooperate with the government, after the court released defendant at the government's request, he proceeded to flee the country. Not only did Newman not cooperate with the government but he was also unavailable to provide the court with evidence necessary to determine defendant Hart's culpability, particularly with respect to Hart's claim that Newman had coerced him into engaging in certain of the alleged violative acts.
While the Court recognizes that a disparity in sentences between co-defendants does not, by itself, justify a downward departure, United States v. Williams, 980 F.2d 1463, 1467 (D.C.Cir.1992), in this case, a grave injustice would be committed if no consideration was given to this factor. There would be an inequity in sentencing this defendant as the government suggests to a sentence of some three years more than a more culpable co-defendant, who has broken his agreement with the government and fled the country. Clearly this fact should be relevant in determining defendant's sentence. The Court has weighed the above along with the fact that Mr. Newman is not presently before the court to testify as to defendant Hart's role including whether Newman's alleged coercion was at all a factor in the case.[3] Newman's absence is in part because the Court, at the Government's urging, did not detain him pending sentencing. For all of these reasons the Court finds a downward departure warranted.
NOTES
[1] The Court further found that if there was an organizer or manager among the co-defendants, it was Ryan Newman, not Mr. Hart.
[2] Ryan Newman's fingerprints were on the gun; the defendant's were not. Mr. Newman pled guilty to a weapons charge; the defendant did not.
[3] Coercion that does not constitute a complete defense may nevertheless warrant a downward departure. U.S.S.G. § 5K2.12. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1708929/ | 500 So.2d 831 (1986)
Donald A. HAYDEN
v.
The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA.
No. 85 CA 1344.
Court of Appeal of Louisiana, First Circuit.
December 23, 1986.
*832 Russell L. Dornier, Baton Rouge, for plaintiff-first appellant Donald Hayden.
*833 Neil H. Mixon, Baton Rouge, for defendant-second appellant Guardian Life Ins. Co. of America.
Before LOTTINGER, SHORTESS and CARTER, JJ.
SHORTESS, Judge.
Donald A. Hayden (plaintiff) and his dependents were insured under a group policy written by The Guardian Life Insurance Company of America (defendant). In 1982, plaintiff's daughter underwent treatment for what was diagnosed as alcoholism and drug abuse. Except for a small fraction of the total charges, defendant refused payment. Plaintiff then brought suit. The trial court ruled that plaintiff's claim should have been paid and awarded him $9,569.21, but it denied plaintiff's claim for penalties and attorney fees. Plaintiff has appealed the denial, and defendant has appealed the finding that the claim was payable under the contract of insurance.
Plaintiff's minor daughter was treated for drug and alcohol abuse at the Talbot Outpatient Center in February and March of 1982, under the supervision of Dr. Augusto Abad. From September to November of 1982, MacTavish Williamson, an independent chemical abuse counselor, treated her for the same problem. In November and December of 1982, she continued to receive treatment for this malady as a patient at the Hazelden Pioneer House in Minnesota. Plaintiff submitted claims for this treatment totalling $9,569.21. Defendant tendered a check (evidently uncashed) for $881.51 for payment of a portion of the Hazelden charges under the "mental or emotional illness" clause of the policy, but it refused to make any other payments for these charges, believing that they were not covered by the policy.
This case raises four issues: (1) What state's law should govern? (2) Under the applicable law, is treatment for alcoholism and drug abuse covered as a "sickness" under the insurance policy? (3) Were these charges incurred "upon the order of a physician" as required by the policy? (4) Should penalties and fees be assessed against defendant?
ISSUE ONE
Defendant asks that the law of Rhode Island be applied. Its position is essentially as follows: Because Louisiana law then excluded small companies such as plaintiff's from group coverage, the policy in question was initially delivered to a Rhode Island trust, under whose auspices the employees of plaintiff's corporation received coverage. LSA-R.S. 22:215 (before amended in 1980). The policy states that it was delivered in Rhode Island and is to be governed by Rhode Island law. No Louisiana statute in effect when these claims arose compelled the application of Louisiana law.
The pertinent law of Rhode Island was not brought to the attention of this or the trial court. Defendant never established that the law of that state differed from our law or that application of Rhode Island law would alter the outcome of this case.[1] Absent a showing of what another state's law is, it will be presumed to be the same as Louisiana's. Lord v. Metropolitan Life Insurance Co., 434 So.2d 1179 (La.App. 1st Cir.1983); Johnson v. Nationwide Life Insurance Co., 388 So.2d 464 (La.App.2d Cir.1980) and cases cited therein. Because defendant failed to establish the content of the relevant law of Rhode Island, we will apply Louisiana law.
ISSUE TWO
The insurance agreement provides coverage for "sickness or injury":
*834 Covered Charges means those charges which are reasonable charges necessary for the treatment of a sickness or injury, actually made to a Covered Person and incurred while he is insured hereunder, on account of such sickness or injury....
It defines "sickness" as "a sickness or disease, suffered by a Covered Person, all complications thereof or therefrom and all related conditions and recurrences thereof." Coverage for mental and emotional illness is significantly limited:
The Insurance Company will not pay Major Medical Expense Benefits under this Policy for charges for medical care and treatment enumerated below, except to the extent therein provided and subject to all other Major Medical Expense provisions in this Policy.
....
(9) Charges for the care or treatment of mental or emotional illness, disorder or disturbance, except such charges incurred (a) during the first sixty days of a single period of confinement of a covered person in a hospital specifically for the treatment of such mental or emotional illness, disorder or disturbance, which confinement lasts at least seven consecutive days; and (b) within one month after the termination of such a single period of hospital confinement.
For the purpose of this provision, all periods of hospital confinement for the care or treatment of mental or emotional illness, disorder or disturbance shall be deemed a single period of confinement unless the periods of hospital confinement are each separated by twelve consecutive months or longer during which the confined Covered Person shall have resumed and continuously carried on the normal full-time activities of a healthy individual of like age and sex. The benefits afforded under (a) or (b) above shall be available but once as to each such single period of hospital confinement.
Defendant's position is that the treatment at Talbot and Hazelden and by Williamson was for an emotional or mental illness; thus, the coverage was limited to the amount defendant tendered. The basis of defendant's argument is that alcohol and drug abuse is properly classified as an emotional or mental illness, not as a sickness or disease. If such chemical abuse is a mental disorder, the charges clearly fall under the mental illness clause of the policy.
Dr. Louis Cataldie and Dr. Augusto Abad, both medical doctors recognized as experts specializing in alcohol and drug abuse, testified that this problem is a sickness or disease. According to Dr. Cataldie, when the patient's primary diagnosis indicates alcoholism, he has a physical disease. Dr. Abad testified that his primary diagnosis of plaintiff's daughter was alcoholism and drug abuse and that for years these maladies have been classified as physical rather than mental problems. Defendant notes that Dr. Abad mentions conduct disorders in his diagnosis; defendant suggests that because of this mention, a primary conduct or mental disorder led to the substance abuse. Dr. Abad made it clear that the conduct disorder was secondary and pointed out that alcohol and drug abuse is often misdiagnosed as a conduct disorder. In their depositions, Dr. Dennis Hogenson, a clinical psychologist at Hazelden, and Jim Heaslip, a chemical dependency counselor at Hazelden, advanced the view that plaintiff's daughter had the disease of chemical dependency, not a mental disorder.
Defendant's only witness, Elizabeth Bennett, a supervisor in defendant's claims division, testified that defendant's policy is to consider substance abuse as a mental or nervous disorder. It was her belief that these problems are so classified in the International Classification of Diseases, Ninth Revision, and the Diagnostic and Statistical Manual of Mental Disorders II.
This precise issue is apparently res nova in Louisiana. In Jennings v. Louisiana and Southern Life Insurance Co., 290 So.2d 811, 813-814 (La.1974), the Supreme Court cited the following definition of *835 "sickness" and guidelines for interpretation of insurance policies.
Webster's Third New International Dictionary (Unabridged) (1971), G. & C. Merriam Company defines:
....
"SICKNESS: ... the condition of being ill: ill health: ILLNESS ... a disordered, weakened, or unsound condition ... a form of disease ..."
....
Words used in an insurance contract are to be understood in the usual and common signification. C.C.1946; Harmon v. Lumbermens Mutual Casualty Co., 247 La. 263, 170 So.2d 646 (1965); Muse v. Metropolitan Life Ins. Co., 193 La. 605, 192 So. 72 (1939). Ambiguous coverage provisions in a policy are construed most favorably to the insured and against the insurer. Schonberg v. New York Life Ins. Co., 235 La. 461, 104 So.2d 171 (1958); Albritton v. Fireman's Fund Ins. Co., 224 La. 522, 70 So.2d 111 (1954); Mutual Life Ins. Co. of New York v. New, 125 La. 41, 51 So. 61 (1910). And, "... if the doubt or obscurity arise for the want of necessary explanation which one of the parties ought to have given, or from any other negligence or fault of his, the construction most favorable to the other party shall be adopted, whether he be obligor or obligee." C.C. 1958.
The weight of the evidence presented in this case supports the view that chemical dependency of the type suffered by plaintiff's daughter is a sickness or disease. To the extent that "sickness" as used in the insurance agreement may be deemed vague or ambiguous, the guidelines cited above indicate that the term should be interpreted as encompassing chemical dependency.
A federal court has noted that chronic alcoholism "is now almost universally accepted medically as a disease. The symptoms... may appear as `disorders of behavior.' " Driver v. Hinnant, 356 F.2d 761, 764 (4th Cir.1966)[2] (Footnote omitted.) In Kitchen v. Time Insurance Co., 232 N.W.2d 863 (Iowa 1975), the court construed the word "sickness" in an insurance contract to include alcoholism.[3] A Wisconsin court, considering whether a "drinking problem" was a handicap for purposes of a discriminatory discharge claim, described "alcoholism" as a disease, proved by expert medical opinion. Connecticut General Life Insurance Co. v. Department of Industry, Labor & Human Relations, 86 Wis.2d 393, 273 N.W.2d 206, 212-213 (1979). In State v. Street, 498 S.W.2d 523, 524 (Mo.1973), the court noted that, unlike the state of intoxication, "[a]lcoholism is a chronic disease" and that the distinction between the two is known generally.
Based on the evidence presented and the cited jurisprudence, we conclude that the plaintiff's daughter's condition was chemical dependency, that her chemical dependency was a sickness covered under the policy, and that a finding that this sickness is not governed by the "mental illness" clause of the policy is not clearly wrong.[4]
ISSUE THREE
Plaintiff seeks recovery for treatment at Talbot, with Williamson, and at Hazelden. We will discuss each treatment separately when considering the question of whether the treatment was undertaken upon the orders of a physician.
*836 TALBOT
Dr. Augusto Abad saw plaintiff's daughter when she began treatment at Talbot. His diagnosis was alcoholism and drug abuse. He testified that the Talbot treatment was occasioned by that diagnosis. He answered affirmatively when asked, "Now, Dr. Abad, all the treatment at Talbot is carried under your duration as a physician, is it not?" MacTavish Williamson, one of the Talbot counselors, testified by deposition that the work at Talbot was done under Dr. Abad's direction. That Dr. Abad is a physician is not disputed. Therefore, we find that the Talbot charges were incurred upon the order of a physician.
WILLIAMSON
Several months after completing the program at Talbot, plaintiff's daughter again began to have problems with substance abuse. She and her parents sought help from MacTavish Williamson. At the time he began this treatment, Williamson was no longer a staff member at Talbot, having formed his own counseling service, MacTavish and Associates. He relied on the diagnosis made by Dr. Abad at Talbot, and he discussed the case with Dr. Henry Ehrlich, a psychiatrist with whom Williamson worked.[5] Under the circumstances, we believe that Williamson's treatment fits the policy requirement: "incurred upon the order of a physician." It is fairly obvious that plaintiff's daughter was continuing the treatment begun by Dr. Abad with the same counselor she saw at Dr. Abad's direction.
HAZELDEN
We consider the Hazelden treatment to be covered by the policy for the following reasons:
(A) The treatment at Hazelden was initiated by Williamson. He decided that an "intervention" had become necessary and chose Hazelden as the appropriate facility. Thus plaintiff's daughter's referral to Hazelden was simply a continuation of the treatment begun by Dr. Abad for her sickness which he had diagnosed.[6]See Baque v. Pan-American Life Insurance Co., 313 So.2d 293, 297 (La.App. 3rd Cir.), writ denied, 318 So.2d 52 (La.1975) (defining "treatment" as all the steps taken to effect a cure of the injury or disease).
(B) Hazelden takes a "team" approach to its services. When a patient arrives, he is evaluated by a team to determine what his particular needs are and what treatment best suits those needs. According to Jim Heaslip, this team includes a medical doctor, Dr. Philip J. Worrell. The administrator of Hazelden is Damian McElrack, described by Heaslip as a doctor. A psychiatrist is available should he be required. Thus, when the "team" diagnosed plaintiff's daughter as dependent on chemicals and recommended treatment, that "team" included a medical doctor.
The Hazelden records indicate the participation of a physician in the diagnosis and treatment. The admission form states that Dr. Worrell was the attending physician. The withdrawal form shows that while at Hazelden plaintiff's daughter received a chest x-ray, a tuberculosis test, a physical exam, and medication for a cough and an eye inflammation. Dr. Worrell's name was signed to this form by S. Sloan. The bill shows five different charges for prescription drugs, presumably ordered by a physician.
(C) The claim form for Hazelden charges indicates that C.D. Townes, M.D., was the attending physician for plaintiff's daughter's treatment for chemical dependency administered at Hazelden.
ISSUE FOUR
Plaintiff claims that defendant arbitrarily, capriciously, and unreasonably denied payment. Whether an insurer had just grounds for refusing to pay is a question *837 of fact, and the trial court's finding on this matter should not be disturbed unless it is clearly wrong. Dorsey v. Board of Trustees, State Employees Group Benefits Program, 482 So.2d 735, 739 (La.App. 1st Cir.1985), writs denied, 486 So.2d 735, 736 (La.1986). Given the conflict among authorities over the question of whether alcohol and drug abuse is correctly termed a "sickness" or a "mental or emotional disorder," we conclude that the trial judge was not clearly wrong in refusing to award penalties and fees.
For the foregoing reasons, we affirm the judgment of the trial court and tax costs to defendant.
AFFIRMED.
NOTES
[1] We have discovered no cases in which a Rhode Island court has addressed the question of whether alcohol and drug abuse is a mental illness or a physical disease. However, that state's statutes treat mental illness and alcoholism separately. R.I.Gen.Laws, § 40.1-4-1, et seq. and 40.1-5-1, et seq. A federal court called on to examine the constitutionality of Rhode Island's law on alcoholism commented that "[a]lcoholism, though itself a damnable evil, is not a manifestation of evil. Rather, it is a dread disease...." Donahue v. Rhode Island Department of Mental Health, Retardation and Hospitals, 632 F.Supp. 1456, 1480 (D.R.I.1986).
[2] That court also noted that the "World Health Organization recognizes alcoholism `as a chronic illness that manifests itself as a disorder of behavior (accent added).'"Driver, 356 F.2d at 764 (footnote omitted).
[3] Contra, Williams v. New England Mutual Life Insurance Company, 419 So.2d 766, 770 (Fla. Dist.Ct.App.1982).
[4] In reaching this last conclusion we are cognizant of the rule of construction which dictates that "exclusionary clauses must be interpreted strictly in the insured's favor." Borden, Inc. v. Howard Trucking Co., Inc., 454 So.2d 1081, 1090 (La. 1984). See also Gregorie v. Hartford Accident and Indemnity Co., 348 So.2d 186, 191 (La.App. 3rd Cir.), writs denied, 350 So.2d 1210, 1213 (La.1977), holding that exclusionary clauses in insurance policies are to be "even more stringently interpreted" against the insurer than ambiguity occurring elsewhere.
[5] Evidently, plaintiff's daughter never saw Dr. Ehrlich personally.
[6] We note again that the policy's definition of "sickness" encompasses "all complications thereof or therefrom and all related conditions and recurrences thereof." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1689677/ | 654 F.Supp. 380 (1987)
QUILL CORPORATION
v.
Clinton E. LeBLANC and Lorraine LeBlanc, d/b/a The Quill
Civ. No. 85-734-D.
United States District Court, D. New Hampshire.
February 6, 1987.
*381 *382 Sulloway, Hollis & Soden by Michael M. Lonergan, Concord, N.H., Laff, Whitesel, Conte & Saret by Charles A. Laff, Larry L. Saret, Janet A. Pioli, Chicago, Ill., for plaintiff.
Upton, Sanders & Smith by Russell F. Hilliard, Concord, N.H., for defendant.
ORDER
DEVINE, Chief Judge.
This is an action for trademark infringement and false designation of origin brought pursuant to the Lanham Act, 15 U.S.C. §§ 1051-1127, and for unfair competition, deceptive trade practices, and injury to business reputation brought pursuant to the common and statutory laws of New Hampshire. Plaintiff Quill Corporation seeks injunctive relief, treble damages, interest, costs, and attorneys' fees against defendants Clinton and Lorraine LeBlanc, d/b/a The Quill. Jurisdiction is based on 15 U.S.C. §§ 1114(1), 1121, and 1125(a); and 28 U.S.C. §§ 1331, 1338(a), and 1338(b). Currently before the Court are plaintiff's motion for summary judgment on all counts, Rule 56(c), Fed.R.Civ.P., and defendants' objection thereto.
I. Factual Background
Plaintiff is the owner of record of six active United States trademark registrations for the mark "QUILL", or "QUILL" accompanied by the illustration of a rhomboid encasing a silhouetted quill. Since 1958 plaintiff has been in the business of selling and distributing general office supplies by mail solicitation, generating sales by sending catalogues and fliers on a periodic basis to existing and potential customers throughout the United States. Plaintiff's mark is featured throughout its sales literature, and photographs in the literature clearly show that many of plaintiff's wares are sold under plaintiff's private label, itself prominently displaying the QUILL mark.
Sometime prior to 1975, plaintiff began sending catalogues and fliers to potential customers in New Hampshire and Maine. Affidavits and exhibits establish that plaintiff mailed approximately 2000 fliers to potential customers in the two states in the ten-month period from May 1975 to February 1976. The extent to which this solicitation resulted in sales to preexistent accounts in the New Hampshire-Maine market, or whether such accounts even existed at the time of the mailing, is unknown. However, the existence of previously established accounts may be inferred from plaintiff's computer-generated report entitled "Analysis of New Accounts", which shows $1,700 in sales for that period to new accounts in the New Hampshire-Maine area.
The Court has seen no evidence that plaintiff registered or sought to register its mark with either New Hampshire or Maine at any time. Plaintiff federally registered its mark "QUILL" on April 1, 1980, and on July 1, 1980, it registered a variation of the mark, adding the previously-described rhomboid illustration. In 1983, 1984, and *383 1985, plaintiff registered four more variations of the QUILL mark.
In 1976, allegedly unaware of plaintiff's existence and of plaintiff's ongoing sales efforts under the QUILL mark in Maine and New Hampshire, defendants opened an office supply store in Conway, New Hampshire, selling essentially the same type of goods as those sold by plaintiff. Defendants named their store "The Quill" and registered "The Quill" as a tradename with the New Hampshire Secretary of State on July 21, 1976. At all times pertinent to this litigation, defendants have not sold private-label merchandise bearing their tradename or any other mark confusingly similar to plaintiff's. However, defendants employ and display their tradename in connection with numerous other facets of their business: on their store and delivery van, in their advertising, on sale fliers sent biannually to customers in New Hampshire and Maine, and, most importantly, on the front cover and spine of 1000 private-label catalogues printed and produced by United Stationers ("US") which defendants distribute annually to existing and potential customers. Distribution of the US catalogue appears to have had a significant and direct impact on defendants' sales: in 1981, the first year defendants distributed the catalogues, gross sales increased by nearly fifty percent.
Plaintiff's sales in New Hampshire between January 1, 1975, and March 30, 1980, were in excess of $170,000. Plaintiff's national and New Hampshire sales have continued to increase since 1980. In 1985 plaintiff's gross sales exceeded $800,000 in New Hampshire, were approximately $2 million in Maine, and on a national basis were more that $150 million. From 1976 to 1980 defendants' sales totalled approximately $140,000; in 1980 nearly $90,000; in 1981 nearly $134,000; and in 1985 more than $300,000.
On numerous occasions customers have confused the two dealers and have sought to order from defendants' store goods advertised in plaintiff's fliers and catalogues. In several of these instances, defendants have sold such customers the desired products rather than direct the customers to plaintiff.
The issue facing the Court is whether, as a matter of law, plaintiff's federally-registered trademark is infringed by defendants' use of a confusingly similar mark to sell similar (and, in some cases, the same) goods in a geographic area in which plaintiff also sells goods, where defendants adopted and began using their mark without knowledge of plaintiff's prior use and have continually used said mark from a date prior to plaintiff's registration.
II. The Claim for Trademark Infringement
The Lanham Act was enacted by Congress in order "to provide uniform, comprehensive federal law to govern questions of trademarks used in and affecting interstate commerce." Thrifty Rent-A-Car System v. Thrift Cars, Inc., 639 F.Supp. 750, 754 (D.Mass.1986) [hereinafter Thrifty] (citing Park `N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 193, 198, 105 S.Ct. 658, 661, 663, 83 L.Ed.2d 582 (1985)). The instant case involves trademarks used in interstate commerce; consequently, the provisions of the Lanham Act provide the controlling law as to the rights of the parties. Id. at 754-55; Mister Donut of America, Inc. v. Mr. Donut, Inc., 418 F.2d 838, 844 (9th Cir.1969).
Federal registration of a mark under the Lanham Act is prima facie evidence that the registrant has exclusive rights to use the registered mark in commerce, subject to any common law legal and equitable defenses which would be otherwise assertible if the mark were unregistered. 15 U.S.C. § 1115(a); Park `N Fly, Inc., supra, 469 U.S. at 194, 105 S.Ct. at 661. In addition, § 1065 of the Act provides that registered marks can become "incontestable", generally by filing an affidavit within one year of expiration of any five-year period following registration, during which period the mark has been in continuous use. Incontestable status is "conclusive evidence" of the registrant's exclusive rights to a *384 mark, as opposed to prima facie evidence. Once such status has been obtained, a junior user[1] of the mark is limited to a narrow range of seven defenses enumerated in the Act in order to justify encroachment upon the senior user's rights. 15 U.S.C. § 1115(b); Park N'N Fly, Inc., supra, 469 U.S. at 194-95 & n. 3, 105 S.Ct. at 661-62 & n. 3. Two of plaintiff's six registered marks have become incontestable within the meaning of the Lanham Act.
Given that plaintiff's mark is incontestable, defendants are limited to the defenses listed in § 1115(b). And, on the basis of evidence presented to the Court, only one of the enumerated defenses applies: § 1115(b)(5). That section provides:
If the right to use the registered mark has become incontestable under section 1065 of this title, the registration shall be conclusive evidence of the registrant's exclusive right to use the registered mark in commerce on or in connection with the goods ... except when one of the following defenses or defects is established:
(5) That the mark whose use by a party is charged as an infringement was adopted without knowledge of the registrant's prior use and has been continuously used by such party ... from a date prior to registration of the mark under this chapter ...: Provided, however, That this defense or defect shall apply only for the area in which such continuous prior use is proved....
15 U.S.C. § 1115(b) (emphasis in original).
Defendants assert that § 1115(b)(5) provides a "complete defense" to plaintiff's claim of infringement, that "all elements of this defense have been met by the LeBlancs," and that "the only remaining issue is the extent of the geographic area to which this priority applies." Defendants' Memorandum at 4. Plaintiff asserts that because "[d]efendants concededly are not the prior user of the QUILL mark in New Hampshire or Maine[,] [t]his negates any right of the defendants to assert Section 1115(b)(5)." Plaintiff's Reply Memorandum at 4. The Court agrees, in large part, with defendants.
Plaintiff's assertion is misplaced because it assumes that the key to determining applicability of a § 1115(b)(5) defense is determining who first used the mark in a given area. Plaintiffs' position is clearly incorrect based on the plain language of the section which looks instead to: (1) adoption of the mark without knowledge of prior use by a senior user, and (2) continuous use by the junior user from a date prior to registration of the mark by the senior user. Based on the following: defendant Clinton LeBlanc's deposition and affidavit; defendants' efforts in applying for and being granted use of the tradename "The Quill" by the New Hampshire Secretary of State; the lack of evidence that plaintiff registered or attempted to register its mark with the New Hampshire Secretary of State prior to defendants' entering the field; and the fact that defendants began doing business under the tradename "The Quill" in 1976 while plaintiff's first federal registration was not until 1980, the Court finds that defendants' adoption and use of their tradename "The Quill" was in good faith and without knowledge of prior use by plaintiff. With regard to the second element of the § 1115(b)(5) defense, it is undisputed that defendants have continuously operated their business since its inception. Accordingly, the Court finds that defendants have successfully established the elements of a § 1115(b)(5) defense.
However, this does not provide, as defendants argue, a "complete defense" to plaintiff's claim. Successful assertion of the § 1115(b)(5) defense merely affects the evidentiary status of the incontestability aspect of a federal registration, changing the import of the federal registration back *385 to prima facie, rather than conclusive, evidence of a registrant's exclusive right to use the mark. Park 'N Fly, Inc., supra, 469 U.S. at 199 n. 6, 105 S.Ct. at 665 n. 6. The threshold elements of the defense being proven, the junior user, who has the burden of pleading and proof, then must establish the boundaries of the area in which it used the contested mark prior to registration in order to support its claim that it has the right to continue using the contested mark in some limited area. Thrifty, supra, 639 F.Supp. at 755; 15 U.S.C. § 1115(b)(5) ("Provided, however, that this defense shall apply only for the area in which such continuous prior use is proved.") (emphasis in original).
The common law rules regarding remote geographical use essentially hold that first appropriation of a mark does not in itself preclude use by a good-faith and innocent user in a remote geographical area:
two parties who innocently adopt similar trademarks and use them in separate markets carve out territories for themselves. Within each territory, each party can use its mark free from interference by the other.
The actual geographic area a party carves out is a question of fact, and a court delimits the area by examining the party's reputation, advertising, and sales with respect to the territory in question. In each instance, the test is whether the party's mark is sufficiently known there, or whether its sales there are of sufficient volume, to create a likelihood of confusion among consumers, should a second user enter the same territory.
Thrifty, supra, 639 F.Supp. at 753 (and citations therein). A good-faith junior user is entitled to injunctive relief against a senior user if the senior user attempts to enter the remote market in which the junior user has built up trademark rights; similarly, a junior user can be enjoined from entering markets in which the senior user has acquired exclusive rights. Id. As defendants have successfully asserted a § 1115(b)(5) defense, the Court turns to determining the limits of the geographic area in New Hampshire and Maine in which defendants have established a right to use the mark at issue.
Federal registration of the senior user's mark provides constructive notice to the world that the senior user has appropriated the mark, and has the immediate effect of foreclosing any junior user from expanding its market area. Id. at 755-56. At the point in time of registration, the junior user's current market its "area [of] continuous prior use," 15 U.S.C. § 1115(b)(5) is frozen, and "[a]s at common law, the junior user's reputation, advertising, and sales delimit its frozen area." Thrifty, supra, 639 F.Supp. at 756. In the instant case, plaintiff registered its mark on April 1, 1980; thus, that date governs the respective rights of the parties. In essence, what defendants had for a market area on April 1, 1980, they get to keep; after that date, expansion of their market area is legally precluded at least to the degree that expansion is based on use of the contested mark.
III. Conclusions of Law
Under Rule 56(c), Fed.R.Civ.P., summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." A dispute of fact is "material" if it "affects the outcome of the litigation," Finn v. Consolidated Rail Corp., 782 F.2d 13, 15 (1st Cir.1986) (quoting Pignons S.A. de Mecanique v. Polaroid Corp., 657 F.2d 482, 486 (1st Cir.1981)), and is "genuine" if there is "sufficient evidence supporting the claimed factual dispute ... to require a jury or judge to resolve the parties' differing versions of the truth at trial," id. (quoting Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976)). The burden is upon the moving party to affirmatively demonstrate that there is no genuine, *386 material factual issue, and the Court is required to view the record in the light most favorable to the party opposing the motion and indulge all inferences favorable to that opposing party. Id.
It is clear on the evidence presented to the Court that plaintiff is entitled to some sort of injunctive relief directed either to defendants' geographic market expansion following April 1, 1980 (the date of plaintiff's federal registration of the QUILL mark), or to defendants' continued use of the tradename "The Quill", or to a combination thereof. However, for the purpose of the motion sub judice, based on the evidence which has been presented by the parties the Court is unable to determine the relief to which each party is entitled.
The evidence presented to the Court raises genuine questions of material fact with regard to the geographic scope of defendants' business activities as of April 1, 1980; that is, the geographic reach and nature of defendants' advertising (bearing in mind that advertising alone or sporadic sales are insufficient to establish the requisite "continuous prior use" of a trademark necessary to create trademark rights, see Thrifty, supra, 639 F.Supp. at 756; Wrist-Rocket Mfg. Co., Inc. v. Saunders Archery Co., 578 F.2d 727, 732 (8th Cir.1978); Sweetarts v. Sunline, Inc., 380 F.2d 923, 929 (8th Cir.1967)), and the geographic extent of defendants' customer base. Of particular concern to the Court are the 1000 US catalogues which defendants mail to potential customers, identified only as catalogues of "The Quill". Defendants increased their sales by nearly fifty percent the first year they distributed these catalogues, they have continued to distribute the US catalogues, and they have continued to enjoy dramatic sales increases. Taken together, these facts imply, but do not establish, that part of defendants' success stems from distributing the catalogues to a wider geographic area than that which was effectively reached by defendants prior to plaintiff's registration.
Because the evidence presented to the Court inadequately equips the Court to make any of the aforementioned determinations, genuine issues of material fact with respect to defendants' "area [of] continuous prior use" remain unresolved. Accordingly, summary judgment for the plaintiff is inappropriate and must be denied.
SO ORDERED.
NOTES
[1] As terms of art used in the field of trademark law, "senior user" denotes "the first seller to adopt and use a mark in the United States," and "junior user" denotes "the second seller to adopt the mark, even though the junior user may be the first in time within a given remote territory." J. McCarthy, Trademarks and Unfair Competition § 26:1 at 204 (1973). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1873100/ | 396 F.Supp. 362 (1975)
Herman Leroy JOHNSON
v.
BENJAMIN MOORE & COMPANY et al.
Civ. A. No. 15694.
United States District Court, W. D. Louisiana, Alexandria Division.
June 20, 1975.
*363 F. Jean Pharis, Pharis & Pharis, Alexandria, La., for plaintiff Leroy Johnson.
John F. Simon, Gold, Hall, Hammill & Little, Alexandria, La., for Benjamin Moore & Co.
Lawrence L. Jones, Asst. U. S. Atty., Shreveport, La., for United States.
Grove Stafford, Jr., Stafford, Pitts & Stafford, Alexandria, La., for intervenors Reliance Ins. Co.
NAUMAN S. SCOTT, District Judge.
This diversity suit seeks damages for personal injuries. Plaintiff was working, finishing floors in new construction at England Air Force Base, Louisiana when fumes from the floor finishing product he was using ignited, causing burns on plaintiff's body. Various other defendants have been dismissed by summary judgments, leaving as the only remaining defendant Benjamin Moore & Company, Inc., manufacturers of the product "Benwood". That defendant has now filed a motion for summary judgment.
The allegations of negligence on the part of Benjamin Moore & Company, Inc. amount to alleged failure to print adequate warnings on the labels of its product "Benwood". The motion for summary judgment is based on an asserted principle of Louisiana law that a manufacturer has no duty to warn of a danger of which the other party has knowledge.
In Singleton v. Olin Mathieson Chemical Corporation, 131 So.2d 329 (La.App. 3rd Cir. 1961) a buyer of shotgun shells brought an action against the manufacturer for injuries sustained when the barrel of his gun ruptured. The Court of Appeals held that the warning on the box of shells that they should not be used in a certain type shotgun adequate to inform users of the shells of the danger that bodily harm might be a result of improper use. The fact that the label did not specifically warn of possible bodily harm was of no importance. ". . . [W]here the consequences of improper usage are such that they will be readily cognizable there is no duty to warn of the particular consequences that may flow therefrom." 131 So.2d at 334. In that case the plaintiff had not read the warning on the label, and there was no evidence he had independent knowledge of the danger involved.
In Thibodaux v. McWane Cast Iron Pipe Co., 381 F.2d 491 (5th Cir. 1967), a natural gas pipeline owned by the city exploded under plaintiff's house. Plaintiff sued the manufacturer of the pipe asserting as negligence their failure to warn the city of the corrosive effect the soil in South Louisiana would have on the pipe. The Fifth Circuit held the manufacturer had no duty to give such warning because the city engineers and other officials knew as well as the manufacturer the nature of the pipe. "It is clear that under Louisiana law the duty to warn does not exist where the other party is already aware of the danger." 381 F.2d at 495, citing authorities.
A copy of a sample label from a can of "Benwood" has been submitted into the record. That label contains direction for use and a warning "CAUTION! COMBUSTIBLE!" The directions called for covering a small area of floor at a time with the product, then wiping up any excess with burlap or other coarse cloth.
Although we feel that the warning was sufficient to put plaintiff under notice that the product was combustible and dangerous if directions were not complied with, for purposes of this motion we need not consider this argument. *364 The plain fact is that plaintiff was fully aware of the danger;[1] was fully familiar with the proper method of application;[2] had actually utilized and followed the proper method of application;[3] when told by "two inspectors and a lieutenant" to apply the wood filler over the entire floor and wipe up the excess with an electric buffer, he protested that this method would be dangerous because of the buildup of fumes;[4] had finally departed from the proper and recommended procedures with full knowledge of the potential danger involved.[5] Further, although plaintiff himself had never had a similar experience he was aware of other incidences when a fire had occurred from this type of procedure.[6]
Under these facts and the law discussed above, we find the manufacturer was under no duty to warn the plaintiff of the danger involved, since plaintiff was already aware of that danger. The facts in this case are even stronger in favor of defendant than in the cited cases because here plaintiff clearly knew of the danger involved.
Plaintiff has cited several cases for the proposition that when an employee is ordered by his employer to perform work in a manner which the employee knows is dangerous the employer cannot assert as contributory negligence the employee's continuing to work under known unsafe conditions. These cases are not applicable to the case sub judice because they deal with the employer's liability, not that of a third party manufacturer who had nothing to do with ordering the employee to perform the work in a dangerous manner.
Based on the foregoing we find that there are no genuine issues of material fact in dispute and defendant is entitled to judgment as a matter of law. Therefore, defendant's motion for summary judgment is granted and plaintiff's claims against defendant Benjamin Moore & Company, Inc. are dismissed.
NOTES
[1] Plaintiff's deposition of December 19, 1972, pp. 57, 67.
[2] Plaintiff's deposition, pp. 53-54.
[3] Plaintiff's deposition, pp. 53-54.
[4] Plaintiff's deposition, pp. 54-55, 73-74.
[5] Plaintiff's deposition, p. 57.
[6] Plaintiff's deposition, pp. 39, 57. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2264594/ | 879 F.Supp. 57 (1994)
Margo NEFF, for Herself and those similarly situated, Plaintiff,
v.
AMERICAN DAIRY QUEEN, INC., Defendant.
Civ. A. No. SA-94-CA-280.
United States District Court, W.D. Texas, San Antonio Division.
July 14, 1994.
James C. Harrington, Texas Civ. Rights Project, Austin, TX, Pamela Breed Bonavita, Bexar County Legal Aid Ass'n, San Antonio, TX, for plaintiff.
*58 Joseph M. Harrison, IV, Haynes & Boone, San Antonio, TX, William L. Killion, Troy A. Bader, Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, MN, for defendant.
ORDER GRANTING SUMMARY JUDGMENT
PRADO, District Judge.
On this date came on to be considered Defendant American Dairy Queen Corporation's ("ADQ") Motion for Summary Judgment, filed in the above-styled and numbered cause on June 14, 1994. After carefully considering all of the papers and pleadings on file, this Court is of the opinion that ADQ's motion should be granted.
BACKGROUND AND PROCEDURAL HISTORY
Ms. Neff originally filed this action in County Court of Law, Bexar County, Texas on February 24, 1994. Ms. Neff, who has a physical disability that requires a wheel chair to gain mobility, brought this action for herself and all those similarly situated pursuant to Title III of the Americans with Disabilities Act, 42 U.S.C. § 12182. Ms. Neff's complaint alleges that ADQ operates and provides public accommodations in San Antonio that are inaccessible to people with disabilities. Specifically, she complains of a lack of proper parking places and loading areas; excessively heavy exterior doors; water fountains that cannot be used by people with disabilities; inappropriate access ramps; service counters that are too high; drive-through windows that are not accessible to the hearing impaired; and inaccessible public restrooms. Ms. Neff seeks injunctive and declaratory relief requiring compliance with the Americans with Disabilities Act and attorneys' fees and costs.
ADQ removed this action to this Court on April 1, 1994, pursuant to 28 U.S.C. § 1441 because this Court could have had original jurisdiction over this action pursuant to 28 U.S.C. § 1331. On that same date ADQ filed a motion to dismiss claiming, inter alia, that ADQ does not own, operate, or lease any of the premises covered by Ms. Neff's complaint. The Court denied that motion as ADQ offered no argument or evidentiary support. However, the Court did state that it would reconsider ADQ's notion if ADQ provided more details as to its position. Order Denying Motion to Dismiss, filed May 6, 1994. ADQ now moves for summary judgment claiming that it does not own, lease, lease to, or operate any Dairy Queen Stores in San Antonio and therefore, Ms. Neff has sued the wrong party to obtain the relief she requests.
ADQ notes that Dairy Queen Stores in San Antonio are owned and operated by R & S Dairy Queen, Inc. ("R & S"), a separate and distinct entity from ADQ. ADQ and R & S do not share common ownership, employees or management. R & S and ADQ have a franchise agreement under which R & S is allowed to operate Dairy Queen Stores. Ms. Neff contends that the franchise agreement between ADQ and R & S gives ADQ de facto operating control over Dairy Queen stores in Texas. Specifically, Ms. Neff points to the Facility Standards and Maintenance section of the Dairy Queen Operating Agreement between ADQ and R & S for one of the San Antonio Dairy Queen Stores. That section requires R & S to first obtain approval of building plans before beginning construction or making any modifications to an existing building.[1] Because the Court concludes that *59 the operating agreement does not give ADQ control over the subject premises for purposes of the Americans with Disabilities Act, the Court concludes that ADQ is entitled to summary judgment on Plaintiff's claims.
STANDARDS FOR SUMMARY JUDGMENT
The Court must address the standard to be applied in determining whether or not to grant summary judgment. Federal Rule of Civil Procedure 56 provides in pertinent part:
Motion and Proceedings [on Summary Judgment]. The motion shall be served at least 10 days before the time fixed for the hearing. The adverse party prior to the day of hearing may serve opposing affidavits. The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). Defendant, though movant for summary judgment, will not carry the burden of proof at trial as to the issues the Court now faces. Under Supreme Court and Fifth Circuit case law regarding summary judgment, the movant need only present or designate evidence which negates or disproves "the existence of any essential element of the opposing party's claim." Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.1986). Once movant has made this showing, the non-movant must then respond with a specific factual showing that there is a genuine issue in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Washington v. Armstrong World Industries, Inc., 839 F.2d 1121, 1123 (5th Cir.1988).
In order to survive a motion for summary judgment, the non-movant must raise a genuine dispute as to a material fact. Fed. R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Genuine disputes over irrelevant, immaterial or unnecessary facts will not render summary judgment inappropriate. Id.; Williams v. Adams, 836 F.2d 958, 961 (5th Cir.1988).
APPLICABILITY OF THE AMERICANS WITH DISABILITIES ACT
The Americans with Disabilities Act states:
No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a). In this case, the parties agree that ADQ does not own, lease, or lease to any of the premises about which Ms. Neff complained. Instead, the parties debate whether ADQ operates the subject premises. Furthermore, Ms. Neff does not allege that ADQ refused to give its approval to construction plans or modifications that would bring Dairy Queen Stores into compliance with the act. Rather, Ms. Neff argues that ADQ has an affirmative duty to enforce compliance with the American with Disabilities Act among its franchisees.
The Americans with Disabilities Act does not define "operates". In the context of this case, however, the Court concludes that ADQ *60 does not operate the San Antonio Dairy Queen stores under any definition of the word. ADQ licenses other entities to use its trademark in compliance with standards established by ADQ. Although ADQ maintains the right to approve all construction plans and modifications, Ms. Neff has provided no evidence that ADQ can require an existing franchise to make modifications to an existing structure.[2] Nor has Ms. Neff shown that ADQ has exercised its approval rights in any way inconsistent with the Americans with Disabilities Act. Had ADQ refused to approve a franchisee's plans to bring a store in compliance with the act, then ADQ might be subject to liability. This Court concludes, however, that merely possessing a veto power over proposed plans and modifications does not constitute operating for purposes of the Americans with Disabilities Act.
Cases cited by Ms. Neff for the proposition that a franchisor can be liable for violations of civil rights under other statutes by franchisees do not aid the Court in this case. In Bradley v. Pizzaco of Nebraska, Inc., 7 F.3d 795 (8th Cir.1993), the Eighth Circuit found that a franchisor could be liable for employment discrimination when a franchisee fired an employee for violations of a policy established by the franchisor. In the present case, Ms. Neff has produced no evidence that any Dairy Queen has failed to comply with the Americans with Disabilities Act because of a policy of ADQ.[3] Therefore, the Court concludes that ADQ does not control the San Antonio Dairy Queen stores for purposes of the Americans with Disabilities Act and summary judgment should be granted in favor of ADQ.
Accordingly, it is hereby ORDERED that ADQ's Motion for Summary Judgment is GRANTED such that Plaintiff take nothing on her claims.
It is further ORDERED that all other pending motions are DENIED AS MOOT.
NOTES
[1] Ms. Neff points to three paragraphs of the Dairy Queen Operating Agreement between ADQ and R & S for a single Dairy Queen Store. Paragraph 5.1 states:
The retail Store shall be constructed and equipped in accordance with Company's approved specifications and standards in effect at the time pertaining to design and layout of the building, and as to equipment, inventory, signage, fixtures, location and design accessory features. Licensee shall not commence construction of the Store until he has received written consent of Company to his building plans. Licensee is solely responsible for obtaining all necessary permits, licenses and/or architectural seals, and in all other respects complying with the applicable legal requirements relating to the building, signs and [unreadable]. Licensee shall be furnished with lists of approved equipment, fixtures and furnishings.
Paragraph 5.2 states:
Any replacement, reconstruction, addition or modification in building, interior or exterior decor or image, equipment or signage, to be made after Company's consent is granted for initial plans, whether at the request of Licensee or Company, shall be made in accordance with written specifications which have received the prior written consent of Company, which shall not be unreasonably withheld.
Finally, Paragraph 5.3 states:
The building, equipment and signage employed in the conduct of Licensee's business shall be maintained in accordance with requirements established periodically by Company, or reasonable, specific lists prepared by Company based upon periodic inspections of the premises by Company's representatives. Within a period of ninety (90) days after the receipt of any particular maintenance list, Licensee shall effect the items of maintenance designated therein including the repair of defective items and/or the replacement of unrepairable or obsolete items of equipment and signage. Routine maintenance shall be conducted in accordance with general schedules published by Company.
[2] A case in the Northern District of Texas came to the same conclusion:
As to the non-procedural grounds upon which Plaintiff relies, Plaintiff seeks to establish that Defendant (ADQ) is exerting such control over its franchisee so as to be operating the restaurant. Plaintiff cites portions of the franchise agreement relating to construction, modification and maintenance of the facilities which require prior written consent of the franchisor before performing such acts. Notwithstanding, the ADA requires that the person liable either "own, lease (or lease to), or operate" the facility in question. Retaining architectural control cannot be tantamount to operating a facility which one does not own or lease.
Young v. American Dairy Queen, Inc., No. 5:93-CV-253-C 1994 WL 761233 (N.D.Tex., filed June 22, 1994).
[3] The case of Wheeler v. Hurdman, 825 F.2d 257 (10th Cir.1987), similarly provides no help for Plaintiff. That case addressed the question of whether a partner in a partnership could be considered an employee for purposes of the Civil Rights Act of 1964. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1862473/ | 603 So.2d 824 (1991)
Elizabeth O'CAIN
v.
HARVEY FREEMAN AND SONS, INC. of Mississippi.
No. 07-CA-59446.
Supreme Court of Mississippi.
Decided December 18, 1991.
Rehearing Denied July 29, 1992.
*825 Jack C. Pickett, Margaret P. Ellis, Kitchens & Ellis, Pascagoula, for appellant.
James H. Heidelberg, Bryant Colingo Williams & Clark, Pascagoula, for appellee.
En Banc.
DAN M. LEE, Presiding Justice, for the Court:
This is a suit by a tenant against her landlord wherein the tenant, Elizabeth O'Cain, seeks damages for emotional distress stemming from the burglary of her apartment and the rape of her roommate. This appeal is from a grant of summary judgment in favor of the defendant-lessor, Harvey Freeman & Sons, by the Jackson County Circuit Court. This case contains very distinct procedural and substantive issues, both of equal importance in our treatment of the case. Therefore, for ease of organization, this opinion examines the substantive facts and law and the procedural issues of fact and law as four separate categories for review.
Finding cumulative error in the trial court's application of procedural and substantive law, we reverse the grant of summary judgment in favor of the defendant, Harvey Freeman & Sons, and remand the same to the trial court for further proceedings.
SUBSTANTIVE FACTS OF THE CASE
In October of 1981, the plaintiff, O'Cain, and her roommate, G.S.,[1] were sharing a two bedroom townhouse apartment in Pascagoula. The two bedrooms and a bathroom were located upstairs while the downstairs area consisted of the kitchen and living room. On the night of October 15, 1981, O'Cain was awakened by a foul, malodorous scent. Both bedroom doors were open, and she heard voices coming from her roommate's bedroom. O'Cain walked to the vicinity of the bathroom and peered into G.S.'s bedroom. By now she had ascertained that her roommate was being assaulted in some way. When she peered into her roommate's bedroom, she only got a glimpse of G.S.'s leg which was hanging off the side of the bed, but she could hear a male's voice. O'Cain panicked and entered the bathroom. She flushed the toilet and turned on the water hoping that if the intruder heard other noises in the apartment, he would leave. O'Cain then opened the bathroom door. When O'Cain opened the door, G.S. grabbed her and jerked her into the bedroom. As this happened, O'Cain stated that she only got a glimpse of the assailant's back as he was descending the stairs. Both women barricaded themselves in the bedroom, and they were able to awaken the residents next door by beating on the common wall. O'Cain and G.S. stated that the intruder came back up the stairs after they had locked themselves in the bedroom. He attempted to open the bedroom door but was unsuccessful since both women had secured the door. The next door neighbors called the police, and apparently the police arrived very quickly. G.S. and O'Cain got the officer's attention from the bedroom window.
There were only two ways to enter the apartment, the front door and a sliding glass patio door. The officer stated that the front door was secured, but there was a 15 to 18 inch opening at the sliding glass door. The officer entered through the opening in the glass door and found O'Cain and G.S. in an upstairs bedroom. The assailant, Larry Williams, was apprehended in a ditch about three quarters (3/4) of a mile from the apartment. Larry Williams was charged, tried, and convicted of the rape of G.S. He either served or is still serving time in the penitentiary for this crime.
O'Cain alleged that the lock on the sliding glass door to her apartment was insufficient. A sliding glass door typically contains a latch-type lock which locks when the latch is in the "up" position. O'Cain's sliding glass door locked when the latch was in the "down" position. Therefore, in order to enter O'Cain's apartment with the *826 door locked in the down position, one need only to slightly lift up on the door and slide the door on its tracks. By lifting the door, the latch would dislodge from the lock. The investigating officer readily ascertained that the rapist gained entry by lifting the glass door, dislodging the lock, and then sliding the door on its tracks.
O'Cain is certain that she locked both doors on the night in question. She was unaware, however, that the lock on the sliding glass door was inadequate protection. Hence, she had never complained about the lock to the landlord, Harvey Freeman & Sons. On the day following the rape, O'Cain contacted a locksmith who came out to the apartment and installed an additional lock on the patio door.
A substantial amount of discovery transpired between the parties. Several depositions were taken in the discovery phase of this case.
Billy Hancock, a locksmith who owned B & W Security in Pascagoula, stated that as a rule of thumb, patio doors are not very secure and can be easily compromised. Hancock stated that since the early 1970s, he had mentioned to at least two apartment managers at Chateau Tourraine that "Charlie bars" should be installed on the patio doors, but he did not remember if he actually told anyone associated with the apartments that security on the patio doors was inadequate. Hancock explained that a "Charlie bar" is a device which augments the security on a patio door. It is a self-storing bar which drops behind the movable door, and if there is no additional security on a patio door, Hancock always recommends "Charlie bars" or some other additional lock.
Upon O'Cain's request, Hancock inspected the patio door of the apartment in question. This inspection was several years after the fact of the break-in and rape. First of all, Hancock stated that it was the outside door in this unit which moved, an out-sliding door. This was not unusual at all as some patio doors are in-sliding, some out-sliding and some are double-sliding. Second, Hancock stated that the door was "installed normally." Hancock also stated that he believed that these apartments were built sometime between 1968 and 1973, and based on his examination of the doors, he was of the opinion that the doors had not been replaced since the original construction.
From a locked position, Hancock was able to violate the door using only his hands. He only had to lift slightly on the door, and the door rolled open in the tracks. "The difference between opening the door with it locked or unlocked is less than five seconds." Hancock explained the weak security on the patio door:
I don't know what the manufacturer had in mind or what his intent was, but the reason you were able to open this door is because the door could be lifted three-eighths of an inch, and when you lifted it from that position you didn't lift the entire door. You lifted one edge which is called the tilt, and because the hook was shaped like this [indicating] and it wasn't fully down because the strike was holding it up.
At the time of Hancock's inspection there were new occupants of the apartment. The additional lock O'Cain had installed on the patio door was still there. Finally, Hancock stated that the ease in which the door could be opened might have existed since the time that the doors were installed.
The responding officer, Wayne McCarty, gave deposition testimony. He stated that the area where the rape occurred was a low crime area. McCarty testified that he entered the apartment through the patio door which was open about 15 to 18 inches. The front door was secured when the officer arrived on the scene. Five to six weeks prior to the deposition, McCarty visited the apartment and stated that he was able to open the locked door by simply giving the outside door a slight lift before sliding.
O'Cain alleged mental and emotional distress injury stemming from the burglary of her apartment and the rape of her roommate. As support for her injury, O'Cain relied upon the deposition testimony of her former counselor, Ms. Polly Bridges.
*827 Polly Bridges has a master's degree in psychology from the University of South Alabama. On March 9, 1983, O'Cain saw Bridges for the first time. Bridges counseled with O'Cain 24-25 times over a three year period. O'Cain, who worked with her mother and step-father in the restaurant business on the Gulf Coast, was having trouble getting along with her mother and step father. At her mother's suggestion, she sought counselling in an effort to improve her relationship with her parents. O'Cain's mother participated in some of the counselling sessions. Prior to the rape incident in October of 1981, O'Cain had divorced, and her divorce was still weighing on her mind.
In February of 1985, Bridges noticed O'Cain's problem with weight control and began tracking her weight at the bi-monthly counselling sessions. O'Cain's weight was more than desired. But at some point in 1981, and it is not known when, O'Cain lost 68 pounds on an Optifast diet. "In 1981 weight was 225 pounds. On Optifast diet dropped 68 pounds and kept it off until November-December of 1981 (after rape). Since then I have lost and gained, lost and gained, but I've never gotten past 195 until the last 3 to 4 months." O'Cain described periods of depression which would be followed by eating binges. According to Bridges, O'Cain suffers from a compulsive eating disorder which is stress induced.
As part of the counselling therapy, Bridges asked O'Cain to prepare a summary of major events in her life. On the summary O'Cain stated that her weight problem began when she was in third grade. O'Cain was born in 1955, and would now be 35-36 years old. Bridges stated that stresses in O'Cain's life which could be contributing to her weight problem included the strained relationships with her mother and step father, the divorce of her parents at an early age, O'Cain's own divorce, unsuccessful relationships with men, and chronic financial problems. "Anything that is stressful will do damage to a person who has a compulsive eating disorder." O'Cain was to continue her bi-monthly sessions with Bridges, but she stopped coming. The last counselling session with O'Cain occurred in April of 1986. Bridges saw both O'Cain and her mother at this last session, and the primary problem which was discussed at this last session was O'Cain's financial problems. In August of 1987, O'Cain stopped in to see Bridges to ask her to prepare a report for her lawyers in this suit.
Bridges did not remember when the rape incident was first raised in counselling, although it was discussed. Bridges stated that O'Cain uses weight as a protective measure against rape. In essence, she remains above her ideal weight as a protective measure against rape. Thus, O'Cain thinks that if she maintains extra weight, she is protecting herself against future attacks.
PROCEDURAL FACTS OF THE CASE
Elizabeth O'Cain originally filed suit on March 2, 1987, in the Jackson County Circuit Court. In the original suit, O'Cain alleged that:
[O]n or about October 15, 1981, while the Plaintiff was in the apartment, her roommate, [name omitted] was held at knifepoint and raped. As a direct and proximate result of this act of violence, the Plaintiff suffered extensive mental and emotional injuries of a permanent and enduring nature.
... [A]s a direct and proximate result of the negligence of the corporate Defendant, the Plaintiff suffered extensive mental, phychological (sic) and emotional injuries of a permanent and enduring nature.
On January 27, 1988, after several months of discovery, Harvey Freeman filed a motion for summary judgment. A hearing on the motion was held on February 5, 1988. Four days later, on February 9, 1988, the trial judge issued a brief order which treated the motion for summary judgment as a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to M.R.C.P. 12(b)(6). The complaint was dismissed with all costs charged to O'Cain.
*828 On February 19, 1988, O'Cain filed an amended complaint. Harvey Freeman & Sons filed a "Motion to Dismiss or in the Alternative Motion for Summary Judgment of Harvey Freeman & Sons, Inc. of Mississippi" on March 15, 1988. A hearing on this motion was held two weeks later on March 31, 1988. Following the hearing, the trial judge issued a Memorandum Opinion and Order on June 7, 1988. This opinion and order granted summary judgment in favor of Harvey Freeman & Sons, and now O'Cain appeals to this Court from this adverse ruling by the trial court.
The record indicates that the trial judge dismissed the first suit for failure to state a claim upon which relief can be granted in that the cause of action attempted to state a claim for bystander recovery for emotional distress. The trial court concluded that in this state, O'Cain had no cause of action as a matter of law for bystander recovery. Therefore, dismissal of the first suit without prejudice afforded O'Cain an opportunity to amend and refile her complaint. The amended complaint attempted to allege emotional injury stemming from the invasion of O'Cain's apartment and the rape of her roommate rather than a bystander claim based on the contemporaneous witnessing of a traumatic event.
Plaintiff's apartment was burglarized and her roommate was raped by one, LARRY WILLIAMS, who entered her apartment through a sliding glass door. That as a result of said burglary and rape, Plaintiff was severely injured and suffered extensive mental psychological and emotional injuries or (sic) a permanent and enduring nature.
Amended Complaint, Record at 485.
Standard of Review
We review de novo a lower court's grant of a summary judgment motion. Short v. Columbus Rubber & Gasket Co., Inc., 535 So.2d 61, 63 (1988). Thus, we use the same standard that was used by the trial court. 10 Wright, Miller & Kane, Federal Practice and Procedure § 2716 (1983 and Supp. 1988). We must review all evidentiary matters before us in the record: affidavits, depositions, admissions, interrogatories, etc. The evidence must be viewed in the light most favorable to O'Cain, the nonmoving party, and she is to be given the benefit of every reasonable doubt. Smith v. Sanders, 485 So.2d 1051, 1054 (Miss. 1986); Dennis v. Searle, 457 So.2d 941, 944 (Miss. 1984). The burden of demonstrating that no genuine issue of fact exists is on Harvey Freeman & Sons. Short v. Columbus Rubber and Gasket Co., 535 So.2d 61, 63-64 (Miss. 1988). A motion for summary judgment lies only when there is no genuine issue of material fact, and the moving party is entitled to a judgment as a matter of law. M.R.C.P. 56(c). The court does not try issues on a rule 56 motion, it only determines whether there are issues to be tried. In reaching this determination, the court examines affidavits and other evidence to determine whether a triable issue exists, rather than the purpose of resolving that issue. Comment, M.R.C.P. 56.
PROCEDURAL CONSIDERATIONS
First of all, the trial court found that the amended complaint restated the same grounds as contained in the original complaint. Presumably, the original complaint was dismissed in that it stated a claim for bystander recovery.
The second summary judgment motion which the defendant filed was styled, "Motion to Dismiss or in the Alternative Motion for Summary Judgment of Harvey Freeman & Sons, Inc. of Mississippi." The motion was brought pursuant to M.R.C.P. 12(b)(6) and M.R.C.P. 56, as was clearly indicated in the body of the motion itself. O'Cain was represented at the hearing on this motion, but she did not file any additional depositions, affidavits, interrogatories, etc. since the hearing on the first summary judgment motion. The trial court opinion noted that O'Cain did not respond to the motion prior to the hearing, despite the fact that a response was "required" by the rules.
A response from O'Cain is not mandated by Rule 56(c) of the Mississippi Rules of Civil Procedure as suggested by the trial *829 court opinion. "The motion shall be served at least ten days before the time fixed for the hearing. The adverse party prior to the day of the hearing may serve opposing affidavits." M.R.C.P. 56(c) (emphasis added). While it is true that if a nonmovant elects to make no response prior to the hearing on summary judgment, then one's non-action is at his own peril.[2] However, M.R.C.P. 56(c) imposes no affirmative requirement on the nonmoving party to respond before the hearing on the motion. Rule 56(c) by its own terms leaves that option with the nonmoving party.
Furthermore, O'Cain did respond to the summary judgment motion. The depositions and interrogatories filed by O'Cain prior to the first summary judgment hearing remained on file following the entry of O'Cain's amended complaint. The defenses raised by O'Cain prior to the first summary judgment hearing on February 5, 1988, were likewise applicable to the second summary judgment motion as well. Therefore, O'Cain merely elected to make no additional response after filing her amended complaint.
Second, the trial court's opinion discusses the statute of limitations and its application to this case. Suffice it to say that the statute of limitations has no application in this case. According to the trial court, the amended complaint either re-states the original complaint which had already been dismissed, or it states new claims and new parties which are barred by the six-year statute. See Miss. Code Ann. § 15-1-49 (1972) (Amended 1989). The date of the event was October 15, 1981. The complaint was filed on March 2, 1987, seven months prior to the expiration of the six-year period. The action was dismissed by way of 12(b)(6) on February 9, 1988. The amended complaint was filed on February 19, 1988, six years and seven months after the date of the occurrence.
M.R.C.P. 15(a) states that:
On sustaining a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6), or for judgment on the pleadings, pursuant to Rule 12(c), thirty days leave to amend shall be granted, provided matters outside the pleadings are not presented at the hearing on the motion.
Within ten days after the 12(b)(6) motion was sustained, O'Cain filed an amended complaint which attempted to frame the claim as something other than one for bystander recovery. Under M.R.C.P. 15(a), O'Cain was not required to petition the court for 30 days leave as the appellee suggests. "[T]hirty days leave to amend shall be granted. ..." M.R.C.P. 15(a) (emphasis added). Further, M.R.C.P. 15(c) applies. "Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading." M.R.C.P. 15(c).
SUBSTANTIVE ISSUES OF THE CASE
Bystander Recovery: The trial judge found that this was a case of bystander recovery, and as a matter of law in this state, O'Cain could not recover. The trial judge is correct in his conclusion that O'Cain could not recover under the prevailing standard of liability for bystander recovery. However, the trial judge is incorrect in his conclusion that this is a bystander case.
In Entex, Inc. v. McGuire, Mr. McGuire witnessed an explosion in which his wife was engulfed in flames. Entex, Inc. v. McGuire, 414 So.2d 437, 439 (Miss. 1982). This Court set out the criteria which one must meet on a claim of emotional trauma by a bystander: (1) Whether the plaintiff was located near the scene of the accident as contrasted with one who was a distance away from it; (2) Whether the shock resulted from a direct emotional impact upon *830 plaintiff from the sensory and contemporaneous observance of the accident, as contrasted with learning of the accident from others after the occurrence; (3) Whether the plaintiff and the victim were closely related, as contrasted with an absence of any relationship or the presence of only a distant relationship. Entex, 414 So.2d at 444. See Thomas v. Global Boat Builders & Repairmen, 482 So.2d 1112, 1117 (Miss. 1986).
In the case at bar, O'Cain fails the Entex test on item two. O'Cain did not actually witness the rape itself, although she was aware that her roommate was being assaulted in the adjacent room.
O'Cain recognizes that her claim fails as one for a bystander and argues that she is not presenting a bystander claim. Rather, she alleges that as a result of the invasion of her apartment and rape, she has suffered extensive mental, psychological and emotional injuries. She makes no claim based on the actual witnessing of the event. In essence, her emotional problems stem from the fact that her apartment and roommate were violated. Extending to O'Cain the benefit of a reasonable doubt, we can proceed on the notion that her claim is for something other than bystander recovery.
Intervening, Superseding Criminal Act: The trial judge also found that the criminal act of Larry Williams was a superseding criminal act which cut off liability from the alleged original wrongdoer, Harvey Freeman & Sons. The trial court opinion stated that criminal acts are, by definition, superseding causes. Unfortunately, this approach by the trial court is a little too simple. As a general rule of thumb, criminal acts can be intervening causes which break the causal connection with the defendant's negligent act, if the criminal act is not within the realm of reasonable foreseeability. Touche Ross v. Commercial Union Ins., 514 So.2d 315, 324 (Miss. 1987); Robinson v. Howard Brothers of Jackson, Miss., 372 So.2d 1074, 1076 (Miss. 1979). In applying reasonable foreseeability to the facts at bar, O'Cain argues that criminal activity is always within the realm of reasonable foreseeability for a lessor of apartment residential property.
Whether something is or is not within the realm of reasonable foreseeability depends upon the facts of the case and the duty which the plaintiff asserts for the particular defendant. "[A]n independent intervening cause is one that could not have been reasonably foreseen by the defendant while exercising due care." Kelly v. Retzer & Retzer, Inc., 417 So.2d 556, 562 (Miss. 1982); Oliver Bus Lines v. Skaggs, 174 Miss. 201, 210, 164 So. 9, 12 (1935). In the case at bar, the question of reasonable foreseeability of criminal activity would be for the trier of fact. Furthermore, the question of superseding intervening cause is so inextricably tied to causation, it is difficult to imagine a circumstance where such issue would not be one for the trier of fact. See Gibson v. Avis Rent-A-Car System, Inc., 386 So.2d 520, 522 (Miss. 1980) (whether intervening cause is foreseeable is for trier of fact). In summary, blanket application of the general rule that intervening criminal acts extinguish the defendant's liability is inappropriate for this case.
Finally, in the case at bar, O'Cain stated that she had no idea that the lock on her patio door was insufficient. Therefore, it goes without saying that O'Cain had never notified the landlord about the questionable lock on the patio door. The door would lock, but as it turned out, the lock was poorly secured. This condition should be treated as a latent defect in the premises. There are "special" rules which pertain to latent defects. A landlord is liable for latent defects which he knows about and conceals or being aware of the defect, he fails to inform the tenant. Loflin v. Thornton, 394 So.2d 905, 906 (Miss. 1981). On this point, the locksmith's testimony is particularly significant. Although he could not remember whom he informed or when, the locksmith stated that he had informed at least two managers at the Chateau Tourraine that "Charlie bars" were needed to augment the existing security. Ergo, we find a dispute of a material fact regarding *831 the landlord's notice or not of a latent defect on the premises. Admittedly, the locksmith's testimony on the question of the landlord's notice is somewhat confusing. Therefore, based on the record that we have at this time, summary judgment was premature without further development on this issue.
This is a straight negligence action, and O'Cain must prove the traditional elements of her claim. Duty-Breach-Causation-Damages. As usual, we intimate no opinion whatsoever on the merits of the plaintiff's claim or her ability to meet the requisites of a negligence action. We merely find error in the procedural and substantive grounds upon which the trial court relied in granting judgment along with an undeveloped issue pertaining to the landlord's notice or not of a latent defect.
Accordingly, we reverse the order of summary judgment entered in this case by the Jackson County Circuit Court on June 7, 1988, and remand the same for further proceedings.
REVERSED AND REMANDED.
PRATHER, ROBERTSON, SULLIVAN, and BANKS, JJ., concur.
SULLIVAN, J., concurs by separate written opinion, joined by ROY NOBLE LEE, C.J., PRATHER, ROBERTSON, and BANKS, JJ.
PITTMAN, J., dissents by separate written opinion, joined by HAWKINS, P.J.
McRAE, J., not participating.
SULLIVAN, Justice, concurring:
I concur with the result of the majority but write separately because I believe the opinion does not discuss a question of law at the foundation of the suit.
Landlord-tenant relationships are one of the last vestiges in this state to which the common law doctrine of caveat emptor applies.[1]See, e.g., Keyes v. Guy Bailey Homes, Inc., 439 So.2d 670, 673 (Miss. 1983) (with regard to homebuilders, doctrine of caveat emptor and merger no longer stand in this jurisdiction). The doctrine developed in sixteenth-century England, when the lease, which usually transferred land for agricultural purposes, was considered a conveyance of real property. Javins v. First Nat'l Realty Corp., 428 F.2d 1071, 1077 (D.C. Cir.1970), cert. denied, 400 U.S. 925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970); Landlord's Liability for Defective Premises: Caveat Lessee, Negligence, or Strict Liability, 1975 Wis.L.Rev. 19, 26 (1975). With the advent of the Industrial Revolution, more and more people abandoned the rural, agrarian life to become city dwellers. Landlord's Liability for Defective Premises, 1975 Wis.L.Rev. at 26. This shift to urban areas also caused changes in the lease agreement. No longer did the lease merely convey real property; rather it took on the appearance of a contract for a place to live. Id.
With this shift away from agrarian life, the doctrine of caveat emptor created problems for the residential tenant. Previously, structures on property were relatively simple in design and the agrarian leaseholder had the expertise to discover and repair any defects on the property. Id. at 28. Urban leaseholders, however, did not have the expertise, nor the funds, to repair the increasingly complex structures they occupied. Id.
Through precedent, the doctrine made its way into the American courts. American courts, recognizing the harshness of the doctrine, have carved out various exceptions. See generally, Restatement (Second) Property (Landlord & Tenant) §§ 17.1-17.6 (known latent defects, lease for purpose involving admission of public, landlord retains control of parts of property, landlord contracts to repair, legal duty to repair dangerous condition, negligent repair); 52 C.J.S. Landlord & Tenant § 417.
More progressive courts, recognizing the unsuitability of the doctrine to modern landlord-tenant relationships, have abrogated *832 the doctrine of caveat emptor in favor of an implied warranty of habitability. Detling v. Edelbrock, 671 S.W.2d 265, 268-69 & n. 4 (Mo. 1984) (citing seventeen jurisdictions recognizing an implied warranty of habitability); see also, Uniform Residential Landlord and Tenant Act § 2.104. Factors in the rationale behind recognition of the implied warranty include: (1) "[r]ecognition of the contractual nature of modern lease agreements and the trend against caveat emptor in favor of a warranty of fitness in consumer transactions; (2) the widespread enactment of state and local housing regulations establishing minimum community standards of habitability; (3) the tenant's reasonable expectation that the property leased for the purpose of human habitation for a designated period of time will be fit for that use for the duration of the lease; and (4) the belief that tenants lack the means or abilities either to fully inspect modern dwelling units or to maintain the premises during the term of the lease." Detling, 671 S.W.2d at 269 [citing King v. Moorehead, 495 S.W.2d 65, 69-75 (Mo. App. 1973); Green v. Superior Court, 10 Cal.3d 616, 111 Cal. Rptr. 704, 707-12, 517 P.2d 1168, 1171-76 (1974); Javins v. First Nat'l Realty Corp., 428 F.2d 1071, 1074-80 (D.C. Cir.), cert. denied, 400 U.S. 925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970)].
Our Court has unquestioningly applied caveat emptor to landlord-tenant relationships. See, e.g., Wilson v. Allday, 487 So.2d 793 (Miss. 1986); Loflin v. Thornton, 394 So.2d 905 (Miss. 1981). Recognizing that tenants should not be without a remedy, we have created exceptions to the doctrine.[2] The majority today continues to apply the doctrine without questioning the unsuitability of the doctrine with regard to contemporary residential leases.
I can no longer endorse the application of caveat emptor to residential lease agreements.[3] With regard to such leases, we should dispose of the outmoded, problematic and unduly burdensome doctrine of caveat emptor which treats the lease as a conveyance of land. The better view is to recognize that landlords are not selling an interest in land, residential tenants do not intend to purchase an interest in land, residential leases are contracts, and landlords have more incentive and opportunity than tenants to inspect and maintain the condition of the premises. See Becker v. IRM Corp., 38 Cal.3d 454, 213 Cal. Rptr. 213, 217, 698 P.2d 116, 120 (1985); Javins v. First Nat'l Realty Corp., 428 F.2d 1071, 1074 & 1079 (D.C. Cir.1970).
Recognizing that non-commercial residential leases are no longer controlled by property law would eliminate the rationale behind the persistent refusal of this Court to apply an implied warranty of habitability or fitness to residential leases. Such a holding would be in line with the recent legislative enactment of the Residential Landlord and Tenant Act (RLTA), H.B. No. 293, Regular Sess. 1991 (effective July 1, 1991), which requires a landlord to "comply with the requirements of applicable building and housing codes materially affecting health and safety" and to "[m]aintain the dwelling unit, its plumbing, heating and/or cooling system, in substantially the same condition as at the inception of the lease... ." RLTA, H.B. No. 293, section 12(a) & (b) (Emphasis added). Although the legislature did not expressly impose a duty upon landlords to provide and maintain fit and habitable premises, by allowing tenants the right to repair defects and receive reimbursement of the expenses of such repairs which violate the obligations of the landlord, see RLTA, H.B. No. 293, section 8, the Legislature has implicitly recognized an implied warranty of habitability with the standard being the building and housing codes. Cf. Landlord's Liability for Defective Premises: Caveat Lessee, *833 Negligence, or Strict Liability, 1975 Wisc. L.Rev. 19, 114 (1975).
Recognizing that building and housing codes which affect health and safety generally are often governed locally, I advocate that the bare minimum standard for an implied warranty of habitability should require a landlord to provide reasonably safe premises at the inception of a lease, and to exercise reasonable care to repair dangerous defective conditions upon notice of their existence by the tenant, unless expressly waived by the tenant. See, e.g., Fitzgerald v. Cestari, 569 So.2d 1258, 1260 (Fla. 1990) [citing Mansur v. Eubanks, 401 So.2d 1328, 1329-30 (Fla. 1981)]; Hand v. Davis, 1990 WL 96583 at 2 (Del.Super. 1990) [citing Ford v. Ja-Sin, 420 A.2d 184, 186 (Del.Super. 1980)]; Becker v. IRM Corp., 38 Cal.3d 454, 213 Cal. Rptr. 213, 221-22, 698 P.2d 116, 125 (1985); Einhorn v. Seely, 136 A.D.2d 122, 525 N.Y.S.2d 212, 215 (N.Y.A.D.Dept. 1 1988) (cites therein); see also Favreau v. Miller, 591 A.2d 68 (Vt. 1991) (statutory implied warranty of habitability includes safe, clean and fit premises).
Breach of the duty to use reasonable care to provide safe premises would entitle the tenant to pursue contract remedies as well as tort. Imposition of tort liability is not unjust. When a product is sold which causes personal injuries, an action in tort may be maintained against the manufacturer or distributor. Hall v. Mississippi Chemical Exp., Inc., 528 So.2d 796, 799 (Miss. 1988) (manufacturer); Coca Cola Bottling Co., Inc. v. Reeves, 486 So.2d 374, 378 (Miss. 1986) (distributor). Likewise when a building is constructed which causes injuries or damages, an action in tort may be maintained against the builder. Keyes v. Guy Bailey Homes, Inc., 439 So.2d 670, 673 (Miss. 1983). There is no reason why a landlord should not also be subject to tort liability when he has failed to use reasonable care to provide safe premises and this failure has caused the tenant personal injuries.
This is not to say that a landlord is an insurer of safety. A landlord is not. Making a landlord subject to tort liability merely requires him to act as a reasonable landlord under the circumstances of the case. The tenant would still be required to show duty, breach, causation, and damages, and the landlord would be entitled to raise the standard tort defenses, such as contributory negligence, unforeseeability or intervening cause.
Applied to the instant case, I would find that Freeman & Sons owed a duty to O'Cain to use reasonable care to provide safe premises at the inception of the lease.
ROY NOBLE LEE, C.J., PRATHER, ROBERTSON and BANKS, JJ., join this opinion.
PITTMAN, Justice, dissenting:
This Court has decided to reverse a summary judgment granted against a tenant in a suit wherein the tenant, Elizabeth O'Cain, makes a claim against her landlord based on her emotional distress resulting from the burglary of her apartment and the rape of her roommate. Because I would affirm the grant of a summary judgment, I respectfully dissent.
I.
While I agree with Justice Dan M. Lee and the majority that O'Cain could not recover under the prevailing standard of liability for bystander recovery and that the trial court's approach classifying the criminal act of Williams as a superseding criminal act cutting off liability is too simple, I do not agree with my esteemed colleagues' basis for reversal. This Court is reversing the case at bar based on the testimony of the locksmith. Justice Dan M. Lee admits that the testimony of the locksmith is confusing. The locksmith's advice to at least two managers at the Chateau Tourraine that "Charlie bars" were needed to augment the existing security was standard advice to any owner of sliding glass doors, notwithstanding the type of lock on the door. It is simply a standard sales pitch. This testimony does not create a dispute of material fact. None of the parties dispute evidence presented through the locksmith. It was a matter ripe for the application of Mississippi law. Summary judgment was appropriate in the case at bar.
*834 II.
Although summary judgment was not appropriate for many of the reasons contained in the trial court opinion such as bystander recovery and superseding criminal activity, I would find that summary judgment is appropriate in this case for other reasons not considered by the trial court. In affirming a grant of summary judgment, this Court can rely on other grounds which were not even considered by the trial court. See Brocato v. Mississippi Publishers Corp., 503 So.2d 241, 244 (Miss. 1987). This is a negligence action, and O'Cain must prove the four traditional elements of a negligence suit, Duty-Breach-Causation-Damages. I examine the first element, duty.
Does the landlord, Harvey Freeman & Sons, have a duty to the tenant, O'Cain? In the absence of an express agreement, there is no duty or obligation upon a landlord to make repairs. Loflin v. Thornton, 394 So.2d 905, 906 (Miss. 1981). Only where there is an agreement for specific repairs will a breach of that agreement impose liability for personal injury. Loflin, 394 So.2d at 906 (citing Floyd v. Lusk, 190 So.2d 451 (Miss. 1966); Weldon v. Lehmann, 226 Miss. 600, 84 So.2d 796 (1956); Ford v. Pythian Bondholders Protective Comm., 223 Miss. 630, 78 So.2d 743 (1955); Hodges v. Hilton, 173 Miss. 343, 161 So. 686 (1935)).
A landlord/lessor has no obligation to make repairs to leased premises at all, even if they are necessary, in the absence of a contract to do so. Ford v. Pythian Bondholders, 223 Miss. 630, 78 So.2d 743 (1955). Where the lessor reserves control over a designated area for common use of tenants and is negligent, lessor is liable for resulting injury. However, the lessor must have actual or constructive knowledge of the defect and a sufficient opportunity to repair the same. Turnipseed v. McGee, 236 Miss. 159, 109 So.2d 551 (1959).
Wilson v. Allday, 487 So.2d 793, 796 (Miss. 1986).
Did the landlord contract with O'Cain to make repairs to her apartment? NO. The lessor reserved a right to inspect in item nine of the lease, but the lease contains no covenant which would include repair work on a patio door lock. The only covenant to repair which is contained in the lease applied to "any accident to or defect in the water pipes, gas pipes, electric light wires or fixtures or heating apparatus... ."
A better question to consider would be, "How could one repair that which is not broken?" The lock on the patio door worked. The problem is that it did not work very well. The real duty which O'Cain is seeking to impose on the landlord would appear to be one of a periodic security inspection of all doors and locks in each apartment unit. Such a duty did not exist in contract between the parties, nor does one exist in law.
In the facts sub judice, it is quite significant that O'Cain stated that she had no idea that the lock on her patio door was insufficient. As Justice Dan M. Lee noted, it goes without saying that the landlord had never been notified about the questionable lock on O'Cain's patio door, the door that would lock but was poorly secured. Thus, the landlord had no notice. I agree that this condition should be treated as a latent defect in the premises and that the "special" rules which pertain to latent defects are applicable. (i.e. A landlord is liable for latent defects which he knows about and conceals or being aware of the defect, he fails to inform the tenant. Loflin v. Thornton, 394 So.2d 905, 906 (Miss. 1981)). Before the landlord can be charged with liability for the latent defect, he must be aware (i.e., have notice), of the problem. The undisputed facts of this record reveal that the landlord had no knowledge of the insufficient lock on O'Cain's patio door. This is not to be confused with the statement by the locksmith who stated that in the 1970s, he recommended that "Charlie bars" be installed on all patio doors since such doors are easily compromised. This is the standard recommendation which the locksmith makes to everyone who has a sliding glass door which is not augmented by additional security.
*835 To summarize, there is no duty to repair absent some covenant to repair. For latent defects, no duty matures on the part of the landlord until he has notice of the problem. While there is a duty to use reasonable care to keep common areas reasonably safe, Cappaert v. Junker, 413 So.2d 378, 379 (Miss. 1982), the facts at bar present no situation which would avail the common area exception. No common area which the landlord controls is involved in this case.
III.
There is no genuine issue of a material fact in this case. The disputes are purely legal ones. As a matter of law, summary judgment was proper, but not for the reasons contained in the trial court opinion. This is a straight negligence action, and O'Cain must prove the traditional elements of her claim: Duty-Breach-Causation-Damages. O'Cain can not get past the first element, duty.
Accordingly, I would affirm the order of summary judgment entered in this case by the Jackson County Circuit Court.
HAWKINS, P.J., joins this dissent.
NOTES
[1] The initials "G.S." are used to protect the identity of the rape victim.
[2] When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him. M.R.C.P. 56(e). (emphasis added).
[1] When applied to the landlord-tenant relationship this doctrine means the tenant takes the premises as he finds them with no implied warranty of fitness. Cappaert v. Junker, 413 So.2d 378, 279-80 (Miss. 1982).
[2] We have recognized exceptions to the doctrine for (1) failure to disclose known latent defects, (2) defects in premises subject to common use, (3) negligent repairs, and (4) express covenants to repair. Wilson v. Allday, 487 So.2d 793, 796 (Miss. 1986); Loflin v. Thornton, 394 So.2d 905, 906 (Miss. 1981); Turnipseed v. McGee, 236 Miss. 159, 166, 109 So.2d 551, 554 (1959).
[3] The doctrine continues to have applicability to agricultural and commercial leases which intend to convey an interest in land. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1814302/ | 173 B.R. 473 (1994)
In re CHILD WORLD, INC., Debtor.
CHILD WORLD, INC., Plaintiff,
v.
SERVICE MERCHANDISE CO., INC., Defendant.
CHILD WORLD, INC., Plaintiff,
v.
SERVICE MERCHANDISE CO., INC. and Dixie Manor, Inc., Defendants.
Bankruptcy No. 92-B-20887(JJC). Adv. Nos. 94-5082A, 94-5083A.
United States Bankruptcy Court, S.D. New York.
November 2, 1994.
*474 Weil, Gotshal & Manges by Martin J. Bienenstock and Chris Wilson, New York City, for Child World, Inc.
McCarthy, Fingar, Donovan Drazen & Smith by William F. Macreery and Deborah Yurchuk McCarthy, White Plains, NY, for Service Merchandise Co., Inc.
*475 DECISION ON MOTIONS FOR SUMMARY JUDGMENT IN THE INSTANT PREFERENCE ACTIONS
JOHN J. CONNELLY, Bankruptcy Judge.
Service Merchandise Company Inc. ("Service Merchandise") moves for summary judgment in two adversary proceedings commenced against it by the post-confirmation debtor, Child World, Inc. ("Child World"). In these adversary proceedings, Child World seeks to avoid as preferential two pre-petition rental payments made to Service Merchandise within 90 days of the filing of its Chapter 11 petition. At issue is whether a check for rent delivered prior to the due date under a lease but not honored until the week(s) after the due date constitute payments on account of antecedent debt.
I.
The salient facts for purposes of this motion are not in dispute. On September 21, 1982, Child World entered into two subleases with Service Merchandise for premises located at 5025 Shelbyville Road in Louisville, Kentucky ("The Shelbyville Road Sublease") and for the premises located at the Dixie Manor Shopping Center, also in Louisville, Kentucky ("The Dixie Manor Sublease"). Under the Shelbyville Road Sublease, the term of which was for 16 years through August 1998, Child World was obligated to pay $19,928,75 to Service Merchandise on the first day of each calendar month. Under the Dixie Manor Sublease, the term of which was for 19 years through August 1992, Child World was obligated to pay $3,080.21 to Service Merchandise and an additional $8,969.56 to Dixie Manor, Inc., the original landlord also on the first day of each calendar month.
Towards the end of January 1992, Child World tendered two checks ("the Shelbyville Road Check") and the ("Dixie Manor Check") to Service Merchandise, both dated January 20, 1992, as payment for the upcoming month's rent.[1] The Shelbyville Road Check cleared Child World's account on February 6, 1992 and the Dixie Manor Check cleared Child World's account on February 13, 1992. On May 6, 1992, Child World filed its Chapter 11 petition. Thereafter, on or about August 17, 1992, Service Merchandise filed a proof of claim in the amount of $370,385.63. Apparently, Child World objected to this claim and subsequently withdrew its objection, without prejudice, in order to bring the instant adversary proceeding.
On May 25, 1994, Child World commenced these adversary proceedings seeking to compel Service Merchandise to return the allegedly preferential transfers, or alternatively, to have its proof of claim expunged. Service Merchandise timely answered and subsequently brought this motion for summary judgment. In short, Service Merchandise contends that both payments are not preferences as a matter of law. Moreover, they invite me to declare that even if they are preferential, the transfers are excepted from avoidance as being substantially contemporaneous exchanges for new value or, alternatively, "ordinary course" payments.
Child World's response is surprisingly sparse of case support for the contention that the payments were preferential as a matter of law. It also fails to rebut the contentions that these payments are excepted from avoidance under 11 U.S.C. § 547(c). Notwithstanding, Child World asks me to grant its counter-motion for summary judgment.
II.
A. Summary Judgment Generally
Federal Rule of Civil Procedure 56(c), made applicable here by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment shall be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 *476 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). In deciding a motion for summary judgment, courts must determine if there are any factual issues to be tried, while at the same time, resolving ambiguities and drawing reasonable inferences against the moving party. Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986) cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987). The burden rests on the moving party to clearly establish the absence of a genuine issue as to any material fact. Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552-53; Adickes v. S.H. Dress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The nonmoving party may oppose a summary judgment motion by making a showing that there is a genuine issue as to a material fact in support of a verdict for that party. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11.
B. 11 U.S.C. § 547
Under the Bankruptcy Code's preference avoidance section, 11 U.S.C. § 547(b), a debtor is permitted to recover, with certain exceptions, transfers of property that (1) are made to or for the benefit of a creditor, (2) are made on account of an antecedent debt, (3) are made while the debtor was insolvent, (4) are made within ninety days of the filing (or within 1 year of the filing if made to an insider) and (5) enable the creditor to receive a larger share of the estate than if the transfer had not been made. Union Bank v. Wolas, 502 U.S. 151, ___, 112 S.Ct. 527, 529-30, 116 L.Ed.2d 514 (1991). The debtor must prove each of the elements of the preference algorithm by a preponderance of the evidence. Sapir v. Eli Haddad Corp. (In re Coco), 67 B.R. 365 (Bankr.S.D.N.Y.1986) If the debtor puts forth sufficient proof to establish a prima facie preference, the burden shifts and the creditor is given the opportunity to establish by a preponderance of the evidence that one of the enumerated exceptions in 11 U.S.C. § 547(c) applies. See J.P. Fyfe, Inc. Of Florida v. Bradco Supply Corp., 891 F.2d 66, 69-70 (3d Cir.1989); In re Western World Funding Inc., 54 B.R. 470, 478 (Bankr.D.Nev.1985).
At least two policy goals are furthered by the Code's preference sections. First, 11 U.S.C. § 547(b) facilitates the prime bankruptcy policy of equality of distribution among creditors of the debtor. Wolas, 502 U.S. at ___, 112 S.Ct. at 533 (citing H.R.Rep. No. 595, 95th Cong., 1st Sess. 177-78 (1977) 1978 U.S.Code Cong. & Admin.News 5787, 5963, 6138). Distributive equality is preserved by requiring any debtor that received a greater payment than others of his class to disgorge so that all may share equally. Id. Avoiding preferences under 11 U.S.C. § 547(b) provides a mechanism through which disgorgement can be accomplished.
The second policy goal, which is rehabilitative in nature, is to "discourage a race by the creditor to collect payment while the debtor is still marginally solvent, or a race to the courthouse to force the debtor into bankruptcy." Matter of CHG International, Inc., 897 F.2d 1479, 1483 (9th Cir.1990), overruled on other grounds by, Wolas, 502 U.S. at ___, 112 S.Ct. at 527. The rationale being that "were there no rule allowing avoidance of preferences, a creditor would have a strong incentive to hound the debtor with demands for collection or petition the debtor into involuntary bankruptcy immediately so that the debtor could not deplete his assets trying to keep afloat." Id. (citing House Report at 6329). See Matter of Xonics Imaging Inc., 837 F.2d 763, 765 (7th Cir.1987).
Here, the parties have stipulated for purposes of this motion that four out of the five elements of the preference algorithm are satisfied. They differ however on the second element, that is, whether the rental payments were made on account of antecedent debt. The parties do not dispute the fact that the debt at issue was incurred on February 1, 1992. Indeed, it is well settled that the obligation to pay rent is deemed to arise on the due dates provided in the lease and not when the lease is signed. Bernstein v. RJL Leasing (In re White River Corp.), 799 F.2d 631 (10th Cir.1986) (citing In re Mindy's, Inc., 17 B.R. 177 (Bankr.S.D.Ohio 1982)); In re Upstairs Gallery, Inc., 167 B.R. 915, 918 (9th Cir. BAP 1994) (citing Coco., 67 *477 B.R. at 370); accord M. Bienenstock, Bankruptcy Reorganization at 369 n. 59 (1987) (for ease of reference, Bienenstock at 369) (citing other cases).
The parties quarrel over which date I ought compare to the February 1, 1992 due date for the rental payments: the date Child World tendered the checks or the dates the checks were honored. Child World argues that the Supreme Court's decision in Barnhill v. Johnson, ___ U.S. ___, 112 S.Ct. 1386, 118 L.Ed.2d 39 (1992) requires that I adopt a date of honor rule and therefore this date renders the transfers on account of antecedent debt. That argument is misguided.
At the outset, there is no question that "a debtor's monthly rent payment, if remitted on the day the monthly rent first becomes due and payable, is not a preference because it is not made in respect of antecedent debt." Bienenstock at 369 (emphasis supplied); See Upstairs, 167 B.R. at 918 (citing Coco, 67 B.R. at 370 (citations omitted)); cf. In re David Jones Builder Inc., 129 B.R. 682 (Bankr.S.D.Fla.1991) (interest payments made by check two and three days before the due date could not be payments on antecedent debt) This conclusion furthers both of the policies underlying 11 U.S.C. § 547(b). Distributive equality among creditors is maintained since rent payments "rest upon current consideration, i.e. a grant of possession for the rent period." Upstairs, 167 B.R. at 918 (citing Coco, 67 B.R. at 370). Similarly, insulating from subsequent attack timely made current rent payments (which for the most part are made by check) negates the incentive a landlord might otherwise have to petition the debtor into bankruptcy.
I have no trouble reconciling a rule of law which employs a date of tender for purposes of evaluating whether a transfer was on account of antecedent debt to the rule of law enunciated in Barnhill. In Barnhill, the Supreme Court selected the date of honor rule rather than the date of tender for purposes of determining if a transfer occurred within the 90-day preference period. ___ U.S. at ___, 112 S.Ct. at 1387. I do not believe that Barnhill is binding here since that decision was purposefully tailored narrowly to the issue of the 90-day preference period, i.e. 11 U.S.C. § 547(b)(4) and not to all of 11 U.S.C. § 547. See Id. at ___ and ___, 112 S.Ct. at 1387-88 and 1391. To the extent that Barnhill drafted new boundaries, I believe the Supreme Court intended to create an island rather than a peninsula.[2]
But even if the unnecessarily broad language is not dicta, I still would find that the transfer were not on account of antecedent debt because the rental obligations were suspended until the checks cleared. See Id. at ___, 112 S.Ct. at 1389 (citations omitted) ("Receipt of a check for an underlying obligation suspends the obligation `pro tanto until the instruments . . . presentment . . . discharge of the underlying obligor on the instrument also discharges him on the obligation.'") Since the path I choose is not outcome determinative in that I would find that the transfers were not on account of antecedent debt (albeit at an earlier or a later date), I prefer to hold that where payment precedes performance, such payment (even if by check) is not made on account of an antecedent debt.[3]See Also Id. at ___, *478 112 S.Ct. at 1392 (Stevens, dissenting) Accordingly, Child World has failed to establish that the two rental payments at issue are prima facie preferences.
Even were I to assume, arguendo, that Child World could have satisfied its burden, I am at a loss to understand why this action was commenced in the first place. See Wolas, 502 U.S. at ___, 112 S.Ct. at 534 (Scalia, concurring) There is no question that the transfers, even using the date of honor, qualify as contemporaneous exchanges of new value and that summary judgment is appropriate in favor of Service Merchandise under 11 U.S.C. § 547(c)(1). See Coco, 67 B.R. at 370. Similarly, I am inclined to believe (although I do not reach this issue) that Service Merchandise would ultimately prevail at a trial on whether the payments were ordinary course payments in the meaning of 11 U.S.C. § 547(c)(2).[4]
Accordingly, Service Merchandise's motions for summary judgment are granted. Service Merchandise is directed to settle an order consistent with this decision in each of the adversary proceedings and to include therein a provision closing the adversary proceedings.
NOTES
[1] A third check was tendered to Dixie Manor Inc., a defendant in the second adversary proceeding at about the time the checks were tendered to Service Merchandise. However Dixie Manor, Inc. and Child World have since settled and accordingly I have limited the factual recitation to those involving Service Merchandise.
[2] The policy considerations behind Barnhill differ from those underlying the other subsections of the preference statute. The Supreme Court conceded as much when it diverged from the consensus view of the Courts of Appeal that a date of tender rule applies under 11 U.S.C. § 547(c). Barnhill, ___ U.S. at ___, 112 S.Ct. at 1391 n. 9. A date of honor rule is understandable in the context of 11 U.S.C. § 547(b)(4) which is geared toward setting a cutoff date (which is in and of itself an arbitrary date) for the review of potentially preferential transfers. Barnhill offers a greater window for the trustee's review of transfers otherwise avoidable but for the arbitrary cutoff date and thereby furthers the goal of distributive equality. The same benefits do not spring forth from adopting a date of honor rule under 11 U.S.C. § 547(b)(2); indeed, such a rule could potentially offer other creditors a windfall at the expense of the landlord. I do not believe that Congress (or the Supreme Court) would have intended such a result.
[3] It goes without saying that the check must be presented for payment within the period deemed reasonable under the U.C.C. and honored upon presentment in order for the delivery date to be considered the time of transfer. See White River, 799 F.2d at 634 (citing O'Neill v. Nestle Libbys P.R., Inc., 729 F.2d 35, 38 (1st Cir.1984)).
[4] Since there is no definition of an ordinary course transaction, courts are left to conduct what amounts to a "peculiarly" "factual inquiry" into "the business practices which were unique to particular parties under consideration." In re Jeffrey Bigelow Design Group, Inc., 956 F.2d 479, 486 (4th Cir.1992) (citing Waldschwmidt v. Ranier (In re Fulghum Constr. Corp.), 872 F.2d 739, 743 (6th Cir.1989) and In re First Software Corp., 81 B.R. 211, 213 (Bankr.D.Mass.1988)) Given the necessity to conduct objective and subjective inquiries of the business relationship, unfortunately, this theory rarely, if ever, lends itself to a motion for summary judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1875519/ | 176 B.R. 715 (1995)
In re ALEXANDER'S INC., et al., Debtors.
Bankruptcy Nos. 92-B-42704(CB) to 92-B-42720(CB).
United States Bankruptcy Court, S.D. New York.
January 6, 1995.
As Amended January 11, 1995.
*716 *717 Shearman & Sterling by Eileen Wishnia, New York City, for debtor.
Hahn & Hessen by David I. Blejwas, New York City, for Official Creditors' Committee.
Wien, Malkin, Betex by Eli R. Mattioli, New York City, for 500-512 Seventh Ave. Associates, Landlord.
MEMORANDUM DECISION GRANTING DEBTORS' MOTION TO EXPUNGE CREDITOR'S CLAIM AND DENYING CREDITOR'S MOTION TO ENLARGE TIME FOR FILING PROOF OF CLAIM
CORNELIUS BLACKSHEAR, Bankruptcy Judge.
Alexander's Inc., et al. (the "Debtors") moved to expunge the claim filed by 500-512 Seventh Avenue Associates ("Associates") for failure to timely file its proof of claim pursuant to Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"). In response, Associates moved to enlarge the time by which to file its claim. This Court finds that Associates' failure to timely file its claim was not due to "excusable neglect." Therefore, this Court grants the Debtors' motion to expunge the claim and denies Associates' motion to enlarge the time by which to file its claim.
FACTS
On May 15, 1992, the Debtors each filed voluntary petitions for relief under Chapter 11 of Title 11, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"). By Order of this Court dated May 15, 1992, the Debtors' chapter 11 cases were consolidated for procedural purposes and are being jointly administered.
The Debtors had primarily engaged in retailing and had operated eleven stores in New York and New Jersey. Prior to the filing of the chapter 11 petitions, the Debtors had made a decision to discontinue their retail operations. Consequently, on May 14, 1993, the Debtors filed their joint plan of reorganization (the "Plan") which contemplates that the Debtors will emerge from bankruptcy as real estate operating companies.
Associates, as landlord for the premises on the 8th, 10th and 18th floors (the "Premises") of the commercial office building located at 500 Seventh Avenue, New York, New York (the "Building"), and the Debtors, as tenants, entered into a lease for the Premises dated January 20, 1983 (the "Original Lease"). The Premises were used as the Debtors' executive and buying offices. The Original Lease was amended on October 18, 1991 (the "Amended Lease" or collectively the "Leases") which extended the term of the lease to December 31, 1993.
Helmsley-Spear, Inc. ("Helmsley-Spear") was the managing agent of the Building during the term of the Leases. In the second sentence of the Original Lease, the landlord was declared as "500-512 Seventh Avenue Associates, a partnership having offices in care of Helmsley-Spear, Inc." The first decretal paragraph of the Amended Lease similarly refers to the landlord as "500-512 Seventh Avenue Associates, a general partnership with an office at 60 East 42nd Street, New York, New York 10165." Both the Leases were signed by "Helmsley-Spear, Inc., Managing Agent" and "Helmsley-Spear, Inc., Agent," respectively, on behalf of the landlord, Associates. Throughout the *718 term of the Leases, the Debtors sent the monthly rent to Helmsley-Spear.
On May 29, 1992, the Debtors filed a motion to reject the Amended Lease (the "Rejection Motion") pursuant to Section 365 of the Bankruptcy Code which was unopposed by Associates. By May 31, 1992, the Debtors had vacated the Premises but left behind certain office fixtures and furniture.
On June 1, 1992, the Debtors filed a motion to abandon the remaining property (the "Abandonment Motion") pursuant to Section 554 of the Bankruptcy Code. Associates responded to the Abandonment Motion by affidavit dated June 8, 1992 (the "Abandonment Response"). Among the other relief requested in the Abandonment Response, Associates sought an administrative priority claim in the amount of $38,700.00 (the "Abandonment Claim"), representing estimated costs to clear the abandoned property left on the Premises.[1] The Abandonment Response, however, did not address the Debtors' rejection of the Amended Lease and failed to assert a claim for damages arising from the rejection of the Amended Lease.
On June 9, 1992, a hearing was held before this Court for the Abandonment and Rejection Motions (the "Hearing"). This Court subsequently signed separate orders authorizing the rejection of the Amended Lease and the abandonment of the property.
On August 4, 1992, the Court set October 16, 1992, as the date by which all claims must be filed (the "Bar Date"). Notice of the Bar Date (the "Notice") was sent to creditors via regular mail on August 17, 1992 and was published in the national editions of the New York Times and the Wall Street Journal.[2] The Notice specifically provided that claims arising from the rejection of leases be filed:
[w]ithin 30 days after service of an order of the Court approving such rejection, or such other period set by the Court, or 30 days after service of a notice of such rejection, if such rejection occurred by the expiration of time fixed by the Court.
The Notice was mailed to Helmsley-Spear, at the location of 60 East 42nd Street, Room 5230, New York, NY 10165, and was not returned, as undeliverable, to either the Debtors or to Poorman-Douglas Corporationthe Debtors' claims agent which served the Notice upon Helmsley-Spear.[3] However, Associates alleges that it never received a copy of the Notice and, thus, was not notified of the Bar Date.[4]
On May 14, 1993, the Debtors filed with this Court their first proposed joint plan of reorganization (the "Plan") and disclosure statement (the "Disclosure Statement"). By order dated July 21, 1993 (the "Scheduling Order"), this Court approved the Debtors' Disclosure Statement. On August 3, 1993, the Debtors mailed to all its creditors copies of the Scheduling Order, the Plan, the Disclosure Statement and a ballot for acceptance or rejection of the Plan (collectively the "Solicitation Materials"). The Solicitation Materials were sent to Helmsley-Spear, 60 East 42nd Street, Room 5230, New York, New York 10165 the exact same address to *719 which the Debtors had mailed the Notice. The section pertaining to claims in the Disclosure Statement clearly sets forth the Bar Date established by this Court and described the number and amount of claims which had been filed and the claims process by which claims were reconciled. Both the Scheduling Order and Disclosure Statement also advised creditors that September 21, 1993 was set as the hearing date for confirmation of the Plan. Associates returned the ballot and voted to accept the Debtors' Plan. The Plan was confirmed pursuant to an order of this Court dated September 21, 1993.
On September 27, 1993, almost one year after the Bar Date and over a year after the Rejection Motion was granted, Associates filed a proof of claim in the form of an affidavit signed by Helmsley-Spear for $546,953.94 (the "September Proof of Claim").[5] On January 11, 1994, after the expiration of the Bar Date, Associates filed a proof of claim, amending its $38,700.00 Abandonment Claim to include lease rejection damages which increased the dollar amount of the claim to $585,653.94 (the "January Proof of Claim). Again, this amendment was signed by Helmsley-Spear and directed the Debtors to send notices with respect to the Associates' claim to "Helmsley-Spear, Inc., c/o Wien, Malkin & Bettex, 60 East 42nd Street, New York, New York 10165, Attn: Robert C. Buff, Esq."
On March 4, 1994, Associates filed yet a second amendment (the "Second Amendment") to a "scheduled claim," increasing the dollar amount of the claim to $606,710.85.[6] This amendment also directs notices to be sent to Helmsley-Spear at the same address.
The Debtors objected to Associates' September Proof of Claim on December 14, 1993. On or about March 22, 1994, Associates responded by filing a motion to extend the time for filing its Proof of Claim ("Extension Motion"). A hearing regarding the Debtor's objection to Associates' claim and Associates' Extension Motion was held on June 23, 1994.
DISCUSSION
I.
EXCUSABLE NEGLECT
Bankruptcy Rule 3003(c) sets forth the requirements for filing proofs of claim in chapter 11 reorganization cases. Rule 3003(c)(3) provides that the "court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed." Rule 9006(b)(1) of the Bankruptcy Rules authorizes the Bankruptcy Court to allow a late filed claim if the creditor failed to comply with the Bar Date due to "excusable neglect." Bankruptcy Rule 9006(b)(1) states in relevant part:
Except as provided . . ., when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion . . . on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect (emphasis added).
Rule 9006(b)(1) of the Federal Rules of Bankruptcy Procedure.
The Supreme Court recently visited the issue of "excusable neglect" in Pioneer Investment Services Co. v. Brunswick Assoc. Ltd. Partnership, 507 U.S. ___, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). Excusable neglect is defined as "an equitable consideration taking all relevant factors of the party's omission and not merely circumstances that were beyond the party's control." Id. 507 U.S. at ___, 113 S.Ct. at 1494. The relevant factors to be taken into consideration when determining whether excusable neglect exists include: (i) the adequacy of the notice; (ii) the danger of prejudice to the debtor; (iii) the length of the delay and its potential impact on the judicial proceedings; (iv) the reason for the delay, including whether it was within the reasonable control of the *720 creditor; and (v) the good faith of the creditor. Id., 507 U.S. at ___, 113 S.Ct. at 1497; In re R.H. Macy & Co., Inc., 161 B.R. 355, 361 (Bankr.S.D.N.Y.1993).
A. Adequacy and Service of Notice
In order to satisfy due process requirements, Associates, a known creditor, was entitled to receive actual notice of the Bar Date. City of New York v. New York, New Haven & Hartford R.R. Co., 344 U.S. 293, 296, 73 S.Ct. 299, 301, 97 L.Ed. 333 (1953). Associates argues that notice was inadequate because the Debtors, instead of listing Associates, improperly listed Helmsley-Spear as the creditor on their schedules of assets and liabilities and statements of financial affairs (the "Schedules"). Associates cites In re Arts des Provinces de France, Inc., 153 B.R. 144 (Bankr.S.D.N.Y. 1993), wherein the court allowed a late filed claim, in part, because the debtors listed the managing agent instead of the landlord as a creditor on their schedules.
This Court concurs with the ruling in In re Arts des Provinces that debtors must list the proper creditors on their schedules pursuant to Bankruptcy Rule 1007(a)(1). However, under the circumstances of this case, we find that Helmsley-Spear was the proper party to list on the Debtors' schedules.
Both the Original and the Amended Leases listed Helmsley-Spear as Associates' "Managing Agent" and "Agent", respectively. Indeed, Helmsley-Spear signed both Leases on behalf of Associates. Moreover, Helmsley-Spear also signed the September Proof of Claim, the January Proof of Claim and the Second Amendment filed by Associates. Each proof of claim and the amendment thereto directed the Debtors to send notices pertaining to Associates' claim to Helmsley-Spear. From the record and papers submitted, there is no evidence before this Court that the Debtors dealt with Associates in any direct manner except through Helmsley-Spear. Helmsley-Spear, therefore, was the proper party for the Debtors to list on their schedules.
Associates proceeds to make three related arguments. Associates claims that the Notice should have been sent to Associates and not to Helmsley-Spear. Associates also argues that the Debtors violated Bankruptcy Rules 2002(a) and 9010(b). This Court, for the same reasons as stated in the preceding paragraphs, does not find these arguments to be persuasive.
Moreover, this Court notes that Bankruptcy Rule 7004(b)(3) allows service by first class mail to be made upon a managing agent of a partnership.[7] Similarly, under New York law, notice to an agent is proper notice even if notice was never actually communicated to the principal. Farr v. Newman, 14 N.Y.2d 183, 187, 250 N.Y.S.2d 272, 275, 199 N.E.2d 369, 371 (N.Y.Ct.App.1964). Undeniably, Helmsley-Spear was acting as agent for Associates. As agent, Helmsley-Spear was the proper party to serve.[8]
Associates also relies on Arts des Provinces and Bankruptcy Rule 9010(b)[9] to argue that the Notice was inadequate because the Debtors failed to send it to Associates' attorneys. This Court disagrees and finds Arts *721 des Provinces distinguishable from the circumstances present in this case. In Arts des Provinces, the court held that the notice was improperly served because it was not served upon the creditor's attorney. However, the creditor's attorneys in Arts des Provinces filed notices of appearance on behalf of the creditor and requested a copy of all notices and papers directed to their client. In contrast, Associates' attorneys failed to file any notices of appearance in this case. Instead, they were merely noted on the record during the Hearing. It is disingenuous for Associates to argue that since they were noted on the record during that specific hearing, all notices pertaining to the Debtors' Chapter 11 cases should have been sent to Associates' attorneys. Appearance for a hearing, on a limited motion within the bankruptcy proceeding, is not the equivalent of putting the Debtors on notice for all matters within the entire bankruptcy proceeding. Therefore, the Debtors were under no obligation under Bankruptcy Rule 9010(b) to send all notices to Associates' attorneys.[10]
B. Receipt of Notice
Associates further alleges that Helmsley-Spear, and thus itself, never received notice of the Bar Date. This Court dismisses such an argument. It is black letter law that once an item is properly mailed, the law presumes that it is received by the addressee. See, Hagner v. United States, 285 U.S. 427, 430, 52 S.Ct. 417, 419, 76 L.Ed. 861 (1932); R.H. Macy, 161 B.R. at 359; Capital Data Corp. v. Capital National Bank, 778 F.Supp. 669, 675 (S.D.N.Y.1991) (even if a statute required receipt, evidence by way of affidavit of service invokes presumption of receipt). The Debtors have established this presumption with respect to Associates by way of the affidavits of Jeanne Hall, an employee of Poorman-Douglas Corporation, who had sworn that a proof of claim form and the Notice were addressed to Helmsley-Spear and were properly deposited in the mail system on August 17, 1992.[11]
It is the claimant's responsibility to rebut the presumption of receipt of the Notice. Meckel v. Continental Resources Co., 758 F.2d 811, 817 (2nd Cir.1985) (proof in addition to denial of receipt necessary to rebut the presumption that the notice was mailed); Dependable Insurance Co. v. Horton, 149 B.R. 49, 58 (Bankr.S.D.N.Y.1992) (affidavits of employees denying receipt of bar notice not enough to rebut presumption of receipt). Associates and Helmsley-Spear dispute receiving the Notice; yet, neither has offered sufficient evidence to rebut the presumption of receipt. Since the law presumes that a properly mailed notice is received by the addressee, the addressee must do more than simply deny that it received notice. Meckel, 758 F.2d at 817; R.H. Macy, 161 B.R. at 360. Associates merely submits an affidavit denying receipt of the Notice.[12] Without more evidence, Associates cannot override the presumption that the Notice was received.[13] This Court, therefore, finds that Associates did receive adequate notice of the Bar Date.
C. Prejudice to the Debtors
Associates claims there will be no prejudice to the Debtors if its claim is allowed. Again, Associates cite In re Arts des Provinces in support of its position. The court in that case held that a debtor cannot claim prejudice when a landlord files a late claim for rent due under a lease rejection because the claim was expected. Arts des Provinces, 153 B.R. at 147. Thus, Associates argues that the Debtors expected that Associates would have a claim for lease rejection damages. The Debtors concede that they expect a claim for lease rejection damages but claim to be surprised by the magnitude of Associates' claim filed one year and three months after the rejection. The Debtors *722 expected some mitigation of the damages by the reletting of the rejected Premises.[14]
While the Court is cognizant that a claim for rejection damages would be expected, expectation is merely one factor in determining prejudice to a debtor. Other factors including confirmation of a plan of reorganization have been considered in determining prejudice to a debtor. See, e.g., In re Drexel Burnham Lambert Group, Inc., 148 B.R. 1002, 1007 (S.D.N.Y.1993) ("acceptance of a substantial late claim after consummation of a vigorously negotiated claims settlement and Plan of Reorganization thereon and a distribution of a major part of the assets thereunder, would disrupt the economic model on which the creditors, the debtor and the stockholders reached their agreements").[15]
Similarly, the Debtors and other creditors will be prejudiced because the Proof of Claim was filed after the Debtors' Plan was formulated, negotiated and confirmed. Debtors had proposed the Plan based upon a claims analysis that was undertaken during the seven-month period following the Bar Date which did not include Associates' substantial claim of over a half a million dollars. Creditors who had timely filed their claims voted on a Plan based on this estimate. Additionally, the assets in this case have already been partially distributed. Thus, allowance of Associates' claim would disrupt the "economic model" on which all parties reached their agreements.
D. Length of Delay and Impact on the Judicial Proceedings
Other factors in determining prejudice to the Debtors includes the length of the delay and a potential impact on the judicial proceedings. Pioneer, 507 U.S. at ___, 113 S.Ct. at 1497. The length of delay in this case is substantial. Associates filed its Proof of Claim on September 27, 1993, almost one year after the bar Date and over a year after the Debtors rejected the Lease. Associates attempts to justify its failure to timely file by claiming that it did not want to file its claim until it had a reasonable idea as to the amount of the claim. However, this Court notes that nothing prevented Associates from timely filing a Proof of Claim and subsequently amending it to reflect actual damages that it incurred. Instead, Associates waited until approximately six weeks after it had received the Solicitation Materials and almost a week after the Plan's confirmation date of September 21, 1993 to timely file.
Administration of the Debtor's case will be adversely affected if Associates' claim were to be allowed. Allowing Associates' claim will now result in an upheaval in the claims reconciliation process,[16] require recomputation and recasting of everything which had occurred in reliance on timely filed claims, including issues related to the Plan which has been confirmed.
The reason for the delay and whether it was within Associates' reasonable control is another factor to be considered. As previously discussed, it was well within Associates' control to timely file its Proof of Claim. Further, this Court finds that Associates is a sophisticated creditor and was aware that it would have a claim for damages arising from the rejection of its Lease almost a year and three months before it filed its claim. Moreover, it received the Solicitation Materials containing clear references to the Bar Date and it voted for the proposed Plan which was subsequently approved. Yet it filed its formal Proof of Claim almost six weeks after it had received the Solicitation Materials. In light of the foregoing, this Court finds that the filing of the Proof of Claim was clearly within Associates' reasonable control.[17]
II.
AMENDMENTS TO PREVIOUSLY FILED CLAIMS
This Court's conclusion that Associates' failure to timely file its claim is not due *723 to "excusable neglect" does not end the inquiry. This Court will address an issue raised by the Debtors that Associates improperly amended its Abandonment Claim.[18]
Amendments after the Bar Date are to be scrutinized very closely to insure that the amendment is in fact genuine and not entirely a new claim. In re W.T. Grant Co., 53 B.R. 417, 422 (Bankr.S.D.N.Y.1985) (citations omitted). It is equally clear that an amendment to a claim may not advance a wholly new claim or theory of liability based on different facts. 8 King, Collier on Bankr. ¶ 3001.03 at 3001-14 (15th Ed.1994).
In Associates' January Proof of Claim and the Second Amendment, Associates attempts to amend its claim for damages which arose from the Debtors' Abandonment Motion to include its claim for damages which arose from the Debtors' Rejection Motion. The theory of liability is obviously different for both claims. The damages from the Rejection Motion arises from Section 365 of the Bankruptcy Code while Associates' claim for damages from the Abandonment Motion arises from Section 554 of the Bankruptcy Code. Moreover, these two claims do not arise from identical facts. The Abandonment claim arose from the Debtors' abandonment of its property on the Premises. That the Debtors abandoned property does not equate to a claim for rejection damages. Thus, this Court concludes that Associates' amendments of its Abandonment claim is improper because it advances an entirely new claim.[19]
III.
CONCLUSION
1. Associates' delay in filing its proof of claim did not result from "excusable neglect."
2. The Debtors' Motion to Expunge the Claim for Failure to timely file is hereby GRANTED.
3. Associates' Motion to Enlarge Time for Filing its Proof of Claim is hereby DENIED.
THE DEBTOR IS TO SETTLE AN ORDER CONSISTENT WITH THIS OPINION ON FIVE (5) DAYS NOTICE.
NOTES
[1] This Court notes that Associates did not file a formal proof of claim for this administrative expense but alleged the claim in the Abandonment Response. This Court assumes that Associates intended for this affidavit to constitute an informal Proof of Claim as it fails to conform substantially to the appropriate "official form" as required by Bankruptcy Rule 3001(a). However, this Court notes that the affidavit is sufficient to constitute an "informal" Proof of Claim because this written assertion apprises this Court of the existence, nature and amount of the claim as well as evidences an intent to hold the Debtors liable. In re South Atlantic Financial Corp., 767 F.2d 814, 819 (11th Cir.1985), Weintraub & Resnick, Bankruptcy Law Manual, ¶ 504 at 5-11, footnote 23 (3d Ed.1992) (citations omitted); 8 King, Collier on Bankruptcy ¶ 3001-03 at 3001-14 (15 Ed.1994).
[2] See Affidavit of Jeanne Hall dated August 25, 1992 (stating that the "Proof of Claim" and "Notice of Procedure and Last Day for Filing Proofs of Claim Against Debtors" were sent to all creditors via first class mail).
[3] See Affidavit of Jeanne Hall, dated April 27, 1994.
[4] See Affidavit of Valerie T. Rosenson, assistant general counsel of Helmsley-Spear, dated March 18, 1994. Associates further alleges that it became aware of the Bar Date only on December 14, 1993, when it received the Objection to Associates' claim filed on September 27, 1993.
[5] Claim No. 2696.
[6] The facts are not clear as to which claim Associates is amending. This Court assumes that Associates intended to amend the January Proof of Claim to include a pre-petition claim for approximately $21,000 arising from electricity charges due under the Amended Lease, which claim was listed by the Debtors as owing to Helmsley-Spear.
[7] Rule 7004(b)(3) states in relevant part:
Upon a domestic or foreign corporation or upon a partnership or other unincorporated association, by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, . . . (emphasis added)
[8] Additionally, although Associates contend that the Debtors violated Bankruptcy Rule 2002(g) by sending the Notice to the 60 East 42nd Street address, this Court finds no such violation. Bankruptcy Rule 2002(g) states in relevant part:
Addresses of Notices. All notices required to be mailed under this rule to a creditor . . . to the address shown in the list of creditors or the schedule whichever is filed later.
As noted previously on the Leases, Associates listed its address as that of Helmsley-Spear. Since the address of Helmsley-Spear is also the address of Associates, it was, thus, the proper address to send the Notice. It is also noteworthy that Associates failed to object to service of the Solicitation Materials when the Debtor had served Helmsley-Spear.
[9] Bankruptcy Rule 9010(b) provides in relevant part:
An attorney appearing for a party in a case under the Code shall file a notice of appearance with the attorney's name, office address and telephone number unless the attorney's appearance is otherwise noted in the record.
[10] Again, this Court notes that on the various Proofs of Claims filed by Associates, Associates itself directed that all documents pertaining to its' claim be sent to Helmsley-Spear.
[11] See Affidavits of Jeanne Hall, dated August 25, 1992 and April 27, 1994.
[12] See Affidavit of Valerie T. Rosenson, assistant general counsel to Helmsley-Spear, dated March 18, 1994.
[13] This Court notes that the Notice sent to Helmsley-Spear was neither returned to the Debtors nor to its claims agent as undeliverable.
[14] See Debtors' Memorandum of Law in Opposition to Motion to Enlarge Time for Filing Proof of Claim at 12.
[15] See, also, In re Au Coton, Inc., 171 B.R. 16, 18 (S.D.N.Y.1994) (holding that a late filed claim would not prejudice the debtor where no plan of reorganization had yet been filed).
[16] The Debtors' claim reconciliation process is "a mature one" having resolved over 1,000 claims.
[17] This Court will not discuss the issue of good faith because it finds no genuine issue in dispute.
[18] See Debtors' Memorandum in Opposition to Motion to Enlarge Time for Filing Proof of Claim at 12.
[19] Even if Associates had meant to amend a "scheduled" proof of claim in its Second Amendment, the same rationale would apply, making it an impermissible amendment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2220321/ | 475 N.E.2d 1146 (1985)
STATE of Indiana ex rel. William B. Keaton, Prosecuting Attorney for the 65TH Judicial Circuit, Relator,
v.
THE CIRCUIT COURT OF RUSH COUNTY AND THE HONORABLE G. RICHARD PILE, As Judge Thereof, Respondents.
No. 1184S460.
Supreme Court of Indiana.
April 3, 1985.
William B. Keaton, Pros. Atty., David R. Butsch, Deputy Pros. Atty., Rushville, for relator.
Susan K. Carpenter, Public Defender, Paul Levy, William Touchette, Deputy Public Defenders, Indianapolis, for defendant-below.
ORIGINAL ACTION
GIVAN, Chief Justice.
On November 27, 1984, this Court issued an Alternative Writ of Mandamus against respondent. The writ compelled respondent to expunge an "Order to Produce" of September 10, 1984, and a "Discovery Order" of October 19, 1984, insofar as they purported to order relator to produce verbatim copies of police reports. Pursuant to Ind.R.O.A. 5(A) respondent filed a return contesting the writ. We hereby order the writ be made permanent.
On November 7, 1983, relator filed an information charging the defendant in this case, David Kidd, with one count of murder. Kidd filed several discovery motions, the third of which requested copies of all police reports. Relator responded to the third discovery motion on January 23, 1984, by objecting to production of the police reports.
*1147 Kidd filed a fourth discovery motion on June 18. On June 20 relator filed a "Motion for Protective Order," which was granted by respondent on that date. Kidd then specifically requested the production of three police reports in his September 6 "Verified Supplemental Motion to Produce." On September 10 respondent ordered relator to produce the reports within ten days.
Two days later relator, again objecting to production of police reports, filed a "Motion to Strike Order to Produce Evidence." The motion was denied, but apparently notice was not furnished to either side. On September 28 Kidd filed a "Verified Motion to Compel Discovery." Following an October 16 hearing on that motion, respondent on October 19 ordered relator to "produce verbatim copies of the police reports" on or before October 22.
In the discovery order respondent entered the following findings: that relator had fully complied with all discovery motions and orders, except that relator had objected, and continued to object, to production of verbatim copies of police reports; that relator had permitted defense counsel to inspect all police reports to determine if such reports contained exculpatory evidence; and that State ex rel. Keller v. Criminal Court of Marion County (1974), 262 Ind. 420, 317 N.E.2d 433, requires production of verbatim copies of police reports by the State. Respondent subsequently granted relator's request for a one-month extension of time to comply with the order.
The issue before us is whether the respondent court exceeded its jurisdiction by ordering pretrial discovery of verbatim copies of police reports over relator's work product objection. In contesting the writ, respondent asserts that State ex rel. Keller requires production of police reports by the prosecution and that any work product privilege enjoyed by relator was waived when relator permitted defense counsel to examine the reports. Relator, by way of response to the return, contends that because police reports constitute the work product of the prosecuting attorney they are not discoverable, and further that the use of verbatim police reports by the defense at trial is subject to abuse.
Initially, we do not agree with respondent's assertion that State ex rel. Keller mandates a trial court to compel pretrial discovery of verbatim copies of police reports. In that case, this Court held that a trial court has the inherent power to balance discovery privileges between parties. "The key to the entire principle of discovery in criminal cases is that of reciprocity, the balancing of the right to discovery on both sides." Id. at 428, 317 N.E.2d at 438. Beyond setting forth the principle that discovery is to be reciprocal, the decision does not purport to define the scope of discovery or to mandate the production of certain materials.
While the recent trend has been to broaden the scope of discovery in criminal cases, the fact that the other side may be compelled to divulge the same or substantially similar information does not necessarily mean that the information sought is discoverable. State ex rel. Meyers v. Tippecanoe Superior Court (1982), Ind., 438 N.E.2d 989 (DeBruler, J., dissenting); see Partlow v. State (1983), Ind., 453 N.E.2d 259. The inherent power of a trial court to guide and control discovery is subject to limitations, some of which have been explicitly delineated by this Court. State ex rel. Meyers, supra (prosecution cannot be compelled to produce each witness's expected testimony); Spears v. State (1980), 272 Ind. 634, 403 N.E.2d 828 (witness statements taken by defense not subject to pretrial discovery over timely work product objection); Brandon v. State (1978), 268 Ind. 150, 374 N.E.2d 504 (State not compelled to "lay bare its case in advance of trial").
We have recognized that in criminal litigation protection must be extended to the attorneys' work product. State ex rel. Meyers, supra; Spears, supra. The work product doctrine protects materials prepared by agents for the attorney as well as those prepared by the attorney himself. United States v. Nobles (1975), 422 U.S. *1148 225, 95 S.Ct. 2160, 45 L.Ed.2d 141; Spears, supra. Protection should therefore be afforded to police reports which, as contended by relator, constitute the work product of the prosecuting attorney.
Where, as in the instant case, a timely work product objection has been made, a trial court's authority to control discovery does not extend to compelling production of verbatim copies of police reports. That is not to say, of course, that factual information contained in such reports, such as the names of witnesses to be called at trial, is not discoverable. Production of complete police reports, however, would place an undue burden on the prosecuting attorney. The prosecution would be forced to excise non-discoverable information from copies of reports it has been compelled to produce.
Further, the use of verbatim copies of police reports by the defense at trial is subject to abuse. In opposing relator's petition for the writ, defense counsel argued that it is incongruous for relator to allow examination of the requested reports in his office, then attempt to invoke a work product privilege to prevent production of verbatim copies of the reports. We find no incongruity, for there is a significant difference between examining the reports on one occasion, in a search for specific information, and having the opportunity to carefully study the reports and have them available at trial. Defense counsel cognizant of the theories and speculations of the investigating officers could subject the officers to misleading and unfair cross-examination.
Respondent also asserts that any work product privilege enjoyed by relator was waived when he allowed defense counsel to examine the reports. We do recognize that the work product privilege is qualified and, as such, can be waived. Nobles, supra; Spears, supra. "What constitutes a waiver with respect to work product material depends, of course, upon the circumstances." Nobles, supra at 239 n. 14, 95 S.Ct. at 2171 n. 14, 45 L.Ed.2d at 154 n. 14.
In the circumstances presented here, we find no waiver of relator's work product privilege. By allowing defense counsel to examine the reports, relator was complying with his affirmative duty to disclose exculpatory information not otherwise revealed through discovery. Brady v. Maryland (1963), 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215. Relator's compliance with that duty does not constitute a waiver with respect to the requested work product material.
We hold that a trial court in a criminal proceeding does not have the inherent power to order production of verbatim copies of police reports over the timely work product objection of the prosecuting attorney. Consequently the respondent court exceeded its jurisdiction by ordering production of the police reports.
The alternative writ previously issued in this case is hereby made permanent.
PRENTICE and PIVARNIK, JJ., concur.
DeBRULER, J., dissents with separate opinion in which HUNTER, J., concurs.
DeBRULER, Justice, dissenting.
In this case, the trial judge sought to maintain a balanced approach in superintending pre-trial discovery between the defense and the prosecution. When the second set of counsel took over the defense and procured a broad discovery order, the judge granted a protective order to the prosecution, which in substance would have required the second set to first exhaust the potential of contact with the first set as a source of information. The first set had inspected the prosecutor's files, which included the items of which the prosecution now claims in this court that the second set should not get a copy. The second set returned to court and procured an order that three police reports, identified by naming the police officers who made them and by the date they were made. These reports had been inspected by the first set of defense counsel while being maintained under the control and possession of the prosecution. Instead of asking for a new protective *1149 order to limit the use of such copies at trial to reasonable and lawful purposes, the prosecution sought to strike the order in toto. If as the majority believes, possession by defense counsel of copies of these documents, as distinguished from knowledge by defense counsel of the content of the documents gained through their actual inspection, provides an intolerable potential for harassment and abuse of police officer witnesses during cross-examination, surely, protective orders and in-trial rulings by the presiding trial judge are the proper means for dealing with that potential, and not writs of mandate and prohibition by the state supreme court. This writ should be denied because relator did not seek the plainly adequate legal remedy of a protective order from the respondent court, which would have provided a record of litigation focusing upon the issue of whether a copy injures state interests, while inspection does not.
This writ should also be denied because Relator has failed to establish a prima facie case here. Such was his certain duty. State ex rel. Crumpacker v. LaPorte Circuit Court (1975), 264 Ind. 27, 338 N.E.2d 261. Absent here from the showing are the form, nature, and intended uses of "police reports." Counsel for the parties at the trial level and before us at hearing appear to know about police reports. Four justices of this court feel confident in their information about police reports. However, the record leaves me in the dark, and on this basis alone, I must vote to deny the writ.
This writ should not be granted through application of the work product doctrine. That doctrine protects the machinations of lawyers and their legal staffs, not law enforcement officers engaged in their day to day filed work. Furthermore, law enforcement officers in Indiana are of mature age and skilled in their profession. Many have a college education or its equivalent. At this point in time, all have received basic training at the Law Enforcement Academy which includes courses in its curriculum which teach the proper manner of testifying and presenting evidence in court. They are trained observers and know the difference between fact and opinion. In short, they are professional witnesses who are paid to do that work for us. They are better prepared than most folks to deal with efforts by lawyers to embarrass or harass them in court through cross-examination. I cannot but believe that law enforcement officers would agree that they do not need special protection against being taxed in court during cross-examination with their own formal written statements regarding a case. I would not grant this writ on the basis of the work product doctrine, because that doctrine was not intended to provide protection for day-to-day police reports, and at this day in age the police don't need that special level of protection anyway.
HUNTER, J., concurs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1779025/ | 765 S.W.2d 455 (1988)
Malcolm TURNER, Appellant,
v.
PV INTERNATIONAL CORPORATION and R.W. Forsythe, Appellees.
No. 05-87-01123-CV.
Court of Appeals of Texas, Dallas.
December 19, 1988.
Rehearing Denied February 16, 1989.
*457 Gerald R. Powell, Waco, Robert D. Allen, Barbara E. Pusch, Dallas, for appellant.
G.H. Kelsoe, Jr., Jeffrey L. Clark, Dallas, for appellees.
Before ENOCH, C.J., and McKAY[1] and BISSETT[2], JJ.
BISSETT, Justice.
PV International Corporation sued Malcolm Turner, individually, and the firm of Turner, Mason & Solomon, a partnership, for damages based on an alleged breach of contract to raise $750,000.00 capital for PV International Corporation, for fraud and for breach of fiduciary duty. R.W. Forsythe sued Malcolm Turner for the alleged alienation of affection of his wife, Barbara Forsythe. No motion to sever the two causes of action was filed in the trial court. Turner answered with a general denial and affirmative defenses of statute of frauds, statute of limitations, judicial estoppel, collateral estoppel and release. Trial was to a jury, which answered all issues favorably to PV International Corporation and R.W. Forsythe, respectively. The judgment decreed that PV International recover $1,250,000.00 from Malcolm Turner, and that R.W. Forsythe, individually, recover $1,000,000.00 from Malcolm Turner. An appeal from that judgment has been perfected by Malcolm Turner, defendant in the trial court. We reverse.
BACKGROUND
This suit was originally filed on May 6, 1980, in the 162nd District Court of Dallas County. Judge Dee Brown Walker presided at the trial, which commenced on July 16, 1984. On December 31, 1984, Judge Walker granted defendants' (Malcolm Turner and the firm of Turner, Mason & Solomon) motion for judgment non obstante veredicto and rendered judgment that plaintiffs PV International Corporation and R.W. Forsythe take nothing. Then, on April 15, 1985, Judge Joe Burnett, sitting for Judge Catherine Crier, judge of the 162nd District Court, on his own motion set aside the judgment non obstante veredicto, and, on the same day, signed a judgment which decreed: (1) that PV International Corporation recover $570,000.00 against Malcolm Turner and the firm of Turner, Mason & Solomon; (2) that PV International Corporation further recover from Malcolm Turner the sum of $830,000.00; and (3) that R.W. Forsythe recover $1,000,000.00 from Malcolm Turner. Judge Crier, by order signed on April 29, 1985, on her own motion set aside the order of Judge Burnett which set aside the judgment non obstante veredicto previously rendered by Judge Walker.
When PV International first filed the appeal, this Court on its own motion raised the issue of jurisdiction. This Court concluded that it did not have jurisdiction, reasoning that "there is not a final and appealable judgment." See PV International Corporation v. Turner, Mason & Solomon, 700 S.W.2d 21, 22 (Tex.App.Dallas 1985, no writ). Accordingly, the appeal was dismissed for want of jurisdiction.
Judge Crier recused herself from further service in the case by order signed on *458 March 24, 1986. The case was transferred to the 160th District Court of Dallas County by order signed on March 26, 1986. Judge Joe Bailey Humphreys signed the final judgment in this case on July 14, 1987. The judgment was solely against Malcolm Turner. PV International does not complain by a cross-point of the failure by Judge Humphreys to decree any recovery against the partnership of Turner, Mason & Solomon. We do not further notice the suit against such partnership.
PV INTERNATIONAL'S SUIT AGAINST TURNER
PV International Corporation (PV International) is a foreign corporation and was chartered in the Cayman Islands in 1974. R.W. Forsythe was president and sole stockholder until 1983, when he sold his stock to a third party. The corporation was engaged in the business of manufacturing and selling explosives (nonmilitary) to third world countries. In May 1977, it had plants in Malaysia and a tentative contract to build a plant in Ecuador. At that time, it was out of money and desperately in need of additional capital.
Forsythe and his wife, Barbara Forsythe, met Malcolm Turner and his wife, JoAnn Turner, in 1969. They became friends and socialized with each other. In late 1969, Forsythe was attempting to raise capital for his company named Kinetics International Corporation and talked to Turner about raising money for the corporation. Some kind of an arrangement was made between the two; later a dispute arose concerning the amount of stock which Turner was to receive for his services. The parties eventually settled the dispute, and a certain amount of stock was issued to Turner. Forsythe later sold Kinetics International Corporation.
On May 13, 1977, the Turners invited the Forsythes to dinner at a restaurant located at Chandler's Landing, a yacht club. At the dinner, Forsythe told Turner about the financial difficulties being experienced by PV International and that additional capital was needed. Forsythe testified that Turner then told him that he could easily raise $750,000.00, the capital needed by PV International. Following the dinner, Turner suggested that Forsythe prepare a "proposal" showing all relevant facts of the corporation and explaining how the $750,000.00 would be spent. Such proposal was prepared by Forsythe and delivered to Turner.
On May 26, 1977, Turner and Forsythe had a meeting. Forsythe testified that Turner agreed that his firm, Turner, Mason & Solomon, "would raise the $750,000.00 for a $10,000.00 fee," plus expenses. Turner testified that it was agreed that his firm would furnish consulting services in connection with his efforts to raise the desired capital and that such services were in the area of organization and fund raising. He further testified that it was understood that he, personally, was not required to fund PV International out of his own resources. On June 20, 1977, Turner told Forsythe that First Oklahoma Venture Company (First Venture) had expressed an interest in investing in PV International and that he was setting up a meeting with John Tinkle, the president of First Venture. On June 24, 1977, Turner told Forsythe that Tinkle wanted him (Forsythe) to go to Ecuador and try to close "the contract" with the government because more than the one operation in Malaysia was needed. Forsythe then went to Ecuador where he remained until July 19, 1977. In the meantime, Turner and Barbara Forsythe commenced "an affair," which continued until May 4, 1978, as hereinafter particularly detailed.
Forsythe also testified that on July 26, 1977, Turner "indicated" that he (Forsythe) "needed to go to Malaysia;" that PV International had problems in Malaysia with the production facility; and that he (Turner) thought it was more important to solve those problems than it was to complete the financing. The next day, July 27, 1977, Forsythe told Turner that PV International was out of working capital and that a Mr. Burridge "had committed that he could raise the $750,000.00." According to Forsythe, Turner told him "at that point that if they did not have an exclusive that he *459 would drop the whole thing, but that First Oklahoma Venture was on the verge of signing and that I just had to be patient, that the lawyers were slow in drawing up the papers." Forsythe accepted the explanation because, in his words, "I was dealing with a friend."
In September 1977, Forsythe flew to Quito, Ecuador, where "we executed the contracts." PV International was supposed to start building a plant immediately. Also, by the middle of September 1977, PV International was entirely out of money, and Forsythe borrowed money personally and sold personal assets to keep the company "going." At that time PV International was negotiating with Trojan Tylar Corporation about a license to produce elements of the explosives, and Turner told him that Tinkle wanted such negotiations concluded "before the money was put up." Forsythe, upon Turner's urging, flew to Salt Lake City, Utah, to talk with the people of Trojan Tylar.
In November 1977, Tinkle, Forsythe and Barbara Forsythe went to Malaysia to view the plant operations. Then, they went to Seoul, Korea, where Forsythe explained PV International's technology to people introduced to him by associates of Tinkle and Turner. All of this traveling was at the expense of PV International. On the plane flying back from Korea, Tinkle "indicated" to Forsythe that he was "excited" over the plant operations in Malaysia and the prospects of additional business in the Far East. Both Turner and Tinkle agreed, according to Forsythe, that after this trip they would complete the financing.
In the fall of 1977, Allstate Insurance Company expressed an interest in investing in PV International. Tinkle contacted Richard Dumlar, Allstate's representative, who was head of Allstate's Venture Capital Investment Department. Several meetings were held in Chicago and Dallas with Turner, Tinkle, Forsythe and Dumlar being present. However, Allstate did not invest in PV International.
As already noted, PV International had signed a contract with the government of Ecuador in September 1977. When the funds promised by Tinkle were not paid, the government of Ecuador agreed to extend the time of performance until January 1, 1978. At that time, PV International hired three engineers who were sent to Ecuador, and Turner "indicated" to Forsythe that "the money would be forthcoming very quickly."
On January 23, 1978, according to Forsythe's testimony, it was agreed between PV International and First Venture that:
(1) a limited partnership and a Texas corporation would be formed immediately, and simultaneously with the formation of such entities, First Venture would invest $350,000.00 in preferred stock in the corporation, which would result in its owning 35% of the stock;
(2) First Venture would loan the newly created corporation $350,000.00 and would place $50,000.00 in the limited partnership, which would give it 40% interest therein; and,
(3) PV International would be a limited partner and would own 50% of the limited partnership business and assets.
The signing of all documents necessary to finalize the agreement was scheduled for February 27, 1978. Forsythe had drafts prepared for all documents required of PV International incidental to the proposed funding in accordance with the accord reached on January 23, 1978. Tinkle did not have drafts of the documents required of First Venture. Consequently, the "deal" was not closed, and the $750,000.00 was not made available to PV International. Construction of the plant facilities in Ecuador was never begun, and the government of Ecuador cancelled the contract sometime prior to July 1978.
At Turner's request, Forsythe executed a letter dated March 27, 1978, stating that he had no claims against Turner or Turner, Mason & Solomon and that their services had been completed in full. Forsythe also went to Malaysia on March 27, 1978, where he remained until May 6, 1978. Upon his return, his wife told him of her affair with Turner. There were no further contacts between Turner, Tinkle, and Forsythe relating *460 to the raising of capital for PV International.
In summary, Turner contacted First Venture concerning the raising of $750,000.00 for PV International. From May 1977 until early May 1978, there were numerous meetings and extensive negotiations between First Venture and PV International concerning various equity and debt funding propositions. An Allstate Insurance Company affiliate was invited by Tinkle to join First Venture in making a substantial investment in PV International. Richard Dumlar, representing Allstate's subsidiary, was fully advised of all matters relating to the potential of PV International and the problems of funding. Allstate's affiliate did not make any investment in PV International. Various investigations and meetings were held; trips were made; and legal work was prepared by attorneys for First Venture and PV International. However, First Venture elected not to fund PV International. This decision was made after March 27, 1978, and prior to May 8, 1978. Turner did not fund any money for PV International. Suit for breach of the alleged oral agreement to provide funds was subsequently filed by PV International against Turner.
Concerning the judgment of $1,250,000.00 in favor of PV International, the jury found:
(1) That Turner agreed to fund PV International's financial needs to the extent of $750,000.00, if not funded by other services (Special Issue No. 1);
(2) That such agreement was breached by failure to provide such funds (Special Issue No. 3);
(3) That Turner, individually, violated his fiduciary duty owed to PV International (Special Issue No. 6);
(4) That such breach was the producing cause of the loss in question (Special Issue No. 7);
(5) That Turner, individually, made one or more fraudulent misrepresentations [sic] to PV International with reference to providing financing to it during the time in question (Special Issue No. 8);
(6) That such fraud was the producing cause of the loss sustained by PV International (Special Issue No. 9);
(7) That the release letter of March 27, 1978 was procured by fraud (Special Issue No. 10);
(8) That the release letter of March 27, 1978 was procured in breach of a fiduciary duty (Special Issue No. 11); and,
(9) That the loss sustained by PV International was $1,400,000.00 (Special Issue No. 12).
Turner does not challenge by separate and distinct points of error any of the jury's findings listed above, except for the jury's answer to special issue twelve.
Turner, in his first point of error, contends that the trial court erred in rendering judgment for PV International because the agreement contravenes the statute of frauds and is, therefore, unenforceable. We disagree.
The initial agreement between Turner and Forsythe, in his capacity as president of PV International, was verbal. Turner argues that "the proposed funding for PV International was to be, in actuality, a corporate reorganization that included and required the sale of stock," and that "any such investment contact is a security under the Securities Act of 1933, 15 U.S.C. § 77a et seq." He further argues that the agreement contravenes the provisions of section 8.319 of the Texas Business and Commerce Code, which provides that a contract for the sale of securities must be in writing and signed by the party against whom enforcement is sought. He relies on Kenney v. Porter, 604 S.W.2d 297 (Tex.Civ.App. Corpus Christi 1980, writ ref'd n.r.e.), and Consolidated Petroleum Industries v. Jacobs, 648 S.W.2d 363 (Tex.App.Eastland 1983, writ ref'd n.r.e.). Neither case is in point since an agreement for the sale of stock in a corporation was involved in both cases. That is not the case here.
The agreement upon which PV International sued Turner, whether it was to fund the $750,000.00 as argued by PV International or to furnish consulting services relating to the raising of capital as argued by Turner, was not restricted to a specific *461 funding source. There was no requested issue or finding that the $750,000.00 was to be funded from the sale of securities.
PV International alleged that Turner made misrepresentations to it and that he violated a fiduciary duty owed to PV International. The jury found that Turner made "fraudulent misrepresentations to PV International with reference to providing financing to it during the time in question" and that he, "acting individually, violated his fiduciary duty owed to PV International." The statute of frauds is not a defense to any action for damages based on fraud or breach of fiduciary duty, both being tort actions. See Sibley v. Southland Life Insurance Co., 36 S.W.2d 145 (Tex.1931). In the instant case, PV International, in its action for damages, has alleged an action that is grounded in tort as well as in contract (breach of the agreement). The statute of frauds has no application in this case. Turner's first point of error is overruled.
In his third point of error, Turner asserts that the trial court erred in rendering judgment for PV International by virtue of the breach of the agreement because the doctrines of "judicial estoppel" and "collateral estoppel" preclude PV International from "pursuing this cause of action" against him. We do not agree.
Turner says that PV International is judicially estopped from complaining about his actions in connection with the services which he supplied PV International because, in a previous lawsuit filed by First Venture against PV International, the latter took the position that Turner was Venture's agent. Turner states PV International made these allegations in its pleadings "in connection with the exact same financing dispute that gave rise to the business claims portion of this lawsuit." Therefore, Turner argues that, since PV International maintained an inconsistent position in the instant lawsuit from its position in the prior lawsuit, it is judicially estopped from claiming that Turner was its agent and owed it a fiduciary duty. Turner further argues that the prior lawsuit, where PV International claimed that First Venture breached the agreement to raise $750,000.00 in capital funding for PV International, collaterally estops it from taking the position in this lawsuit that Turner committed the same breach. Thus, Turner claims that the doctrine of collateral estoppel precludes relitigation of identical fact or legal issues that were actually litigated and central to the judgment in the suit between First Venture and PV International, even though Turner was not a party to that lawsuit. In support of that position, Turner says that he, as the admitted agent of First Venture by PV International, was in privity with First Venture's interests and possessed the right to assert the collateral estoppel effect of the lawsuit between First Venture and PV International.
The pleading upon which Turner bases his claim is not before us in this appeal. Such pleading, "PV International's First Amended Cross-Action," filed by PV International in Cause No. 80-1138-G-134, in the 134th District Court of Dallas County, styled First Venture Corporation of Bartlesville, Oklahoma v. PV International Corporation and Richard W. Forsythe, was attached to Turner's First Amended Original Answer as an exhibit; however, it was not attached to his Fourth Amended Original Answer, his trial pleading, nor was it introduced in evidence. In that state of the record, we do not consider the allegations made by PV International in its cross-action against First Venture for any purpose.
Assuming, arguendo, that PV International's cross-action in this First Venture lawsuit is properly before us, there are reasons why judicial estoppel is not present in this case. Judicial estoppel requires pleadings or statements made under oath. Thate v. Texas & P. Ry. Co., 595 S.W.2d 591 (Tex.App.Dallas 1980, writ dism'd w.o.j.); Aetna Life Ins. Co. v. Wells, 557 S.W.2d 144, 147 (Tex.Civ.App.San Antonio 1977), writ ref'd n.r.e. per curiam, 566 S.W.2d 900 (Tex.1978). The allegations made in the cross-action were not made under oath. Further, judicial estoppel bars a party from successfully maintaining a position in one action and then *462 maintaining an inconsistent position in a subsequent action. See Long v. Knox, 155 Tex. 581, 291 S.W.2d 292, 295-96 (1956). Here, PV International did not successfully maintain its cross-action in the prior suit.
Collateral estoppel requires a prior suit between the same parties or their privies and a previous litigation of fact or legal issues that were essential to judgment in the first lawsuit. Van Dyke v. Boswell, O'Toole, Davis and Pickering, 697 S.W.2d 381, 384 (Tex.1985); Benson v. Wanda Petroleum Co., 468 S.W.2d 361 (Tex.1971). Turner was not a party to the litigation between First Venture and PV International. Turner claims that he was in privity with First Venture in the prior suit as First Venture's agent. Turner's agency claim is apparently based on PV International's allegations in its cross-action that Turner was First Venture's agent. PV International did not succeed in that action, however. Consequently, Turner's agency claim has no basis. Further, the issues litigated in this suit are different from those litigated in the prior suit. Neither "judicial estoppel" nor "collateral estoppel" exists in the present case. Turner's third point of error is overruled.
Turner claims in his second point of error that the trial court erred in rendering judgment for PV International by virtue of the breach of the agreement because Forsythe, in his capacity of president of PV International, executed a binding release that released any right that PV International possessed to pursue this cause of action against him. We do not agree.
The release in question, which was introduced into evidence, is in the form of a letter, dated March 27, 1978, and reads as follows:
Mr. Richard W. Forsythe
PV International Corp.
13601 Preston Rd.
Dallas, Texas 75240
Dear Dick:
We are in receipt of your payment to Turner, Mason & Solomon in the amount of $10,245.49. This letter is to state that this sum represents payment in full for all professional services rendered and expenses incurred to date by us. Moreover we state that our verbal agreement to provide financial, management and organizational consulting services to PV is completed to our full mutual satisfaction. We state that there are no unpaid, outstanding claims for services or expenses by Turner, Mason & Solomon against PV International or you personally. Nor do we have any rights to expectations of future consulting assignments or payments of any kind as a result of the performance of our past services. Additionally, by your execution of this letter agreement where indicated below, you stated that neither you personally, PV International Corporation, its affiliates or subsidiaries have any claim whatsoever against Turner, Mason & Solomon, Harry F. Mason or me personally and that our services have been completed in full as evidenced by your payment.
Sincerely,
/S/ M.M. Turner
M.M. Turner
MMT:cw
UNDERSTOOD AND AGREED
TO BY:
/S/ Richard W. Forsythe
Richard W. Forsythe
President of PV International
3/27/78
Date
The jury, in response to special issues one and three, found that Turner "agreed to fund PV International's financial needs to the extent of $750,000.00 if not funded from other sources" and that such agreement "was breached by failure to provide such funds." The release relates solely to the initial agreement made in May 1977 by Turner and Forsythe in his capacity as president of PV International; it does not cover any other promise by Turner to provide funds. In that respect, and at the time the release was signed, Forsythe testified:
[Turner] wanted to be paid that fee prior to the closing of the $750,000.00, and he promised me when I returned from Malaysia that this time he would corner *463 Tinkle and have the money available when I got off the plane from Malaysia or else he would come in with the money from alternate routes....
A release, valid on its face, until set aside, is a complete bar to any action by the releasor based on matters covered and discharged by the release. Hart v. Traders & General Ins. Co., 144 Tex. 146, 189 S.W.2d 493 (1945); Atkins v. Womble, 300 S.W.2d 688 (Tex.Civ.App.Dallas 1957, writ ref'd n.r.e.). P.V. International contends, however, that the release does not represent a bar to recovery because the jury found that it was procured by fraud. We disagree.
In Community Development Construction Corp. v. Fleetwood, 640 S.W.2d 331, 335 (Tex.App.Houston [1st Dist.] 1982, writ ref'd n.r.e.), the court said:
We find that the release in question was valid on its face, that it was properly identified and introduced into evidence and as such was a bar to Fleetwood's suit since the release had never been set aside and there were no pleadings requesting that it be set aside.
That is exactly the situation in this case. While PV International did allege that the release, because of fraudulent representations by Turner, was null and void, it did not sue to set it aside because of such alleged fraudulent representation. Moreover, the judgment did not set the release aside. There is no basis for a holding that the trial court impliedly set it aside. Therefore, the release, as a matter of law, is a complete bar to PV International's suit against Turner for breach of the initial agreement made in May 1977. However, it is not a bar to PV International's action to recover damages for Turner's alleged breach of his promise to "come in with the money from alternate routes" if First Venture failed to fund the $750,000.00.
Turner does not attack the jury findings in response to the questions asked it in special issue one and three. Turner's second point of error is overruled.
Turner, in his fourth point of error, contends that the trial court erred in awarding PV International damages in the amount of $1,250,000.00 because there was no causal link between such damages and any of the theories of recovery advanced by PV International. He further contends in his fifth point of error that there was no evidence or, alternatively, factually insufficient evidence, to support the jury's answer to special issue twelve, the damage issue.
Special issue twelve, and the jury's answer thereto, read as follows:
What sum of money, if paid now in cash, do you find from a preponderance of the evidence would reasonably compensate P.V. International for its losses and damages sustained, if any? In connection with this damage issue you will consider the following items of loss or damage, and none other: loss or depreciation in value of the assets of P.V. International and actual pecuniary loss sustained by PV International resulting from its inability to supply product for sale to Malaysia and Ecuador, if any, and to staff said countries with personnel.
Answer in dollars and cents, if any, or `None'.
Answer: 1.4 million dollars as to M.M. Turner
none as to Turner, Mason & Solomon
The charge contained no other definitions or instructions concerning this issue. Counsel for Turner objected to the submission of this issue on the grounds: (1) it did not restrict or limit the claim with reference to losses and damages attributable to any part of any cause of action alleged by PV International; (2) there was no element qualifying the inquiry about the loss and damages attributable to any wrongdoing on the part of Turner and the firm of Turner, Mason & Solomon; (3) it called upon the jury to speculate as to the depreciation in value of assets without identifying any cause for such depreciation; (4) it called upon the jury to speculate as to actual pecuniary loss from inability to supply product and staff without identifying any such claimed loss attributable to or identifiable with any wrongful conduct on the part of either Turner or the firm of Turner, Mason & Solomon; and (5) the *464 issue was not restricted to the matters raised in this lawsuit.
In general, PV International argues that the jury's damage finding as to Turner was based on the jury's finding of his fraud, breach of fiduciary duty, breach of contract, and proximate cause as to such actions, and that its damages recovery as to Turner was thus sufficiently established from Turner's found actions and causation. Additionally PV International argues that Texas Rules of Civil Procedure 279 requires all findings necessary to the judgment to have been found by the trial court.
PV International also argues that the amount of damages found by the jury in special issue twelve is virtually the same amount of damages shown by the evidence to be caused by Turner. Specifically, the evidence of future lost profits was $1,242,000.00 and the evidence of additional out-of-pocket expenses was $162,000.00, for a total of $1,404,000.00. PV International further argues that the jury's finding demonstrates that the damages found in special issue twelve were attributable to the actions and conduct of Turner and that the jury found Turner's fraud and breach of fiduciary duty was a producing cause of the loss.
In addition to the facts already set out in this opinion, there are other facts which are peculiar to the jury's answer to special issue twelve. By July 1978, the governments of Ecuador and Malaysia had cancelled the contracts with PV International for the manufacture of explosives in those countries. From May 1977 until July 1978, there had been a very substantial increase in the cost of certain component chemicals required for the manufacture of explosives by PV International. The evidence also established that there was market uncertainty in those countries. Forsythe testified that PV International expended $162,000.00 with respect to the expected and promised financial aid from First Venture and that such monies were spent at the insistance of Turner and Tinkle. He further testified that had the $750,000.00 been available in January 1978 or earlier, the ventures in Ecuador and Malaysia would have resulted in a profit of $1,242,000.00. PV International continued to sell explosives to the government of Malaysia until 1983, when the government "switched to a Norwegian company producing explosives," and "that was the end of PV International."
In order to sustain a damage award, a plaintiff must secure a jury finding that the damages, including "lost profits," were causally linked to the wrongful act of the defendant, whether the standard of causation be proximate cause or producing cause. El Paso Drive-In Cafes, Inc. v. Wilson, 467 S.W.2d 200, 205 (Tex.Civ.App. El Paso 1971, no writ); LeBlanc, Inc. v. Gulf Bitulithic Co., 412 S.W.2d 86, 94 (Tex.Civ.App.Tyler 1967, writ ref'd n.r. e.); Pampa v. Long, 110 S.W.2d 1001, 1003 (Tex.Civ.App.Amarillo 1937, no writ). It is well established that the damage issue submitted to the jury must restrict the damages to those caused by the wrongful or negligent acts of the defendant, and a damage issue that does not so restrict such damages is fatally defective. El Paso Development Co. v. Ravel, 339 S.W.2d 360 (Tex.Civ.App.El Paso 1960, writ ref'd n.r. e.); Melear v. Fairchild, 278 S.W.2d 280 (Tex.Civ.App.Amarillo 1954, no writ); Standard Paving Co. v. Pyle, 131 S.W.2d 200 (Tex.Civ.App.Fort Worth 1939, no writ).
PV International argues that the jury's damage finding was "virtually identical" to the damage evidence. The problem with this argument is that there is still no linkage to causative conduct on the part of Turner. The losses proved and found could very well be related to other causes such as increased costs to obtain the components used to make the explosive, or the market uncertainty in Ecuador and Malaysia, or both. The damage issue was defective for failing to limit the jury to consideration of only that inability to supply product and staff which was caused by Turner's alleged breach, and not from other possible causes, such as higher component costs and market conditions.
As to the tort theories advanced by PV International in support of its claim that *465 judgment for $1,250,000.00 was properly authorized, and assuming, arguendo, that they are viable theories, in neither the "producing cause" issue, nor the damage issue, nor anywhere else in the trial court's charge, was the jury limited to consideration of damages causally linked to the tortious conduct of Turner. Vague references to the "loss" in special issue twelve are inadequate to render judgment for $1,250,000.00. Turner's objections to the submission of the issue should have been sustained. Turner's fourth point of error is sustained.
We now consider Turner's fifth point of error, wherein he claims that there is "no evidence," or alternatively, "factually insufficient evidence" to support the damage award to PV International of $1,250,000.00. PV International contends that the award was proper because it was entitled to a recovery of "lost profits" which were caused by Turner's breach of the agreement or tortious conduct.
As a general proposition, in order to recover for lost profits as consequential damages, the plaintiff must show the amount of the loss by competent evidence with "reasonable certainty." Southwest Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098 (1938). Recovery for profits that are anticipated or expected in the future, but which are lost due to an act or omission of the defendant, cannot be recovered where they are dependent upon "uncertain and changing conditions, such as market fluctuations, or the chances of business, or where there is no evidence from which they may be intelligently estimated." Id. at 1098 (quoting 17 C.J. Damages § 112-f (1919)).
If the business for which lost profits are sought is shown to be an ongoing business, then evidence that the business was established and making a profit at the time when the contract was breached or the tort was committed is admissible to show lost profits. See White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex.1983). Proof of an operation of a business at a loss, without more, fails to meet the test of showing lost profits with reasonable certainty. See First Texas Sav. Ass'n v. Dicker Center, 631 S.W.2d 179, 187 (Tex.App.Tyler 1982, no writ).
As a general rule, damages must be measured by a proper legal standard, and that standard must be used to guide the fact finder in determining what sum would compensate an injured party. Jackson v. Fontaine's Clinics, Inc., 499 S.W.2d 87, 90 (Tex.1973); Mangham v. Hall, 564 S.W.2d 465, 468 (Tex.Civ.App. Corpus Christi 1978, writ ref'd n.r.e.). In any given case, the measure of damages is a question of law. International Great Northern Ry. Co. v. Casey, 46 S.W.2d 669, 671 (Tex.Comm'n.App.1932, holding approved). In a breach of contract action, the measure of damages is just compensation for the loss or damage actually sustained. Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952). The measure of damages for loss of profits as consequential damages, as is the case here, is net profits. See R.A. Corbett Transp., Inc. v. Oden, 678 S.W.2d 172, 176 (Tex.App.Tyler 1984, no writ). "Net profits" is defined as "what remains in the conduct of a business after deducting from its total receipts all of the expenses incurred in carrying on the business." Id. at 176; accord, Mangham, 564 S.W.2d at 469; Giles v. Rayburn, 173 S.W.2d 371, 373 (Tex.Civ.App.San Antonio 1943, no writ). Thus, in order to recover lost profits, damages must be shown with "reasonable certainty;" net profits must be shown by objective, rather than subjective, facts, figures, and data. Automark of Texas v. Discount Trophies, 681 S.W.2d 828, 830 (Tex.App.Dallas 1984, no writ).
In proving a claim of "lost profits," if the business was not created by the contract in question then its profitability should be measured by the years preceding the breach. See Verette v. Travelers Indemnity Co., 645 S.W.2d 562, 569-70 (Tex. App.San Antonio 1982, writ ref'd n.r.e.); Birge v. Toppers Menswear, Inc., 473 S.W.2d 79, 85 (Tex.Civ.App.Dallas 1971, writ ref'd n.r.e.). In Davis v. Small Business Inv. Co., 535 S.W.2d 740 (Tex.Civ.App. Texarkana 1976, writ ref'd n.r.e.), a defendant company filed a counterclaim for damages *466 on the ground that the appellant investment company had breached an agreement to secure additional financing for defendant. Undisputed evidence established that when the agreement for financing was negotiated, defendant had never operated at a profit. Id. at 743. As such, the court held that any award of lost profits would "necessarily be based upon pure speculation" and denied recovery as a matter of law. Id. at 743; cf., Copenhaver v. Berryman, 602 S.W.2d 540 (Tex.Civ.App.Corpus Christi 1980, writ ref'd n.r.e.) (plaintiffs produced no evidence that defendant's breach limited plaintiffs' expansion of their business to support award of additional lost profits).
It was conclusively established that PV International was incorporated in 1974. There was no evidence relating to "profit" or "loss" for the years 1974 and 1975. It was, however, conclusively proved that PV International did not operate at a profit during the years 1976, 1977, and 1978, although it did operate at a profit for the years 1979, 1980, 1981, and 1982.
PV International contends that "lost future profits are recoverable when a business has actual profits, or when a business establishes a basis for the computation of probable losses." It relies on Pace Corporation v. Jackson, 155 Tex. 179, 284 S.W.2d 340, 348-49 (1955); Berne v. Keith, 361 S.W.2d 592, 599 (Tex.Civ.App.Houston 1962, writ ref'd n.r.e.); and Barbier v. Barry, 345 S.W.2d 557, 563 (Tex.Civ.App. Dallas 1961, no writ). It argues that Pace "expressly holds that actual profits made after the time of the wrongful conduct is sufficient to constitute the basis for damages."
The cases of Pace, Barbier and Berne do not support PV International's recovery of profits under the facts of the instant case. In Berne, for instance, the project had generated profits from its beginning in 1954 until the date of trial in 1961. Berne, 361 S.W.2d at 599. That is not so in the instant case.
In Pace, the challenge to the jury's award for "lost profits" was that "damages cannot be recovered for lost profits in a new and unestablished business" and that the jury findings were based upon "pure speculation and conjecture." Pace, 284 S.W.2d at 348. The Supreme Court disagreed and concluded that since the business was established on the strength of the contract and there being no other evidence of the profitability or unprofitability of the business, evidence of sales and circumstances subsequent to the breach would support the jury's award of lost profits. Id. at 348-50. In the case at bar, the corporation had been in business since 1974 and, at the time of the alleged breach, had not made a profit in any of the four years that it had been in operation.
In Barbier, while the court recognized the rule that a recovery of lost profits will not be denied merely because a business is new if factual data is available to furnish a basis for computation of probable losses, it held that under the evidence the alleged loss of anticipated profits was too speculative to support a recovery. Barbier, 345 S.W.2d at 563. In the case here, considering the rising costs of components necessary for the manufacture of the explosives and the unstable market conditions in Ecuador and Malaysia, the anticipated profits are too speculative to warrant a recovery of lost profits.
PV International has failed, as a matter of law, to meet its burden of proving by evidence of probative value factual data necessary to support its claim for lost profits and upon which its alleged loss may be legally ascertained. All of the evidence offered by PV International in support of its claim that it is entitled to a recovery of anticipated profits renders such claim uncertain and speculative. The subjective opinion of Forsythe, an interested party, is not sufficient. There is no evidence which will support the recovery by PV International of $1,250,000.00 as consequential damages for lost profits. Turner's fifth point of error is sustained.
FORSYTHE'S SUIT AGAINST TURNER
The jury further found: (1) that Turner, by his acts, intentionally alienated the affections that Barbara Forsythe, hereafter *467 "Barbara," had for Forsythe, her husband (special issue thirteen);[3] (2) that such acts were the producing, contributing or controlling cause of the alienation (special issue fourteen); (3) that Forsythe, by his acts, did not intentionally alienate the affections that Barbara had for him (special issue eighteen); and (4) that Forsythe did not know of the intimate relationship between Turner and Barbara before May 6, 1978 (special issue twenty-one). In addition, the jury awarded Forsythe $250,000.00 as actual damages by reason of the alienation of affections of Barbara and $750,000.00 as exemplary damages (special issues fifteen and sixteen).
Turner, in his sixth point of error, contends that the trial court erred in rendering judgment against him in favor of Forsythe in the amount of $1,000,000.00 because the suit for alienation of affections is barred by the two-year statute of limitations. He claims that the testimony of Barbara and her husband established, as a matter of law, that if "there were an alienation of affections between Forsythe and his wife Barbara, it occurred in 1977."
A cause of action for alienation of affections at the time this suit was filed was governed by article 5526 of the Texas Revised Civil Statutes, the two-year statute of limitations.[4]Whitley v. Whitley, 436 S.W.2d 607, 609 (Tex.Civ.App.Houston [14th Dist.] 1968, no writ).
A cause of action for alienation of affections is an intentional tort arising out of the impairment of consortium between the spouses of a marriage. Consortium generally includes "the mutual right of the husband and wife to that affection, solace, comfort, companionship, society, assistance and sexual relations necessary to a successful marriage." Whittlesey v. Miller, 572 S.W.2d 665, 666 (Tex.1978). In order to establish a cause of action for loss of consortium, it is not necessary that there be a loss of all elements of consortium, but any substantial impairment of them caused by intentional conduct is sufficient. Whitley, 436 S.W.2d at 610; Williams v. Rearick, 218 S.W.2d 225, 229 (Tex.Civ.App. Amarillo 1949, no writ); Collier v. Perry, 149 S.W.2d 292, 294 (Tex.Civ.App.El Paso 1941, writ dism'd judgmt cor.).
For purpose of application of the two-year statute of limitations, a cause of action generally accrues at a time when facts come into existence which authorize the plaintiff to file suit. However, an exception to this accrual rule has been applied in some situations where the plaintiff was unable to know of his injury at the time of actual accrual; the exception is known as the "discovery rule." Robinson v. Weaver, 550 S.W.2d 18, 19 (Tex.1977). The discovery rule has been applied in actions based on fraud. Where the fraud is concealed or unknown to the defrauded party, limitation does not begin to run when the fraud is perpetrated. Instead, it begins to run from the time the fraud is discovered or could have been discovered through the exercise of reasonable diligence. See, e.g., Mooney v. Harlin, 622 S.W.2d 83, 85 (Tex. 1981); Quinn v. Press, 135 Tex. 60, 140 S.W.2d 438, 440 (1940). The discovery rule has also been applied in the following cases: Kelley v. Rinkle, 532 S.W.2d 947 (Tex.1976) (suit for defamation); Gaddis v. Smith, 417 S.W.2d 577 (Tex.1967) (where a foreign object was negligently left by a surgeon in his patient's body)[5]; Rothman v. Gulf Coast Investment Corp., 497 S.W.2d 792 (Tex.Civ.App.Beaumont 1973) (breach of contract), rev'd on other grounds, 506 S.W.2d 856 (Tex.1974); and Ellison v. McGlaun, 482 S.W.2d 304, 311-12 (Tex.Civ.App.Amarillo 1972, writ ref'd n.r.e.) (action for fraudulent concealment of indebtedness).
In Turner v. Turner, 385 S.W.2d 230, 239 (Tex.1964), the Supreme Court held *468 that the period of limitations began to run from the time of the plaintiff wife's loss of consortium and not from the time that her husband "felt a lessening of his affections" for her.
As hereinbefore noted, Forsythe filed this lawsuit on May 6, 1980. By June 1977, during social encounters between the Turners and the Forsythes, Barbara first began to feel that Turner had charisma and was very exciting. By July 1977, the affair had begun in earnest. Barbara and her husband were having problems at that time. On July 12, 1977, Barbara and Turner had sexual relations for the first time. By the first of August 1977, she said that she knew she loved him. They had had a "whirlwind affair" and spent a great deal of time together. They had sexual relations a couple of times a month, and they saw each other many more times than that. The affair ended on May 4, 1978. Barbara testified that during the time of this affair she loved her husband, but she was not "in love" with him, and that in 1977 she transferred her love for her husband to Turner. It is undisputed that Barbara told her husband on May 8, 1978, that she wanted a divorce and that she was considering marriage to Turner. Forsythe testified that he lost the affections of his wife in 1977 and that the signal of that was, among other things, that she seemed to be colder toward him and did not seem to enjoy making love to him as much as she had in the past.
We have concluded that the "discovery rule" should apply in an alienation of affection suit. While there is testimony from Forsythe himself that he lost the affections of his wife in 1977, the evidence, when viewed in its entirety, shows that there was no material loss of consortium until May 8, 1978. The evidence shows that Forsythe did not learn of the relationship between Turner and Barbara until such date. There is no evidence that Forsythe should have learned of such relationship prior to May 8, 1978, by the exercise of reasonable diligence. We, therefore, hold that the period of limitations in this case began to run on May 8, 1978, and that Forsythe's suit for alienation of affections was not barred by the two-year statute of limitations. Turner's sixth point of error is overruled.
In his seventh point of error, Turner claims that the trial court erred in admitting into evidence tape recorded telephone conversations between him and Barbara because the records were the result of an illegal wiretap and should have been excluded under section 2515 of title 18 of the United States Code. We agree.
Forsythe testified that Barbara told him in July 1978 that she had had sexual relations with Turner. At that time, there was an agreement between Forsythe and Turner that Turner would not contact Barbara for a period of 120 days (which would expire in September 1978). Forsythe further testified that when he learned of the sexual relationship between Turner and Barbara, he purchased a wiretapping and tape recording device and hooked it up to his residential telephone. This device remained in operation until December 1978. During that period of time, all telephone conversations via his residential telephone were taped and recorded, including numerous conversations between Turner and Barbara. Neither Turner nor Barbara knew that the telephone had been tapped and that their conversations were being recorded. Barbara did not learn of this fact until two weeks before trial, about July 1, 1984. The tape recordings were typed by Forsythe's secretary. When the recordings and typewritten transcriptions thereof were offered into evidence, Turner objected to their introduction on the ground that they were in violation of the federal wiretap statute, 18 U.S.C. § 2510, et seq. The objection was overruled and the tape recording and the typewritten transcriptions were introduced into evidence.
The tape recordings and the typed transcriptions thereof brought to the jury the most intimate and private conversations between Barbara and Turner. The transcriptions comprised sixty-six single-spaced pages. There is no need to detail the conversations.
The issue presented by this point of error is the scope of the Omnibus Crime Control *469 and Safe Street Act of 1968, 18 U.S.C. §§ 2510 et seq., sometimes called "The Federal Wiretap Statute." In pertinent part, section 2511(1)(a) of that statute makes it illegal for any person, except as otherwise provided in the Act, to willfully intercept any wire or oral communication.[6] The statute further makes it illegal for any person to disclose "to any other person the contents of any wire or oral communication, knowing or having reason to know that the information was obtained through the interception of a wire or oral communication in violation of this subsection." 18 U.S.C. § 2511(1)(c). Section 2511(2)(d), however, allows a person to intercept wire or oral communications where "such person is a party to the communication or where one of the parties to the communication has given prior consent to such interception...." 18 U.S.C. § 2511(2)(d) (Emphasis added).
Section 2515, in pertinent part, provides:
Whenever any wire or oral communication has been intercepted, no part of the contents of such communication and no evidence derived therefrom may be received in evidence in any trial [including trials in state courts] ... if the disclosure of that information would be in violation of this chapter.
18 U.S.C. § 2515. The statutory definition of "person" includes "any individual." 18 U.S.C. § 2510(6). Forbidden communications include communications which are "unlawfully intercepted." 18 U.S.C. § 2518(10)(a)(i).
Section 2511 establishes a broad prohibition of all private electronic surveillance. United States v. Jones, 542 F.2d 661 (6th Cir.1976). Nevertheless, Forsythe argues in his brief that the "Federal Wiretap Statute does not apply to recording conversations of one's own residence." He relies upon Simpson v. Simpson, 490 F.2d 803 (5th Cir.), cert. denied, 419 U.S. 897, 95 S. Ct. 176, 42 L. Ed. 2d 141 (1974). In that case, the husband attached a wire tapping device to his residential telephone and intercepted his wife's conversation with a third party and used such conversation to obtain a divorce. Thereafter, his ex-wife sued him to recover civil penalties pursuant to 18 U.S.C. § 2520. The Court in the ex-wife's suit determined that the statute did not apply to recordings of telephone conversations made by the husband at his residence.
There do not appear to be any Texas cases on the issue raised by Turner in this his seventh point of error. However, several courts in other jurisdictions have refused to follow the holding in Simpson, while other courts have followed it.[7]
Forsythe further contends in his brief that "an exception to [the] Federal Wiretap Statute is the consent to such recording by one party to the conversation." 18 U.S.C. 2511(2)(d); U.S. v. Hodge, 539 F.2d 898 (6th Cir.1976), cert. denied, 429 U.S. 1091, 97 S. Ct. 1100, 51 L. Ed. 2d 536 (1977). We agree. However, in support of that contention, he argues: "Mrs. Forsythe consented to the tapes being played to the jury, and such consent acts as a consent to the recording." To this, we do not agree.
The Act applies to civil as well as criminal cases; to state as well as federal proceedings. *470 United States v. Giordano, 416 U.S. 505, 528 n. 17, 94 S. Ct. 1820, 1832-33 n. 17, 40 L. Ed. 2d 341 (1974). Texas courts are bound by the provisions of the Act. Matter of Bates, 555 S.W.2d 420, 431 (Tex. 1977).
The purpose of the section 2515 is not only to ensure that courts do not become partners to illegal conduct, but also to protect privacy. See Gelbard v. United States, 408 U.S. 41, 92 S. Ct. 2357, 33 L. Ed. 2d 179 (1972). Thus, the Act is designed to prohibit "all interceptions of oral and wire communications, except those specifically provided for in the Act...." Giordano, 416 U.S. at 514, 94 S.Ct. at 1826. See also United States v. Burroughs, 564 F.2d 1111, 1114 (4th Cir.1977). Texas recognizes the same right of privacy which lies at the heart of the federal statute. Billings v. Atkinson, 489 S.W.2d 858, 860 (Tex. 1973). The provisions of the Act have been applied to suits for alienation of affections in other jurisdictions. Pulawski v. Blais, 506 A.2d 76, 78 (R.I.1986); see also Chappell v. Redding, 67 N.C.App. 397, 313 S.E.2d 239, 244 (Ct.App.1984).
First, we dispose of the contention by Forsythe that Barbara "consented to the tapes being played to the jury, and such consent acts as a consent to the recording." That contention is without merit for two reasons. First, the statute, 18 U.S.C. § 2511(2)(d), plainly states that there is no violation where one of the parties to the communication has given "prior consent to such interception." In this case, it was conclusively shown that Barbara did not know that her conversations with Turner were being recorded until two weeks before trial; therefore, she could not have given "prior consent to such interception [recording]." Second, there is no evidence that she consented to the introduction of the taped recordings or typewritten transcriptions thereof in evidence.
As to Forsythe's argument that the wiretap statute does not apply to interspousal recording, we believe that the decision in Simpson is wrong. We, therefore, decline to follow it. We are not bound to follow the holding in that case merely because Texas lies within the geographic limits of the Fifth Circuit but are bound to follow only the decision of the United States Supreme Court and the Texas Supreme Court on a particular question of law arising in a civil case. Barstow v. State, 742 S.W.2d 495, 500-01 (Tex.App. Austin 1987, writ denied); Summertree Venture III v. Federal Sav. & Loan Ass'n, 742 S.W.2d 446 (Tex.App.Houston [14th Dist.] 1987, writ denied); Woodard v. Texas Dep't of Human Resources, 573 S.W.2d 596, 598 (Tex.Civ.App.Amarillo 1978, writ ref'd n.r.e.). Neither the United States Supreme Court nor the Texas Supreme Court has addressed the issue.
Simpson creates an exception which is not found in the Act itself. If Congress had intended to create a special exception for interspousal wiretap of their residential telephone, it would have so provided when the Act was enacted. We hold that the Act (18 U.S.C. §§ 2510, et seq.) prohibits all wiretapping activities unless specifically excepted. There is no express exception for instances of willful electronic interceptions of conversation between a spouse and a third party without prior consent. We decline to create such an exception, even where the wiretap device is attached to the telephone in the spouses' residence, as is the case here. Pritchard v. Pritchard, 732 F.2d 372 (4th Cir.1984); Kratz v. Kratz, 477 F. Supp. 463 (E.D.1979); Stamme v. Stamme, 589 S.W.2d 50 (Mo.App.1979); Markham v. Markham, 265 So. 2d 59 (Fla. App.1972).
Moreover, Simpson is distinguishable from the case at bar on the facts. In that case, the suit was between the ex-wife and her former husband. Here, the suit is between the husband and a third party.
In the instant case, it is not just the privacy of the wife that is involved, but that of a third party as well. The introduction of the recording and the typed transcriptions was inherently prejudicial to Turner. See Pulawski v. Blais, 506 A.2d 76, 78 (R.I.1986).
Having determined that section 2511(1)(a) applies to interspousal wiretaps, the provisions of section 2515 of the Act *471 prohibit the admission in evidence of the telephone recordings and the typed transcriptions thereof. It was reversible error to admit them into evidence. Turner's seventh point of error is sustained.
In his eighth point of error, Turner asserts that the trial court committed reversible error in admitting evidence of his extraneous extra-marital affairs because such evidence was irrelevant, or alternatively, any probative value was substantially outweighed by the danger of unfair prejudice, causing the jury to decide the cause on an improper basis. We agree.
Counsel for Forsythe, in his examination of Turner as an adverse party, in effect, brought to the attention of the jury that Turner was, in general, a rake and a philanderer and that Turner perfected schemes in the guise of marriage-counseling to commence sexual relations with other women. Specifically, he inquired about such "marriage-counseling" of four named women. One of the women testified that she had had a sexual affair with Turner. Another woman testified that Turner "made a pass at her." Barbara, in her testimony, repeatedly mentioned Turner's affairs with other women. She testified that she voluntarily took the stand to try to keep Turner from continuing to take advantage of other women.
The record shows that Turner admitted that he had an affair with Barbara which commenced in July 1977 and continued until May 4, 1978. This admission was made before evidence of any of his other affairs was offered into evidence. Counsel for Turner objected to the introduction into evidence of any of such affairs, on the grounds that they were irrelevant to any contested issue in the case, and that they had no probative value since Turner never denied having an affair with Barbara, but, on the other hand, readily admitted such fact. All of the objections were overruled.
Evidence of extraneous extra-marital affairs, if offered under Texas Rule of Civil Evidence 404(b), must relate to an issue "actually being controverted." Otherwise, the evidence has no probative value. 2 J. Weinstein & M. Berger, Weinstein's Evidence § 404[09] (1988). A scheme, plan or design to commence an affair through a counseling ruse only goes to prove that such ruse was employed in the case at bar to commence the affair in question. The ultimate object is to prove that an affair took place.
It is undisputed that Turner and Barbara had an affair. Turner also admitted that he and Barbara discussed her marriage troubles, and he admitted that he and Barbara discussed her getting a divorce from her husband. The evidence of the other extra-marital affairs does not relate to a contested issue in this case, and, therefore, has no probative value whatsoever. The only thing that such evidence could accomplish was to inflame the minds of the jury and cause them to decide the case on an improper basis.
Texas Rule of Civil Evidence 403 provides:
Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, or needless presentation of cumulative evidence.
"Unfair prejudice" refers to "an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one." FED.R.EVID. 403 advisory committee note.
That the introduction into evidence of the other extra-marital affairs had its intended effect is apparent from the verdict. The jury awarded Forsythe $250,000.00 for pecuniary loss by reason of the alienation of affections. More indicative of the prejudice and passion aroused in the jury is the exemplary damage award of $750,000.00. This verdict is especially startling in light of the testimony of Barbara, who admitted that she still loved her husband, although "in a different way," after the affair with Turner. She and her husband were still married and were living together at the time of trial (July 1984). The only explanation for the damage awards in the light of all the evidence is that the jury decided the case on an improper basis, an emotional *472 basis; as a result of aroused passions and sympathies; and as the result of a jury perception of Turner being the habitual adulterer. This is precisely the result which Rule 403 is designed to prevent. Turner's eighth point of error is sustained.
In view of our sustaining Turner's seventh and eighth points of error, and since the judgment of the trial court will be reversed and the cause remanded, there is no need for us to consider his ninth and tenth points of error, wherein he challenges the jury's finding of $250,000.00 actual damages and $750,000.00 exemplary damages. However, were we to consider these points, we would hold that the admissible evidence is factually insufficient to support the jury holding of $250,000.00 as actual damages and that the jury finding of $750,000.00 as exemplary damages, under the admissible evidence, is clearly excessive and shocks the conscience of this Court.
The action brought by PV International Corporation against Malcolm Turner is severed from the action brought by R.W. Forsythe against Malcolm Turner. The judgment of the trial court, insofar as it awarded PV International Corporation a recovery of $1,250,000.00 as damages against Malcolm Turner, together with interest thereon from date of judgment, is reversed, and judgment is here rendered that PV International Corporation take nothing in its suit against Malcolm Turner. The judgment of the trial court, insofar as it awarded R.W. Forsythe a recovery of $1,000,000.00 as damages against Malcolm Turner, together with interest thereon from date of judgment, is reversed and the cause is remanded to the trial court for a new trial. Costs are assessed 50% to PV International and 50% to R.W. Forsythe.
NOTES
[1] The Honorable Connally McKay, Justice, retired, Court of Appeals, Twelfth District of Texas at Tyler, sitting by assignment.
[2] The Honorable Gerald T. Bissett, Justice, retired, Court of Appeals, Thirteenth District of Texas at Corpus Christi, sitting by assignment.
[3] The 70th Legislature, in Regular Session, abolished suits for alienation of affections, effective September 1, 1987. Act of June 17, 1987, ch. 453 §§ 1, 2, 1987 Tex.Gen.Laws 2030.
[4] Now TEX.CIV.PRAC. & REM.CODE ANN. § 16.003 (Vernon 1986).
[5] In enacting TEX.REV.CIV.STAT.ANN. art. 4590i § 10.01 (Vernon Supp.1989), the legislature abolished the discovery rule in health care liability cases where application of that section does not violate the Texas Constitution. Morrison v. Chan, 699 S.W.2d 205, 208 (Tex.1985).
[6] Sections 2511(1)(a), (1)(c) and (2)(d) were amended in 1986 to include electronic communication as well as oral and written communications. Electronic Communication Privacy Act of 1986, Pub.L. No. 99-508, 101(c)(1)(A), 100 Stat. 1848, 1951. In addition, "willfully" was changed to "intentionally" in sections 2511(1)(a) and (1)(c). Id. 101(f)(1), 100 Stat. 1948, 1983. The statute is discussed in this opinion as it existed at the time of the recordings and trial.
[7] The courts in the following cases have repudiated the holding in Simpson: Pritchard v. Pritchard, 732 F.2d 372 (4th Cir.1984); United States v. Jones, 542 F.2d 661 (6th Cir.1976); Flynn v. Flynn, 560 F. Supp. 922 (N.D.Ohio 1983); Heyman v. Heyman, 548 F. Supp. 1041 (N.D.Ill. 1982); Gill v. Willer, 482 F. Supp. 776 (W.D.N.Y. 1980); Kratz v. Kratz, 477 F. Supp. 463 (E.D.Pa. 1979); Remington v. Remington, 393 F. Supp. 898 (E.D.Pa.1975); Richenbacker v. Richenbacker, 290 N.C. 373, 226 S.E.2d 347 (1976); Stamme v. Stamme, 589 S.W.2d 50 (Mo.Ct.App.1979). The courts in the following cases have followed the holding in Simpson: Anonymous v. Anonymous, 558 F.2d 677 (2nd Cir.1977); Kempf v. Kempf, 677 F. Supp. 618 (E.D.Mo.1988); Lizza v. Lizza, 631 F. Supp. 529 (E.D.N.Y.1986); Baumrind v. Ewing, 276 S.C. 350, 279 S.E.2d 359, cert. denied, 454 U.S. 1092, 102 S. Ct. 657, 70 L. Ed. 2d 630 (1981). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1782105/ | 692 S.W.2d 209 (1985)
R. Marshall DOWNS, Appellant,
v.
CITY OF FORT WORTH, et al., Appellees.
No. 2-84-235-CV.
Court of Appeals of Texas, Fort Worth.
June 20, 1985.
*210 Law Offices of Lane, Lane, Ware & Bays, Michael L. Ware, Fort Worth, for appellant.
Wade Adkins, City Atty., Daniel M. Tartaglia, Asst. City Atty., Fort Worth, for appellees.
Before BURDOCK, JOE SPURLOCK, II and HILL, JJ.
OPINION
BURDOCK, Justice.
This is an appeal by a police officer who was suspended pursuant to the Firemen's and Policemen's Civil Service Act (Act).[1]
We affirm.
R. Marshall Downs was indefinitely suspended on May 16, 1984, by the Chief of Police of the City of Fort Worth, Texas. Downs appealed the suspension to the Firemen's and Policemen's Civil Service Commission of the City of Fort Worth (Commission) which affirmed the action of the police chief. Downs then filed an action under the Uniform Declaratory Judgments Act, TEX.REV.CIV.STAT.ANN. art. 2524-1 (Vernon 1965), seeking an interpretation of the Firemen's and Policemen's Civil Service Act and claiming that Downs sufficiently notified the Commission of his request to appeal to an independent third party hearing examiner. The District Court upheld the Commission's order suspending Downs indefinitely. The basic issue presented on appeal is whether an employee must make the election to appeal to the Commission or a third party hearing examiner within ten days after receiving notification of suspension.
Appellant, in three points of error, alleges that the trial court erred in ruling that:
1) appellant's letter of May 25, 1984, did not comply with sec. 17 of the Act;
2) appellant's election to have his appeal heard by a third party hearing examiner had to be made within ten days after receiving notice of the order of suspension; and
3) the Chief of Police's letter of May 16, 1984, was adequate to meet the requirements of sec. 16b(b) of the Act.
We shall first consider appellant's third point of error in which he alleges that the letter he received from Fort Worth Police Chief H.F. Hopkins was inadequate to comply with the requirements of sec. 16b. We disagree.
On May 16, 1984, Chief H.F. Hopkins caused to be served on Downs the following letter notifying him of his suspension:
Officer R.M. Downs Identification No. 1538 Fort Worth Police Department 1000 Throckmorton Street Fort Worth, Texas 76102
Officer Downs:
Effective May 16, 1984 you are suspended indefinitely from the Police Department of the City of Fort Worth.
Attached hereto is a copy of the written statement filed with the Firemen's and Policemen's Civil Service Commission of the City of Fort Worth, giving the reasons for this suspension. You have ten (10) days after receipt of this order of suspension within which to submit a written appeal to the Firemen's and Policemen's Civil Service Commission in accordance with Section 16, Vernon's Annotated Civil Statutes, Article 1269m.
*211
/s/ H.F. Hopkins
H.F. Hopkins
Chief of Police
HFH/DBG/mr
cc: Firemen's and Policemen's
Civil Service Commission
City of Fort Worth
1000 Throckmorton Street
Fort Worth, Texas 76102
Section 16b(b) provides in pertinent part:
If the chief or head of a department suspends a person, the chief or head shall, not later than the 120th hour after the hour of suspension, file a written statement with the commission giving the reasons for the suspension, and shall immediately furnish a copy of the statement to the suspended officer or employee. The chief or department head shall deliver the copy in person to the suspended officer or employee. The order of suspension shall inform the officer or employee that if he wishes to appeal, he must file a written appeal with the commission not later than the 10th day after the date on which the officer or employee receives a copy of the statement.
The gist of appellant's contention is that the letter from Chief Hopkins did not further inform appellant of his option to have his appeal heard by an independent third party hearing examiner, as set forth in sec. 16c(a) of the Act. We fail to see how the letter from Chief Hopkins was inadequate to meet the notice requirements of sec. 16b(b). Section 17 of the Act sets forth the procedure for appeals before the Commission and is not included as part of sec. 16b(b). A plain reading of the statute reflects that nowhere is it required that the police chief notify a suspended employee of his right to a third party hearing examiner as set forth in sec. 16c(a) of the Act. Appellant's third point of error is overruled.
In his first point of error, appellant claims the trial court erred in concluding that the choice of having an independent third party hearing examiner hear an appeal pursuant to sec. 16c(a) of the Act, instead of the Commission, must be made in the appeal and filed within ten days from the date the employee receives a copy of the suspension.
Here, Downs' first letter simply informed the Commission he wished to appeal the suspension imposed by the Chief of Police. The letter is dated May 25, 1984, and was submitted within ten days as prescribed by sec. 16b(b). Downs' first letter is set forth below:
TO Charlie Shappard
Director Civil Service/Fort
Worth
FROM R.M. Downs
SUBJECT Appeal of Indefinite Suspension
Dear Mr. Shappard:
The purpose of this letter is to appeal the indefinite suspension given me by Chief Hopkins of the Police Department of the City of Fort Worth, Texas in accordance with Article 1269M, Tex. Rev.Civ.Stat.Anno.
The basis of my appeal are the facts as alleged are not wholly true, that the charges are not legally sufficient and that there is not just cause stated or in existence for my termination.
I herewith request a full, fair, and impartial hearing.
Respectfully,
/s/ R.M. Downs
R.M. Downs
After the expiration of ten days from the date notifying him of his suspension, Downs sent a second letter to the Commission. The second letter is similar to the first except for the additional language as follows:
TO Charlie Shapard [sic]
Director Civil Service/Ft.
Worth
FROM R.M. Downs
SUBJECT Appeal of Indefinite Suspension
*212 Dear Mr. Shapard: [sic]
The purpose of this letter is to appeal the indefinite suspension given me by Chief Hopkins of the Police Department of the City of Fort Worth, Texas, in accordance with Article 1269M, Tex. Rev.Civ.Stat.Anno. The basis of my appeal are the facts as alleged are not wholly true, that the charges are not legally sufficient and that there is not just cause stated or in existence for my termination. I herewith request a fair and impartial hearing by a third party hearing examiner. [Emphasis supplied.]
Respectfully,
/s/ R.M. Downs
R.M. Downs
Both the City and the Commission contend this second letter was not in compliance with the statute which sets out the following requirement for a hearing by a third party examiner.
Sec. 16a. (a) In a city having a population of less than 1,500,000 according to the most recent federal census, in an appeal of an indefinite suspension, a suspension, a promotional passover, or a recommended demotion, the appealing employee may elect to appeal to an independent third party hearing examiner instead of to the commission. To exercise this choice, the appealing employee must submit a letter to the director stating his decision to appeal to an independent third party hearing examiner.
Although sec. 16c(a) makes no mention that the choice of a hearing before a third party hearing examiner must be made within ten days after receipt of the notice of suspension, the trial court found that failure to make such a designation within that time period constitutes a waiver.
Downs relies on Wade v. City of Garland, 671 S.W.2d 657 (Tex.App.Dallas 1984, no writ), to support his position that his first letter or both letters, written after the ten day appeal period had expired, constitute substantial compliance with the statute. We disagree. The court's holding in Wade must be considered in light of the ruling in City of Plano Firefighters' and Police Officers' Civil Service Commission v. Maxam, 685 S.W.2d 125 (Tex.App.Dallas 1985, no writ). Both Wade and Plano deal with the sufficiency of notice of appeal as prescribed in sec. 17 of the Act. Downs' assertion that the court relied on sec. 17 of the Act to reach its conclusions of law is not supported by the record. This is an issue of deadlines and not one of substantive pleadings.
A reading of sec. 16b(b) reveals that the officer must file a written appeal within ten days. Once this is done, a reading of the entire Act reflects a definite timetable to quickly resolve these disputes. The clear meaning of secs. 16b(b), 16c(a), and 17 is that these time limits must be closely followed. The language of the Act is mandatory and not permissive in nature. If a judgment were granted in contravention of a mandatory statutory provision it would be a void judgment. Gayle v. Alexander, 75 S.W.2d 706, 708 (Tex.Civ.App. Waco 1934, no writ). We therefore hold that secs. 16b and 17 of the Act are mandatory in nature and any change of Downs' choice of a hearing forum must have been made prior to the expiration of the ten days allowed to appeal the suspension. To accept Downs' position that the choice of hearings can be made at any time would run afoul of the deadlines set forth in the Act. Point of error one is overruled.
In his second point of error, Downs alleges that the Act does not require the election of a third party hearing examiner to be made within ten days after receiving notice of the suspension. Downs asserts that sec. 16c(a) is silent as to when the choice between a hearing by the Commission and hearing by a third party hearing examiner must be made once an appeal has been perfected. However, a close reading of the remainder of sec. 16c reveals a statutory scheme whereby a hearing examiner is selected *213 and the hearing must commence within forty-five days after his selection.
A reading of sec. 16c(a) clearly puts the burden on the suspended employee to decide which forum will hear his appeal. We do not find that Downs had to decide who would hear his case at the time he made his appeal, but we do find that this decision had to be made within ten days of receipt of the notice of suspension to avoid unduly delaying the proceedings. To accept Downs' interpretation of this provision would have the effect of unduly delaying the administration of justice. Appellant's second point of error is overruled.
The judgment is affirmed.
NOTES
[1] All references are to TEX.REV.CIV.STAT. ANN. art. 1269m (Vernon Supp.1985). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1782482/ | 690 S.W.2d 679 (1985)
Reece LAWSON, Individually and d/b/a L & L Fine Jewelry, Appellant,
v.
COMMERCIAL CREDIT BUSINESS LOANS, INC., Appellee.
No. 11-84-146-CV.
Court of Appeals of Texas, Eastland.
May 2, 1985.
Rehearing Denied May 30, 1985.
Donald M. Hunt, Carr, Evans, Fouts & Hunt, Lubbock, for appellant.
Rick W. Hightower, Biggers, Beasley, Amerine & Earle, Dallas, for appellee.
DICKENSON, Justice.
This is a summary judgment case. Since there are fact issues, we reverse and remand.[1]
Reece Lawson sued Commercial Credit Business Loans, Inc., alleging a cause of *680 action under the Deceptive Trade Practices Consumer Protection Act.[2] Lawson also alleged a cause of action for breach of contract. Commercial Credit moved for summary judgment, urging: (1) the jewelry was purchased for resale and, consequently, the transaction was not actionable under the Deceptive Trade Practices Act; (2) there was no contract because the sale of jewelry was never consumated; (3) even if there was a contract, it was unenforceable because of the Statute of Frauds;[3] (4) Lawson's check was never cashed, and without damages there can be no cause of action; and (5) it would be unconscionable to allow Lawson to obtain jewelry worth $874,000 when his bid was only $380,000.
While there was some confusion as to whether purchases for resale were covered by the Deceptive Trade Practices Act at the time this summary judgment was granted on December 22, 1983, the Supreme Court has now resolved the matter. See Big H Auto Auction, Inc. v. Saenz Motors, 665 S.W.2d 756 at 758 (Tex.1984):
To limit "use" would be contrary to the statutory mandate of sec. 17.44 on construction and application of the Act.
The cases holding that a purchase for resale is not a use are inapplicable....
We hold that the purchase by Saenz Motors of two vehicles from Big H Auto Auction, Inc., for resale, is a "use" within the meaning of the Act.
The summary judgment proof must be viewed, as to all issues which are properly raised by the motion for summary judgment and the nonmovant's response, as placing the duty on the movant to negate all of such issues of law and fact. City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 at 678 (Tex.1979). When Commercial Credit filed its motion for summary judgment, it assumed the "burden of establishing that there exists no material fact issue" and that it "is entitled to judgment as a matter of law." Swilley v. Hughes, 488 S.W.2d 64 at 67 (Tex.1972).
Lawson's deposition indicates that an auctioneer told him about the jewelry which Commercial Credit was offering for sale. Lawson went from his home in Hereford to look at the jewelry in Dallas. A representative of Commercial Credit permitted Lawson to inspect the jewelry and the inventory sheets. The figures which Commercial Credit gave to Lawson showed 5,700 gold charms, 7,757 gold chains and 13,000 gold earrings. Lawson testified that he "bid them $380,000" and handed him a personal check dated September 6, 1982. Commercial Credit wanted a cashier's check or wire transfer of funds. Lawson knew they already had a bid for $375,000. After lunch Mr. Meyer of Commercial Credit, according to Lawson's deposition, said:
You own the merchandise, but the original owner ... has five days to pick up the merchandise, but I do not feel he's financially able.... He owes us over a mill(ion).
Lawson said that he asked Mr. Meyer if they were "going to peddle my bid," and Mr. Meyer said: "Commercial Credit is a big company, and we don't do business that way." Lawson left his personal check and told Commercial Credit they could run it through for collection or that he would bring a cashier's check with him when he came to pick up the jewelry. They agreed that they had a deal. Then they shook hands and left.
Before the five days were up, Lawson learned from another jewelry dealer that he was not "going to get that gold. It's going to Philadelphia." Later Mr. Meyer of Commercial Credit called and told him: "The original owner is getting the merchandise back." Lawson told him that he had heard that they sold the gold to someone else, and Mr. Meyer replied: "No. The original owner's getting the gold back." Three or four days later Lawson's check was returned to him in the mail. Lawson contacted the original owner and confirmed *681 the fact that he did not get his gold back from Commercial Credit.
We find that there is a fact issue[4] as to whether Commercial Credit accepted Lawson's bid, thereby creating an oral agreement to sell the repossessed jewelry to him. Further, we hold that the Statute of Frauds, supra note 3, does not insulate Commercial Credit from liability under the Deceptive Trade Practices Act, supra note 2, for the false and misleading statements which its employees made to Lawson when they found a bidder who would pay more money for the jewelry.
Commercial Credit relies upon, and quotes from, the case of Keriotis v. Lombardo Rental Trust, 607 S.W.2d 44 at 45 (Tex.Civ.App.Beaumont 1980, writ ref'd n.r.e.):
While there is some confusion in the case law on this subject, an analysis reveals that the holdings have for the most part been harmonious. The reasoning of the court in Collins v. McCombs, 511 S.W.2d 745, 747 (Tex.Civ.App.San Antonio 1974, writ ref'd n.r.e.), is particularly appropriate to the case at bar, and we here adopt its language:
Even if it be conceded that an action in tort for [misrepresentation] is unaffected by the provisions of the statute of frauds, the judicial disregard of the statute should be limited to situations in which the essence of the action truly sounds in tort.... Since plaintiff is here seeking to recover what he would have gained had the promise been performed, it is apparent that his action, while cast in language sounding in tort, is an indirect attempt to recover for the breach of the unenforceable promise and is, therefore, barred by the statute of frauds.
Keriotis also states, 607 S.W.2d at 46:
In the case at bar ... no attempt is made to establish any acts other than the promise to convey and the failure to do so.
The summary judgment proof in this case raises the fact issue that Commercial Credit did more than merely fail to perform under an oral agreement. It would appear from Lawson's deposition that while Commercial Credit's employees shook hands with Lawson to signify their agreement, took Lawson's check as a deposit, promised him that he could take possession of the jewelry after five days unless the debtor paid off his note, and assured him that they were not "shopping his bid," Commercial Credit was in fact doing that very thing. Moreover, when Commercial Credit found a bidder who would pay $5,000 more than Lawson, its employee wrote Lawson a letter stating that the debtor had reclaimed the jewelry. This was a misrepresentation, for the summary judgment proof shows that the jewelry was sold to a third party who outbid Lawson after Commercial Credit had accepted Lawson's offer.
This is not a situation where a party made an oral contract which is unenforceable because of the Statute of Frauds and then subsequently refused to perform. The summary judgment proof indicates that there are disputed facts which could establish that misrepresentations were made at the very time the oral agreement was made and that additional misrepresentations were made at the time the agreement was breached.
We need not reach the question of whether the deposit constituted payment "made and accepted" within the statutory exception to the Statute of Frauds. Section 2.201(c)(3), supra note 3.
The fact that Lawson's check was not cashed does not bar his claim under the Deceptive Trade Practices Act. A "consumer" is defined by the Act as one "who seeks or acquires" any goods or services. Section 17.45(4), supra note 2.
Finally, Commercial Credit's defense that Lawson's claim was unconscionable was *682 not conclusively established. At most, there is a fact issue for the jury to resolve.
The summary judgment is reversed, and the cause is remanded.
NOTES
[1] This appeal was transferred from the Dallas Court of Appeals to this Court on April 26, 1984. See TEX.REV.CIV.STAT.ANN. art. 1738 (Vernon Supp.1985).
[2] TEX.BUS. & COM.CODE ANN. sec. 17.41 et seq. (Vernon Supp.1985).
[3] TEX.BUS. & COM.CODE ANN. sec. 2.201 (Vernon 1968).
[4] Consequently, we sustain Point of Error number two: "The district court erred in granting summary judgment for defendant, because material issues of fact exist on all elements of a deceptive trade practice cause of action." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1787130/ | 607 S.W.2d 44 (1980)
Gus KERIOTIS, Appellant,
v.
LOMBARDO RENTAL TRUST et al., Appellees.
No. 8524.
Court of Civil Appeals of Texas, Beaumont.
October 9, 1980.
Rehearing Denied October 30, 1980.
Kenneth W. Lewis, Beaumont, for appellant.
Chilton O'Brien, Beaumont, for appellees.
KEITH, Justice.
Plaintiff (appellant herein) brought this action under the Deceptive Trade Practices-Consumer *45 Protection Act, Tex.Bus. & Comm.Code Ann. § 17.41 et seq. (Supp. 1980), hereinafter "DTPA", for damages arising out of an alleged oral misrepresentation that defendants would sell a certain parcel of real estate to plaintiff for $75,000. The trial court entered summary judgment that plaintiff take nothing, and we affirm.
Plaintiff conceded in oral argument that if the statute of frauds, Tex.Bus. & Comm. Code Ann. § 26.01 (1968), and as amended (Supp.1980), applies to this case, the trial court's action in granting summary judgment was proper. Thus the sole question for our determination is whether the statute of frauds precludes actions under DTPA for damages for deceptive acts committed in connection with the sale of real estate.
The sequence of events leading up to this suit is not contested. Plaintiff testified that he called Annette L. Jackson and discussed with her the possibility that he might purchase the building, of which he was already a tenant. Defendant Jackson subsequently wrote a letter to plaintiff stating that "[t]he price we discussed for Orleans & Wall is all right ..." but refusing seller financing. Plaintiff made no further effort to pursue the transaction until after he learned of the sale of the building to a third party. According to plaintiff's brief, "[t]he violation of the Deceptive Trade Practices-Consumer Protection Act was the representation by Annette L. Jackson that a piece of real estate in Jefferson County would be sold to plaintiff for the sum of $75,000 and the subsequent sale within the next few days by defendants of that same piece of property for a sum of $105,000."
The basis for computation of damages sought is the difference between the price allegedly promised and the price of $105,000 received by defendants in the subsequent sale of the property. Plaintiff argues that although the measure of damages is the amount plaintiff would have gained had the oral contract been performed, the action is in tort for misrepresentations made unlawful by DTPA. Defendants counter that regardless of the terms in which it is couched, the action amounts to a suit for damages for failure to perform an oral contract for the sale of land.
Although this is a case of first impression under DTPA, we do not write on a clean slate. While there is some confusion in the case law on this subject, an analysis reveals that the holdings have for the most part been harmonious. The reasoning of the court in Collins v. McCombs, 511 S.W.2d 745, 747 (Tex.Civ.App.-San Antonio 1974, writ ref'd n. r. e.), is particularly appropriate to the case at bar, and we here adopt its language:
"Even if it be conceded that an action in tort for [misrepresentation] is unaffected by the provisions of the statute of frauds, the judicial disregard of the statute should be limited to situations in which the essence of the action truly sounds in tort.... Since plaintiff is here seeking to recover what he would have gained had the promise been performed, it is apparent that his action, while cast in language sounding in tort, is an indirect attempt to recover for the breach of the unenforceable promise and is, therefore, barred by the statute of frauds. See Canell v. Arcola Housing Corp., 65 So. 2d 849 (Fla.Sup.1953); Papanikolas v. Sampson, 73 Utah 404, 274 P. 856 (1929)."
But see Hastings v. Houston Shell & Concrete, 596 S.W.2d 142, 144 (Tex.Civ.App.-Houston [1st Dist.] 1979, writ ref'd n. r. e.).
The Collins court in the omitted portion of the above language notes an exception to its rule of damages in cases arising under § 27.01, Tex.Bus. & Comm.Code Ann. (1968), relating to fraud in the inducement in real estate transactions. The distinctions in the causes of action, the measures of damages, and the applicability of the statute of frauds are illustrated by Sibley v. Southland Life Ins. Co., 36 S.W.2d 145 (Tex. Comm'n App.1931, opinion adopted). In Sibley, the contract to convey land had been fully performed; plaintiff sought damages for defendant's failure to perform certain oral promises which induced plaintiff to purchase the land. The court held that the statute of frauds did not bar recovery on the action for deceit.
*46 In contrast to Sibley is Wade v. State National Bank, 379 S.W.2d 717 (Tex.Civ. App.-El Paso 1964, writ ref'd n. r. e.). The Wade plaintiff relied upon the oral promise of the deceased to leave her estate, including real property, to the plaintiff in exchange for the plaintiff's forbearance from investigating the circumstances of her father's death. Since there was no writing evidencing the promise to convey by will, the court held that the plaintiff was barred by the statute of frauds. In both cases the measure of damages sought was the difference between the value of the thing promised and its value as received. In both cases the collateral promise was intended to induce action or forbearance on the part of the promisee. However, in Sibley the plaintiff was not relying upon the collateral promise for enforcement of the principal agreement, which was for the conveyance of land. The plaintiff in Wade, on the other hand, was attempting to rely upon the alleged oral agreement for enforcement of the principal contract to devise real property.
Thus it is not only the nature of damages sought but also the relationship of the promise to the purposes of the statute of frauds which controls the application of the statute. Rankin v. Naftalis, 557 S.W.2d 940, 943-944 (Tex.1977). See also Long v. Humble Oil & Refining Co., 154 S.W.2d 925, 933 (Tex.Civ.App.-Galveston 1940, writ ref'd w. o. m.); Vallejo v. Romero, 511 S.W.2d 716, 718 (Tex.Civ.App.-San Antonio 1974, no writ).
In the case at bar, both the alleged misrepresentation and the damages sought support the conclusion that plaintiff is attempting to recover damages for failure to perform an oral promise governed by the statute of frauds. No collateral agreement whatever is alleged or proved and no attempt is made to establish any acts other than the promise to convey and the failure to do so. Under this state of the record, we must conclude that the trial court properly determined that the cause of action was for breach of contract and was therefore unenforceable under the statute of frauds. Collins v. McCombs, supra.
We are in accord with this language used in Wade v. State National Bank, supra (379 S.W.2d at 720):
"We fail to see how there could be any recovery for fraud involving the breach of an unenforceable contract. To hold otherwise would be to create an anomoly, and allow one to do indirectly what he could not by law do directly."
For the reasons stated, the judgment of the trial court is AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1787531/ | 661 S.W.2d 587 (1983)
Emma BROWN, Plaintiff-Respondent,
v.
P.N. HIRSCH & COMPANY STORES, INC., Defendant-Appellant.
No. WD 33,978.
Missouri Court of Appeals, Western District.
September 27, 1983.
Motion for Rehearing and/or Transfer to Overruled and Denied November 29, 1983.
Application to Transfer Denied January 17, 1984.
*588 Jeffrey T. O'Conner, Kansas City, for defendant-appellant.
J. Michael Cronan, Cronan & Messick, Kansas City, for plaintiff-respondent.
Before TURNAGE, P.J., and PRITCHARD and KENNEDY, JJ.
Motion for Rehearing and/or Transfer to Supreme Court Overruled and Denied November 29, 1983.
*589 TURNAGE, Presiding Judge.
Emma Brown filed suit against P.N. Hirsch & Company for false imprisonment and slander. The court directed a verdict in favor of Hirsch on the false imprisonment count, and entered judgment on the jury's verdict in favor of Brown on the slander count for $5,000 actual damages and $100,000 punitive damages.
On this appeal Hirsch contends the court gave an erroneous verdict directing instruction. Reversed and remanded.
This suit arose from an incident which occurred while Emma and her husband, Robert, were in the Hirsch store in Boonville in October, 1980. According to Emma's evidence, the couple had been in the store five to ten minutes looking at various articles when they stopped at a rack holding mens' wallets. This rack was located near the checkout counter. Robert picked up a wallet and handed it to Emma for her to examine and Emma returned it to Robert. According to Emma, Cheetah Maupin, the store manager, approached the Browns at this point and asked "Are you going to pay for it or put it back?" Emma stated that Cheetah accused her of stealing a wallet by placing it in her pocket. Emma said she told Cheetah that she could search her clothing, which Cheetah proceeded to do without finding any wallet. Emma stated that after a heated exchange about the incident, which was conducted in loud language in the hearing of other persons, Cheetah ordered the couple to leave the store. After the Browns left the store Emma went to a nearby restaurant where her mother was employed. Emma cried and told her mother about the events at the Hirsch Store. Emma's mother, Mary Taylor, accompanied Emma, without her husband, back to the Hirsch store.
When Emma and Mary returned to the Hirsch Store, Mary asked Cheetah about the earlier incident. According to Emma, Cheetah replied that Emma had stolen a billfold and that Emma had been in the store every day for a week taking something. Emma denied stealing and Emma and Cheetah again engaged in a heated exchange in loud voices. Cheetah again ordered Emma to leave the store and Mary led Emma away.
Emma's evidence also showed that various employees of the Hirsch Store had been told by Cheetah and other store managers to watch out for young black girls who come into the store to see if they were taking merchandise. Emma is a young black female.
Cheetah's version of the incident was that the Browns were looking at mens' billfolds and she saw Emma put one in her pocket. It was at that point that Cheetah told Emma "I saw that" and that she could either pay for it, put it back, or Cheetah could do something else. Emma took the billfold out of her pocket and threw it across several counters. Cheetah said Emma made several ugly remarks to her and became quite upset. Cheetah denied searching Emma and denied accusing her of stealing on previous occasions.
Cheetah testified that she subsequently told Harvey Fogle, a Boonville police officer that she had caught Emma shoplifting and that Emma had been in the store previously and had taken things. Cheetah also testified that she told Mary Lou Pottus, an employee of a Coast-to-Coast store in Boonville and two employees at the Wee Discount Store in Boonville, that she had caught Emma shoplifting. Emma testified that when she was in these two stores after the Hirsch incident she was followed closely by employees during the time she was in the store.
The court gave the following verdict director patterned after MAI 23.10(1). The verdict director read as follows:
Your verdict must be for plaintiff if you believe:
First, Cheetah Maupin was an employee of P.N. Hirsch and Company Stores, Inc. and was acting within the scope and course of her employment by P.N. Hirsch and Company Stores, Inc., and
Second, Cheetah Maupin stated either:
"She [Emma Brown] was caught shoplifting", or
*590 "She [Emma Brown] stole a billfold", or
"She [Emma Brown] had been in the store before taking things", and
Third, Cheetah Maupin was at fault in making any one or more of the statements submitted in paragraph Second, and
Fourth, such statement or statements referred to in paragraphs Second and Third exposed plaintiff to ridicule or deprived plaintiff of the benefit of public confidence and social associations, and
Fifth, such statement or statements referred to in paragraphs Second, Third and Fourth were heard by one or more of the following: Mr. Robert Brown, Mr. Harvey L. Fogel, Mrs. Mary Taylor, Mrs. Rickie Hammond, or Mrs. Mary Lou Pottus, and
Sixth, plaintiff Emma Brown's reputation was thereby damaged.
Acts were within the "scope and course of employment" as that phrase is used in this instruction even though not specifically authorized by P.N. Hirsch and Company Stores, Inc. if:
1. They were done by Cheetah Maupin to further the business of P.N. Hirsch and Co. Stores, Inc. under the general authority and direction of P.N. Hirsch and Co. Stores, Inc., and
2. They naturally arose from the performance of Cheetah Maupin's work.
The principal contention made by Hirsch is that the above instruction was patterned after MAI 23.10(1) which is for use in cases when no privilege is involved. Hirsch contends that the statement made by Cheetah while the Browns were in the store was qualifiedly privileged and for that reason the verdict director should have submitted the issue of malice as contained in MAI 23.10(2) to overcome the privilege. In this contention Hirsch is correct because the Notes on Use to 23.10(1) state "it is a question of law for the court to decide whether qualified privilege applies. Use MAI 23.10(2) if the court determines qualified privilege is applicable."
Hirsch pleaded qualified privilege in its answer. The store also filed a motion for a directed verdict at the end of Emma's case and at the close of all the evidence alleging the incident in the store gave rise to a qualified privilege which could only be overcome by a finding by the jury of malice on the part of Cheetah. That contention has been carried forth in the motion for new trial and on this appeal. Thus, the relevant question is whether or not Cheetah's accusation that Emma was stealing was qualifiedly privileged.
In Gust v. Montgomery Ward & Co., 229 Mo.App. 371, 80 S.W.2d 286 (1935) the court was confronted with a similar situation. Mrs. Gust and her two sisters-in-law had just left the Montgomery Ward store where they had been shopping and were on the sidewalk in front when a clerk ran out and said "[H]ere these shoplifters are. Give me that merchandise you stole. You stole that merchandise and hid it in your clothes. Some of you hid it in your clothes but you won't get away with it." The court quoted the applicable rule defining qualified privilege as a privilege which:
"[R]elates more particularly to private interests; and comprehends communications made in good faith, without actual malice, with reasonable or probable grounds for believing them to be true, upon a subject matter in which the author of the communication has an interest, or in reference to which he has a duty, public, personal, private, either legal, judicial, political, moral or social, made to a person having a corresponding interest or duty."
Id. 80 S.W.2d at 290[5-13].
The Gust court held that ordinarily when defamatory words are published malice may be implied, but when the occasion is privileged, the presumption of malice is rebutted and the burden is on the plaintiff to prove express malice. The court held that the words spoken by the store clerk were qualifiedly privileged. The question of malice or of good faith in the publishing of the defamatory material is for the jury *591 except when there is no substantial evidence to support such a finding.
Under the holding in Gust it is apparent that the words spoken by Cheetah when she first confronted Emma and Robert called for the submission to the jury of this case under the law applicable to qualified privilege. That being true the verdict director was erroneous because it followed MAI 23.10(1) instead of MAI 23.10(2) as directed by the Notes on Use.
The verdict director combined all of the statements made by Cheetah on the four different occasions that Emma's evidence showed she said that Emma had stolen merchandise. The initial incident was heard by Emma's husband, Robert, and Mrs. Rickie Hammond. The second incident involved the conversation with Emma and her mother, Mary. The third was the conversation with officer Fogel, and the fourth, with Mary Lou Pottus. The conclusion reached above that the initial words spoken by Cheetah at the time Emma and Robert were in the store were qualifiedly privileged would apply only to that incident. The words spoken to Officer Fogel, to Emma's mother, Mary, and Mary Lou Pottus require separate treatment.
The words spoken to Officer Fogle were also qualifiedly privileged under the rule applied by the majority of states Annot., DefamationCommunication to Police, 140 A.L.R. 1466, 1471 (1942). This court in Davenport v. Armstead, 255 S.W.2d 132, 134 (Mo.App.1952) held that a communication to law enforcement officers for the purpose of helping bring a criminal to justice are not absolutely privileged. While the court did not expressly hold that such communication was subject to a qualified privilege, it discussed whether the evidence would support an instruction based on qualified privilege. Thus the court held by implication that such communications are qualifiedly privileged and this court now holds expressly that such communications are qualifiedly privileged. For that reason an instruction submitting the words spoken by Cheetah to Officer Fogle should have also been framed under MAI 23.10(2) which submits the question of malice to the jury.
The statement made by Cheetah to Mary Taylor when she took her daughter into the Hirsch store presents a different question. Emma's counsel read excerpts from the deposition of Mary because Mary did not testify in person. The portion read stated that when Mary entered the Hirsch store Cheetah approached her and said nothing until Mary inquired "[w]hat happened to my daughter?" Mary said that Cheetah then told her that Emma had stolen a billfold. She also said that Cheetah told her that she did not want Emma in the store any more and told Emma to get out. She also said that Cheetah had said that Emma had been in there every day for the last week taking something. In Williams v. School District of Springfield R-12, et al., 447 S.W.2d 256, 268[21, 22] (Mo.1969), the court quoted from 33 Am.Jur., Libel & Slander, Section 93, pp. 105-106: "It is generally held that the publication, of a libel or slander, invited or procured by the plaintiff, or by a person acting for him in the matter, is not sufficient to support an action for defamation." The court held that absolute privilege is confined to few situations but it does extend to publications made with the consent of the plaintiff. It is apparent that the statements by Cheetah to Mary were in response to questions asked by Mary concerning the prior incident and it is further apparent that Mary was acting for Emma in the matter. Under Williams the words spoken in response to Mary's inquiry were spoken with consent and were, thus, absolutely privileged. That being true the verdict director should not have submitted any words spoken when Mary and Emma returned to the Hirsch store because such words were spoken with Mary's consent.
The fourth occasion on which Cheetah accused Emma of stealing was her statement made subsequent to the two incidents in the Hirsch store. Cheetah admitted that she told Mary Lou Pottus of the Coast-to-Coast store and two employees at the Wee Discount Store that she had caught Emma shoplifting, however, only the statement *592 to Pottus was mentioned in the verdict director. Under the rule governing the application of the doctrine of qualified privilege quoted above from Gust the statement to Pottus was not qualifiedly privileged. In her initial confrontation with Emma, Cheetah had an interest and a duty upon the subject matter of the communication; specifically that she had caught Emma shoplifting and Emma had a corresponding interest. The same cannot be said of Cheetah's statement to Pottus. Pottus had no duty or interest in the statement made by Cheetah concerning an incident which did not involve Pottus or her employer's property. The statement made by Cheetah to Pottus that she had caught Emma shoplifting was the accusation of a crime and was slander per se. Hoog v. Strauss, 567 S.W.2d 353, 357[6, 7] (Mo.App.1978). Of course, a statement constituting slander per se eliminates the plaintiff's need to show actual damages. White v. American Postal Workers Union, St. Louis, 579 S.W.2d 671, 674[3] (Mo.App.1979). On retrial this statement would be properly submitted under a slander per se instruction.
Hirsch raises other questions which may arise on re-trial and so will be briefly noted.
Hirsch contends that there was insufficient evidence upon which the jury could find that Cheetah Maupin was an agent of Hirsch acting within the scope of her employment at the time she made the slanderous remarks. Hirsch admitted throughout that Cheetah was employed by it as the store manager and never claimed at trial that Cheetah was not acting within the scope of her duties. Hirsch cannot now take the position that she was acting outside the scope of her employment when that was not its trial theory. Herrington v. Hall, 624 S.W.2d 148, 153[6] (Mo.App.1981).
Hirsch also contends that Emma did not produce evidence of actual malice and, thus, the defense of qualified privilege should prevail. Emma produced evidence from a number of Hirsch employees that they had been instructed by both Cheetah and previous store managers to watch for young black girls entering the store to see if they were taking merchandise. There was no evidence that employees had been instructed to watch for other persons or other classes of persons. From these instructions to its employees, the jury could infer that malice did exist against young black girls, of which Emma was one.
Other matters raised need not arise on re-trial, but in the event they do the parties have the benefit of the briefs.
The judgment is reversed and this case is remanded for further proceedings.
All concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2345442/ | 716 F. Supp. 1546 (1989)
ALCOLAC INC.
v.
CALIFORNIA UNION INSURANCE COMPANY.
Civ. No. S 88-3776.
United States District Court, D. Maryland.
July 21, 1989.
H. Gregory Skidmore, Cumberland, Md., Peter F. Axelrad, Thomas M. Wood, IV, Frank, Bernstein, Conaway & Goldman, Baltimore, Md., for plaintiff.
Dennis M. Flannery, Stephen H. Sachs, John R. Read, W. Scott Blackmer, Wilmer, Cutler & Pickering, Washington, D.C., for defendant.
MEMORANDUM.
SMALKIN, District Judge.
This case is before the Court on the defendant's motion for summary judgment, which will be granted. The matter has been fully briefed, and there is no need for an oral hearing. Local Rule 105.6, D.Md.
This is a declaratory judgment action, in which the plaintiff seeks a declaration that it is covered under an excess insurance *1547 certificate issued by defendant California Union Insurance Company (Cal Union) for the period January 1, 1980 to January 1, 1981. Coverage is sought for acts by Alcolac which led to a substantial award of damages against it in litigation recently concluded in the Missouri state courts. The opinion of the Missouri appellate court in the matter occupies over two hundred pages in a recent volume of the Southwestern Reports. Elam v. Alcolac, Inc., 765 S.W.2d 42 (Mo.App.1988), petition for cert. filed, 57 U.S.L.W. 3828 (U.S. June 8, 1989) (No. 88-1992). It would be fruitless at this point to restate the facts as set forth in the opinion of the trial and appellate courts in the Elam litigation. It suffices to say that there can be no dispute that the damages awarded in Elam stemmed from "the discharge, dispersal, release or escape of smoke vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids of [sic] gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse of [sic] body or [sic] water," within the relevant language of an absolute pollution exclusion which the plaintiff says is not, but which the defendant says is, a valid part of the Cal Union policy.[1] According to the testimony as summarized in the reported appellate opinion, the Elam plaintiffs' damages flowed from repeated gross violations of standard and/or safe operating procedures regarding the handling of toxic substances, which contaminated the environment adjacent to the Alcolac Sedalia plant, near which all of the Elam plaintiffs lived.[2] Recognizing that the judgment in the underlying case is conclusive on the facts relevant to this case,[3] there can be no genuine dispute of material fact in this case on the issue that the damages suffered by the Elam plaintiffs stemmed from events within the ambit of the absolute pollution exclusion. The only unresolved questions pertinent to the instant suit are questions that deal with the legal effect and validity of that exclusion.
The parties seem to agree that the substantive law of Maryland should apply to interpretation of the insurance policies directly pertinent to the instant case. Maryland law, unlike that of many other jurisdictions, is not hostile to insurers in the initial judicial construction of policy provisions. Rather, the courts in Maryland are instructed to construe the policy so as to ascertain the intent of the contracting parties, Mateer v. Reliance Insurance Co., 247 Md. 643, 648, 233 A.2d 797, 800 (1967), rather than to comb it for ambiguities. Of course, if a true ambiguity is found, then it is generally to be resolved against the insurer. Id.
With these premises in mind, the Court determines that there is no genuine issue of material fact in dispute and that the defendant is clearly entitled to summary judgment. Fed.R.Civ.P. 56(c). See Celotex Corp. v. Catrett, 477 U.S. 317, 106 *1548 S.Ct. 2548, 91 L. Ed. 2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The Court notes the plaintiff's strenuously argued position that it has not been afforded the meaningful opportunity for discovery contemplated by Fed.R.Civ.P. 56(f) and mentioned by the Supreme Court in Celotex, 477 U.S. at 326, 106 S. Ct. at 2554, but this Court disagrees. There is no need to engage in discovery in a coverage suit when the relevant policies are either in the insured's possession or were directed by the Court to be turned over to the insured, at the Court's express instruction to counsel, in aid of the insured's opposition to the insurer's motion. The Court will not allow the taking of depositions or other discovery in an attempt to generate ambiguity where none exists. The pertinent policy provisions have been laid on the table, and there is simply no factual issue that needs to be explored in discovery in order for the Court to make its decision on the legal questions relevant to this suit. Therefore, the Court concludes that the record is sufficiently developed to enable it to consider this motion on the merits, without the need of further discovery.[4]
There is, in this Court's judgment, no ambiguity at all in the Cal Union policy's reference to the Canadian Universal policy as the principal insurance which the Cal Union policy follows. (It is the Canadian Universal policy which actually embodies the absolute pollution exclusion relied upon by Cal Union in this lawsuit.) The plaintiff's position on the claimed ambiguity seems to be generated by the fact that the Canadian Universal policy was not a basic casualty/liability policy, but was, itself, an excess policy, like the Cal Union policy in suit here. There is no reason, as a matter of law, why one excess policy cannot refer to another excess policy as the principal insurance for the purpose of incorporating the terms, nor is there any reason why a second-tier excess policy cannot refer to another excess policy as the principal insurance for the purpose of incorporating its terms and conditions, and other policy provisions, of the first excess policy as the terms, conditions, and provisions the second will follow. Indeed, just such a situation was present in a case recently decided in this Court. See Highlands Insurance Co. v. Gerber Products Co., 702 F. Supp. 109, 113 (D.Md.1988). This Court can find no requirement in law or in the language of any of the policies that the principal insurance referred to in the Cal Union policy must have been a basic casualty liability policy, rather than another excess policy. As the defendant points out (Reply Memorandum at 9-10), a layered approach to excess insurance is common in commercial practice. Consequently, the Court concludes that the Cal Union policy incorporates the terms, conditions, and provisions of the Canadian Universal umbrella policy underlying it, and that there is no ambiguity or dispute of fact on this point.
The next question is whether the absolute pollution exclusion endorsement in the Canadian Universal policy is void for want of a separate signature on the endorsement. Given that it was the duty of the insured to provide the terms of the underlying policy to Cal Union, making Alcolac the source of the endorsement copy accompanying the defendant's present motion, coupled with the undisputed fact that the endorsement was incorporated in the underlying Canadian Universal policy when issued, the Court is of the opinion that the separate signature requirement on the face of the endorsement is not an impediment to the effectiveness of that part of the Canadian Universal policy, either on its own or as incorporated in the Cal Union coverage. Although there is apparently no Maryland case on this point, cases from other jurisdictions have recognized the general rule that, when the master policy is properly delivered incorporating all endorsements, the endorsements need not have been separately signed by the insurer. See Greenway v. North Carolina Farm Bureau Mutual *1549 Insurance Co., 35 N.C.App. 308, 241 S.E.2d 339, 342 (1978); Dunn v. Traders & General Insurance Co., 287 S.W.2d 682, 687 (Tex.Civ.App.1956). See also 1 Couch on Insurance 2d §§ 3:24, 4:35 (1984). Here, reference to Canadian Universal Policy NCUL3182 (submitted by Canadian Universal in support its summary judgment motion in Civil No. S 84-4154) shows that the absolute pollution exclusion endorsement, Endorsement # 1, was specifically incorporated in the policy from its inception. See Appendix A hereto. The Court also perceives no issue in dispute as to the validity of the exclusion under Maryland insurance regulations. Cal Union was a surplus lines carrier not admitted under the jurisdiction of the Maryland Insurance Commissioner, and any regulatory prohibition upon the inclusion of an absolute pollution exclusion clause in a policy regulated by the Maryland Insurance Commissioner is not an issue in this case.
Finally, the only remaining question is whether the absolute pollution exclusion ought to be given a reading that gives it effect so as to deny coverage for the Elam damages. The Court is of the opinion that it should. There is no ambiguity in the clause, it is clear on its face, and the damages in the underlying litigation unquestionably flowed from events within its ambit. This pollution exclusion is just what it purports to be absolute and the Court perceives no reason why Cal Union should be denied the benefit of its bargain with Alcolac, as reflected in the insurance contract. See Guilford Industries, Inc. v. Liberty Mutual Insurance Co., 688 F. Supp. 792 (D.Me.1988). See also Independent Petrochemical Corp. v. Action Casualty & Surety Co., No. 83-3347, slip op. at 181 (D.D.C. September 2, 1988). Alcolac's arguments that it expected that all personal injury or property damages "inadvertently" caused by its Sedalia plant operations would be covered by the Canadian Universal and Cal Union policies cannot generate coverage where none exists under the parties' contract of insurance.
In short, this Court is convinced that no amount of further discovery or parsing of the insurance policies at issue will illuminate the fundamental issues relevant to this case, which are plain and clearly ripe for decision, and which result in this Court being of the opinion that the defendant's motion for summary judgment should be granted. Accordingly, an order will be entered separately.[*]
*1550 APPENDIX A
NOTES
[1] Because there are common legal issues concerning the absolute pollution exclusion in this case and in Alcolac v. St. Paul Fire & Marine Insurance Co., 716 F. Supp. 1541, the Court has considered the arguments raised by the plaintiff in opposition to Canadian Universal's motion for summary judgment in that case (Opposition Memorandum at 38-41), as if fully applicable to this case. None of them is persuasive, particularly the plaintiff's contention that the Elam plaintiffs' injuries were attributable to some insured event or events not falling within the exclusive clause's definition of pollution. (Id. at 40).
[2] Although perhaps relevant in the other declaratory judgment litigation brought by Alcolac, see supra note 1, the question of whether the Elam plaintiffs' damages were "accidental" in origin is irrelevant as regards the present case because of the absolute nature of the pollution exclusion at issue here; other policies had only a qualified pollution exclusion.
[3] The effect of the Elam judgment is derived from Missouri law. 28 U.S.C. § 1738 (1982); Allen v. McCurry, 449 U.S. 90, 96, 101 S. Ct. 411, 415, 66 L. Ed. 2d 308 (1980). Under Missouri law, Alcolac is collaterally estopped in this coverage suit, by the outcome of the underlying suit, from relitigating facts relevant to whether it committed acts within the absolute pollution exclusion. See St. Paul Fire & Marine Insurance Co. v. Starr, 651 S.W.2d 517, 520 (Mo.App.1983). See also Bresnahan v. May Department Stores Co., 726 S.W.2d 327, 329-30 (Mo.1987) (en banc); Steyer v. Westvaco Corp., 450 F. Supp. 384, 397 (D.Md.1978). The Court, of course, reserves decision on the scope of any estoppel relevant to the qualified pollution exclusions in other policies at issue in Civil No. S 84-4154. See supra notes 1-2.
[4] Contrary to the plaintiff's position (Opposition Memorandum at 6), the Court is convinced that the affidavit and papers submitted by Cal Union accompanying its motion are proper supporting materials under Fed.R.Civ.P. 56(e).
[*] As a wholly separate and independent reason for its decision in favor of the defendant herein, the Court notes that neither the basic liability policy (St. Paul) nor the other excess policy (Canadian Universal) provides coverage for the damages in Elam, for reasons set forth in this Court's Memorandum Opinion in Alcolac v. St. Paul Fire & Marine Insurance Co., 716 F. Supp. 1541, issued this date. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2375969/ | 793 S.W.2d 692 (1990)
FEDERAL LAND BANK ASSOCIATION OF TYLER, Appellant,
v.
William C. SLOANE, Lettie Sloane, and Robert C. Sloane, Appellees.
No. 12-88-00231-CV.
Court of Appeals of Texas, Tyler.
May 31, 1990.
Rehearing Denied August 31, 1990.
*694 David M. Bond, Charles T. Newton, Jr., Houston, for appellant.
Blair A. Bisbey, Jasper, for appellees.
RAMEY, Chief Justice.
This appeal arises from the award of damages in an action for negligent misrepresentation. We affirm the trial court's decision as to liability and reform the judgment to reflect the proper award of damages.
Appellees, William C. Sloane, Lettie Sloane, and Robert C. Sloane (hereinafter "Sloanes"), brought suit against appellant, Federal Land Bank Association of Tyler (hereinafter "Bank"), for negligently misrepresenting that the Sloanes' loan application had been approved.
The testimony shows that in March of 1986 the Sloanes approached the Bank's loan officer, David Weeks (hereinafter "Weeks"), about obtaining financing to build at least two chicken houses so that the Sloanes could raise broilers for Pilgrim's Pride (hereinafter "Pilgrim"). On March 7, 1986, the Sloanes, while in the presence of Weeks at the Bank's San Augustine office, completed a financial statement in which Mrs. Sloane inadvertently left two creditors off of the financial statement.
In May of 1986, Weeks orally informed the Sloanes that their loan application had been approved by the Bank's board. In reliance upon Weeks' representation, the Sloanes moved utility lines and had the sites for the chicken houses prepared. When the Sloanes told their general contractor, Sid Coufal of D & B Poultry, that the loan had been orally approved and that they were free to begin work on the site, Coufal stated that it was unusual to start work before the loan papers had been signed, so he contacted Weeks to confirm that the loan had indeed been approved. Weeks told Coufal that the loan had been approved as an "add on" type transaction.[1] Thereafter, in August of 1986 and prior to the beginning of construction on the site, the Sloanes received a letter from the Bank informing them that the loan would not be *695 approved. They were advised that they could seek a review of the Bank's decision with the credit review committee.
Although the Sloanes did not seek to have the committee review the denial of their loan application, they did unsuccessfully seek to obtain financing elsewhere. Because they were not able to quickly obtain other financing, Pilgrim withdrew its commitment to contract with the Sloanes to raise broilers. Damages alleged by the Sloanes included: (1) marital discord resulting in the separation of Mr. and Mrs. Sloane; (2) treatment for migraine headaches suffered by Mrs. Sloane; (3) inability to make their annual farm mortgage payment due to personal funds invested in the aborted construction project and increased interest rates due to the requirement that the Sloanes refinance their farm mortgage; (4) costs estimated at $15,000 incurred in moving utility lines and having the "dirt work" done to prepare a pad for the chicken house sites; (5) mental anguish suffered by Robert Sloane as a result of the additional financial strain placed upon him due to denial of the loan; (6) loss of 5 acres of pasture land previously used for the growing and harvesting of hay; and (7) lost profits estimated at $12,000 per year for at least five years as a result of losing the contract with Pilgrim.
After hearing the evidence, the Court entered judgment in favor of the Sloanes, and based upon the jury's verdict, awarded $70,000 in damages and $11,974.48 in prejudgment interest.
By its first point of error, the Bank contends that the trial court erred in denying its motion for judgment n.o.v. because the Sloanes were, in effect, suing for breach of an oral contract to loan money, and such contracts are unenforceable under the Statute of Frauds.[2]
The elements necessary to prove negligent misrepresentation are set forth in Rosenthal v. Blum, 529 S.W.2d 102 (Tex.Civ. App.Waco 1975, writ ref'd n.r.e.):
One who, in the course of his business, profession, or employment, or in a transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Id. 529 S.W.2d at 104 (quoting Tentative Draft No. 12, Restatement of Torts (2nd ed. 1966), § 552 (1977)). Furthermore, it is immaterial whether such misrepresentation was made by accident or intent, since it needs only to have been made and to have been false when made. Susser Petroleum Co. v. Latina Oil Corp., 574 S.W.2d 830, 832 (Tex.Civ.App.Texarkana 1978, no writ).
It is clear from the Plaintiff's Second Amended Petition that the Bank's denial of the loan is not at issue in the instant case. In fact, the Sloanes concede that the Bank acted reasonably in turning down the Sloanes' loan. Mrs. Sloane testified as follows during trial: "You see, we're not questioning Federal Land Bank turning down our loan ... that's not what we're objecting to." In Collins v. McCombs, 511 S.W.2d 745, 747 (Tex.Civ.App.San Antonio 1974, writ ref'd n.r.e.), the Court held that:
Even if it be conceded that an action in tort [for misrepresentation] is unaffected by the provisions of the Statute of Frauds, the judicial disregard of the statute should be limited to situations in which the essence of the action truly sounds in tort [not contract]. (Emphasis ours.)
Where the injury to the subject matter is only the economic loss of the contract itself, the action sounds in contract alone. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.1986); Webber v. Kellogg Co., *696 720 S.W.2d 124, 129 (Tex.App. Houston [14th Dist.] 1986, writ ref'd n.r.e.).
The case at bar is distinguishable from Reed and Webber because the Sloanes were not seeking to enforce a contract for the loan which they alleged was promised to them.[3] Instead, they sought damages which were the purported result of their reliance upon Weeks' oral representation that the loan had been approved. The cases cited by the Bank in support of its Statute of Frauds argument involve recovery for breach of an unenforceable contract by disguising the true contractual nature of the complaint as a suit for recovery based upon fraud; in these cases the wolf drops his sheep's clothing by seeking damages for breach of contract rather than damages sounding in tort. However, in the case at bar, the Statute of Frauds is clearly inapplicable because the damages sought by the Sloanes are separate and distinct from those which would have been sought had a breach of contract action been pursued. The Bank's first point of error is therefore overruled.
By its second point, the Bank argues that the Sloanes are not entitled to recover for negligent misrepresentation because the representations made the subject of complaint were allegedly induced by the Sloanes' misrepresentations to the Bank.
The sole case which the Bank cites in support of this point of error is Monier v. Guaranty Trust Co. of N.Y., 82 F.2d 252, 254 (2d Cir.1936), which stands for the proposition that "any material falsity in the facts asserted existing on that date [the date of the financial statement] would be ground for rescinding a loan made in reliance on the statement, regardless of the borrower's innocence in making the false assertion." Once again, the Bank relies upon its right to rescind the oral agreement to loan money. The fact that the Bank had the right to refuse the loan does not bar the Sloanes' right to recover for negligent misrepresentation because this is not an action for breach of contract. Furthermore, Ted Conover, the Bank's president, who ultimately made the decision to refuse the Sloane's loan, testified that the fact that the Sloanes failed to include two creditors on their financial statement was not the reason for the Bank's refusal to approve their loan. Thus, even if the reasonableness of the Bank's refusal of the loan were at issue, the Monier case would not be applicable.
While it is conceivable that the Sloanes' allegedly inadvertent omissions of debt disclosures to the Bank could have been viewed by the trier of fact as contributory negligence on the part of the Sloanes,[4] the jury specifically found that the Sloanes were not contributorily negligent. The Bank did not raise a point of error challenging the jury's negative finding on that issue; therefore, the issue is not before us. San Jacinto River Authority v. John Thomas Duke, 783 S.W.2d 209. The Bank's second point of error is overruled.
In its third through sixth points of error, the Bank contends that there is no evidence, or in the alternative, insufficient evidence to support the jury's award of damages in the amount of $70,000; that the Sloanes are only entitled to recover "out-of-pocket expenses" if any; that "lost profits" are not properly considered a part of out-of-pocket expenses; that lost profits and out-of-pocket expenses are legally inconsistent with each other; and that damages for mental anguish are not recoverable in a negligent misrepresentation case.[5] Since each of these points deals with the recovery of damages, they will be considered together.
*697 In response to Special Issue No. 6, the jury awarded the following damages categorized as follows:
$25,000.00 - past damages for monetary losses
other than lost profits
$1,500.00 - future damages for monetary losses
other than lost profits
$15,000.00 - past damages for lost profits
$13,500.00 - future damages for lost profits
$15,000.00 - past damages for mental anguish
$ -0- - future damages for mental anguish
__________
$70,000.00
PAST AND FUTURE DAMAGES FOR MONETARY LOSSES OTHER THAN LOST PROFITS
The Bank argues that the evidence did not support the jury's award of "out-of-pocket" damages (past or future).[6] With regard to past out-of-pocket expenses, the undisputed testimony is that Mrs. Sloane borrowed $15,000 to pay for the site preparation for the chicken houses. She testified that $8,500 of this money was paid to a Mr. Birdwell for the dirt work; $1,230 was expended on labor in tearing the old chicken house down according to receipts introduced into evidence; $280.00 was paid to "REA" for moving utility poles, and the total amount of receipts for supplies and equipment rental introduced into evidence totalled $217.03. Furthermore, both Mrs. Sloane and Robert Sloane testified that Robert contributed approximately $1,200 in labor while acting as a foreman/coordinator on the site preparation project but was never paid for these services. Mrs. Sloane testified that she did not have receipts for some of the work done on the site preparation, which receipts were destroyed when their home burned in November of 1986. The aforementioned out-of-pocket expenses are supported by sufficient evidence.
There was additional testimony that a trencher was rented to dig utility line trenches, but there was no proof of the amount of this expenditure. Mrs. Sloane also testified that she and her son had purchased a special type of tractor required by Pilgrim to transport a generator for the chicken houses. The Sloanes paid $3,000 down for the tractor but were unable to continue making payments on it; consequently, the vendor took the tractor back and canceled the Sloanes' remaining debt obligation on it. However, Mrs. Sloane admitted that the tractor should not have been purchased at that time, that it had other unspecified and unallocated uses on the farm, and that the Bank had no responsibility for the loss of the tractor and the payments. The Bank timely objected to this testimony about the tractor because it had not been plead as an element of damage claimed by the Sloanes. Therefore, the $3,000 expenditure on the tractor and any installment payments thereon were not out-of-pocket expenses recoverable against the Bank.
Although the Sloanes testified that they tore down an older, smaller chicken house in order to build a new one, no value was ever placed on the destroyed chicken house, and testimony with regard to it indicated that it had no real worth. Without proof of the value of the former structure, no amount was recoverable for such past out-of-pocket expenses.
Lastly, with regard to past out-of-pocket expenses, Mrs. Sloane testified that as a direct result of the Bank's negligent misrepresentation, she was unable to make the annual payments to the Bank on her farm note which had an interest rate of 11%. She testified that the annual payment was between $6,000 and $7,000, but that they had put the money into the construction project instead of setting it aside for the annual note payment. Although the Bank was lenient with them and allowed additional time to make the payment, Mrs. Sloane testified that they ultimately *698 refinanced the farm at a different lending institution at 12% interest; furthermore, the new farm loan was payable in full after one year instead of being payable in annual installments. Mrs. Sloane admitted that the Bank offered to refinance the loan but she chose unilaterally to move the loan to the Chireno Bank. Furthermore, there was no attempt to specify the amount of damages suffered by the Sloanes as a result of refinancing the farm note. Thus, there was no evidence to consider the refinancing of the farm note as an out-of-pocket expense, past or future.
As to future monetary losses, Robert Sloane testified that it was necessary to bulldoze five acres of pasture land used to grow hay in order to prepare a proper site for the proposed chicken houses. There was no proof of the reasonable cost of restoration of this tract to hay production. Also, Mrs. Sloane testified that she has been treated for migraine headaches due to nerves. However, she did not introduce any evidence with regard to expenses she has incurred in this regard nor attempt to project future medical expenses for treatment of her migraines. Therefore, even if we were to assume that the medical expenses were recoverable, no evidence was introduced to support such a recovery.
Based upon an analysis of the evidence viewed in the light most favorable to the Sloanes, we find that the award for past monetary losses should be reformed to reflect a recovery of $11,427.03 and the jury verdict of $1,500 for future monetary losses is not supported by the evidence. The Bank's third point of error is sustained in the amount of $13,572.97 of the $25,000 jury finding as it relates to the award of past "out-of-pocket" expenses, and sustained as to future expenses.
PAST AND FUTURE DAMAGES FOR LOST PROFITS
The jury awarded the Sloanes $15,000 in damages for past lost profits and $13,500 in damages for future lost profits. The Sloanes had ceased operations in the poultry business in any form in January, 1984, over two years before making application for the loan in question. The general rule is that damages for lost profits of a new and unestablished business will be denied. 28 Tex.Jur.3d Damages § 177; 22 Am. Jur.2d Damages § 627; 28 C.J.S. Damages § 42.
The Sloanes concede that Texas law does not generally allow recovery of expected profits for an unestablished business; they argue, however, that they are entitled to recover lost profits based on one or both of the following exceptions: (1) the evidence demonstrated that they had successfully operated a poultry operation for a number of years prior to seeking a contract with Pilgrim, and (2) even in the absence of a history of profitability, there is proof of the actual existence of a future contract from which lost profits can be calculated with reasonable certainty. Allied Bank West Loop v. C.B.D. & Assoc., 728 S.W.2d 49, 54-55 (Tex.App.Houston [1st Dist.] 1987, writ ref'd n.r.e.).
The Sloanes' poultry business was not an established, on-going business concern. Lettie Sloane testified that they were not in the poultry business when they applied for the loan and had not been for over two years. Several years previously, the Sloanes had fed chickens for a different feeder; there was no attempt to prove that the operations or the contractual arrangement with the prior feeder, Gold Kist, and Pilgrim were similar. In fact, the Sloanes were primarily feeding pullets for Gold Kist whereas they would have fed broilers for Pilgrim. The operations were dissimilar: Pilgrim refused to consider the Sloanes to become contract feeders unless they removed the standing chicken houses and built much larger houses with entirely different equipment as prescribed by Pilgrim. These requirements necessitated the attempt to secure the financing which resulted in this dispute. This additional financing expense would have significantly altered the Sloanes' prior profit margin, if any, according to John Johnson, Pilgrim's Broiler Production Manager. The Sloanes' prospective feeding arrangement with Pilgrim *699 was a new and unestablished business.
We next must determine whether there was sufficient evidence to establish the actual existence of a future contract with Pilgrim from which lost profits could be calculated with reasonable certainty. The facts in the Allied Bank case upon which the Sloanes rely are briefly as follows: C.B.D. & Associates (hereinafter "C.B.D.") operated an oilfield brokerage business whereby it coordinated the buying and selling of oilfield equipment for which it received a commission. C.B.D. had two bank accounts at Allied Bank West Loop (hereinafter "Allied"). Because of the wrongful acts of Allied, C.B.D. was forced out of business. C.B.D. sued Allied and was awarded damages, including lost profits. Allied appealed and challenged the sufficiency of the evidence to support an award of lost profits. Upon reviewing the sufficiency of the evidence, the court held that in addition to the profits from commissions that C.B.D. had actually made during its operation as a broker, the jury was also entitled to consider as evidence of lost profits a $50,000 commission that C.B.D. would have earned from the sale of pipe to A.I.S. had that sale not been canceled. The court stated that "a party must show either a history of profitability or the actual existence of a future contracts from which lost profits can be calculated with reasonable certainty." Allied Bank West Loop v. C.B.D. & Assoc., Inc., et al., 728 S.W.2d at 55. In Allied Bank, the sale of the pipe to A.I.S. was a contract to be performed in the future which actually existed and the lost profit was clearly established as being in the liquidated sum of $50,000.
In the instant case, the Sloanes introduced the following evidence in support of their contention that a future contract actually existed:
1. A letter written by John Johnson of Pilgrim which was sent to the Bank and which stated: "I have agreed to feed out broilers to (the Sloanes) once the houses are complete according to Pilgrim's Pride Corporation's specifications with good roads and loading pads. I further state that once the houses are complete that we look forward to many years of successful production of chickens on (the Sloanes') farm."
2. The testimony of John Johnson at trial by deposition:
A. Pilgrim would have entered into a contract with the Sloanes had the necessary construction taken place within the agreed time frame, and that assuming the Sloanes were doing a proper job, and "at least as well as the average," Pilgrim would have continued their business relationship.
B. Although Pilgrim does not sign a contract until the construction is complete and there were no signed contracts with the Sloanes, if the construction had been completed according to Pilgrim's specifications, Pilgrim would have contracted with the Sloanes to raise chickens.
C. Although it is possible that something could have occurred which would have prevented the placement of the contract, he had never before had that happen.
We find that this evidence does not satisfy the requirements of the Allied Bank case. Allied Bank states that lost profits may be recovered where the claimant proves the "actual existence" of future contracts from which lost profits can be calculated with reasonable certainty. In this case, there was no proposed form of contract between the Sloanes and Pilgrim introduced into evidence; there was no proof as to any of the specific terms of such proposed future contract from which the jury could award lost profits with reasonable certainty. By contrast, in the Allied Bank case the $50,000 commission which would have been earned in the future by C.B.D. was liquidated, which was determined by a contract that actually existed. We believe that the Allied Bank court's intent in making the "future contracts" exception was to restate the principle that lost profits cannot be recovered in the absence of a history of profitability unless the claimant proves the actual existence of a specific contract from which future profits can be determined *700 with reasonable certainty. See Pace Corp. v. Jackson, 155 Tex. 179, 284 S.W.2d 340 (1955); Automark of Texas v. Discount Trophies, 681 S.W.2d 828 (Tex.App.Dallas 1984, no writ).
There having been no future contract in existence, we need not examine the testimony of Russell Burks, a neighboring contract feeder with Pilgrim. Burks' testimony attempts to establish profits which the Sloanes would have earned had a future contract existed.
The Sloanes also pleaded that they sustained some loss of profits from the sale of hay, having bulldozed approximately five acres of pasture land in preparation for the erection of the proposed new broiler houses. This was likewise a new and unestablished business. Robert Sloane testified that they had hay cuttings off the pasture last year for the first time. Their hay sales the previous year were unrelated to the hay production he expected in the future.[7] Furthermore, without further explanation, Mrs. Sloane testified that there could be hay profits "[i]f the weather permits"; Robert said hay profits depended upon "what kind of year it was." We find with no past history of profitability and the speculative nature of any hay profits the evidence fails to demonstrate the facts with any certainty that would authorize a recovery of lost hay profits from this new and unestablished business. The Bank's third and fifth points of error are sustained to the extent that they allege that there was no evidence to support the Sloanes' recovery of damages for past or future lost profits.
Since we find that the evidence did not support damages for lost profits, we need not discuss the Bank's fourth point of error pertaining to the right to recover damages for lost profits in a negligent misrepresentation case. Likewise, we need not address the Bank's fifth point of error claiming that "out-of-pocket losses" and "lost profits" are mutually exclusive measures of recovery.
DAMAGES FOR MENTAL ANGUISH
The jury awarded the Sloanes $15,000 for past mental anguish incurred as a proximate result of the Bank's negligent misrepresentation. By its sixth point of error, the Bank argues that damages for mental anguish are not recoverable in a suit for negligent misrepresentation.
Although damages for mental anguish are independent of damages for pecuniary loss, Texas courts have awarded recovery of damages for mental anguish in a wide variety of negligence actions in which damages were limited to recovery for pecuniary loss. Kneip v. UnitedBank-Victoria, 734 S.W.2d 130, 136 (Tex.App.Corpus Christi 1987, no writ); Sanchez v. Schindler, 651 S.W.2d 249 (Tex.1983); also see St. Elizabeth Hospital v. Garrard, 730 S.W.2d 649 (Tex.1987) (holding that physical injury no longer an element of the common-law action for negligent infliction of mental anguish); City of Ingleside v. Kneuper, 768 S.W.2d 451 (Tex.App.Austin 1989, writ denied) (allowing recovery for past mental anguish under the Whistleblower Act where city employee was fired for reporting criminal activity in connection with city's building inspections); City of Watauga v. Taylor, 752 S.W.2d 199 (Tex.App. Fort Worth 1988, no writ) (allowing recovery of mental anguish for flooding of property as a result of City's negligent maintenance of drainage ditch); Kold-Serve Corporation, et al. v. Ward, 736 S.W.2d 750 (Tex.App.Corpus Christi 1987, writ dism'd) (allowing recovery for mental anguish where buyer of ice-making machine sued seller alleging breach of contract, breach of warranties and deceptive trade practices).
In a recent case similar to a negligent misrepresentation cause of action, the supreme court denied writ in a suit for damages for mental anguish by a wife and child of a prison inmate who were negligently notified that the inmate had died. Texas Department of Corrections v. Winters, *701 765 S.W.2d 531 (Tex.App.Beaumont 1989, writ denied). We conclude that damages for mental anguish are recoverable in a negligent misrepresentation cause of action in Texas.
Finally, we examine the sufficiency of the evidence to support the jury's award of $15,000 for past mental anguish. In Moore v. Lillebo, 722 S.W.2d 683 (Tex.1986), the Texas Supreme Court described mental anguish as "emotional pain, torment and suffering." However, "[m]ental anguish is more than disappointment, anger, resentment or embarrassment although it may include all of these." Kneip v. United-Bank Victoria, 734 S.W.2d 130, 136 (Tex. App.Corpus Christi 1987, no writ) (quoting Trevino v. Southwestern Bell Telephone Co., 582 S.W.2d 582, 584 (Tex.Civ. App.Corpus Christi, 1979, no writ)).
In the instant case, Mrs. Sloane testified that since the denial of the loan, her husband of 31 years had moved out of their house because he was so angry with her as a result of this transaction. She further testified that since the denial of the loan, she had suffered from and been treated for migraine headaches due to nerves. Additionally, Robert Sloane testified that his nerves were "on the edge all the time," that since the denial of the loan, he was required to work two jobs to make ends meet and that he spent a great deal of time worrying.
The Supreme Court has stated the following with regard to proof of mental anguish without requiring a physical manifestation:
The problem is one of proof, and to deny a remedy in all cases because some claims may be false leads to arbitrary results which do not serve the best interests of the public. Jurors are best suited to determine whether and to what extent the defendant's conduct caused compensable mental anguish by referring to their own experience.
St. Elizabeth Hospital v. Garrard, 730 S.W.2d at 654.
We find that there was sufficient evidence to support the jury's award of $15,000 for past mental anguish. Accordingly, the Bank's third point of error as it relates to the sufficiency of the evidence to sustain the jury's award for past mental anguish is overruled.
We reform the judgment below to provide that the Sloanes recover the sum of $11,427.03 for past monetary losses other than lost profits, and the sum of $5,212.80[8] for prejudgment interest, and as reformed, affirm those portions of the judgment; and we affirm that portion of the judgment awarding the sum of $15,000 to the Sloanes for past mental anguish damages; otherwise, we reverse the judgment, and hereby render judgment that the Sloanes take nothing as to any award for lost profits, past or future, over and against the Bank.
NOTES
[1] The Bank held the mortgage on the Sloane farm at the time they sought the additional funds to build the chicken houses. The balance on their original mortgage was $47,000 at the time they sought the loan at issue.
[2] Appellant argued to the trial court that there was "no evidence" to support a finding that Weeks supplied "false" information at the time the representations were made, and thus no action for "misrepresentation" could be supported. On appeal, however, no similar sufficiency point was presented. This Court, therefore, is precluded from considering same. San Jacinto River Authority v. John Thomas Duke, 783 S.W.2d 209 (Tex.1990).
[3] According to testimony, Weeks had represented that the Bank would lend them an additional $104,000 for purposes of building the chicken houses.
[4] Contributory negligence is a defense to the cause of action for negligent misrepresentation. Restatement (Second) of Torts, § 552A (1977).
[5] In their briefs, both parties cite as authority for their argument an unpublished opinion of this Court. However, TEX.R.APP.P. 90(i) states that unpublished opinions may not be so cited by counsel or court.
[6] Although no category entitled "out-of-pocket expenses" was presented to the jury for determination, we assume, for purposes of this opinion, that the Bank is referring to that category of damages (past and future) entitled "damages for monetary losses other than lost profits" which is actually a broader category of recovery than "out-of-pocket expenses." For convenience, we will refer to this category of damages as "out-of-pocket expenses."
[7] The Sloanes sold a total of 300 to 400 bales of hay the preceding year. They estimated that hay production could be 75 bales per acre per cutting with anticipated three cuttings per year. Therefore, 3,625 bales of hay could be produced over the 25 acres in the hay grass.
[8] Interest was calculated based upon the principles set forth in Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549 (Tex.1985); Voskamp v. Arnoldy, 749 S.W.2d 113, 124 (Tex.App. Houston [1st Dist.] 1987, writ denied); and Bulgerin v. Bulgerin, 724 S.W.2d 943 (Tex.App. San Antonio 1987, no writ). Since neither party raised a point of error contesting the time period used by the trial court to calculate interest, error, if any, has been waived. TEX.R.APP.P. 52(a); Buffalo Marine Service, Inc. v. Monteau, 761 S.W.2d 416 (Tex.App.Houston [14th Dist.] 1988, no writ). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1428762/ | 832 F. Supp. 1014 (1993)
John L. BOWMAN, individually and as executor of the estate of John W. Bowman, Plaintiff,
v.
NORFOLK SOUTHERN RAILWAY COMPANY, Defendant.
Civ. A. No. 0:91-3270-12.
United States District Court, D. South Carolina, Columbia Division.
September 9, 1993.
*1015 A. Philip Baity, Ridley, Ridley & Burnette, Fort Mill, SC, Sharon McCain Rickborn, Columbia, SC, for plaintiff.
John Gregg McMaster, Henry Dargan McMaster, Frank Barnwell McMaster, Tompkins & McMaster, Columbia, SC, for defendant.
MEMORANDUM OPINION AND ORDER
JOSEPH F. ANDERSON, Jr., District Judge.
This matter is currently before the court on the defendant's motion for summary judgment on all of the plaintiff's causes of action, the defendant's alternative motion to dismiss for failure to state a claim plaintiff's action based on inadequate grade crossing warning devices, and the plaintiff's motion for summary judgment on his claim for failure to sound statutorily required warnings. In addition, the plaintiff has moved to have this court reconsider its order of February 26, 1992, in which the court concluded that the speed ordinance of the City of Rock Hill was preempted by federal law. Oral argument on these motions was heard on August 18, 1993. For the reasons discussed below, the defendant's motion for summary judgment is granted in part and denied in part; the defendant's motion to dismiss is denied; the plaintiff's motion for summary judgment is denied; and the plaintiff's motion to reconsider is denied.
Summary judgment is appropriate "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 any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). It is well-established that summary judgment should be granted "only when it is clear that there is no dispute concerning either the facts of the controversy or the inferences to be drawn from those facts." Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir.1987).
The party moving for summary judgment has the burden of showing the absence of a genuine issue of material fact, and the court must view the evidence before it and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 993, 8 L. Ed. 2d 176 (1962). When the defendant is the moving party and the plaintiff has the ultimate burden of proof on an issue, the defendant must identify the parts of the record that demonstrate the plaintiff lacks sufficient evidence. The nonmoving party must then go beyond the pleadings and designate "specific facts showing that there is a genuine issue for trial." Fed. R.Civ.P. 56(e). See also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
*1016 Viewed in the light most favorable to the plaintiff, the facts are as follows: On May 22, 1990 at approximately 7:00 a.m., defendant Norfolk Southern's freight train was proceeding north near Rock Hill, South Carolina. At the same time, John W. Bowman, the plaintiff's decedent, was driving his pick-up truck east on Robertson Road on his way to work. Bowman worked at the MTM Chemical plant, located adjacent to the defendant's railroad tracks near the Robertson Road crossing. He had worked at MTM for about four months. As Bowman attempted to cross the tracks at the Robertson Road crossing, the defendant's train struck his pickup truck and caused the truck to flip over. Bowman survived the accident, but sustained severe head injuries, which rendered him comatose. Bowman remained in a coma until December 10, 1992, when he died of complications associated with his vegetative condition.
John L. Bowman, the decedent's father, brought this diversity action both individually and as the executor of his son's estate for wrongful death and negligence. The plaintiff alleges that the defendant was negligent for the following: (1) operating the train at an excessive speed; (2) failing to provide adequate warning devices at the grade crossing; (3) failing to remove from the railroad's right of way vegetation that obstructed the decedent's view of the approaching train; and (4) failing to sound the warnings required by S.C.Code Ann. § 58-15-910 (Law.Co-op. 1976). In addition, the plaintiff alleges negligent entrustment by the defendant in allowing the engineer who was driving at the time of the accident to operate the train.
The defendant's main argument for summary judgment on most of the plaintiff's claims is that these state-law claims are preempted by federal law. This issue is largely controlled by the United States Supreme Court's recent decision, CSX Transportation, Inc. v. Easterwood, ___ U.S. ___, 113 S. Ct. 1732, 123 L. Ed. 2d 387 (1993), which presented a fact situation very similar to the case presently at bar. In Easterwood, the Court addressed the pre-emptive effect of the Federal Railroad Safety Act of 1970 (FRSA), 45 U.S.C. §§ 421-447 (1988 & Supp. II 1990).
The FRSA contains an express pre-emption clause, section 434, which provides, in part:
The Congress declares that laws, rules, regulations, orders, and standards relating to railroad safety shall be nationally uniform to the extent practicable. A State may adopt or continue in force any law, rule, regulation, order, or standard relating to railroad safety until such time as the Secretary has adopted a rule, regulation, order, or standard covering the subject matter of such State requirement.
45 U.S.C. § 434 (1988). Thus, the focus of the pre-emption inquiry is whether the Secretary of Transportation has issued regulations pursuant to the FRSA "covering the same subject matter" as the state law pertaining to railroad negligence.
I. Excessive Speed
The defendant first argues that the plaintiff's negligence action based on alleged excessive speed is pre-empted. The court agrees.
The Secretary of Transportation has issued regulations, codified at 49 C.F.R. § 213.9(a) (1992), that set the maximum speed limits for all freight and passenger trains for the different classes of track on which they travel. The Easterwood Court held that these speed regulations pre-empt state common-law claims based on excessive speed. Easterwood, ___ U.S. at ___-___, 113 S.Ct. at 1742-44. As the Court observed:
On their face, the provisions of § 213.9(a) address only the maximum speeds at which trains are permitted to travel given the nature of the track on which they operate. Nevertheless, related safety regulations adopted by the Secretary reveal that the limits were adopted only after the hazards posed by track conditions were taken into account. Understood in the context of the overall structure of the regulations, the speed limits must be read as not only establishing a ceiling, but also precluding additional state regulation of *1017 the sort which [Easterwood] seeks to impose on [the defendant railroad].
Id. at ___, 113 S.Ct. at 1742.
In the instant case, the uncontradicted evidence demonstrates that the tracks where the accident occurred were Class IV tracks. Under the speed regulations of 49 C.F.R. § 213.9(a), the maximum speed limit on this class of track is 60 m.p.h. There is no evidence in the record in this case that the train was exceeding 60 m.p.h. The speed tapes from the train indicate that the train was traveling between 46 and 48 m.p.h. at the time of the accident. At oral argument on this motion, plaintiff's counsel conceded that these records were reasonably accurate.
Two federal district court decisions after Easterwood have applied the Supreme Court's analysis and have concluded that state-law claims based on excessive speed are preempted. See Eldridge v. Missouri Pacific R.R., 832 F. Supp. 328, 330 (E.D.Okla. 1993); Watson v. Rail Link, Inc., 826 F. Supp. 487, 490 (S.D.Ga.1993).
Moreover, before Easterwood, this court reached essentially the same conclusion in its order of February 26, 1992, in which this court held that the FRSA pre-empted the City of Rock Hill's speed ordinance restricting trains to twenty-five miles per hour. The court recognized that the Secretary's train speed regulations, C.F.R. §§ 213.9 and 213.57, covered the exact subject matter of the municipal ordinance. Therefore, the court concluded that the plaintiff's claims based on excessive speed were pre-empted.
Plaintiff has moved this court to reconsider its order of February 26, 1992 in light of newly discovered evidence that the defendant railroad allegedly has an internal policy of following municipal speed ordinances. Additionally, the plaintiff asserts that the railroad has a self-imposed speed limit of 50 m.p.h. on the track at which the accident occurred. Although a defendant's internal policies may be evidence of due care in a typical negligence action, see e.g., Lee v. Missouri Pacific R. Co., 566 So. 2d 1052 (La.Ct.App.1990), that issue merely goes to the state common-law of negligence. Because this court determines that state law regarding train speed is pre-empted, evidence of the defendant's internal policies about train speed is irrelevant.
Plaintiff also argues that state law regarding train speed is not pre-empted because the crossing at issue in this case presented an essentially local hazard. The pre-emption clause of the FRSA contains a savings clause, which provides:
A State may adopt or continue in force an additional or more stringent law, rule, regulation, order, or standard relating to railroad safety when necessary to eliminate or reduce an essentially local safety hazard, and when not incompatible with any Federal law, rule, regulation, order, or standard, and when not creating an undue burden on interstate commerce.
45 U.S.C. § 434 (1988). The Easterwood Court specifically did not address the FRSA's pre-emptive effect of suits "for breach of related tort law duties, such as the duty to slow or stop a train to avoid a specific, individual hazard." Easterwood, ___ U.S. at ___ n. 15, 113 S.Ct. at 1743 n. 15. However, this case does not seem to present the type of "specific, individual hazard" to which the Court in Easterwood referred. Accordingly, the court does not agree that the savings clause of 45 U.S.C. § 434 applies to this case.
In his amended complaint, plaintiff alleges that the defendant was negligent "[i]n operating its train across the Robertson Road crossing at an excessive rate of speed which was dangerous under all the circumstances." Amended Complaint at ¶ 25(d). Plaintiff asserts that the Robertson Road crossing was "ultrahazardous" because of the following: (1) the crossing is used by trucks transporting hazardous materials to and from the two chemical plants adjacent to the tracks; (2) the location of the crossing in an industrial area created heavy automobile traffic when plant workers change shifts; and (3) the defendant railroad had notice of a previous accident that occurred at the same crossing on July 1, 1988. Plaintiff's theory apparently rests on a common-law negligence principle that reasonable persons must take greater care to avoid ultrahazardous situations.
*1018 However, in Easterwood the Supreme Court rejected a similar argument. The Court noted:
The state law on which [Easterwood] relies is concerned with local hazards only in the sense that its application turns on the facts of each case. The common law of negligence provides a general rule to address all hazards caused by lack of due care, not just those owing to unique local conditions. [Easterwood's] contrary view would completely deprive the Secretary of the power to pre-empt state common law, a power clearly conferred by § 434.
Easterwood, ___ U.S. at ___, 113 S.Ct. at 1743. Indeed, were the court to accept the plaintiff's argument, such an exception would swallow the FRSA's clear intent to pre-empt state law.
The legislative history of the FRSA supports the conclusion that the savings clause does not apply in the instant case. As the Eleventh Circuit Court of Appeals observed: "[T]he legislative history [of the FRSA] makes it abundantly clear that this savings clause is to be narrowly construed." Easterwood v. CSX Transportation, Inc., 933 F.2d 1548, 1553 n. 3 (11th Cir.1991) (citing H.Rep. No. 1194, 91st Cong., 2d Sess. 11 (1970), reprinted in 1970 U.S.C.C.A.N. 4104, 4117), aff'd, ___ U.S. ___, 113 S. Ct. 1732, 123 L. Ed. 2d 387 (1993). First, an "essentially local safety hazard" cannot be statewide in character. See id.; see also Norfolk & Western Ry. Co. v. Public Utilities Commission, 926 F.2d 567, 571 (6th Cir.1991) ("Manifestly, this `local safety hazard' exception cannot be applied to uphold the application of a state-wide rule."). Plaintiff's common-law theory of negligence for failure to slow a train under certain circumstances is a statewide rule.
Secondly, to avoid pre-emption, the state regulation of a local safety hazard must "`not [be] capable of being adequately encompassed within uniform national standards.'" Easterwood, 933 F.2d at 1553 n. 3 (quoting H.Rep. No. 1194, supra, at 4117). The circumstances listed by the plaintiff that allegedly make the Robertson Road crossing a specific local hazard are actually addressed in the federal regulatory scheme. See 23 C.F.R. § 646.214(b)(3)(i)(E) (requiring automatic gates and flashing lights to be installed at certain projects when the following exists: "[e]ither a high volume of vehicular traffic, ... substantial numbers of ... trucks carrying hazardous materials, unusually restricted sight distance, continuing accident occurrences, or any combination of these conditions") (emphasis added). Accordingly, the hazards presented by the crossing at issue in this case are not only capable of being adequately encompassed within the uniform national standards, but actually are so encompassed.
Even if the court accepted plaintiff's assertion that the Robertson Road crossing presented an "essentially local safety hazard" to avoid pre-emption under the savings clause of 45 U.S.C. § 434, the plaintiff would still have to show that the state regulation does not create an undue burden on interstate commerce. Although the plaintiff did not address this issue, the common-law theory on which his excessive speed claim rests is an example of the "hodgepodge of state safety regulations" that Congress sought to avoid when it enacted the FRSA to provide uniform railroad regulation. See Easterwood, 933 F.2d at 1552.
Therefore, the court rejects plaintiff's argument that federal law does not pre-empt state law generally regarding a railroad's duty to slow a train for an extra-hazardous crossing. See Walker v. St. Louis-Southwestern Ry. Co., 835 S.W.2d 469, 474 (Mo.Ct. App.1992) (holding that "the old common law duty to moderate train speed ... at an extra-or ultra-hazardous crossing" is pre-empted).
II. Adequacy of Grade Crossing Warning Devices
A. Pre-emption
The defendant asserts that the plaintiff's cause of action for negligence based on allegedly inadequate warning devices at the Robertson Road crossing is pre-empted by federal law. The defendant argues that, under the standards set forth in Easterwood, pre-emption has occurred because the crossing at issue was inspected pursuant to a federally funded program established by the South Carolina Highway Department. This *1019 court disagrees with the defendant's reading of Easterwood.
In Easterwood, the Supreme Court specifically addressed pre-emption of claims based on inadequate warning devices at grade crossings. In analyzing pre-emption in this area, the Court examined a series of regulations promulgated by the Secretary of Transportation that address grade crossing safety.
First, the Court examined the regulations of 23 C.F.R. pt. 924 (1992), which require each state receiving federal aid to establish a highway safety improvement program to evaluate and remedy highway hazards. The Court also noted that parallel regulations, codified at 23 C.F.R. pt. 1204.4, "require state programs to systematically identify hazardous crossings and develop `a program for the elimination of hazards.'" Easterwood, ___ U.S. at ___ & n. 6, 113 S.Ct. at 1738 & n. 6. The Court determined that these regulations merely "establish the general terms of the bargain between the federal and state governments: the States may obtain federal funds if they take certain steps to ensure that the funds are efficiently spent." Id. at ___, 113 S.Ct. at 1739.
Furthermore, the Court noted that these regulations were not intended to displace state negligence law. "In fact, the scheme of negligence liability could just as easily complement these regulations by encouraging railroads the entities arguably most familiar with crossing conditions to provide current and complete information to the state agency responsible for determining priorities for improvement projects in accordance with § 924.9." Id. at ___, 113 S.Ct. at 1739. Accordingly, the Court refused to find preemption based on the "general mandates" of these regulations. Id. at ___-___, 113 S.Ct. at 1739-40.
In addition, the Easterwood Court refused to find pre-emption based on regulations that require states to comply with the standards set out in the Federal Highway Administration's Manual on Uniform Traffic Control Devices for Streets and Highways (MUTCD). As the Court noted, the Manual was intended to set standards for traffic control devices, but not to establish legal requirements for installation of these devices. Therefore, the Court concluded that "the requirement that the States comply with the MUTCD does not cover the subject matter of the tort law of grade crossings." Id. at ___, 113 S.Ct. at 1740.
Finally, the Easterwood Court examined the pre-emptive effect of the provisions of 23 C.F.R. § 646.214(b)(3)-(4). These regulations provide that particular warning devices must be installed, or federal approval must be obtained, for certain crossing projects. Because these regulations "displace state and private decision making authority" about the devices required at certain crossings, the Court concluded that "when [these regulations] are applicable, state tort law is pre-empted." Easterwood, ___ U.S. at ___-___, 113 S.Ct. at 1740-41. Section 646.214(b)(3) applies to projects in which federal funds participate in the installation of warning devices.[1] Accordingly, the pre-emption issue in Easterwood turned on whether federal funds participated in the installation of warning devices at the crossing where the collision occurred.
Defendant in the instant case contends that state tort law is pre-empted because the Robertson Road crossing was inspected pursuant to the Highway Department's Railroad Grade Crossing program, which is federally funded. This reading of Easterwood cannot prevail.
The crossing at issue in Easterwood was not only inspected, but the Georgia Department of Transportation had actually planned to upgrade the site and had initially set money aside for the plan. Id. at ___-___, 113 S.Ct. at 1741-42. Nevertheless, the Court found no pre-emption had occurred because no federal funds actually participated in the installation of warning devices at that crossing. Id. The situation in Easterwood thus presented a stronger argument for pre-emption than that urged by the defendant here; yet, the Supreme Court rejected *1020 the railroad's claims of pre-emption. See id.; see also Southern Pacific Transportation Co. v. Builders Transport, Inc. 1993 WL 185620 (E.D.La. May 25, 1993) (unpublished) (following Easterwood and finding no pre-emption of state-law negligence action based on inadequate warning devices even though crossing had been rated, evaluated, and prioritized to receive an upgrade using federal funds).
Therefore, this court concludes that the plaintiff's negligence claim for failure to provide adequate warning devices at the crossing is not pre-empted by federal law.
B. Failure to State a Claim
In the alternative to pre-emption, the defendant asserts that the plaintiff's action based on inadequate warning devices fails to state a claim under South Carolina law. It is undisputed that the Robertson Road crossing contained the standard crossbuck warning signs, the only warnings required by South Carolina statute. See S.C.Code Ann. § 56-5-1010 (Law.Co-op.1991); S.C.Code Ann. § 58-17-1390 (Law.Co-op.1976). Defendant alleges that railroads have no duty to install additional warning devices because the Highway Department has the exclusive authority to install such devices. The South Carolina MUTCD and S.C.Code Ann. §§ 56-5-930 and -1020 apparently vest such authority for selecting and installing crossing warning devices solely in the Highway Department.
However, the court does not agree that these provisions were intended to relieve railroads of their common-law duty to provide safe passage across their rails. See, e.g., Graham v. Seaboard Air Line R.R., 250 F. Supp. 566, 571 (D.S.C.1966) ("Where a railroad crosses a public highway a motorist using the highway has a right to use the crossing just as much as the railroad has a right to use it; and it is the common law duty of the railroad to give such signals and to take such actions as are reasonably sufficient to protect travellers using the crossing."); cf. Doremus v. Atlantic Coast Line Ry. Co., 242 S.C. 123, 130 S.E.2d 370, 375 (1963) (holding that railroad company has common-law duty, independent of statute, "to give such signals as may be reasonably sufficient in view of the situation and surroundings to put individuals using the highway on their guard"). Because railroads are the entities most familiar with the dangers presented by a particular crossing, they should be encouraged to bring dangers to the attention of the appropriate authorities. Although railroads may lack the authority to physically install warning devices, they have a duty to identify crossings that pose particular threats and to report such dangers to the Highway Department. See Easterwood, ___ U.S. at ___ n. 5, 113 S.Ct. at 1738 n. 5 (noting that the allocation of the authority to install safety devices to state and local governments "apparently does not relieve the railroads of their duty to take all reasonable precautions to maintain grade crossing safety, including, for example, identifying and bringing to the attention of the relevant authorities dangers posed by particular crossings") (citing Southern Ry. Co. v. Georgia Kraft Co., 188 Ga.App. 623, 373 S.E.2d 774, 776 (1988)). Accordingly, this court denies defendant's motion to dismiss plaintiff's claim relating to the adequacy of the warning devices at the crossing.
III. Failure to Remove Vegetation
The issue of pre-emption of the plaintiff's claim based on the railroad's alleged failure to remove vegetation from its right of way was not briefed by either side. However, at oral argument the defendant briefly addressed the pre-emption of plaintiff's vegetation claim; thus, the court is inclined to dispose of this issue. The court concludes that the plaintiff's claim is partially pre-empted.
Under 49 C.F.R. § 213.37 (1992), railroad track owners must keep vegetation on, or immediately adjacent to, the tracks under control. As the Eleventh Circuit Court of Appeals stated, "[b]ecause the Secretary has chosen to regulate vegetation, Congress explicitly has pre-empted all state regulation in this area." Easterwood v. CSX Transportation, Inc., 933 F.2d 1548, 1554 (11th Cir. 1991), aff'd, ___ U.S. ___, 113 S. Ct. 1732, 123 L. Ed. 2d 387 (1993). However, as the Fifth Circuit Court of Appeals found, because these regulations apply only to vegetation on, and immediately adjacent to, the railbed, states are free to regulate vegetation located beyond the area contemplated by 49 *1021 C.F.R. § 213.37. Missouri Pacific R. Co. v. Railroad Commission of Texas, 833 F.2d 570 (5th Cir.1987). Accordingly, plaintiff's claim relating to vegetation immediately on or adjacent to the track is pre-empted; but to the extent that the plaintiff's claim relates to vegetation on the defendant's right of way near the tracks, beyond the area covered by the federal regulation, this claim is not preempted.
Viewing the evidence in the light most favorable to the plaintiff, there is sufficient evidence of excessive vegetation to deny summary judgment for the defendant on the part of the plaintiff's claim that is not pre-empted.
IV. Failure to Sound Warning Signals
Both the plaintiff and the defendant have moved for summary judgment on the plaintiff's claim for failure to sound the warning signals required by S.C.Code Ann. § 58-15-910. This section provides that a train must ring a bell or sound a whistle "at a distance of at least five hundred yards from the place where the railroad crosses any public highway ... and [must keep the signal] ringing or whistling until the engine ... has crossed such highway." The signal must be sounded continuously until the engine passes the crossing, Curry v. United States, 129 F. Supp. 38 (D.S.C.1954), and violation of this section is negligence per se, Seaboard Coast Line R.R. v. Owen Steel Co., 348 F. Supp. 1363 (D.S.C.1972). However, under the statute both ringing of the bell and blowing of the whistle are not required, either being sufficient signal of the approach of the train. McAbee v. Southern Ry. Co., 166 S.C. 166, 164 S.E. 444 (1932).
Because both parties have moved for summary judgment on this issue, the facts must be viewed in the light most favorable to the non-moving party for each party's motion. Plaintiff's motion for summary judgment on this point is denied because there is evidence in the record that the bell on the engine was ringing continuously from the start of the train's trip that morning. Similarly, defendant's motion for summary judgment on this issue is denied because a jury could conclude that the bell was in fact not operating at the time of the accident. Whether the appropriate signal was given in this case is disputed and is, therefore, a question for the jury.
V. Negligent Entrustment
Plaintiff has alleged a cause of action against the railroad for negligent entrustment in allowing the engineer who was involved in the accident to drive the train. Obviously, plaintiff's motivation behind his negligent entrustment theory is to get the engineer's prior driving record into evidence. Such evidence would otherwise be inadmissible under Fed.R.Evid. 404(b), but would be admissible in a negligent entrustment action to show notice on the part of the railroad company.
Defendant has moved for summary judgment on plaintiff's negligent entrustment claim. Defendant asserts that because the engineer was indisputably acting within the scope of employment in driving the train at the time of the accident, respondeat superior applies, and negligent entrustment is, therefore, superfluous. This court agrees and grants defendants motion for summary judgment on this issue.
Although South Carolina apparently has not addressed this issue, the general rule is that when vicarious liability has been admitted, a plaintiff may not proceed on a negligent entrustment theory. See Hackett v. Washington Metropolitan Area Transit Authority, 736 F. Supp. 8, 9-11 (D.D.C.1990) (holding that negligent entrustment claim is "unnecessary, prejudicial and redundant" when defendant employer admits that the employee was acting within the scope of employment) (citing Houlihan v. McCall, 197 Md. 130, 78 A.2d 661 (1951); Breeding v. Massey, 378 F.2d 171 (8th Cir.1967); Hood v. Dealers Transport Co., 459 F. Supp. 684 (N.D.Miss.1978); Elrod v. G & R Construction Co., 275 Ark. 151, 628 S.W.2d 17 (1982); Tittle v. Johnson, 124 Ga.App. 706, 185 S.E.2d 627 (1971); and Plummer v. Henry, 7 N.C.App. 84, 171 S.E.2d 330 (1969)); see also Cole v. Alton, 567 F. Supp. 1084 (N.D.Miss. 1983) (granting summary judgment on a claim of negligent entrustment where vicarious liability was not disputed). The rationale behind this rule appears sound: "permitting proof of previous misconduct would only *1022 serve to inflame the jury and result in the `danger that the jury might draw the impermissible inference that because the [driver] had been negligent on other occasions he was negligent at the time of the accident.'" Hackett, 736 F.Supp. at 9 (quoting Houlihan, 78 A.2d at 665).
In the instant case, the defendant railroad has admitted that the engineer was acting within the scope of his employment in driving the train. Accordingly, this court grants defendant's motion for summary judgment on plaintiff's cause of action for negligent entrustment.
VI. Contributory Negligence and Other Negligence Issues
This case presents several remaining negligence issues that are raised either in the plaintiff's complaint or as affirmative defenses. More specifically, these issues are: failure to see the plaintiff, failure to stop the train in time, and contributory negligence. Viewing the evidence in the light most favorable to the non-moving party, the court concludes that each of these issues presents disputed questions of fact for the jury. Therefore, summary judgment on these issues is inappropriate.
CONCLUSION
For the foregoing reasons, defendant's motion for summary judgment on plaintiff's claim for excessive speed is granted. Defendant's motion for summary judgment, and alternative motion to dismiss, on plaintiff's claim for inadequate warning devices is denied. Defendant's motion for summary judgment on plaintiff's claim for failure to control vegetation on the railroad's right of way is granted in part and denied in part. In addition, defendant's motion for summary judgment is granted on plaintiff's claim for negligent entrustment, but denied on the plaintiff's remaining causes of action. Finally, plaintiff's motion for summary judgment for failure to sound required warning signals is denied, and plaintiff's motion to reconsider is also denied.
IT IS SO ORDERED.
NOTES
[1] The requirements of 23 C.F.R. § 646.214(b)(3) also apply to railroad-highway grade crossings located within the limits of, or near the terminus of, a federal-aid highway project. The defendant in the instant case has not alleged that the Robertson Road crossing falls within this category. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1459167/ | 864 F. Supp. 17 (1994)
Gary ZUSPANN, Plaintiff,
v.
Jesse BROWN, Secretary of the Department of Veteran Affairs, Wallace Hopkins, Dr. Edward Young and Dr. Susan Mather, Defendants.
Civ. No. W-94-CA-058.
United States District Court, W.D. Texas, Waco Division.
September 13, 1994.
*18 *19 James Eric Wren, III, Haley, Davis, Wren & Bristow, Robert L. McHaney, Jr., Waco, TX, for plaintiff.
Theodore C. Hirt, Dept. of Justice, Civ. Div., Felicia L. Chambers, U.S. Dept. of Justice, Federal Programs Branch, Washington, DC, for defendant Jesse Brown.
Stephen F. McGraw, U.S. Dept. of Justice, Trial Atty., Torts Branch, Civ. Div., Helene M. Goldberg, Nicki L. Koutsis, U.S. Dept. of Justice, Civ. Div., Washington, DC, for defendants Dr. Edward Young, Dr. Susan Mather and Wallace Hopkins.
ORDER
WALTER S. SMITH, Jr., District Judge.
Came on to be considered the Motion to Dismiss of Defendants Hopkins, Mather and Young, and the Secretary's Motion to Dismiss.
I. Background
This is a civil action filed by Gary Zuspann, a handicapped veteran of the United States Navy, against the Secretary of the Department of Veteran Affairs; Dr. Edward Young, Chief of Staff at the Department of Veterans Affairs Hospital in Houston; Dr. Susan Mather, a Department physician in the office of the Undersecretary of Health; and Wallace Hopkins, Director of the Department of Veteran Affairs in Waco.
Plaintiff claims that he has been denied medical care, including life-sustaining medical treatment, to which he is entitled as a United States Veteran. Plaintiff claims that this denial of medical care violates the Rehabilitation Act of 1973, 29 U.S.C. § 701, et seq., and the Fifth Amendment of the United States Constitution. Plaintiff also brings a Bivens action against Defendants Young, Mather, and Hopkins for deprivation of Plaintiff's constitutionally protected property interest in his disability benefits. Plaintiff seeks declaratory relief, compensatory and punitive damages.
Plaintiff's claims arise out of his service with the Navy in Operation Desert Storm. Plaintiff was a mess cook on board the surface vessel, the U.S.S. New Orleans. While anchored in the Persian Gulf during the war, the crew of the U.S.S. New Orleans could see burning oil wells from Iraq, and Plaintiff was exposed to smoke and debris from these fires. Oil slicks were also visible on the surface of the Persian Gulf, and the U.S.S. New Orleans relied on the Gulf for its water supply. In March of 1991, the main power supply of the U.S.S. New Orleans failed, and a portable diesel fuel generator was used for power. The exhaust from this equipment permeated the entire ship for about six months. This was especially a problem because the ventilation system on board the ship was inoperable. The smell of hydrogen sulfide gas was often present on the ship, and reservoirs of diesel fuel directly above the Plaintiff's sleeping area were opened on numerous occasions.
After his service on board the U.S.S. New Orleans, the Plaintiff and other crew members disembarked in the Philippines and were ordered to assist in the clean up of ash and debris from a recent volcanic eruption. Unlike the volunteers from organizations assisting with the cleanup, the Plaintiff and crew were not given protective clothing and respirators to protect them from the dangerous volcanic ash (which contained quantities of silica).
The Plaintiff was then flown from the Philippines back to the mainland of the United States. After returning to Texas, the Plaintiff's health began to quickly deteriorate. After numerous examinations by V.A. doctors, the Plaintiff was examined by Dr. Claudia Miller, a physician specializing in environmental and occupational medicine. Dr. Miller concluded that Plaintiff's symptoms were compatible with the disease known as chemical sensitivity and recommended that he be sent to an environmental unit for diagnosis, and that various allergy tests be conducted. Dr. Hamill, the Plaintiff's attending physician in Houston, likewise diagnosed the Plaintiff with having symptoms compatible with chemical sensitivity. Finally, even Dr. Susan Mather concluded that chemical sensitivity was descriptive of Plaintiff's conditions.
Despite this diagnosis, the Plaintiff contends that the Department has refused to provide treatment for chemical sensitivity. *20 In fact, the Department refuses to recognize chemical sensitivity as a valid illness, despite the fact that numerous Persian Gulf veterans have suffered similar symptoms. The Plaintiff has been hospitalized several times in private hospitals for treatment since the Department's refusal to recognize his illness, but the Plaintiff is unable to pay such large hospital bills.
II. Motion to Dismiss
A motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) may be based on the complaint alone, the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts. Ynclan v. Department of the Air Force, 943 F.2d 1388, 1390 (5th Cir.1991). However, a motion that constitutes an attack on the subject matter jurisdiction of the court occurs when the motion refers to matters outside the pleadings, such as affidavits or testimony. Oaxaca v. Roscoe, 641 F.2d 386, 389 (5th Cir.1981). A court may consider affidavits and/or testimony when a party is making an attack on the court's jurisdiction. Id. at 389.
III. Discussion
In order to properly file a suit in federal court, the plaintiff must establish that the court has jurisdiction to hear the case. A federal court's jurisdiction can be based on either diversity of citizenship or a federal question. Diversity of citizenship creates federal jurisdiction when a suit is between "citizens of a State, and foreign states or citizens or subjects thereof." 28 U.S.C. § 1332(a)(2); Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1064 (5th Cir.1992). Federal jurisdiction based on a federal question exists when either: 1) some substantial, disputed question of law is a necessary element of one of the well-pleaded state claims; or, 2) one of the claims is effectively one of federal law. NGS American, Inc. v. Barnes, 805 F. Supp. 462, 464 (W.D.Tex.1992). The plaintiff in this case maintains that the court's jurisdiction is based on a federal question.
Congress, however, may limit the jurisdiction of a federal court, and has done so in this case. Through 38 U.S.C. § 511, Congress has expressly indicated that a federal court's jurisdiction to hear disputes involving veteran's benefits is to be of a limited nature.
This Act, § 511, creates a specific appellate review structure for disputes involving veterans and the Department of Veteran Affairs. The process begins with a decision being made at the Department level. If the veteran disagrees with the Department's decision, the veteran may appeal within the VA by filing a notice of disagreement with the Board of Veterans Appeals. 38 U.S.C. § 7105. The Board's decision is the final decision of the Secretary. 38 U.S.C. § 7104.[1] Review of the Secretary's final decision is governed by Chapter 72 of Title 38 of the United States Code. A veteran desiring to appeal the Secretary's decision must file a notice of appeal. 38 U.S.C. § 7266(a). The Court of Veterans Appeals has "exclusive jurisdiction" to review the decisions of the Board of Veterans Appeals. 38 U.S.C. § 7252(a); Strott v. Derwinski, 964 F.2d 1124, 1126 (Fed.Cir.1992) (stating that "Congress created the Veterans Court in part to provide judicial review of veteran's benefits decisions[, and that] [p]rior to the Act, there existed a statutory bar to such judicial review."). Any appeals from the Court of Veteran Appeals must be filed with the Court of Appeals for the Federal Circuit. 38 U.S.C. § 7292. The detailed nature of the procedural and appellate structure contained within the Veterans' Judicial Review Act clearly indicate Congress' intent to confine decisions affecting veteran's benefits within this structure.
*21 In cases involving veteran's benefits, many courts have held that § 511, and its precursor § 211(a), limits the federal judiciary's ability to exercise jurisdiction over suits involving veteran benefits. The key determinant in whether the federal court lacks jurisdiction to decide the dispute is dependant upon whether the veteran is challenging the day-to-day determination and interpretation of VA policy or making a constitutional attack on a statute.
For instance in Ryan v. Cleland, the court dismissed the plaintiff's claims for lack of jurisdiction because the plaintiff was challenging the day-to-day determination of VA policy. 531 F. Supp. 724 (E.D.N.Y.1982). In that case, a group of Vietnam veterans sought to force the V.A. to recognize and treat veterans for injuries they allegedly suffered from exposure to dioxin. The court held that the veterans' claims of entitlement to medical benefits did not rise to the level of a constitutional violation. Id. at 732. Thus, § 211(a) was a complete bar to the court asserting jurisdiction over the veterans' claims. Complaints about the quality and type of care provided was precisely the disputes Congress intended to preclude from judicial review with the passage of § 211(a). Id. at 732.
Since Ryan, the Second and Eighth Circuits have addressed the issue of when federal courts have the jurisdiction to resolve disputes involving veteran benefits. In Larrabee By Jones v. Derwinski, the Second Circuit distinguished constitutional claims that attack the statute as drafted from claims that attack the statute as applied. 968 F.2d 1497, 1500 (2nd Cir.1992). Section 211(a) precludes judicial review of non-constitutional claims, and a plaintiff may not circumvent the jurisdictional limitations imposed by § 211(a) by alleging damages for a constitutional violation arising out of a denial of benefits. Id. at 1500; Pappanikoloaou v. Administrator of the Veterans Admin., 762 F.2d 8, 9 (2nd Cir.) (per curiam), cert. denied, 474 U.S. 851, 106 S. Ct. 150, 88 L. Ed. 2d 124 (1985); Tietjen v. United States Veterans Admin., 884 F.2d 514, 515 (9th Cir.1989); Higgins v. Kelley, 824 F.2d 690, 691 (8th Cir.1987); Hiljer v. Walters, 749 F.2d 1553 (11th Cir. (per curiam), cert. denied, 472 U.S. 1029, 105 S. Ct. 3506, 87 L. Ed. 2d 637 (1985); Anderson v. Veterans Admin., 559 F.2d 935, 936 (5th Cir.1977) (per curiam); Hartmann v. United States, 615 F. Supp. 446, 449 (E.D.N.Y.1985). Thus, § 211(a) precludes a federal court from exercising jurisdiction over claims seeking a particular type or level of care for veterans even when the claim is cloaked in constitutional terms. Congress' amendment to § 211 in 1988 foreclosed any possibility that federal courts could decide claims made by veterans that involved a denial of benefits or a level of care. The statutory language and scheme of § 211 clearly indicate Congress intended to exclude all issues affecting veterans benefits, even constitutional issues, from the federal judicial system. Larrabee By Jones, 968 F.2d at 1501; Hicks v. Veterans Admin., 961 F.2d 1367, 1370 (8th Cir.1992) (holding that the statute applies to "all questions of law and fact." 38 U.S.C. § 511(a) emphasis added in original). (The statute includes all claims, whatever their bases, as long as the claim is "necessary to a decision by the Secretary under a law that affects the provision of benefits by the Secretary to veterans.") Id. at 1369.
Plaintiff in this case is not alleging a facial attack on the constitutionality of an Act of Congress. Instead, Plaintiff is merely complaining about a denial of benefits. Plaintiff asserts within his complaint that he is challenging the policies and regulations of the Secretary, but the Plaintiff fails to specifically point to a policy or regulation that prevents plaintiff from obtaining medical care. In fact, plaintiff later denies that he is seeking change in agency policy or regulations at all. See Plaintiff's Response to Secretary's Motion to dismiss plaintiff's complaint at 19.
The gravamen of plaintiff's complaint is that he requires a particular level of care, i.e., chemical free living area. And that because he is not being provided with a specific level and type of care, his constitutional rights are being violated.
Other courts that have addressed this issue have held that a veteran cannot escape Congress' intent to confine decisions involving veteran's benefits and level of care to the *22 Department of Veterans Affairs by couching their arguments in constitutional terms. Furthermore, given the complexity of the health problems experienced by the Persian Gulf War Veterans and the variance of opinion inherent in medical diagnoses and treatment, this is the very type of case that would enmesh the courts in expensive, time-consuming litigation (involving a battle of experts) that § 511's judicial bar was constructed to avoid. Congress intends that such decisions be made by the Veterans Administration in the first instance, with exclusive review, if any, in the recently-created Court of Veterans' Appeals. The plaintiff cannot be allowed to circumvent Congress' purpose in enacting § 511.
Therefore, this court lacks the jurisdiction to hear plaintiff's claims.
IV. Conclusion
Accordingly, it is
ORDERED that Defendant's Hopkins, Matter, Young, and the Secretary's Motion to Dismiss is GRANTED. It is further
ORDERED that this case be DISMISSED without prejudice. It is further
ORDERED that any pending motions be DENIED as moot.
NOTES
[1] The present Act, the Veterans Judicial Review Act of 1988, located at 38 U.S.C. § 511 provides the following:
"(a) The Secretary shall decide all questions of law and fact necessary to a decision by the Secretary under a law that affects the provision of benefits by the Secretary to veterans ... Subject to subsection (b), the decision of the Secretary as to any such question shall be final and conclusive and may not be reviewed by any other official or by any court, whether by action in the nature of mandamus or otherwise." 38 U.S.C. § 511. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1502470/ | 413 S.W.2d 800 (1967)
R. L. DEWS et ux., Appellants,
v.
B. C. FLOYD et al., Appellees.
No. 272.
Court of Civil Appeals of Texas, Tyler.
March 30, 1967.
*801 Charles E. Coleman, Tyler, for appellants.
Lawrence & Lawrence, Wm. M. Williams, Jr., Tyler, for appellees.
DUNAGAN, Chief Justice.
This suit was instituted by appellees, as the plaintiffs in the court below, on September 13, 1965, against appellants.
Following the filing of defendants'-appellants' original answer, plaintiffs-appellees filed their first amended original petition on December 6, 1965. On February 18, 1966, appellants filed their first amended answer and it was on these pleadings that the case went to trial before the court without the aid of a jury on June 17, 1966. The suit was brought to recover indebtedness due under a contract of sale prior to its rescission, for balance due on a promissory note, and for attorney's fees.
On March 3, 1964, appellants and appellees entered into a valid contract in good faith by which appellees were to sell a house and lot in the City of Tyler to appellants. Appellants were to pay a certain sum each month and keep up the taxes and insurance. Upon completion of performance by appellants, appellees were to convey title to them. There were certain expenses in connection with the making of the contract, which expenses appellants were unable to pay and which were represented by a promissory note given by appellants to appellees in the amount of $236.00.
On March 1, 1965, appellees considered appellants to be in default and brought a forcible detainer proceeding in the justice court, Precinct No. 1, Place No. 2, Smith County, Texas, in which they sought judgment for restitution of the premises described in the purchase contract costs, and for such other relief as they "may be entitled to, either in law or in equity." The justice court granted appellees possession of the premises and also a judgment for the sum of $443.64 as rent and costs; however, the judgment was found void by the trial court in this case insofar as it allowed the money judgment, since the money judgment exceeded the jurisdictional amount in the justice court.
Because the money judgment awarded by the justice court exceeded the jurisdictional amount of such court, suit was brought in the 7th Judicial District Court of Smith County for the indebtedness accruing to appellees under the contract of sale prior to the rescission thereof, which included the unpaid balance due and owing on the principal, taxes, insurance, the balance due on the $236.00 promissory note and for attorney's fees.
The pertinent portions of the contract, which forms the basis of this lawsuit, read:
"The purchase price is Nine Thousand Five Hundred and No/100 ($9,500.00) Dollars. Purchaser agrees to pay the purchase price as follows: $250.00 cash as down payment, * * * and the payment thereafter of equal monthly installments in the amount of Eighty-Five and no/100 ($85.00) Dollars each, the first installment to become due and payable on or before April 1, 1964, and a like *802 installment to become due and payable on or before the 1st day of each succeeding month thereafter until the entire indebtedness is paid, * * *.
"* * * and Purchaser herein agrees to pay all taxes due on the above described premises during the time this contract is in force * * *.
"* * *
"If Purchaser fails to comply with any of the conditions and obligations agreed to and assumed herein, the Seller may at his option declare the entire balance of the purchase price due and collectible or may rescind this contract; and in the event of rescission, all payments already made by the Purchaser herein shall be taken and retained by the Seller not as a penalty but as and for liquidated damages for the breach of this contract; and Purchaser herein is to make payment on or before each installment due date, and in the event Purchaser is as much as thirty (30) days delinquent, on any installment due date, Seller herein may exercise his option herein given to rescind the contract, and the failure of the Seller to exercise such option at the time of any default shall not operate to bar or abridge his right to exercise such option upon any subsequent default of the Purchaser. A letter addressed in the ordinary mails to the Purchaser at his last known post office address shall be sufficient notice of the exercise of such option by the Seller and within ten (10) days from the mailing of said notice, Purchaser agrees to deliver possession to the Seller.
"In the event it becomes necessary for the Seller herein to employ an attorney or attorneys to file suit against Purchaser herein, for collection of the balance due under this contract or for possession of said premises, then and in that event, Purchaser herein agrees to pay any reasonable attorney's fees that Seller may have been forced to expend in connection with this contract.
"In the event Seller elects to declare this contract null and void and of no further force and effect through failure of the Purchaser to carry out the terms of this contract and make the payments of principal and interest when due, the Seller shall be entitled and shall receive full surrender and possession of said premises and improvements thereon, and the Purchaser agrees that the Seller may begin dispossession proceedings in any court for such possession as against a monthly tenant if and when the monthly payments as stipulated herein are not paid on or before the 1st day of each month when due. Then and in that event, this agreement at the option of Seller or his legal representatives or assigns shall become and be void and of no effect except as to this clause and the Seller shall be entitled to immediate surrender and possession of said premises."
Several months after the contract was executed, appellants fell in arrears and never thereafter got back on a current basis. They not only fell in arrears on the monthly installment payments, but failed to pay the taxes and insurance. Therefore, it became necessary for appellees to assume payment of these obligations as provided by the terms of the contract.
After having defaulted, appellants continued to reside on the premises and forced appellees to bring the forcible detainer proceeding to recover possession as hereinabove stated.
The court in the instant case entered judgment for appellees in the sum of $573.10, together with interest thereon at the rate of eight percent (8%) per annum from date of judgment and all costs of suit. The judgment did not award appellees a recovery for any sum of money due and owing them that accrued after rescission, except the $100.00 for attorney's fees which the court found to be a reasonable sum for the services rendered. From this judgment, appellants have appealed.
*803 Also, the trial court filed findings of fact and conclusions of law in which it found that:
(a) Sometime during the fall of the year of 1964, the appellants fell in arrears in their installments set out in the contract and were never thereafter on a current basis.
(b) The appellants were notified on or about April 28, 1965, that the contract was in default and proper and timely demand was made of them for possession of the premises.
(c) The premises were released by the appellants only after the filing of a forcible entry and detainer suit and judgment was entered therein.
(d) The appellants were obligated to pay under said contract and there accrued and was due to be paid to the appellees before the rescission the sum of $78.00 as unpaid installment payments.
(e) Under the contract, the appellants promised to pay the county, state, Tyler Independent School District and Tyler Junior College taxes for the year 1964.
(f) The composite of the taxes for the said state, county, school district and Junior College for the year of 1964 was $154.64.
(g) The appellants have never paid this sum or any part thereof, but the appellees did pay such taxes for appellants.
(h) The sum of $154.64 in taxes paid by the appellees was added to the sum due by the appellants to the appellees under the said contract.
(i) The appellants had the undisturbed use and occupancy of the premises described in the contract for the period of time from the date of the contract until the same was released on or about the 28th day of May, 1965.
(j) The value of such use and occupancy of the premises during the period from March 3, 1964, through and until the time of the said release of the premises by the appellants, after allowing all proper offsets and credits so due, is the sum of $78.00.
(k) The appellants were unjustly enriched in the amount of $154.64 by the use of the premises without paying for the taxes indicated.
(1) The appellees employed the firm of Lawrence & Lawrence, attorneys at law, to represent them and prosecute their rights under the contract herein involved. Such law firm did treat and negotiate with the appellants, file a forcible entry and detainer action, attend hearings thereunder and file this litigation and carried it through trial and judgment. The sum of $100.00 is a reasonable attorney's fee for such services of said law firm.
(m) The appellants executed and delivered a promissory note dated March 3, 1964, in the original principal amount of $236.00.
(n) This note became in default in July, 1964.
(o) After allowing all proper credits, the sum of money due under this promissory note as of the date of the judgment in this cause was the sum of $240.64.
(p) Appellees, by the letter dated April 27, 1965, and received by appellants on April 28, 1965, giving notice to appellants that the contract was in default and demanding possession of the premises, was notice of their intention to rescind the contract in question.
(q) The appellees did file a forcible entry and detainer suit against the appellants and a judgment was entered in justice court, Precinct No. 1, Place No. 2, Smith County, Texas, for the recovery of possession of the premises in question and for the sum of $443.64 as rent, together with all costs of suit.
(r) No evidence was offered by the appellants at the hearing and trial in contravention *804 of any of the facts and proof of the appellees.
The appellants contend "It was reversible error for the Court to render judgment in favor of Appellees, because such judgment is not supported by, and is contrary to, the findings of the Court, * * *"
The basis of appellants' contention, it seems, is that the appellees elected to rescind the contract and obtained possession of the premises, having so elected, all of appellants' obligations under the contract were terminated. In support of this contention, the appellants argue that appellees, having elected to rescind the contract and bringing the action in justice court, are estopped to maintain the present action. Appellants further argue that once an election had been made to rescind the contract and judgment for the sum of $443.64 had been secured in justice court, representing the same relief asked for in this court, no further action could be maintained under the contract in question. Appellants' contention is overruled.
The only relief sought under the contract by appellees in their pleading in the justice court was for "judgment for restitution of said premises and for costs, and for such other relief as [t]he[y] may be entitled to, either in law or in equity." This suit was brought by the appellees for the purpose of recovering possession of the property described in the purchase contract.
The judgment entered in the justice court allowed the following recovery:
"IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that Plaintiffs, B. C. FLOYD and LEROY FLOYD, have restitution for which let writ issue, of the premises described in their complaint, * * *.
"and further that they do have and recover of and from Defendants, R. L. DEWS and wife, MEARLEAN DEWS, the sum of $443.64, as rent and all costs of suit, for which let execution issue."
That part of the judgment entered in the justice court awarding to appellees the sum of $443.64 exceeds the jurisdictional amount of the court. Therefore, it is obvious that in this respect the judgment on its face is void.
Furthermore, the only relief sought by the appellees in the justice court, other than for restitution of the premises and costs, was for what they were "entitled to, either in law or in equity." Therefore, not being entitled to recover judgment for the sum of money as was awarded by the justice court, "either in law or in equity," appellees prayer for relief did not include a recovery for any portion of the money judgment awarded them in the justice court case. Under this state of the record, it is apparent that the appellees for the first time sought to recover for monies due them under the contract and on the promissory note in the suit filed in the 7th District Court and now before us.
A void judgment has been termed mere waste paper, an absolute nullity; and all acts performed under it are also nullities. Again, it has been said to be in law no judgment at all, having no force or effect, conferring no rights, and binding nobody. It is good nowhere and bad everywhere, and neither lapse of time nor judicial action can impart validity. Commander v. Bryan, 123 S.W.2d 1008, (Tex.Civ.App., Fort Worth, 1938, n. w. h.); 34 Tex.Jur., Sec. 262, page 177; Maury v. Turner, 244 S.W. 809, (Tex. Com.App., 1922).
Also, a void judgment has been defined as "one which has no legal force or effect, invalidity of which may be asserted by any person whose rights are affected at anytime and at any place directly or collaterally." Black's Law Dictionary; Reynolds v. Volunteer State Life Ins. Co., 80 S.W.2d 1087, (Tex.Civ.App., Eastland, 1935, writ ref.); Gentry v. Texas Department of Public Safety, 379 S.W.2d 114, 119, (Tex.Civ.App., Houston, 1964, writ ref., n. r. e., 386 S.W.2d 758).
*805 In Commander v. Bryan, supra, the court said:
"Nor will a void judgment be given effect of res adjudicata in a subsequent suit involving the same subject matter. * * *
"`A judgment void upon its face and requiring only an inspection of the record to demonstrate its invalidity, is a mere nullity, in legal effect no judgment at all, conferring no right and affording no justification. Nothing can be acquired or lost by it; it neither bestows nor extinguishes any right, and may be successfully assailed whenever it is offered as the foundation for the assertion of any claim or title. * * *" (Emphasis added).
Where a court rendering judgment does not have jurisdiction, the judgment is void and cannot operate as res adjudicata; it neither binds, bars, nor estops anyone. 34 Tex.Jur.2d, Sec. 467, page 514.
It has also been held that "It is not necessary to take any steps to have a void judgment reversed, vacated or set aside. It may be impeached in any action direct or collateral." Holder v. Scott, 396 S.W.2d 906, (Tex.Civ.App., Texarkana, 1965, writ ref., n. r. e.).
When the judgment is not merely erroneous, but an absolute nullity, it can have no binding force or effect, either in the tribunal in which it is rendered, or in any other in which it may be brought in question. Milan County v. Robertson, 47 Tex. 222; Barton v. Montex Corporation, 295 S.W. 950, (Tex.Civ.App., Austin, 1927, n. w. h.).
Furthermore, if it appears that, on account of the limited jurisdiction of the justice court in which the forcible entry and detainer proceedings are pending, all matters between the parties cannot be adjudicated, either party may maintain an action in a court of competent jurisdiction for proper relief. Holcombe v. Lorino, 124 Tex. 446, 79 S.W.2d 307, 309, (Tex.Sup., 1935).
Article 3994, Vernon's Ann.Texas Civil Statutes, reads: "The proceedings under a forcible entry, or forcible detainer, shall not bar an action for trespass, damages, waste, rent or mesne profits."
It has been the uniform holding under this Article that a forcible entry and detainer proceeding is not exclusive, but is cumulative of any other remedy that a party may have in the courts of this state. Scott v. Hewitt, 127 Tex. 31, 90 S.W.2d 816, 103 A.L.R. 977 (1936); Holcombe v. Lorino, supra; Bull v. Bearden, 159 S.W. 1177, (Tex.Civ.App., Fort Worth, 1913, n. w. h.); 103 A.L.R. 977; See 25 Tex.Jur.2d, Sec. 6, page 470.
Jurisdiction to recover possession of property by those who are entitled to the possession thereof is vested by Article 3973, Vernon's Annotated Texas Statutes, 1925. The proceeding is by a forcible entry and detainer or a forcible detainer suit as the case may be. The primary object of such a suit is a recovery of possession. The primary issue is a right to possession. There may be joined in said suit a cause of action to recover delinquent rents payable under the contract if the amount is within the jurisdiction of the justice court. Rule 738, Texas Rules of Civil Procedure. However, this is rent as such and not damages for wrongful withholding of the premises or other benefits accruing to the appellees under the contract. This is all the relief that may be given in the justice court. Haginas v. Malbis Memorial Foundation, 349 S.W.2d 957, (Tex.Civ.App., Houston, 1961), and Haginas v. Malbis Memorial Foundation, 163 Tex. 274, 354 S.W.2d 368, (1962, affirming the Court of Civil Appeals).
It seems that Rule 738 which permits suits for rents in connection with one for forcible entry and/or forcible detainer applies to suits of landlords against their tenants, where the rents claimed are in such amount *806 as the justice court would have jurisdiction of. Hengy v. Hengy, 151 S.W. 1127, 1132, (Tex.Civ.App., San Antonio, 1912, n. w. h.). This not being a suit between landlord and tenant, therefore we do not construe any part of the relief sought by appellees in the justice court to be an action for rent.
Moreover, the sum of $443.64 recovered in the justice court was for rent only. Thus, it appears that this judgment does not cover any of the items sued for in the District Court. Therefore, even though appellees had sought and recovered judgment in the justice court for monies due them under the contract (which this record does not so show) representing the same relief in whole or in part sought in the instant case, the judgment allowing such recovery being void, consequently, they recovered nothing that was awarded them by the judgment now before us for review. So, appellees' rights to recover judgment for any monies accruing to them under the contract of purchase were not adjudicated in the justice court case.
Moreover, rescission is an equitable remedy. Complete and full justice is a fundamental doctrine of equity jurisprudence, and if damages, as well as rescission, are essential to accomplish full justice, they will both be allowed. Holland v. Western Bank & Trust Co., 56 Tex. Civ. App. 324, 118 S.W. 218, (1909, n. w. h.).
Appellants do not attack the contract in any way or deny that they owe the note. Appellants stipulated in the trial court that the attorney's fees sued for and allowed by the court were reasonable. As a matter of fact, they do not deny the justness of any part of appellees' claim of indebtedness sued for in this case and found by the trial court to be due and owing to appellees.
The trial court's findings of fact and conclusions of law, which we find to be amply supported by the evidence, adequately supports the judgment here under review. Stinson v. Sneed, 163 S.W. 989, (Tex.Civ. App., Amarillo, 1914, n. w. h.); Bailey v. Mann, 248 S.W. 469, (Tex.Civ.App., El Paso, 1923, n. w. h.); Gray v. Merritt, 276 S.W. 187, (Tex.Com.App., 1925); Groce v. P. B. Yates Mach. Co., 288 S.W. 161, (Tex. Com.App., 1926).
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1506648/ | 899 S.W.2d 760 (1995)
GIFFORD HILL AMERICAN, INC., Appellant,
v.
Paul V. WHITTINGTON, Appellee.
No. 07-94-0090-CV.
Court of Appeals of Texas, Amarillo.
May 18, 1995.
*761 True, Rohde & Sewell, Maureen F. Moore, Dallas, for appellant.
Carr, Fouts, Hunt, Craig, Terrill & Wolfe, Donald M. Hunt, Gary M. Bellair, Lubbock, for appellee.
Before REYNOLDS, C.J., and BOYD and QUINN, JJ.
BOYD, Justice.
From a judgment finding appellee Paul Whittington was wrongfully discharged and awarding $124,991 in actual damages, $100,000 in exemplary damages, and prejudgment interest of $67,158.29, appellant Gifford Hill American (GHA) brings this appeal. Appellee's theory of recovery was that his firing was at least partially based on his efforts to recover workers' compensation, an action which, under statute, an employer may not consider when firing an employee. Tex.Rev. Civ.Stat.Ann. art. 8307c.[1] We reform the judgment of the trial court and, as reformed, affirm the judgment.
Appellee began working for GHA as a welder in 1972. In 1988, he was diagnosed with a back injury and underwent surgery for the injury. At the time of his diagnosis and surgery, appellee did not believe his *762 injury was work related. Upon his return to work, his employer provided him with a small crane to assist in moving heavy objects. In late March of 1989, appellee suffered an on-the-job injury to his neck but continued to work for several days after the injury. However, on the Monday following the injury, he informed his supervisor, Gene Daily, that he was unable to work because of the injury and that he was contemplating filing a workers' compensation[2] claim. According to appellee, Daily was upset to hear of his inability to work because of the injury and suggested he first use vacation time to see if his condition improved. As appellee did not have any accrued vacation time, Daily arranged for a week's vacation time for him. According to appellee, Daily made the arrangement because he was upset about the injury due to the consequences of the loss of injury-related work time. In addition to the financial implications of a work-related injury noted below, Daily would have received an award if he and his employees worked for 1000 days without any loss of work time because of an injury.
Appellee's work-injury-related absence would have other implications for both Daily and appellee's co-workers. Under GHA's safety program, each member of a safety team is awarded $25 and a free dinner for each quarter of the year that all members of the team work without injury. If any team member is injured during the quarter, no one receives the free dinner and the money awarded to the other members of the team is reduced by $5. The supervisor's award was reduced by $10 and the injured worker would not receive any award. If the injury resulted in the loss of work, the injured worker would not receive any awards for the remainder of the year. Those who were injured, and their supervisors, also lost the opportunity to participate in several drawings each year for awards totaling $50,000.
Appellee's last work day at GHA was April 17, 1989. On May 8 of that year, appellee had a myelogram performed and was told by his doctor on May 9 or 10 he needed surgery. On May 10, appellee told Daily of his need for surgery and was referred by Daily to Royce Adams, Daily's supervisor. According to appellee, Adams showed little reaction to the news. Around this time, GHA told Adams and Daily of the need to reduce the work force because of a reduction in the amount of work being done by the company. Daily was responsible for selecting the individual employees in his department to be "laid off."[3] Appellee was one of three employees selected by Daily to be "laid off." GHA asserts that under the company's policy, which we later discuss, Daily had no discretion in selecting individual employees to be "laid off." When appellee later informed Adams of a change in the date of the surgery, Adams informed him he had been laid off. Over the course of the next year, GHA discharged approximately one-third of its employees.
In challenging the trial court judgment, GHA presents three points of asserted error:
1) the evidence was legally and factually insufficient to support a finding that GHA violated article 8307c in discharging appellee; 2) the trial court erred in permitting appellee to present testimony of undisclosed expert witnesses; and 3) the trial court improperly calculated prejudgment interest.
In discussing GHA's first point, we must note the well established standards by which we determine the legal or factual sufficiency of the evidence to support the verdict. In reviewing a no evidence, or legal sufficiency challenge, we must review the record to determine whether there is more than a scintilla of evidence to support the finding. *763 Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965). If such evidence exists, the finding is not legally insufficient. Stedman v. Georgetown S. & L. Ass'n, 595 S.W.2d 486, 488 (Tex.1979). Evidence is merely a scintilla when it is so weak as to create a mere surmise or suspicion of a fact. Seideneck v. Cal Bayreuther Associates, 451 S.W.2d 752, 755 (Tex.1970).
When reviewing the factual sufficiency of the evidence, we are required to examine the entire record to determine whether there is some probative evidence to support the finding and, if there is, we must further determine whether the evidence supporting the finding is so weak or the answer so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust. Garza, 395 S.W.2d at 823; In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951); Hydrocarbon Management, Inc. v. Tracker Exploration, Inc., 861 S.W.2d 427, 431-32 (Tex.App.Amarillo 1993, no writ); Raw Hide Oil & Gas, Inc. v. Maxus Exploration Co., 766 S.W.2d 264, 276 (Tex.App. Amarillo 1988, writ denied).
Because circumstantial evidence may be sufficient to support a finding that an employee's workers' compensation claim was a factor in his discharge, Paragon Hotel Corp. v. Ramirez, 783 S.W.2d 654, 658 (Tex. App.El Paso 1989, writ denied), GHA concedes that appellee's evidence is sufficient to "raise the inference that there is a casual link" between his workers' compensation claim and his discharge. The evidence supporting this inference is that appellee's layoff came shortly after his initial efforts to collect workers' compensation benefits, the decision was made by a person with knowledge of his workers' compensation claim, and there was some evidence of a negative attitude toward his injured condition.
However, GHA argues that, under the evidence, it is entitled to the benefit of the rule that uniform application of non-discriminatory policy does not violate article 8307c, even when the policy's application negatively affected an employee who has made a claim for workers' compensation benefits. See Texas Division-Tranter, Inc. v. Carrozza, 876 S.W.2d 312, 313 (Tex.1994); Palmer v. Miller Brewing Co., 852 S.W.2d 57, 61 (Tex.App.Fort Worth 1993, no writ); Swearingen v. Owens-Corning Fiberglas Corp., 968 F.2d 559, 564 (5th Cir.1992). GHA, however, failed to obtain or request a jury finding on this defense. That being so, if its evidence failed to conclusively establish this defense, the defense was waived. Akin v. Dahl, 661 S.W.2d 911, 913 (Tex.1983), cert. denied, 466 U.S. 938, 104 S. Ct. 1911, 80 L. Ed. 2d 460 (1984); Tex.R.Civ.P. 279.
The only evidence that such a policy existed came from the testimony of GHA's employees Royce Adams and Gene Daily. No documents setting out the policy were introduced into evidence. According to Adams and Daily, the policy for selecting employees for layoffs was as follows: those employees who were "unavailable for work" at the time of the layoff, regardless of reason, were the first ones selected; second, those employees who had been temporarily assigned to the department making the layoffs were chosen; lastly, the remaining employees to be laid off were selected by reverse seniority.[4] It was also established that employees were not informed of the existence of such a policy. It is axiomatic that the jury, as factfinder, is free to accept or reject any or all of the testimony of any witness. Benoit v. Wilson, 150 Tex. 273, 239 S.W.2d 792, 796 (1951); Bayou Terrace Inv. Corp. v. Lyles, 881 S.W.2d 810, 813 (Tex. App.Houston [1st Dist.] 1994, no writ). See also Texas Workers Compensation Comm'n v. Garcia, 893 S.W.2d 504, 535 (Tex. 1995) (Spector, J., concurring in part, dissenting in part).
In asserting it is entitled to the benefit of the rule, GHA primarily relies upon the cases of Texas Division-Tranter, Inc. v. Carrozza, 876 S.W.2d at 313; Palmer v. Miller Brewing Co., 852 S.W.2d 57, 61 (Tex.App.Fort Worth 1993, no writ); Swearingen v. Owens-Corning Fiberglas Corp., 968 F.2d at 559; *764 and Parham v. Carrier Corp., 9 F.3rd 383 (5th Cir.1993). However, the evidence in this case is in contrast to that produced in those cases. In Carrozza, Swearingen and Parham, the policies relied upon by the defendants were embodied in collective bargaining agreements. In Palmer, the question involved an absence control policy included in a union contract. In this case, because of the absence of any written evidence of the existence of a uniform, non-discriminatory discharge policy and the somewhat equivocal testimony concerning the details[5] of the asserted policy, the record is not sufficient to conclusively establish the defense. Consequently, GHA's failure to obtain a jury finding as to an element of this defense waives the right to rely upon the defense. GHA's first point is overruled.
In its second point, GHA assigns error to the trial court's failure to exclude the testimony of two of appellee's expert witnesses: Melissa Duhon, a psychologist who treated appellee, and C. Richard Waits, an economist. GHA contends that because of appellee's incomplete answers to interrogatories in this respect, Rule 215(5) of the Texas Rules of Civil Procedure prescribes an automatic sanction of exclusion of these witnesses' testimony.
In its first set of interrogatories, GHA requested the identity of each expert witness and:
(a) The subject matter upon which expert witness is expected to testify; and
(b) The substance of the facts and opinions to which the expert witness is expected to testify and a summary of the grounds for each opinion.
Appellee's initial response included the name and address of Dr. Duhon and the statement that she would "verify the mental condition I was in at the time I first went to see her until the present time." On November 4, 1991, GHA filed a motion to compel discovery asserting that this answer was an insufficient response to part (b) of its interrogatory. On November 8, 1991, appellee filed his response to the motion, stating GHA's motion was the first notice he had of a claim that his response was inadequate and attaching approximately twenty-one pages of Dr. Duhon's notes. The trial jury in this case was sworn on October 13, 1993. The record before us does not show that the trial court ever ruled on GHA's motion to compel. Inasmuch as GHA failed to obtain a ruling upon its motion, it may not assert error predicated upon the motion. Tex.R.App.P. 52(a).
GHA also contends that its complaint was preserved by its pretrial motion in limine. However, no such motion appears in the record,[6] nor have we been referred to or discovered any ruling by the trial court upon such motion. Because the record fails to show any pretrial ruling concerning the discovery dispute, GHA's complaint is waived. Remington Arms Co., Inc. v. Caldwell, 850 S.W.2d 167, 170 (Tex.1993).
With reference to Dr. Waits, appellee provided a supplemental response on January 22, 1992, identifying Dr. Waits and stating that he "is expected to testify on the value of [p]laintiff's lost earnings and other company benefits." On June 4, 1992, appellee provided a supplemental response stating Dr. Waits was expected to testify as to "the economic loss of the plaintiff" and attached a worksheet listing the amount of lost wages and benefits as to which Dr. Waits would testify.
Rule 166b(6)(b) of the Texas Rules of Civil Procedure provides "when the identity or the subject matter of such expert witness' testimony has not been previously disclosed in response to an appropriate inquiry," the party must supplement its response "to include the name, address and telephone number of the expert witness and the substance of the [expert's] testimony." GHA's complaint is that when appellee failed to present a summary of Dr. Waits's testimony in his supplemental *765 response, by virtue of Rule 215(5), exclusion of such testimony was automatic.
In support of its position that the trial court reversibly erred in failing to exclude Waits's testimony, GHA relies upon the cases of Sharp v. Broadway National Bank, 784 S.W.2d 669, 672 (Tex.1990); Boothe v. Hausler, 766 S.W.2d 788, 789 (Tex.1989); and E.F. Hutton & Co., Inc. v. Youngblood, 741 S.W.2d 363, 364 (Tex.1987). However, perusal of the Sharp and Youngblood cases reveals the party seeking to present the expert testimony wholly failed to identify the expert in any response. That being so, and relying upon the plain language of Rule 166b(6)(b),[7] the courts excluded the proffered testimony. In Boothe, the defendant's failure to disclose the address of his witness when he knew her address required the exclusion of that witness's testimony. In explaining why that was the result, the appellate court explicated that under Rule 166b(6)(a), the parties have an affirmative duty to supplement their answers if an answer "is no longer true and complete and the circumstances are such that failure to amend the answer is in substance misleading."
In this case, after receiving appellee's supplemental response of June 4, 1992, as far as the record before us shows, GHA failed to make any objection concerning the completeness of the response.[8] Without any evidence of a complaint from GHA in the sixteen-month period intervening between June 4, 1992, and the commencement of trial in October 1993, the trial court could easily have concluded that GHA had no complaint about the response. Although GHA contends the exclusion is automatic and does not require an objection, we disagree. It is the established rule that the failure to obtain a pretrial ruling on discovery disputes that exist before commencement of trial constitutes a waiver of any claim for sanctions based on that conduct. Remington Arms Co., Inc., 850 S.W.2d at 170. Additionally, and significantly, in each of the cases GHA relies upon, there was a timely objection to the receipt of the testimony. Here, GHA failed to object when Dr. Waits's testimony was presented at trial. Without a timely trial objection, GHA waived any error in admitting the testimony. Tex.R.App.P. 52(a). For each and all of the above reasons, we overrule GHA's second point.
In its third point, GHA asserts the trial court erred in calculating prejudgment interest. We agree. Citing only the statute, GHA posits the determination of prejudgment interest in this case is governed by article 5069-1.05 of the Texas Revised Civil Statutes. Section 6(a) of that article provides that "[j]udgments in wrongful death, personal injury and property damage cases must include prejudgment interest." Tex. Rev.Civ.Stat.Ann. art. 5069-1.05 § 6(a) (Vernon Supp.1995). Appellee, however, urges that a claim of this nature under article 8307c is one for economic damages governed by the rule promulgated in Cavnar v. Quality Control Parking, 696 S.W.2d 549, 554 (Tex.1985). In that case, the court held that "a prevailing plaintiff may recover prejudgment interest compounded daily (based on a 365-day year) on damages that have accrued by the time of judgment." Id. (emphasis in original). Some courts have held that damages under article 8307c are governed by the rule in Cavnar, Pacesetter Corp. v. Barrickman, 885 S.W.2d 256, 263 (Tex.App.Tyler 1994, no writ); City of La Porte v. Prince, 851 S.W.2d 876, 885 (Tex.App.Waco 1993, writ granted), while at least one court has held such damages to be for personal injury and therefore governed by article 5069-1.05 § 6. See Acme Boot Co., Inc. v. Montenegro, 862 S.W.2d 806, 811 (Tex.App.El Paso 1993, no writ).
Determination of this point requires an examination of the damages awarded by the jury. Initially, we note that prejudgment interest may not be awarded on exemplary damages. Ellis Co. State Bank v. Keever, 888 S.W.2d 790, 797 (Tex.1994); Vail v. Texas Farm Bureau Mutual Insurance Co., 754 *766 S.W.2d 129, 137 (Tex.1988); Cavnar, 696 S.W.2d at 555; Tex.Civ.Prac. & Rem.Code Ann. § 41.006 (Vernon Supp.1995). In asking the jury to determine appellee's actual damages, the trial court instructed them to consider four elements: 1) past lost wages and benefits; 2) future lost wages and benefits; 3) past mental anguish; and 4) future mental anguish. The jury was not asked to apportion its determination of damages among those four elements. Parenthetically, damages for past lost wages and benefits are purely economic damages upon which the award of prejudgment interest would be governed by the Cavnar decision. Because they are also economic damages, prejudgment interest and benefits in the future may not be recovered because they are not accrued by the time of judgment as required by Cavnar.
In its appeal, GHA does not challenge the award of any prejudgment interest that may have been awarded on future lost wages or benefits; rather, it contends only that prejudgment interest should have been calculated as provided by section 6(a) of article 5069-1.05. That contention limits us to a decision as to how any prejudgment interest allowable can be awarded on the unsegregated damage award made by the jury.
Although we do not adopt the holding of the El Paso Court of Appeals in Acme Boot that all damages recovered by virtue of article 8307c are personal injury damages, we are of the opinion that if appellee wanted to benefit from the prejudgment calculations provided for in Cavnar, it was his obligation to have submitted a damage question in which the various damage elements were segregated. Because those elements were not segregated, for the purposes of this case, we hold that prejudgment simple interest on the damage award is to be calculated as provided in article 5069-1.05, section 6(g).[9] We also find that the court's holding in Cavnar, that the failure to segregate damages prevents the recovery of prejudgment interest, is inapplicable here because each of the elements permit recovery of at least simple interest except for future economic damages and, as we noted, GHA failed to raise that question on this appeal.
Applying the interest calculation provided in article 5069-1.05, § 6(g) to the actual damages award of $124,991 for the period of May 7, 1991 through November 15, 1993, we find the trial court should have awarded prejudgment interest in the amount of $31,607.31.[10]
Accordingly, finding error in that part of the trial court's judgment awarding prejudgment interest, we reform the trial court judgment to reflect the amount of prejudgment interest as $31,607.31. As reformed, the judgment is affirmed. See Tex.R.App.P. 80(b), 82.
QUINN, J., concurring.
QUINN, Justice, concurring.
I fully concur in the majority's opinion and disposition of points two and three. However, I specially concur in its disposition of point one.
In addressing the retaliatory discharge claim recognized under article 8307c of the Texas Revised Civil Statutes,[1] Gifford Hill American, Inc. invoked comparison with the McDonnell Douglas shifting burden test. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). In doing so, it admitted that Paul Whittington's evidence "raised the inference that there ... [was] a casual link" between his discharge and his workers compensation claim. The admission satisfied the causative nexus required under article 8307c. See Parham v. Carrier Corp., 9 F.3d 383, 386 (5th Cir.1993) (holding that the worker's compensation *767 claim need not be the sole cause but simply a determining factor); Acme Boot Co. v. Montenegro, 862 S.W.2d 806, 808 (Tex.App.El Paso 1993, no writ) (holding proof that the worker's compensation claim "contributed" to the adverse employment decision sufficient causation). But for it, I would have respectfully concluded that the evidence was both legally and factually insufficient to establish anything other than Gifford Hill's desire to enhance employee safety and dislike for employee injuries. Moreover, from neither of those stimuli alone could one reasonably infer retaliation as contemplated by article 8307c. Parham v. Carrier Corp., 9 F.3d at 387-88.
NOTES
[1] Repealed by Acts of May 12, 1993, 73rd Leg., R.S., ch. 269, § 1, 1993 Tex.Gen.Laws 990, 1235. (Current version at Tex.Lab.Code Ann. § 451.001 (Vernon Supp.1995)).
[2] Although at the time of these events the relevant statutory provisions were referred to as "workmen's" compensation, we use the current and more politically correct designation of "workers" compensation.
[3] We note that GHA uses the terms "layoff" and "termination [of employment]" without offering any explicit distinction between the two terms. Black's Law Dictionary 888 (6th ed. 1990) defines the term "layoff" as a termination, either temporary or permanent. However, from the context in which the terms are used, we will assume the term "layoff" is used to mean a temporary period of dismissal from work. See, e.g., Fishgold v. Sullivan Drydock & Repair Corp., 328 U.S. 275, 286-87, 66 S. Ct. 1105, 1111-12, 90 L. Ed. 1230 (1946); CBS, Inc. v. International Photographers, 603 F.2d 1061, 1063 (2nd Cir. 1979).
[4] Seniority has a special meaning at GHA in that it is an employee's length of service with his current department which determines seniority for layoffs rather than length of service with the company.
[5] For example, the testimony of Adams and Daily did not establish how long one must be absent from work to be "unavailable." There was evidence that some short term absences due to illness did not make one "unavailable" under the asserted policy.
[6] There is, however, a response to GHA's motion in limine.
[7] In the Youngblood case, the court referred to this section of the rule by its former number, 166b(5).
[8] It is suggested that GHA complained of this asserted error in its motion in limine. However, as we noted above, that motion is not in the record before us.
[9] We disagree with appellee's argument that the "simple interest" provision in section 6 of the article includes annual compounding. Where the legislature has intended interest to be compounded annually, it has explicitly expressed that intent. See, e.g., Tex.Rev.Civ.Stat.Ann. art. 5069-1.05, § 3(a) (Vernon Supp.1995).
[10] The period from May 7, 1991 through November 15, 1993 amounts to 923 days or 2.5288 years. Applying the statutory interest rate of ten per cent per annum results in a total interest percentage of 25.288. Applying this interest to the damage figure of $124,991.00 results in the interest figure of $31,607.31.
[1] The provision was repealed and replaced in 1993 by § 451.001 of the Texas Labor Code. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2391862/ | 725 S.W.2d 427 (1987)
GREATER HOUSTON TRANSPORTATION COMPANY, Yellow Cab Company, Houston Cab Company, Robert Moore, and Marvin Hughes, Appellants,
v.
Dellora WILSON, Terrye Smith Kimble, Christine MacMurphy and Louise Derr, Appellees.
No. B14-86-413CV.
Court of Appeals of Texas, Houston (14th Dist.).
January 29, 1987.
Rehearing Denied February 26, 1987.
*428 Jennifer Ramsey, James H. Limmer, Robert L. Ramey, Houston, for appellants.
J. Michael Coman, Pasadena, W. Allyn Hoaglund, Frances M. Smith, Dale Ledbetter, Houston, for appellees.
Before PAUL PRESSLER, MURPHY and ELLIS, JJ.
OPINION
MURPHY, Justice.
In consolidated actions appellees sued for actual and exemplary damages for their injuries sustained in a three-car accident involving a Yellow Cab driven by appellant *429 Marvin Hughes. Appellants Greater Houston Transportation Company, Houston Cab Company, and Yellow Cab Company (the cab companies) attempted to avoid vicarious liability for Hughes's actions on the theory that he was not an authorized or permissive user of the Yellow Cab. Before trial, the court entered a default judgment on liability against Hughes as a sanction for failing to appear for depositions. Final judgment was entered upon jury findings. The cab companies and Hughes have brought separate appeals. We affirm.
The accident occurred on a four-lane street divided by a median. A collision occurred between the taxicab and Dellora Wilson's Cadillac. The Cadillac crossed the median and collided head-on with a van containing appellees Christine MacMurphy, Louise Derr, and Terrye Smith Kimble. The cause of the accident was a disputed fact at trial. Dellora Wilson was both a plaintiff (suing the cab companies and Hughes) and a defendant (sued by the three women in the van). No one claimed the driver of the van was negligent.
The jury found that Wilson was not negligent and, therefore, did not answer issues on proximate cause and comparative negligence. The jury found that Hughes was driving the cab with the permission of the cab companies and engaged in their service on the occasion in question. The jury also answered affirmatively issues establishing negligent entrustment by the cab companies and awarded exemplary damages.
The first four points of error brought by the cab companies concern the propriety of informing the jury about the default judgment against Hughes when the cab companies denied being vicariously liable for Hughes's negligence.
In point one appellants contend the trial court erred in letting the jury be informed during voir dire that Marvin Hughes had been found by the court to be negligent and that his negligence was a proximate cause of the accident, while prohibiting counsel for the cab companies from informing the veniremen of the true nature of the default judgment. Apparently this prohibition was made during a pre-trial motion hearing. That hearing and motion are not in the appellate record and counsel for appellants made no objection at the time the default judgment was mentioned. No error has been preserved. See Mossler v. Foreman, 493 S.W.2d 627 (Tex. Civ.App.-Houston [14th Dist.] 1973, writ ref'd n.r.e.). Point of error one is overruled.
The cab companies also complain of the court's charge: (1) because it omitted an issue asking whether Hughes was negligent, and (2) because a jury instruction, placed within the comparative negligence issue, informed the jury that Hughes was negligent and that such negligence was a proximate cause of the collision in question.
We hold that the charge was correct. The supreme court has instructed that when a plaintiff in a comparative negligence case establishes as a matter of law that a defendant was negligent, then that negligence should be made known to the jury and included in the issue comparing the negligence of the plaintiff and the defendant. Eagle Trucking Co. v. Texas Bitulithic Co., 612 S.W.2d 503, 507 (Tex. 1981). This is what the trial court did in its third issue asking the jury to compare Wilson's negligence with Hughes's negligence.
The cab companies attempt to distinguish Eagle Trucking on two grounds. First, in Eagle Trucking the defendant employer admitted that its employee was in the course of his employment. Appellants' defense to the actions based on vicarious liability was that Hughes was an unauthorized driver acting without the cab companies' permission. After hearing extensive testimony regarding this issue, the jury found against appellants. Since vicarious liability was established, the rule in Eagle Trucking is applicable.
Appellants also urge that the rule in Eagle Trucking should be limited to situations in which a defendant's negligence became a matter of law because of some act a party committed at the time the accident occurred. They note that in Eagle Trucking the trial court found the employer negligent as a matter of law because its employee *430 committed negligence per se by violating traffic laws. Hughes's negligence was judicially determined because of his actions (or more precisely, inaction) wholly unrelated to the traffic accident. They further note that a ruling that a party is negligent per se leaves open the fact issue of whether that negligence was a proximate cause. A default judgment entered in a negligence case establishes both that the defaulting party is negligent as a matter of law and that his negligence was a proximate cause of the occurrence. See Morgan v. Compugraphic Corp., 675 S.W.2d 729, 731-32 (Tex.1984).
Appellants conclude from these distinctions that the supreme court, in making its broad statement of law in Eagle Trucking, did not envision the type of fact situation before us and its opinion need not be followed here. We find appellants' argument unpersuasive and follow the rule as stated in Eagle Trucking.
The cab companies contend that informing the jury about the default judgment in voir dire and in the instruction deprived them "of the opportunity to obtain findings that Wilson was the sole proximate cause of the accident." We note that the cab companies would not have been entitled to a jury issue inquiring whether Dellora Wilson's negligence was a sole proximate cause of the accident because such an issue would have been an inferential rebuttal issue. See Tex.R.Civ.P. 277; Sendejar v. Alice Physicians & Surgeons Hospital, Inc., 555 S.W.2d 879, 887 (Tex. Civ.App.-Tyler 1977, writ ref'd n.r.e.); McCane Sondock Detective Agency v. Penland Distributors, Inc., 523 S.W.2d 62, 67 (Tex.Civ.App.-Houston [14th Dist.] 1975, no writ). Ignoring for the moment appellees' negligent entrustment causes of action, the effect of the default judgment against Hughes was that it precluded the jury from finding that Wilson was 100 percent negligent and Hughes not negligent.
The threshold question in a negligence case is whether a party acted negligently, not whether his actions were a proximate cause of the occurrence. See Tex.R.Civ.P. 277 ("Conditioned upon an affirmative finding of negligence ... a further question may inquire whether the corresponding specific acts or omissions ... were proximate causes of the accident....") Appellants fully litigated the issue of Wilson's negligence. The jury found she was not negligent. The jury properly skipped the issue asking whether her negligence was a proximate cause. Because there was no negligence of Wilson to compare, the jury properly left the comparison answers blank. Eagle Trucking, 612 S.W.2d at 505. Since Wilson was not negligent, the cab companies cannot demonstrate harm resulting from the court's actions. See Thompson v. Robbins, 157 Tex. 463, 304 S.W.2d 111 (1957). Points two and three are overruled.
In their fourth point of error appellants assert that the alleged errors discussed above tainted the whole trial and caused the jury to reach the wrong conclusions in resolving other fact issues in the case. This argument is wholly speculative. We cannot presume what influenced the jury. Point of error four is overruled.
In their fifth point of error the cab companies assert that the trial court erred in denying their motion for new trial. To support their claim that newly discovered evidence necessitated a new trial appellants presented the affidavit of a cab company employee stating that Marvin Hughes, who could not be located up to the time of trial, appeared in the cab companies' offices after judgment was rendered and offered to testify as to the facts surrounding the accident. Appellants presented no affidavit by Hughes and presented no competent evidence as to what he would say if put on the witness stand. In order to obtain a new trial on the ground of newly discovered evidence it is essential that the moving party introduce competent, admissible evidence showing the existence of the newly discovered evidence relied upon. Godwin v. Pate, 667 S.W.2d 201 (Tex.App.-Dallas 1983, no writ); McInnes v. Yamaha Motor Corp., 659 S.W.2d 704, 714 (Tex.App.-Corpus Christi, 1983), aff'd, 673 S.W.2d 185 (Tex.1984). This has not been done. We find no abuse of discretion *431 in denying a new trial. See Jackson v. Van Winkle, 660 S.W.2d 807 (Tex.1983).
The cab companies have waived their points of error six through fourteen for failure to brief the facts and authorities relied upon. See Tex.R.App.P. 74(f); Olson v. Texas Commerce Bank, 715 S.W.2d 764 (Tex.App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.).
Marvin Hughes has brought a separate appeal complaining that the trial court abused its discretion in entering a default judgment against him for failure to appear for depositions. Rule 215 clearly authorized the court to sanction Hughes. Tex.R. Civ.P. 215(2)(b)(5). There is nothing in the record to indicate that the court abused its discretion. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238 (Tex.1985). Hughes's point of error is overruled.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2413839/ | 737 S.W.2d 17 (1987)
Alberto MARTINEZ, Appellant,
v.
RV TOOL, INC., Appellee.
No. 08-86-00282-CV.
Court of Appeals of Texas, El Paso.
July 1, 1987.
Rehearing Denied August 26, 1987.
Roger Jatko, Keith Wilson, Bell & Jatko, Odessa, for appellant.
Perry Davis, Jr., W. Stacy Trotter, Shafer, Davis, McCollum, Ashley, O'Leary & Stoker, Odessa, for appellee.
Before OSBORN, C.J., and SCHULTE and WOODARD, JJ.
OPINION
OSBORN, Chief Justice.
Alberto Martinez appeals from a take nothing judgment entered in a third-party personal injury suit. We affirm.
Mr. Martinez was employed in November, 1983, as a floor hand for Bates Well Service. He sustained serious injuries to his left hand when a safety clamp, which had been leased from RV Tool, Inc., slipped down on a drill collar and fell, striking his hand. The jury found no negligence and did not award any damages, since the damage issue was conditionally submitted based upon a finding of negligence and proximate cause upon the part of the defendant.
At the time of the accident, Bates Well Service, a corporation owned by W.D. Bates and son, Larry Bates, had a well servicing unit working in Winkler County, Texas. The unit operator was Kenneth Stewart. In order to do some drilling operations, Bates Well Service leased reverse operating equipment, including a pump, pit, swivel, drill collars and safety clamps from RV Tool, Inc., another corporation owned by W.D. Bates and son, Larry Bates. The reverse unit operator was Gordon Storey, an employee of RV Tool, Inc. Although Mr. Storey advised the well service crew that the safety clamps should be removed as each drill collar was pulled, Mr. Stewart, the unit operator, testified that it was his responsibility to see that the clamps were removed as each drill collar was raised. In effect, Mr. Stewart, as unit operator, took full responsibility for the happening of this accident. This apparently resulted in the jury's believing that the co-employee alone was at fault, although no issue was submitted to the jury as to the negligence of *18 Mr. Stewart. See: Magro v. Ragsdale Brothers, Inc., 721 S.W.2d 832 (Tex.1987). No negligence was found upon the part of either Appellant or Appellee. By his first two points of error, Appellant contends the trial court erred in refusing to allow proof of the compromise settlement agreement between Appellant and Bates' compensation carrier. It is asserted that this evidence was offered for the purpose of showing bias upon the part of Larry Bates. He was called as an adverse witness, and the evidence was fully developed before the jury as to his position as president and as co-owner of RV Tool, Inc., and his co-ownership of Bates Well Service. He was not present when the accident occurred, but did testify about the drilling operations and the equipment being used at the time of the accident.
The general rule is that a jury in a third-party suit should not be made aware of a worker's compensation claim. Myers v. Thomas, 143 Tex. 502, 186 S.W.2d 811 (1945). Since information as to a worker's compensation claim is not material to the liability and damage issues in the third-party suit, it is reversible error to advise the jury of such a claim. Pattison v. Highway Insurance Underwriters, 278 S.W.2d 207 (Tex.Civ.App.Galveston 1955, writ ref'd n.r.e.); Allmon v. Texas Electric Service Co., 242 S.W.2d 806 (Tex.Civ.App.El Paso 1951, writ ref'd n.r.e.).
The settlement agreement would not be admissible under the holding in Scurlock Oil Company v. Smithwick, 724 S.W.2d 1 (Tex.1986), because it is not a "Mary Carter" agreement between identical parties from a prior proceeding. The compromise settlement agreement was not signed by Larry Bates and did not involve Bates Well Service as a party to the claim. In fact, under the Workers' Compensation Act, Alberto Martinez was barred from making a claim against Bates Well Service. Although this case did involve two interrelated companies, that evidence was fully developed and the jury was able to evaluate Larry Bates' testimony, knowing his ownership and position with the two companies. The compromise settlement agreement in the compensation case would not have impeached him. It would only have served to confuse the jury on issues unrelated to this suit. Points of Error Nos. One and Two are overruled.
The Appellant asserts in the next two points of error that the trial court erred in refusing to permit Buddy Mallone to testify as a rebuttal witness. In November, 1985, Appellee served interrogatories on Appellant to obtain the names of any expert witnesses Appellant intended to call to testify at the trial. The response filed February 11, 1986, gave the name of a medical doctor and an economist. On June 9, 1986, supplemental answers were filed which listed Buddy Mallone, a consultant, as an expert witness who would testify "concerning the job responsibilities of a reverse unit operator during drill out operations in the presence of the pulling unit crew." Trial commenced on June 24, 1986, and the evidence was completed the following day. The supplemental answers were not filed thirty days prior to the trial as required by Rule 166b, para. 5, Tex.R. Civ.P. Mr. Mallone was not called as a witness until after the defendant had rested and he was presented as a rebuttal witness. The court denied the request. No bill of exception was made to show what his testimony would have been at the time of the trial. His affidavit was attached to the motion for new trial and he testified by bill of exception at the hearing on the motion for new trial.
In Morrow v. H.E.B., Inc., 714 S.W.2d 297 (Tex.1986), the Court noted that a failure to properly supplement interrogatories "results in the loss of the opportunity to offer the witness' testimony. The sanction is automatic. The exception is when good cause is shown why the testimony should be allowed in spite of the discovery sanction." Also see: Gutierrez v. Dallas Independent School District, 729 S.W.2d 691 (Tex.1987). In this case, no evidence was offered to show good cause and there is no showing of an abuse of discretion. Yeldell v. Holiday Hills Retirement and Nursing Center, Inc., 701 S.W.2d 243 (Tex.1985). Appellant listed Buddy Mallone as an expert witness. Having failed to comply with *19 Rule 166b, para. 5, Tex.R.Civ.P., the witness could not be tendered in rebuttal as a fact witness. He was not present when the accident occurred. The amended answers to the interrogatories and the affidavit filed with the motion for new trial show that he was going to testify as an expert concerning oil field customs and practices. The Appellant could not do indirectly that which he could not do directly. He could not state his intention to call Mr. Mallone as an expert witness and then when the testimony was refused because of a failure to comply with the applicable rule purport to call him as a factual witness to present the same evidence to the jury. No error is shown. Points of Error Nos. Three and Four are overruled.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2457193/ | 895 S.W.2d 825 (1995)
Ali H. NAYEF, Appellant,
v.
ARABIAN AMERICAN OIL COMPANY and Aramco Services, Inc., Appellees.
No. 13-93-00422-CV.
Court of Appeals of Texas, Corpus Christi.
February 23, 1995.
*826 Nada M. Makdissi, Houston, for appellant.
Robert E. Meadows, Harvey G. Brown, Jr., Sewell & Riggs, Houston, for appellees.
Before FEDERICO G. HINOJOSA, Jr., CHAVEZ and BASS[1], JJ.
OPINION
CHAVEZ, Justice.
In two "issues," which we take as appellant's points of error, appellant complains that the trial court forced him to elect between pursuing a worker's compensation claim and a claim for intentional infliction of emotional distress that he jointly filed, and that the trial court erred in directing a verdict for the defendant at the conclusion of the trial. We find no error and affirm the judgment of the trial court.
Appellant was hired by appellees for work in Saudia Arabia on September 11, 1979 as an Engineer III. As part of his employment agreement, appellant was made aware that he was not covered by the Texas Worker's Compensation Act but by a form of voluntary worker's compensation insurance which would afford him the same protection and benefits that he would have had had he been covered by the Texas act. Appellant worked in various capacities for his employer for a period of nearly ten years when he informed his employer that he intended to resign for family reasons. He asked his supervisor to circulate his resume among Aramco's related companies in the United States, but he was unable to find employment with any of them. *827 Appellant went on vacation and later returned to find that he was being transferred because of his anticipated retirement and because of excess manpower. His transfer did not require a change in his title or salary, but appellant considered the transfers a demotion and demeaning to his status as a planning engineer.
On one of his moves, appellant suffered a back injury requiring him to seek medical attention. Eventually, one of the treating physicians restricted his driving activities. Appellant complained that his back condition suffered in the bus ride from his post in Abqaiq to the better medical facilities in Dhahran, a distance of some fifty miles. Appellant contends he was given demeaning assignments but that he always discharged them. His last reassignment changed his duties from those of a staff planning engineer to those of a general engineer which required him to do on site engineering work and desert driving. Appellant refused to do any desert driving because he felt that driving on uneven surfaces would affect his back condition. Appellant had a discussion of his medical condition with his supervisor, who did not accept his explanation. The supervisor felt he was refusing to follow orders and issued him a first warning. A third warning would have required his termination.
Appellant, however, filed a grievance with the company and began the process of pleading his grievance through the various layers of the grievance system. Disillusioned because he lost at the first two levels of the system, he by-passed the third level and went to the fourth and final level. Appellant claims he suffered severe depression and anxiety during all of this time. Believing the grievance procedures were futile, appellant claims he was forced into submitting his resignation, and he returned to the United States before his grievance at the fourth level was finalized. After returning to the United States, he filed this suit.
Appellant's counsel claims that before jury voir dire began, the trial judge forced her to elect which cause of action she was to try, the suit for damages alleging intentional infliction of emotional distress or the claim for worker's compensation benefits. Appellant concedes that this conversation or event occurred outside the record. Appellees claim that the conversation never took place and that, without a record, appellant has preserved nothing for appeal.
It is well settled that the Texas Worker's Compensation Act bars an employee from bringing a common law negligence action against the employer, but not for intentional torts. Massey v. Armco Steel Co., 652 S.W.2d 932, 933 (Tex.1983); Reed Tool Co. v. Copelin, 610 S.W.2d 736, 739 (Tex. 1980). But, if the employee collects benefits under the Act and also alleges the injury was as a result of an intentional tort, the employee is barred from recovering damages outside the Act. Porter v. Downing, 578 S.W.2d 460, 461 (Tex.Civ.App.Texarkana 1979, writ ref'd n.r.e.). In some instances, an employee may have a worker's compensation claim against the employer and also a common law claim for an intentional tort. In order to maintain the two separate causes of action, however, the employer's intentional act must be separable from the compensation claim and produce an independent injury. Massey, 652 S.W.2d at 933.
Before trial, appellees filed a motion for partial summary judgment in which all the relief it sought was to limit appellant's damages to those which would be recoverable under the Texas Worker's Compensation Act. The motion was simply denied without written opinion. The record before us does not show that a motion for severance was filed or ruled on, nor does it show what occurred during or following voir dire concerning appellant's claim that the trial court forced her to elect the cause of action she was proceeding on. The record does show that the worker's compensation claim was separable from the claim for intentional infliction of emotional distress because the intentional tort was not the cause of the onthe-job injury. At the conclusion of plaintiff's case and before preparation of the charge, the court inquired of appellant's counsel as to which cause of action she was proceeding on. After some discussion, appellant stated she was proceeding on the intentional tort. After directing a verdict in favor of the defendant, appellant, in response to a *828 question, again told the court that there was no other cause of action surviving. The record, therefore, is silent as to the claimed error of being wrongly forced to make an election, and there being nothing preserved for this court to review, we must affirm the trial court. Tex.R.App.P. 50(d). Accordingly, we overrule appellant's point of error one.
In her second point of error, appellant claims that the trial court erred in directing a verdict in favor of appellees on the intentional infliction of emotional distress claim. Texas first adopted the tort of intentional infliction of emotional distress in 1993. Twyman v. Twyman, 855 S.W.2d 619, 621-22 (Tex.1993). In doing so, the supreme court adopted the elements of Section 46(1) of the RESTATEMENT (SECOND) OF TORTS. Id. at 622. Those elements are: 1) the defendant acted intentionally or recklessly, 2) the conduct was extreme and outrageous, 3) the actions of the defendant caused the plaintiff emotional distress, and 4) the emotional distress suffered by the plaintiff was severe. RESTATEMENT (SECOND) OF TORTS § 46(1) (1965).
Recently, the supreme court held that an employer's questioning of an employee concerning the taking of a wreath from the store without paying for it was not, as a matter of law, extreme and outrageous conduct. Randall's Food Mkts, Inc. v. Johnson, 891 S.W.2d 640, 644 (1995). In Randall's, the employer's agents asked a management level employee to explain her wrongdoing. The court there said that the employer acted within its legal rights to investigate reasonably credible allegations of wrongdoing. That conduct, the court found, was not "beyond all possible bounds of decency," "atrocious," and "utterly intolerable in a civilized community," but rather a managerial function necessary to the ordinary operation of a business organization. Id. at 644 (citing Wornick Co. v. Casas, 856 S.W.2d 732, 735 (Tex.1993)).
Here, Aramco disputed appellant's claimed inability to do desert driving and refused to provide him with transportation to and from work or to the medical facility, citing company policy and the unavailability of vehicles. There was a question as to the duration of his driving restrictions. But for all of appellant's grievances, he was afforded hearings through the various levels set up by the company. While the company did not provide him with an independent medical examination to determine whether or not his disability prevented him from driving, it did provide him with medical care and paid his salary during his off time. Appellant also claims that his transfer to a demeaning position and different location, without reduction in salary or benefits, constitutes a part of the company's outrageous conduct towards him. Because he did not succeed at the first two levels of the grievance ladder and felt he would probably not succeed at the fourth and final level, appellant chose to resign rather than run the risk of receiving additional warnings leading to his termination.
The facts of this case do not meet the "outrageous conduct" test set out in Twyman or Randall's. Accordingly, we overrule appellant's second point of error.
We affirm the judgment of the trial court.
NOTES
[1] Assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to TEX. GOV'T CODE ANN. § 74.003 (Vernon 1988). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2452251/ | 909 S.W.2d 475 (1995)
John G. SONNIER and Hope Sonnier, Appellants,
v.
CHISHOLM-RYDER COMPANY, INC., Unipunch Products, Inc., 3800 Highland, Inc. and Premax Limited Partnership of Niagara Falls, Appellees.
No. 95-0206.
Supreme Court of Texas.
Argued May 11, 1995.
Decided July 7, 1995.
Rehearing Overruled October 5, 1995.
*476 Clinard J. Hanby, The Woodlands, Kurt Arbuckle, Houston, for appellants.
Derral K. Sperry, John D. Wittenmyer, for appellees.
ENOCH, Justice, delivered the opinion of the Court, in which HIGHTOWER, CORNYN, GAMMAGE and SPECTOR, Justices, join.
In 1969, the Texas Legislature enacted a statute of repose that protects registered or licensed architects and engineers from liability *477 in suits filed more than ten years after the substantial completion of improvements to real property or the commencement of operations of equipment attached to real property. Act of May 27, 1969, 61st Leg., R.S., ch. 418, § 1, 1969 Tex.Gen.Laws 1379 (codified as TEX.REV.CIV.STAT.ANN. art. 5536a (1969)) (amended 1985) (current version at TEX.CIV. PRAC. & REM.CODE § 16.008). The Legislature amended this statute in 1975 to extend repose protection to persons who construct or repair improvements to real property. Act of May 14, 1975, 64th Leg., R.S., ch. 269, § 1, 1975 Tex.Gen.Laws 649 (codified as TEX. REV.CIV.STAT.ANN. art. 5536a § 2 (1975)) (amended 1985) (current version at TEX.CIV. PRAC. & REM.CODE § 16.009). We are asked by certified question from the United States Court of Appeals for the Fifth Circuit whether the manufacturer of a tomato chopper that was installed in a cannery and twenty years later removed and reinstalled in another cannery is protected under the statute of repose in section 16.009. We conclude that the manufacturer does not receive repose protection under section 16.009.
I.
In February 1965, Chisholm-Ryder Co., Inc. (Chisholm)[1] manufactured a tomato chopper for use in a commercial cannery on the premises of the Sugar Land Central Unit of the Texas Department of Corrections. The machine weighed approximately 1,200 pounds, was bolted to the ground to prevent vibration, and was powered by electrical wires housed in conduit attached to the walls. In 1985, the Sugar Land Central Unit ceased its tomato processing operations, and the Texas Department of Corrections moved the machine to the Ramsey Unit where the machine was installed in the same manner as part of a different production line. In 1990, John G. Sonnier, a supervisory employee at the Ramsey Unit, had a portion of his arm severed while inspecting the machine. The Sonniers brought a diversity action in federal court for damages against Chisholm. Chisholm defended, claiming that the suit was barred by the statute of repose found in section 16.009 of the Texas Civil Practice and Remedies Code. Tex.Civ.Prac. & Rem.Code § 16.009. Both parties moved for judgment as a matter of law, and both motions were overruled. The trial court held a jury trial exclusively on the statute of repose defense. The jury found that the tomato chopper was an "improvement to real property at the Central Sugarland Unit." On the basis of that finding, the district court entered judgment that the plaintiffs take nothing.
On appeal, the United States Court of Appeals for the Fifth Circuit certified the following question to this Court:
Whether a person or entity that manufactures a tomato chopping machine "constructs... an improvement to real property" for the purpose of qualifying for the protection of the Statute of Repose. Tex. Civ.Pract.[sic] & Rem.Code § 16.009 when that machine is originally installed by another party on real estate, then removed and reinstalled by such other party on real estate at a different location.
47 F.3d at 134 (ellipses in original).
II.
At the outset, we recognize the question comes to us without a unanimous vote of the Fifth Circuit panel. The dissent from the certification argued that the question of Texas law is settled, citing Dedmon v. Stewart-Warner Corp., 950 F.2d 244, 249 (5th Cir. 1992), and that the certification was unnecessary. To the contrary, the majority of the panel apparently believed the law of the State of Texas is not settled on the issue, thus the question was certified to us. Due to this disagreement, we believe a brief comment is necessary.
We welcome the opportunity to respond to certified questions from the federal courts and give deference to the requests brought to us. We recognize that certification "helps build a cooperative judicial federalism," Lehman *478 Bros. v. Schein, 416 U.S. 386, 391, 94 S. Ct. 1741, 1744, 40 L. Ed. 2d 215 (1974), and helps avoid inconsistency between the decisions of federal and state courts on issues of state law.
We accepted the certified question in this case because only our intermediate appellate courts have had the occasion to interpret the statute with the benefit of both briefing and oral argument. And this Court's one opinion on the substance of the statute, Conkle v. Builders Concrete Products Mfg., 749 S.W.2d 489 (Tex.1988), a per curiam opinion, decided without the benefit of oral argument, provides no analysis of the statute, but turns on the decisions of two lower appellate courts. We also note that Conkle`s discussion of section 16.009 has been subjected to thoughtful criticism by a court of appeals, see Williams v. U.S. Natural Resources, Inc., 865 S.W.2d 203, 207-08 (Tex.App.-Waco 1993, no writ) (questioning this Court's opinion in Conkle), by federal district courts, e.g., Dayton Indep. Sch. Dist. v. U.S. Mineral Products Co., 789 F. Supp. 819, 821 (E.D.Tex. 1992) (reviewing Dedmon and urging the Fifth Circuit to consider the legislative history of section 16.009, and suggesting that this Court has approved an interpretation focusing on protecting construction industry professionals), by a panel of the Fifth Circuit, see Dedmon, 950 F.2d at 249 (recognizing that although the statute appears to protect those in the construction industry, Conkle may suggest the contrary), and in the academic community, see Shannon, The Reach for Repose: Have the Texas Courts Gone Awry?, 24 TEX.TECH L.REV. 196, 206-13 (1993) (arguing that Conkle is subject to various interpretations). It is not a stretch to conclude that Dedmon, in fact, sent this Court a signal that Texas jurisprudence on section 16.009 was not well considered and that our sole opinion has not correctly construed the statute. See Dedmon, 950 F.2d at 250 (suggesting that the legislative history should lead to a result contrary to the one advanced by Texas intermediate courts of appeals, and stating that at most, Conkle only tacitly resolved the issue). Williams, the most recent court of appeals case on the issue, buttressed this conclusion. We accepted the certified question pursuant to Texas Rule of Appellate Procedure 114 to resolve the controversy regarding the correct construction of this statute.
III.
We address the question by breaking it down into two subquestions: 1) whether a manufacturer of personalty which becomes an improvement to real property "constructs" an "improvement to real property;" and 2) when personalty is installed and used on one piece of land for over ten years, and then is removed and reinstalled on another property by the initial purchaser, whether the ten-year repose period starts again upon the substantial completion of the personalty's reinstallation.
We begin our analysis by reviewing the language in the statutes of repose. Section 16.008 states in pertinent part as follows:
(a) A person must bring suit for damages for [personal injury and other injuries] against a registered or licensed architect or engineer in this state, who designs, plans, or inspects the construction of an improvement to real property or equipment attached to real property, not later than 10 years after the substantial completion of the improvement or the beginning of operation of the equipment in an action arising out of a defective or unsafe condition of the real property, the improvement, or the equipment.
TEX.CIV.PRAC. & REM.CODE § 16.008. The language in section 16.009 is similar, but differs in a material respect from the preceding section. Section 16.009 reads:
(a) A claimant must bring suit for damages for [personal injury and other injuries] against a person who constructs or repairs an improvement to real property not later than 10 years after the substantial completion of the improvement in an action arising out of a defective or unsafe condition of the real property or a deficiency in the construction or repair of the improvement.
Id. § 16.009. Both statutes provide protection to those in the construction industry, but their applications differ.
*479 The sections differ in who they protect and the object of the work protected. Section 16.008 protects registered or licensed architects or engineers, while 16.009 protects a person who constructs or repairs, and section 16.008 protects those inspecting improvements to real property or equipment attached to real property, while 16.009 only protects those who construct or repair improvements to real property.
IV.
The Sonniers argue that Chisholm did not "construct" an "improvement to real property," but instead merely manufactured a product that another party moved and attached to the realty. As such, the Sonniers argue that Chisholm is not entitled to the protection afforded by the statute of repose. Whether the statute of repose applies to those who do no more than manufacture personalty that is subsequently attached as improvements to real property is a question of first impression for this Court. We find merit in the Sonniers' argument and agree that the statute of repose was not intended to grant repose to manufacturers in product liability suits but only to preclude suits against those in the construction industry that annex personalty to realty.
An improvement includes all additions to the freehold except for trade fixtures which can be removed without injury to the property. Generally, whether an attachment of personalty to realty constitutes an improvement is a question of the owner's intent. This Court's opinion in Logan v. Mullis, 686 S.W.2d 605, 607 (Tex.1985), is frequently cited for its discussion of the three factors to be considered to ascertain whether personalty has become permanently attached to the realty: 1) the mode and sufficiency of annexation, either real or constructive; 2) the adaptation of the personalty to the use or the purpose of the realty, and 3) the intention of the owner who causes the personalty to be annexed to the realty. The third factor is preeminent and the other two are evidence of intent. Id. The owner's intent is critical because personalty does not constitute an improvement until it is annexed to realty. To constitute an improvement there must be a joinder of personalty with realty. It is critical to distinguish among the three concepts involved in determining whether an object is an improvementthe personalty, the realty to which the personalty is annexed, and the result, the improvement. There can be no improvement without annexation to realty, and until personalty is annexed to realty, it by definition cannot be an improvement. Only upon annexation does the personalty lose its characteristics as personal property and become viewed as an improvement. The plain language of the statute applies to those who construct or repair improvements the statute applies to those who start with personalty and transform the personalty into an improvement.
Early appellate decisions construing this statute have created confusion by failing to grasp the significance of the different elements that combine to create an improvement. The confusion stems from focusing on the personalty as attached to realty without reference to the fact that it is the annexation that transforms the personalty into an improvement. For example, the court of appeals in Ellerbe v. Otis Elevator Co., 618 S.W.2d 870 (Tex.Civ.App.-Houston [1st Dist.] 1981, writ ref'd n.r.e.), applied the statute in favor of an elevator manufacturer, reasoning that: "An elevator in a multi-storied building obviously constitutes an improvement on real property. The manufacturer of the elevator would be a person performing or furnishing construction of the elevator even though it did not install it in the building." 618 S.W.2d at 872. Although it is true that an elevator installed in a building constitutes an improvement, such a fact does not lead to the conclusion that the manufacturer of the elevator alone constructed an improvementpersonalty annexed to real property.
The next case to address this issue was Reddix v. Eaton Corp., 662 S.W.2d 720 (Tex. App.-San Antonio 1983, writ ref'd n.r.e.). In that case, Eaton manufactured an electric hoist that operated an outdoor elevator. The court concluded that materialmen "who [do] no more than manufacture ... materials [do] not benefit from the statute [of repose]." Id. at 724. It then held that the hoist was a *480 mere component of the elevator and, thus, the manufacturer of a "fully assembled" hoist was not a beneficiary of the repose statute. Reddix correctly held that under the statutory language, a materialman who does no more than manufacture or supply materials does not benefit from the statute. But its reasoning adopted the convoluted view of improvements announced in Ellerbe. In short, the Reddix court did not find repose was required under Ellerbe because the hoist was only a component of an elevator and not a complete improvement in itself. By failing to look at an improvement as personalty annexed to realty and failing to determine who actually constructed the improvement, Reddix tacitly approved the incorrect holding in Ellerbe that off-site manufacturers of personalty later annexed to real property as improvements are protected by the statute.
The holding in Reddix was a turning point in the analysis of section 16.009 because of its citation to Ellerbe and its discussion of materialmen. Reddix has been understood as holding that even though a materialman who merely supplies parts is not protected, one who supplies an entire product is protected. A correct application of the statute, however, holds that those who are not connected with the construction, whether they supply a component or an entire product, are merely materialmen because they perform no work or labor in constructing an improvementannexing personalty to real property. See Huddleston v. Nislar, 72 S.W.2d 959, 962 (Tex.Civ.App.-Amarillo 1934, writ ref'd).
Next came Dubin v. Carrier Corp., 731 S.W.2d 651 (Tex.App.-Houston [1st Dist.] 1987), after remand, 798 S.W.2d 1 (Tex. App.-Houston [14th Dist.] 1990, writ dism'd by agr.). Here the trial court initially granted summary judgment for the manufacturer of a heating unit because of the repose statute. On the first appeal, the appellate court, concluding that the heater was an improvement, stated that section 16.009 required proof that a heater was installed more than ten years before the accident occurred. The summary judgment was reversed because there was no evidence that the heater was installed more than ten years before the injury. In so holding, the court relied upon Ellerbe`s statement that a manufacturer is protected notwithstanding the fact that it did not install the product. The court of appeals then remanded the case to the trial court. The parties did not appeal to this Court. On remand, the trial court again granted summary judgment to the manufacturer. In reviewing this disposition, the court of appeals, again following the dubious distinction drawn in Ellerbe, held that the manufacturer "both made a portion of the unit and also manufactured the entire assembly" and affirmed the summary judgment.
Finally, in Ablin v. Morton Southwest Co., 802 S.W.2d 788 (Tex.App.-San Antonio 1990, writ denied), the court held that a garage door opener was an improvement and was affixed more than ten years before the injury. The plaintiffs argued that the opener was not an improvement because it was easily removable. Ablin cited Logan and held that the evidence demonstrated that the opener was an improvement as a matter of law.
This Court's only opinion on the substance of section 16.009 is Conkle. In Conkle, the plaintiff was killed in a concrete batch plant. The defendant manufacturer received summary judgment under section 16.009, and the court of appeals affirmed in an unpublished opinion. This Court reversed, holding that two fact issues precluded summary judgment. First, we held that fact issues existed as to whether the defendant only manufactured component parts. Second, summary judgment was improper because there was a factual dispute as to whether the plant was actually an improvement in the first instance given evidence that the plant was portable. In Conkle, the petitioner, who presumably followed the jurisprudence as espoused by the courts of appeals, only argued that the defendant was a mere materialman who did no more than construct component parts of a cement batching plant.
Conkle and the other cases addressing section 16.009 assumed without questioning the propriety of extending repose protection to off-site manufacturers, and focused instead on the issue evolving out of Reddixwhether a complete system had been built as opposed to only part of a system. The writs of error *481 in all other cases that discussed off-site manufacturers have either been dismissed by agreement, see Rodarte v. Carrier Corp., 786 S.W.2d 94 (Tex.App.-El Paso 1990, writ dism'd by agr.); see also Dubin II, 798 S.W.2d at 1; or were not filed, Karisch v. Allied-Signal, Inc., 837 S.W.2d 679 (Tex. App.-Corpus Christi 1992, no writ); Big West Oil Co. v. Willborn Bros. Co., 836 S.W.2d 800 (Tex.App.-Amarillo 1992, no writ). Thus, this certified question is the first occasion for us to squarely address this issue.
We have found no authority that identifies a class of property as an improvement although not annexed to real estate. Neither have we found authority that states a component part, although annexed to realty, retains its character as personalty because it is merely a component of a larger system.
Exclusive focus on the distinction between a component part and a total system has resulted in a confused body of law leading to irreconcilable applications. Reddix held that a manufacturer of a motor that raises an elevator is not protected and is no more than a materialman. 662 S.W.2d at 723. Ablin, on the other hand, held that a manufacturer of a motor that raises a garage door is protected. 802 S.W.2d at 792. Dedmon, in deciding that a heater is an improvement, noted that a creative attorney could argue that anything is a part of its own system as opposed to a component of a larger system. 950 F.2d at 248. And the court in Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 517 n. 13 (5th Cir.1992), gave life to this idea when it held that an electrical duct is its own system and is not a component. One cannot effectively argue that a fully functioning hoist is any more or less a component part of an elevator than a garage door opener is more or less a component part of a garage door, or an electrical duct is any more or less a component part of an electrical system, or that a tomato chopper is any more or less a component part of a cannery.
Although there are a number of court of appeals opinions that have followed this distinction, the distinction between the manufacturer of a component and an entire system has skewed the focus of the rule and does violence to the concept of "improvement" and thus, to the plain language of the statute.
These opinions cut against the concept of improvement because they assume that personalty can exist as an improvement without attachment to real property. Such a conclusion is inconsistent with the requirement that property be annexed to realty with the intent that it be a permanent addition to the realty. There can be no such thing as an improvement until personalty is annexed to realty. Whatever it is that a manufacturer actually makes, it is not an improvement until it is annexed.
These opinions, therefore, are contrary to the plain language of the statute because they look at the word "construct" in connection with an incomplete understanding of "improvement." Personalty is not an improvement until annexed to realty; the manufacturer of personalty does not "construct" an improvement because there is no relationship with the annexation.
Recently, in Williams, 865 S.W.2d at 203, the Waco court of appeals addressed whether the statute of repose precluded suit against the manufacturer of a furnace installed in a house when the manufacturer did not actually annex the furnace to the real property. The court held that the statute of repose does not protect the manufacturer of a product who does not actually annex the product. The court questioned the reasoning of the other courts of appeals that have held that off-site manufacturers of goods purchased and installed by third parties come within the statute.
No writ of error was filed in Williams; consequently, we did not have the occasion to review the court's holding. Now, as we review the holding, we conclude that the reasoning was correct. We agree that the prior courts erred in holding that the construction of personalty, even as a complete system, is the equivalent of the construction of an improvement to realty. See Shannon, 24 TEX. TECH L.REV. at 220. Accordingly, we disapprove of the express language to the contrary in Ellerbe and interpretations of Conkle inconsistent with the analysis in Williams. There is no evidence that Chisholm did anything *482 more than manufacture personalty to be used by those in the construction industry. See Huddleston, 72 S.W.2d at 962. Thus, Chisholm did not "construct" an "improvement to realty."
The jury in the present case found that the tomato chopper was an improvement as to the Sugar Land cannery. The determination that personalty has been transformed into an improvement is not dispositive of the applicability of section 16.009. For example, a motel could bolt a painting to a wall, intending that it not be removed and thus transforming the painting into an improvement. The motel's demonstrated intent does not transform the artist into one who constructs an improvement. Because the statute protects those who construct or repair improvements, the statute only protects those who annex personalty to realty, not those who manufacture personalty that is used in constructing an improvement. This reading of the statute is the only one consistent with the plain language of the statute, the legislative history, and the statutory purpose. See TEX.GOV'T CODE § 311.023 (in construing a statute, whether or not ambiguous, a court may consider, inter alia, the object sought to be obtained and the legislative history). As originally enacted, section 16.008 required that:
There shall be commenced and prosecuted within ten years after the substantial completion of any improvement to real property or the commencement of operation of any equipment attached to real property... all actions or suits [for damages] against any registered or licensed engineer or architect in this state performing or furnishing the design, planning, inspection of such construction of any such improvement, equipment or structure or against any such person so performing or furnishing such design, planning, inspection of construction of any such improvement, equipment or structure.
Act of May 27, 1969, 61st Leg., R.S., ch. 418, § 1, 1969 Tex.Gen.Laws 1379 (codified as Tex.Rev.Civ.Stat.Ann. art. 5536a (1969)) (amended 1985) (current version at TEX.CIV. PRAC. & REM.CODE § 16.008) (emphasis added). Thus, the statute had at its origin an intent to protect those who design improvements to realty.
Section 16.009 was intended to complement section 16.008 by providing comparable repose protection to those who constructed the improvements to realty the architects and engineers designed. The forebear to section 16.009 originally read:
There shall be commenced and prosecuted within ten years after the substantial completion of any improvement to real property, and not afterward, all actions or suits in court for [damages] arising out of the defective or unsafe condition of any such real property or any deficiency in the construction or repair of any improvements on such real property against any person performing or furnishing construction or repair of any such improvement.
Act of May 14, 1975, 64th Leg., R.S., ch. 269, § 1, 1975 Tex.Gen.Laws 649 (codified as TEX. REV.CIV.STAT.ANN. art. 5536a § 2 (1975)) (amended 1985) (current version at TEX.CIV. PRAC. & REM.CODE § 16.009).
The legislative history is silent with respect to those who manufacture personalty subsequently installed in buildings as improvements. From the history of the act, it is consistent to hold that the act was intended to protect those who actually alter the realty by constructing additions or annexing personalty to it, not to protect those who do no more than manufacture personalty that is later transformed by third parties into an improvement. This holding avoids the morass currently experienced by the state's jurisprudence and alluded to by the Dedmon court:
We find the "improvement versus component part" distinction difficult to apply because, if only systems can be improvements, there is no principled way to tell whether an item is a system or a part of one. Arguably, the ducts that convey warm air from the heater throughout the dwelling are part of the attic system, rather than the heating system. Or if, as in this case, they convey chilled as well as heated air, it is fair to say that the ducts themselves are an "air-moving system" to *483 which two "air temperature modification systems" attach.
Dedmon, 950 F.2d at 248.
The record before us indicates only that Chisholm manufactured personalty and sold it to the Department of Corrections. Absent any evidence that Chisholm did more, we conclude that Chisholm did not construct an "improvement to real property" as contemplated by section 16.009.
V.
The Sonniers ask us to consider, and the question certified to us to answer is, assuming the tomato chopper is an improvement, whether its detachment from the real property at the Sugar Land Unit and reannexation at the Ramsey Unit revivifies the ten-year statute of repose as to the manufacturer of the tomato chopper. It should be apparent from the analysis above that the answer is no. In fact, it should be apparent that this question does not arise under our analysis of the statute of repose because the question assumes the manufacturer constructed an improvement without any relation to the annexation.
The jury in this case answered that the tomato chopper was an improvement at the Sugar Land Unit. Clearly the ten-year statute of repose has run with respect to those who constructed that improvement. Whether the tomato chopper was an improvement at Sugar Land depended upon the facts surrounding its annexation to Sugar Land. The statute of repose governing the annexation at Sugar Land is not revivified by any activity occurring at another construction site. The subsequent annexation at Ramsey created a new ten-year repose period protecting those who annexed the personalty to the realty there, assuming the facts support a finding that the chopper was an improvement at Ramsey.
* * * * * *
Chisholm is only the manufacturer of personalty. As such it cannot claim the protection of section 16.009 of the Texas Civil Practice and Remedies Code because it did not "construct ... an improvement to real property." Texas court of appeals decisions are disapproved and Conkle is overruled to the extent they hold that an off-site manufacturer of personalty used in the construction of an improvement may claim the protection of section 16.009.[2]
Dissenting opinion by OWEN, Justice in which PHILLIPS, Chief Justice, and GONZALEZ, and HECHT, Justices, join.
I respectfully dissent.
*484 I do not agree with the Court's conclusion that the manufacturer of a tomato chopper to be installed in a cannery is excluded from the scope of section 16.009 by virtue of the fact that the manufacturer did not also perform the installation. There is no such limitation in the statute. Chisholm-Ryder Company, Inc. constructed the tomato chopper. If the tomato chopper was an improvement to real property, Chisholm-Ryder comes within the purview of section 16.009. On the record before us, the question of whether the tomato chopper was an improvement is at least one of fact. The jury resolved this issue adversely to the Sonniers.
I.
The underlying facts are largely undisputed. For many years, the Texas Department of Corrections operated a canning plant at its facility in Sugar Land, Texas. In 1965, the TDC ordered a tomato chopping unit from Chisholm-Ryder. The unit was then manufactured in its entirety by Chisholm-Ryder. However, Chisholm-Ryder did not install the tomato chopper.
The tomato chopper weighs approximately 1200 pounds and was bolted to the floor of the Sugar Land cannery. It was connected to the next phase of the cannery process by steel piping which was anchored to the floor with bolts. The tomato chopper was powered by electrical lines enclosed in a rigid conduit attached to the side of the building, and to the floor, walls, and ceiling. The tomato chopper was controlled by a master switch at a main breaker panel connected to the chopper by another conduit. It had the capacity to chop ten to twelve tons of tomatoes per hour. In 1985, the tomato chopping unit was moved to the TDC's Ramsey III Unit, where it was similarly installed. There was testimony from a representative of the TDC that if the TDC were to cease making tomato puree, it would sell the tomato chopper separately from the real estate.
John Sonnier, an employee of the TDC, lost his hand and a portion of his arm in 1990 while inspecting the tomato chopper at the Ramsey III Unit. Suit ensued in federal district court in which the jury found the tomato chopper was an improvement to the real property at the Sugar Land facility. The Sonniers have appealed an adverse judgment, and the United States Court of Appeals for the Fifth Circuit has certified the following question to us:
Whether a person or entity that manufactures a tomato chopping machine "constructs... an improvement to real property" for the purpose of qualifying for the protection of the Statute of Repose, Tex. Civ.Pract. & Rem.Code § 16.009 when that machine is originally installed by another party on real estate, then removed and reinstalled by such other party on real estate at a different location.
II.
The Court has applied an inappropriate test in determining whether the tomato chopper is an improvement, and accordingly, whether Chisholm-Ryder can be the manufacturer of an improvement. The Court concludes that the chopper was "personalty" at the time it was made, and therefore, Chisholm-Ryder could never be the constructor of an improvement under section 16.009 unless Chisholm-Ryder installed the "personalty." The Court has borrowed the law applicable to fixtures and rigidly applied it to the term "improvement" in section 16.009. Such a construction does not give effect to the plain meaning of the statute.
The inquiry should be what the parties objectively intended at the time the item or product in question was constructed. The principle consistently running throughout our case law, prior to today, has been that section 16.009 applies where the object or product was intended to become a part of real property at the time it was made. There is a fundamental distinction between items of this nature, such as an elevator or a furnace, and items of "personalty" such as a tank car or a painting. It is virtually incontrovertible that at the time a manufacturer makes an elevator or a furnace, it is contemplated that these items will become an integral part of a building. The examples of "personalty" relied upon by the Court to validate its rationale, the tank car in the case of Logan v. Mullis, 686 S.W.2d 605 (Tex.1985), and a painting bolted to a motel wall in the Court's hypothetical, *485 are not analogous. It cannot be said that at the time these items were manufactured, they were intended to become improvements to real property within the meaning of section 16.009.
I agree with the Court that until an elevator or furnace or a comparable item becomes a part of real property, it is not an improvement. But once sufficiently annexed, the question raised under section 16.009 is did the manufacturer construct an improvement? The Court myopically and incorrectly focuses on the fact that at one point in the progression of events, the object was not attached to real property.
The Court grants repose only to contractors, builders, and repairmen. It does not and cannot answer the question of why the Legislature used much broader terms in the statute: "a person who constructs or repairs an improvement." Where the Legislature intended to single out specific trades or professions in statutes of repose, it has done so. Accord Dedmon v. Stewart-Warner Corp., 950 F.2d 244, 246 (5th Cir.1992). In section 16.008, the Legislature extended protection only to "a registered or licensed architect or engineer." Tex.Civ.Prac. & Rem.Code § 16.008. The Court's holding today is at odds with the statute it construes.
III.
In reaching its conclusion that the tomato chopper at issue does not fall within the ambit of section 16.009 of the Texas Civil Practice and Remedies Code as a matter of law, the Court overrules the holding of one of our prior decisions and disapproves of no fewer than seven decisions of the courts of appeals. Conkle v. Builders Concrete Prods. Mfg. Co., 749 S.W.2d 489 (Tex.1988); Karisch v. Allied-Signal, Inc., 837 S.W.2d 679 (Tex.App.-Corpus Christi 1992, no writ); Big West Oil Co. v. Willborn Bros. Co., 836 S.W.2d 800 (Tex.App.-Amarillo 1992, no writ); Ablin v. Morton Southwest Co., 802 S.W.2d 788 (Tex.App.-San Antonio 1990, writ denied); Dubin v. Carrier Corp., 798 S.W.2d 1 (Tex.App.-Houston [14th Dist.] 1989, writ dism'd by agr.); Rodarte v. Carrier Corp., 786 S.W.2d 94 (Tex.App.-El Paso 1990, writ dism'd by agr.); Dubin v. Carrier Corp., 731 S.W.2d 651 (Tex.App.-Houston [1st Dist.] 1987, no writ); Ellerbe v. Otis Elevator Co., 618 S.W.2d 870 (Tex.App.-Houston [1st Dist.] 1981, writ ref'd n.r.e.), appeal dism'd, 459 U.S. 802, 103 S. Ct. 24, 74 L. Ed. 2d 39 (1982).
There has been only one prior occasion on which this Court squarely addressed the substantive provisions of section 16.009.[1] We did so in Conkle v. Builders Concrete Products Manufacturing Co. The facts are strikingly similar to those presented by the certified question. The plaintiff in Conkle was killed when he became trapped in a bin that was part of a concrete batch plant. Conkle, 749 S.W.2d at 490. Dillon Steel designed and manufactured the bins and hoppers. It did not install them, and it did not manufacture or construct the mixer apparatus that was joined with them to form the concrete batch plant. Id. The plant originally was sold and delivered to Lok Rok Corporation and assembled on Lok Rok's property, but the entire plant was subsequently moved to the site where Douglas Conkle later lost his life. Id. The trial court granted summary judgment to Dillon Steel as the manufacturer of an improvement, and the court of appeals affirmed. Id. at 489. Our Court reversed.
Our decision in Conkle is significant to our inquiry here for several reasons, the most important of which is that the manufacturer did not install the bins and hoppers. The decision of the court of appeals in Conkle (which is unpublished) as well as the briefing in that court and in our Court show this very clearly. Contrary to the Court's holding today, the fact that the manufacturer was not the installer was not dispositive of the question of whether section 16.009 applied. We held in Conkle that one in Chisholm-Ryder's *486 shoes may nevertheless rely on section 16.009. See id. at 491. The United States Court of Appeals for the Fifth Circuit relied on Conkle for this very proposition in Corbally v. W.R. Grace & Co., 993 F.2d 492, 494 (5th Cir.1993): "Conkle preserved an offsite manufacturer's repose, but only if the manufacturer `constructs the entire improvement and not a component part of it.'"
The Court attempts to undermine our prior holding by asserting that the writ of error before us in Conkle "assumed without questioning the propriety of extending repose protection to off-site manufacturers." This is incorrect. One of the specific points before us was spelled out in the court of appeals' decision under review. That court held:
Dillon argues that the question to be answered is whether or not the manufacturer of the improvement must actually erect or install the improvement to benefit from the statute as the person who "constructs or repairs improvements to real property." We agree with Dillon's analysis. We find the question has been answered. A manufacturer of a product is the one who performs or furnishes construction even though it does not install the item.
Slip op. at 18 (relying on Ellerbe v. Otis Elevator Co., 618 S.W.2d 870, 872 (Tex.Civ. App.-Houston [1st Dist.] 1981, writ ref'd n.r.e.), appeal dism'd, 459 U.S. 802, 103 S. Ct. 24, 74 L. Ed. 2d 39 (1982)).[2]
In our decision in Conkle, we discussed Ellerbe v. Otis Elevator, noting that the court of appeals in Conkle relied on Ellerbe for the proposition that "a person who constructs an improvement to real property need only furnish construction, even though it does not install the item." Conkle, 749 S.W.2d at 491. If the fact that Dillon Steel had not installed the improvement were fatal to its defense, we would have so held in Conkle. We did not.
What we did hold was that a fact question was raised by the evidence. Id. Thus, notwithstanding that Dillon Steel had not installed the bins and hoppers, an issue remained to be tried under section 16.009. (That issue was whether the bins and hoppers in which Conkle died constituted an improvement to real property and whether Dillon Steel manufactured the entire unit or only component parts.) Id. The Court's decision today overrules a fundamental holding in Conkle.
The Texas courts of appeals have similarly applied the straightforward wording of the statute. There is a long line of decisions from the courts of appeals which concludes that the protections extended by section 16.009 and its predecessor, TEX.REV.CIV.STAT. ANN. art. 5536a, § 2, do not turn on whether the one who constructs the "improvement" also installs it. Ellerbe v. Otis Elevator Co. was the first to so hold. Otis designed and manufactured an elevator for a multi-storied building, but did not install it. Ellerbe, 618 S.W.2d at 872. The court of appeals affirmed summary judgment in favor of Otis under article 5536a, § 2. Id. at 874.
In line with Ellerbe, other decisions have concluded that a manufacturer does not have to be the installer to be afforded inclusion in this statute of repose. Big West Oil, 836 S.W.2d at 801 (affirming summary judgment for constructor of underground storage tanks who did not install them); Ablin, 802 S.W.2d at 791-92 (affirming summary judgment in favor of manufacturer of garage door opener even though there was no direct evidence that the unit was actually installed by the manufacturer); Dubin II, 798 S.W.2d at 2 (upholding summary judgment for marketer and distributor of heater who was not the installer); Rodarte, 786 S.W.2d at 95 (affirming summary judgment in favor of manufacturer of heater-air conditioner who had no role in installation or servicing); Dubin I, 731 S.W.2d at 654 (sustaining summary judgment for designer and manufacturer of same wall heater that was subject of Dubin II); see also McCulloch v. Fox & Jacobs, Inc., 696 S.W.2d 918, 922-23 (Tex.App.-Dallas 1985, *487 writ ref'd n.r.e.) (summary judgment upheld in favor of owner who did not design or construct pool, but hired contractor, approved dimensions, and always intended to convey pool to Homeowners Association). Accord Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 518 n. 13 (5th Cir.1992) (affirmed summary judgment for manufacturer of electrical bus duct); Dedmon v. Stewart-Warner Corp., 950 F.2d 244, 247 (5th Cir. 1992) (summary judgment for manufacturer of residential furnace affirmed).
We need not pass upon whether this principle of law was correctly applied to the facts in each of these cases, but the holding that section 16.009 may apply to those who construct but do not install improvements to real property was sound. It is derived from the plain meaning of the statute: "a person who constructs ... an improvement to real property." Prior to today, only one Texas decision has reached an opposite conclusion. Williams v. U.S. Natural Resources, Inc., 865 S.W.2d 203 (Tex.App.-Waco 1993, no writ) (relying in part on Dayton Indep. Sch. Dist. v. U.S. Mineral Prods. Co., 800 F. Supp. 1430 (E.D.Tex.1992)).
Implicit in each of the cases which held that the manufacturer was entitled to repose even though it was not the installer was the conclusion that the manufacturers of petroleum storage tanks, garage door openers, elevators, air conditioners, and comparable items contemplate that their products will be attached to and become a part of real property. In deciding if something within or upon real property is an improvement within the meaning of section 16.009, the determinative factor should not be who installed it. The inquiry should include the intent of the parties at the time the item at issue was constructed, the manner in which it is used in conjunction with the property, and the manner in which it is attached or connected in some way to the real property.
The Court relies upon our decision in Logan v. Mullis, 686 S.W.2d 605 (Tex.1985), but applies the factors we articulated without analysis. In Logan, we delineated the factors used to determine whether personal property had become a fixture to real property. Id. at 607. The essence of our holding in that case was that we must look at the broader picture and to the objective intentions of the parties to ascertain whether something is an improvement. The decision in Logan concerned an item of personalty that was designed to remain personalty, a railroad tank car. Accordingly, the Court looked only to the intent of the person who annexed it to realty. Id. If we apply the rationale of our holding in Logan to the facts before us today, it is obvious that the intentions and reasonable expectations of the constructor must also be considered.
The facts in Logan shed light on the reasoning which led to our decision. Logan acquired an easement on which he built a road. As part of that project, he built a culvert beneath the road where it intersected a creek. To accomplish this, he cut both ends off of a railroad tank car, put it in the creek bed, and covered it with gravel. Id. Logan had given the owners of the subservient estate the right to use this road, but he later became embroiled in a dispute with them and destroyed the culvert. Id. The question before us was whether Logan had the right to remove the culvert. Id. We set out the three factors relevant to determining "whether personalty has become a fixture, that is, a permanent part of the realty to which it is affixed":
(1) the mode and sufficiency of annexation, either real or constructive;
(2) the adaptation of the article to the use or purpose of the realty; and
(3) the intention of the party who annexed the chattel to the realty.
Id.
We explained that the third criterion dealing with intent is preeminent, while the first and second criteria constitute evidence of intention. Id. In determining intent, Logan also instructs that we are to look at objective manifestations. Id. at 608. While as a general rule, intent is a question of fact, even testimony that the personalty was not meant to become a fixture will not prevail in the face of undisputed evidence to the contrary. "Where reasonable minds cannot differ, the issue is one of law rather than one of fact." Id.
*488 We held in Logan that the intention to make the tank car a fixture was conclusively established by Logan's conduct at the time he built the culvert. "The manner in which he affixed the tank car to the realty, the circumstances surrounding the building and eventual destruction of the culvert, and the adaptability of the culvert to the peculiar topography of the land are all prime evidence of intention." Id. We held as a matter of law that the culvert was a fixture. Id. at 609.
Logan was not a case construing section 16.009, but the principles it set out are instructive in determining the meaning of "improvement" as used in that statute. Those principles are not, however, the only factors to be considered in determining whether something is an improvement to real property within the meaning of section 16.009.
The inquiry in this case should be whether Chisholm-Ryder constructed an improvement. In other words, was it reasonable for Chisholm-Ryder to expect that its product would become a part of real property? This concept runs throughout our prior case law, although it has not been articulated in these exact words.
IV.
Admittedly, the Legislature did not give us precise guidelines for determining the outermost reach of section 16.009. However, the language of the statute cannot be read to exclude automatically those who do not construct the improvement on the job site. Most of the difficulty in the case law has been encountered in attempting to parse whether the item manufactured is an improvement or a component part of an improvement. See, e.g., Reddix v. Eaton Corp., 662 S.W.2d 720, 724 (Tex.App.-San Antonio 1983, writ ref'd n.r.e.).
I agree with the observation of the Court and of the Fifth Circuit that the distinction drawn in Reddix and Conkle between an improvement versus a component part can be difficult to apply. I would articulate the distinction between what is and is not included under section 16.009 somewhat differently. Those who only supply materials, such as nuts, bolts, nails, concrete, or lumber, are not included. They do not "construct" an improvement, but merely provide materials. But where "construction" must take place, such as the construction of an elevator or oil storage tanks, the manufacturer is included within the scope of section 16.009 if its product does in fact become a part of real property and if it was the objective intent of the parties at the time the item was constructed that it would become an improvement.
Articulating the test for the application of section 16.009 in this manner does no violence to Conkle, Ablin, or Ellerbe, as the Court suggests. A fact question would remain under Conkle as to whether the bins and hoppers were an improvement. See Conkle, 749 S.W.2d at 491. The garage door opener in Ablin and the elevator in Ellerbe would fall within the scope of section 16.009 as a matter of law. See Ablin, 802 S.W.2d at 791-92; Ellerbe, 618 S.W.2d at 872. Only the result in Reddix was and is questionable, regardless of whether the test for the application of repose under section 16.009 is stated in terms of component parts versus an improvement, or in terms of whether the item was constructed with the view that it would become an improvement to real property. See Reddix, 662 S.W.2d at 722-24. In some cases, such as this one involving the tomato chopper, reasonable minds may differ as to what is an improvement, and a fact question is presented.
Aside from the "component parts" distinction, a few courts also have struggled with the concept of whether the reach of the statute includes manufacturers and suppliers of standardized goods such as garage door openers. Williams, 865 S.W.2d at 205-06; Dedmon, 950 F.2d at 249-50; Dayton, 800 F.Supp. at 1436-39. These decisions have considered whether the statute confines repose to those persons who supply individual expertise not susceptible of the quality control standards of a factory. The Dedmon decision attempted to answer that question and to determine if the Texas Legislature intended to focus on the actor or on the product in section 16.009. The court in Dedmon observed:
We suspect that the Texas Legislature intended the repose statute to protect a specific class of economic actorsconstruction-industry *489 professionals who perform certain functions. But the broad wording of the statute blurs the intended boundaries of that class.
950 F.2d at 249. The Fifth Circuit ultimately concluded, based on Conkle, that our Court had adopted a product-oriented approach. Id. at 250.
While the Fifth Circuit found the boundaries blurred when determining what products should be deemed improvements when attached to realty, the court had no difficulty in concluding that the scope of section 16.009 is not dependent on whether the improvement was actually installed by the one who manufactured it. Judge Reavley, writing for the court, observed:
The statute's plain words protect any person who "constructs ... an improvement to real property," and do not distinguish whether the person constructs the improvement on the premises, or off of the premises for later installation by another.
Id. at 247.
The question of whether the Legislature intended to extend repose to manufacturers of mass-produced products, even if the products were intended to become and did become an improvement to real estate, must similarly be resolved by applying the straight-forward meaning of the words in the statute. The statute draws no distinction between an improvement that is mass-produced and one that is specifically tailored for a given piece of real property.
The intent of a statute of repose is to provide some ending point for the assertion of claims. The Legislature deemed repose appropriate and in the public interest for certain suits involving an improvement to real property. The basic policy considerations underpinning a statute of repose exist for both a manufacturer of a tomato chopper and a general contractor. Those policy considerations may not be coextensive; there may be additional factors weighing in favor of repose for one class of constructor as opposed to another. But that does not mean that repose is unavailable, as a matter of law or principle, to either class of constructor. The determining factor is what the Legislature has put in place. We must be guided by the statute itself.
The Court today rejects the interpretation of section 16.009 previously adhered to by this and other courts. In so doing, it has ignored fundamental principles in our jurisprudence. "[I]n the area of statutory construction, the doctrine of stare decisis has its greatest force." Marmon v. Mustang Aviation, Inc., 430 S.W.2d 182, 186 (Tex.1968). I agree that we should not apply this principle rigidly, but there are no compelling reasons to overrule the long line of Texas cases interpreting section 16.009. The longstanding interpretation of the statute has wrought no hardships or injustices, and there is no indication whatsoever that the Legislature disagrees with our prior interpretation of the statute or the interpretation in numerous decisions of the courts of appeals. The courts of appeals construed the predecessor of section 16.009, art. 5536a § 2, beginning with Ellerbe in 1981. The Legislature reenacted this statute with very little change as part of the Civil Practice and Remedies Code in 1985. See Acts 1969, 69th Leg., R.S., ch. 959, § 1, 1969 Tex.Gen.Laws 3242, 3253-54. As this Court has held:
The rule is well settled that when a statute is re-enacted without material change, it is presumed that the legislature knew and adopted the interpretation placed on the original act and intended the new enactment to receive the same construction.
Coastal Indus. Water Auth. v. Trinity Portland Cement Div., 563 S.W.2d 916, 918 (Tex. 1978). See also Kennedy v. Hyde, 682 S.W.2d 525, 529 (Tex.1984).
We must apply the statute as written. The ordinary meaning of "construct" includes the construction of a tomato chopper. Section 16.009 does not require the constructor to also be an installer. The Legislature could have, but did not, expressly limit this statute of repose to contractors and installers. Chisholm-Ryder constructed a tomato chopper. If the tomato chopper is an improvement, the statute of repose applies.
V.
I agree with the Court that the fact the tomato chopper was removed from the Sugar *490 Land cannery and reinstalled at the Ramsey III Unit is not dispositive of whether the chopper was an improvement. However, I disagree with the Court that the subsequent annexation of the chopper at the Ramsey III Unit creates a new ten year period of repose. The protection intended from the statute of repose would be defeated if the time within which suit must be brought began to run anew upon relocation of the improvement. See Conkle, 749 S.W.2d at 491 (fact question existed as to whether bins and hoppers were an improvement even though there was some evidence they were portable); Karisch, 837 S.W.2d at 681 (heat exchanger an improvement as a matter of law notwithstanding evidence that heat exchangers were sometimes moved within the refinery or removed and sold); Johnson v. Machine Ice Co., 820 S.W.2d 850, 852 (Tex.App.-Houston [14th Dist.] 1991, writ denied) (fact question as to whether ice plant was an improvement although there was evidence it was removable and could be relocated); Ablin, 802 S.W.2d at 790 (garage door opener improvement as a matter of law even though easily removable). The intent of the parties and the nature of the item's use were to be considered in determining if the item was an improvement.
VI.
Applying the traditional factors our courts have considered in cases of this nature to the tomato chopper, there is at least a fact question as to whether it is an improvement. (See, e.g., Conkle, 749 S.W.2d at 491, where we found a fact issue existed as to whether the bins and hoppers were an improvement to real property.) Both the TDC and Chisholm-Ryder could reasonably have expected that the tomato chopper would be annexed to real property and become an improvement. The tomato chopper was ordered by the TDC, and then manufactured for the TDC. There could be little doubt that it was to be used and installed in a processing plant. It weighed approximately 1200 pounds and had the capacity to chop ten to twelve tons of tomatoes per hour. It was not a household product. The TDC and Chisholm-Ryder unquestionably knew that it would have to be firmly attached in some manner to a building, and that wiring, conduit, and tubing would connect it to the plant. These are facts from which a jury could reasonably find and did find that the tomato chopper was an improvement.[3]
Instead of focusing on the objective intent of the parties, and factors such as how the alleged improvement is annexed to the property and its adaptation to the use of the real property, the Court focuses on who performed the installation. This is a departure from our prior jurisprudence, and the Court cites no authority for this novel approach. Under this new test for what constitutes an improvement, an elevator in a high rise building is and at the same time is not an improvement, depending on one's vantage point. The elevator is an improvement if you are the defendant who actually installed it, but it is not if you are the defendant who manufactured it. Surely, the Legislature never intended the word "improvement" to have such a meaning.
* * * * * *
The response to the question certified by the United States Court of Appeals for the Fifth Circuit should be that, based on the record before us, the manufacturer of the chopping machine constructed an improvement to real property within the meaning of *491 section 16.009 of the Texas Civil Practice & Remedies Code if the tomato chopper is an improvement. Whether it was an improvement was a fact question answered by the jury.
NOTES
[1] Chisholm-Ryder changed its name to 3800 Highland, Inc. That company later dissolved, and most of its liabilities were assumed by Premax Limited Partnership. Although Premax contests whether it assumed the potential liability in this case, the federal district court did not address that issue. Nor need we, given the limited nature of the certified question before us. See Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 349 (Tex.1990).
[2] In response to the dissent, a few remarks are appropriate. First, notwithstanding the dissent's reference to stare decisis, a cursory reading of the dissent demonstrates that this Court is unanimous in questioning the jurisprudential value of Conkle and the court of appeals' decisions discussed above.
This is so because both this Court and the dissent disapprove of the notion that whether a manufacturer makes only a component part or the whole thing is dispositive of any issue under section 16.009. The dissent's test for improvement would place great importance on whether the manufacturer of the product intended the product to become an improvement or whether it was reasonable for the manufacturer to expect its product would become an improvement at the time the product was manufactured. Under this test, it is irrelevant whether the manufacturer made a component part or the whole part. And since Conkle supports the proposition that only manufacturers of whole systems receive the benefit of the repose statute, the dissent silently disavows that portion of the opinion.
Second, although it asserts that this Court has disregarded settled jurisprudence, the dissent's proposed test is clearly inconsistent with the principles espoused by earlier court of appeals decisions, both those interpreting section 16.009 and those determining whether property is an improvement. Not in Ellerbe nor in Reddix did the court consider the intent of the manufacturer. Reddix, which commented on the distinction between a whole product as opposed to a part, surely is deserving of disapproval even by the dissentthe manufacturer of a part may equally intend its product to be an improvement.
Finally, the dissent's test is significantly more broad than any holding in this area so far. Despite its protests to the contrary, the dissent's test encompasses all materialmenall suppliers of any kindin the context of the statute of repose. For example, a manufacturer of concrete reinforcing bars certainly intends for its products to be improvements. Under the dissent's test, the manufacturer would be afforded repose. Arguably even suppliers of raw materials would be covered by the repose statute to the extent their labor contributed to the refining or extracting of the materials. The statute does not go that far.
[1] Section 16.009 provides in pertinent part:
§ 16.009. Persons Furnishing Construction or Repair of Improvements
(a) A claimant must bring suit for damages ... against a person who constructs or repairs an improvement to real property not later than 10 years after the substantial completion of the improvement in an action arising out of a defective or unsafe condition of the real property or a deficiency in the construction or repair of the improvement.
TEX.CIV.PRAC. & REM.CODE § 16.009.
[2] The issue was joined in the briefing in this Court. Conkle asserted: "The summary judgment evidence ... creates an issue of fact as to whether Dillon constructed an improvement on real property, or whether it merely constructed and fabricated component parts of machinery which were erected and placed on real property by persons other than Dillon." (Emphasis added.) Dillon Steel responded: "The question as to whether one must actually erect or install the improvement to claim protection of the statute was answered in Ellerbe."
[3] The only issue submitted to the jury, to which it answered "yes", was as follows:
Do you find from a preponderance of the evidence that the tomato chopper was an "improvement" to real property at the Central Sugarland Unit?
"Improvement" means all additions and betterments to the premises and includes everything that permanently enhances the value of the premises, and may even be something easily removable so long as it is attached and intended to remain permanently as part of the building. Likewise, merely attaching something as part of the building does not make it an improvement unless it is intended to remain permanently part of the building.
You are instructed that to determine whether the tomato chopper was an improvement, you should consider the mode and sufficiency to which it was affixed to the premises, the adaption of it to the use or purpose of the premises, and the intention of the party who placed it in the premises. The intention of the party who does the annexing is preeminent; the other two factors are merely evidence of intent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1553295/ | 57 B.R. 566 (1986)
In re AUTO-TRAIN CORPORATION, a Florida corporation, a/k/a Railway Services Corporation, Debtor.
Bankruptcy No. 80-00391.
United States Bankruptcy Court, District of Columbia.
January 28, 1986.
Imogene Lehman, Cadwalader, Wickersham & Taft, Washington, D.C., for trustee.
OPINION
GEORGE FRANCIS BASON, Jr., Bankruptcy Judge.
With respect to a number of claims filed in this case, the Trustee's notice of objection to the claim was mailed by first-class *567 mail to the claimant's last known address but was returned by the U.S. Postal Service as being undeliverable. In each such instance, the Trustee has filled a "motion for entry of order" and has submitted a form of order sustaining the Trustee's objection on the ground that the claimant "has waived any right to receive notice of the Trustee's objection" by "failure to advise the Court or the Trustee" of the claimant's current address.
The matters in issue are generally for small amounts (under $500.00).[1] Some of the claims were filed up to five years ago, or even longer. From the perspective of an individual claimant holding such a small claim, it may seem harsh to be deprived of the right to be heard because of failure to keep the Court or the Trustee advised over such a long period of time of the claimant's current address. Yet there is no practical alternative. It would be prohibitively expensive and time-consuming and probably not very effective for the Trustee to hire the services of a tracing agency. The Trustee has duties to conserve the assets of the estate and to make distribution as quickly as possible not to waste assets and time in fruitlessly pursuing will-o'-the-wisps. The Trustee also has a duty to file an objection to a claim only when the objection is well grounded in fact and is warranted in law (see Bankruptcy Rule 9011), and this Trustee's performance in this case provides every reason to believe that the Trustee has adhered diligently and conscientiously to that duty.
Rule 5(b) of the Federal Rules of Civil Procedure provides that "if no address [of a party or the party's attorney] is known, [service shall be made] by leaving it [a copy of the paper to be served] with the clerk of the court." Regrettably, there is no comparable specific provision in Bankruptcy Rule 3007, relating to objections to claims, nor in Bankruptcy Rule 9014, relating to "contested matters,"[2] nor in Bankruptcy Rule 7004, relating to manner of service.[3] However, the United States Court of Appeals for the Second Circuit has recently dealt with this issue in the case of In re Martin-Trigona, 763 F.2d 503 (1985). There, the trial court granted default judgment to a bankruptcy trustee and denied a defendant's motion to vacate the default. Service was by first-class mail to the last known addresses of the defendants. The Court of Appeals held (763 F.2d at 505-506):
. . . the uninterrupted legitimacy of former Rule 704(c) is evidenced by its retention substantially unchanged as Rule 7004(b) of the new bankruptcy rules, promulgated after Northern Pipeline. We conclude that appellee's service of process by first-class mail to the above addresses was effective and that the district court had personal jurisdiction over appellants.
* * * * * *
Helen Martin-Trigona's failure either to collect corporate mail sent to the Ridge Road address or to change the address for service of process with the Secretary of State constitutes a willful disregard of legal process and a willful default. Equally willful was Anthony Martin-Trigona's decision to return the envelopes mailed to him unopened.
This Court need not, and does not, make a finding that the claimants' failure to keep the Court or the Trustee advised of their current addresses constituted a "willful disregard of legal process" or a "willful default." Indeed, the Court takes this opportunity to announce that it intends to be *568 lenient in granting motions to vacate its orders sustaining the Trustee's objections, when the orders are based on failure to keep the Trustee or the Court advised of the claimants' current addresses, whenever a claimant tenders a facially valid rebuttal on the merits to the Trustee's objections.
For all the foregoing reasons, and on the authority of Martin-Trigona, and based on a finding that the claimants' failures to advise the Court or the Trustee of their current addresses constitute waivers of the right to receive notice of the Trustee's objections, this Court will grant the Trustee's motions.
NOTES
[1] The Trustee has filed well over 100 such motions. In all but seven, less than $500 is at issue. None involves over $2,500, and only one involves over $2,000.
[2] The Advisory Committee Note following Rule 3007 states: "The contested matter initiated by an objection to a claim is governed by Rule 9014 . . ." The Advisory Committee Note following Rule 9014 explains the meaning of "contested matter" as follows: "Whenever there is an actual dispute, other than an adversary proceeding, before the bankruptcy court, the litigation to resolve that dispute is a contested matter."
[3] Rule 9014 requires service "in the manner provided for service of a summons and complaint by Rule 7004 . . ." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1633835/ | 889 S.W.2d 666 (1994)
TACON MECHANICAL CONTRACTORS, INC., Appellant,
v.
GRANT SHEET METAL, INC., Appellee.
No. B14-93-00470-CV.
Court of Appeals of Texas, Houston (14th Dist.).
December 8, 1994.
Rehearing Overruled December 29, 1994.
*668 Eric Carter, James L. Deem, Dallas, for appellant.
Gregory M. Cokinos, Craig E. Power, Douglas R. Drucker, Houston, Marc J. Wojciechowski, Marvin Moos, David A. Ward, Jr., Woodlands, for appellee.
OPINION
SEARS, Justice.
Tacon Mechanical Contractors, Inc., appeals from a judgment awarding Grant Sheet Metal, Inc. actual damages of $130,368.50 and exemplary damages of $150,000.00. Tacon raises twenty-two points of error, primarily challenging the legal and factual sufficiency of the evidence supporting the jury findings of liability, damages, and attorney fees. Grant brings one cross-point claiming the appeal was taken for delay and without sufficient cause. We affirm the trial court's judgment.
Tacon is a mechanical contractor that was responsible for installation of heating, ventilation, air conditioning (HVAC) and plumbing work on four construction projects. Grant was a subcontractor of Tacon, responsible for fabrication and installation of HVAC duct work. The parties encountered problems on the job. Tacon complained that Grant did not keep sufficient personnel, and Grant complained that Tacon caused interference on the job by running pipe through spaces designated for Grant's prefabricated duct work. Grant also complained that Tacon wrongfully withheld payment for work performed.
*669 Tacon terminated Grant in April 1986, before completion of the projects. Grant then filed suit against Tacon and the sureties on the bonds on the various jobs. Tacon filed a cross-claim alleging breach of contract. The jury found that Tacon breached all four contracts, intentionally interfered with Grant's work on three of the projects, wrongfully terminated Grant, and misapplied construction trust funds. The jury awarded Grant actual damages from Tacon and the sureties, and assessed exemplary damages against Tacon. The jury found no breach of contract by Grant.
Most of Tacon's points of error are challenges to the legal and factual sufficiency of the evidence supporting the jury findings of liability and damages. Therefore, we first set out the standard of review applicable to such challenges.
When a party challenges the legal sufficiency of an adverse finding, it must demonstrate that there is no evidence supporting the finding. In reviewing "no evidence" points of error, an appellate court must consider only the evidence and inferences tending to support the finding and disregard all contrary evidence and inferences. Weirich v. Weirich, 833 S.W.2d 942, 945 (Tex.1992). If there is any evidence of probative force to support the finding, the point must be overruled. Southern States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex.1989).
When a party claims the evidence is factually insufficient to support a finding, the appellate court must consider all of the evidence. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex.1989). Having done so, the court should set aside the verdict only if the evidence is so weak as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).
In point of error one, Tacon challenges the factual and legal sufficiency of the evidence supporting the jury's finding that Tacon breached all of its contracts with Grant. Tacon contends the evidence conclusively established that Tacon terminated the contracts after Grant had breached them. Furthermore, Tacon claims the jury issue on contract damages was erroneously submitted because Grant pled only "substantial performance."
Our review of the record reveals that Tacon terminated Grant for the stated reasons that Grant did not maintain adequate materials or qualified personnel on the job. Gene Grant, owner of Grant Sheet Metal, and Ralph May, former employee, testified that Grant had an adequate number of sufficiently experienced personnel on all of the job sites. Leroy Leuder, formerly a general foreman for Grant, testified that he kept a daily log of the number of employees working and that he gave a copy of this to the general contractor. These logs were admitted into evidence. Leuder testified that he was unaware of any complaints about Grant's personnel until just before Grant was terminated. Leuder further testified that Tacon was responsible for furnishing smoke dampers and they ordered the wrong size for the job.
Although Tacon presented evidence of defects in Grant's performance, Grant's evidence is sufficient to support the jury's verdict. Certainly, the jury's finding is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong unjust." Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). Thus, we overrule point of error one.
In point of error two, Tacon challenges the sufficiency of the evidence supporting the awards of damages because these amounts were based on the full contract price and Grant did not perform the full amount of work. Because our analysis of this point of error relates to our analysis of point of error three, we turn first to that point.
In point of error three, Tacon claims the evidence is legally and factually insufficient to support the jury's finding that Tacon wrongfully interfered with Grant's performance. Tacon's argument under this point of error consists of six sentences, broadly asserting there is no evidence, that Tacon rightfully terminated Grant, and that testimony by Robert Rimkus was based on unsubstantiated hearsay to which Tacon objected. Tacon does not provide any citations to the record for these assertions and does not present any argument for its alternative contention *670 that the evidence is factually insufficient. Because Tacon has presented no argument or citations to authority or to the record regarding its factual insufficiency claim, we find that claim waived. See White v. Bath, 825 S.W.2d 227, 230 (Tex.App. Houston [14th Dist.] 1992, writ denied), cert. denied, ___ U.S. ___, 113 S. Ct. 1868, 123 L. Ed. 2d 488 (1993). Although we find Tacon's argument regarding legal insufficiency deficient, primarily for lack of citations to the record, we will consider that contention.
Tacon cites Black Lake Pipe Line Co. v. Union Construction Co., 538 S.W.2d 80 (Tex. 1976) in support of its contention that Tacon's termination of Grant was not interference that would entitle Grant to recover damages. Grant claimed, however, that Tacon interfered by failing to procure certain materials and by installing piping in the space designated for Grant's duct work. There is evidence showing that Tacon installed pipe in spaces designated for Grant's duct work, that Tacon failed to pay Grant in a timely manner, and that Tacon gave Grant payment by check that was returned by the bank for insufficient funds. There is also testimony by Paul Avenell of Tacon that Grant completed its work on the New Caney High School project. This evidence is sufficient to support the jury's finding of wrongful interference. With a legal sufficiency challenge, an appellate court may not second guess a factfinder "unless only one inference could be drawn from the evidence." State v. $11,014.00, 820 S.W.2d 783, 785 (Tex.1991). We overrule point of error three.
Next, we must determine whether Grant was entitled to recover full contract damages. A nonbreaching party is generally entitled to all its actual damages necessary to put it in the same economic position it would have been in had the contract not been breached. General Elec. Supply Co. v. Gulf Electroquip, Inc., 857 S.W.2d 591, 599 (Tex. App.Houston [1st Dist.] 1993, writ denied). Tacon argues that Grant did not complete the work on the projects and, thus, is not entitled to full payment. This assertion, however, ignores case law regarding wrongful interference with contract performance. When one party to a contract, by wrongful means, prevents the other party from performing, this interference with performance constitutes breach of contract. S.K.Y. Inv. Corp. v. H.E. Butt Grocery Co., 440 S.W.2d 885, 889 (Tex.Civ.App.Corpus Christi 1969, no writ). Such a breach not only excuses performance by the injured party, but also entitles him to recover damages sustained by reason of the breach. Id. at 889-890.
Because there was sufficient evidence to support the jury's findings that Tacon wrongfully interfered with Grant's performance of these contracts, Grant was entitled to recover the damages it sustained as a result of Tacon's breach. S.K.Y. Inv. Corp., 440 S.W.2d at 889. There is evidence in the record supporting the amounts awarded by the jury.
Tacon, however, claims that Grant could only recover damages pursuant to the doctrine of substantial performance and that Grant failed to establish the requisite elements of that doctrine. The doctrine of substantial performance allows a party to a contract, who is himself in breach but who nevertheless substantially completed performance, to recover damages for that performance. Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex.1990). The jury found that Tacon, and not Grant, breached the contract. Therefore, the doctrine of substantial performance is inapplicable. Accordingly, we overrule point of error two.
In point of error four, Tacon contends the evidence was legally and factually insufficient to support the jury's findings as to all amounts of damages for interference. As under point of error three, Tacon's argument under this point of error does not mention its factual insufficiency claim or cite any authority or reference to the record regarding this contention. Therefore, we hold that Tacon has waived its factual insufficiency claim. See White, 825 S.W.2d at 230. We turn to Tacon's legal insufficiency claim.
Each of the contracts contain the following clause:
Should Contractor [Tacon] delay Subcontractor's [Grant's] work, then and in such event Contractor shall owe Subcontractor therefor only an extension of time for completion *671 equal to the delay caused, and then only if written claim for delay is made to Contractor within forty-eight (48) hours from the beginning of the delay.
Tacon argues that, under this provision, Grant was required to give 48 hours written notice of delays allegedly caused by Tacon or Grant was not entitled to recover damages for delay. Grant offers two responses to Tacon's contention. First, Grant asserts that, even if this clause prohibits recovery of damages for delay, Tacon has waived this defense by failing to plead it. Second, Grant maintains that this provision does not preclude recovery of damages for delay. We turn to the waiver argument first.
Rule 94 requires affirmative pleading of certain specified defenses and of "any other matter constituting an avoidance or affirmative defense." Tex.R.Civ.P. 94. Where an affirmative defense is not pled or tried by consent, it is waived. Espinoza v. Victoria Bank & Trust Co., 572 S.W.2d 816, 827 (Tex.Civ.App.Corpus Christi 1978, writ ref'd n.r.e.). Tacon is attempting to avoid liability for damages for delays by contending a contractual clause precludes liability. A similar attempt was unsuccessful in Borders v. KRLB, Inc., 727 S.W.2d 357 (Tex. App.Amarillo 1987, writ ref'd n.r.e.). In Borders, the appellant claimed his liability was limited under a liquidated damages clause in the contract. Id. at 360. The court held that this claim was waived because appellant had not pled the provision as an avoidance defense. Id.
Tacon's argument that the delay provision in the instant contract precludes liability for delay damages is a classic avoidance defense. Tacon did not affirmatively plead this provision, but merely filed a general denial. Furthermore, this defense was not tried by consent. Therefore, we hold that Tacon has waived this contention and we need not determine whether this clause precludes the damages awarded. We overrule point of error four.
In point of error five, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Tacon intentionally interfered with Grant's contract. In point of error six, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Tacon wrongfully terminated Grant. In point of error seven, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Tacon terminated Grant with malice.
Under these points, Tacon provides no citations to the record and cites no authority. The argument presented is conclusory. Where an appellant's points of error are not supported by authorities, citation to the record, and contain mere conclusory argument, those points are waived. See Anheuser-Busch Co., Inc. v. Summit Coffee Co., 858 S.W.2d 928, 942 (Tex.App.Dallas 1993, writ denied), cert. filed, 63 USLW 3161 (Aug. 30, 1994). We also note that Tacon's arguments under these three points do not mention the factual insufficiency claim. This lack of briefing alone waives this claim. Barham v. Turner Constr. Co., 803 S.W.2d 731, 740 (Tex.App.Dallas 1990, writ denied). Thus, we overrule points of error five through seven.
In point of error eight, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Tacon misappropriated trust funds. Tacon argues that there was no proof that Tacon received any specific trust funds.
Grant argues that Tacon received funds from the general contractor and that a portion of these funds were to be held in trust for the benefit of, and in payment to, Grant for work performed. The instruction to jury question nine advised the jury that construction payments made to a contractor under a construction contract for the improvement of real property in Texas are trust funds and that a subcontractor who labors or furnishes labor or materials for that construction is a beneficiary of those trust funds. The instruction further stated that "a trustee who, with intent to defraud, directly or indirectly retains, uses, disburses or otherwise diverts trust funds without first fully paying all current or past due obligations incurred by the trustee to the beneficiaries of the trust funds, has misapplied the trust funds."
*672 Our review of the record indicates there was sufficient evidence showing that Tacon did not make payments for certain invoices for work performed by Grant. There was also evidence that Tacon frequently withheld payment in full of invoices from Grant. We find this evidence sufficient to support the jury's finding that Tacon misappropriated trust funds. We overrule point of error eight.
In point of error nine, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding of damages for misappropriation of trust funds. Under this point, Tacon provides no citations to the record and no authority. Furthermore, the argument consists of three sentences effectively stating no more than mere conclusions that there is no evidence to support the jury's finding. Where an appellant's points of error are not supported by authorities, citation to the record, and mere conclusory argument, those points are waived. See Anheuser-Busch Co., 858 S.W.2d at 942. We hold that Tacon has waived this complaint and we overrule point of error nine.
In point of error ten, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's award of exemplary damages. As under previous points of error, Tacon presents no argument for its alternative contention that the evidence is factually insufficient. Because Tacon has presented no argument regarding its factual insufficiency claim, we find that claim waived. See White, 825 S.W.2d at 230. Therefore, we turn to Tacon's legal sufficiency claim.
Tacon claims that no evidence supports the responses to the jury questions on which this question is based and, therefore, there is no evidence supporting an award of exemplary damages. Jury question thirteen involves an award for exemplary damages and response to this question is predicated on the jury's affirmative response to questions five (wrongful interference), eight (whether the wrongful termination of Grant was done with malice), ten (damages for misapplication of trust funds), or twelve (damages for misrepresentations). The jury found that Tacon had made no misrepresentations and thus, awarded no damages under jury question twelve. We have already upheld the jury's findings in response to questions five and ten. Therefore, Tacon's argument that there is no basis for the jury question regarding exemplary damages is without merit. We overrule point of error ten.
In point of error eleven, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding of damages owed by Seaboard Surety Company, Continental Casualty Company, and Commercial Union Insurance Company. Seaboard, Continental, and Commercial Union are co-defendants who have not appealed. Grant urges us to overrule this point of error because Tacon has no standing to complain about damages awarded against its non-appealing co-defendants.
In Jackson v. Fontaine's Clinics, Inc., 499 S.W.2d 87, 92 (Tex.1973), the petitioner brought a complaint about an award of exemplary damages against her non-appealing co-defendants. The supreme court held that a petitioner may not complain of errors which do not injuriously affect him or which merely affect the rights of others. Id. Based on Jackson, we hold that Tacon may not complain about the award of damages against the sureties. We overrule point of error eleven.
In point of error twelve, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's findings of attorney's fees. Tacon's only argument under this point of error is "the evidence conclusively establishes as a matter of law that Grant is not entitled to recover damages from Tacon under any theory" and therefore is not entitled to recover attorney's fees. Because we have upheld the jury findings of liability in favor of Grant, Tacon's argument is without merit. We overrule point of error twelve.
In point of error thirteen, Tacon challenges legal and factual sufficiency of the evidence supporting the jury's failure to find liability on Tacon's claim that Grant breached its contracts with Tacon. When a party challenges the legal sufficiency of an adverse finding on an issue on which he had the burden of proof, he must demonstrate on appeal that the evidence conclusively established *673 all vital facts in support of the issue. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). We use a two-prong test in reviewing a "matter of law" challenge. First, we examine the record for evidence supporting the finding, while ignoring contrary evidence. Id. If there is no evidence to support the finding, we must then examine the entire record to determine if the contrary proposition is established as a matter of law. Id. If the contrary proposition is conclusively established, we will sustain the point of error. Meyerland Community Improvement Ass'n v. Temple, 700 S.W.2d 263, 267 (Tex.App.Houston [1st Dist.] 1985, writ ref'd n.r.e.).
Where a party attacks the factual sufficiency of the evidence on an issue on which he had the burden of proof, he must demonstrate that the adverse finding is against the great weight and preponderance of the evidence. Hickey v. Couchman, 797 S.W.2d 103, 109-10 (Tex.App.Corpus Christi 1990, writ denied). We must examine the entire record to determine if there is some evidence to support the finding. Cain, 709 S.W.2d at 176.
Although Tacon does not provide any record citations or discussion of the evidence under this point, it alludes to such discussion under other points of error. Under point of error one, there is discussion of the evidence regarding Grant's performance. As with many other points of error in Tacon's brief, we find the argument conclusory and lacking in record citations and analysis. Although we could find waiver, Shenandoah Assoc. v. J & K Prop., Inc., 741 S.W.2d 470, 492 (Tex. App.Dallas 1987, writ denied), we will address this point of error.
Our review of the record indicates there is evidence that Grant maintained adequate numbers of experienced personnel. Furthermore, Grant's daily logs showing the personnel on each job each day were admitted into evidence. This is certainly evidence to survive a legal sufficiency challenge.
There is evidence from Tacon's witnesses that Grant under-staffed the projects with inexperienced workers. There is also evidence that Grant failed to complete the projects; however, the evidence showed that Tacon caused many delays by installing piping in the spaces designated for Grant's ductwork. There is evidence that Tacon delayed payments due to Grant for work performed and paid Grant with checks that were returned for insufficient funds. Furthermore, Tacon terminated Grant before it could complete its performance.
In reviewing "great weight" points, we must be mindful that the jury was not convinced by a preponderance of the evidence that Grant breached its contracts with Tacon. We may only reverse if the great weight of the evidence supports an affirmative answer. See Herbert v. Herbert, 754 S.W.2d 141, 144 (Tex.1988). Based on our examination of the record, we do not find that the great weight of the evidence supports an affirmative finding that Grant breached its contracts with Tacon. Therefore, we overrule point of error thirteen.
In point of error fourteen, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's failure to find damages suffered by Tacon for Grant's breach of contract. Under this point of error, Tacon cites no authority, makes a one sentence conclusory argument, and offers no citations to the record. Where an appellant's points of error are not supported by authorities or citations to the record, and contain mere conclusory argument, it waives those points of error. See Anheuser-Busch Co., 858 S.W.2d at 942. Thus, we overrule point of error fourteen.
In point of error fifteen, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Grant performed in a good and workmanlike manner. Tacon presents no argument for its alternative contention that the evidence is factually insufficient. Because Tacon has presented no argument regarding its factual insufficiency claim, we find that claim waived. See White, 825 S.W.2d at 230. Therefore, we turn to Tacon's legal sufficiency claim.
Grant contends that the evidence conclusively establishes that "none of the jobs were even completed ... much less performed in a good and workmanlike manner." The jury was instructed that "good *674 and workmanlike manner" means "the manner in which an ordinary prudent subcontractor engaged in constructing a building would have performed the particular work under the same or similar circumstances." Having reviewed the record, we find there is sufficient evidence showing that Grant maintained adequate staff on each of the projects, that they provided adequately experienced personnel, that their crews were adequately supervised, and that they performed their assigned tasks as well as they could, given the interference by Tacon. We find this sufficient to support the jury's finding and we overrule point of error fifteen.
In point of error sixteen, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's failure to find damages as a result of Grant's failure to perform in a good and workmanlike manner. Because we have upheld the jury's finding that Grant did not fail to perform in a good and workmanlike manner, we need not address this point of error.
In point of error seventeen, Tacon challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Tacon was entitled to no attorney's fees. Since Tacon did not prevail on any of its claims, the jury properly did not award attorney's fees to Tacon. Nichols v. Acers Co., 415 S.W.2d 683, 692 (Tex.Civ.App.Austin 1967, writ ref'd n.r.e.). Thus, we overrule point of error seventeen.
In point of error eighteen, Tacon contends the damages awarded to Grant were manifestly too large. Tacon claims "the jury clearly ignored the law and the evidence and based its shockingly excessive awards on sympathy for Grant and prejudice against Tacon, fanned by Grant's argument about the strong preying on the weak...." Again, Tacon fails to offer any citations to the record or to explain how or where the record indicates the award resulted from jury passion or prejudice. We find Tacon's briefing of this argument seriously deficient. Although we could find waiver, Shenandoah Assoc., 741 S.W.2d at 492, we will consider this point.
Generally, the jury's awards of damages will not be overturned on grounds of excessiveness if any probative evidence sustains the awards. Tri-State Motor Transit Co. v. Nicar, 765 S.W.2d 486, 493 (Tex. App.Houston [14th Dist.] 1989, no writ). An appellate court will not substitute its judgment for that of the jury unless the record as a whole establishes the damage award resulted from the jury's passion, prejudice, or improper motive. Gulf States Util. Co. v. Reed, 659 S.W.2d 849, 855 (Tex.App. Houston [14th Dist.] 1983, writ ref'd n.r.e.). If after reviewing the record, the court finds the award so excessive as to shock the conscience, the court may grant a remittitur. International Armament Corp. v. King, 674 S.W.2d 413, 419 (Tex.App.Corpus Christi 1984), aff'd, 686 S.W.2d 595 (Tex.1985).
Having reviewed the record, we have found sufficient evidence to support the jury's award of damages for Tacon's breach of contract, for Tacon's wrongful interference with Grant's performance, and for misapplication of trust funds. The jury awarded total actual damages in excess of $217,000.00 and exemplary damages of $150,000.00. There was testimony from Grant's witnesses indicating more damages for breach of contract than the jury subsequently awarded. Thus, we find no merit to Tacon's assertion that the jury's awards resulted from prejudice or passion. We overrule point of error eighteen.
In point of error nineteen, Tacon claims the trial court erred in excluding the subject of Grant's bankruptcy from the voir dire and the opening statement.[1] Tacon contends this issue was relevant to rebut Grant's claim that Tacon was the source of Grant's financial problems. Furthermore, Tacon maintains that this information was relevant to Grant's failure to provide adequate staff and materials for the jobs.
*675 The trial court has broad discretion with respect to voir dire. Babcock v. Northwest Memorial Hosp., 767 S.W.2d 705, 709 (Tex.1989). To obtain a reversal, a complaining party must show that the trial court abused its discretion and that the error was calculated to cause and probably did cause the rendition of an improper judgment. TEX. R.CIV.P. 228. The trial court also has broad discretion to limit opening statements. Ranger Ins. Co. v. Rogers, 530 S.W.2d 162, 170 (Tex.Civ.App.Austin 1975, writ ref'd n.r.e.). Any abuse of discretion by the trial court is reversible error if it was calculated to cause and probably did cause the rendition of an improper judgment. Southern Pac. Transp. Co. v. Peralez, 546 S.W.2d 88, 97 (Tex.App.Corpus Christi 1976, writ ref'd n.r.e.).
The rulings in court regarding the subject of Grant's motion in limine appear on the record. The motion in limine is not in the transcript, although Grant's supplemental motion in limine is. Without the motion, it is difficult to determine which requests the trial court granted or denied because the parties and the court tend to refer to the requests by number, rather than by subject matter. The only discussion relevant to bankruptcy is the court's ruling regarding other lawsuits, for which the court ruled that counsel could not mention such lawsuits during voir dire or opening argument. Tacon's counsel then brought up the bankruptcy as follows:
MR. LUTTRELL [Tacon's trial counsel]: One other thing. And I guess it is not, per se, a lawsuit. But there is also the bankruptcy situation, which isis going to be involved in this reputation situation. I assume you would not want anything said on that.
THE COURT: When was the bankruptcy filed?
MR. WETZEL [Grant's counsel]: 1983.
THE COURT: Oh.
MR. WETZEL: Before this occurred these incidents occurred, the four contracts. And then it came out of bankruptcy.
THE COURT: Approach the Bench on it.
To preserve a complaint for review, a party must have presented trial court with a request, or an objection. See TEX.R.APP.P. 52(a). Tacon's counsel did not object to the trial court's refusal to allow mention of bankruptcy during voir dire or opening argument; however, the bankruptcy was raised often during testimony.
We find that Tacon has not established a clear abuse of discretion by the trial court in refusing to allow mention of bankruptcy during voir dire or opening argument. Furthermore, Tacon did not object to this failure. Finally, Tacon has not demonstrated how the court's ruling was calculated to cause and probably did cause the rendition of an improper judgment. We overrule point of error nineteen.
In point of error twenty, Tacon claims the trial court abused its discretion in failing to exclude the testimony of Leroy Leuders after he violated the rule. Tacon contends that Leuders had conversations with Gene Grant after the rule was invoked. Tacon asserts that it timely requested the trial court strike the testimony and declare a mistrial.
Placing witnesses "under the rule" means that, at the request of either party, witnesses on both sides shall be sworn and removed from the courtroom to a place where they cannot hear the testimony as delivered by any other witness in the case. TEX.R.CIV.P. 267(a). When placed under the rule, witnesses are to be instructed not to converse with each other or with any other person about the case other than the attorneys in the case, except with the permission of the court. TEX.R.CIV.P. 267(d). When confronted with a possible violation of the rule, the court has discretionary authority to consider all of the facts in determining whether to disqualify the witness. See Southwestern Bell Tel. Co. v. Johnson, 389 S.W.2d 645, 648 (Tex.1965).
Here, Leuders admitted he had conversations with Gene Grant, but that there were no specific comments about the jobs. Leuders also testified that they discussed golf and what some of the former employees are now doing. Leuders denied discussing *676 Grant's financial condition. Leuders also testified that these conversations occurred before he was sworn in as a witness. The trial court stated that he was denying Tacon's motion to strike because he found that the conversations occurred before Leuders was sworn in and because the conversations did not concern any specific issues involved in the case. We find no abuse of discretion by the trial court. We overrule point of error twenty.
In points of error twenty-one and twenty-two, Tacon claims the trial court erred in overruling its motion for judgment n.o.v./motion to disregard jury findings and its motion for new trial because the cumulative effect of all of the error operated to deny Tacon a fair trial and caused rendition of an unjust and improper verdict. These two points of error rest upon findings of error under prior points of error. Because we have found no error by the trial court, we find no cumulative error. We overrule points of error twenty-one and twenty-two.
Grant raises one cross-point contending Tacon's appeal was groundless, frivolous and taken for delay. Accordingly, Grant claims it is entitled to an award of damages equal to ten percent of the amount in dispute. In support of this claim, Grant asserts that thirteen of Tacon's seventeen points of error challenging the sufficiency of the evidence supporting jury findings contain no references to the record. Grant further notes that eleven of Tacon's twenty-two points of error cite no authority.
We have indicated our position on Tacon's brief; however, "[i]neptitude in the presentation of an appeal is not an adequate ground for assessment of a frivolous appeal penalty." Daniel v. Esmaili, 761 S.W.2d 827, 831 (Tex. App.Dallas 1988, no writ). We will not punish Tacon for the inadequacies of its attorney unless the circumstances indicate that the appeal was brought for purposes of delay and without sufficient cause. See id. In Daniel, the court found four factors sufficient to support imposition of delay damages. Those factors included the unexplained absence of statement of facts, the unexplained failure to file a motion for new trial, a poorly written brief, and the unexplained failure of appellant's counsel to appear for oral argument. Id.
We find no factors indicating the appeal is completely groundless or brought merely for purposes of delay. Therefore, we overrule Grant's cross-point.
We affirm the trial court's judgment.
NOTES
[1] At the risk of being repetitive, we note that Tacon again fails to cite any authority under this point of error. We urge Tacon's counsel to review Rule 74 of the Texas Rules of Appellate Procedure and to submit briefs with case authority, citations to the record, and analysis applying that authority to the facts of the case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1634589/ | 490 S.W.2d 818 (1972)
FIREMAN'S FUND INSURANCE COMPANY et al., Petitioners,
v.
COMMERCIAL STANDARD INSURANCE COMPANY et al., Respondents.
No. B-3157.
Supreme Court of Texas.
November 15, 1972.
Rehearing Denied March 14, 1973.
*819 Cantey, Hanger, Gooch, Cravens & Munn, Tolbert L. Greenwood and Howard Barker, Fort Worth, for petitioners.
Garrett, Settle & Callaway, Rufus S. Garrett, Jr., Stone, Tilley, Parker, Snakard, *820 Law & Brown, G. W. Parker, Jr., Fort Worth, for respondents.
DANIEL, Justice.
This is a declaratory judgment action brought by Thomas S. Byrne, Inc. and its liability insurance carrier, Commercial Standard Insurance Company, against Sam P. Wallace Co., Inc. and its insurance carrier, Fireman's Fund Insurance Company, and General Motors Corporation and its insurance carrier, Royal Indemnity Insurance Company, for the construction of certain indemnity provisions in a contract between Wallace and General Motors. The question is whether Wallace was ultimately liable for a sum paid by Byrne and Commercial Standard in settlement of a suit brought by a Wallace employee against General Motors.
The contract contains two indemnity sections (Sec. 12 and Sec. 20). The trial court held that the language of Section 12 was broad enough to indemnify General Motors against losses from injuries sustained by the Wallace employee even if they resulted from the sole negligence of General Motors, and that in any event Wallace was liable because the evidence showed that the accident was due to the sole negligence of Wallace employees and not to any negligence of General Motors. The Court of Civil Appeals affirmed. 478 S.W.2d 811. We disapprove the above mentioned conclusions with reference to Section 12 but affirm on the basis of other findings and conclusions of the courts below.
On October 2, 1964, General Motors executed separate contracts with Thomas S. Byrne, Inc., as general contractor and with Sam P. Wallace Co., Inc., for the mechanical superstructure work on an annex to its Arlington plant. The contracts contained identical liability insurance and indemnity provisions for General Motors' protection. General Motors' contract with Wallace was assigned to Byrne under provisions specifically permitting such assignment. Thereafter, Wallace became a subcontractor under Byrne with no change in the terms of its insurance and indemnity obligations to General Motors.
While working on that part of the job being performed by Wallace, two Wallace employees, R. L. Gamble and Woodrow W. Frith, were injured when they fell from a scaffold which overturned. Both were paid workmen's compensation benefits by Fireman's Fund, which also carried Wallace's compensation insurance. The two employees then filed separate personal injury suits against General Motors, alleging that General Motors negligently permitted an automobile frame on a conveyor in the assembly line to come in contact with and overturn the scaffold. Fireman's Fund intervened seeking recovery of the compensation benefits paid. In both suits General Motors filed third party actions against Byrne for indemnity, and Byrne in turn filed a fourth party action for indemnity against Wallace in the Gamble suit. Thereafter, the collective defendants and their insurance carriers entered agreements whereby Byrne and its carrier, Commercial Standard, would defend the suits against General Motors. It was further agreed that Byrne and Commercial Standard would dismiss Wallace and Fireman's Fund from the Gamble suit; that they would not make Wallace a party to the Frith suit; and that this would be without prejudice to Byrne or Commercial in a subsequent action against Wallace and Fireman's Fund for the purpose of determining ultimate liability, if any, of Wallace under its contract with General Motors.
After the jury failed to agree in Gamble's case, Commercial Standard made a $20,000 settlement with him, having first obtained written consent of Wallace and Fireman's Fund, the latter agreeing not to assert the $9,782 subrogation claim against Gamble and that Byrne and Commercial might bring this declaratory judgment action to determine "the liability of Wallace to indemnify Byrne or General Motors" for the amount of the settlement and expenses of the defense. It was also agreed that if it were *821 determined that Wallace had no indemnity obligation that Byrne and Commercial Standard would pay the compensation subrogation claim to Fireman's Fund.[1]
The relevant sections of the contract between Wallace and General Motors are as follows:
"12. LIABILITY INSURANCE
"The Contractor shall protect the Owner and Architect-Engineer against all liabilities, claims or demands for injuries or damages to any person or property growing out of the performance of work under this specification. The contractor assumes all liability for any injuries or damages occasioned by his agents or employes on the premises of the Owner regardless of whether such agent or employe is, at the time of such injury to [sic] damage, acting within the scope of his employment.
"All insurance policies are to be issued by companies authorized to do business under the law of the State in which the work is to be done and copies of said policies shall be filed with the Owner before work is started.
"Limits for Liability Insurance shall be not less than $100,000.00 for injury to one person, $300,000.00 for injury to more than one person, and $100,000.00 for property damage.
"Contractor shall protect the Owner and Architect-Engineer against all claims arising from the use of passenger automobiles, motor trucks, and other motor vehicles owned and operated by the Contractor and/or employes of the Contractor in connection with the work herein specified. Contractor shall submit to the Owner and Architect-Engineer certificates of insurance evidencing public liability and property damage coverage on all such vehicles.
"In addition to the Liability Insurance for the protection of the Owner and Architect-Engineer, the Contractor shall, during the continuance of the work under this contract and also extra work in connection therewith, maintain Liability Insurance for injury and/or death to any of his employes and/or to other persons, including any liability which may arise by virtue of the statute or law now in force or which may hereafter be enacted."
* * * * * *
"20. CONTRACTOR'S RESPONSIBILITY
"All Contractors shall be responsible each for his work and every part thereof, and for all materials, tools, appliances, and property of every description used in connection therewith, (in case of general contract, General Contractor assumes entire responsibility). They shall specifically and distinctly assume and do so assume all risks of damage or injury from any cause except negligence of Owner,[2] its officers, agents and employes, to property or persons used or employed on or in connection with the work, and of all damage or injury to any persons or property wherever located, resulting from any action or operation under the contract or in connection with the work, and undertake and promise to protect and defend the Owner and Architect-Engineer against all claims on account of any such damage or injury. (See Item 12 `Liability Insurance', Paragraph 1, also Item 13 `Fire and Supplemental Insurance', Paragraph 2)."
The conclusion of the lower courts that Wallace is liable to General Motors under the general language contained in Section *822 12, regardless of whether the injuries were caused by the negligence of General Motors, is contrary to our recent holding in Joe Adams & Son v. McCann Construction Company, 475 S.W.2d 721 (Tex. 1971). See also Sira and Payne, Inc. v. Wallace and Riddle, 484 S.W.2d 559 (Tex. 1972); Spence & Howe Construction Co. v. Gulf Oil Corp., 365 S.W.2d 631 (Tex. 1963); Mitchell's, Inc. v. Friedman, 157 Tex. 424, 303 S.W.2d 775 (1957); and Westinghouse Electric Corp. v. Childs-Bellows, 352 S.W.2d 806 (Tex.Civ.App., 1961, writ. ref.).
The above cases stand for the general rule followed in Texas and a majority of other jurisdictions that a contract of indemnity will not afford protection to the indemnitee against the consequences of his own negligence unless the contract clearly expresses such an obligation in unequivocal terms. These decisions indicate a progressively stricter application of the rule in this State. Our opinion in McCann, supra, was by a divided court with a vigorous dissent, the author of which later, in Sira and Payne, supra, wrote for the court in applying the McCann decision and in stating its holding,
"... that an indemnity agreement will not be held to protect an indemnitee against the consequences of his own negligence unless the obligation is expressed in clear and unequivocal language; and, moreover, the effect of our decision was to hold that parol evidence is not admissible to show that such was the intention of the parties when the obligation is expressed in language which is unclear or equivocal."
We have, in fact, progressed toward the so-called "express negligence" rule as near as is judicially possible without adopting it and thereby requiring in all cases that the parties state, in so many words, that they intend to save the indemnitee harmless from liability for his own negligence. In this connection, it should be clear from our opinion in McCann, supra, including its discussion of the leading cases and modification of our opinion in Ohio Oil Co. v. Smith, 365 S.W.2d 621 (Tex.1963), that broad general statements of the indemnity obligation are not sufficient to protect an indemnitee against his own negligence, and that the only presently recognized exceptions are limited to (1) agreements in which one person clearly undertakes to indemnify another against liability for injuries or damages caused by defects in certain premises or resulting from the maintenance or operation of a specified instrumentality as in Mitchell's, Inc. v. Friedman, supra, and Houston & T. C. R. Co. v. Diamond Press Brick Co., 111 Tex. 18, 222 S.W. 204, 226 S.W. 140 (1920); (2) agreements which fall within the peculiar circumstances of the indemnitor having complete supervision over the property and employees of the indemnitee in connection with the performance of the indemnitor's contract, as in Spence & Howe, supra; and (3) contracts in which there is an unequivocal provision that indemnitor will protect and indemnify the indemnitee from any and all liability by reason of injuries to indemnitor's employees as in Ohio Oil, supra.
None of the above exceptions appear in the contract between Wallace and General Motors. The general language on which the lower courts placed principal reliance is in the first sentence of Section 12, which provides that contractor (Wallace) shall protect the owner (General Motors) "against all liabilities, claims or demands for injuries or damages to any person ... growing out of the performance of work under this specification." In McCann, we held that similar general words of indemnity against injuries "sustained by any party or parties through or on account of any act or in connection with the work" of the subcontractor were insufficient to clearly indicate an intention to protect the contractor-indemnitee against liability for damages caused solely by the latter's own negligence. We also held that all of the relevant provisions of the contract should *823 be considered in arriving at its intent and meaning. We must consider the second sentence in Section 12, which speaks only of the contractor assuming "liability for any injuries or damages occasioned by his agents or employees on the premises of the owner ..." The third paragraph of Section 12 provides for protection from liability arising from the use of trucks and other vehicles of the contractor and his employees operated in connection with the work, and the last paragraph relates to liability insurance for the protection of Wallace. Finally, Section 20 entitled "Contractor's Responsibility," specifically excepts "negligence of Owner [General Motors]" from the risks of damages or injury assumed by Wallace and concludes with a parenthetical reference to Section 12.
We cannot agree with the contention of Byrne and Commercial that the requirement in Section 12 that Wallace carry certain liability insurance for the protection of General Motors evidenced an intention to cover negligent acts of the latter. While the meaning of the contract provisions relating to liability insurance are not clear, the most reasonable construction is that they were to assure performance of the indemnification agreement as entered into by the parties. Such provisions are often required to guard against insolvency of the indemnitor, and they should not be considered as any evidence of intent to broaden the contractual indemnity obligation. Standard Oil Co. v. Wampler, 218 F.2d 768 (5th Cir. 1955); Kansas City Power & Light Co. v. Federal Constr. Corp., 351 S.W.2d 741 (Mo.1961). See also Traveler's Indemnity Company v. Equipment Rental Company, 345 S.W.2d 831 (Tex.Civ.App. 1961, writ ref. n. r. e.).
Considering all of the indemnity provisions of the contract together, we find no clear and unequivocal language showing that the contract was intended to indemnify General Motors against the consequences of its own negligence. Therefore, we disapprove the holdings of the lower courts to the contrary.
We next consider the lower courts' alternative holdings against Wallace and Fireman's Fund based upon the trial court's finding that "the injuries resulted solely from the negligence" of Wallace's employees, Gamble and Frith. The case was tried informally and without a jury on stipulations, admissions and exhibits from the court files in the Gamble and Frith cases. Only the transcript and a partial stipulated statement of facts were brought forward on appeal.
Since there was a settlement made with Gamble by Byrne and Commercial Standard without any judicial determination of whether General Motors was negligent as alleged in Gamble's petition, Byrne and Commercial Standard properly assumed the burden of showing that the accident occurred during the performance of Wallace's work under the contract; that General Motors had a potential liability in the Gamble suit; that the settlement with Gamble was reasonable considering the risk involved, and was made in good faith; and that the accident was not in fact due to any negligence on the part of General Motors. Sira & Payne, Inc. v. Wallace and Riddle, supra; Mitchell's, Inc. v. Friedman, supra.
Wallace and Fireman's Fund admitted that the accident occurred during the performance of Wallace's contract and that Gamble and Frith were injured in the accident "while in the performance of their work as employees of Sam P. Wallace, Inc. in the course and scope of their employment." The potential liability of General Motors and the reasonableness and good faith nature of the settlement was demonstrated in the evidence of a hung jury in the first Gamble trial which caused admittedly reasonable attorneys' fees in the sum of $9,108, and by the written consent of Wallace and Fireman's Fund to the settlement. The latter made no contest of the reasonableness of the settlement in the trial court. They stated in their briefs filed in the Court *824 of Civil Appeals and in this Court that they "do not contest the reasonableness of the amount of the settlement," but contend that they were entitled to have Byrne and Commercial "prove facts which might have rendered GM liable to Gamble if the settlement had not been reached."
Petitioners further assert that their consent to the settlement "has the effect of binding Petitioners and Respondents to the reasonableness of the amount of the settlement and the liability of GM to Gamble." On appeal, Wallace and Fireman's Fund assert two conflicting arguments: (1) that "the evidence establishes as a matter of law that GM was not liable" and that, consequently, a voluntary settlement on its behalf was unreasonable, and (2) that Byrne and Commercial are foreclosed from denying General Motors' negligence "not only by the settlement for GM's negligence, but by the allegations of negligence in the petitions of Gamble and Frith." They contend as a matter of law that Byrne and Commercial Standard could not make a reasonable settlement based on the potential liability of General Motors and then prevail in this indemnity action on a showing that the accident was not in fact caused by any negligence of General Motors. We disagree with this contention.
It is not at all unusual for an indemnitee to "buy his peace" with a plaintiff and at the same time contend in a subsequent indemnity action that he was not in fact negligent or liable in the case which was settled. Gamble was seeking $200,000 in damages against General Motors, and it cost over $9,000.00 in attorneys' fees for the first trial. With another trial and another like expenditure in the offing, and considering the risk involved, it is not surprising that all of the parties to this action consented to a settlement with Gamble for $20,000.00. Evidently, it was thought by all to be a reasonable and prudent settlement regardless of who might be held ultimately liable for its payment. Otherwise, Wallace and Fireman's Fund would not have given their consent to it.
Under these circumstances, the Gamble pleadings and the settlement with him do not constitute an admission of General Motors' negligence, and neither do they foreclose any rights of indemnity subsequently asserted on the grounds that General Motors was not in fact negligent. Regardless of the pleadings of a claimant asserting negligence of the indemnitee and the settlement by the indemnitee with the consent of the indemnitor, or after the indemnitor declined to defend, the issue of whether indemnitee was actually negligent is to be decided in the subsequent indemnity suit. Sira & Payne, Inc. v. Wallace and Riddle, supra; Crews Well Service v. The Texas Company, 358 S.W.2d 171 (Tex.Civ. App.1962) affirmed per curiam in 360 S.W.2d 873 (Tex.1962).
Some jurisdictions require that the indemnitee prove actual rather than potential liability to the plaintiff with whom he has settled before he can recover the amount of the settlement from the indemnitor. This rule obviously is a discouragement to settlements of cases when there is a future indemnity suit yet to be tried. Texas does not follow this rule. Our courts have held that it is sufficient for the settling indemnitee to show a potential liability and that his settlement was reasonable, prudent and in good faith under the circumstances. Gulf, Colorado & Santa Fe Railway Co. v. McBride, 159 Tex. 442, 322 S.W.2d 492 (1959); Mitchell's, Inc. v. Friedman, supra; Missouri Pacific Railroad Company v. Southern Pacific Company, 430 S.W.2d 900 (Tex.Civ.App., 1968, writ ref. n. r. e.). Byrne and Commercial Standard fully met their burden of proof on these issues.
The evidence that the accident was caused by the Wallace employees, Gamble and Frith, and not by General Motors, consisted of 27 pages of testimony given in the Gamble trial by Wayne C. Starnes, who was Wallace's construction superintendent on the General Motors job. Starnes was an eye-witness to the accident and his testimony *825 clearly supports the trial court's finding that "such injuries resulted solely from the negligence of Gamble and Frith." The record does not show whether a proper predicate was laid for the use of the testimony of this witness given in another trial. With no exception or assignment of error based on this particular point, we can only assume that the proper predicate was laid or that it was waived.
The only question raised on this appeal concerning the Starnes testimony in the Gamble suit concerns the manner in which it was brought into the record for consideration by the trial court. Byrne and Commercial Standard attached what appears to be a court reporter's transcript of the testimony to its Requests for Admissions addressed to Wallace and Fireman's Fund. They were asked in Request No. 3 to admit "that Exhibit `C' attached hereto is a true copy of the testimony of Wayne C. Starnes at the trial of Cause No. 47839-C ... styled R. L. Gamble vs. General Motors Corporation, et al." In reply, Wallace and Fireman's Fund moved that the request be stricken as being outside the scope and intent of Rule 169 Texas Rules of Civil Procedure, and because it was irrelevant and immaterial. Subject to the foregoing, these defendants answered that they "are without sufficient information to admit or deny the Request."
Wallace annd Fireman's Fund did not comply with that portion of Rule 169 which, under the circumstances, requires a sworn statement "setting forth in detail the reasons why" they "cannot truthfully either admit or deny." The trial court granted additional time for the defendants to file a verified denial, and upon failing to do so, the request was deemed admitted.
The primary purpose of Rule 169, which was taken with minor textual changes from Federal Civil Rule 36 as it existed in 1941, is to simplify trials by eliminating matters about which there is no real controversy, and there is some discretion lodged in the trial court in its enforcement. Sanders v. Harder, 148 Tex. 593, 227 S.W.2d 206 (1950). Its proper use has been encouraged by our courts and extended to matters of fact within the knowledge of or readily ascertainable by the litigant of whom the request is made. Masten v. Masten, 165 S.W.2d 225 (Tex. Civ.App., 1942, writ ref.); Watson v. Godwin, 425 S.W.2d 424 (Tex.Civ.App., 1968, writ ref. n. r. e.); McPeak v. Texas Department of Public Safety, 346 S.W.2d 138 (Tex.Civ.App., 1961, no writ). In the spirit of cooperation required by this Rule, Wallace and Fireman's Fund should have ascertained the accuracy of this transcription from the court reporter if that could have been done without cost or considerable burden. If not, they should have filed a sworn statement setting forth in detail why they could not truthfully admit or deny without taking on a costly and unreasonable burden and lodged an objection on the same grounds. They did neither. Under such circumstances, the trial court did not abuse its discretion in deeming the request as admitted.
In Request No. 6, plaintiffs asked defendants to admit the Starnes' testimony "to be true and correct." Defendants made the same objections as to Request No. 3. Clearly, Request No. 6 was outside the scope and purpose of Rule 169, and defendants' objections to it should have been sustained. The rule does not require a litigant to admit or deny the truth or falsity of another person's testimony in the trial of another case, and the trial court has no discretion to so extend the scope and purpose of the Rule.[3] However, the error was harmless in this case, because the truth of *826 Starnes' testimony was never put in issue. Wallace and Fireman's Fund offered no testimony in contradiction of it or in any manner bearing on the question of whose negligence caused the accident, and on appeal they admitted in connection with their argument against the reasonableness of the settlement that "the evidence establishes as a matter of law that GM was not liable."
We have given careful consideration to Petitioner's other points of error, and they are overruled.
Having heretofore noted our disapproval of the holdings below based alone upon Section 12 of the contract, the judgments of the lower courts are otherwise affirmed.
WALKER, J., not sitting.
NOTES
[1] The parties have informed the Court that the Frith case was similarly settled, with Fireman's Fund paying $9500 to Frith with the consent of Byrne and Commercial Standard, without prejudice to this appeal and with ultimate responsibility for the cost of settlement, as well as Fireman's $4621 subrogation claim, to be determined by the result of this appeal.
[2] Emphasis is supplied throughout this opinion unless otherwise noted.
[3] 4A Moore's Federal Practice, § 36:04, pp. 36-28 to 36-48; 20 A.L.R. 3d 764. See Syracuse Broadcasting Corporation v. Newhouse et al., 271 F.2d 910 (2nd Cir. 1959); Johnstone v. Cronlund, 25 F.R.D. 42 (E.D.Penn.1960); Securities and Exchange Comm'n v. Micro-Moisture Controls, Inc. et al., 21 F.R.D. 164 (S.D.N.Y. 1957); and Booth Fisheries Corp. v. General Foods Corp., 27 F. Supp. 268 (D. Del.1939). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1717995/ | 394 So. 2d 905 (1981)
Frank W. LOFLIN, d/b/a Loflin Enterprises
v.
Tetta THORNTON.
No. 52395.
Supreme Court of Mississippi.
March 4, 1981.
Rehearing Denied March 18, 1981.
John H. Downey, Wells, Downey & Wicker, Jackson, for appellant.
Paul D. Snow, III, Jackson, for appellee.
Before SMITH, P.J., and LEE and HAWKINS, JJ.
LEE, Justice, for the Court:
Tetta Thornton obtained a verdict in the Circuit Court of the First Judicial District of Hinds County, Honorable Charles T. Barber, presiding, in the sum of fifteen thousand dollars ($15,000). The lower court ordered a remittitur in the sum of seventy-five hundred dollars ($7,500), or new trial on damages only. Thornton accepted the remittitur, final judgment was entered in her favor for seventy-five hundred dollars ($7,500), and Loflin has appealed here. We hold that Loflin was entitled to a peremptory instruction and reverse.
The declaration charged that on February 17, 1978, appellee lived at 1363 Cadillac Drive, Jackson, in a house she rented from appellant. That night, she heard a noise outside the house, went to investigate and several bricks at the lower part of the house suddenly fell, striking her left leg and causing serious injuries. It was charged further that appellant was under the duty to keep the house in a reasonably safe condition, *906 that he breached that duty, injuring appellee as a proximate result thereof.
The evidence reflects that appellee had rented and occupied the house for nineteen (19) years. Mr. George Gilmore owned the property from February, 1966 until October 26, 1977, when appellant purchased same from him. Gilmore built a brick curtain wall approximately twenty-four (24) inches high around the house in order to protect the space underneath the house from wind and to keep animals out from under it. During the time that appellee lived there, she passed the curtain wall daily and had not seen anything hidden or unknown about its condition. She did testify, however, that she knew at all times the wall was dangerous. Appellant testified that, other than a routine request for plumbing work, he had never received any repair request from appellee until after the accident occurred, and had no knowledge of any defective condition of the curtain wall. Appellee stated in a deposition that she had not informed appellant about the condition of the wall. On trial, appellee testified that she had told him about the condition of the wall, and described her inconsistent deposition statement as resulting from forgetfulness and confusion.
During the trial, appellee attempted to establish a repair contract between appellant and herself. Appellee testified that she had informed appellant of the dangerous condition of the curtain wall, and he had agreed to repair same. Nothing in the declaration charged a repair agreement by appellant.
Issues are framed and presented by the pleadings. This Court is bound by those issues raised in the pleadings and the proof in the record which supports them. In Southern Pine Electric Power Assn. v. Denson, 214 Miss. 397, 57 So. 2d 859 (1952), Mr. Justice Percy M. Lee, aptly said:
"Lawsuits must have issues. Those issues must be made by the pleadings. Proof must conform to the issues made by such pleadings. Otherwise, lawyers trying a case, will be like mariners, without any form of compass, sailing an uncharted sea." 214 Miss. at 416, 57 So.2d at 865.
We now consider the charge of the declaration, the proof, and the law relating to them. In the old case of Jones v. Millsaps, 71 Miss. 10, 14 So. 440 (1893), the Court said:
"The intending tenant must use his own faculties, and judge for himself if the premises he desires to lease are in repair, and are suitable for his use. If he wishes to protect himself against the hazards of subsequently accruing accidents or defects requiring repairs, he must do so by proper covenants in his contract of lease. He takes his leased premises for better or for worse, as an ancient authority aptly characterizes his taking. He takes the premises as he finds them, and he must return them as nearly as possible, in like condition... . The duty of the tenant to examine the premises, and protect himself by proper stipulations in his contract of lease if danger is suggested by his examination, is the same in case of the leasing of a whole or of a part, only." 71 Miss. at 18, 14 So. at 441.
Later decisions of the Court have made the position of a tenant somewhat less vulnerable than that stated above. A landlord is now liable for injuries incurred as a result of dangers, which usually are latent, which he knows about and conceals, or, being aware of same, does not inform the tenant. Where the tenant knows of the defect or danger on the premises, no duty arises to the landlord with respect thereto. Hiller v. Wiley, Miss., 5 So. 2d 489 (1942); McDonald v. Wilmut Gas & Oil Co., 180 Miss. 350, 176 So. 395 (1937); Rich v. Swalm, 161 Miss. 505, 137 So. 325 (1931).
In the absence of an express agreement between the landlord and tenant to make repairs, there is no obligation or duty upon the landlord to do so, and only where there is an agreement for specific repairs will a breach of that agreement impose liability for personal injury. Floyd v. Lusk, 190 So. 2d 451 (Miss. 1966); Waldon v. Lehmann, 224 Miss. 600, 80 So. 2d 796 (1956); Ford v. Pythian Bond Holders Protective *907 Comm., 223 Miss. 630, 78 So. 2d 743 (1955); Hodges v. Hilton, 173 Miss. 343, 161 So. 686 (1935).
The proof, without contradiction, shows the following:
(1) The record is absent any showing that appellant concealed the danger from appellee.
(2) Appellee admitted she knew the wall was dangerous.
(3) Any evidence of a contract to repair the wall was improperly admitted (or was properly excluded) since such theory was outside the scope of the pleadings.
(4) Appellee's pleadings do not form the legal basis for any recovery.
In determining whether or not a peremptory instruction should be granted, the trial judge must consider the evidence on behalf of the party against whom the peremptory instruction is requested, along with all reasonable inferences, in the light most favorable to said party, disregard any evidence of the other party in conflict therewith, and, if the evidence and reasonable inferences to be drawn therefrom would support a verdict for such party, the request for peremptory instruction should be denied. Gates Rubber Co. v. Duke, 367 So. 2d 910 (Miss. 1979); Georgia-Pacific Corp. v. Blakeney, 353 So. 2d 769 (Miss. 1978); Paymaster Oil Mill Co. v. Mitchell, 319 So. 2d 652 (Miss. 1975).
In the case sub judice, the declaration and evidence in support thereof did not state or make out a case of liability against appellant. The judgment of the lower court is reversed and judgment is entered here in favor of the appellant.
REVERSED AND RENDERED.
PATTERSON, C.J., SMITH and ROBERTSON, P. JJ., and SUGG, WALKER, BROOM, BOWLING and HAWKINS, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1746156/ | 639 F. Supp. 750 (1986)
THRIFTY RENT-A-CAR SYSTEM, INC., Plaintiff,
v.
THRIFT CARS, INC., Defendant.
Civ. A. No. 83-1979-Y.
United States District Court, D. Massachusetts.
July 15, 1986.
*751 Paul H. Johnson, esq., Mead, Johnson & Stevenson, Tulsa, Okl., and William Looney, Looney & Grossman, Boston, Mass., for plaintiffs.
William J. Brennan, III, Smith, Stratton, Wise & Heher, Princeton, N.J. and William S. Dorman, Tulsa and Richard F. McCarthy, Willcox, Pirozzolo and McCarthy, Boston, Mass., for defendants.
MEMORANDUM OF DECISION
YOUNG, District Judge.
This is an action for trademark infringement and false designation of origin brought pursuant to the Lanham Act, 15 U.S.C. § 1051 et seq., and for unfair competition at common law. The plaintiff, Thrifty Rent-a-Car System, Inc. ("Thrifty Rent-a-Car") seeks a permanent injunction, damages, costs, and attorneys' fees against the defendant, Thrift Cars, Inc. ("Thrift Cars").
In large measure, the facts are undisputed. On March 3, 1958, one L.C. Crow, an individual doing business as Thrifty Rent-a-Car System, commenced renting cars under the trade name "Thrifty" from his place of business on Route 66, Tulsa, Oklahoma. Early in 1962, Stemmons, Inc., an Oklahoma corporation in the business of re-selling used cars, purchased Crow's business and began to expand it. On March 15, 1962, the first rental using the "Thrifty" trade name occurred outside the state of Oklahoma in Houston, Texas. Recognizing the possibilities for expansion of the car rental business, Stemmons, Inc. commenced opening other car rental outlets in Wichita, Kansas, Dallas, Texas, and St. Louis, Missouri. Stemmons, Inc. also changed its name to The Thrifty Rent-a-Car System, Inc., the present plaintiff Thrifty Rent-a-Car. On July 30, 1962, Thrifty Rent-a-Car made application to the United States Patent Office to register the service mark "Thrifty Rent-a-Car System."
In October, 1962, Peter A. Conlon began to operate a car rental business with two cars out of his home in East Taunton, Massachusetts. Conlon was completely unaware of the existence and operations of Thrifty Rent-a-Car in the Southwest and Midwest. On October 24, 1962, Conlon incorporated his business as Thrift Cars, Inc., the defendant Thrift Cars. Thrift Cars' business in East Taunton operated somewhat differently than the standard car rental business. Since East Taunton, Massachusetts is not a major commercial center, Thrift Cars did not operate a retail car rental outlet there where one could walk in off the street and select a rental car from a waiting fleet. Rather, Thrift Cars provided a more customized service wherein the rentor would arrange for his or her rental car in advance and Thrift Cars would then deliver the car which had been rented or leased to the customer's location and would pick it up thereafter at that or another pre-arranged location at the end of the rental term. Thus, in the years immediately following 1962 Thrift Cars, on occasion, delivered rental vehicles to customers at Logan International Airport in Boston, at Provincetown, the Falmouth Marina, Hyannis, and Nantucket. Thrift Cars advertised its custom car rental service in the Taunton area yellow pages phone directory, in the Taunton Daily Gazette, in the Cape Cod Times a newspaper of general circulation serving the Cape Cod area as well as the islands of Martha's Vineyard and Nantucket and in The Anchor the newspaper of the Roman Catholic Diocese of Fall River. For a time during 1963 Thrift Cars advertised in The Inquirer and Mirror, a Nantucket newspaper with, at that time, a circulation of approximately eight thousand. *752 After 1963, however, Thrift Cars dropped its advertisements in The Inquirer and Mirror since business gleaned from the yellow pages was sufficient for its needs.
On July 26, 1964, the United States patent office granted service mark No. 774,288 "Thrifty Rent-a-Car" to the plaintiff Thrifty Rent-a-Car. This official confirmation of Thrifty Rent-a-Car's service mark was but one indicator of its business success. Indeed, Thrifty Rent-a-Car had, during the years following 1962, continued an aggressive and successful system of expansion through franchises and directly owned rental agencies. Thrifty Rent-a-Car's first Massachusetts outlet opened on December 5, 1967.
Thrift Cars, meanwhile, had not been idle. For some time it had desired to operate a traditional car rental facility at the Nantucket Airport and on May 30, 1970, this dream was realized when the proper licensing authorities permitted Thrift Cars to establish a car rental facility at that site. This facility advertises its existence by calling itself "Thrift Cars" through both onsite signs and off-site newspaper and yellow pages advertising. Thrift Cars' chief executive officer Peter Conlon having removed to Nantucket, Thrift Car's operations are primarily located there and the original East Taunton site is largely dormant.
Collision with Thrifty Rent-a-Car was now inevitable. When Thrift Cars operated its customized service delivering cars from East Taunton, its market impact was felt primarily in what the car rental industry considers the tertiary market, i.e. the market which serves those individuals having need of replacement cars for periods which bridge the short term car rental and the longer term automobile lease. When Thrift Cars opened its traditional Nantucket outlet, however, it entered what is known as the resort market, a fiercely competitive market in which Thrifty Rent-a-Car had enjoyed considerable success.[1] By the time of trial, Thrifty Rent-a-Car had franchises in twenty three different locations in Massachusetts[2] and, with five hundred rental car outlets world wide, it is fifth in car rental locations after Hertz, Avis, National, and Budget car rental services (in that order). There is no doubt that, given the mobility of society, confusion exists between the car rental services provided by Thrifty Rent-a-Car and Thrift Cars, at least within the County of Nantucket. The parties stipulate as much.
1. Common Law Background
To understand the issues before the Court, it is helpful to review briefly a few salient principles of the common law of trademarks.
In Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 36 S. Ct. 357, 60 L. Ed. 713 (1916), the Supreme Court determined that the senior user of a trademark cannot monopolize markets that neither its trade nor reputation has reached.
Since it is the trade, and not the mark, that is to be protected, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and identified by his use of the mark. But the mark, of itself, cannot travel to markets where there is no article to wear the badge and no trader to offer the article.
240 U.S. 403, 416, 36 S. Ct. 357, 361, 60 L.Ed 713. In Hanover, the court declined to enjoin Allen & Wheeler Co. from selling Tea Rose flour in four southern states, even though Hanover Star had first marketed Tea Rose flour in New England. Allen & Wheeler had adopted the mark Tea Rose in good faith, without knowledge of Hanover Star's prior use. The companies' *753 markets were "remote," meaning that neither had sold or advertised in territory served by the other.
In United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 39 S. Ct. 48, 63 L. Ed. 141 (1918), the court extended Hanover, holding that a senior user enters a junior user's territory subject to whatever rights the junior has acquired. In United Drug, United Drug Co. was the original distributor of Rex drugs and first marketed them in New England. Upon expanding into Louisville, Kentucky, it encountered competition from Rectanus Co., a local producer and vendor of Rex blood purifier. Like Allen & Wheeler in Hanover, Rectanus had adopted the contested mark in good faith, though after United's use in a remote market. The Court refused to enjoin Rectanus and summarized its reasons:
[T]he general rule is that as between conflicting claimants to the right to use the same mark, priority of appropriation determines the question.... But the reason is that purchasers have come to understand the mark as indicating the origin of the wares, so that its use by a second producer amounts to an attempt to sell his goods as those of his competitor. The reason for the rule does not extend to a case where the same trademark happens to be employed simultaneously by two manufacturers in different markets separate and remote from each other, so that the mark means one thing in one market, and an entirely different thing in another. It would be a perversion of the rule [if] an innocent party who had in good faith employed a trade-mark in one State, and by the use of it had built up a trade there, being the first appropriator in that jurisdiction, might afterwards be prevented from using it, with consequent injury to his trade and good-will, at the instance of one who theretofore had employed the same mark but only in other and remote jurisdictions, upon the ground that its first employment happened to antedate that of the first-mentioned trader.
248 U.S. 90, 100, 39 S. Ct. 48, 51, 63 L. Ed. 141.
Subsequent cases have further developed the principles articulated in Hanover and United Drug. A senior user who tries to enter a good-faith junior user's remote market can be enjoined from doing so. Food Fair Stores, Inc. v. Square Deal Market Co., 206 F.2d 482 (D.C.Cir.1953); Sweetarts v. Sunline, Inc., 380 F.2d 923 (8th Cir.1967). Similarly, a junior user may not enter markets where the senior user has acquired exclusive rights. Id.
The essence of the common law doctrine found in Hanover and United Drug, then, is that two parties who innocently adopt similar trademarks and use them in separate markets carve out territories for themselves. Within its territory, each party can use its mark free from interference by the other. See generally 2 McCarthy, Trademarks and Unfair Competition § 26:1 at 286-88 (2d ed. 1984).
The actual geographical area a party carves out is a question of fact, and a court delimits the area by examining the party's reputation, advertising, and sales with respect to the territory in question. 2 McCarthy, supra, § 26:12 at 309. In each instance, the test is whether the party's mark is sufficiently known there, or whether its sales there are of sufficient volume, to create a likelihood of confusion among consumers, should a second user enter the same territory. Sweetarts v. Sunline, Inc., supra at 927. A party who has established a reputation in an area may acquire exclusive rights to its mark there, even though the product bearing the mark is unavailable. Stork Restaurant v. Sahati, 166 F.2d 348 (9th Cir.1948) (national reputation of Stork Club, a celebrity-patronized New York City night club, precluded adoption of name "Stork Club" by local San Francisco bar). To the extent advertising extends customer awareness of a mark into new territory, it is a factor in deciding whether the territory has been successfully appropriated by the mark's owner. However, trademark rights cannot be established by advertising alone. Wrist-Rocket Manufacturing Co., Inc. v. Saunders Archery Company, 578 F.2d 727, 732 (8th *754 Cir.1978). Though sales are an important consideration in delimiting a trademark owner's area, sales must be "significant enough to pose the real likelihood of confusion." Sweetarts v. Sunline, Inc., supra at 929. Sporadic and inconsequential sales cannot establish an owner's exclusive right to its mark. Id.
Most cases applying the Hanover-United Drug doctrine hold that a junior user charged with trademark infringement can successfully defend itself by proving two elements. 2 McCarthy, supra, § 26:1 at 288. First, it must show it adopted the mark in good faith, meaning without knowledge of prior use by a senior user.[3]Id. This Court finds Thrift Cars did, in fact, adopt its mark in good faith. Second, it must demonstrate that the area where it used the mark was remote, meaning that the mark of the senior user was not known to customers in that area. Id. This Court finds that, at least as to the area of the City of Taunton, Thrift Cars' use of its mark was "remote" from the senior use by Thrifty Rent-a-Car.
2. The Lanham Act
In passing the Lanham Act, Congress intended to provide uniform, comprehensive federal law to govern questions of trademarks used in and affecting interstate commerce. Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S. Ct. 658, 83 L. Ed. 2d 582 (1985). Since this case raises questions involving trademarks in interstate commerce, the Lanham Act provides the controlling law. See Mister Donut of America, Inc. v. Mr. Donut, Inc., 418 F.2d 838, 844 (9th Cir.1969) (question of whether to enjoin local Orange County donut business from expanding into other areas of California served by national plaintiff was governed by Lanham Act because expansion would affect interstate commerce).
The Lanham Act encompasses a policy prohibiting state interference with rights the Act accords federally registered trademarks. 15 U.S.C. § 1127; accord Burger King of Florida, Inc. v. Hoots, 403 F.2d 904 (7th Cir.1968). In Burger King, a case similar in some ways to the instant case, the court resolved competition between the Lanham Act and a state trademark-registration statute. The plaintiff, the national, federally-registered chain of Burger King restaurants, sought to enjoin the defendant, a local Mattoon, Illinois, restaurant operating under the name Burger King, from opening a second restaurant in another Illinois city. The defendant urged the court to incorporate its Illinois registration into the Lanham Act and grant it trademark rights to the entire state, not just Mattoon. The court refused, bluntly clarifying the legal priorities:
[T]he policy ... to provide protection of federally registered marks used in interstate commerce [] may not be defeated or obstructed by State law [and if] state law conflicts with the policy it "must yield to the superior federal law."
....
... [W]hether or not Illinois intended to enlarge the [rights of state registrants at] common law ..., the Illinois Act does not enlarge [defendant's common law rights] where the federal mark has priority.
403 F.2d 904 at 907, 908.
To the extent, then, that Thrift Cars suggests rights to the marks "Thrift" and "Thrifty" are controlled by common law and state statutes, and not the Lanham Act, it is in error. In Burger King, supra, a junior user's state registration of its mark could not enhance its rights at the expense of a senior user who held a federal *755 registration. Here, junior user Thrift Cars, who does not hold a state registration but relies only on the common law, has even less hope of similarly enhancing its rights. The Lanham Act has preempted the salient areas of trademark law discussed above and controls the rights of both parties in this case. See also Mister Donut, supra at 844.
3. The Lanham Act and the § 1115(b)(5) Defense
The Lanham Act statutorily expanded the common law rights of a senior user of a trademark who registers its mark under the Act. Lanham achieves that result because registration is "constructive notice of the registrant's claim of ownership." 15 U.S.C. § 1072. Consequently, a junior user charged with trademark infringement by a senior user who is a federal registrant is ordinarily deprived of a defense because it cannot prove good faith adoption of the mark. See generally 2 McCarthy, supra § 26:13 at 313-14.
Federal registration under the Lanham Act is prima facie evidence of the registrant's exclusive right to a mark, subject to common law legal and equitable defenses. 15 U.S.C. § 1115(a); Park "N Fly, Inc., supra. After a waiting period, a registrant may quiet title in its mark, removing the threat of common law defenses, by making the mark "incontestable."[4] 15 U.S.C. § 1065; Park 'N Fly, Inc., supra. Incontestability is "conclusive evidence" of the registrant's exclusive right to the mark, subject only to particular defenses specified in the Act. 15 U.S.C. § 1115(b); Park `N Fly, Inc., supra. Thrifty Rent-a-Car's mark became incontestable on July 26, 1969.
In light of this uncontroverted fact, Thrift Cars has but one defense, 15 U.S.C. § 1115(b)(5), relevant to the case at bar:
If the right to use the registered mark has become incontestable under § 1065 of this title, the registration shall be conclusive evidence of the registrant's exclusive right to use the registered mark in commerce ... except when one of the following defenses or defects is established:
....
(5) That the mark whose use is charged as an infringement was adopted without knowledge of the registrant's prior use and has been continuously used by such party or those in privity with him from a date prior to registration of the mark under this chapter ...: Provided, however, that this defense of defect shall apply only for the area in which such continuous prior use is proved
....
15 U.S.C. § 1115(b).
Proof of § 1115(b)(5), then, is not a defense on the merits to alleged trademark infringement. 2 McCarthy, supra, 26:18 at 329. Rather, proving § 1115(b)(5) reduces the import of federal registration from conclusive evidence, to mere prima facie evidence, of a registrant's exclusive right to its mark. Id. A non-registrant junior user may then raise the common law Hanover-United Drug defense with respect to the area in which it used the contested mark before registration. Id.; see Steak & Brew, Inc. v. Beef & Brew Restaurant, Inc., 370 F. Supp. 1030 (1974). Such a non-registrant junior user has the burden of pleading and proving this defense. 2 McCarthy, supra 26:18 at 323; see also Foxtrap, Inc. v. Foxtrap Inc., 671 F.2d 636, 640 (D.C. Cir.1982).
4. Delimiting Junior User's Area of Continuous Prior Use
Under the Lanham Act, a senior user's federal registration of a mark has the effect of freezing a junior user's market area. Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato Chip Co., 477 F.2d 150 (6th Cir.1973); Burger King, supra. This is so because the junior user cannot *756 raise the Hanover-United Drug defense against charges of trademark infringement with respect to markets into which it expands after registration. Registration is constructive notice of the senior user's appropriation of the mark in those markets and destroys the good faith element of the junior user's defense.
The area frozen by registration, or "area [of] continuous prior use," 15 U.S.C. § 1115(b)(5), is the area in which the junior user continuously marketed its goods before the mark was registered. Burger King, supra at 908; Concord Laboratories, Inc. v. Concord Medical Center, 552 F. Supp. 549, 552 (1982). As at common law, the junior user's reputation, advertising, and sales delimit its frozen area. 2 McCarthy, supra, § 26:18 at 327. The area will not necessarily coincide with state boundaries. Burger King, supra; see generally 2 McCarthy, supra, § 26:12 at 309-12. Thrift Cars is in error where it argues that by good-faith use of its mark in remote East Taunton, it acquired exclusive rights to the mark throughout Massachusetts. Raxton Corporation v. Anania Associates, Inc., 668 F.2d 622 (1st Cir.1982) (Raxton II), on which Thrift Cars heavily relies, is distinguished on its facts. In Raxton, neither party had obtained a federal registration of its mark, but the defendant junior user had a Massachusetts registration. Raxton Corporation v. Anania Associates, Inc., 635 F.2d 924 (1st Cir.1980) (Raxton I). In the instant case, senior user Thrifty Rent-a-Car has a federal registration of its mark, and defendant junior user Thrift Cars has no Massachusetts registration.
In light of the above discussion, July 26, 1964 the date of Thrifty Rent-a-Car's federal trademark registration emerges as the crucial date for determining the rights of the parties. On that date Thrifty Rent-a-Car was using its service mark in at least Oklahoma, Texas, Kansas, and Missouri. For nearly two years prior to that date, Thrift Cars had been using its confusingly similar mark in complete good faith within the area of East Taunton, Massachusetts. This Court finds that defendant Thrift Cars has not established a continuous market area for its mark outside East Taunton, Massachusetts, from 1962 to 1964. Though Thrift Cars showed limited advertising in southern Massachusetts during the years in question, advertising alone cannot establish trademark rights. Wrist-Rocket Manufacturing Co., supra at 732. Thrift Cars has also not sustained its burden with respect to "sales," or in this case rentals, to customers outside East Taunton. The sporadic rentals in Nantucket and elsewhere about which Thrift Cars presented evidence are insufficient to establish the continuous prior use of a trademark that the Lanham Act requires. See Sweetarts v. Sunline, Inc., supra; Wrist-Rocket Manufacturing Co., supra. The simple fact is that, as of July 26, 1964, Thrift Cars was known only to those who lived in the Taunton area and those in Fall River, the Cape, and Islands areas who desired to seek Thrift Cars out in East Taunton and negotiate with it there, either by telephone or in person.
In finding that defendant Thrift Cars' "area [of] continuous prior use" is limited to East Taunton, the Court does not foreclose all activity by defendant outside East Taunton. While the Court may, as part of its remedy, limit a party's right to advertise, see id.; Holiday Inn v. Holiday Inns, Inc., 534 F.2d 312 (C.C.P.A.1976), aff'd, 645 F.2d 239 (4th Cir.1981), the Court should and does consider the nature of a defendant's product and marketing scheme in fashioning a remedy which properly balances competing interests. See Wrist-Rocket Manufacturing Co., supra at 732 (nature and marketing of slingshots considered in delimiting defendant's pre-registration market area); Flavor Corporation of America v. Kemin Industries, Inc., 503 F.2d 729 (8th Cir.1974) (injunction against advertising in two states where plaintiff had established exclusive rights modified to let defendant continue advertising in national publications).
Here, the nature of Thrift Cars' car rental business is to provide customers a vehicle *757 by which to travel from one city to another. To confine Thrift Cars' rentals to East Taunton would destroy its business and deny it the benefit of the § 1115(b)(5) defense to which it is entitled. Such an order would frustrate the intent of Congress in retaining the defense. The intended effect of § 1115(b)(5), far from trying to diminish a good-faith junior user's rights, is to allow the junior user maximum benefit of any good will acquired by hard and honest labor. The statute achieves that result by freezing, not cutting back, the junior user's business activities on the date of registration. See Old Dutch Foods Inc. v. Dan Dee Pretzel & Potato Chip Co., supra; Burger King, supra.
ORDER
Commencing on July 25, 1986 the defendant Thrift Cars, Inc. is permanently enjoined from using the word "Thrift" in any way in the conduct of any car or truck rental or leasing business outside Taunton, Massachusetts, including the facility on Nantucket. Thrift Cars' business activities on July 26, 1964, the date of registration, did not include operating facilities on Nantucket or in any other area outside East Taunton. Thrift Cars may not subsequently expand its use of the Thrift trade name to include such operations. However, to the extent that Thrift Cars made rentals to customers outside East Taunton before July 26, 1964 using the Thrift trade name, it may continue to make such rentals, i.e. it may, in response to the advertising delimited below, supply rental cars driven from the East Taunton facility to any point in Massachusetts, including the Cape and Islands.
Thrift Cars is enjoined from advertising its business using the Thrift trade name outside East Taunton, except in those media which the record shows it used before July 26, 1964. Specifically, Thrift Cars may advertise in the yellow pages of the Taunton area telephone book, in the Cape Cod Times, the Inquirer and Mirror, the Taunton Daily Gazette, and The Anchor. Thrift Cars may not advertise in media, other than those publications listed above, intended to target customers outside East Taunton. Thrift Cars may advertise in any medium intended to target only East Taunton customers.
Thrifty Rent-a-Car is enjoined from operating any business establishment in East Taunton. Similarly, Thrifty Rent-a-Car may not advertise in media intended to principally target the East Taunton community. Thrifty Rent-a-Car may advertise in media intended to principally target areas outside East Taunton and in national and state advertising schemes.
In so ordering, the Court realizes that some targets of the plaintiff Thrifty Rent-a-Car's national and state advertising campaigns may also be exposed to the advertisements of the defendant Thrift Cars. However, the bare possibility of customer confusion is insufficient to justify the punitive effect of enjoining defendant Thrift Cars from all advertising outside East Taunton. Cf. Flavor Corporation of America v. Kemin Industries, Inc., supra at 733 ("The bare possibility that a potential customer of [plaintiff] ... might be misled by [defendant's] advertising ... is insufficient to justify the punitive effect of an injunction...."). See also Burger King, supra at 909 ("The mere fact that some people will travel from one market area to another [and be exposed to both marks] does not, of itself, establish that confusion will result.") Moreover, the Lanham Act does not mandate total elimination of customer confusion. Holiday Inn v. Holiday Inns, Inc., supra at 317-18 (approving of the judgment in Alfred Dunhill of London, Inc. v. Dunhill Tailored Clothes, Inc., 293 F.2d 685 (C.C.P.A.1961): "All the members of the court deciding that case were fully aware that there had been confusion, was likely to be more and that the court which adjudicated the applicant's right to use, in imposing conditions on the manner of use, hoped only to minimize, not to eliminate, confusion and, of course, to protect the other party's private rights.") Accord Burger King, supra at 909 ("The court's decision restricted use of *758 the mark by plaintiffs and defendants to ... separate markets so that public confusion would be reduced to a minimum.) [Emphasis added]. This Court is confident that its order accords with the intent of Congress in passing the Lanham Act and satisfactorily protects the private rights of the parties in this litigation.
Thrifty Rent-a-Car shall recover its statutory costs but its claim for damages is dismissed since, upon the present record, the assessment of damages would be utterly speculative.
SO ORDERED.
NOTES
[1] The other major component of the car rental market is what is known as the commercial market, serving primarily business travelers. Examples of commercial car rental outlets are to be found at Logan International Airport in Boston.
[2] To give some sense of the geographical penetration of Thrifty Rent-a-Car in Massachusetts, it is worthwhile listing the location of its car rental franchises. They are presently located in Abington, Arlington, Bedford, Boston, Brookline, Cambridge, East Hampton, Falmouth, Framingham, Haverhill, Holbrook, Hyannis, New Bedford, Norwood, Orleans, Pembroke, Plymouth, Quincy, Randolph, Raynham, South Attleboro, Wellfleet, and Weymouth.
[3] One may question why trademark rights should turn on a junior user's subjective state of knowledge. The answer is two-fold. First, a merchant who adopts a trademark knowing that another party already uses it in a remote area must surely intend to prevent the senior user from expanding into his own territory. Such behavior conflicts with a policy of fostering trade by allowing a merchant the maximum benefit of his good will. Second, a junior user's knowledge may evidence knowledge by others in the area, and a consequent lack of remoteness. 2 McCarthy, supra, § 26:4 at 292-93.
[4] Generally, a registrant may make its mark incontestable by filing an affidavit within one year after the expiration of any five year period following registration, during which the mark has been in continuous use. 15 U.S.C. § 1065. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1775391/ | 342 S.W.2d 366 (1961)
Nelson ENGLISH d/b/a Air Conditioning Engineering, Appellant,
v.
CENTURY INDEMNITY COMPANY, Appellee.
No. 13668.
Court of Civil Appeals of Texas, San Antonio.
January 11, 1961.
*367 Mahoney & Shaffer, Corpus Christi, for appellant.
Fischer, Wood, Burney & Nesbitt, Corpus Christi, for appellee.
MURRAY, Chief Justice.
This is an appeal from a judgment of the 105th District Court of Nueces County, wherein it was adjudged and decreed that plaintiff and cross-defendant, Nelson English, d/b/a Air Conditioning Engineering Company, and intervener, Ward Howe, d/b/a Ward Howe Electric Company take nothing; that defendant and cross-plaintiff, Century Indemnity Company, recover the sum of $7,045, which sum of money had been tendered into the registry of the court by the State of Texas; and that Century Indemnity Company recover from Nelson English the sum of $4,112.73, together with interest. Both Century Indemnity Company and English excepted to the judgment and gave notice of appeal, but only English perfected his appeal by timely filing an appeal bond. Ward Howe did not appeal and need not be further mentioned. Nelson English, d/b/a Air Conditioning Engineering Company, will hereinafter be referred to as appellant and Century Indemnity Company as appellee. Appellant was the original plaintiff, but the recovery was had upon the cross-action of appellee.
The construction and legality of three contracts are here involved. (1) A construction contract between appellant and the State of Texas acting by and through its Board of Control. (2) A performance bond given to the State, with appellant as principal and Century Indemnity Company as surety, guaranteeing the performance of the construction contract. (3) The indemnity agreement between appellant and appellee, wherein appellant agreed to indemnify appellee "against any and all damages, loss, costs, charges and expenses of whatsoever kind or nature, including counsel and attorney fees, * * * which it shall or may at any time sustain or incur by reason or in consequence of its suretyship or procurement of suretyship, or which it may sustain or incur in connection with any litigation, investigation, collection of premiums, or other matter connected with suretyship, * * *."
It is appellant's contention that the construction contract was illegal and void because it violated Section 19 of Article 3271a, Vernon's Ann.Civ.Stats., in that R. V. *368 Woodward, who signed the engineering plans and specifications and under whose supervision the engineering work was done, was not a registered professional engineer, as is required by that section. The pertinent part of Sec. 19 reads as follows:
"* * * it shall be unlawful for this State, or for any of its political subdivisions, for any county, city, or town, to engage in the construction of any public work involving professional engineering, where public health, public welfare or public safety is involved, unless the engineering plans and specifications and estimates have been prepared by, and the engineering construction is to be executed under the direct supervision of a registered professional engineer; * * *."
Under the provisions of the construction contract, appellant was to install summer and winter air conditioning in the Marine Laboratory Building at Rockport, Texas, which building was being constructed for the Texas Game and Fish Commission, according to certain plans and specifications, for a fixed contract price of $11,545. Upon its face, this was a perfectly legal and valid contract. Before entering into the performance of this contract it was necessary for appellant English to furnish a performance bond in the sum of $11,545, guaranteeing the completion of the construction contract according to its terms. In order to induce appellee to sign such a bond, appellant made a written application to appellee, coupled with an agreement to indemnify appellee as above stated. Appellee accepted the application and agreement of indemnity and signed the performance bond and it was posted with the State, and the work was begun by appellant under the construction contract.
Appellant contends that he had practically completed the contract when it was cancelled by the State and appellee called upon to complete it. Appellant had been paid the sum of $4,500 at the time, and contends he was due the balance of the contract price, amounting to $7,045, less just a few hundred dollars that it would have taken to complete the contract. Appellee completed the contract and by cross-action recovered judgment as above stated.
Appellant's defense against appellee's cross-action was that the construction contract was illegal and void, as being in violation of Sec. 19, art. 3271a, supra, and this being true, the performance bond signed by appellee as surety was likewise void. and that the indemnity agreement executed by appellant to secure appellee as a surety on his performance bond was also void.
We may, for the purpose of this opinion, assume without deciding, that the construction contract was illegal and void as violating Sec. 19, supra, and that the performance bond was illegal and void, because given to guarantee the performance of an illegal contract. Nevertheless, this would not render the indemnity agreement between appellant and appellee void and unenforceable, because it was given in consideration of appellee's signing the performance bond as surety, and the consideration was paid when appellee so signed.
There is no intimation that anyone discovered the invalidity of the construction contract until after all the transactions herein involved had taken place. The construction contract was perfectly legal on its face, and there was nothing to put appellee or anyone else upon notice that R. V. Woodward, who signed the plans. and specifications and under whom the work was performed, was not a registered professional engineer. The parties were charged with knowledge of the provisions of Sec. 19, supra, but not with the fact that R. V. Woodward was not a registered professional engineer. He was probably a professional engineer, but not a registered one.
It is quite possible that if appellee had discovered the illegality of the construction contract and had denied any liability *369 when the State called upon it to complete the construction contract, it might have successfully defended itself in any suit that the State might have brought against it. Massachusetts Bonding & Insurance Co. v. Gottlieb, Tex.Com.App., 15 S.W.2d 1020; Edwards County v. Jennings, 89 Tex. 618, 35 S.W. 1053. Appellee did not discover this defense, and in good faith, as found by the jury, proceeded to complete the construction contract. It is therefore entitled to recover upon its cross-action
The law seems to be well settled that where a separate and independent written indemnity agreement is given to secure a surety upon a performance bond for an illegal contract, such indemnity agreement is not tainted by such illegality, unless the indemnitee knew or should have known of the illegality of the original contract. Illies v. Fitzgerald, 11 Tex. 417; 23 Tex.Jur. p. 524, § 4; 24 Am.Jur. p. 461, § 11; 42 C.J.S. Indemnity § 7, p. 573.
The fifth paragraph of the indemnity contract made appellee the exclusive judge of whether it would contest claims made upon it under the performance bond in the following broad language:
"Fifth: That the Company shall have the exclusive right for itself, and for the indemnitor(s), to decide and determine whether any claims * * * made * * * against the Company and/or principal on said bond, jointly or severally, shall or shall not be defended * * * and its decision shall be final, conclusive and binding upon the indemnitor(s), and any * * * loss, cost, charge, expense or liability thereby incurred, sustained, or paid, shall be borne by the indemnitor(s) and the indemnitor(s) especially consent thereto."
In the face of this provision, the question is not whether appellee might have successfully defended against the claims and demands of the State, or whether there was legal liability under the performance bond, or whether appellee was negligent in spending too much money in completing the construction contract, but did appellee act in good faith in completing the contract and in making other expenditures? Central Surety & Ins. Corp. v. Martin, Tex.Civ. App., 224 S.W.2d 773; Fidelity & Casualty Co. of New York v. Harrison, Tex.Civ. App., 274 S.W. 1002; United States Fidelity & Guaranty Co. v. Jones, 5 Cir., 87 F.2d 346.
We are not here dealing with the common law principle to reimburse the surety for any amount paid upon the debt in which the liability of the principal is controlling, but with liability under the express terms of an agreement of indemnity entered into by appellant and appellee. Such a contract is not against public policy, and "as the parties bind themselves, so shall they be bound."
The only test is, in making payments under the performance bond, did appellee act in good faith and was it free from fraud? Appellant does not contend that, in completing the construction, appellee acted in bad faith or fraudulently; he only contends that appellee acted negligently. The jury expressly found that appellee acted in good faith, and of course if it acted in good faith, it did not act fraudulently.
Appellant next contends that the trial court erred in not permitting him to plead and introduce evidence to prove that he was entitled to recover the $7,045 tendered into the registry of the court by the State, based on quantum meruit. If appellant had a cause of action on a quantum meruit basis, it arose when the State cancelled his written contract on October 26, 1954, and the first time he filed any pleading setting up a claim on quantum meruit was when he filed his first amended original petition on June 17, 1959, nearly five years after his cause of action had arisen. The two and four statutes of limitation were plead. Furthermore, if he had a cause of *370 action on this basis, it would have to be against the State, and he has never named the State as a defendant. Before appellant could maintain a suit against the State on a quantum meruit basis, there would have to be pre-existing legislation giving permission or authority to appellant to sue the State, and no such pre-existing law was shown to exist. State Constitution, art. III, § 44, Vernon's Ann.St.Const.; M.M.M., Inc. v. Mitchell, 153 Tex. 227, 265 S.W.2d 584; Gray v. Blau, Tex.Civ.App., 223 S.W.2d 53.
Regardless of everything else, appellant was not prejudiced by the ruling of the court, because the agreement of indemnity was broad enough to assign to appellee any claim that he might have for work done under the construction contract even though it was due him on a quantum meruit basis.
Appellant next complains because the court submitted to the jury Issue No. 6, relating to attorney's fees expended in defending appellant's cause and in prosecuting appellee's cross-action. We overrule these contentions because under the broad language contained in the agreement of indemnity, appellee was entitled to recover attorney's fees, whether spent in defending appellant's cause of action, or in prosecuting its cross-action, and the jury on sufficient evidence found such fees to be of the sum of $3,500. The only question actually propounded to the jury was the amount of the attorney's fees, and the answer of the jury was supported by the evidence.
Appellant's ninth and tenth points, complaining of the submission of Special Issue No. 7 to the jury, are without merit and are overruled. Under the terms of the indemnity agreement, appellee was clearly entitled to recover all costs and expenses incurred in connection with its defense of appellant's suit for negligence, as well as those incurred in prosecuting its crossaction, and the only question really submitted to the jury was the amount of such costs and expenses. The answer of the jury was supported by the evidence.
Appellee presents one cross-point of error, reading as follows: "The Trial Court erred in overruling Cross-Appellant's Motion for Judgment against Nelson English, Cross-Appellee, for the sum of $5,112.73, and in limiting the amount of the recovery in said judgment to the sum of $4,112.73."
The record does not show that Century Indemnity Co., filed an appeal bond, and therefore it is not a cross-appellant. However, it did file a motion to disregard the jury's answer to Special Issues Nos. 1, 2 and 5, and to allow it recovery for the full amount expended in completing the construction contract. The trial court overruled this part of appellee's motion for judgment, and in effect gave appellant credit for the $1,000 spent negligently in such completion. The jury found in effect that this $1,000 was spent by appellee in good faith. As we have heretofore pointed out, negligence is no defense to the provisions of the indemnity contract, the only defense being bad faith on the part of appellee in making the expenditures. While it did not file an appeal bond, appellee did except to the judgment of the court and gave notice of appeal. In order to permit this question on appeal, it was not necessary for appellee to file a motion for new trial, as is required by Rule 324, Texas Rules of Civil Procedure, as amended Sept. 1, 1957, as appellee comes within the exceptions stated in that rule. See, Rule 324, Vernon's Texas Rules of Civil Procedure, 1960 Pocket Parts.
Neither is appellee precluded from assigning this cross-point by the provisions of Rule 325 or Rule 374, T.R.C.P. We sustain the cross-point.
Accordingly, the judgment of the trial court will be amended so as to allow a recovery by appellee against appellant in the sum of $5,112.73, instead of $4,112.73, and as thus amended the judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1822886/ | 138 So. 2d 597 (1962)
STATE of Louisiana, through the DEPARTMENT OF HIGHWAYS, Plaintiff and Appellant,
v.
Aubrey O. HENDERSON, Defendant and Appellee.
No. 500.
Court of Appeal of Louisiana, Third Circuit.
March 8, 1962.
*598 D. Ross Banister, Glenn S. Darsey, Brunswig Sholars, and Chester E. Martin, by Chester E. Martin, Baton Rouge, for plaintiff-appellant.
Bean & Rush, by James W. Bean and Warren D. Rush, Lafayette, for appellee.
Before CULPEPPER, SAVOY and HOOD, JJ.
CULPEPPER, Judge.
This suit was filed under the provisions of LSA-R.S. 48:441-48:460 providing for expropriation by a declaration of taking. Portions of defendant's land and improvements near Lafayette, Louisiana were taken for the construction of a highway. With its declaration of taking the plaintiff deposited in the Registry of the Court the sum of $126,116. Defendant's answer demanded compensation and damages totaling $285,670. After trial on the issue of quantum, the lower court awarded defendant judgment for the sum of $60,249.05 over and above the amount already deposited. From this judgment plaintiff has appealed asking that the total amount of compensation be reduced to $101,942 and that under the provisions of LSA-R.S. 48:456 judgment be awarded in favor of plaintiff and against defendant for the excess amount which plaintiff has deposited. Defendant answered the appeal asking an increase in the total compensation to $285,670, subject to a credit of $190,461.99 already received by defendant.
The record shows that two tracts of land were expropriated. The first parcel, designated as #10-9, contains 9.235 acres fronting 1,750.43 feet by a depth of approximately 230 feet on an existing state highway. This parcel of land was used by the defendant as part of a nursery. The improvements thereon consisted of a residence and a variety of greenhouses, sheds and other buildings used in connection with the nursery. On this tract there was also located a portion of defendant's nursery fields in which were planted large numbers of camellias, azaleas, magnolia, magnolia grande flora and other nursery stock.
The second parcel of land consisted of a triangular shaped tract containing 1.012 acres located just north of the first parcel, but not contiguous to it, and a short distance from the existing state highway. This tract had no improvements.
Defendant has accepted the valuations placed by the State on most of the improvements. The issues remaining on appeal are as follows: (1) Is the nursery stock movable or immovable and, if immovable, and therefore expropriated, what compensation is due defendant by reason of the expropriation of these plants. (2) The market value of the land in both tracts 10-9 and 11-3. (3) The value of the residence, barbecue shed and bird house designated as O, P & Q. (4) Is the State entitled to a refund of $24,174 of the item of $30,804 which it deposited for the expropriation of three greenhouses and a boiler room designated as buildings K, L, M and N because only a portion of these buildings was *599 actually on the right of way and the remainder was off the right of way. (5) Is defendant entitled to an additional award of $7,400 for weather damages to movable potted plants which were located in greenhouses expropriated and for which defendant did not have storage room in other greenhouses.
Our learned brother below decided the issue of the nursery stock in his well considered written opinion, the following portion of which we adopt as our own:
"At the trial of this rule, it was admitted by the attorneys representing the department of highways that the nursery stock was not included in fixing the value of the land and improvements. In addition, defendant Henderson established by his own testimony that the plants growing on the property consist of large shrubs and trees, and other plants, vines, and flowers generally used in large landscaping jobs, and that they could not be moved to another location until this fall because they would die if transplanted at this season of the year. He further testified that it would cost $25,000 to $30,000 to effect this transplanting operation in the fall, using a crew of men and winch and trailer trucks and other heavy equipment for this purpose.
"Henderson also called Mr. Earl Vallot, a nurseryman of considerable experience in Lafayette Parish, who testified that he had been requested by Mr. Dan A. Ritchey, Jr., to estimate the value of the nursery stock in the right of way; that he had done so, and had reported to Mr. Ritchey that his appraisal ran to $45,249.05. He was paid for these services by the Department of Highways. A list of the plants and their value as made and determined by Mr. Vallot, is in evidence marked D-1 for identification. A copy of his inventory was furnished to the State at the time he made it.
"No evidence was introduced by the State in rebuttal, counsel taking the position that these plants growing in the soil were not part of the land but were movable property, and hence could not be included in the estimate of the value of the land and its improvements for expropriation purposes, because under LSA-R.S. 19:1, expropriation extends only to `immovable property.' In support of this proposition, they cite and rely upon R.C.C. Art. 468, and the cases of Folse v. Triche, et al., 113 La. 915, 37 So. 875, and Rosata v. Cali, La.App., 4 So. 2d 54. Also cited are excerpts from 42 Am.Jur. 200, 201, and 73 C.J.S. Property §§ 8-9, pp. 174-175.
"It is the opinion of this Court that the position taken by the State is untenable. The case of Folse v. Triche, supra, is clearly inapplicable here. In that case certain machinery placed upon a plantation for use in a sugar refinery and hence becoming immovable by destination, was declared to have been converted to movable property again as a result of a fire which destroyed the refinery. Even so, the Court on rehearing held that such part of the machinery as would be used in reconstructing the refinery would not be considered as having lost its character as immovable by destination, and only that portion of the machinery or equipment which could not be so used would be considered as having reverted to its status of movable.
"In Rosata v. Cali, supra, the community of acquets and gains had been dissolved by the death of the wife. Included in the community was a strawberry crop planted by the husband on the wife's separate property, and the court of appeal held that under R.C.C. Art. 2407, such was a movable and under an agreement between the legatees after the wife's death, passed to the husband who acquired all of the community *600 movables other than a packing shed and sewing machine. Again, we find no possible theory upon which this holding can be extended to the case at bar.
"On the contrary, it seems clear that such nursery stock as is located on Mr. Henderson's property is not immovable by destination, but actually forms part of the realty and is immovable by nature. R.C.C. Art. 465, dealing with such matters, reads as follows:
"`Standing crops and the fruits of trees not gathered, and trees before they are cut down, are likewise immovable, and are considered as part of the land to which they are attached.
"`As soon as the crop is cut, and the fruits gathered, or the trees cut down, although not yet carried off, they are movables.
"`If a part only of the crop be cut down, that part only is movable.'
"The Court has been unable to find a specific instance where the above article has been applied to nursery stock by the Courts of this State, but there are a host of decisions in our jurisprudence that crops of rice, cane, corn, cotton, grown by the owner of the soil, are immovable by nature, form part of the land, and pass with it if the same be sold before they are harvested, unless expressly reserved and excepted from the sale. This is a basic concept in our law, and is so well settled as to require no further citation. Planiol, Traite Elementaire De Droit Civil, has this to say regarding the interpretation placed upon the corresponding articles of the Code Napoleon:
"`2205. All plants which grow from the ground are immovable as long as they are attached to the soil. This rule applies to the most humble of plants as well as to the greatest oaks of the forest. The French Code takes this rule for granted but does not express it in general terms. The lawmaker applies it solely to crops and fruits, "to standing crops and the fruits of trees not gathered" to use the common formula (500). Foreign Codes, on the contrary, have an explicit provision covering this point (Italian Code, Art. 410, Spanish Code, Art. 334, S. 2; German Code, Art. 94).' (Emphasis added.)
"`2206. Condition of Their Immobilization
`"Plants are immovables provided their roots are in the soil itself. It follows that plants and shrubs placed in pots or boxes are movables, even though the pot or the box be covered with earth during the late spring, summer and early autumn. But it is not necessary, when the plant is put in the ground, that it remain there indefinitely. Thus, the trees of a nursery garden are immovables, even though they be destined eventually to be displaced.' (Emphasis added.)
"The uncontradicted evidence in this case is that the plants listed by Mr. Vallot, found within the limits of the right of way sought on Mr. Henderson's land, shows that the nursery stock have their roots imbedded in the soil, and are not in pots or boxes, some few of the smaller items being cuttings planted in the ground and not yet rooted.
"Nor was the power of eminent domain a stranger to the laws of France, although probably not in the distilled form set forth in [LSA-] R.S. 48:441 et seq., and the learned French scholar in the same work has this to say, which we deem to be most appropriate here:
"`No. 2214. Difference between Immovables by Nature and Immovables by Destination * * *'"
*601 `"(2) In the case of the exercise of the right of eminent domain, the expropriator is not held, in principle, to pay the value of things which are only immovable by destination because they continue to exist, as movables, and to retain their value and utility, and they do so even when separated from the immovable. There is an exception solely for the things which could not be transported conveniently or which would suffer too great a depreciation on account of their removal. The expropriation award on the contrary, necessarily comprises all that has become immovable by nature, following its incorporation in the soil or in the building.' (Emphasis added.)
"Also of interest are comments to be found in the annotation in Vol. 1 A. L.R.2d pp. 887, 888, and 889; 42 Am. Jur. Sec. 19, p. 200, and 73 C.J.S. Property §§ 8-9, pp. 174-175.
"In view of the foregoing, the conclusion that the plants and shrubs, collectively referred to as `nursery stock,' growing in the soil on the property of Mr. Henderson and included within the right of way sought to be taken by the State for highway purposes, are part and parcel of the soil, is inescapable. They pass to the department with the soil in full ownership from the moment that the order of expropriation is signed."
In urging us to depart from the ancient rule that trees are part of the land in which they are rooted, plaintiff has cited the following from 42 Am.Jur. 200, Sec. 19:
"The courts are in conflict as to the nature, as realty or personalty, of nursery stock growing in the soil for sale and transplantation. The conflict arises, in large part, from the relationship and intention of the parties in the particular case, and the particular purpose for which the question is to be determined. That nursery trees and perennials are within the strict letter of the ancient rule that whatever is growing in the soil is a part thereof and must be regarded as real property is beyond doubt, and this is still the rule in some situations, and for some purposes, in the absence of any reservation or competent evidence of the intention of the parties to the contrary. The courts soon began to recognize the injustice of a strict application of the ancient rule, and to regard them as personalty in certain particular circumstances and relationships. In a recent case, it has been held that in the absence of evidence that the parties as between themselves intended that it should be a part of the realty, nursery stock growing in the soil should be classified as personal property."
It may be that in certain situations, as for instance in the case of landlord and tenant or vendor and purchaser, etc., (See also 73 C.J.S. Property § 8, p. 174) justice and equity might require a departure from the ancient rule in particular circumstances and relationships, but we find no such equitable considerations in the instant case. Actually, the equitable factors here favor defendant. The evidence shows clearly that except during the dormant season, from fall until about May 1, such nursery stock cannot be moved without great risk of loss. The order of expropriation was signed on April 29, 1960. On May 10, 1960 defendant filed a motion seeking dismissal of the order of expropriation or in the alternative a delay until January 1, 1961 to move said nursery stock. The evidence shows that in June of 1960, before the court was able to hear defendant's motion, the plaintiff cleared the right of way and destroyed all of said plants with a bulldozer, causing defendant to lose thousands of dollars. We do not infer that the plaintiff did not have the legal right to destroy the nursery stock, but under the facts we can see no equitable considerations favoring plaintiff's present argument that the court should treat it as being movable and therefore beyond the State's right of expropriation.
*602 Plaintiff contends further that if we hold the nursery stock to be immovable by nature, a serious problem will arise as to the measure of compensation to be awarded. Plaintiff argues that the only way we can consider the value of the nursery stock is insofar as it adds to, or detracts from, the value of the land for its highest and best use which is commercial purposes. This argument has no merit. We, like the trial court, are of the opinion that compensation should be allowed for this nursery stock as in the case of growing crops. We are aware that this constitutes an exception to the traditional definition of crops, as being harvested annually, but in all other respects this nursery stock is the same as a crop. It has been planted, cultivated, sprayed, and cared for like any other crop. It was intended to be dug from the soil and sold. Therefore, for the purposes of these expropriation proceedings we are of the opinion it should be treated as a crop and damages allowed for the value thereof at the time of its destruction under the provisions of LSA-R.S. 48:218 which reads in part as follows:
"In expropriating lands for rights of way, if any improvement of the landowner or any crops upon the land are damaged or destroyed by the location of the right of way, the owner may recover compensation, in addition to the compensation for the property or the right of way, for the actual injury to or destruction of the improvement or crop."
We do not find this conclusion in conflict with State of Louisiana Through Department of Highways v. Glassell, 226 La. 988, 77 So. 2d 881 (La.S.Ct.1955) in which the court held native pecan trees "* * * not grown on the land as a special crop * * *" could not be regarded as constituting a separate item of damages and "* * * should have been considered by the judge only in determining the value of the land on which they were located * * *." In the instant case the nursery stock was not composed of native trees and was grown as a special crop.
In awarding $42,749.05 as compensation for the destruction of the nursery stock, the trial judge rendered well considered written reasons which we adopt as our own:
"At the trial, it was stipulated that all testimony taken on trial of defendant's motion to recall the original judgment of expropriation should be considered on the decision of this cause. During that trial it was brought out that the department of highways had, through Mr. Ritchey, engaged Mr. Earl Vallot, a nurseryman of Youngsville, Louisiana, to inventory and appraise the nursery stock in the right of way, which he did prior to the filing of the suit and prior to the time that the highway department or its legal staff decided that this nursery stock constituted movable property. His inventory in detail is in evidence identified as D-1, and the appraisal thereof totals $45,249.05. Mr. Vallot gave three copies of his report to Mr. Ritchey, and was paid for his services by the Department of Highways.
"Having heretofore decided that this nursery stock formed part of the land, and should have been considered in the estimate made by the State, the Court must now determine what additional value should be awarded for the taking thereof, and whether or not the original estimate of value of the land and its improvements lying within the right of way should be increased or diminished. The evidence consists of 163 pages, in addition to many exhibits and the transcript of the original motion hereinabove mentioned, and will not be detailed in this opinion.
"In addition to Mr. Vallot, the State produced Mr. L. D. Kelleher, Jr., a nurseryman of Baton Rouge, and Mr. Edwin Lott, New Orleans, District *603 Entomologist for the Louisiana Department of Agriculture, who has held that position for some thirty-two years, a gentleman of great eminence in his field. Mr. Kelleher fixed the value of the nursery stock within the right of way at $21,990.55, based on an inspection made December 22, 1959. Some of the plants were not included in the inventory according to the written report made, these being some fifty pine trees (used for shade in the cultivation of orchids at the nursery), a large number of camellias affected by scale which were then unmarketable, and a large number of azaleas. Mr. Lott was consulted with regard to the disease problem, and his testimony is simply that on December 22, 1959, the date of his inspection, the scale infestation of the plants excluded was such that they could not have been sold under the regulations of the department of agriculture. His written report is also in evidence.
"It was brought out in the testimony, however, that scale of this type is a common problem to nurserymen; annual inspections are conducted by agents of the department of agriculture and a written report made to the operators. Scale is controlled by application of an oil-emulsion spray, applied generally in the Spring, after all danger of freezing is past, and another inspection is made after which the plants are usually found free of disease and are cleared for sale.
"Henderson's Nursery was never denied a permit to operate, although scale was found and reported two or three years prior to 1959. The cost of applying this spray, which is a routine procedure in the nursery business, amounts to a maximum of $50 per acre. Mr. Lott testified on cross examination that plants can be marketed in from two weeks to one month after spraying (Tr. 55), and that the infested leaves are replaced by the growth cycle in the Spring.
"The taking in this instance occurred on April 29, 1960, on which date the Court must conclude that in the ordinary operation of this nursery the stock would have been cleaned up and marketable.
"Mr. Lott mentioned some freeze damage noted by him in some of the young azaleas, and in his written report indicated this to have been in 185 Kings white and 1700 pink formosa, with some additional water damage found in some sasanqua and camellias. He testified that at the time of his inspection the nursery appeared in a neglected (overgrown) condition. In the written report he used the term abandoned, however, in his testimony which impressed the Court as being very fair, said that neglected was a more fitting description (Tr. 51). He also said that the plants he saw were not to be classified as plants that should have been destroyed or dug out (Tr. 56). In short, his opinion is that Mr. Henderson would have been required to `clean up' before marketing the diseased plants.
"Obviously, the difference in the appraisal of Mr. Vallot and Mr. Kelleher lies in the fact that Mr. Vallot saw the plants at a different time of the year and considered them all marketable, while Mr. Kelleher saw them during the winter while they were at their worst, so to speak, and did not assign any value to a large number of items which were not considered marketable at that time by Mr. Lott. The Court must attempt to fix the value of this property on the basis of the testimony in the record. Mr. Henderson increased the Vallot appraisal, but did not take into account the water and freeze damage noted by Mr. Lott, or the scale. The values used by Kelleher and Vallot are very much the same, the *604 difference being in the number of plants listed.
"Mr. Henderson stated that it was his practice to clean up early in the Spring, cultivate his plants by mechanical means and remove summer grass, killed by cold during the winter, and to apply spray around the middle of March. He is corroborated in this by the critical reports made by the State inspectors in the years prior to 1959 and 1960, with subsequent issue of his license to operate.
"Counsel for the State suggests in brief that Henderson's nursery was abandoned. The record does not reflect such to be the case; on the contrary, the business was principally large landscaping jobs, using large plants and shrubs, and operated by him profitably in this fast growing community.
"Considering Mr. Vallot's estimate, and deducting therefrom the cost of treating the plants in the Spring of 1960, based upon $50 per acre on 9.235 acres, we have a deduction of $461.75 to render the plants marketable in April, 1960. The camellias infested with the scale could have been cleaned up by spraying between March 15 and April 9 (Tr. 44), so that this deduction from Vallot's estimate would appear to be the only reduction in his value that should be applied. However, considering the fact that some of the azaleas were in briars, and some plants showed water and cold damage, (there being no testimony in the record as to how much this would have affected their value for sale), the Court feels that a total allowance should be made of $2500.00, reducing Mr. Vallot's estimate to $42,749.05 being the value of the property taken on April 29, 1960.
"Since these plants are in the nature of growing crops, this value is to be added to the value of the land."
The next issue is the amount of compensation to be awarded for the two tracts of land taken. The measure of compensation is admittedly the market value of the land for its highest and best use at the time of its expropriation on April 29, 1960. The tract designated as #10-9, containing 9.235 acres fronting 1,750.43 feet on the Billeaud-Lafayette State Highway and located one to two miles outside the city limits of Lafayette, was found by the trial judge to have a value of $50 per front foot. We agree with the trial judge's reasons as follows:
"We next consider the value given to the bare land and its improvements. Mr. Ritchey and Mr. Fleming fixed the price at $40 per front foot. Mr. Dwight Andrus, Mr. D. S. Young, and Mr. Chester Martin, all realtors in Lafayette Parish, valued this property at from $60 to $75 per front foot. Lafayette is a rapidly growing community, and as a result in recent years land values have increased at a phenomenal rate. Mr. Andrus and Mr. Young are perhaps the leading developers of the area and their opinion, along with that of Mr. Martin is entitled to great weight. Their study of the land in question, however, was not so thorough and detailed as was that of the State's appraisers insofar as tract 10-9 is concerned. Mr. Ritchey cites comparable sales of land situated on other highways going into Lafayette, where prices ranging from $45 per front foot to $54 per front foot were paid, and which he `adjusted' to the property under discussion arriving at his value of $40. The adjustment was apparently a conclusion reached by him resulting from his own opinion that the other properties were more desirable than the Henderson property, after considering various factors elaborated upon in his testimony.
"It is the duty of the Court to determine from this evidence what the fair market value of the property expropriated *605 was on April 29, 1960. Dept. of Highways, State Through, v. Havard, 239 La. 133, 118 So. 2d 131; Dept. of Highways, State Through, v. Ragusa, 234 La. 51, 99 So. 2d 20; Dept. of Highways, State Through, v. Tolmas, 238 La. 1, 113 So. 2d 288. Offers for purchase are not admissible for showing value. Dept. of Highways v. McDuffie, 240 La. 378, 123 So. 2d 93.
"It was brought out in the testimony of Mr. Martin (Tr. 75), that because of the location of the Lafayette Municipal Airport which limits the use of certain of the property along this highway, there is little available land for sale except that of Mr. Henderson. Considering all of the factors involved and the comparable sales mentioned by Mr. Ritchey, the Court is of the opinion that the value of $40 per front foot placed on tract 10-9 is too low, and same should be increased to the sum of $50 per front foot, which would make the total value of the land $87,500.00, a difference of $17,500.00 in the amount paid."
As to the triangular tract of land designated #11-3 and containing 1.012 acres, the trial court awarded $3,000. This was the market value found by the State's expert witness, Mr. Ritchey. Counsel for the defendant argues strenuously that this award should be increased to $5,000 per acre which was the amount of the appraisal of the expert witnesses, D. S. Young, Dwight W. Andrus and Chester Martin. However, counsel for the plaintiff has pointed out that this tract of land does not front on the highway, being located approximately 50 feet from the existing Billeaud-Lafayette State Highway. Under the circumstances we find no manifest error sufficient to disturb the award of the trial court.
The trial court awarded defendant $12,080 for the residence and barbecue house. Defendant contends that this award should be increased to at least $19,000 based on the testimony of Mr. Young and Mr. Martin that the residence contains approximately 2500 square feet of space and would cost $27,000 to replace. It was admittedly depreciated and in need of maintenance. The trial judge was apparently influenced by the evidence that this dwelling was of an unusual hollow tile construction which, although costly, was not particularly desirable for residential construction. Furthermore, the evidence shows clearly that this area is now commercial in nature and the dwelling was actually being rented for $150 a month. Considering all of these factors we find no manifest error in the trial court's award.
As to the award for the buildings designated K, L, M and N, the record shows that M is a building measuring 60 feet by 44.5 feet used as a boiler room, and K, L and N are greenhouses, each measuring approximately 30 feet by 104 feet, attached thereto and all used as one unit. The right of way took 8 to 10 feet off the end of the boiler room and the side of the greenhouse designated as K, but the remainder of these buildings was outside of the right of way. In making his appraisal, prior to the expropriation, the State's expert realtor, Mr. Ritchey, admittedly considered these four buildings as being one unit and consequently they were listed in the order of expropriation as being taken and their total appraised value was deposited in the Registry of the Court. However, the State now argues that it was in error in listing these four buildings in its order of expropriation because of the rule of law that an expropriating authority cannot expropriate more than it needs. Plaintiff cites LSA-R.S. 48:456 which provides in pertinent part "If the compensation finally awarded is less than the amount so deposited, the court shall enter judgment in favor of the plaintiff and against the proper parties for the amount of the excess." The State contends that its estimate should have included K, as it did, at its value of $6,630, but that the balance of $30,804 deposited by the State *606 for these improvements constituted a deposit for buildings that it could not expropriate, since they were outside the right of way, and that therefore the State's deposit for these items was excessive by the sum of $24,174 for which amount it claims a refund.
In support of this contention plaintiff cites Stewart v. Department of Highways, 113 So. 2d 120 (Orleans App.1959) in which part of a building was situated on the land taken for a right of way and the remainder of the building was situated on land left to the owner. Mrs. Stewart contended the State had no right to demolish that portion of the building off the right of way and asked for damages for trespass. It is true, as counsel for plaintiff in the instant case contends, the court stated the general rule that an expropriating authority can take only as much property as it needs, but in the Stewart case the facts show that the landowner objected to the Department of Highways taking any portion of the building located outside the highway. The court held as follows:
"The contention of the Department of Highways and of the other defendants is that the judgment under which the value of the expropriated property was fixed contemplated that in the amount awarded there was included the value of the entire structure in question, since it would be manifestly unfair to a landowner for an expropriating authority which requires land on which a part of a building is located to take the position that it need pay only the proportionate value of that building determined in accordance with how much of the building is on land taken and how much is on land not taken from the landowner.
"(1) There is no doubt of the soundness of this argument in most instances. Surely where a situation exists in which the demolition of a part of a building would result in the destruction of or the serious depreciation in the value of an unneeded portion, the expropriating authority could not be heard to say that it should pay only for that part of the building which is on the land which is needed by it. On the other hand, however, there is no principle better established than that an expropriating authority cannot take one inch or one item of property more than is actually needed if the owner of a building which is partially on land which is expropriated desires that the other unneeded portion be cut off and left to him."
In the instant case the defendant did not object to plaintiff's taking the entire buildings and the evidence shows clearly that the three greenhouses and the boiler room to which they were attached were all one unit and that the demolition of the boiler room and a portion of one of the greenhouses seriously depreciated the value of the unneeded portion of this unit. We therefore are of the opinion that the plaintiff could and did expropriate and pay compensation for this entire improvement and cannot now claim reimbursement for the portions thereof just outside the right of way.
Our Supreme Court granted a writ of certiorari in the Stewart case and reversed the judgment of the Court of Appeal for the reason that since the entire building, including that portion located outside the right of way, was described in the order of expropriation, and a sum deposited in the compensation therefor, the entire building was therefore in fact expropriated. No appeal having been taken from the judgment of expropriation the Supreme Court held it was res judicata and the State had a right to demolish the entire building. See Stewart v. Department of Highways, 240 La. 812, 125 So. 2d 372 (La.S.Ct.1960).
The final issue is defendant's claim of $7,400 for weather damage to movable potted plants which were located in the greenhouses expropriated and for which defendant contends he had insufficient storage *607 space to prevent these damages. Defendant cites no authorities in support of his contention. Clearly this claim has no merit. These plants were movable and could not be expropriated. Our jurisprudence is well settled that an expropriating authority is not liable for the costs or damages incurred by the owner in moving from the expropriated premises. Such injuries, inasmuch as they result only from the exercise by the State of its legal right, are damna absque injuria. See Rapides Parish School Board v. Nassif, 232 La. 218, 94 So. 2d 40; State v. Sauls, 234 La. 241, 99 So. 2d 97.
For the reasons assigned, the judgment appealed from is affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1823690/ | 166 B.R. 799 (1994)
In re R.H. MACY & CO., INC., et al., Debtors.
Anthi MANOUSOFF, Appellant,
v.
MACY'S NORTHEAST, INC., Appellee.
No. 93 Civ. 4130 (CSH).
United States District Court, S.D. New York.
March 21, 1994.
*800 Bonita E. Zelman, Jay R. Indyke, Kenneth A. Reynolds, Siegel, Sommers & Schwartz, New York City, for Anthi Manousoff.
Judy G.Z. Liu, Weil, Gotshal & Manges, New York City, for Macy's Northeast, Inc.
MEMORANDUM OPINION AND ORDER
HAIGHT, District Judge:
Anthi Manousoff appeals from a decision of the Bankruptcy Court of the Southern District of New York, (Burton Lifland, J.) denying her application to have a late notice of claim deemed timely pursuant to Bankruptcy Rules 9006(b).
BACKGROUND
In October 1990, Manousoff commenced a personal injury action against R.H. Macy ("Macy's" or "Debtor") in New York state court seeking recovery for injuries sustained in a fall in Macy's Roosevelt Field store in June 1990. Manousoff was represented by Bonita Zelman, an attorney with approximately seventeen years experience in personal injury and criminal law.
On January 27, 1992, Macy's filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. Manousoff's personal injury action was automatically stayed by 11 U.S.C. § 362(a). By order dated October 14, 1992, the Bankruptcy Court set December 15, 1992 as the deadline for filing all proofs of claim (the "bar date"). Notice of the bar date was mailed to Manousoff on or about October 21, 1992.
Manousoff is an elderly woman who speaks little English. Her children, both of whom are fluent in that language, periodically review her mail. Upon receiving the notice of the bar date, Manousoff's son forwarded the claim forms to Zelman with a request for an update on Manousoff's case. Zelman concedes that she received the package of forms sometime in November 1992. Rather than look at the forms to see if they were important, Zelman just tossed them into Manousoff's file without reading them. Zelman claims she first became aware of the bar date on December 21, 1992 (six days after that date) through an acquaintance who practices bankruptcy law. Zelman called Macy's counsel seeking an extension to file a timely notice of claim; Macy's counsel declined. Because of the intervening holidays, Zelman did not file a notice of claim on Manousoff's behalf until December 28, 1992, thirteen days after the bar date.
Manousoff then retained special bankruptcy counsel to make an application to have her late claim deemed timely. Manousoff essentially made two arguments. First, Manousoff claimed that it was improper for Macy's to have mailed the notice of claim to her rather than to her attorney, where Macy's was aware that appellant was represented by counsel. Second, Manousoff argued that under the standards set forth by the Supreme *801 Court in Pioneer Investment Services v. Brunswick Associates, Ltd., ___ U.S. ___, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993), her failure to file a timely notice of claim constituted excusable neglect, and under Bankruptcy Rule 9006, her application should be granted.
The application was denied by Chief Bankruptcy Judge Lifland in a decision issued from the bench on May 4, 1993, and clarified in a written decision entitled "Extract From Amended Bench Decision", In re R.H. Macy & Co. Inc., 1993 WL 195408 (Bankr.S.D.N.Y. May 12, 1993). As an initial matter, Chief Judge Lifland found that it was not improper for Macy's to have mailed the notice of claim to Manousoff rather than her attorney. Chief Judge Lifland also ruled that Manousoff's counsel's failure file a timely notice of claim did not constitute excusable neglect. Manousoff appeals from that decision.
DISCUSSION
Bankruptcy Rule 9006 authorizes the Bankruptcy Court to extend certain time periods, even after their expiration, upon a showing of "excusable neglect." The Supreme Court recently considered the term "excusable neglect" in this context in Pioneer Investment Services v. Brunswick Associates, Ltd., ___ U.S. ___, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993). In circumstances very similar to the case at bar, a creditor applied to have a notice of claim filed 20 days after the bar date deemed timely under Bankruptcy Rule 9006. The Court held that the determination of whether neglect is "excusable" is an equitable determination, which should take into account "all relevant circumstances surrounding the party's omission." Id., at ___, 113 S.Ct. at 1498. The Court suggested a number of factors which should be considered in making that determination. These include: (1) the danger of prejudice to the debtor; (2) the length of the delay and the potential impact on judicial proceedings; (3) the reason for the delay, including whether it was within the reasonable control of the movant[1]; (4) whether the movant acted in good faith; and (5) the quality of notice given to the movant about the bar date. After finding that there was no prejudice to the debtor, minimal delay to the proceedings, good faith on the part of the movant, and questionable notice of the bar date, the Pioneer court found that the bankruptcy court abused its discretion in denying the creditor's application.
In the case at bar, Chief Judge Lifland applied the Pioneer factors to the case at bar. In Manousoff's favor, he found that the length of the delay was minimal and did not adversely impact the proceedings, and he found that Manousoff was acting in good faith. In Macy's favor, he found that the quality of notice given to Manousoff was sufficient, the reason for the delay was completely within the control of Manousoff, and allowing the late notice of claim would prejudice the debtor. Balancing those factors, Chief Judge Lifland found it would be inequitable to Macy's to grant Manousoff an extension of the bar date.
Manousoff does not challenge Chief Judge Lifland's findings with respect to four of the five Pioneer factors.[2] She does object, however, to Chief Judge Lifland's finding that allowance of the late claim would prejudice Debtor. Chief Judge Lifland based that finding on the fact that Debtor is self-insured for the first $500,000 of every personal injury claim. He concluded that "[e]xtending the bar date to allow Mrs. Manousoff to file her proof of claim could result in a depletion of assets which would otherwise be available for distribution to other creditors. This factor therefore weighs in favor of the Debtor." Extract from Amended Bench Decision at 6.
Chief Judge Lifland's analysis is, of course, mathematically correct. But I read *802 the Pioneer majority opinion as holding that prejudice to the debtor is a more flexible and complex concept than a simple dollar-for-dollar depletion of assets otherwise available for timely filed claims. Were it otherwise, virtually all late filings would be condemned by this factor; they seek to share, with timely filed claims, in the bankrupt's limited resources.
The boundaries of a more expansive concept of prejudice to the debtor are not entirely clear. The Supreme Court furnishes no assistance in Pioneer. The majority refers to the unchallenged findings below concerning "the absence of any danger of prejudice to the debtor or of disruption to efficient judicial administration posed by the late filings," without reciting what the lower courts said on the points. Id. at ___, 113 S.Ct. at 1499. The pertinent lower court decisions are unreported. The Court may have been referring to the absence of prejudice factor when it observed that the bankruptcy court had taken judicial notice "of the fact that the debtor's second amended plan of reorganization, offered after this litigation was well underway, takes account of respondents' [the late filers] claims." Id. But Pioneer leaves the prejudice to the debtor factor undefined.
Some assistance, however, may be gleaned from district court cases. In In re Drexel Burnham Lambert Group, Inc., 148 B.R. 1002, 1007-08 (S.D.N.Y.1993), the proposed late claim amounted to $200 million, which was "about 20% of all remaining claims for which liquidations and payments remained to be processed." The liquidating plan in Drexel was well advanced when this late claim was asserted. In refusing to find excusable neglect, and affirming the bankruptcy court, Judge Pollack said: "The acceptance of a substantial late claim after consummation of a negotiated claims settlement and Plan of Reorganization thereon and a distribution of the major part of the assets thereunder, would disrupt the economic model on which the creditors, the Debtor and the stockholders had reached their agreements." See also Linder v. Trump's Castle Associates, 155 B.R. 102, 108 n. 10 (D.N.J.1993), in which the district court, remanding to the bankruptcy court for reconsideration in the light of Pioneer a personal injury claimant's motion to file late, observed: "In some cases a claim that is six months late will create substantial prejudice and interference, and in others it would create none."
These cases suggest that the inquiry into prejudice to the estate does not stop with dollar-for-dollar depletion. The analysis depends upon a broader consideration of the circumstances: an analysis consistent, in my judgment, with the rationale of Pioneer. The pertinent circumstances include the size of the late claim in relation to the estate and, closely related to the first, the disruptive effect the late filing would have upon a plan close to completion.
Accordingly I reverse the order appealed from and remand the case to the bankruptcy court for further proceedings consistent with this opinion. The bankruptcy court should reconsider the factor of prejudice to the debtor, and having done so, reexamine the question of excusable neglect, of which prejudice to the debtor is only one of several factors.
It is SO ORDERED.
NOTES
[1] In evaluating this prong, the Court specifically found that respondents should be held accountable for the acts and omissions of their chosen counsel. Accordingly, "in determining whether respondents' failure to file their proofs of claim prior to the bar date was excusable, the proper focus is upon whether the neglect of respondents and their counsel was excusable." Id., at ___, 113 S.Ct. at 1499 (emphasis in original).
[2] Appellant concedes that the form of the notice sent by debtor was sufficient, although she objects to the fact that it was sent to her rather than her attorney of record. See Appellant's Brief, at 21. Appellant also acknowledges that the delay in filing may have been in the reasonable control of Zelman. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1513147/ | 846 S.W.2d 453 (1992)
Suzette KENDRICK, Appellant,
v.
ALLRIGHT PARKING, Allright San Antonio Parking, Inc., and Allright Parking Texas, Inc., Appellees.
No. 04-92-00044-CV.
Court of Appeals of Texas, San Antonio.
December 31, 1992.
Rehearing Denied January 28, 1993.
*454 Russell H. McMains, Kimberley Hall Seger, Anthony F. Constant, Corpus Christi, Joyce W. Moore, Garza, Moore & Lazor, P.C., San Antonio, for appellant.
William L. Powers, Cathy J. Sheehan, Isidro O. Castanon, Plunkett, Gibson & Allen, Inc., San Antonio, for appellees.
Before BUTTS, CHAPA and CARR, JJ.
OPINION
CHAPA, Justice.
The opinion of October 30, 1992 is withdrawn and the following is substituted. Appellant, Suzette Kendrick, appeals a summary judgment order granted in favor of appellees, Allright Parking, Allright San Antonio Parking, Inc., and Allright Parking Texas, Inc. The single issue before this court is whether the trial court erred in granting appellees' motion for summary judgment.
FACTUAL BACKGROUND
The facts of this case reveal that appellant parked her car on an Allright parking lot in downtown San Antonio on August 28, 1988. While moving some items from her trunk to the front seat of her car, appellant was suddenly attacked by a man who pushed her into her car and kidnapped her by driving the car out of the parking lot. *455 Appellant was forcibly taken to a separate location where she was raped.
Appellant subsequently filed a suit against appellees for negligence for "failing to provide security to its invitees against assaults, failing to provide security instruction to its employees, failing to warn its invitees of the lack of any security, failing to warn its invitees of the potential for such assaults and alternatively failing to inspect the property and determining the dangers of assault on the property."
Appellees filed a motion for summary judgment, claiming that they owed no duty to protect appellant because they "did not have reason to believe from what they had observed or from past experience that such acts were occurring or were about to occur... that would pose imminent probability of harm to an invitee...." The trial court granted the summary judgment accordingly. Appellant contends that the summary judgment order was improper because issues of facts exist on whether appellees' owed a duty to appellant.
STANDARD OF REVIEW
The standard of review in a summary judgment case is whether the movant met his burden for summary judgment by establishing there exists no genuine issue of material fact and that he is entitled to a judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex.1985); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979); TEX.R.CIV.P. 166a(c). In deciding whether a disputed material fact issue precludes summary judgment, the reviewing court will take as true all evidence favoring the nonmovant. Nixon, 690 S.W.2d at 548-49. Every reasonable inference from the evidence will be indulged in favor of the nonmovant, and any doubt will be resolved in his favor. Id. at 549.
The defendant's burden of proof in a summary judgment is to show as a matter of law that the plaintiff has no cause of action against him. Citizens First Nat'l Bank of Tyler v. Cinco Exploration Co., 540 S.W.2d 292, 294 (Tex.1976); Gaddis v. Smith, 417 S.W.2d 577, 582 (Tex.1967). A defendant may accomplish this by disproving that there is no genuine issue of fact as to at least one of the essential elements of the plaintiff's cause of action. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex.1991); Anderson v. Snider, 808 S.W.2d 54, 55 (Tex.1991).
DUTY
Although the summary judgment in this case was not granted on specific grounds, it is clear from the record that appellees successfully attacked appellant's cause of action on the issue of duty, which is one of the key elements of a negligence action. El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex.1987); Colvin v. Red Steel Co., 682 S.W.2d 243, 245 (Tex.1984).
Appellant claims on appeal that questions of fact exist with respect to the foreseeability of harm, which in this case may have imposed upon appellees a duty of care. In contrast, appellees argue they were charged with no duty to protect their business invitees from harm because they had no reason to believe from what they observed or from past experience that such criminal acts were occurring or about to occur.
Generally, an occupier of a business premises is not liable to his customer invitees for the criminal acts of third persons. Nixon, 690 S.W.2d at 550. However, several courts have held that the owner of a business has a duty in some situations to protect his customers from criminal attacks of third persons because of the special relationship that exists between the business invitor and the customer invitee. See, e.g., Walkoviak v. Hilton Hotels Corp., 580 S.W.2d 623, 625 (Tex.Civ.App.Houston [1st Dist] 1979, writ ref'd n.r.e.); Eastep v. Jack-In-The-Box, Inc., 546 S.W.2d 116, 118 (Tex.Civ.AppHouston [14th Dist] 1977, writ ref'd n.r.e.); Morris v. Barnette, 553 S.W.2d 648, 649 (Tex.Civ.App.-Texarkana 1977, writ ref'd n.r.e.).
Such a duty has arisen in the context of a parking facility operator vis-a-vis his customer invitees. See Allright, Inc. v. Pearson, 711 S.W.2d 686, 689 (Tex.App.Houston *456 [1st Dist.] 1986), affd in part and rev'd in part on other grounds, 735 S.W.2d 240 (Tex. 1987); Ronk v. Parking Concepts of Texas, Inc., 711 S.W.2d 409, 414 (Tex.App.Fort Worth 1986, writ ref'd n.r.e.).
Appellees asserted in their motion for summary judgment and in their brief on appeal that they owed no duty to appellant under the test of liability expressed in Ronk. The court in Ronk held: the operator of an open-air parking lot owes a duty to protect his business invitees from intentional injuries caused by third parties if the operator has reason to believe from what he has observed or from past experience that such acts are occurring, or that there is a likelihood that such acts are about to occur, on the part of third persons which is likely to endanger the safety of the business invitee. [Emphasis added.] Id. at 414.
The Ronk v. Parking Concepts standard was criticized as too restrictive in the case of Garner v. McGinty, 771 S.W.2d 242, 246 (Tex.App.Austin 1989, no writ), in which the court preferred to examine its case under a test governing the duty to protect invitees when the invitor knows or has reason to know from past experience or from his own observations that the business is likely to attract crime.
In Garner, the court held: a business invitor owes a duty to his business invitees to take reasonable steps to protect them from intentional injuries caused by third parties if he knows or has reason to know, from what he has observed or from past experience, that criminal acts are likely to occur, either generally or at some particular time. [Emphasis added].
Id. This rule mirrors the principle set forth in other cases in which the business in issue was prone to attract crime because of the particular character of the business or its previous experience. See Walkoviak v. Hilton Hotels Corp., 580 S.W.2d 623, 625 (Tex.Civ.App.Houston [1st Dist.] 1979, writ ref'd n.r.e.); Morris v. Barnette, 553 S.W.2d 648, 649 (Tex.Civ.App.Texarkana 1977, writ ref'd n.r.e.). Cf. Allright, Inc. v. Pearson, 711 S.W.2d 686, 690 (Tex. App.Houston [1st Dist] 1986), affd in part and rev'd in part on other grounds, 735 S.W.2d 240 (Tex. 1987).
Garner, Walkoviak, and Morris derive their tests from Section 344 of the Restatement (Second) of Torts, which reads: Business Premises Open to Public: Acts of Third Persons or Animals A possessor of land who holds it open to the public for entry for his business purposes is subject to liability to members of the public while they are upon the land for such a purpose, for physical harm caused by the accidental, negligent, or intentionally harmful acts of third persons or animals, and by the failure of the possessor to exercise reasonable care to
(a) discover that such acts are being done or are likely to be done, or
(b) give a warning adequate to enable the visitors to avoid the harm, or otherwise to protect them against it. [Emphasis added.]
Restatement (Second) of Torts § 344 (1965).
To further explain this rule, Garner, Walkoviak, and Morris have also adopted or referred to the language of Comment f of Section 344, which provides:
Duty to police premises. Since the possessor is not an insurer of the visitor's safety he is ordinarily under no duty to exercise any care until he knows or has reason to know that the acts of the third person are occurring, or are about to occur. He may, however, know or have reason to know from past experience, that there is a likelihood of conduct on the part of third persons in general which is likely to endanger the safety of the visitor, even though he has no reason to expect it on the part of any particular individual. If the place or character of his business, or his past experience, is such that he should reasonably anticipate careless or criminal conduct on the part of third persons, either generally or at some particular time, he may be under a duty to take precautions against it, and to provide a reasonably sufficient number *457 of servants to afford a reasonable protection. [Emphasis added.]
Restatement (Second) of Torts § 344 cmt. f (1965).
In the context of this case, wherein the summary judgment evidence suggests, and appellees even admit, that the nature of this business was prone to attract criminal activity, we examine the issue of duty in light of the cases of Garner, Walkoviak, and Morris.
ANALYSIS [3] The question this court first addresses is whether appellees' summary judgment evidence conclusively establishes that appellees did not know or could not have known from their past experience or from the character of their business that criminal acts like those involved here were likely to occur, either generally or at some particular time. "A matter is conclusively established only if ordinary minds cannot differ about the conclusion to be drawn from the evidence." Harris v. Varo, Inc., 814 S.W.2d 520, 522 (Tex.App.Dallas 1991, no writ).
Appellees introduced the following summary judgment evidence: (1) appellant's answers to interrogatories; (2) an excerpt from appellant's deposition; and (3) affidavits from four Allright Parking San Antonio employees. The answers and the deposition were used to point out appellant was uncertain whether the parking lot attendant on duty actually witnessed the attack since allegedly thirty seconds had elapsed between the time she last spoke to the attendant and the time she was assaulted by her assailant. The affidavits indicated that four Allright employees lacked any knowledge of criminal activity resulting in personal injury on the lot in question or that any of Allright's customers were in imminent danger of harm on the lot. The one employee who was on duty at the time of the attack said in his affidavit, "I did [sic] not recall any criminal activity of any nature occurring." He also gave no indication that he tried to prevent the attack from occurring or attempted to notify the authorities.
In response, appellant presented the following summary judgment evidence: (1) an excerpt from her deposition in which she described how she chatted with the parking lot attendant just seconds before the attack and how the parking lot attendant stood only fifteen to twenty feet away from her and looked directly at her immediately before the attack, suggesting the attendant knew or should have known she was attacked; (2) the parking lot attendant's deposition in which he said he was told by his superiors to be aware of suspicious activities; (3) an Allright Parking city manager manual which warned of the threat of crime and urged attendants to be vigilant about "intruders" and to call police about suspicious activities; and (4) an affidavit from a security expert who said police statistics indicated crime had occurred around the lot and that parking industry warnings should have made the criminal activity foreseeable to appellees.
We do not believe that the affidavits of the four Allright employees introduced by appellees conclusively establish that the crimes at hand were unforeseeable as a matter of law. The mere fact each of them lacked knowledge of specific incidents of prior criminal activities on the lot itself is not conclusive on the issue of foreseeability. Allright, 711 S.W.2d at 690. Foreseeability only requires that the general character of the injury be reasonably anticipated. Nixon, 690 S.W.2d at 551.
By contrast, appellant introduced the deposition of the parking attendant who was on duty at the time appellant was kidnapped. The attendant acknowledged that he was instructed by his employer to be alert for thieves, suspicious persons or other unauthorized personnel. The attendant said he was supposed to ask such persons to leave the lot or to call the police if they refused to leave voluntarily. He even acknowledged that his employer was concerned for the safety of its customers and their property.
As indicated above, appellant also offered its managerial manual which warned, "The company's operations create many *458 temptations and opportunities for theft of money and vehicles. It is of major importance to minimize such events. Property and human life are at risk." [Emphasis in original.] The manual at the very least raises a fact issue of the foreseeability of criminal acts. Appellant further introduced an affidavit in which a security expert claimed appellees' own parking association had repeatedly warned about the incidence of "violent" parking lot crime. In addition, the expert, relying on San Antonio police statistics, said that the intersection where the parking lot is located had been plagued by "vehicular burglary; vehicular theft; sex offense; disturbance; marijuana and cocaine possession; theft from person; and suspicious person."
After reviewing the record, we find that ordinary minds can differ as to the conclusions drawn from the evidence offered by both sides. We also find that the evidence, which must be viewed in favor of appellant, raises issues of fact as to whether the criminal attack on appellant was foreseeable.
The existence of a legal duty under a given set of facts and circumstances is usually a question of law for the court to decide. Vaquera v. Salas, 810 S.W.2d 456, 460 (Tex.App.San Antonio 1991, writ denied). Foreseeability of harmful consequences will trigger the existence of a duty as the underlying basis for negligence. Corbin v. Safeway Stores, Inc., 648 S.W.2d 292, 296 (Tex.1983). "While foreseeability as an element of duty may frequently be determined as a matter of law, in some instances it involves the resolution of disputed facts or inferences which are inappropriate for legal resolution." Mitchell v. Missouri-Kansas-Texas R.R. Co., 786 S.W.2d 659, 662 (Tex.), cert, denied, 498 U.S. 896, 111 S. Ct. 247, 112 L. Ed. 2d 205 (1990). In such cases, it is properly submitted to the trier of fact. Id.; Bennett v. Span Industries, Inc., 628 S.W.2d 470, 474 (Tex.App.Texarkana 1981, writ ref'd n.r.e). See also Fort Bend County Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 395 (Tex.1991). Thus, the summary judgment evidence presents issues of fact of whether the incident at hand was foreseeable under the test described above in Garner, raising the possibility that appellees owed a duty as a matter of law to take steps to offer reasonable protection against such attacks.
On rehearing, appellees insist that we have abandoned our opinion of Castillo v. Sears, Roebuck & Co., 663 S.W.2d 60 (Tex. App.San Antonio 1983, writ ref'd n.r.e.), by examining the questions before us under the Garner test. We disagree.
In Castillo, this court spelled out the extent of a business invitor's duty in a business setting which fails to attract or provide a climate for crime.[1] We recognized, as other courts do, that because of the special relationship between an invitor and invitee, the invitor still owes a duty to offer some protection to his invitee, even when he has no reason to anticipate criminal acts, in situations in which he observes criminal activity occurring or about to occur.
The Castillo rule is consistent with Section 344 of the Restatement (Second) of Torts. Comment f helps illustrate the general language of Section 344 of the Restatement. It draws a distinction between premises which are prone to attract criminal activity and premises which are not. As to the former, a more stringent duty is imposed on the business invitor to ensure that the potential for criminal activity, either generally or at some particular time, will not result in harm to his invitees. As to the latter, the premises owner or occupier has a narrower duty to ensure that the invitee is protected when crime is occurring or about to occur.
*459 The situation described in Castillo fell under the latter category because it was the type of business establishmenta department store located inside a shopping mallthat did not attract or provide a climate for violent criminal activity. Castillo nevertheless does not dismiss the rule expressed in Garner, for it recognizes that some types of businesses may be required to provide security for its business invitees. 663 S.W.2d at 66.
Appellees continue to insist that it had no duty under the Castillo rule, which, unlike appellees' business, applies only to businesses not prone to attract crime. However, even under the Castillo analysis, we still reach the same conclusion that issues of fact exist and that rendering the summary judgment was improper. The evidence clearly raises a fact issue regarding whether the parking lot attendant knew or should have known that appellant, a lot customer, was victimized by a criminal attack on the lot. Appellant suggests that the lot attendant witnessed the assault and kidnapping or had reason to believe the assault and kidnapping were occurring or that consequently, subsequent criminal acts were about to occur. Although the attendant denies any knowledge, a fact issue has nevertheless been raised.
The evidence clearly establishes that the attendant did nothing to thwart or report the kidnapping and subsequent rape. It is inconceivable that a parking lot attendant would owe a duty to protect the automobiles parked on his lot, but owe no duty towards the safety of his customers when an attack takes place in his presence. If in fact the lot attendant knew or should have known about the attack, then a duty of care would have existed to guard against and report the ongoing crime in some way to thus avoid further injury or damage depending on the totality of the circumstances.
Finally, appellees insist that no issue of fact exists with respect to the duty under Ronk v. Parking Concepts of Texas, Inc. 711 S.W.2d at 414. Likewise, if we examine the summary judgment evidence in light of Ronk, we still reach the same result. The Ronk test states that a duty to protect invitees exists if the operator of an open-air parking lot "has reason to believe from what he has observed ... that [criminal] acts are occurring, or ... about to occur." As stated above, an issue of fact exists on whether the lot attendant knew or had reason to know that the attack was occurring and that subsequent criminal attacks were about to occur.
The point is granted and the judgment is reversed.
NOTES
[1] This court said:
There is no duty upon the owners or operators of a shopping center, individually or collectively, or upon merchants and shopkeepers generally, whose mode of operation of their premises does not attract or provide a climate for crime, to guard against the criminal acts of a third party, unless they know or have reason to know that acts are occurring or are about to occur on the premises that pose imminent probability of harm to an invitee.... [Emphasis added.]
Castillo, 663 S.W.2d at 66. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1608006/ | 773 F. Supp. 1082 (1991)
UNITED STATES of America, Plaintiff,
v.
Julius LORINCE, Defendant.
No. 88 C 3900.
United States District Court, N.D. Illinois, E.D.
May 13, 1991.
*1083 Fred Foreman, U.S. Atty., Anne L. Wallace, Asst., Chicago, Ill., for plaintiff.
Jeffrey Lawrence, Kelley, Kelley & Kelley, Schaumburg, Ill., for defendant.
MEMORANDUM OPINION AND ORDER
ILANA DIAMOND ROVNER, District Judge.
I. INTRODUCTION
In this action the United States seeks to enforce defendant Julius Lorince's guarantee of payment upon a promissory note. Pending before the Court are the parties' cross-motions for summary judgment. For the reasons set forth below, the Court denies the government's motion for summary judgment and grants Lorince's cross-motion for summary judgment on the ground that this action was filed beyond the statute of limitations.
II. FACTS[1]
On or about August 15, 1978, the Bremen Bank & Trust Company of Tinley Park, Illinois ("Bremen Bank") made a loan to Villa Marie Restaurant, Inc. ("Villa Marie"). (Amended Complaint ¶ 2; Answer ¶ 2.) The Small Business Administration ("SBA") previously had agreed to guarantee 85 percent of this loan on July 5, 1978. (Lorince 12(e) ¶ 1 and Ex. A.) In exchange for the loan, Villa Marie executed a promissory note (the "Note") dated August 1, 1978 in the amount of $375,000, payable to Bremen Bank. (Amended Complaint ¶ 2 and Ex. A; Answer ¶ 2; Lorince 12(e) ¶ 2 and Ex. B.) Peter Poulakis and Kyriakos Poulakis, the principals of Villa Marie, each guaranteed payment of the Note by signing an SBA guarantee form. (Lorince 12(e) ¶ 3 and Ex.'s C and D.)
On or about December 4, 1978, Chablis III, Inc. ("Chablis") purchased the assets of Villa Marie. (Lorince 12(e) ¶ 4.) In connection with the purchase, Bremen Bank required Chablis and its three principals Richard L. Hutchison, Lawrence Elkin, and Hazel Jackson to guarantee payment of the Note. (Id. and Group Ex. E.)[2]
On or about January 4, 1980, defendant Julius Lorince purchased the stock of Chablis. (Lorince 12(e) ¶ 5 and Ex. F.) On February 29, 1980, Lorince executed his own guaranty of the Note. (Lorince 12(e) ¶ 6 and Ex. G.) Lorince also executed a separate, undated agreement to purchase the stock in Chablis owned by Hutchison and Elkin, together with their spouses, Joan Carole Hutchison and Temple Elkin (collectively, the "sellers").[3] (Lorince 12(e) *1084 Ex. F.) Pursuant to this agreement, Lorince agreed to indemnify and hold harmless the sellers as to any liability arising out of the Note or the guaranties, including liability to the SBA, Bremen Bank, Hazel and James E. Jackson, or Kyriakos and Peter Poulakis. (Id. Ex. F ¶ 3.)
John W. Davis purchased the assets of Chablis from Lorince pursuant to an agreement dated July 26, 1980. (Lorince 12(e) ¶ 8 and Ex. I.) In connection with this purchase, Davis, individually and as the president of Leonardo al Dente Restaurant, Inc. ("Leonardo al Dente"), executed an agreement dated June 30, 1980 pursuant to which he and Leonardo al Dente "assume[d] and agree[d] to pay the indebtedness evidenced by the ... Note in accordance with the terms thereof, on which there [was] a present unpaid principal balance in the amount of approximately $333,800.00" (Lorince 12(e) ¶ 7 and Ex. H.) Pursuant to the July 26, 1980 purchase agreement which followed, Davis further agreed to assume the SBA loan made by Bremen Bank (referred to in the agreement as the "SBA loan"), and "to indemnify and save [Chablis] and Julius Lorince, Richard L. Hutchison, Lawrence Elkin and James Jackson[4], harmless from and against any and all liability, costs, damages, expenses, judgments, and claims, including reasonable attorneys' fees, which they or any of them may incur, suffer, or sustain by reason of [Davis'] default in the repayment of the SBA Loan." (Id. at 2.) Davis also agreed to cooperate with Chablis in attempting to have the prior individual guaranties removed from the Loan. (Id.) However, this removal was not made a condition of the purchase (see id.) and, as is evident from the pending suit against Lorince, it never came to pass.
Leonardo al Dente went out of business on or about August 11, 1981. (Lorince 12(e) ¶ 9.) Bremen Bank wrote to Lorince on August 18, 1981, notifying him that the restaurant had closed its doors and defaulted on the Note and demanding that Lorince perform on his personal guarantee. (Lorince 12(e) ¶ 9 and Ex. J.) The letter indicated that a principal balance of $329,788.17 remained outstanding on the Note. (Id. Ex. J.)
Lorince has not made any payment upon the Note. (Amended Complaint ¶ 7; Answer ¶ 7.) The records of Bremen Bank indicate that the last payment made upon the Note was received on August 21, 1981. (Lorince 12(e) ¶ 10 and Ex. K, Attachments.)
On November 19, 1981, the SBA notified Bremen Bank that it would purchase the 85 percent of the loan which it had guaranteed. (Lorince 12(e) ¶ 13 and Ex. M.) On April 14, 1982, the SBA wrote to Lorince informing him that the maturity of the Note had been accelerated, and that the entire balance of principal and interest was due and payable. (Lorince 12(e) ¶ 14 and Ex. N.) The letter also notified Lorince that the SBA would conduct a public auction to liquidate the collateral which secured the loan and apply the proceeds to the outstanding principal and accumulated interest on the Note. (Id.) On April 27, 1982, the equipment and fixtures of Leonardo al Dente were sold at auction, yielding net proceeds of $29,757.27. (Lorince 12(e) ¶ 15 and Ex. O.) J & H Auctioneers & Liquidators, Inc. ("J & H"), which conducted the auction, wrote a check to the SBA for the amount of the net proceeds on May 4, 1982. (Id. and Ex. P.) The SBA received the check on May 5, 1982. (Id.) The SBA received an additional check from J & H in the amount of $26.75 on May 13, 1982. (Lorince 12(e) ¶ 16.)[5]
*1085 The government filed this action on May 3, 1988[6], seeking to recover from Lorince an unpaid principal balance of $321,640.90 on the Note[7] plus interest which has accrued at the rate of 10 percent per annum and which, as of April 26, 1988, totalled $192,144.90. (Amended Complaint ¶ 6.) All other persons liable on the Note have discharged their obligations in bankruptcy. (Lorince 12(e) ¶ 17.)[8]
III. ANALYSIS
The single issue presented by the cross-motions for summary judgment is whether the government's lawsuit is timely.[9] The applicable statute of limitations is set forth in 28 U.S.C. § 2415(a), which, in relevant part provides:
... [E]very 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 ...: Provided, That in the event of later partial payment or written acknowledgment of debt, the right of action shall be deemed to accrue again at the time of each such payment or acknowledgment....
(Emphasis in original.) The parties do not dispute the fact that the government failed to file this suit within six years after its cause of action first accrued. Thus, the particular question presented in this case is whether there has been either a partial payment or written acknowledgement of debt sufficient to renew the limitations period under § 2415(a).
A. Initial Accrual of the Cause of Action
In evaluating the timeliness of this action, the Court must first determine when the limitations period commenced. According to the provisions of § 2415(a), the six-year limitations period begins to run when the cause of action first accrues. The general rule is that a cause of action upon a guarantee of a note accrues not upon a mere default in payment, but only when the creditor notifies the guarantor that the entire debt has been accelerated and demands payment of the entire balance. See, e.g., United States v. Boozer, 732 F. Supp. 20, 22 (N.D.N.Y.1990); United States v. Lowy, 703 F. Supp. 1040, 1043 (E.D.N.Y.1989); United States v. Frey, 708 F. Supp. 310, 312 (D.Kan.1988); United States v. Rollinson, 629 F. Supp. 581, 584 (D.D.C.1986), aff'd, 866 F.2d 1463 (D.C.Cir.), cert. denied, 493 U.S. 818, 110 S. Ct. 71, 107 L. Ed. 2d 37 (1989). See also United States v. Vanornum, 912 F.2d 1023, 1025 (8th Cir.1990).
Lorince asserts that the cause of action initially accrued on August 18, 1981, when Bremen Bank notified Lorince that the Note was in default and demanded that he perform on his guarantee. (Lorince Mem. at 4, 6.) The government does not dispute this contention (see Government Mem. at 2), and the Court finds it to be well taken. The August 18, 1981 letter from Bremen Bank does not expressly mention acceleration of the Note nor does it expressly demand payment of the full amount outstanding. (See Lorince 12(e) Ex. J.) *1086 Nonetheless, the letter does indicate that the loan was in default, lists the outstanding balance, and demands that Lorince honor his guaranty. (See id.) Accordingly, the letter was sufficient to mark the initial accrual of the government's cause of action and to trigger the six-year limitations period.
The SBA sent what might be characterized as a second demand letter to Lorince on April 14, 1982. (Lorince 12(e) ¶ 14 and Ex. N.) Unlike Bremen Bank's August 18, 1981 letter, the SBA's letter expressly states that the Note had been accelerated and demands payment of the amounts outstanding. (See id. Ex. N.) However, even if the Court were to assume that the cause of action on the Note did not accrue until the date of the SBA's letter, that assumption alone would not render this suit timely. If the limitations period had not commenced until April 14, 1982, it nonetheless would have expired on April 14, 1988, more than two weeks before the government filed this lawsuit. Therefore, unless a subsequent partial payment or written acknowledgement of debt caused the limitations period to run anew, the government's action must be dismissed as untimely.
B. Partial Payment
As set forth above, § 2415(a) provides that a partial payment of a debt owed to the United States renews the six-year limitations period. The government contends that the proceeds which the SBA received from the auction of Leonardo al Dente's equipment and fixtures on May 5, 1982 and May 13, 1982 constituted partial payments sufficient to renew the statutory limitations period under § 2415[10], because the equipment and fixtures were collateral and the SBA had a duty to apply the proceeds to the outstanding balance on the Note and thereby reduce the amount for which Lorince was liable. Lorince disagrees on two grounds.
Lorince argues first that the SBA's liquidation of the collateral and application of the proceeds to the outstanding balance on the Note does not constitute a "payment" within the meaning of § 2415, because although this reduced the amount owed by the debtor (i.e. Davis or Leonardo al Dente), it did not necessarily reduce the amount Lorince owed as guarantor. This argument is not persuasive. The basis for the argument lies in the guaranty itself, which provides:
The obligations of [Lorince] hereunder shall not be released, discharged, or in any way affected, nor shall [Lorince] have any rights or recourse against Lender, by reason of any action Lender may take or omit to take under the foregoing powers.
(Lorince 12(e) Ex. G.) Lorince argues that under the terms of this provision, the SBA's liquidation of collateral and use of the proceeds to pay down the outstanding balance on the Note would not reduce his own liability on the guaranty. However, this provision simply makes it clear that the powers which the lender enjoys under the guaranty are in fact elective, and that the guarantor cannot escape liability based upon which powers the lender chooses to exercise or not to exercise. See, e.g., Istituto Mobiliare Italiano, S.p.A. v. Motorola, Inc., 689 F. Supp. 812, 817 (N.D.Ill.1988) (Bua, J.) (secured creditor's failure to act against assets securing loan does not vitiate liability of unconditional guarantor); Rollinson, supra, 629 F.Supp. at 584-86 (seven deferrals of principal payments by bank and SBA did not discharge guarantors from liability). Indeed, Lorince does not contend that the SBA has failed to give him the benefit of the auction proceeds in *1087 assessing his liability, and the record in fact suggests the opposite.
Lorince's second argument holds greater merit. Lorince argues that even if the SBA's application of the auction proceeds did reduce the debt for which he is responsible under the guaranty, this use of the auction proceeds does not qualify as a payment which would renew the statutory limitations period under § 2415(a) because it reflects neither his own acknowledgment of the debt nor his willingness to discharge it.
The legislative history of § 2415 reflects a congressional intent to codify the common law principle that "[t]he obligation of a debt will continue where a debtor has acknowledged the debt and indicated his willingness to discharge the obligation." See S.Rep. No. 1328, 89th Cong., 2d Sess. 3 (1966), reprinted in 1966 U.S.Code Cong. & Admin.News 2502, 2504. See also United States v. Rollinson, supra, 866 F.2d at 1468; United States v. Blusal Meats, Inc., 817 F.2d 1007, 1010 (2d Cir.1987); F.D.I.C. v. Petersen, 770 F.2d 141, 144 (10th Cir. 1985) (dissenting opinion); United States v. Glen Falls Ins. Co., 546 F. Supp. 643, 645 (N.D.N.Y.1982). This principle rests in turn upon the premise that when a debtor has unequivocally acknowledged a preexisting debt and demonstrated an intention to honor it, she has effectively made a new promise to pay the debt and thereby triggered a new limitations period. See Rollinson, 866 F.2d at 1468; Glen Falls, 546 F.Supp. at 645-46.
In this context, not every partial payment of a debt is sufficient to start the statute of limitations running anew under § 2415; rather, the circumstances of the payment must reflect the intent of the debtor to honor the debt. As the court explained in Glen Falls:
[W]hether part payment takes a case out of the statute of limitations depends on the intention of the debtor. It must be shown that there was part payment of an admitted debt, made and accepted in circumstances where an unequivocal promise may be inferred to pay the remainder of the debt. Thus, it is the intent of the debtor when he made the payment, not the intention of the creditor when he received the payment, that is the crucial inquiry here.
546 F.Supp. at 645-46.[11]See also Joseph v. Carter, 382 Ill. 461, 467, 47 N.E.2d 471, 474-75 (1943) ("Payment resulting in law in a new promise which would take the case out of the Statute of Limitations is only that designedly made as a payment upon the note. There must be an actual and affirmative intention to make such payment before a promise can be inferred.") The requirement of conduct evincing the debtor's affirmative intent to honor the debt makes intrinsic sense, for when a debtor takes no action or acts in an ambiguous manner, it is implausible to construe her conduct as any sort of "promise" to act further. Moreover, given the significant benefit which accrues to the government when the debt is acknowledged namely, another six years in which to bring suit upon the debt it is only reasonable to insist that the circumstances of the acknowledgement be plain, such that a reasonable person would have notice of the consequences of her conduct. Accordingly, the auction proceeds which the SBA received on May 5 and May 13, 1982 and applied to the Note may be deemed "partial *1088 payments" sufficient to renew the limitations period under § 2415(a) only if they marked Lorince's acknowledgement of his obligation and his willingness to pay the outstanding balance of the Note. For the reasons set forth below, they do not.
As a practical matter, it is difficult to characterize use of the auction proceeds to reduce the outstanding balance on the Note as a payment for purposes of § 2415(a). The funds to effectuate that reduction came not from Lorince, but from the auctioneer which conducted the auction on the SBA's behalf. Moreover, prior to the auction, the SBA had already asserted control over the equipment and fixtures of Leonardo al Dente. Consequently, all the SBA accomplished through the auction was conversion of assets already in its possession from one form to another. Neither Lorince nor any other debtor or guarantor played any part in this transaction, and none of the funds used to reduce the outstanding balance on the Note came from their pockets. Accordingly, neither application of the auction proceeds nor the auction itself can properly be characterized as a partial payment for purposes of § 2415(a).
Indeed, at first blush, it would seem that to the extent there was any payment involved in the liquidation of the collateral, logically it would have occurred when the SBA first exerted ownership over the collateral prior to the auction. The record does not reflect when that event occurred. However, even if the Court were to assume that the SBA did not exercise control over the collateral until the date of the auction itself and use that date as the date of payment, it would be of no avail to the government. The auction took place on April 27, 1982, more than six years prior to the filing of this suit. Therefore, assuming that the limitations period began anew on the date of the auction, this suit would still be untimely.
Against this logic the government offers a more technical view of the transaction which would support its contention that no payment was made until the SBA actually received the auction proceeds. In the government's view, "[t]he proceeds of the sale of collateral are in substance funds owned by the debtor, whose right, title and interest to the property is being transferred pursuant to the Uniform Commercial Code ("UCC"), Section 9-504(4),[12] but subject to the secured party's paramount right to receive said funds for application against the loan balance." (Gov. Mem. at 2.) Thus, the government maintains that even once the SBA asserted control over the collateral it had not yet been "paid"; rather, until the SBA actually applied the auction proceeds to the outstanding balance of the Note, it merely enjoyed a lien upon the collateral. (See id. and Gov. Reply to Defendant's Supp. Mem. at 4.) See 70 C.J.S. Payment § 22 at 26 (1987) ("The mere taking of collateral security for a preexisting debt does not discharge the debt, nor do proceedings or attempts to secure payment by resort to the security where no payment results, or mere forbearance to enforce or collect the security, although payment thereby might have been obtained.") (footnotes omitted). The government further argues that because the debtor retained an ownership interest in the collateral until such time as the collateral was sold at auction and the proceeds were delivered to the SBA for application against the debt, the auctioneer should be viewed as the agent of the debtor rather than the SBA. Looking at the transaction from this perspective, the government concludes, receipt of the auction proceeds really was a payment on behalf of the debtor.
Assuming that the government's portrayal of the transaction is correct as a matter of law, the Court nonetheless concludes that transfer of the auction proceeds from the auctioneer to the SBA fails to *1089 qualify as a partial payment within the meaning of § 2415(a), because that payment does not evince Lorince's own acknowledgement and promise to repay the debt. The government itself characterizes the payment as one on behalf of the debtor rather than Lorince.[13] However, without more, a payment by or on behalf of the debtor does not renew the statute of limitations as to the guarantor. See Rollinson, 866 F.2d at 1468-69 (collecting authorities reflecting the general rule that partial payment of note by debtor does not toll statute of limitations against guarantor); Petersen, 770 F.2d at 143 (partial payment suspends statute of limitations only against party making such payment); Kallenbach v. Dickinson, 100 Ill. 427, 431 (1881) (payment by debtor does not arrest statute as against surety unless debtor is designated as surety's agent "not only for the purpose of liquidating the note by payment, but also for the purpose of doing what, in legal estimation, is necessary to make a new promise that will remove the bar of the statute"); Korf v. Fansler, 57 Ill.App.3d 440, 441-42, 15 Ill. Dec. 55, 56, 373 N.E.2d 325, 326 (2d Dist.1978) (payment by third party to creditor, which creditor applied to outstanding balance on promissory note, insufficient to indicate a promise to pay on the part of the debtor)[14]; Deaton v. Deaton, 109 Ill.App. 7, 10 (3d Dist.1903) (payment by principal does not extend statute as to guarantor). In this case, the record supplies no additional evidence which would permit attribution of the purported payment to Lorince. Although the record indicates that the SBA notified Lorince that the auction would take place, the record reflects no involvement by Lorince in either the conduct of the auction or disposition of the auction proceeds. Indeed, all that occurred on the two dates on which the government maintains the limitations period began to run anew was the SBA's receipt of checks from the auctioneer. To construe this receipt as action by Lorince reaffirming his obligations under the Note strains credulity and renders the premise underlying the partial payment provision of § 2415(a) an utter fiction. Thus, in Hoffman v. Sheahin, the court spurned the contention that a party's authority to liquidate collateral and apply the proceeds to an outstanding obligation should be considered the equivalent of authority to render a "voluntary" payment on the debtor's behalf:
We think this extends the "agency" beyond its intended scope and ignores its true nature as well as the basis upon which payment is held to give new life to the debt. The "agency" is not one solely on behalf of the debtor, if indeed it is truly one at all. It is rather a power coupled with an interest, irrevocable by the donor. In exercising it the donee acts on behalf of the creditor, whether himself or another, rather than for the debtor, though the latter has empowered him to do the act. The application therefore lacks the voluntary character which gives to the debtor's own act, or to that of an agent acting solely on his account, the character of waiver of immunity and acknowledgment that the debt retains vitality.
121 F.2d 861, 862 (D.C.Cir.1941) (citation omitted). Moreover, such an untenable construction would permit the government *1090 to manipulate the timing of auctions and the disposition of auction proceeds in order to renew the statutory limitations period and thereby undermine the interests served by the statute of limitations. See Zaks v. Elliott, 106 F.2d 425, 427 (4th Cir.1939).[15]
Indeed, the notion that the creditor's liquidation of collateral qualifies as a partial payment which renews the statute of limitations long has been rejected by courts applying state statutes of limitations comparable to § 2415. These courts have reasoned that although the creditor in this context typically disposes of the collateral pursuant to authority granted by the debtor, usually the authority was given years before when the loan was first made; and at the point when the creditor avails himself of that authority, the debtor no longer has any say in the matter. Thus, it is implausible to construe from the creditor's action a new promise on behalf of the debtor. As Professor Williston has explained:
It would be a more logical position to deny that in any case a renewed right arises at the time payment is collected by the creditor from collateral in his hands, unless at least the debtor at the time of the sale voluntarily authorizes the credit or subsequently voluntarily ratifies it. In any other case though it be granted that the debtor originally authorized the collection, a new promise may fairly be implied only at the time when the authority was given. The authority when once given could not subsequently be revoked by the debtor had he wished to do so, and there is nothing from which it can be inferred that at the time the collection was made the debtor still acknowledged the existence of the debt or was willing to pay it.
1 S. Williston, Williston on Contracts § 176 at 695-96 (3d ed.1957) (footnotes omitted). Accord Hoffman v. Sheahin, 121 F.2d at 862 ("[a] power of application given when the debt is incurred expresses intention as of that time, not as of some time within or following the period of limitations"). See also, e.g., Zaks v. Elliott, 106 F.2d at 427 ("[a]ccording to the great weight of authority, an application to the debt by the creditor of the proceeds from the sale of collateral will not [renew the statute of limitations] because the payment is not voluntary on the part of the debtor"); Easton v. Bigley, 28 Wash.2d 674, 183 P.2d 780, 783 (1947) ("where part payment of a note is made from money realized by the sale of collateral, a new promise is not to be implied as of the date of the sale of the collateral nor as of any date later than the transfer of the collateral to the creditor") (emphasis in original); Regan v. Williams, 185 Mo. 620, 84 S.W. 959, 962 (1905) (per curiam) (mortgagee's authority to sell mortgaged property and apply proceeds to debt "cannot fairly be construed as an authority to the mortgagee to make a new promise on behalf of mortgagor to pay the debt, so as to avoid the statute of limitations"); Wolford v. Cook, 71 Minn. 77, 73 N.W. 706, 706-07 (1898) (creditor's liquidation of collateral and application of proceeds to balance of promissory note did not renew statute of limitations, because it was merely the exercise of a right bestowed upon creditor at the time loan was made rather than a voluntary payment by debtor evincing a new promise to pay the *1091 outstanding balance).[16]Contrast First Nat. Bank of Oxford v. King, 164 N.C. 303, 80 S.E. 251, 252 (1913) (where debtor delivered collateral to bank, designated bank cashier as his agent in event of his default upon note, and agreed to remain liable for any deficiency once collateral was liquidated and the proceeds applied to note, limitations period was revived more than six years later when cashier liquidated the collateral). Here, although there is no dispute that Lorince authorized the SBA to realize upon the collateral securing the loan, it is also plain that he did so at the time he signed the guaranty in 1980, not when the auction was conducted in 1982. Moreover, although the SBA gave Lorince notice of the auction in its letter of November 19, 1981, there is no evidence that Lorince thereafter did anything more than yield to the SBA's chosen course of conduct. Compare Nunn v. W.T. McKnight & Bros., 79 Ark. 393, 96 S.W. 193, 194 (1906) (limitations period revived where debtor had been notified of sale and he assented to sale and application of proceeds to the debt), with Wolford v. Cook, 73 N.W. at 707 (limitations period not revived where debtor merely knew that plaintiff was exercising his contractual right to liquidate collateral and raised no objection). As the Minnesota Supreme Court explained in Wolford, mere acquiescence in the creditor's decision to employ his contractual right to liquidate collateral and apply the proceeds to the debt does not constitute a promise to satisfy the remaining deficiency:
The plaintiff's right to receive the proceeds of the collateral mortgages, and apply them in part payment of defendant's note, was acquired under and by virtue of the contract made at the time the collaterals were transferred to him. His subsequent exercise of that right was not a voluntary payment made by the defendant from which a promise to pay the residue can be inferred.... The fact that he made no objection when informed by plaintiff that he had applied the proceeds of these collaterals on his note could not take the case out of the statute. He had no reason to object, and, if he had done so, it would have been futile. Plaintiff had merely exercised a contract right which he acquired in 1889. Defendant's passive acquiescence in the exercise of that right constituted neither a voluntary payment as of that date, nor a new promise in writing to pay the balance of the debt.
Id. See also Shanks v. Louthan, 79 Kan. 363, 99 P. 613, 614 (1909) (mortgagor's knowledge that mortgagee in possession of property was applying net rental proceeds to balance of promissory note was not sufficient to renew statute of limitations). Thus, at the time the SBA received and applied the auction proceeds, Lorince cannot be said to have made any new promise to pay the Note which renewed the limitations period.
In arguing for a contrary result, the government relies in part upon United States v. Quinones, 36 B.R. 77 (D.P.R.1983). In that case, the district *1092 court held that a partial payment upon a note, made by the trustee of a bankrupt's estate pursuant to a court order, was sufficient to renew the statute of limitations as to the bankrupt's co-debtors under § 2415. Id. at 79. The court reasoned that because the other debtors admitted that the payment reduced the amount for which they were liable under the note, they had effectively agreed that it amounted to a partial payment on their behalf within the meaning of § 2415. "Defendants have in fact acknowledged the existence of their debt and have impliedly promised to pay the balance by accepting the reduction in their liability." Id.
This Court finds the reasoning of Quinones to be flawed. First, payments must be voluntary in order to reflect the debtor's acknowledgment of his obligation. Williston, § 175 at 692, citing Restatement of the Law of Contracts, § 86(2)(b). For this reason, other courts have rejected the notion that payments made by trustees in bankruptcy qualify as partial payments reviving the statute of limitations. See American Woolen Co. v. Samuelsohn, 226 N.Y. 61, 123 N.E. 154, 156 (1919); Simpson v. Tootle, Wheeler & Motter Mercantile Co., 42 Okl. 275, 141 P. 448, 449 (1914). In other words, although the debtor may benefit from the creditor's use of collateral proceeds to reduce her debt, the voluntary conduct on her part which is needed for that transaction to qualify as a partial payment under § 2415 is missing. The lack of a freely-rendered payment evincing the debtor's acknowledgment of the debt in these circumstances led the district court in United States on behalf of SBA v. Richardson, 1990 WL 27358 (E.D.Pa. March 12, 1990), to depart from Quinones and repudiate the notion that the debtor's mere acceptance of a reduction in the debt from application of the collateral proceeds reflects a "promise" by the debtor renewing the statute of limitations:
The SBA argues here that the forced windfall, voluntarily accepted by defendant through the foreclosure sale, specifically the reduction of his debt owed to the government, is a ... statute-reviving acknowledgment of his debt. They contend that although the foreclosure and consequent payment on the debt was involuntary, he did not have to accept credit for that payment on his debt. Thus when he voluntarily did so, he made the requisite acknowledgment.
Although one cannot help but admire counsel's ingenuity, this syllogism ultimately strikes me as specious. To proclaim this foreclosure payment voluntary is tantamount to proclaiming an eminent domain compensation in which the propriety of the sovereign's taking has been challenged, albeit unsuccessfully voluntary, because the condemnee ultimately accepted the compensation paid him as mandated by the takings clause of the Fifth Amendment of the United States Constitution.
Under the circumstances, I decline to extend Quinones beyond its facts, in the strictly bankruptcy context. Unlike the debtors there, defendant here did not voluntarily seek the protection of bankruptcy court or seek the ratable distribution of his estate among his creditors. The only voluntary act done by defendant with regard to the Williamstown property was completed in 1977 when he pledged it as collateral to secure the original loan.
Id. at *2.
The issue of voluntariness aside, it remains widely recognized that payment made on behalf of one debtor does not toll the statute of limitations as to her fellow debtors. See authorities cited at page 1089, supra. The Quinones court's reliance upon the fact that such a payment reduces the remaining liability of the other debtors is misplaced, for that reduction is a result of contract principles, not any new promise to pay the debt which the other debtors have made. As the Missouri Supreme Court observed in Regan v. Williams, supra:
[I]t is not the indorsement of a credit, but the payment that operates as a renewal of a promise and removes the bar of the statute of limitations. The party relying on a payment to stop the statute must not only establish that it was made, *1093 but made by the authority of the defendant.
84 S.W. at 961 (citations omitted) (emphasis added).[17] Accordingly, only if the other debtors have voluntarily consented to the partial payment does that payment revive the statute of limitations as to them. See Madison County Trust & Deposit Co. v. Smith, 233 A.D. 623, 254 N.Y.S. 548 (1931) (contractual authorization of agent to make payment upon note "on behalf" of the maker and indorsers sufficed to bind them for a new limitations period when payment was made); Mortgage Guarantee Co. v. Chotiner, 8 Cal. 2d 110, 64 P.2d 138, 140 (1936) (guarantors were bound by extensions of note despite their lack of contemporary knowledge and consent, where guaranty agreement provided that guarantors "authorize extensions without notice"). But see Kallenbach v. Dickinson, supra, 100 Ill. at 431 (agent must be authorized not only to make payment, but also to take action which renewed the statute of limitations).
The government also relies upon two Illinois cases in which courts concluded that payments administered by the creditor sufficed to toll the statute of limitations. Neither of these cases is applicable here, however. The first is Joseph v. Carter, supra, 382 Ill. 461, 47 N.E.2d 471. In Joseph, the appellant and his wife had jointly executed a note payable to a bank. When the note became past due, the bank appropriated funds from the private account of appellant's wife and applied them to the note. The question presented was whether this constituted a payment which tolled the statute of limitations as to appellant. The appellate court concluded that it was, for two principal reasons. First, in the appellate court's view, the terms of the note authorized the bank to apply the debtors' assets to the note. 314 Ill.App. 630, 638, 42 N.E.2d 321, 325 (1st Dist.1940). Second, there was evidence that the bank had asked appellant whether it might apply the balance of his wife's account to the note and that appellant had given his consent. Id. at 640, 42 N.E.2d at 326. The Illinois Supreme Court reversed. With respect to the terms of the note, the supreme court held that although the note authorized the bank to apply the debtors' payments upon other liabilities to the note, that authorization could not be construed so broadly as to permit the bank to apply credits belonging to one of the debtors to the note. Id. 382 Ill. at 465-66, 47 N.E.2d at 474. The court then considered whether or not the appellant's apparent consent to use of his wife's account tolled the statute of limitations. The court took note of the rule that "one joint maker of a note cannot, by payment thereon or any other act, stop the running of the Statute of Limitations against the other joint maker, unless it appears that the party making the payment was the agent for that purpose." Id. at 466, 47 N.E.2d at 474. Thus, the statute of limitations could be tolled as to the appellant only if the bank, in applying his wife's account to the note, had acted as his authorized agent in doing so. Id. at 466, 47 N.E.2d at 474; see also Sexton v. Brach, 124 Ill.App.3d 202, 206, 79 Ill. Dec. 686, 689, 464 N.E.2d 284, 287 (3d Dist.1984). Turning to the record, the court observed that despite the appellant's apparent consent to application of his wife's account, there was no evidence that the appellant had the authority to permit that application or that his wife had either consented to or ratified the use of her account, such that the bank might be deemed to have acted as the appellant's authorized agent. Id. 382 Ill. at 466-67, 47 N.E.2d at 474.
Payment, to toll the statute, must be made by the debtor and not by the creditor. Nothing in the conversations between the bank officers and the appellant, as shown by this record brings this case within the rule of authorized agency on his part. *1094 Id. at 467, 47 N.E.2d at 474. The court acknowledged the bank's generally recognized right to set off the deposits of its debtors against any amounts owed to it. Id. at 467, 47 N.E.2d at 474. However, the court stressed that the exercise of that right by itself was not enough to toll the statute:
Payment resulting in law in a new promise which would take the case out of the Statute of Limitations is only that designedly made as a payment upon the note. There must be an actual and affirmative intention to make such payment before a promise can be inferred.
Id. at 467, 47 N.E.2d at 474-75. Because the record revealed that the appellant had no authority to permit the bank's application of his wife's account, the court reaffirmed its conclusion that the bank had not acted as his agent in making that application. Id. at 467-68, 47 N.E.2d at 474-75. Consequently, the application did not toll the statute of limitations as to the appellant. Id. at 468, 47 N.E.2d at 475.
The government maintains that because the guaranty agreement in this case expressly authorized the SBA to liquidate the collateral and apply the proceeds to the balance of the Note, the SBA may be deemed to have acted as Lorince's agent when it exercised this authority. However, as set forth above, the mere fact that the SBA was authorized under the guaranty agreement to realize upon the collateral does not mean that its subsequent exercise of that power marked a renewed acknowledgment of and promise by Lorince to honor his debt. See authorities cited at pages 1090-91, supra.
The second Illinois case upon which the government relies is Niehaus v. Niehaus, 2 Ill.App.2d 434, 120 N.E.2d 66 (4th Dist. 1954). There, the court held that the statute of limitations upon a mortgage was tolled when the mortgagee, after the mortgagor's default, took possession of the mortgaged premises, collected the rents due, paid the taxes, and used the remaining income to reduce the outstanding balance of the mortgage. Id. at 443, 120 N.E.2d at 70. The government maintains that the SBA is in the same position as the mortgagee in Niehaus, and that the SBA's application of the proceeds realized upon the collateral should be deemed to have renewed the statutory limitations period. Yet, in Niehaus, the mortgagee took possession of the premises pursuant to an oral agreement with the mortgagor after the mortgagor fell into arrears on the mortgages. See id. at 438, 120 N.E.2d at 68. Thus, the mortgagee effectively acted as the mortgagor's agent in managing the property and making payments upon the mortgage. Contrast Shanks v. Louthan, supra, 99 P. at 614 (mortgagor's knowledge that mortgagee had taken possession of property, collected rents, and applied proceeds to mortgagor's outstanding obligation not sufficient to revive statute of limitations; payment must be made by debtor or by someone acting under his direction in order to qualify as partial payment which renews limitations period); Adams v. Holden, 111 Iowa 54, 82 N.W. 468, 471 (1900) (defendants' possession of land, collection of rents and profits, and application of proceeds to debt did not remove case from statute of limitations: "if part payment of the debt from rents and profits be assumed, this payment was involuntary, and does not establish recognition of the debt"). Moreover, the court in Niehaus held only that the payments in question tolled the statute as to the principal debtors; it did not consider whether such payments would have tolled the statute as to guarantors in the position of Lorince.
Finally, this is not a case in which Lorince may be deemed to have consented to renewal of the limitations period. In arguing that it is, the government relies upon United States v. Rollinson, supra, 866 F.2d 1463. In Rollinson, the court concluded that an agreement to postpone the maturity date of a promissory note triggered a new limitations period as to the guarantor under § 2415(a). That agreement was entered into by the debtor and the SBA after the debtor defaulted on the loan and the note was assigned to the SBA. At the outset, the court acknowledged that as a general rule, the principal debtor does *1095 not act as the guarantor's agent; consequently, partial payments and written acknowledgments made by the debtor do not normally toll or renew the limitations period as to the guarantor. 866 F.2d at 1468-69. However, the court also noted that the parties could alter this rule by agreement. Id. at 1469. Thus, where the guarantor has signed an agreement which authorizes the principal debtor to extend or renew the debt, a subsequent extension or renewal would trigger a new limitations period as to the guarantor. Id. The guarantor in Rollinson had signed such an agreement, authorizing the lender to modify any terms of the promissory note and to grant any extension or renewal in its unfettered discretion. Id. at 1471. Accordingly, the court held that the subsequent modification of the note was sufficient to continue the statute of limitations as to the guarantor. Id. at 1471-72.
The government maintains that this case is comparable to Rollinson, in that Lorince signed a guaranty which bestowed upon the lender complete discretion "to deal in any manner with the [l]iabilities and the collateral," including the authority "to realize upon the collateral or any part thereof...." (Amended Complaint Ex. B.) Although this language clearly authorized the SBA to dispose of the collateral, it did not permit the SBA to renew the statutory limitations period in doing so. The government's argument overlooks a key aspect of the Rollinson opinion. The Rollinson court found that the limitations period had been tolled not simply because the guarantor had authorized extensions or renewals of the promissory note, but because, pursuant to that authority, the debtor and the SBA had entered into a subsequent agreement, supported by consideration, effectuating the extension or renewal. Id. at 1470-71, citing FDIC v. Petersen, supra, 770 F.2d at 143. Indeed, the court noted that even when the guarantor has consented to future extension or renewal of the promissory note, a mere partial payment by the debtor will not affect the statute of limitations. Rollinson, 866 F.2d at 1470. Here, there was no subsequent change in the terms of the Note; the SBA simply exercised its contractual right to dispose of the collateral. Rollinson makes clear that to the extent the exercise of that power resulted in a partial payment upon the Note, it did not suffice to renew the limitations period as to Lorince. Id. at 1469, 1470. Accordingly, to the extent the SBA's receipt of the auction proceeds constituted a partial payment upon the Note, it was not a payment which renewed the limitations period as to Lorince. See id. at 1470-71; Petersen, 770 F.2d at 143.
For all of these reasons, the Court concludes that the SBA's receipt of the auction proceeds on May 4 and 5, 1982 did not constitute partial payments renewing the statute of limitations as against Lorince under § 2415.
C. Written Acknowledgment of Debt
The government also argues that on two occasions, Lorince acknowledged in writing his obligation under the guaranty. On May 4, 1982, August 5, 1982, and February 15, 1984, Lorince submitted "Offer in Compromise" forms to the SBA proposing to settle the SBA's claim for $1,000 and $5,000, respectively. (Supp. Aff. of Joseph J. Feldmann ¶¶ 7, 9, 10 and Ex.'s 6, 9, 10.)[18] With both the May 4, 1982 offer and the February 15, 1984 offer, Lorince submitted a "Financial Statement of Debtor" Form 770 supplied by the SBA. (Id. and Ex.'s 7, 11.)[19] Both statements appear to list the balance of the Note as a debt which Lorince owed to the SBA.[20] The government *1096 argues that when Lorince listed the Note as a debt on his financial statements, he acknowledged that debt in writing, thus causing the limitations period to run anew under § 2415. The Court disagrees.
An acknowledgment in writing is sufficient to renew the limitations period if it is unequivocal and reflects an intent on the part of the debtor (or in this case, the guarantor) to pay the debt. Glen Falls, 546 F.Supp. at 645. See also Blusal Meats, 817 F.2d at 1010; F.D.I.C. v. Cardona, 723 F.2d 132, 137-38 (1st Cir.1983). The government contends that Lorince's financial statements fall within the scope of this rule because they list the Note as a liability without qualification or reservation. The government relies upon the following widely-quoted passage from Professor Corbin's treatise:
The new promise to pay can be made in any form of expression, by word or act, that is capable of understanding and proof. It is very generally held that an acknowledgment that a sum of money is actually due, if made without any accompanying denial of willingness, justifies the inference of a promise to pay.
1A A. Corbin, Corbin on Contracts § 216 at 297 (1963) (footnote omitted). See, e.g., Rollinson, 866 F.2d at 1468; Blusal Meats, 817 F.2d at 1010; Cardona, 723 F.2d at 137. Corbin's statement of the law represents a somewhat relaxed approach to acknowledgment of a debt, in the sense that it does not require an affirmative demonstration of a willingness to pay the debt; rather, the mere absence of a denial will do. Compare Glen Falls, 546 F.Supp. at 545-46 (circumstances of partial payment must reflect "an unequivocal promise" to pay remainder), with Clarkson Co. v. Shaheen, 533 F. Supp. 905, 932 (S.D.N.Y.1982) (acknowledgment of debt renews limitation period "if it recognizes the debt and contains nothing inconsistent with an intention to pay it"). Nonetheless, even this more lenient standard requires some affirmative "acknowledgment that a sum of money is actually due." 1A Corbin § 216 at 297; see id. at 299 ("[f]or a mere acknowledgment of the debt to justify the implication of an unconditional promise to pay, the acknowledgment must be definite and unconditional"). See also Blusal Meats, 817 F.2d at 1010.
Lorince's financial statements do not supply such an affirmative acknowledgment. As evidence of Lorince's intent, these statements cannot be divorced from either their purpose or context. Although the forms appear to list the balance of the Note as a liability, the forms were plainly prepared and submitted for purposes of negotiating a settlement with the SBA.[21] Indeed, the statements themselves are SBA forms, and completion of these forms is specifically required by the SBA in order for a compromise offer to be considered "workable". (See reverse side of Offer in Compromise form, "Instructions for Presenting Offer" and "Elements of a Workable Compromise Offer" ¶ 3, Supp. Aff. of Joseph J. Feldmann Ex.'s 7, 9, *1097 10.)[22] In the context of settlement negotiations, the defendant's financial situation and, in particular, his ability to pay any judgment which might be entered, is always a prime consideration. No doubt this is why the SBA requires completion of the financial statements before considering an offer of compromise; like any plaintiff considering settlement, it must take into account all of its debtor's liabilities certain or contingent, disputed or undisputed in order to assess his ability to pay any prospective judgment which the SBA might obtain. And like any defendant proposing settlement, Lorince had an incentive to disclose as many liabilities as he could on the financial statement whatever he thought of their merits in order to convince the SBA that he lacked the resources to pay a substantial judgment and that accordingly the SBA should settle for some amount less than the full amount of his guaranty. In this context, it is no surprise that Lorince would list the outstanding balance of the Note as one of his liabilities. It was after all, the SBA's claim on the guaranty of the Note that Lorince was attempting to settle, and listing the amount outstanding on the Note among his other debts was consistent with attempting to persuade the SBA that given the number of demands made against him, it should let him off the hook for the relatively paltry sums he offered in settlement. Perhaps when Lorince completed the financial statement forms he believed he was liable to the SBA for the full amount of the guaranty. Perhaps he thought the SBA's claim was meritless but hoped to avoid litigation and persuade the SBA to settle for the nuisance value of a future suit. Whatever Lorince's state of mind, to construe from his inclusion of the Note on the financial statements an unequivocal acknowledgement of liability and a promise to pay the SBA would ignore the context and motives which color those statements.
The Second Circuit reached a similar conclusion in United States v. Blusal Meats, supra, 817 F.2d 1007. In that case, a meat wholesaler (Blusal) and its principals had been criminally charged with conspiring to defraud the United States by obtaining food stamps from unauthorized sources and redeeming them under the false representation that they had been received from the sale of food to low-income individuals. The defendants pled guilty to the charges. In their pleas, defendants estimated that they had netted from $35,000 to $40,000 from their scheme, and counsel for one of the defendants reiterated that approximation at sentencing. Years later, the government filed a civil suit against Blusal seeking, inter alia, to recover the $40,000 which Blusal had purportedly gained from the criminal activity under the theory of unjust enrichment. The district court dismissed the claim as untimely. On appeal, the government argued that the statements which defendants and their counsel had made in connection with the criminal plea and sentencing hearings constituted an acknowledgement of their debt to the government sufficient to renew the statutory limitations period under § 2415(a). The court of appeals disagreed:
The statements of [defendants] and their attorneys, relied on by the Government, do not satisfy the requirement that Blusal acknowledge[d] that it owed the claimed money to the United States. Made in the context of plea and sentencing proceedings, the defendants' admissions of guilt and estimates of illegal gains were clearly intended to downplay the amount of damages done by their crimes and to show their contrition in order to obtain lenient sentences. Nothing in the record or in the cited remarks supports the inference that the defendants' admission of wrongfully profiting by approximately $40,000 entailed an acknowledgment of indebtedness to the victim *1098 for that amount. The sentencing judge might well have considered restitution in meting out punishment; however, the statements, without more, are not acknowledgements of debt within the meaning of the common law and section 2415(a).
Id. at 1010.
The fact that Lorince included the balance of the Note on the financial summaries he submitted to the SBA is arguably more of an acknowledgement of the debt than the statements at issue in Blusal Meats. Nonetheless, the Second Circuit's rationale is equally germane here. Lorince prepared the financial summaries in question for purposes of negotiating a settlement with the SBA. Viewed in that light, Lorince's portrayal of the Note as one of his obligations is subject to varying interpretations, as set forth above. To say that Lorince acknowledged the debt is plausible; but to say that he acknowledged it unequivocally and effectively "promised" to make good upon his obligation is to take his actions out of context and to ignore the realities of settlement negotiations, in which it is common for a party to acknowledge the merits of his opponent's case in an effort to hammer out an amicable resolution of the controversy.
As the government points out, courts have occasionally relied upon the defendant's financial statements as evidence of an acknowledgement of the debt for purposes of § 2415(a). Thus, in F.D.I.C. v. Cardona, supra, 723 F.2d 132, the court concluded that an executor's listing of three outstanding demand notes on an estate tax return constituted sufficient acknowledgment of those debts to renew the statute of limitations:
Although it is in the interest of the estate for the executor to list on the tax return all of the amounts that the estate may reasonably claim as liabilities, a scrupulous executor would not list any amounts that the estate intended not to pay. We may fairly draw the inference that the estate intended to pay the Cardona debts listed on the tax return; any other interpretation would leave the estate's executor vulnerable to a charge of tax evasion.
Id. at 137-38. Similarly, in Clarkson Co. v. Shaheen, supra, 533 F.Supp. at 932, the court concluded that when a company had referred to a "longstanding note" in its annual report and carried the balance of the note on its books for several years, it had recognized the "continuing validity of the obligation" and thereby renewed the statutory limitations period. See also F.D.I.C. v. Consolidated Mortgage and Finance Corp., 691 F. Supp. 557, 564 (D.P.R.1988) (listing of debt in annual report filed with governmental office interrupted statute of limitations). In these cases, the debt was listed in financial summaries which were in effect "statements to the world" of the debtor's obligations. See Cardona, 723 F.2d at 137. In this setting, the debtors had the incentive, indeed the obligation, to portray their debts accurately and to exclude or disclaim debts which they did not intend to honor or which they believed were invalid. It was therefore fair to assume that by including their debts on their financial summaries, the debtors had demonstrated their intent to honor the debt. Here, in contrast, the meaning of Lorince's inclusion of the Note on the financial summaries is clouded by the fact that the summaries were prepared for and submitted to the SBA solely for purposes of a settlement proposal. Accordingly, the concrete evidence of the debtor's intent to make good upon his obligation which was present in Cardona and Clarkson is missing in this case. Cf. In re Povill, 105 F.2d 157, 160 (2d Cir.1939) (although listing of claim in bankrupt's schedules constituted an acknowledgment of the debt in a literal sense, it did not demonstrate the bankrupt's intention to pay the debt in fact, it demonstrated just the opposite and therefore did not interrupt the running of the statute of limitations); Miwon, U.S.A., Inc. v. Crawford, 629 F. Supp. 153, 156-57 (S.D.N.Y.1985) (defendant's statements acknowledging debt in deposition and trial testimony in prior litigation did not toll statute of limitations, as they were compulsory statements given under oath reflecting defendant's intent to tell the truth, not *1099 intent to pay the debt). Had Lorince prepared and used the financial statements for other purposes, it might be appropriate to construe them as acknowledgments of an ongoing obligation. Because Lorince actually prepared them solely for purposes of a settlement offer, however, the statements lack the circumstantial indicia of either an admission of or an intent to honor the debt.
Indeed, the contents of the documents which accompanied the financial statements in question suggest that Lorince did not intend to honor his debt to the SBA. On the SBA Form 1150 "Offer in Compromise" which Lorince, Hutchison, and Elkin submitted on May 4, 1982, they wrote the following as the reasons why the SBA should accept their offer:
Each of us spent our available cash and assets on the restaurant. Each of us borrowed heavily to the end of our credit limit and we are each paying back large loans representing money lost in the restaurant.
(Supp. Aff. of Joseph J. Feldmann Ex. 6.) The evident tenor of these remarks is that neither Lorince nor his fellow debtors could afford to pay anything on the Note beyond the $1,000 which they each were offering in settlement. On the Form 1150s which Lorince submitted on his own behalf on August 5, 1982 and February 15, 1984, this sentiment is expressed even more firmly:
Due to the continued decline in the steel and steel related industry, upon which my ability to pay is dependent, I cannot see the near possibility of my submitting a greater amount than above.[23]
(Id. Ex.'s 9, 10.) These remarks make it all the more clear that the financial statements upon which the government relies were submitted in an attempt to avoid suit and settle the SBA's claim, and in that light cannot be characterized as a renewed promise to make good upon the guaranty.
The Court recognizes that its holding is contrary to that of the court in United States v. Hosko, No. 88-0088 (M.D.Pa. Feb. 28, 1989), aff'd without published opinion, No. 89-5267, 884 F.2d 1386 (3d Cir. August 4, 1989). In that case, the SBA wrote to the guarantors of a promissory note in default, requesting them to submit financial statements and tax returns so that an orderly settlement of the outstanding debt could be arranged. The guarantors complied with the SBA's request, providing it with financial statements which included the outstanding balance of the promissory note among their listed liabilities. A cover letter accompanying the statements indicated that the guarantors had only a limited income, but were hopeful that they could reach a settlement with the SBA. (See D.Ct.Op. at 6-7; App.Ct.Op. at 2-3.) Relying upon Cardona, supra, the district court concluded that the inclusion of the note among the liabilities listed on the guarantors' financial statement "constituted an effective acknowledgement of the debt" sufficient to renew the statute of limitations under § 2415(a). (D.Ct.Op. at 7-8.) The court of appeals agreed, rejecting the guarantors' contention that their reply to the SBA was a mere courtesy and that they actually believed that they owed the SBA nothing on the note:
Mr. Hosko's subjective feeling that he did not owe any money, a feeling uncommunicated to SBA in his June 28, 1982 letter, is insufficient to create a genuine issue of material fact and so avoid summary judgment in the face of the plain, objective acknowledgment in the financial statement that he owed $225,000. "It is very generally held that an acknowledgment that a sum of money is actually due, if made without any accompanying denial of willingness, justifies the inference of a promise to pay." 1A A. Corbin, Corbin on Contracts § 216 (1963); see Federal Deposit Ins. Corp. v. Cardona, 723 F.2d 132, 137 (1st Cir. 1983). The financial statement plainly acknowledged indebtedness to SBA. The Hoskos' uncommunicated feeling that others were responsible does not negate acknowledgment.
*1100 (App.Ct.Op. at 5) (footnote omitted).[24]
This Court declines to follow Hosko for the reasons it has set forth above. Although Lorince might be said to have acknowledged the Note to some degree by including it among his liabilities on the financial statements which he submitted to the SBA, given the circumstances of those statements, it cannot fairly be said that he unequivocally acknowledged the debt and manifested his intention to honor it. The financial statements were prepared solely for purposes of the settlement offer, and indeed were required by the SBA for that purpose. These were not statements prepared in the normal course of business, and upon which others might rely for purposes other than the settlement proposal. Thus, in contrast to the tax returns upon which the court relied in Cardona, the financial statements in question do not reflect an unequivocal affirmation of the debt. Lorince's financial statements must be viewed as an inseparable part of his proposal to settle the SBA's claim against him. To treat these statements as a decisive confession of liability imports meaning which the context of the statements does not reasonably permit. Indeed, the statement accompanying Lorince's individual settlement offers on August 5, 1982 and February 15, 1984 that he could not "see the near possibility of ... submitting a greater amount" than what he proposed in settlement[25] a disclaimer far stronger than the guarantors' statement in Hosko belies any notion that the financial statements manifested Lorince's intention to honor his debt to the SBA.[26]
Finally, the Court notes that using the financial statements which Lorince submitted to the SBA in the manner the government suggests would imbue settlement negotiations with the types of binding consequences that courts traditionally have been reluctant to recognize. Federal Rule of Evidence 408 reflects the longstanding tradition of refusing to rely upon statements made in the course of settlement discussions as evidence of a party's liability. In relevant part, Rule 408 provides:
Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible....
Among the principal concerns which support this rule is the fear that if settlement offers or statements made in the course of settlement negotiations were accepted as admissions of liability on the part of the individual making the offer or statement, parties would shy away from attempts to resolve their disputes. See, e.g., Perzinski v. Chevron Chemical Co., 503 F.2d 654, 658 (7th Cir.1974). Lorince has not invoked Rule 408 in responding to the government, *1101 and the admissibility of the financial summaries upon which the government relies is therefore not in question. Nonetheless, the policy concerns which underlie Rule 408 Rule bespeak the problems of attaching binding significance to these summaries for purposes of the statute of limitations.
Courts have previously rebuffed attempts to use documents prepared in connection with settlement offers as admissions of liability. For example, in Ramada Development Co. v. Rauch, 644 F.2d 1097 (5th Cir.1981), a development company sued the owner of a motel to recover the amounts owed for construction of the motel. The motel owner counterclaimed, asserting that the developer had not fully performed on the construction contract and had been negligent in the planning and construction of the motel. At trial, the owner sought to introduce into evidence a report prepared for the developer by an architect concerning the flaws which the owner had cited in the construction of the motel. The owner argued that the report supported his arguments as to most of the defects. However, the trial court excluded the report under Rule 408, finding that the developer had commissioned the report as a basis for settlement negotiations which were ultimately unsuccessful. The court of appeals affirmed, agreeing that the report "appears to fit squarely within the exclusionary scope of rule 408." Id. at 1107. Accord Blu-J, Inc. v. Kemper C.P.A. Group, 916 F.2d 637, 642 (11th Cir. 1990) (independent evaluation prepared for purpose of exploring settlement "falls squarely within the Ramada Dev. Co. holding and the proscription of rule 408").
Relying in part upon the Fifth Circuit's opinion in Ramada Development, the Seventh Circuit held in Kritikos v. Palmer Johnson, Inc., 821 F.2d 418, 422-23 (7th Cir.1987), that the trial court had erred in relying upon letters which the plaintiff's representative had written in connection with settlement efforts as evidence of the plaintiff's fault in a breach of contract action. These letters reflected the opinion that plaintiff himself was partly responsible for the delays which he had characterized as a breach of contract and that plaintiff's case would be difficult to argue. The court noted that the purpose of Rule 408 is to encourage settlements by allaying fears that the statements which a party makes in the course of settlement negotiations might later be used against him at trial as an acknowledgement of liability. Id. at 423. Because the letters at issue were written for purposes of exploring settlement, the Seventh Circuit concluded that it was improper for the trial court to rely upon them as substantive evidence of liability. Id. See also Prudential Ins. Co. of America v. Curt Bullock Builders, Inc., 626 F. Supp. 159, 164 (N.D.Ill.1985) (Moran, J.) ("the admission of any statement made during, or any document prepared for, any kind of conciliation effort at least raises a Rule 408 issue").
The fact that the government is not relying upon the financial statements which Lorince submitted to the SBA for purposes of his settlement offer on the ultimate question of liability does not diminish the concerns reflected in Rule 408. Although the government is not attempting to cast Lorince's financial statements as an admission on the merits of this suit per se, it is attempting to cast the inclusion as something which is equally important an acknowledgement of and promise to make good upon the guaranty sufficient to trigger a new limitations period and render this suit timely. The government relies upon those statements as evidence of Lorince's "promise" to repay his debt, a promise which would enable the government to get past the threshold statute of limitations problem.
A comparable attempt to use a settlement-related statement was rejected in Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506 (2d Cir.1989). In that case, the plaintiffs had sued the defendant for breach of contract. The defendant moved for summary judgment, contending that the plaintiffs' claims were not enforceable under the statute of frauds, because there was no written memorandum evidencing any agreement between the parties. In response, the plaintiffs relied upon a letter and draft agreement which the *1102 defendant's officer had previously mailed to them in an effort to settle the dispute. The trial court disregarded these documents and entered summary judgment in favor of the defendants, holding that the documents constituted inadmissible evidence of a settlement offer. The court of appeals affirmed, rejecting the plaintiffs' contention that the documents were admissible for the limited purpose of satisfying the statute of frauds:
Appellants urge that they sought to introduce the documents only in order to meet the statute of frauds. However, such a proffer presents two conflicting goals: proving the existence of a contract in compliance with the statute of frauds and overcoming the strictures of Rule 408. For appellants, satisfying the statute of frauds was the necessary first step to proving, ultimately, the validity of their claims of breach of contract. Since the two questions were so closely intertwined, admission of the documents even initially for the purpose of meeting the statute of frauds requirement would, under the circumstances of this case, militate against the public policy considerations which favor settlement negotiations and which underlie Rule 408.
Id. at 510 (citation omitted).
As in Trebor Sportswear, use of the financial summaries Lorince submitted to the SBA in connection with his settlement offers as a purported acknowledgement of the debt would be improper. Although the government relies upon these statements solely for purposes of satisfying the statute of limitations, even that use would effectively penalize Lorince for a statement made in connection with a settlement proposal and thus undermine the policy embodied in Fed.R.Ev. 408.
For these reasons, the Court finds that the financial statements submitted by Lorince on May 4, 1982 and February 15, 1984 were not written acknowledgments of his obligations under the guaranty sufficient to renew the six-year limitations period.
IV. CONCLUSION
For the reasons set forth above, the government's motion for summary judgment is denied and Lorince's cross-motion for summary judgment is granted, the Court finding that this action is barred by the statute of limitations.
NOTES
[1] Lorince has properly submitted with his motion for summary judgment a statement of material facts as to which he contends there is no dispute, as required by local General Rule 12(e) (now superseded by General Rule 12(m)). The government has not submitted such a statement in support of its own motion for summary judgment, nor has it responded to Lorince's 12(e) statement as required by Rule 12(f) (now superseded by General Rule 12(n)). As this Court has noted, "[t]hese statements are critical to allow the court to focus on the relevant factual and legal issues without having to pore through exhibits and argumentative factual narratives in an attempt to discern which facts are agreed upon." Herhold v. City of Chicago, 723 F. Supp. 20, 22 n. 1 (N.D.Ill.1989). In view of the government's failure to comply with Local Rule 12, the Court has accepted as true all assertions of fact contained in Lorince's 12(e) statement. See id. However, where appropriate, the Court has cited to certain exhibits which the government has submitted in support of its motion for summary judgment. In any event, neither party has contended that there is any question of material fact which precludes entry of summary judgment.
[2] Each of these individuals, as well as Lorince (who subsequently signed his own guaranty on the Note as described below), agreed to become an "additional guarantor" of the Note. (See Lorince 12(e) Group Ex.'s E, G.) (Emphasis supplied.) Thus, it does not appear that the execution of guaranty agreements with Bremen Bank by these individuals absolved the prior guarantors of liability to Bremen Bank.
[3] It is unclear from the record what Hazel Jackson's status was as of the date of this stock purchase. The purchase agreement makes reference to her (as well as James E. Jackson), but not as a seller, and she was not a signatory to the agreement. It appears that she previously may have sold her shares in Chablis. (See Lorince 12(e) Ex. F ¶ 3.)
[4] Presumably, James Jackson was related in some way to Hazel Jackson; however, the record does not make this clear.
[5] The record does not reflect the manner in which these proceeds were applied. If the SBA acted in accordance with its April 14, 1982 letter to Lorince, the proceeds presumably were applied first to the accumulated interest and then to the principal.
[6] The government's original complaint named both Hutchison and Lorince as defendants; however, on May 12, 1988, the government filed an amended complaint against Lorince alone.
[7] This amount is slightly smaller than the balance of $329,788.17 recited in Bremen Bank's August 18, 1981 letter to Lorince. The record does not reflect whether the reduction is accounted for by application of the proceeds from the April 27, 1982 auction, payment by another guarantor, or something else.
[8] Lorince has not named these individuals, but presumably they include each of the other people who executed guaranties, namely Peter Poulakis, Kyriakos Poulakis, Richard L. Hutchison, Lawrence Elkin, and Hazel Jackson. It is unclear from the record whether Davis ever executed a guaranty pursuant to his assumption of the Note in connection with his purchase of the assets of Chablis in 1980.
[9] The government initially moved for summary judgment on the merits of its claim against Lorince. However, Lorince's subsequent cross-motion for summary judgment raised the issue of the timeliness of this suit, and the parties devoted the remainder of their briefing to that issue alone. Because, as set forth below, the Court concludes that this suit is barred by the statute of limitations, the Court does not reach the merits of the government's claim.
[10] The records of Bremen Bank reveal that it received a payment of $255 on the Note on August 21, 1981. The parties have assumed for the sake of argument that this payment constituted a partial payment within the meaning of 28 U.S.C. § 2415(a). (See Lorince Mem. at 6.) Thus, assuming that the limitations period initially began to run when Bremen Bank sent its August 18, 1981 letter to Lorince, the limitations began to run anew three days later when the Bank received this partial payment. However, as with the SBA's April 14, 1982 letter, the additional time which this payment bestowed upon the government is inconsequential, for if August 21, 1981 were used as the starting date, the limitations period would be deemed to have expired on August 21, 1987, long before the government actually filed suit.
[11] In Glen Falls, a building contractor defaulted on its obligations under a contract with the government, and the government sought to recover from the defendant, which had executed a performance bond as surety for the contractor. The government filed suit more than six years after the default occurred, but argued that the limitations period had been renewed three years after the default when the defendant sent a check to the government for an amount which was less than one-half of the performance bond. The court rejected this argument, relying upon a letter which had accompanied this check. 546 F.Supp. at 646. The letter asserted that the check "constitute[d] [the surety's] full obligation to the Government." See id. at 644. In the court's view, this letter precluded any inference that the surety intended the check to be a partial payment and in fact reflected the opposite intent, i.e., that the debt be eradicated entirely. Id. at 646. Thus, however the government viewed the payment, the surety itself had made no new promise to honor the remaining debt which could trigger a new limitations period. Id. Accordingly, the court dismissed the suit as untimely. Id.
[12] Section 9-504(4) of the Uniform Commercial Code provides that when a secured party disposes of collateral after a default upon an obligation, the disposition transfers to a purchaser for value all of the debtor's rights in the collateral and discharges the security interest. See Ill.Rev.Stat. ch. 26, ¶ 9-504(4) (1989). Based upon this provision, the government maintains that until the sale of the collateral, the debtor maintains an ownership interest in it; thus, even if the secured party has taken possession of the collateral and arranged for its disposition, the secured party has not yet been "paid" by the debtor.
[13] Thus, the government observes that the SBA looked to Lorince for payment of the deficiency on the Note only after the proceeds of the auction were applied to the Note. (See Gov. Mem. at 3.)
[14] In Korf, the court found two additional facts inadequate to reflect a promise on the part of the debtor to honor the remainder of his debt. First, in attempting to collect upon the debt, the plaintiff had sent defendant a letter reminding him of the debt and recounting a conversation between them concerning the debt, and the plaintiff argued that the defendant's silence in response to this letter constituted an acknowledgement of his obligation. However, the court rejected the notion that the defendant's silence reflected the requisite "actual and affirmative intent" to make good upon the debt. 57 Ill. App.3d at 442, 15 Ill.Dec. at 56, 373 N.E.2d at 326. Second, in the course of a hearing before the trial court, the defendant had been asked whether he still owed the balance on the note, and the defendant had responded, "I suppose so." Nonetheless, the court concluded that this statement was not sufficiently indicative of either an intent to pay the balance of the note or an acknowledgement of his obligation to do so. Id. at 442, 15 Ill.Dec. at 56, 373 N.E.2d at 326.
[15] The government argues that its freedom to renew the statute of limitations by controlling the timing of collateral sales could be constrained by the judicial imposition of a duty to act with reasonable dispatch. (Gov. Reply to Defendant's Supp. Mem. at 5.) See Nyhus v. Travel Management Corp., 466 F.2d 440, 452-53 (D.C.Cir.1972) (where statute of limitations does not commence until party makes a demand, "a party is not at liberty to stave off operation of the statute inordinately by failing to make demand; when statutorily unstipulated, the time for demand is ordinarily a reasonable time"); accord United States v. Vanornum, supra, 912 F.2d at 1027; Rollinson, 866 F.2d at 1466. But see United States v. Boozer, supra, 732 F.Supp. at 23 n. 4, and United States on behalf of SBA v. LaFrance, 728 F. Supp. 1116, 1121-22 (D.Del. 1990), calling into question whether defenses of laches and equitable estoppel may be asserted against the United States. However, even assuming that the SBA is constrained to dispose of collateral within a reasonable period of time, the fact that it is the SBA which controls the disposition renders it implausible to construe that disposition as evidence of the guarantor's intent to honor the debt.
[16] Certain cases have emphasized the fact that the debtor was unaware that the collateral was being liquidated and applied to the debt in finding the lack of a voluntary payment by the debtor in these circumstances. See, e.g., Regan v. Williams, 84 S.W. at 962; Wanamaker & Brown v. Plank, 117 Ill.App. 327, 331 (1st Dist. 1904). Yet, as the court explained in Wolford v. Cook, the debtor's lack of knowledge is not dispositive:
Some of the cases may be misleading, for the reason that they seem to lay some stress on the fact that the debtor never knew of, and consequently never assented to, the application by the creditor of the proceeds of the collaterals. If the debtor had any option in the matter, or any power to object effectively to the application, there would be some force in the suggestion that his assent to it amounted to a voluntary payment by him as of that date. But this cannot be so where the creditor is merely exercising an absolute legal right under the original contract.
73 N.W. at 707. The government has not contended here that Lorince had any authority to forestall or control liquidation of the collateral and disposition of the proceeds. Indeed, the face of the guaranty agreement gives the SBA unfettered discretion in that regard. (Lorince 12(e) Ex. G.) Thus, the fact that the SBA notified Lorince that the collateral would be auctioned and the proceeds used to reduce the principal and interest outstanding on the Note is immaterial in determining whether the transaction constituted a voluntary payment by Lorince.
[17] The court in Regan went on to note:
At the time of the sale the plaintiff had no interest in the property. He had no right to the proceeds of the sale. The money which, it is claimed, was applied in part payment of the note, was not his money. It would be applied by law to the extinguishment pro tanto of his debt, but the application was not under his control and involved no action of his mind.
84 S.W. at 962.
[18] Lorince submitted the May 4, 1982 offer jointly with Hutchison and Elkin, who had executed guaranties in connection with the 1978 purchase of Villa Marie by Chablis. The offers of August 5, 1982 and February 15, 1984 were submitted by Lorince alone.
[19] Although Lorince submitted an offer on August 5, 1982, it is unclear whether he submitted a separate financial statement with this offer. None appears in the record.
[20] In certain respects, the financial statements are ambiguous. The May 4, 1982 Offer in Compromise lists an outstanding balance on the Note of $340,000. (Supp. Aff. of Joseph J. Feldmann Ex. 6.) The financial statement accompanying this offer lists two liabilities to the SBA one in the amount of $360,000, and another entitled "Contingent Liabilities, SBA guaranteed loan" in the amount of $300,000. (Id. Ex. 7.) Presumably, the Note balance is included in the first amount. The February 15, 1984 Offer in Compromise lists an outstanding balance on the Note of $379,868.98. (Id. Ex. 10.) The accompanying financial statement lists a single liability to the SBA in the amount of $380,000. (Id. Ex. 11.) Presumably, the balance was simply rounded off in this instance. In any event, the government argues that in both instances, Lorince listed the amount outstanding on the Note without characterizing the debt as being contingent or contested. Lorince has not disputed this assertion.
[21] A settlement offer by itself is not sufficient to renew the statute of limitations. As Corbin has explained:
An offer to pay a statement amount in compromise and settlement of a disputed claim is not an acknowledgment of indebtedness, even as to the amount offered; but it is a promise that is conditional on acceptance as settlement in full. This condition must be performed in order to make the promise itself enforceable. If it is accepted by the creditor, there is a sufficient consideration for the debtor's promise; there is a valid and enforceable accord executory. Payment as offered operates as complete satisfaction. If the offer is not accepted as made, the antecedent claim, barred or not barred, is not affected.
1A Corbin § 216 at 300-01 (footnotes omitted).
[22] The text of the SBA Form 1150 "Offer in Compromise" makes it clear that the form is to be used for purposes of settlement:
This offer is submitted by the undersigned to compromise a claim of the Small Business Administration resulting from a loan to the above borrower which is now fully due and payable and for which I (we) am alleged to be liable.
(Supp. Aff. of Joseph J. Feldmann Ex.'s 7, 9, 10 at Box No. 1.)
[23] Lorince proposed to pay the SBA $5,000 in the offers he submitted on August 5, 1982 and February 15, 1984. (See Supp. Aff. of Joseph J. Feldmann Ex.'s 9, 10.)
[24] Although the fact that the Third Circuit's opinion is unpublished suggests that the panel which decided the case believed the opinion lacked "precedential or institutional value," see 3d Cir. Rules, App. 1 ("Internal Operating Procedures") ch. V § F(2), it does not appear that the Third Circuit prohibits citation to its unpublished opinions. Compare 7th Cir. Rule 53(b)(2)(iv).
[25] The Court interprets Lorince's statement that he could not see the "near possibility" of settling for a greater sum to mean that he could not envision a remote chance of paying more money to the SBA, even at a later date. To read into the statement a suggestion that Lorince might be able to offer a further or greater payment at a later date would unduly strain Lorince's words, for nothing in his statement as a whole holds out any hope of paying the SBA more than the small sum he offered in 1982 and again in 1984.
[26] Compare Harbaugh v. Herr, 131 Kan. 235, 289 P. 957 (1930) (debtor's letter to creditor stating "I am not able to raise the money" to pay the debt at present, but "I hope to be able to do something [next year]" and "I expect to complete the payment as soon as I can" sufficed as a written acknowledgment renewing statute of limitations), with Berghuis v. Burges, 205 Minn. 151, 285 N.W. 464 (1939) (debtor's letter to creditor stating "I am sorry that I can not clean up this obligation, but I simply can not at this time" and making no pledge of payment in the future could not be construed as a promise to pay the debt which renewed the limitations period). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1712754/ | 487 S.W.2d 729 (1972)
Rafael GUERRERO, Appellant,
v.
The STATE of Texas, Appellee.
No. 45314.
Court of Criminal Appeals of Texas.
December 13, 1972.
*730 Pena, McDonald & Gutierrez, by L. Aron Pena, Edinburg, Robert Nino, Houston, for appellant.
Oscar McInnis, Dist. Atty., and Thomas P. Berry, Asst. Dist. Atty., Hidalgo, and Jim D. Vollers, State's Atty., Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
ODOM, Judge.
This appeal is from a conviction for the offense of sale of a narcotic drug, to-wit: heroin. Punishment was assessed by the jury at eighteen years.
Initially, appellant contends that the trial court erred in overruling his motion *731 to excuse five prospective jurors for cause after they allegedly expressed a prejudice against a probated sentence as a possible punishment. The voir dire examination was not transcribed and made a part of the record on appeal. The entire voir dire examination must be brought before this court in order to enable us to ascertain whether error has been shown. See, e. g., Wood v. State, 486 S.W.2d 771 (No. 45,227 Oct. 18, 1972); Longs v. State, Tex.Cr.App., 429 S.W.2d 157; McCullough v. State, Tex.Cr.App., 425 S.W.2d 359.
Appellant's second contention is that the evidence shows as a matter of law that he was entrapped into committing the offense.
The record reflects that on February 1, 1971, Officer Wilkins, an undercover agent for the narcotics section of the Texas Department of Public Safety, asked a suspected narcotics addict by the name of Escobedo where he could purchase "a gram of heroin." Escobedo, not knowing Wilkins' true identity as an undercover agent, took him to a used car lot in McAllen. Wilkins gave Escobedo $25.00 for the purchase. Escobedo, leaving Wilkins in the parked car, walked to the door of a trailer house located on the used car lot. There he talked with appellant who was standing in the door-way of the trailer house. From a distance of about thirty feet, Wilkins watched Escobedo hand appellant the $25.00. Appellant then stepped out of the door-way, picked up "a brown object about the size of a fist," and walked toward the front of the trailer house. He stopped momentarily to talk to another person and then continued walking to the front of the trailer where he dropped the brown object by the side of an old refrigerator. Appellant then reached down, as though to pick up the brown object, but instead picked up a small silver package which was under the refrigerator. He walked back to where Escobedo was waiting and placed the silver package in Escobedo's pocket. Escobedo then returned to the car where Wilkins was seated and handed the silver package to him. Wilkins unwrapped the silver package and found only one-half gram of substance inside. Escobedo returned $12.50 to Wilkins and explained that appellant had "only one-half gram left."
The chain of custody of the substance was established and the chemist testified that the substance was heroin.
"It appears to be well established that the factual issue of entrapment is a question for the jury, unless as a matter of law the accused has established beyond a reasonable doubt he was entrapped."
Jones v. State, Tex.Cr.App., 427 S.W.2d 616. See Accardi v. United States, (5th Cir.) 257 F.2d 168; Demos v. United States (5th Cir.), 205 F.2d 596. See generally, 17 Baylor Law Review 426. In determining whether entrapment has been established as a matter of law, the court must consider not only the predisposition of the accused but weigh also the conduct of law enforcement agents, which conduct must not fall below reasonable standards of the proper use of governmental power in law enforcement. Jones v. State, supra. In this regard, it is noted that the evidence reveals nothing of the predisposition of the appellant and shows no questionable conduct on the part of the undercover agent. See Walker v. United States (5th Cir.), 285 F.2d 52; Accardi v. United States, supra. The evidence does not show, as a matter of law, that appellant was entrapped. Vera v. State, Tex.Cr.App. 473 S.W.2d 22; Jones v. State, supra. See also, Ochoa v. State, Tex.Cr.App., 444 S.W.2d 763; Godin v. State, Tex.Cr.App., 441 S.W.2d 196.
Further, the trial court did not err in refusing the requested charge on entrapment. It is fundamental that before a charge is required, a fact question must be raised by the evidence. There must be a question as to in whose mind the intent originated and a question as to whether the accused was induced to act. Sutton v. *732 State, 170 Tex. Crim. 617, 343 S.W.2d 452; Cooper v. State, 162 Tex. Crim. 624, 288 S.W.2d 762. Without evidence of inducement, entrapment is not raised. Thomas v. State, 163 Tex. Crim. 308, 290 S.W.2d 680; Brown v. State, 162 Tex. Crim. 85, 282 S.W.2d 224; Jones v. State, supra; Cliff v. State, 144 Tex. Crim. 340, 162 S. F.2d 712. The evidence before us reflects that the agent merely furnished the appellant the opportunity to sell heroin. There is no evidence that appellant was induced to act in a manner he would not have acted otherwise.
Next, it is asserted that the trial court erred in refusing to compel the testimony of Escobedo.
After the state rested its case, appellant called as a witness Escobedo, and the following colloquy occurred:
"Q. (By Appellant's Counsel) You were sworn yesterday?
A. Yes sir. I was sworn yesterday.
Q. All right. What is your name?
A. Juan FORTUNATO Escobedo.
Q. Mr. Escobedo, where are you from?
A. I was told by my attorney not to answer anything unless he was present.
COURT: Counsel, I was going to say something about that. Who is his attorney?
PROSECUTING ATTORNEY: Mr. Raul Longoria.
APPELLANT'S COUNSEL:
Your Honor, I am surprised because yesterday in the presence of the Sheriff he told me he would testify. He gave me a statement and his testimony is certainly important."
The record reveals that Escobedo had eight indictments pending against him at the time of trial, each for possession and sale of heroin. It is further revealed, through the testimony of witness Wilkins, that one indictment "grew out of the same incident for which this defendant is now on trial." Clearly, the trial judge was correct in refusing to compel his testimony. Hall v. State, Tex.Cr.App. 475 S.W.2d 778.
Appellant also complains of the trial court's refusal to grant a continuance until such time as witness Escobedo's lawyer could be present. Appellant asked for a continuance and pleaded surprise in that the day before trial the witness had agreed to testify and had given a sworn statement as to what his testimony would be.
Article 29.13, Vernon's Ann.C.C.P., provides:
"A continuance or postponement may be granted on the motion of the State or defendant after the trial has begun, when it is made to appear to the satisfaction of the court that by some unexpected occurrence since the trial began, which no reasonable diligence could have anticipated, the applicant is so taken by surprise that a fair trial cannot be had."
The record reflects that Escobedo was subpoenaed from the Hidalgo County Jail and questioned by appellant's counsel while in custody of the Sheriff. However, when asked by the trial judge whether he knew that Escobedo was under indictment and whether he was represented by counsel, appellant's counsel admitted that he had never asked. By the exercise of reasonable diligence, appellant's counsel could have anticipated the occurrence. It was further revealed that Escobedo was represented by Raul Longoria, a member of the Legislature, and since the Legislature was in session at the time, he would not be available for almost a month. A motion for continuance or postponement on the ground of surprise is addressed to the sound discretion of the trial court, and the failure to grant such a motion is not error unless there is a showing of abuse of discretion. No such abuse is shown herein. Rollins v. *733 State, 488 S.W.2d 429 (No. 45,413 Dec. 6, 1972); Baker v. State, Tex.Cr.App., 467 S.W.2d 428.
Complaint is made that the trial court committed reversible error by excluding the testimony of Sheriff Castaneda. Appellant called Sheriff Castaneda as a witness to testify as to what Escobedo told appellant's counsel the day before the trial. The witness was asked: "... did Juan Fortunato Escobedo tell you at anytime, or tell us at anytime, that he knew Rafael Guerrero?" An objection thereto was sustained as being hearsay. The trial court did not err by so ruling. See, Gibbs v. State, Tex.Cr.App., 468 S.W.2d 69. See also, 24 Tex.Jur.2d 51, Evidence, Section 557, Note 3, and cases cited therein.
Appellant contends that the trial court erred by receiving into evidence testimony of a pre-trial identification of appellant that was impermissibly suggestive and conducted in absence of counsel.
The record reveals that a positive in-court identification of appellant was made by Officer Wilkins. Appellant made no objection to this testimony. The state made no attempt to bolster such identification by offering testimony of another identification. However, on cross-examination, appellant elicited from the witness the fact that he had identified appellant the night he was arrested, after indictment, at the Edinburg Police Station, in a one-on-one confrontation at which time appellant was without counsel. We note that appellant made his objection to the testimony concerning the pre-trial identification only after he himself had placed it before the jury. See, Joshlin v. State, 488 S.W.2d 773 (1972); Martinez v. State, Tex.Cr. App., 437 S.W.2d 842. We note further that appellant did not object to the in-court identification by a motion to suppress; he did not object when such was introduced at trial; he did not request a separate hearing on the matter; and he did not complain of the in-court identification in his motion for new trial. Nevertheless, we must determine whether due process has been denied the appellant.
An in-court identification of a defendant by a witness who has previously identified him in all illegal lineup, or in a confrontation that is impermissibly suggestive, is admissible if the state can demonstrate that the in-court identification was based upon observations of the defendant of independent origin. United States v. Wade, 388 U.S. 218, 87 S. Ct. 1926, 18 L. Ed. 2d 1149; Benson v. State, 487 S.W.2d 117 (No. 45,335 Nov. 29, 1972); Dorsey v. State, Tex.Cr.App., 485 S.W.2d 569; Martinez v. State, Tex.Cr.App., 437 S.W.2d 842.
The record reflects that Officer Wilkins had ample opportunity to observe appellant under good lighting conditions for several minutes at the scene of the offense. Moreover, the record reflects that Officer Wilkins observed appellant with the specific purpose in mind to obtain an accurate description.[1] Further, Wilkins' identification of appellant in court was unequivocal both on direct examination and on cross-examination. We conclude that the evidence is sufficient to show that Wilkins' in-court identification of appellant was based, independently, on his observation of appellant at the scene of the offense. Benson v. State, supra; Dorsey v. State, supra; Ward v. State, Tex.Cr.App., 474 S.W.2d 471.
*734 Appellant urges that the trial court committed reversible error in admitting into evidence his photograph that was taken the night he was arrested, on the grounds that it was the product of an unfair and improper lineup. Appellant argues that "on the night of arrest the agent was shown a photograph of defendant, which was admitted in evidence over the objection of defendant." However, the record reflects the following colloquy:
"Q. (By Counsel for Appellant) And, did you identify this defendant with the assistance of a photograph shown to you?
A. (Wilkins) No sir.
Q. Do you know if a photograph was taken of the defendant when he was mugged and booked in jail on March 31?
A. I know some pictures were taken of him, yes, sir."
The record reflects that the photograph was introduced to show that appellant had a mustache at the time of arrest; it in no way was connected to the pre-trial identification.
Finally, appellant contends that his retained counsel was ineffective. Counsel being retained, any claimed incompetency or lack of effective assistance on the part of such counsel cannot be imputed to the state. Howard v. Beto, (5th Cir.) 375 F.2d 441; Lawson v. State, 467 S.W.2d 486. This record does not support or reflect any willful misconduct by his employed counsel without appellant's knowledge which amounts to a breach of the legal duty of an attorney as is the test in such a case. Mills v. State, 483 S.W.2d 264; Trotter v. State, 471 S.W.2d 822.
No reversible error is shown. The judgment is affirmed.
NOTES
[1] Officer Wilkins testified that he did not know the name of the person he observed selling the heroin to Escobedo and that he could not arrest him at the time because that would have exposed his true identity as an undercover agent. Therefore, it was his specific intention to obtain an accurate description of the appellant, to give that description to police officers so that they might ascertain his name before he had a chance to leave the immediate area. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2326386/ | 290 F.Supp.2d 344 (2003)
Lumnije ARIFI, as Administratrix of the Estate of Bajram Arifi Plaintiff,
v.
DE TRANSPORT DU COCHER, INC. and Karol Kubicki, Defendants.
Lumnife Arifi, as Administratrix of the Estate of Bajram Arifi Plaintiff,
v.
Great Dane Trailers, Inc., et al., Defendants.
Nos. 01-CV-5569 (ILG), 03-CV-1275 (ILG).
United States District Court, E.D. New York.
November 13, 2003.
*345 Phyllis E. Spisto, Hicksville, NY, for Plaintiff.
David Alexander Abrams, Strongin, Rothman & Abrams, LLP, New York City, for Defendants.
MEMORANDUM & ORDER
GLASSER, District Judge.
Before the Court is the motion of Defendant Transport du Cocher, Inc. ("Coachman") to disqualify the firm of Lester *346 Schwab Katz & Dwyer, LLP from representing Defendant CRA Trailers, Inc. ("Great Dane"). For the reasons that follow, Coachman's motion to disqualify is granted.
FACTUAL BACKGROUND
This motion arises out of an action for wrongful death brought by Lumnije Arifi ("Plaintiff") against Coachman and Great Dane. On December 9, 2000, Plaintiff's deceased husband, Bajram Arifi ("Plaintiff's decedent" or "decedent"), sustained serious injuries when his car struck the rear of a parked tractor-trailer on Woodhaven Boulevard in Queens, New York. (Abrams Aff. Ex. J, Pl. Compl. against Great Dane ¶ 46.) The tractor-trailer was operated by Coachman, (Abrams Aff. ¶ 3); the trailer and its rear-impact safety bar were allegedly manufactured by Great Dane, (Pl. Compl. against Great Dane ¶ 43). Plaintiff's decedent died two days after the accident from the injuries he sustained. (Abrams Aff. ¶ 3.)
In July 2001, Plaintiff instituted an action in the Supreme Court of Queens County against Coachman, alleging that decedent's injuries and death were caused by Coachman's carelessness, negligence, and recklessness. (Abrams Aff. Ex. C, Pl. Compl. against Coachman ¶ 8.) Coachman later removed the action to the United States District Court for the Eastern District of New York. (Abrams Aff. ¶ 12.)
In December 2002, Plaintiff filed an action in the Supreme Court of Queens County against Great Dane, the manufacturer of the tractor-trailer, alleging that a dangerous and defective condition in the rear-impact safety bar caused the decedent's injuries and death. (Abrams Aff. Ex. E, Pl. Summons with Notice.) Great Dane, in turn, removed this action to the United States District Court for the Eastern District of New York. (Abrams Aff. Ex. F, Notice of Removal.) On March 17, 2003, Magistrate Judge Chrein directed that the two actions be consolidated for discovery purposes. (Abrams Aff. ¶ 15.)
History of LSKD's Involvement with Coachman
After the accident, Plaintiff retained attorney Phillis Spisto, Esq. ("Spisto") to represent Plaintiff's interests against those involved in the accident. (Abrams Aff. ¶ 4.) After learning of the accident but before any lawsuits were initiated, Coachman, through its insurer, Markel Insurance Company of Canada ("Markel"), also sought legal representation. (Sabourin Aff. ¶ 4.) Anticipating litigation, Markel undertook various investigations, including taking statements from the driver of the tractor-trailer and a principal of Coachman. (Sabourin Aff. ¶ 4.) Eventually, Markel received a letter of representation from Spisto, along with a request for presuit discovery. (Sabourin Aff. ¶¶ 5, 6.) In response, Markel contacted Lester Schwab Katz & Dwyer, LLP ("LSKD") to represent and defend the interests of Coachman, Markel's insured. (Sabourin Aff. ¶ 7.)
On June 14, 2001, Charles Sabourin ("Sabourin"), a senior claims representative for Markel, perhaps with several other Markel employees, spoke by telephone with Lawrence R. Green, Esq. ("Green"), an LSKD partner. (Green Aff. ¶ 3; Sabourin Aff. ¶ 9.) Accounts differ as to the exact content of that conversation. According to Green, during that conversation, Markel merely provided him with some basic information about the underlying accident and requested that he "get Ms. Spisto off Markel's back." (Green Aff. ¶ 3.) Sabourin, however, recalls discussing more during that conversation, including the facts and findings that resulted from Markel's investigations, the substance of Plaintiff's allegations, and his theories for *347 defending Coachman. (Sabourin Aff. ¶ 9.) Green and Sabourin agree that Markel directed Green to contact Spisto regarding her requests for pre-suit discovery. (Green Aff. ¶ 4; Sabourin Aff. ¶ 9.)
Green contacted Spisto on that day and requested that she have no further contact with Markel or Coachman regarding the accident. (Green Aff. ¶ 4.) Green followed up this conversation with a letter to Spisto dated June 14, 2001, which stated that Green "[would] be representing the interests of [Markel] and its insureds with regard to the accident." (Green Aff. Ex. A.) Also on that day, Markel sent a fax to Green, which indicated that Green should contact Spisto and that Markel would send Green the claims investigation file. (Abrams Aff. Ex. B.)
Green was out of the office for the next several days, during which time the file arrived. (Green Aff. ¶¶ 6, 7.) Coachman asserts that the claims investigation file sent to Green included the following: (a) the results of Markel's investigation into the accident; (b) the insured's privileged statement to Markel investigators; (c) the privileged statement of the driver provided to Markel investigators; (d) information obtained from non-party witnesses involved in the post-accident repair of the trailer; (e) external investigation reports; and (f) Markel's internal notes and memoranda containing the adjusters' conclusions, impressions, and analysis of (1) Plaintiff's asserted claims against Coachman, (2) theories of defense for Coachman, and (3) strategies for defense of the claim. (Sabourin Aff. ¶ 8.)
When Green returned to the office on June 25, 2001, he received a message from Sabourin, requesting that the claims investigation file be returned to Markel. (Green Aff. ¶ 7.) Green maintains that he did not read the file, does not recall opening it, and returned it immediately as requested by Sabourin. (Green Aff. ¶ 7.) At that point in time, both parties considered LSKD's representation to be terminated. (Green Aff. ¶ 7; Sabourin Aff. ¶ 10.) Markel later retained the firm of Strongin, Rothman, and Abrams to defend Coachman against Plaintiff's claims. (Sabourin Aff. ¶ 10.)
After Plaintiff instituted its second suit in state court, Great Dane, the Defendant in that suit, retained LSKD to assist in its defense.[1] LSKD attorneys Harold Lee Schwab, Esq. ("Schwab") and Natasha Nordahl, Esq. ("Nordahl") were and continue to be primarily responsible for the Great Dane defense. Great Dane filed an answer to Plaintiff's complaint and with it asserted a cross-claim against Coachman, alleging that Coachman's negligence, breach of contract, obligation, or warranty caused Plaintiff's damages and that Great Dane is entitled to indemnification from Coachman. (Abrams Aff. Ex. K, Answer ¶¶ 39, 40.)
Green maintains that he has never spoken with Schwab or Nordahl about the earlier representation of Coachman and has not read any of the papers prepared by LSKD for the defense of Great Dane. (Green Aff. ¶ 9.) In fact, Schwab asserts that neither he nor Nordahl would have known of the potential conflict but for Coachman's bringing it to their attention. (Schwab Aff. ¶ 9.) Aside from his assertion that he has had no involvement in the Great Dane defense, Green makes no claims about his general interactions with Schwab or Nordahl.
*348 After Coachman discovered the potential conflict, there followed some communication between Abrams and Green regarding LSKD's former involvement with Markel. (Abrams Aff. ¶ 16.) Coachman refused to waive any conflict (Abrams Aff. ¶ 17), and LSKD continued to insist that no conflict existed (Abrams Aff. Ex. I). As such, Coachman now moves to disqualify LSKD from representing Great Dane.
DISCUSSION
In this Circuit, the American Bar Association Code of Professional Responsibility ("ABA Code") provides guidelines for the professional conduct of the bar. Mitchell v. Metro. Life Ins. Co., Inc., 2002 WL 441194, at *3 (S.D.N.Y. March 21, 2002); see also Local Civil Rule 1.5 (grounds for discipline include conduct violative of the New York State Lawyer's Code of Professional Responsibility). Even where, as here, subject matter jurisdiction is based upon diversity of citizenship, "[e]thical standards imposed upon attorneys in federal court are a matter of federal law." County of Suffolk v. Long Island Lighting Co., 710 F.Supp. 1407, 1413-14 (E.D.N.Y.1989) (quoting Cord v. Smith, 338 F.2d 516, 524 (9th Cir.1964), clarified, 370 F.2d 418 (9th Cir.1966) (holding that federal law applies even in diversity action where state's substantive law controls)).
The provisions of the ABA Code applicable here are Canons 4 and 9, which state that a lawyer "should preserve the confidences and secrets of a client" and "should avoid even the appearance of professional impropriety." ABA Code (1980), at http://www.abanet.org/cpr/ethics/mcpr.pdf; NCK Org. Ltd. v. Bregman, 542 F.2d 128, 130 n. 2 (2d Cir.1976). The ABA Code's Disciplinary Rules provide more specific guidance on the manner in which an attorney must treat client confidences:
Except when permitted under DR 4-101(C),[2] a lawyer shall not knowingly:
1. Reveal a confidence or secret of a client.
2. Use a confidence or secret of a client to the disadvantage of the client.
3. Use a confidence or secret of a client for the advantage of the lawyer or of a third person, unless the client consents after full disclosure.
N.Y.Code of Prof. Resp. § DR 4-101(B) (McKinney 2003).
The duty of loyalty that runs from an attorney to a client does not necessarily end when the formal attorney-client relationship ends, In re "Agent Orange" Prod. Liab. Litig., 800 F.2d 14, 17 (2d Cir.1986), because the attorney owes a "duty of continuing loyalty" to his former client, Id. (quoting In re Corn Derivatives Antitrust Litig., 748 F.2d 157, 161 (3d) Cir.1984)). The ABA Code also addresses the duties owed by an attorney to a former client:
[A] lawyer who has represented a client in a matter shall not, without the consent of the former client after full disclosure:
1. Thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client.
2. Use any confidences or secrets of the former client except as permitted by DR 4-101(C) or when the confidence *349 or secret has become generally known.
N.Y.Code of Prof. Resp. § DR 5-108(A) (McKinney 2003). The rule against successive representations addresses "the unfair advantage that a lawyer can take of his former client in using adversely to that client information communicated in confidence in the course of the representation." Mitchell, 2002 WL 441194, at * 4.
In Evans v. Artek Sys. Corp., 715 F.2d 788, 791 (2d Cir.1983), the Court of Appeals held that an attorney may be disqualified from representing a client in a particular case if:
(1) the moving party is a former client of the adverse party's counsel;
(2) there is a substantial relationship between the subject matter of the counsel's prior representation of the moving party and the issues in the present lawsuit; and
(3) the attorney whose disqualification is sought had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client.
This "high standard of proof on the part of one who seeks to disqualify his former counsel" is necessitated by "a client's right freely to choose his counsela right which of course must be balanced against the need to maintain the highest standards of the profession." Gov't of India v. Cook Indus., Inc., 569 F.2d 737, 739 (2d Cir. 1978). Furthermore:
A client whose attorney is disqualified incurs a loss of time and money in being compelled to retain new counsel who in turn have to become familiar with the prior comprehensive investigation which is the core of modern complex litigation. The client moreover may lose the benefit of its longtime counsel's specialized knowledge of its operations.
Id. at 739 (internal citations omitted). For this reason, "disqualification has been granted or approved only when the issues involved have been identical or essentially the same." Id. at 740 (internal citations omitted). When deciding a motion for disqualification, the Court must resolve any doubts in favor of disqualification. Crudele v. New York City Police Dep't, 2001 WL 1033539, at *2 (S.D.N.Y. Sept. 7, 2001).
The first element of the Evans test requires the Court to find that Coachman is a former client of LSKD and that Great Dane and Coachman are adverse parties. See Evans, 715 F.2d at 791. LSKD argues that its representation of Coachman was short-lived and limited to "getting Spisto off Markel's back." Nevertheless, Coachman was a client of LSKD, as Green made clear in his letter to Spisto where he wrote, "I will be representing the interests of Markel Insurance Company of Canada and its insureds with regard to the accident." (Green Aff. Ex. A.) Although the duration of the representation turned out to be limited, both Green and Coachman apparently understood that Coachman was a client of LSKD.
Furthermore, while LSKD argues that cross-claims are brought as a matter of course, Great Dane and Coachman are nevertheless adverse parties. LSKD clearly asserted in its answer to Plaintiff's complaint that Coachman's negligence or breach caused the damages sustained by Plaintiff. As a practical matter, if a jury finds Coachman and Great Dane liable for Plaintiff's injuries, Coachman and Great Dane will each likely assert that the other was primarily responsible for the damages. In that respect, Coachman and Great Dane are in adverse positions and will continue to remain so as the litigation progresses.
The second element of the Evans test, that there is a substantial relationship between *350 the subject matter of LSKD's prior representation of Coachman and the issues in the present lawsuit against Great Dane, is clearly met here. See Evans, 715 F.2d at 791. LSKD's prior representation of Coachman concerned pre-suit discovery sought by Plaintiff in connection with the accident. LSKD's current client, Great Dane, is being sued by the same Plaintiff with regard to the same accident and has asserted a cross-claim against Coachman to determine liability. The substantial relationship test does not depend on the amount of work performed or the duration of the representation, but on the similarity of issues in the former and present representations. Here, the issues are identical and, thus, the substantial relationship element is met.[3]
Finally, the Evans test requires the Court to find that Green had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of Coachman. See Evans, 715 F.2d at 791. The finding abovethat there is a substantial relationship between the two representations creates a rebuttable presumption that Coachman imparted to Green confidential information relevant to the present suit. See USFL, 605 F.Supp. at 1461. Coachman is not required to prove that Green actually had access to confidential information while representing Coachman but only that he was likely to have had such access. Gov't of India, 569 F.2d at 740 (explaining that such a requirement would "put the former client to the Hobson's choice of either having to disclose his privileged information ... or having to refrain from the disqualification motion altogether").
While there is no reason to doubt Green's claim that he does not remember any confidential information, the Court nevertheless finds that he was likely to have had access to such information during the short period of representation. See Schwed v. Gen. Elec. Co., 990 F.Supp. 113, 117 n. 2 (N.D.N.Y.1998) (holding in case where attorney claimed he did not possess confidential information and did not recall any discussions regarding the case, that the third prong of the Evans test was nevertheless met because there was a likelihood that attorney had access to confidential information). Green's admission that he returned the claims investigation file to Coachman demonstrates that he was, at one time, in physical possession of it.[4] Furthermore, Green was a party to a conversation with several employees of Markel regarding the accident.
Although Green's representation of Markel was limited, he had at least enough information about the accident and Coachman's relationship to it to contact Plaintiff's attorney regarding the matter. This access might give LSKD an unfair advantage in its representation of Great Dane. As the court in Mitchell explained,
Client confidences are not so inert as to limit their usefulness to defined legal *351 disciplines or practice areas. They are fungible, and once disclosed can be applied by an experienced lawyer in ways too numerous to anticipate at this stage of the proceeding.... "The dynamics of litigation are far too subtle, the attorney's role in that process is far too critical, and the public's interest in the outcome is far too great to leave room for even the slightest doubt concerning the ethical propriety of a lawyer's representation in a given case."
2002 WL 441194, at *8 (quoting Emle Indus., Inc. v. Patentex, Inc., 478 F.2d 562, 571 (2d Cir.1973)).
Imputing Disqualification to LSKD
The foregoing analysis merely establishes that Green is disqualified from representing Great Dane in this action. The ABA code further provides that, "if a lawyer is required to decline employment or to withdraw from employment under a Disciplinary Rule, no partner, or associate, or any other lawyer affiliated with him or his firm, may accept or continue such employment." Cheng v. GAF Corp., 631 F.2d 1052, 1056 (2d Cir.1980), vacated on other grounds, 450 U.S. 903, 101 S.Ct. 1338, 67 L.Ed.2d 327 (1981) (disqualifying law firm in case where associate had been involved in the same matter while employed at a legal services office that represented the adverse party);[5]see also N.Y.Code of Prof. Resp. § DR 5-105(D) (McKinney 2003) ("[w]hile lawyers are associated in a law firm, none of them shall knowingly accept or continue employment when any one of them practicing alone would be prohibited from doing so"). The ABA Code's presumption that client confidences are shared among attorneys in a law firm may be rebutted if "(1) the attorney is effectively screened, i.e. an adequate `Chinese Wall' is created, and (2) there is no further appearance of impropriety." Crudele, 2001 WL 1033539, at *3.
LSKD does not claim to have erected a Chinese Wall between Green and the rest of the firm. Although Green is not "personally involved" in the Great Dane defense, "he is a member of a relatively small firm.... [and] it is unclear to us how disclosures, admittedly inadvertent can be prevented throughout the course of this representation." Cheng, 631 F.2d at 1058. Because Green was not screened from the rest of the firm, LSKD has failed to rebut the presumption that confidences were shared. Imputing the disqualification to the entire firm will prevent the possibility of trial taint and any appearance of impropriety.
CONCLUSION
Coachman has established that it is a former client of LSKD, the current counsel to Great Dane, and that Coachman and Great Dane are adverse parties; that there is a substantial relationship between the subject matter of that prior representation and the issues in the present lawsuit; and that Green was likely to have had access to privileged information in the course of his representation of Coachman. LSKD has failed to rebut the presumption that those confidences were shared within LSKD. For these reasons, Defendant Coachman's motion to disqualify the firm of Lester Schwab Katz & Dwyer from representing Defendant Great Dane is granted.
SO ORDERED.
NOTES
[1] At some point prior to instituting suit against Great Dane, Plaintiff terminated Spisto and retained the firm of Antin, Erlich, and Epstein, which continues to represent Plaintiff.
[2] DR 4-101(C) outlines several situations in which a lawyer may reveal confidences of a client, including when it is required by a court order, necessary to prevent a crime, or necessary for the lawyer to defend himself against an accusation of wrongful conduct. None of these exceptions apply here.
[3] According to LSKD, the substantial relationship element cannot be met because Plaintiff instituted her lawsuit against Coachman after LSKD's representation of Coachman had ended. The articulation of the standard for disqualification by the Evans court makes clear, however, that the subject matter of the prior representation need not involve litigation. See USFL, 605 F.Supp. at 1459 (holding that law firm's prior representation of client required its disqualification even where the former representation "entailed not litigation but general background legal work"). That LSKD represented Coachman before Plaintiff filed her lawsuit against Coachman does not change the result that the prior and current representations are substantially related.
[4] Although Green claims to have never read the file, it is unclear whether any other LSKD employees may have opened or read it.
[5] Although the Supreme Court vacated Cheng on procedural grounds, district courts continue to look to the case for guidance and the Second Circuit appears to consider its reasoning sound. Crudele, 2001 WL 1033539, at *3 n. 3 (citing Baird v. Hilton Hotel Corp., 771 F.Supp. 24, 27 n. 1 (E.D.N.Y.1991)). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1378096/ | 30 Cal.3d 705 (1982)
639 P.2d 267
180 Cal. Rptr. 196
THE PEOPLE, Plaintiff and Respondent,
v.
GREGORY WRIGHT, Defendant and Appellant.
Docket No. Crim. 21692.
Supreme Court of California.
February 4, 1982.
*707 COUNSEL
Jeff Reich, under appointment by the Supreme Court, for Defendant and Appellant.
Quin Denvir, State Public Defender, and Mark E. Cutler, Chief Assistant State Public Defender, as Amici Curiae on behalf of Defendant and Appellant.
George Deukmejian, Attorney General, Robert H. Philibosian, Chief Assistant Attorney General, Arnold O. Overoye, Assistant Attorney General, Roger E. Venturi and Anthony L. Dicce, Deputy Attorneys General, for Plaintiff and Respondent.
*708 OPINION
BROUSSARD, J.
After guilty pleas to two counts of burglary in the second degree (Pen. Code, §§ 459, 460) defendant was sentenced to prison for three years on each count, the terms to run concurrently. On this appeal he attacks the validity of California Rules of Court, rules 421 and 423, providing criteria governing aggravation and mitigation for sentencing purposes.
In the first burglary defendant obtained entry to a residence by smashing the glass in the front door. The residents were out of town at the time. He took numerous items of jewelry, clothing and personal effects along with about $200 in coins and currency. The value of the stolen items was originally estimated at $1,500 but later increased to $2,300.
In the second offense occurring six days later, defendant obtained entry to a residence by breaking a window near the front door at a time when the resident was absent. He took stereo equipment, two color televisions, radios, jewelry, silverware and coins with an estimated value of $3,250. A neighbor observed a vehicle leaving the residence, and when defendant was apprehended after a high-speed chase he admitted the first offense and cooperated with authorities by pointing out the scene of other burglaries he committed.
Defendant had nine convictions over the prior twelve years ranging in seriousness from possession of liquor by a minor, loitering, grand theft auto, and grand theft from the person. Although never sent to prison, he had served county jail terms and been committed to California Rehabilitation Center as a narcotics addict.
Defendant expressed remorse in his interview with the probation officer. He stated that his motive for the offenses was to obtain money to return to his home in Oregon. He admitted using approximately $20 of heroin per week prior to his arrest.
Addressing the question of the alternative punishments of sixteen months, or two or three years for second degree burglary (Pen. Code, §§ 461, 18), the probation officer recommended the maximum. He referred to one factor in mitigation, defendant's voluntary cooperation with the authorities subsequent to arrest. (Cal. Rules of Court, rule 423(b)(3).) The report referred to seven factors in aggravation: The *709 crimes involved (1) multiple victims, (2) premeditation, (3) the taking of property of great monetary value, and defendant (4) had numerous prior convictions, (5) had been committed to the California Rehabilitation Center, (6) was on parole when the burglaries were committed, and (7) had unsatisfactory parole performance.
Following argument, the court found the single mitigating factor and the first four aggravating factors. The court denied probation, and because of the aggravating factors sentenced defendant to three years on each conviction, the terms to run concurrently.
(1) Defendant urges that adoption of rules 421 and 423 are contrary to powers granted the Judicial Council by article VI, section 6 of our Constitution and that the legislative direction to adopt such rules lacks proper standards and is an invalid delegation of legislative power.
Prior to 1977, a system of indeterminate sentences was followed in California. In 1976, the Legislature enacted the Determinate Sentencing Act (Stats. 1976, ch. 1139) adopting a system of specification of three possible terms of imprisonment for each offense (Pen. Code, § 1170, subd. (a)(2)). In determining which term to impose, "the court shall order imposition of the middle term, unless there are circumstances in aggravation or mitigation of the crime." (Pen. Code, § 1170, subd. (b).) The Legislature directed the Judicial Council to "promote uniformity" in sentencing by adoption of rules providing criteria for trial judge consideration regarding imposition of lower or upper prison terms. (Pen. Code, § 1170.3, subd. (a).)[1] The statutory authorization permits the council to adopt rules establishing circumstances in aggravation and mitigation relating to the crime and to the defendant. (People v. Harvey (1979) 25 Cal.3d 754, 758 [159 Cal. Rptr. 696, 602 P.2d 396]; People v. Cheatham (1979) 23 Cal.3d 829, 833 et seq [153 Cal. Rptr. 585, 591 P.2d 1237].)
*710 The Judicial Council adopted Sentencing Rules for the Superior Courts. (Cal. Rules of Court, rules 401-453.) The trial court must consider the criteria enumerated in the rules and may also consider additional criteria reasonably related to the decision and stated on the record. (Id. rules 408, 409.) Selection of the upper term is justified only if circumstances in aggravation are established by a preponderance of evidence and outweigh circumstances in mitigation. Similarly, selection of the lower term is justified only if circumstances in mitigation are established by a preponderance of the evidence and outweigh circumstances in aggravation.
Rule 421 lists circumstances in aggravation,[2] rule 423 circumstances in mitigation.[3]
*711 Article VI, section 6 of the California Constitution provides in part: "To improve the administration of justice the council shall survey judicial business and make recommendations annually to the Governor and Legislature, adopt rules for court administration, practice and procedure, not inconsistent with statute and perform other functions prescribed by statute."
The constitutional provision empowers the council without further legislative authorization to "adopt rules for court administration, practice and procedure, not inconsistent with statute." The additional provision permitting the council to "perform other functions prescribed by statute" establishes that the council may perform additional functions when authorized by the Legislature.
The fact that the direct grant of power to adopt "rules" is limited to "court administration, practice and procedure" does not mean that the Legislature may not grant to the council additional power to adopt rules, including rules governing substantive matters. This section is phrased in terms of a grant of power to the council, not limitation, and the concluding phrase is a general grant of power to the Legislature to *712 authorize the council to perform additional functions. Because the express provision authorizing the council to adopt rules for court "administration, practice and procedure" permits rule adoption without express legislative authorization, the quoted words should be read as limiting the council's power to act in the absence of legislative authorization, and not a limitation on the Legislature's general authority to confer power on state agencies expressly confirmed by the concluding phrase to "perform other functions prescribed by statute."
The authority of the Legislature to grant to the council power to adopt rules in addition to those directly authorized by article VI, section 6 has been recognized in prior cases. Under section 6, the direct authorization to adopt procedural rules is limited to rules "not inconsistent with statute," and in In re Marriage of McKim (1972) 6 Cal.3d 673, 678, footnote 4 [100 Cal. Rptr. 140, 493 P.2d 868], the court recognized that the Legislature by adoption of statute had authorized the council to adopt rules superseding other statutes. (See also In re Marriage of Lusk (1978) 86 Cal. App.3d 228, 233 [150 Cal. Rptr. 63]; In re Marriage of Fink (1976) 54 Cal. App.3d 357, 365, fn. 4 [126 Cal. Rptr. 626]; In re Marriage of Dover (1971) 15 Cal. App.3d 675, fn. 3 [93 Cal. Rptr. 384].) We conclude there is no violation of article VI, section 6.
(2) An unconstitutional delegation of legislative power occurs when the Legislature confers upon an administrative agency unrestricted authority to make fundamental policy decisions. (Clean Air Constituency v. California State Air Resources Bd. (1974) 11 Cal.3d 801, 816 [114 Cal. Rptr. 577, 523 P.2d 617]; Kugler v. Yokum (1968) 69 Cal.2d 371, 376 [71 Cal. Rptr. 687, 445 P.2d 303].) "This doctrine rests upon the premise that the legislative body must itself effectively resolve the truly fundamental issues. It cannot escape responsibility by explicitly delegating that function to others or by failing to establish an effective mechanism to assure the proper implementation of its policy decisions." (Kugler v. Yokum, supra, 69 Cal.2d at pp. 376-377.)
(3) The doctrine prohibiting delegations of legislative power does not invalidate reasonable grants of power to an administrative agency, when suitable safeguards are established to guide the power's use and to protect against misuse. (Southern Pac. Transportation Co. v. Public Utilities Com. (1976) 18 Cal.3d 308, 313 [134 Cal. Rptr. 189, 556 P.2d 289]; Clean Air Constituency v. California State Air Resources Bd., supra, 11 Cal.3d 801, 817; People ex rel. Younger v. County of El Dorado *713 (1971) 5 Cal.3d 480, 507 [96 Cal. Rptr. 553, 487 P.2d 1193].) The Legislature must make the fundamental policy determinations, but after declaring the legislative goals and establishing a yardstick guiding the administrator, it may authorize the administrator to adopt rules and regulations to promote the purposes of the legislation and to carry it into effect. (Pacific Legal Foundation v. Brown (1981) 29 Cal.3d 168, 201 [172 Cal. Rptr. 487, 624 P.2d 1215]; Clean Air Constituency v. California State Air Resources Bd., supra, 11 Cal.3d 801, 817; Kugler v. Yokum, supra, 69 Cal.2d 371, 376.) (4) Moreover, standards for administrative application of a statute need not be expressly set forth; they may be implied by the statutory purpose. (Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 168 [130 Cal. Rptr. 465, 550 P.2d 1001]; Turner v. Board of Trustees (1976) 16 Cal.3d 818, 827 [129 Cal. Rptr. 443, 548 P.2d 1115]; In re Marks (1969) 71 Cal.2d 31, 51 [77 Cal. Rptr. 1, 453 P.2d 441]; In re Petersen (1958) 51 Cal.2d 177, 185-186 [331 P.2d 24].)
(5) Changing from the system of indeterminate sentences to determinate sentences and fixing the alternative terms, the Legislature made the fundamental policy decision that terms were to be fixed by choosing one of the alternatives on the basis of circumstances relating to the crime and to the defendant. (See People v. Harvey, supra, 25 Cal.3d 754, 758; People v. Cheatham, supra, 23 Cal.3d 829, 833 et seq.) The Legislature directed the Judicial Council to adopt rules establishing criteria for imposing the upper or lower terms in order to promote uniformity. (Pen. Code § 1170.3, subd. (a)(2).) While promotion of "uniformity" in some circumstances may not provide a sufficient standard, the Legislature established the standard in the correlative provision of Penal Code section 1170, subdivision (b), providing that the criteria be based on the absence or presence of aggravating or mitigating circumstances.
The standards are sufficiently precise in the circumstances. The Judicial Council because of its membership including justices and judges who have extensive experience in determining sentences is uniquely situated to implement the legislative policy. Moreover, prior to the adoption of the Determinate Sentencing Act, the council had conducted seminars and institutes for judges on sentencing practices in criminal cases. (See Gov. Code, § 68551.) In the circumstances, it would be questionable, if not unwise, to reject the experience and qualifications of the agency and insist that the Legislature impose the detailed criteria when it chose to adopt the new method of sentencing. (See In re Marks, supra, 71 *714 Cal.2d 31, 52.) Similar broad delegations to public agencies enjoying the expertise to implement the legislative policy have been upheld. (E.g., id. at pp. 52-53 [determination of outpatient status for narcotic addicts]; Southern Pac. Transportation Co. v. Public Utilities Com., supra, 18 Cal.3d 308, 313 [public convenience and necessity].)
When the case was pending before it, the Court of Appeal rejected defendant's claims that he was denied effective assistance of counsel, that the probation report was defective, that the trial court erred in finding aggravating circumstances of prior convictions and taking of property of great monetary value, and that it failed to find additional circumstances in mitigation. (6) The Court of Appeal also determined that the trial court erred in finding the aggravating factor of multiple victims but that the error did not require a remand for resentencing. We agree with the Court of Appeal's resolution of these issues and adopt its reasoning by reference. (See Highland Ranch v. Agricultural Labor Relations Bd. (1981) 29 Cal.3d 848, 867 [176 Cal. Rptr. 753, 633 P.2d 949]; People v. Meredith (1981) 29 Cal.3d 682, 695 [175 Cal. Rptr. 612, 631 P.2d 46].)
The judgment is affirmed.
Richardson, J., Kaus, J., and Tobriner, J.,[*] concurred.
NEWMAN, J., Concurring.
Nearly 50 years ago this court stated: "In the creation of the board of harbor commissioners of the port of Eureka, Statutes 1869-70, page 744, it was attempted to confer upon that board power to impose penalties for any violation of such rules and regulations as that board should make pursuant to the act creating it, not exceeding, for any one violation, the sum of $500. This provision was declared unconstitutional in the case of Board of Harbor Commissioners, etc., v. Excelsior Redwood Co. (1891) 88 Cal. 491 [26 P. 375]. The court there held that conceding the legislature could delegate to the plaintiff the authority to make rules and regulations with reference to the navigation of Humboldt Bay, the penalty for a violation thereof was in the hands of the legislature, and the error was not cured by fixing a maximum penalty, for the vice lay in attempting to delegate such legislative power to plaintiff." (Gilgert v. Stockton Port District (1936) 7 Cal.2d 384, 390 [60 P.2d 847].)
*715 That reference in the final five words to "such legislative power" referred, I believe, to the power to prescribe penalties. "We are of the opinion, therefore," said Justice Pullen for a unanimous court, "that in so far as the Port District Act attempts to delegate penal authority to the port district or its commission ... it is unconstitutional...." (Ibid. at p. 392.)
I concur with the majority here because I have concluded that Penal Code section 1170.3 does not delegate "penal authority" within the meaning of the Gilgert opinion. By no means, though, would I support any inference that either Gilgert or Board of Harbor Commissioners, supra, has now been overruled. (Cf. W. Gellhorn, Administrative Prescription and Imposition of Penalties, 1970 Wash.U.L.Q. 265, 268: "Administrative Prescription of the Penalty Attaching to An Offense.")
In addition, it should be noted that precedents dealing with the delegation of adjudicative power (see, e.g., maj. opn., ante p. 713, citing In re Marks (1969) 71 Cal.2d 31, 52-53 [77 Cal. Rptr. 1, 453 P.2d 441], and Southern Pac. Transportation Co. v. Public Utilities Com. (1976) 18 Cal.3d 308, 313 [134 Cal. Rptr. 189, 556 P.2d 289]) rarely guide us when we are concerned with the delegation of legislative power. (See 1 Davis, Administrative Law Treatise (2d. ed. 1978) § 3:10; Newman & Surrey on Legislation (1955) pp. 603 (fn. 8.) and 620.)
BIRD, C.J.
I respectfully dissent.
I.
In enacting Penal Code section 1170.3, the Legislature delegated to the Judicial Council the task of legislating what crimes are aggravated and what crimes are mitigated felonies. In so doing, the Legislature failed to make the general policy decisions necessary to determine what factors justify a variance from the middle term. Although the Judicial Council's role as set forth in article VI, section 6 of the California Constitution is to adopt procedural rules, the Legislature has expanded that limited role to include the adoption of rules which essentially define substantive criminal law.
The Legislature has given its power to the Judicial Council to define the aggravating and mitigating factors to be considered by all sentencing judges, without any hint as to what factors the Legislature deemed *716 sufficiently important to increase or decrease the terms of imprisonment for felonies. This general delegation places the Judicial Council squarely in the business of substantive law making, unfettered by legislative guidance. This general delegation also places a reviewing court in an impossible position. There is no method by which the court can decide if the rules formulated by the council are consistent with the Legislature's will. There is nothing in the relevant statutes against which to measure the aggravating and mitigating factors drafted by the council.
In deciding whether the Judicial Council may choose which aggravating and mitigating factors are to be considered by the trial courts, the constitutional limitations placed on the Judicial Council's powers must be understood. The council's power has been constitutionally limited to "rules for court administration, practice and procedure, not inconsistent with statute...." (Cal. Const., art. VI, § 6.) Substantive rule making has always been thought to be beyond the constitutional mandate of the council. (See McAllaster, Should the Rule-Making Power Be Given to the Courts? (1931) 6 State Bar J. 215, 220.)
The sentencing criteria in rules 421 and 423 are substantive in nature. The trial court's sentencing discretion is limited by statute only to the extent that an upper or lower term may not be imposed unless there has been a factual finding of circumstances in aggravation or mitigation. (Pen. Code, § 1170, subd. (b).) A Judicial Council rule specifies that the sentencing factors drafted and adopted by it must be used in any determination to impose the upper or lower term. (Cal. Rules of Court, rule 409.) The factors listed in rules 421 and 423 thus become the method by which the aggravation/mitigation determination is resolved. These factors establish a mandatory public policy for aggravation and mitigation which the trial courts must respect. In this way, the Judicial Council has improperly taken on the role of legislating in an area outside its constitutional functions as defined by article VI, section 6 of the state Constitution.
The Judicial Council under article VI, section 6 may "perform other functions prescribed by statute." However, the Legislature may not delegate general policy decisions to nonrepresentative bodies. (Clean Air Constituency v. California State Air Resources Bd. (1974) 11 Cal.3d 801, 816-817 [114 Cal. Rptr. 577, 523 P.2d 617].) This limitation on legislative delegation is not merely the vestigial remainder of the largely repudiated "nondelegation" doctrine. (See Dougherty v. Austin (1892) 94 Cal. 601, 606-607 [28 P. 834, 29 P. 1092].) It is a requirement *717 which the courts enforce "to preserve the representative character of the process of reaching legislative decision." (Kugler v. Yocum (1968) 69 Cal.2d 371, 375-384 [71 Cal. Rptr. 687, 445 P.2d 303]; see generally Stewart, The Reformation of American Administrative Law (1975) 88 Harv.L.Rev. 1667, 1671-1681.)
The real issue is whether the Legislature conferred upon the Judicial Council "the unrestricted authority to make fundamental policy determinations." (Clean Air Constituency v. California State Air Resources Bd., supra, 11 Cal.3d at p. 816.) If so, an unconstitutional delegation of power has occurred. (Ibid.)
The statute which delegates to the Judicial Council the task of writing sentencing criteria, Penal Code section 1170.3, does not on its face provide the necessary "adequate yardstick" for the guidance of the council.[1] (See Clean Air Constituency v. California State Air Resources Bd., supra, 11 Cal.3d at p. 817.) There is no way in which a judicial review of the council's criteria can be undertaken to determine if they reflect general legislative policy as it pertains to the classification of crimes in terms of mitigation or aggravation of punishment. Such a policy cannot be gleaned from Penal Code section 1170.3. What the Legislature thinks about the adequacy of any of the factors in rules 421 and 423 to justify the imposition of an upper or lower term is not capable of ascertainment.
The majority's attempt to find the necessary standard by reference to Penal Code section 1170, subdivision (b) is tautological. Section 1170, subdivision (b) merely states that the sentencing court shall impose the middle of three terms unless there are circumstances in aggravation or mitigation. The majority's reliance on this provision misses the real point. Which of the many factors concerning an offense or an offender justify the imposition of different sentences upon offenders who are guilty of the same crime? Whether the numerous factors defined by the *718 Judicial Council are consistent with the Legislature's will is no more answerable by reference to section 1170, subdivision (b) than by reference to section 1170.3.
In marked contrast to this general delegation is the Legislature's approach to another discretionary judicial decision, the detention of minors who are taken into custody and who are the subjects of petitions alleging a violation of law (Welf. & Inst. Code, § 602). In this area, the Judicial Council has been directed by statute to make rules to govern "practice and procedure." (Welf. & Inst. Code, § 265.) However, the Legislature has provided by statute the basic grounds which must exist before a minor may be detained. (Welf. & Inst. Code, § 635.)[2] In that statute the Legislature provided the necessary guidance to the council. By so doing, it avoided a general delegation. The Judicial Council is not precluded from adopting a rule which is consistent with the legislative determination of what grounds are sufficient to justify a minor's detention. (See Cal. Rules of Court, rule 1327.) If challenged, the propriety of the factors in rule 1327 can be judged by reference to Welfare and Institutions Code section 635.
Contrast this with Penal Code sections 1170.3 or 1170, subdivision (b), which give no basis on which to measure whether rules 421 and 423 meet the Legislature's intent. The proper body has not made the admittedly difficult decisions as to which grounds are to be considered to justify the imposition of an aggravated or mitigated term of imprisonment.
*719 While the Legislature's reliance upon Judicial Council expertise is completely proper in enacting statutes which set forth the criteria to be used for a determination of aggravation or mitigation, a complete delegation to the Judicial Council of the power to formulate that policy is an unconstitutional delegation of power.
II.
A separate issue in this case concerns the proper standards for determining when remand is necessary in cases where sentencing error has occurred. This issue is an important and recurring one and has spawned a number of Court of Appeal decisions.
Whether a judgment must be reversed and a cause remanded for resentencing due to error by the trial court in relying upon improper or unsupported factors in aggravation, or in refusing to find supported mitigating factors, must be decided in accord with the Watson test for prejudicial error. (People v. Watson (1956) 46 Cal.2d 818, 836 [299 P.2d 243]; Cal. Const., art. VI, § 13.) That is, the reviewing court must determine if "it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error." (People v. Watson, supra, 46 Cal.2d at p. 836.)
In determining the existence of Watson error in the sentencing context, however, it must be remembered that Penal Code section 1170, subdivision (b) creates a statutory preference for imposition of the middle term.[3] Also, rule 439(b) states that "[s]election of the upper term is justified only if ... circumstances in aggravation are established by a preponderance of the evidence and outweigh circumstances in mitigation."
The fact that a greater number of aggravating than mitigating circumstances may be established is not determinative. It is the weight that the sentencer accords to the factors which governs whether imposition of the upper or lower term is justified. This requires "[a] quantative and qualitative analysis" of multiple factors. (People v. Lambeth (1980) 112 Cal. App.3d 495, 501 [169 Cal. Rptr. 193], original italics.)
*720 The statutory preference for imposition of the middle term, when coupled with the requirement that aggravating circumstances must outweigh mitigating circumstances before imposition of the aggravated term is proper, creates a presumption. Consideration of improper or unsupported aggravating factors, or failure to find mitigating circumstances which are present, prejudices an individual sentenced to the upper term. Many Court of Appeal decisions have so held, remanding for sentencing when an improper factor was considered, even where other aggravating and no mitigating circumstances were present, "because it could not be determined whether the twice-used fact was determinative for the sentencing court." (People v. Smith (1980) 101 Cal. App.3d 964, 968 [161 Cal. Rptr. 787]; accord, People v. Lawson (1980) 107 Cal. App.3d 748 [165 Cal. Rptr. 764]; People v. Garfield (1979) 92 Cal. App.3d 475 [154 Cal. Rptr. 869]; People v. Roberson (1978) 81 Cal. App.3d 890 [146 Cal. Rptr. 777].) This rule is particularly apt because even if there were remaining valid factors "sufficient to find aggravation, the court is not bound to do so." (People v. Roberson, supra, 81 Cal. App.3d at p. 893.)
Also, where a reviewing court finds that a properly established factor in mitigation was rejected by the sentencing court, and an improper or unsupported factor in aggravation was utilized, remand has been ordered. (People v. Covino (1980) 100 Cal. App.3d 660, 670-672 [161 Cal. Rptr. 155].) Any other standard which merely determines if the imposed sentence would be wholly unsupported or arbitrary in the absence of error does not square with the Watson test for prejudice.
Since the imposition of the upper term in the instant case was based on at least one unsupported aggravating factor, as the majority recognize (maj. opn. at p. 714), a remand for sentencing is required. "Appellant is entitled to a new hearing on the question of circumstances in mitigation and aggravation at which all the mitigating factors are expressly considered and from which [unsupported facts are] excluded from consideration." (People v. Covino, supra, 100 Cal. App.3d at p. 672.)
Mosk, J., concurred.
NOTES
[1] Penal Code section 1170.3, subdivision (a) provides: "The Judicial Council shall seek to promote uniformity in sentencing under Section 1170, by:
"(a) The adoption of rules providing criteria for the consideration of the trial judge at the time of sentencing regarding the court's decision to:
"(1) Grant or deny probation.
"(2) Impose the lower or upper prison term.
"(3) Impose concurrent or consecutive sentences.
"(4) Consider an additional sentence for prior prison terms.
"(5) Impose an additional sentence for being armed with a deadly weapon, using a firearm, an excessive taking or damage, or the infliction of great bodily injury."
[2] Rule 421 provides: "Circumstances in aggravation include:
"(a) Facts relating to the crime, including the fact that:
"(1) The crime involved great violence, great bodily harm, threat of great bodily harm, or other acts disclosing a high degree of cruelty, viciousness or callousness, whether or not charged or chargeable as an enhancement under section 12022.7.
"(2) The defendant was armed with or used a weapon at the time of the commission of the crime, whether or not charged or chargeable as an enhancement under section 12022 or 12022.5.
"(3) The victim was particularly vulnerable.
"(4) The crime involved multiple victims.
"(5) The defendant induced others to participate in the commission of the crime or occupied a position of leadership or dominance of other participants in its commission.
"(6) The defendant threatened witnesses, unlawfully prevented or dissuaded witnesses from testifying, suborned perjury, or in any other way illegally interfered with the judicial process.
"(7) The defendant was convicted of other crimes for which consecutive sentences could have been imposed but for which concurrent sentences are being imposed.
"(8) The planning, sophistication or professionalism with which the crime was carried out, or other facts, indicate premeditation.
"(9) The defendant used or involved minors in the commission of the crime.
"(10) The crime involved an attempted or actual taking or damage of great monetary value, whether or not charged or chargeable as an enhancement under section 12022.6.
"(11) The crime involved a large quantity of contraband.
"(12) The defendant took advantage of a position of trust or confidence to commit the offense.
"(b) Facts relating to the defendant, including the fact that:
"(1) He has engaged in a pattern of violent conduct which indicates a serious danger to society.
"(2) The defendant's prior convictions as an adult or adjudications of commission of crimes as a juvenile are numerous or of increasing seriousness.
"(3) The defendant has served prior prison terms whether or not charged or chargeable as an enhancement under section 667.5.
"(4) The defendant was on probation or parole when he committed the crime.
"(5) The defendant's prior performance on probation or parole was unsatisfactory."
[3] Rule 423 provides: "Circumstances in mitigation include:
"(a) Facts relating to the crime, including the fact that:
"(1) The defendant was a passive participant or played a minor role in the crime.
"(2) The victim was an initiator, willing participant, aggressor or provoker of the incident.
"(3) The crime was committed because of an unusual circumstance, such as great provocation, which is unlikely to recur.
"(4) The defendant participated in the crime under circumstances of coercion or duress, or his conduct was partially excusable for some other reason not amounting to a defense.
"(5) A defendant with no apparent predisposition to do so was induced by others to participate in the crime.
"(6) The defendant exercised caution to avoid harm to persons or damage to property, or the amounts of money or property taken were deliberately small, or no harm was done or threatened against the victim.
"(7) The defendant believed he had a claim or right to the property taken, or for other reasons mistakenly believed his conduct was legal.
"(8) The defendant was motivated by a desire to provide necessities for his family or himself.
"(b) Facts relating to the defendant, including the fact that:
"(1) He has no prior record or an insignificant record of criminal conduct considering the recency and frequency of prior crimes.
"(2) The defendant was suffering from a mental or physical condition that significantly reduced his culpability for the crime.
"(3) The defendant voluntarily acknowledged wrongdoing prior to arrest or at an early stage of the criminal process.
"(4) The defendant is ineligible for probation and but for the ineligibility would have been granted probation.
"(5) The defendant made restitution to the victim.
"(6) The defendant's prior performance on probation or parole was good."
[*] Retired Associate Justice of the Supreme Court sitting under assignment by the Chairperson of the Judicial Council.
[1] Penal Code section 1170.3, subdivision (a) provides: "The Judicial Council shall seek to promote uniformity in sentencing under Section 1170, by:
"(a) The adoption of rules providing criteria for the consideration of the trial judge at the time of sentencing regarding the court's decision to:
"(1) Grant or deny probation.
"(2) Impose the lower or upper prison term.
"(3) Impose concurrent or consecutive sentences.
"(4) Consider an additional sentence for prior prison terms.
"(5) Impose an additional sentence for being armed with a deadly weapon, using a firearm, an excessive taking or damage, or the infliction of great bodily injury."
[2] Welfare and Institutions Code section 635 provides: "The court will examine such minor, his parent, guardian, or other person having relevant knowledge, hear such relevant evidence as the minor, his parent or guardian or their counsel desires to present, and, unless it appears that such minor has violated an order of the juvenile court or has escaped from the commitment of the juvenile court or that it is a matter of immediate and urgent necessity for the protection of such minor or reasonably necessary for the protection of the person or property of another that he be detained or that such minor is likely to flee to avoid the jurisdiction of the court, the court shall make its order releasing such minor from custody.
"The circumstances and gravity of the alleged offense may be considered, in conjunction with other factors, to determine whether it is a matter of immediate and urgent necessity for the protection of the minor or reasonably necessary for the protection of the person or property of another that the minor be detained."
In contrast to the six-year difference between some mitigated and aggravated terms of imprisonment, detention authorized by this statute may not extend more than fifteen judicial days past the minor's detention hearing. (In re Robin M. (1978) 21 Cal.3d 337 [146 Cal. Rptr. 352, 579 P.2d 1].)
[3] Penal Code section 1170, subdivision (b) provides in pertinent part: "When a judgment of imprisonment is to be imposed and the statute specifies three possible terms, the court shall order imposition of the middle term, unless there are circumstances in aggravation or mitigation of the crime." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1500993/ | 771 S.W.2d 577 (1989)
DALLAS COUNTY BAIL BOND BOARD, Appellant,
v.
Harold Rhett STEIN, Appellee.
No. 05-87-01363-CV.
Court of Appeals of Texas, Dallas.
April 25, 1989.
Rehearing Denied June 5, 1989.
*578 Alec B. Stevenson, III, Donald G. Davis, Dallas, for appellant.
John D. Nation, Dallas, for appellee.
Before STEWART, ROWE and BAKER, JJ.
ROWE, Justice.
Appellee, Harold Rhett Stein filed suit to enjoin appellant, Dallas County Bail Bond Board, from interfering with his employment as an agent of a licensed bail bondsman. The trial court granted the injunction and ordered the Board to issue Stein an employee's bail bond identification card. In two points of error, the Board complains that the trial court erred in concluding that a probated state conviction and a probated federal conviction are not final convictions. In two counterpoints, Stein challenges this Court's jurisdiction over this appeal and the Board's authority to regulate employees of bail bondsmen. For the reasons discussed below, we sustain the Board's first point of error and dissolve the injunction.
Background
The record reflects that for twelve years Stein was a licensed bondsman. While licensed, Stein was convicted of deadly assault on a court participant under Texas law and of possession in commerce and affecting commerce of a firearm by a felon under federal law. Both crimes are felonies. At the time of trial, Stein was on probation for each offense. In September 1986, Stein's license expired, and he did not renew it. One month later, Stein began working as an employee of a licensed bonding company. Stein testified that his duties included meeting and negotiating with members of the public for bail bonds and collecting money for such bonds.
In December 1986, the Board adopted rule D1, which became effective December 23, 1986. Rule D1 provides:
1. "Agent" as used in this rule shall mean any person hired by the licensee who performs any of the following duties:
(a) meets and negotiates with members of the public for the purpose of selling bail bonds;
(b) receives money as a fee or money or property as collateral for bail bonds;
(c) presents bonds to the Sheriff's Department for approval;
(d) interviews or takes information from persons who have been released from jail pursuant to a bond provided by the licensee.
2. No licensee shall employ, as an agent, any person who, after August 27, 1973, commits or has committed an offense for which he has been finally *579 convicted, such offense being a felony or a misdemeanor involving moral turpitude.
3. This rule is effective when approved by the Bail Bond Board and posted for the required period of time. Agents presently employed by a licensee who do not qualify as such under this rule may continue such employment until the expiration date of their employer's present license.
After the adoption of this rule, Stein applied to the Board for an employee's identification card, but the Board denied his application because of the two felony convictions. Thereafter, a representative of the Dallas County Sheriff's Department visited Stein's employer and threatened to close down the business if he found Stein working there.
Stein filed this suit to enjoin the Board from interfering with his continued employment as an employee of a licensee and to compel the Board to issue an appropriate identification card. Following two hearings, the trial court granted the injunction, concluding that while the Board did have authority to regulate employees of bondsmen, Stein's probated state court conviction was not final. The trial court further concluded that in the absence of proof to the contrary, it would presume that federal law regarding the finality of Stein's conviction was identical to Texas law. For these reasons, the trial court concluded that Stein had not been finally convicted of any felony.
Jurisdiction over Appeal
Before addressing the Board's contentions, we shall first dispose of the arguments raised by Stein's counterpoints in support of the trial court's judgment. In his second counterpoint, Stein argues that this Court lacks jurisdiction over this cause because the Board failed to file a cost bond and is not exempt from the cost bond requirement. A party desiring to appeal must file a cost bond unless such party is excused by law. See TEX.R.APP.P. 40(a)(1) & 46(a). There is no statute specifically excusing bail bond boards; however, a county is exempt from the cost bond requirement. See TEX.CIV.PRAC. & REM. CODE ANN. § 6.001(b)(4) (Vernon Supp.1989). Stein contends that the Board is not the same as the county itself, and, consequently, this section does not excuse it from filing a cost bond. We disagree.
In Dallas County Appraisal District v. Institute for Aerobics Research, the supreme court addressed a similar issue concerning appeal bonds under the Texas Tax Code. 751 S.W.2d 860 (Tex.1988). In that case, a provision of the Tax Code expressly exempted counties from the cost bond requirement but did not expressly exempt the appraisal district or the appraisal review board. The supreme court held that the exemption of the county also applied to the appraisal district and to the review board. Id. at 861-62. In so holding, the supreme court reasoned:
It would be rather incongruous to exempt the county from the requirement of filing an appeal bond, but then to hold that the legal entity through which the county performs its governmental function must itself post an appeal bond. The undesirable state of having public funds tied up in litigation militates against such a holding.
Id. at 861.
We find this same reasoning persuasive in the instant case. The Board in this case is a governmental agent of the county for purposes of regulating the bail bond industry. As such, the same statute which excuses the county from filing a cost bond also excuses the Board. We overrule Stein's second counterpoint.
Authority of Board
In his first counterpoint, Stein challenges the authority of the Board to regulate employees of bail bond licensees. Stein maintains that the statute regulating bail bondsmen[1] does not regulate employees of bondsmen and does not authorize county bail bond boards to do so. Consequently, Stein asserts that the Board may *580 not prohibit licensed bondsmen from employing persons who have been convicted of felonies or misdemeanors involving moral turpitude. We disagree.
In support of his position, Stein has cited a recent attorney general opinion which concludes that county bail bond boards may not prohibit licensed bondsmen from employing persons who have been convicted of felonies and crimes of moral turpitude. Op.Tex.Att'y Gen.No. JM-1012 (1989). In that opinion, the attorney general relied heavily upon prior case law holding that bail bond boards may not impose burdens, conditions, or restrictions in addition to those which the Bail Bond Act imposes. See Austin v. Harris County Bail Bond Bd., 756 S.W.2d 65, 67 (Tex.App.-Houston [1st Dist.] 1988, writ denied); Texas Fire & Casualty Co. v. Harris County Bail Bond Bd., 684 S.W.2d 177, 178 (Tex. App.Houston [14th Dist.] 1984, writ ref'd n.r.e.); Bexar County Bail Bond Bd. v. Deckard, 604 S.W.2d 214, 216 (Tex.Civ. App.San Antonio 1980, no writ). We think that the attorney general's reliance on these cases was misplaced. In each of these cases, the county boards had denied applications for licenses on the ground that the applicant failed to comply with certain local rules. Since the Bail Bond Act expressly sets forth the requirements for a license, these courts correctly reasoned that the local boards lacked authority to impose different or additional requirements. As Stein points out, however, the Bail Bond Act does not expressly set forth eligibility requirements for employees of licensees. Thus, such analysis is inapplicable to the present case.
Under Texas administrative law, an agency's rule-making powers may be expressly conferred on it by statute or implied from other powers and duties given or imposed by statute. See Texas Liquor Control Bd. v. Super Sav. Stamp Co., 303 S.W.2d 536, 539 (Tex.Civ.App.San Antonio 1957, writ ref'd n.r.e.); TEX.JUR. 3d Administrative Law § 11 (1979). The only requirement is that an agency's rules must be consistent with the laws of this state. Gerst v. Oak Cliff Sav. & Loan Ass'n, 432 S.W.2d 702, 706 (Tex.1968). In determining whether an administrative agency has exceeded its rule-making powers, the critical factor is whether the agency's rule harmonizes with the general objectives of the statute involved. Gerst, 432 S.W.2d at 706; Jefco, Inc. v. Lewis, 520 S.W.2d 915, 921 (Tex.Civ.App.Austin 1975, writ ref'd n.r.e.). Where a statute expressly authorizes an agency to regulate an industry, it impliedly authorizes the agency to promulgate rules and regulations necessary to accomplish such purpose. Super Sav. Stamp Co., 303 S.W.2d at 539. By conferring upon an agency the power to make rules and regulations necessary to carry out the purposes of an act, the Legislature forecloses the argument that it intended to spell out the details of regulating an industry. Super Sav. Stamp Co., 303 S.W.2d at 540, cited with approval in Gerst, 432 S.W.2d at 706.
The Bail Bond Act declares the business of executing bail bonds to be a business affecting the public interest. Bail Bond Act § 1. The Act also expressly delegates to the Board the power and duty "to exercise any powers incidental or necessary to the administration of this Act, to supervise and regulate all phases of the bonding business and enforce this Act within the county, and to prescribe and post any rules necessary to implement this Act." Id. at § 5(f)(1). Such broad rule-making power impliedly authorizes the Board to supervise and regulate employees of bondsmen to the extent that such employees perform meaningful duties in the bonding business. By implementing rule D1, the Board extended a restriction that the Bail Bond Act imposes on licensees to certain employees of such licensees. See id. at § 3(c). In doing so, the Board merely foreclosed the possibility that an individual who is ineligible for a license under the Act could circumvent this requirement by operating a bonding business as an agent of a licensee. We note that the Board did not impose the restriction of rule D1(2) upon all employees in the bonding business regardless of their duties. Instead, the Board imposed such restriction only upon those employees, defined as "agents", who perform particular, *581 meaningful duties in the process of issuing bonds. Stein's testimony at trial established that he performed at least two of the duties used to define an "agent" within the meaning of rule D1. We hold that the Board did not exceed its rulemaking powers by implementing rule D1 or by applying it to Stein. Accordingly, we overrule Stein's first counterpoint.
Finality of Convictions
In its two points of error, the Board asserts that the trial court erred in concluding that a probated state court conviction and a probated federal conviction were not final convictions. The Board maintains that probation only suspends the imposition of sentence and does not in any way affect the finality of a conviction for purposes of rule D1. In response, Stein points to various criminal cases which suggest that a probated conviction is not final until probation has been revoked. We agree with the Board's contention that probation in no way affects the finality of a conviction for purposes of rule D1.
Ordinarily, administrative rules are construed like statutes. Lewis v. Jacksonville Bldg. & Loan Ass'n, 540 S.W.2d 307, 310 (Tex.1976); see also Texas Liquor Control Bd. v. Attic Club, Inc., 457 S.W.2d 41, 45 (Tex.1970) (rule promulgated by administrative agency considered under same principles applicable to legislative acts), appeal dismissed, 400 U.S. 986, 91 S.Ct. 459, 27 L.Ed.2d 435 (1971). Thus, we must attempt to ascertain and give effect to the intent of the Board's rule. See Lewis, 540 S.W.2d at 310. Although we are not necessarily bound by the Board's construction of rule D1, we note that courts frequently defer to an administrative agency's construction of its own rules. See Texas Health Facilities Comm'n v. El Paso Medical Surgical Assocs., 573 S.W.2d 291, 295 (Tex.Civ.App.Tyler 1978, writ ref'd n.r.e.). With these principles in mind, we shall now focus on interpreting rule D1.
We first note that the language of the rule is remarkably similar to certain language contained within the Bail Bond Act. Section 3(c) of the Bail Bond Act provides:
No person shall be eligible for a license under this Act, who after the effective date of this Act, commits an offense for which he is finally convicted, such offense being a felony or misdemeanor involving moral turpitude.
The Board used very similar language[2] in section 2 of rule D1:
No licensee shall employ, as an agent, any person who, after August 27, 1973, commits or has committed an offense for which he has been finally convicted, such offense being a felony or a misdemeanor involving moral turpitude.
At the first hearing in this cause below, the chairman of the Board, testifying as to the purpose of rule D1, explained this similarity as follows:
The purpose of the rule would be in that the legislature has declared executing bail bonds a business involving the public interest and the wording in the statutes relating to the type of people that the legislature desired to be in the bonding business, the board has looked at that and passed a rule for employees also to have a reputation involving honesty, truthful, fair dealing to coincide with the licensees themselves is what the purpose of the rule was.
In light of this testimony and the similarity between the rule and the act, we conclude that the intent of rule D1 was to extend the restriction that the Bail Bond Act imposes on licensees to certain significant employees of such licensees. Thus, we shall interpret rule D1 in accordance with our interpretation of the similar section of the Bail Bond Act.
We have found no cases addressing whether a party serving probation for an offense has been "finally convicted" within the meaning of the Bail Bond Act. Likewise, we have discovered no cases addressing this issue under any other licensing statute containing a similar restriction.[3]*582 Thus, this issue appears to be one of first impression. For certain purposes in state criminal proceedings, a conviction is not treated as final while the accused is still serving a probated sentence.[4] We decline, however, to apply such interpretation broadly to a civil licensing statute.
"Probation" is the release of a convicted defendant under conditions imposed by the court for a specified period during which the imposition of sentence is suspended. TEX.CODE CRIM.PROC.ANN. art 42.12, § 2(b) (Vernon Supp.1989). Probation affects only the imposition of sentence, not the judgment of conviction. See Nealy v. State, 500 S.W.2d 122, 125 (Tex. Crim.App.1973); Onion, Practice Commentary, TEX. CODE CRIM.PROC.ANN. art. 42.12 (Vernon 1979). Thus, the sentence to be served, either actually confined or on probation, has no effect on the finality of a conviction. Ashley v. State, 527 S.W.2d 302, 305 (Tex.Crim.App.1975).
We recognize that the satisfactory completion of the probationary period releases the probationer from all penalties and disabilities resulting from the conviction. See TEX. CODE CRIM.PROC.ANN. art 42.12, § 7 (Vernon Supp.1989). The plain language of this statute clearly suggests that while on probation, the probationer is subject to some penalties and disabilities associated with conviction. By successfully fulfilling the terms of his probation, the probationer is released from such disabilities at the expiration of the period of probation. Id. This release does not affect the finality of the conviction; rather, it merely removes those legal disadvantages associated with such conviction. Accordingly, we conclude that for purposes of the Bail Bond Act and rules adopted pursuant to it, whether Stein was on probation as a result of his convictions has no bearing on whether such convictions were final. Thus, we sustain the Board's first and second points of error.
We reverse the trial court's judgment and dissolve the injunction.
NOTES
[1] TEX.REV.CIV.STAT.ANN. art. 2372p-3 (Vernon Supp.1989) [hereinafter "Bail Bond Act"].
[2] We note that the Board even incorporated the effective date of the Bail Bond Act into its rule.
[3] Cf. TEX.REV.CIV.STAT.ANN. art. 179d, § 13b(c)(1) (Vernon Supp.1989) (bingo equipment distributors); TEX.REV.CIV.STAT.ANN. art. 4413(29bb), § 11B(a)(1) & (2) (Vernon Supp.1989) (private investigators and security agents); TEX.REV.CIV.STAT.ANN. art. 4413(29cc), § 8(a)(1) (Vernon Supp.1989) (polygraph examiners); TEX.REV.CIV.STAT.ANN. art. 4506a (Vernon Supp.1989) (revocation of doctor's license for drug-related offenses); TEX. REV.CIV.STAT.ANN. art. 4512b, § 14a(4) (Vernon Supp.1989) (chiropractors); TEX.REV.CIV. STAT.ANN. art. 4512c, § 23(a)(1) (Vernon Supp. 1989) (psychologists); TEX.REV.CIV.STAT. ANN. art. 4512e, § 19(a)(3) (Vernon Supp.1989) (physical therapists); TEX.REV.CIV.STAT.ANN. art. 4542a-1, § 26A (Vernon Supp.1989) (revocation of pharmacist's license for drug-related offenses); TEX.REV.CIV.STAT.ANN. art. 4549, § 3(b) (Vernon Supp.1989) (revocation or suspension of dentist's license); TEX.REV.CIV. STAT.ANN. art. 8700, § 7(a)(5) (Vernon Supp. 1989) (auctioneers).
[4] Cf. Ex Parte Brown, 662 S.W.2d 3, 4 (Tex.Crim. App.1983) (habeas corpus jurisdiction); Ex Parte Payne, 618 S.W.2d 380, 381 (Tex.Crim.App. 1981) (habeas corpus jurisdiction); Ex Parte Murchison, 560 S.W.2d 654, 656 (Tex.Crim.App. 1978) (enhancement); White v. State, 171 Tex. Crim. 683, 353 S.W.2d 229, 230 (1961) (enhancement); Ellis v. State, 134 Tex.Crim. 346, 115 S.W.2d 660, 662 (1938) (enhancement); Fetters v. State, 108 Tex.Crim. 282, 1 S.W.2d 312, 313 (1927) (enhancement); Brittian v. State, 85 Tex. Crim. 491, 214 S.W. 351, 352 (1919) (enhancement). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2616451/ | 564 P.2d 277 (1977)
278 Or. 305
Robert L. DELANEY et al., Appellants,
v.
GEORGIA-PACIFIC CORPORATION, a Georgia Corporation, et al., Respondents.
No. 422-128.
Supreme Court of Oregon, In Banc.
Argued and Submitted January 3, 1977.
Decided May 10, 1977.
*279 Barnes H. Ellis and Karen K. Creason, of Davies, Biggs, Strayer, Stoel & Boley, Portland, argued the cause and filed briefs for appellants.
Norman J. Wiener, of Miller, Anderson, Nash, Yerke & Wiener, Portland, argued the cause for respondents. With him on the brief were Peter C. Richter and James N. Westwood, Portland.
Before DENECKE, C.J., and HOLMAN, TONGUE, HOWELL, BRYSON, MENGLER and BRADSHAW, JJ.
DENECKE, Chief Justice.
Plaintiffs appeal from an adverse decree in a suit arising out of the conduct of a joint venture. We reverse in part and remand for further proceedings.
Montana Pacific International (MPI) is a corporation formed to carry out a joint venture. One half of its stock was subscribed to by Montana Lumber Sales (MLS) and the other half by Georgia-Pacific Corporation (GP).[1] MLS is a closely-held Montana corporation, owned in part and controlled by plaintiffs Donald Delaney and Robert Delaney. The Delaneys, MLS, its associated companies, and certain key MLS employees are referred to in the record as the "Montana group," and we will adopt that usage for convenience.
The Montana group, prior to 1974, had experience and prospects for timber acquisition in Montana and Canada, but was heavily in debt and needed capital. GP had money, access to financing, and an extensive wood product marketing network. On February 6, 1974, MLS and GP executed a "Joint Venture Agreement" creating a joint venture to be known as Montana Pacific International. The venture was for an indefinite term; its purpose was stated to be:
"* * * [A]cquiring Assets, conducting the business of managing and harvesting forest growth, manufacturing, buying, selling, and generally trading and *280 dealing in timber, logs, lumber, and wood products other than plywood, pulp and paper * * *."
The agreement also provided that each party's interest would be 50 per cent. They were to share equally in overall management responsibility, but the Montana group was to have "operating responsibility for the management of all Assets of Joint Venture, including, but not limited to the types of products to be manufactured and supervision of the day to day operations." Each party's capital contribution was to be $1.5 million. GP agreed to use its best efforts to obtain additional financing and both parties agreed to guarantee the venture's debts.
Some time in the spring of 1974 the Montana group learned that a "timber package" they had sold in 1973 to Louisiana Pacific Corporation (LP) might be available by purchase or assignment. This "package" consisted of cutting rights to Montana timber which was under diverse ownership. The Montana group had negotiated contracts with the individual owners and had then transferred the cutting rights to LP, which agreed to cut 45 million board feet per year and to pay MLS $18 per thousand board feet. Robert Delaney, learning that LP might be willing to reconvey the package, or a portion of it, to MLS, informed GP that this was a possible business opportunity for the joint venture. GP agreed that the possibility should be followed up.
After a period of complex negotiations, MPI and LP executed, on June 24, 1974, a "Timber Cutting Contract" conveying to MPI the timber remaining uncut by LP. MPI agreed to pay LP $40 per thousand board feet for the merchantable timber covered by the contract. At the same time MPI purchased from LP an existing sawmill near Roundup, Montana, and the site for a potential mill at Lewistown, Montana. It was contemplated by the joint venturers that MPI would reconstruct or replace the Roundup mill and would construct a new mill at Lewistown in order to process the timber as it was cut.
In the meantime they had also determined to incorporate MPI. The incorporation and the LP transaction were consummated at the same time. The contract with LP was, therefore, executed by MPI, a Montana corporation. The corporation was required to make cash payments totaling $7,350,000 to LP at closing: $650,000 for the Roundup and Lewistown mill sites, and $6.7 million as a "deposit" to be applied, at the rate of $20 per thousand board feet, to the price of the first 335 million board feet cut by MPI. This cash payment was made by the parties' capital contributions to the joint venture corporation and by obtaining a loan from the Bank of America in the amount of $4.5 million, payable in six months.[2]
MPI then proceeded with construction of the new mill at Roundup. The Montana group undertook on-site responsibility for the mill's design and construction, and also acquired additional timber cutting rights for MPI. The mill was substantially completed by March 1975 at a total cost of approximately $4.35 million. Construction and operating costs during this period were met by advances from GP to MPI.
Also during this period, however, conflicts developed between the parties about control of the mill, the handling of the venture's financing, and the details of management. The discord became critical by May of 1975 and the parties have, since that time, been unable to agree upon the proper conduct of the venture. The venture has not been a financial success. The Roundup mill has always operated at a loss; the Lewistown mill has not been constructed. MPI is heavily in debt to GP, the timber contracts purchased from LP are approaching expiration, and the entire future of MPI is highly doubtful.
This suit was filed in October 1975. Plaintiffs, suing both individually and derivatively on behalf of MPI, have charged *281 GP with breaches of its fiduciary duties as a joint venturer. GP denied any liability for the alleged breaches, and counterclaimed for $703,000, plus interest on notes representing loans to MLS.
The trial court held that plaintiffs were not entitled to any relief, and decreed that GP was entitled to judgment on its counterclaim. Plaintiffs appeal, contending that the trial court applied incorrect legal standards to the facts, and that under the proper legal principles they are entitled to equitable relief or damages, or both.[3]
The Appropriate Legal Standards
As partners or joint venturers, plaintiffs and GP owed one another a duty of loyalty, fair dealing and full disclosure in all matters affecting the conduct of the venture's business. Starr v. International Realty, 271 Or. 396, 403, 533 P.2d 165 (1975); Dean Vincent, Inc. v. Russell's Realty, 268 Or. 456, 466, 521 P.2d 334 (1974); Fouchek v. Janicek, 190 Or. 251, 262, 225 P.2d 783 (1950). This duty continued throughout the parties' relationship. In Fouchek v. Janicek, supra 190 Or. at 273, 225 P.2d at 793, we said:
"* * * The obligation of partners to act with the utmost candor and good faith in their dealings between themselves is not lessened by the existence of strained relations between them or the existence of any condition which might, in and of itself, justify the firm's dissolution. The fiduciary obligations of a partner remain until the relationship is terminated. * * *."
Some question has been raised about the effect of the incorporation of MPI upon the parties' fiduciary obligations. The corporation was formed for purposes of facilitating dealings with outsiders, and was not intended to place the parties to the joint venture on an arms-length basis with one another. Of course, to the extent that the articles of incorporation, bylaws, and shareholders' agreement specifically alter the parties' rights and duties, these later documents control over the earlier joint venture agreement. They do not, however, purport to dissolve the fiduciary relationship.
Whether we consider the corporation as organized to carry out the purposes of a continuing joint venture,[4] or simply regard the parties as equal owners of a close corporation, their relationship was such that each was entitled to the other's performance of fiduciary duties of loyalty, good faith, and full disclosure. Baker v. Commercial Body Builders, 264 Or. 614, 629, 507 P.2d 387 (1973).
We agree with the trial court that some of the alleged breaches by GP, whether or not they were in fact violations of duty under the appropriate legal standard, did not result in any ascertainable damage to MPI. This opinion will not, therefore, discuss all of the parties' charges and countercharges. We will deal only with the matters which we consider necessary to an understanding of our disposition of the case.
Changes in Terms of MPI's Debt Financing
In order to make the cash payments to LP required at closing, MPI had to borrow money. GP personnel secured $4.5 million for this purpose for MPI from the Bank of America. The GP personnel informed the Montana group that they had borrowed this *282 amount for six months and had signed a note. The Montana group never saw the note and apparently was not informed exactly when the note was due except some time in December 1974. GP guaranteed the loan.
The intention of GP at the time of the loan, which was expressed to the Montana group, was that when this note became due it would be renewed for a longer term, 3 to 5 years. The renewal would be guaranteed by GP which would also guarantee loans to MPI of larger amounts. GP's action and intention were pursuant to paragraph 4(b) which provides, in part: "MPI may borrow funds for the acquisition of assets and for working capital. OPM [GP's subsidiary] shall use its best efforts to assist MPI in borrowing such funds and each of the parties agrees to jointly and severally guarantee payment of any loan or loans to MPI."
Harry Kane was GP's, and also MPI's executive vice president of finance and a member of MPI's board of directors. On December 19, 1974, about a week before the 6-months note was due, and in the absence of any demand by Bank of America, Mr. Kane caused GP to pay the Bank of America loan. He also had a demand note to GP executed on behalf of MPI in the amount of the payoff by GP.
It is undisputed that Mr. Kane took these steps without consulting MPI's board of directors (which had met only two days earlier, on December 17) and without informing the Montana group of his intentions.[5] It is also undisputed that he did this without informing MPI's board of directors or the Montana group that in October 1974 GP had approved a guarantee to the Bank of America of any indebtedness of MPI up to $10 million.
In the minutes of the GP board of directors' meeting at which this guarantee was approved, the chairman and Mr. Kane stated that it was necessary in conjunction with the purchase from LP to make this guarantee. We interpret this statement to mean that the guarantee was required under the obligation GP assumed under paragraph 4(b) of the shareholders' agreement previously quoted.
When a guarantor is required to pay a debt it has guaranteed, the guarantor has a right to payment from the debtor. However, in this case there is no evidence the bank required payment from GP or MPI. The strong inference is to the contrary. At the time the note was paid, GP's guarantee was on file with the bank and it would have covered any renewal or extension of the loan. The trial court found the bank was prepared to lend funds to MPI on the basis of this. The expectation of the Montana group, as expressed in the shareholders' agreement, was that GP would arrange longer term financing.
GP contends that it had a right to pay off the Bank of America loan under the terms of the shareholders' agreement executed upon the incorporation of MPI. The section of the agreement relied upon by GP provides:
"* * * If either party pays any debt of MPI, the other party shall reimburse such party for any payment in excess of one-half of such debt; provided, however, that no prepayment of term indebtedness shall be made without the mutual consent of the parties. * * *."
We do not construe this provision to authorize GP to pay the Bank of America loan and substitute a demand note without the knowledge or approval of the MPI board of directors and without notifying MPI of possible alternative financing.
The agreement provides that the business and affairs of MPI are to be managed by a six-member board of directors, and that GP *283 and MLS are each to have the right to designate three of the directors.
It is not, of course, a breach of fiduciary duty for a joint venturer, or a stockholder in a close corporation, to loan money to the enterprise. However, the refinancing of a debt in excess of $4.5 million is a major item of business; the terms of such a refinancing were a proper matter for determination by the board of directors. MPI's board, including the Montana group's nominees, should have been informed that the $10 million loan guarantee was in the hands of the Bank of America and should have been given an opportunity to explore the possibility of long-term bank financing. Instead GP appropriated to itself the power that inevitably accrues to a creditor who is in a position to call in a major debt at any time.
We have been cited to no authorities which are in point. It has been held that corporate insiders may not profit financially from a private purchase of a corporation's liabilities when they had a duty to acquire them for the corporation. Young v. Columbia Land & Inv. Co., 53 Or. 438, 99 P. 936, 101 P. 212 (1909). See, generally, 3 Fletcher Cyclopedia Corporations §§ 868-869 (1975 Repl. Vol.). Although there is here no question of financial profit to GP (except in the matter of interest rates, discussed below) the fiduciary principle is, in our opinion, the same. GP obtained significant financial leverage in the management of MPI without the authority of MPI's board of directors and without informing the board that alternative possibilities existed. This transaction was a clear breach of duty on the part of GP.
Interest Charged MPI by GP
The parties had, of course, understood from the outset that GP would make some cash advances to the joint venture. Although the interest rate to be charged on these advances was never the subject of an express written agreement, there was ample evidence of an understanding that the charge would be from 1/4 per cent to 1/2 per cent over the Bank of America's prime rate. Until December of 1974, GP carried the interest owed by MPI on its book at the rate of 1/4 per cent over the prime rate. On December 19 Mr. Kane directed GP's accounting department that MPI was to be charged interest at 2 per cent above the prime rate, that interest was to be compounded monthly, and that both of these charges were to be made retroactive to July 10, 1974, the date of GP's first cash advance to MPI.
These changes had not been discussed in advance with the Montana group or at the December 17 board meeting. When he learned of these changes Wayne Knutson, a member of the Montana group and MPI's treasurer, protested, but GP has continued to charge MPI interest on all advances at 2 per cent over the Bank of America prime rate, compounded monthly. At the time of trial no payments on principal or interest had been made.
The evidence was conflicting as to whether payment of this rate of interest would result in a profit to GP. Mr. Kane testified at length about the cost of GP's own financing, and the trial court found that there was no profit to GP. We will accept this finding for purposes of this opinion, although there was persuasive testimony to the contrary.
It is true, as the trial court observed, that GP had not promised to finance MPI indefinitely at a loss to itself. However, GP was not justified in ignoring its original agreement to provide financing at 1/4 or 1/2 per cent above prime and in unilaterally imposing a higher interest charge retroactively on all advances. Nor was it entitled to compound the interest in the absence of any agreement to that effect.
We consider the fact that the original interest rate on GP's books was 1/4 per cent above prime to be convincing evidence that this was GP's understanding of the original agreement. We hold that GP is entitled only to simple interest at that rate on all advances to MPI until the time that the Montana group acquiesced in the higher interest charges. On remand, the trial *284 court will have to determine the appropriate date.[6]
Contractual Concessions to Louisiana Pacific
Georgia-Pacific personnel, negotiating on behalf of MPI for the purchase of the LP timber package, agreed to certain contractual terms which were solely for the benefit of LP and which increased the risk of the transaction to MPI.[7] This was done without disclosing the facts to the Montana group or to the MPI board as a whole. The trial court so found.
The 1973 contract between the Montana group and LP provided for a $2 million "refundable deposit" which was paid by LP on execution of the contract. It was to be applied, at the rate of $4 per thousand board feet, to the purchase price of the timber as it was cut, up to 500 million board feet. If the recoverable timber proved to be less than 500 million board feet, the unamortized portion of the deposit was to be refunded to LP.
The 1974 contract between LP and MPI contained a comparable provision for an initial cash payment by MPI of $6.7 million, which was to be applied, at the rate of $20 per thousand board feet, to the purchase price of the timber as it was cut, up to 335 million board feet. This payment was labeled in the contract a "refundable deposit," as it was in the 1973 contract. However, unlike the 1973 contract, the 1974 contract contained no provision for a refund to MPI of any portion of that "deposit" in the event the recoverable timber did not total 335 million board feet. The contract was drafted in this form in order to permit LP to take, at a later time, whatever position as to refundability of the payment it might determine to be most advantageous for tax purposes.
Thus, the contract was written, for LP's benefit, in deliberately ambiguous language, and the ambiguity and its possible adverse effect on MPI were concealed from the Montana group. On appeal GP has neither denied that its representatives concealed this aspect of the negotiations with LP, nor attempted to justify the contractual provisions as the price of any reciprocal benefit to MPI. Although the written contract was presented to MPI's board for approval, it is not surprising that the unwary members of the Montana group did not notice the ambiguity. It was designed not to be noticed.
GP has tendered no excuse for this breach of duty, and we can conceive of none. GP does contend, accurately, that there is no showing of actual or probable financial loss to MPI as a result of these terms of the LP contract. In fact, plaintiffs have consistently taken the position that there is no shortage of recoverable timber on the contract lands. That is not the point. The decision whether the risk of loss was so slight that MPI could bear it solely to provide LP with a tax advantage was one in which the Montana group was entitled to share.
Although not the direct cause of any loss to MPI, GP's secret concession to LP did play a part in a related matter of which plaintiffs also complain.
The original sale of timber cutting rights from MLS to LP included the assignment by MLS of its interest in a ranch, and the timber thereon, which it was purchasing under a land sale contract. The sales contract stated the assignment was "To secure payment of any refund which may be due to Buyer [LP] from Seller [MLS] under the terms of Paragraph 4.1 [the provision for the refundable deposit] * * *." The trial court found the parties originally contracted and intended that this assignment *285 was to be only for security purposes; however, later the timber on the ranch was included in the list attached to the cutting contract. We find the assignment was solely for security purposes.
After the terms of the sale from LP to MPI had been agreed upon, GP personnel learned that GP foresters believed the quantity of merchantable timber on the LP contract lands might be considerably less than 335 million board feet, the minimum quantity upon which MPI's cash payment of $6.7 million to LP had been calculated. GP then informed the Montana group that the timber on the MLS ranch would have to be sold to LP at $18 per thousand board feet (the base price under the 1973 contract between MLS and LP) so that it could be included in the LP conveyance to MPI. The Montana group objected to this transaction, insisting that the ranch timber was an asset of MLS and that, except for its assignment for security purposes, it was no part of the LP "package." Without explanation, GP insisted that unless the ranch timber was conveyed to LP at the 1973 contract price, GP would not agree to the consummation of the LP transaction. Under protest, the ranch timber was conveyed to LP.
Certainly the effects of this transaction were not concealed: MLS was required to sell its timber at $18 to LP, which in turn sold the timber to MPI at $40. When plaintiffs agreed to this transaction they clearly understood what they were doing, although they were not informed why GP insisted that it be done. The trial court held that they executed the conveyance with a full understanding of its consequences and that there was no duress or fraud in the transaction of a kind which would warrant relief. However, GP never revealed to the Montana group that because the "refundable deposit" was not refundable, if the timber ran below 335 million board feet MPI would lose a portion of its $6.7 million deposit and GP would bear one-half of this loss.
In Starr v. International Realty, supra (271 Or. at 405, 533 P.2d 165), we recognized as the established, and the "better," rule that the absence of "deception or fraud" is not sufficient to justify a partner in acquiring an interest in partnership property adverse to that of the firm, and that only full disclosure of all relevant facts would suffice. Similarly, the mere absence of fraud as to the nature of the timber conveyance does not justify GP's insistence upon it as a condition of the consummation of the LP transaction. Plaintiffs were entitled to know the real reasons for GP's adamant stand. Had those reasons been made clear, it is possible that plaintiffs, because of their own cash needs, would have chosen to go ahead with the LP transaction on those terms in hopes that MPI would soon be operating profitably. We cannot assume, however, that that would have been the case.
GP has not suggested any explanation for its insistence upon this conveyance other than that advanced by plaintiffs: that a shortage of timber under the contract would result in a loss to MPI and that this was known to GP but had been concealed from plaintiffs. To protect MPI against possible loss as a result of GP's secret concession to LP, plaintiffs were persuaded to sell their timber at $18 per thousand board feet, MPI became contractually obligated to cut and pay for that timber at $40 per thousand board feet, and LP was given a windfall profit of $22 per thousand board feet.
This transaction cannot be undone in the present case. LP is not a party to this case. Although it has assigned the cutting contracts to MPI, it still retains the right to payment for all merchantable timber cut from the lands covered by the contract. We cannot in this case, divest LP of its right to receive payment at the contract rate as the ranch timber is cut. This does not mean, however, that no relief is available.
GP is responsible for inducing plaintiffs to sell their ranch timber to LP at $18, without full disclosure of important facts. That price was far below the value of the timber at that time, and resulted in a windfall profit to LP. Plaintiffs cannot be restored *286 to ownership of their timber in this case, but they are entitled to recover the damages resulting from this transaction. On remand, the trial court shall determine the quantity of timber involved, and shall enter judgment for plaintiff in the amount of the difference between the price to be received by LP and the price received by plaintiffs.[8]
Chip Prices
On September 24, 1974, MPI and GP entered into a "Wood Chip Contract." MPI agreed to sell, and GP to buy, all wood chips produced by the MPI mill at Roundup and the proposed mill at Lewistown. The price was to be determined by a formula based on the chip export price received by GP under an existing contract with Marubeni Corporation. MPI was to be notified, at stated intervals, of changes in price under the Marubeni contract.
A few months later the export chip market suffered substantial changes and GP, as a consequence, renegotiated its ship export contracts. Marubeni Corporation, in return for a reduction in the quantity of chips it was obliged to buy, agreed to a substantial increase in the unit price. It is undisputed that MPI was never notified of this price change, and that its board, therefore, did not know that the base price under MPI's September agreement with GP would be significantly higher than in the past.
The Roundup mill did produce some chips which were purchased by GP; the record is not clear whether MPI actually received the higher price to which it was entitled. Plaintiffs contend, however, that if MPI had been properly notified of the increase in the contract price, its production plans for the Roundup mill would have been different. Under the September 24 agreement, MPI had in GP a guaranteed buyer for its entire chip output. There was evidence that many of the logs available at the Roundup mill were not suitable for the manufacture of lumber, but might have been chipped for profitable sale to GP had the increase in the contract price been known.
We are inclined to accept plaintiffs' argument that the probable reason that GP did not inform MPI of the increase in the export chip price was that GP already had more chips than it could sell under its renegotiated export contracts. By concealing this information from MPI, plaintiffs contend, GP was improperly elevating its own interests over those of the venture.
Although the evidence does not permit any realistic estimate of the financial loss to MPI as a result of GP's failure to inform MPI of the increase in contract prices, we find that this failure was a breach of GP's fiduciary duties as well as its contractual obligations.
Refusal to Agree to Construction of Lewistown Mill
Plaintiffs contend that one of the major reasons for the financial failure of MPI has been GP's refusal to approve prompt construction of the Lewistown mill. Plaintiffs insist that a second mill at Lewistown was essential to the efficient utilization of the total timber package purchased from LP. They further contend that the need for this mill was understood from the beginning of MPI's involvement in the LP transaction, and that GP has nevertheless repudiated this understanding and refused to finance the construction of that mill. As a consequence, plaintiffs argue, the contract timber cannot be cut and processed before the contracts with the timber owners expire.
We have reviewed the record and have found no evidence of an unconditional agreement to construct the Lewistown mill at any given time. It is clear that construction of the mill was a part of the parties' general plans for MPI. It is also clear, however, that GP has consistently taken the position that the Lewistown mill would be constructed *287 only after the Roundup mill was completed and proved to be satisfactory. When initial results from the Roundup mill were disappointing, GP members of the MPI board refused to approve construction of the Lewistown mill.
The parties presented considerable evidence about the reasons for the early losses from operations at the Roundup Mill; it is not necessary for us to determine where the blame for these losses lies. It is enough to conclude, as we do, that there is no evidence that GP was motivated by anything but legitimate business concerns when it refused to approve the construction of a second mill while the first was operating at substantial losses. Perhaps it is true, as plaintiff contends, that it would have been better business judgment to proceed immediately with the construction of both mills. However, GP never agreed unconditionally to proceed with construction of the Lewistown mill at any particular time and there is no showing that it acted in bad faith in refusing to agree to finance its construction. We find no breach of duty in this respect.
Expulsion of Montana Group from Management
On May 28, 1975, at the annual MPI shareholders' meeting, Robert Flowerree, the new president of GP, was elected to MPI's board of directors to replace Robert M. Pamplin, GP's outgoing president. The newly-elected board of directors then met and unanimously elected officers for the following year.[9] Immediately after the election of officers Mr. Flowerree, who presided at the board meeting, abandoned the previously announced agenda and turned the meeting over to Mr. Kane who presented to the board a proposed curtailment plan designed to cut MPI's costs and reduce its losses. This proposal called for the termination of the employment of Robert Delaney and Wayne Knutson. The Montana group was surprised and upset by these proposals, and the meeting adjourned, after protests by the Montana group and some discussion, without any formal action on the matter. There followed a series of special board meetings at which the parties attempted to work out some accommodation. These attempts were not successful, and this lawsuit followed.
During the period after the May 28 meeting GP substantially took over all management of MPI. Although the Montana group members remained on the board and on MPI's payroll, policy was dictated by GP. On June 20, according to the trial court's findings:
"* * * GP stated that it was placing its representative, Dewey Mobley, at Roundup to check on and oversee the operation, leaving Clifford Rawlings in charge. Mr. Floweree informed Mr. Robert Delaney and Mr. Donald Delaney that they were not to communicate with any employees at the mill as to how to run the mill operation and that they were not to carry on the MPI timber acquisition program. Following that meeting, the Montana officers were removed as authorized signatories on all checking accounts of MPI, and from and after that date the Montana officers have been effectively precluded from functioning as officers of MPI."
MPI's bylaws provide that the Chairman (Mr. Flowerree) is to be the chief executive officer, with "general and active control of its business and affairs," and that the President (Robert Delaney) is to be the chief operating officer and shall, "subject to the direction of the Chairman and the Board of Directors, * * * have general management of its business properties and affairs." *288 Removal of any officer may be accomplished by a vote of a majority of the whole board of directors.
Other bylaw provisions permit ordinary business to be transacted by a majority of a quorum of the board. The separate provision for removal of officers only by a majority of the whole board is, we believe, of significance, particularly in light of the provision in the shareholders' agreement that each party has the right to designate three members of the six-member board of directors. The apparent intent of the parties was to make it impossible for an officer to be removed by one party's designees on the board. Robert Delaney was not formally removed as president of MPI on June 20, but since that date he has been prevented by GP from performing the responsibilities of his office. The fact that the bylaws provide that the president is to exercise his general management responsibilities "subject to the direction of the Chairman and the Board" does not authorize the chairman to strip the president of his entire authority. A decision of that magnitude is tantamount to his removal, and could be authorized only by a majority of the board.
GP has contended that the Delaneys were bad managers of MPI's operations, spending money unnecessarily on travel, exercising poor judgment in matters of timber acquisition, and failing to exercise proper fiscal controls. The trial court, in general, agreed with these contentions. Assuming these charges are true, they are not a justification for GP to take over the entire management of the enterprise in violation of the parties' agreement to share management authority equally.
Although we are not convinced that there was, as plaintiffs contend, a complete takeover by GP on May 28, we find that GP effectively ousted the Montana group from management of MPI on and after June 20, that this ouster was unjustified and was a violation of GP's fiduciary duties, and that as of that date, considering the prior pattern of GP's high-handed behavior in relation to the venture, plaintiffs were entitled to dissolution of MPI. The relief we direct is premised on this conclusion.
In Baker v. Commercial Body Builders, supra (264 Or. 614, 507 P.2d 387), we pointed out that when those in control of a corporation have engaged in conduct which is oppressive toward other shareholders, an equity court obtains jurisdiction under ORS 57.595 to decree dissolution if the circumstances warrant, or to fashion other appropriate equitable relief "[d]epending upon the facts of the case and the nature of the problem involved * * *." 264 Or. at 631-632, 507 P.2d at 395. In the present case it appears that dissolution and liquidation, always a harsh remedy, would be particularly hazardous to the interests of MPI's owners. Its major assets are the LP timber cutting contract and the Roundup mill; the values of these assets are interdependent. The contracts with the timber owners will expire at varying times in the near future. If anything is to be salvaged from this venture, quick action by persons familiar with the operation is necessary.
Plaintiffs prayed for a decree that GP be required to purchase their shares in MPI at a "fair and equitable price * * * reflecting the values thereof had GP performed in a timely manner its representations and promises made at the inception of the joint venture, and conducted the operation in the best interests of MPI * * *." As evidence of the appropriate value plaintiffs point to a "pro forma" projection of MPI's anticipated profits over a 10-year period, prepared by GP in support of an application for bank financing.
We find these projected profits far too speculative to provide the basis for relief in this case. We do, however, believe that this is an appropriate cause for relief in the form of a requirement that GP purchase plaintiffs' stock at a fair price. See Baker v. Commercial Body Builders, supra (264 Or. at 633, 507 P.2d 387). That price should be determined as of June 20, 1975, the date when we have found that the entire management of the venture was taken over by GP. The case must be remanded to the *289 trial court for further proceedings to determine MPI's value on that date, taking into account the adjustments made necessary by our holding in this opinion that GP has charged MPI with excessive interest.
GP contends that the Montana group is not entitled to any relief because it has come into equity with unclean hands. We do not agree.
There was evidence that some of the materials used in the construction of the Roundup mill were purchased from suppliers in which the Montana group members held undisclosed interests. The trial court found that the transactions were fair to MPI. There was no showing of a fraudulent intent on the part of the Montana group or of any damage to MPI as a result of these transactions. Although these conflicts of interest should have been disclosed, the circumstances do not require that plaintiffs be denied the assistance of a court of equity. Allowing equitable relief here is not permitting plaintiffs to either profit by, or to extricate themselves from the consequences of, their own wrongdoing. Compare Bergquist v. International Realty, 272 Or. 416, 432-433, 537 P.2d 553 (1975); Martin v. Tikka, 263 Or. 350, 500 P.2d 1209 (1972); Merimac Co. v. Portland Timber, 259 Or. 573, 488 P.2d 465 (1971); Oliphant v. French, 256 Or. 341, 472 P.2d 275 (1970). See, generally, Fadeley, The Clean-Hands Doctrine in Oregon, 37 Or.L.Rev. 160 (1958).
Except as indicated in this opinion, the decree of the trial court is affirmed. Remanded for further proceedings in accord with this opinion.
NOTES
[1] The formal parties to the joint venture are Rocky Mountain Timber Corporation, a wholly-owned subsidiary of MLS, and O.P.M. Co., Inc., a wholly-owned subsidiary of GP. No one contends that the interposition of these subsidiary corporations has any significance for purposes of this case. We will, therefore, treat MLS and GP as the joint venturers in name as well as in fact.
[2] MPI was incorporated with a capital of $3 million. GP contributed its $1.5 million in cash. MLS borrowed $675,000 from GP, and the balance of its contribution from a third party. To secure the loan from GP, MLS pledged to GP its shares in MPI.
[3] Although MPI is a Montana corporation and its business activities are centered there, the parties have assumed that their rights and duties are governed by Oregon law. GP is a Georgia corporation with its principal place of business in Oregon. Many of the negotiations between the parties took place in GP's offices in Portland. The joint venture agreement was executed there. MLS is a Montana corporation. Rocky Mountain Timber Corporation and O.P.M. Co. (see note 1, supra) are both Oregon corporations. Under the circumstances, and in the absence of any reason to believe that the choice of law would affect the result, we have adopted the parties' assumption that Oregon law applies.
[4] See, e.g., Arditi v. Dubitzky, 354 F.2d 483 (2d Cir.1965), Jolin v. Oster, 55 Wis.2d 199, 198 N.W.2d 639 (1972).
[5] How Mr. Kane managed this transaction without informing the Montana group is a mystery to us. The signature of the treasurer, Wayne Knutson, a member of the Montana group, appears from the corporate records to be required for the execution of MPI's notes. Nevertheless the testimony of Mr. Kane is clear that he took these steps himself, and that he did not inform the Montana group until later.
[6] There is evidence that at some undisclosed time after December 19, 1974, members of the Montana group, acting as officers of MPI, signed notes incorporating the higher rate.
[7] LP was organized as a public-issue corporation in 1973 as part of a "spin-off" of portions of the GP organization pursuant to an order of the Federal Trade Commission. There is evidence that certain GP personnel who were active in MPI's affairs had undisclosed interests, both direct and indirect, in LP's shares.
[8] The judgment will be in favor of Mid State Development Corporation, the Delaney company which was the owner of the ranch timber.
[9] These officers were:
Chairman and Chief
Executive Officer Robert E. Flowerree (GP)
President and Chief
Operating Officer Robert L. Delaney (Mont)
Executive Vice President
Finance Harry J. Kane (GP)
Vice President Donald L. Delaney (Mont)
Vice President Clifford C. Rawlings (Mont)
Secretary Ralph M. Davisson (GP)
Treasurer Wayne K. Knutson (Mont)
Assistant Treasurer Marion L. Talmadge (GP) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1530324/ | 619 S.W.2d 207 (1981)
Leonard BLAYLOCK, III, Appellant,
v.
Ted M. AKIN, Appellee.
No. 8877.
Court of Civil Appeals of Texas, Texarkana.
May 29, 1981.
Rehearing Denied July 7, 1981.
*208 Earl Rutledge, Law Offices of Earl Rutledge, P. C., Fort Worth, for appellant.
Richard A. Sayles, Carrington, Coleman, Sloman & Blumenthal, Dallas, for appellee.
CORNELIUS, Chief Justice.
This is an appeal from a summary judgment. Blaylock sued Akin for damages for breach of an alleged agreement to settle a judgment debt. Upon Akin's motion the district court granted summary judgment that Blaylock take nothing and that Akin recover his costs. Blaylock appeals.
The summary judgment proof consisted only of the depositions of both Blaylock and Akin. From them certain undisputed facts are shown: On May 3, 1971, Akin obtained a judgment against Blaylock in the sum of $2,059.48, together with $26.00 cost of court and interest from date at 6% per annum. In January of 1978, Blaylock's attorney, John Curtis, approached Akin seeking to satisfy the judgment debt. From that point on the depositions present differing versions of the facts. Blaylock's testimony was that he had several outstanding judgments against his corporation and himself as guarantor in addition to the judgment held by Akin. Late in 1977 he made a financial comeback he described as a "financial home run" which allowed him to begin to retire his obligations. He testified that "I owed the money and never went bankrupt and kind of hung in there and when I made a financial comeback, I turned funds over to John Curtis and instructed him to clear up the debts." After Curtis's initial contact with Akin, Curtis reported to Blaylock that he had a firm settlement agreement whereby Akin agreed to accept the original principal of the judgment without attorney's fees and court costs, which would be $1450.00. A cashier's check for that amount, plus a form releasing the judgment, was sent to Akin. Some 30 to 40 days later Akin called back and said that he had found his file and discovered that the judgment was for $1805.00. Blaylock said he understood that the $1805.00 amount represented the principal, plus attorney's fees and court costs. Blaylock testified that he then agreed to pay the additional $355.00 and thereafter went to Akin's office where Akin agreed to accept the additional amount and release the judgment. Blaylock left a blank check with Akin which he said Akin was to fill in with the exact amount of the judgment over $1450.00, contact Curtis and tell him the amount, and send the release to Curtis when the check cleared. Curtis then told Akin to cash the $1450.00 check and that he would look for the release.
*209 Akin's deposition testimony was that he never made an agreement to take less than the full amount of the judgment. He said that he may have stated at first that he would accept the full amount of the judgment principal in satisfaction of the debt, but that no agreement was reached as to what the dollar amount was. He could not remember the exact amount and could not find his file. He received a cashier's check from Curtis for $1450.00, together with a form to be signed to release the judgment lien. He called Curtis and told him he would not accept the check as the full amount of the judgment. Curtis told him to go ahead and cash it and they would come up with any difference. Akin cashed the check but did not sign the release. When Akin found his file he contacted Curtis and told him he wanted the total amount of the judgment, including attorney's fees and interest, amounting to some $2,700.00. He said that he changed his mind and decided he wanted the full amount of the judgment rather than only the principal because Blaylock had called his office numerous times and had become very belligerent.
The trial judge concluded that the judgment debt was a liquidated demand, there was no consideration for an agreement to accept less than the full amount of the debt, there was no estoppel, and the purported agreement to release the judgment would in any event be unenforceable because it was in violation of the statute of frauds. Based upon those conclusions, summary judgment was rendered for Akin. Blaylock contends that the judgment was improper because there were at least fact issues on the questions of a valid agreement, accord and satisfaction, and estoppel, which if found in his favor would entitle him to judgment.
To constitute a valid and enforceable agreement to accept less than the full amount due on a debt, the agreement must amount to a novation or to an accord and satisfaction, or the creditor must have been guilty of some conduct which, if relied upon by the debtor, would wrongfully prejudice him if the creditor is allowed to repudiate his agreement or representation.
Both a novation and an accord must be supported by consideration to be enforceable. Motheral v. Motheral, 514 S.W.2d 475 (Tex.Civ.App. Corpus Christi 1974, writ ref'd n. r. e.); Pickering v. First Greenville National Bank, 495 S.W.2d 16 (Tex.Civ.App. Dallas 1973, writ ref'd n. r. e.); Grindstaff v. North Richland Hills Corporation No. 2, 343 S.W.2d 742 (Tex.Civ. App. Fort Worth 1961, writ ref'd n. r. e.); 1 Tex.Jur.2d Accord and Satisfaction § 10, p. 216; San Gabriel Valley Ready-Mixt v. Casillas, 142 Cal. App. 2d 137, 298 P.2d 76 (1956); 41 Tex.Jur.2d Novation § 9, p. 555; 66 C.J.S. Novation § 11, p. 693; § 12, p. 695. The summary judgment proof in this case is devoid of any evidence which would support a finding of a valid consideration for the alleged agreement. Forbearance of bankruptcy or the known insolvency of the debtor may constitute such consideration, but they are not shown here. Prather v. Citizens Nat. Bank of Dallas, 582 S.W.2d 903 (Tex.Civ.App. Waco 1979, writ ref'd n. r. e.); Turner v. Pugh, 195 S.W.2d 374 (Tex. Civ.App. Amarillo), rev'd on other grounds, 145 Tex. 292, 197 S.W.2d 822 (Tex. 1946); Brown Shoe Co. v. Beall, 107 S.W.2d 456 (Tex.Civ.App. Texarkana 1937, no writ); Rotan Grocery Co. v. Noble, 36 Tex. Civ.App. 226, 81 S.W. 586 (1904, writ ref'd); 1 Tex.Jur.2d Accord and Satisfaction § 14, pp. 218-220; § 17, pp. 221, 222. There is no evidence that Akin knew Blaylock to be insolvent at the time of the alleged agreement. Blaylock himself never testified to that fact, although he said that during the time preceding his financial comeback he never went bankrupt. The evidence, in fact, shows Blaylock was not insolvent at the time of the alleged agreement. He testified that his financial comeback brought him the funds with which he could begin negotiations to clear up his debts. Further, if Blaylock did in fact refrain from filing for bankruptcy, it was on his own volition. By the time he entered into his alleged agreement with Akin, he was in the financial position where he could begin to clear up his debts on his own without bankruptcy *210 proceedings. There is no evidence that either forbearance from the filing of bankruptcy or Blaylock's alleged insolvency were considered as part of an agreement with Akin.
Neither would Blaylock's agreement to make "prompt payment after many years without payment" constitute consideration for the alleged agreement. It would merely be an agreement to pay an obligation already owed. See: Stone v. Morrison & Powers, 298 S.W. 538 (Tex.Com.App.1927, holding approved); Pasadena Police Officers Ass'n v. City of Pasadena, 497 S.W.2d 388 (Tex.Civ.App. Houston [1st Dist.] 1973, writ ref'd n. r. e.); Signs v. Bankers Life & Casualty Co., 340 S.W.2d 67 (Tex. Civ.App. Dallas 1960, no writ); 13 Tex. Jur.2d Contracts § 63, p. 203.
Furthermore, an accord and satisfaction must involve a settling of an unliquidated and disputed amount. The mere payment and acceptance of a sum of money less than the amount of an undisputed indebtedness in full satisfaction of the debt does not constitute an accord and satisfaction and does not bar the creditor's suit to recover the balance due. Reeves v. Hall, 437 S.W.2d 424 (Tex.Civ.App. Austin 1969, no writ); Wilson v. Woolf, 274 S.W.2d 154 (Tex.Civ.App. Fort Worth 1954, writ ref'd n.r.e.); Silvers Box Corporation v. Boynton Lumber Co., 297 S.W. 1059 (Tex.Civ. App. Eastland 1927, writ ref'd). There was no dispute in this case as to the amount of the debt. Indeed, both parties in their pleadings and briefs agree that the amount of the debt was $2,059.48, plus $26.00 costs, together with interest from date at 6% per annum. That is a liquidated and undisputed amount. The fact that at one time the parties did not know or remember the exact amount of that debt would not render it disputed and unliquidated.
The summary judgment proof likewise does not raise fact issues on the essential elements of estoppel. Estoppel does not arise unless acts, words or conduct relied on to establish it have misled the other party to his detriment or have caused him to waive some right that he had. Reeves v. Hall, supra. Blaylock states in his response to the motion for summary judgment that he made payment in reliance on Akin's representations and promises, but that constituted no detriment to Blaylock, because he admittedly owed the debt. Furthermore, he has not waived any right of his to claim bankruptcy, because that right, if available, would still be available to him regardless of any promise or conduct on the part of Akin.
We agree with the trial court that, according to the summary judgment proof, Blaylock has failed to raise a genuine issue of fact as to one or more of the essential elements of his cause of action, and that a take nothing judgment was proper.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1793946/ | 528 So. 2d 699 (1988)
Cortez DOUGLAS, Plaintiff-Appellee,
v.
Juanita Dykes DOUGLAS, Defendant-Appellant.
No. 19,891-CW.
Court of Appeal of Louisiana, Second Circuit.
May 4, 1988.
*700 Williams & Williams by Moses Junior Williams, Tallullah, for defendant-appellant.
Samuel Thomas, Tallullah, for plaintiff-appellee.
Before JASPER E. JONES, FRED W. JONES, Jr., and LINDSAY, JJ.
LINDSAY, Judge.
The defendant, Juanita Dykes Douglas, filed an application for supervisory writs, objecting to the trial court judgment granting custody of her minor daughter, Valis, to the plaintiff, Cortez Douglas. On February 11, 1988, this court granted the defendant's writ application and ordered that the record be filed and the case docketed for opinion. For the following reasons we reverse and vacate the trial court judgment.
FACTS
The plaintiff and defendant were married in Louisiana. They physically separated before their daughter was born on March 11, 1982. A judicial separation was granted April 6, 1982 in the Sixth Judicial District Court and custody of the child was awarded to the defendant. Following the separation, the defendant went to Texas to live and the plaintiff moved to California. The defendant left the actual custody of the child with her mother, Beatrice Dykes, in Tallulah, Louisiana.
On July 12, 1985, the defendant obtained a divorce from the plaintiff in Texas. The Texas divorce decree awarded custody of the child to the present defendant, Juanita Dykes Douglas.
On April 29, 1987, the plaintiff filed suit in the Sixth Judicial District Court for a divorce and also sought custody of the *701 child. In his petition, plaintiff stated he was domiciled in California and the defendant was domiciled in Texas.
An attorney was appointed to represent the absentee defendant. The record contains a copy of a letter purportedly sent by the appointed attorney to the defendant. The letter was returned to the attorney as undeliverable due to an insufficient address.
The record does not show service of process upon the attorney who was appointed to represent the defendant. However, the attorney filed an answer and general denial to the plaintiff's petition and then waived his own appearance at the hearings conducted January 28 and 29, 1988.
The record fails to show that any notice of the proceedings was given to the grandmother, Beatrice Dykes, who had actual custody of the child.
The defendant was not present at the hearing which commenced on January 28, 1988. On that date, the trial court heard the plaintiff's testimony and ordered that the child be brought to court after the noon recess. The child and the grandmother were present during the afternoon session of court. After verbal objections by the grandmother that the defendant did not receive notice of the proceedings, plaintiff's counsel and the court agreed to allow the proceedings to remain open until the next morning to allow the defendant to make an appearance. However, the trial court signed a judgment that day granting a divorce and custody of the child to the plaintiff.
The next morning, the defendant filed a petition to annul the trial court judgment which had been rendered the previous day. The defendant also moved for a stay of the proceedings. The motion was denied by the trial court. The defendant's counsel then gave notice of intent to apply to this court for supervisory writs. A writ application was subsequently filed.
In her application for supervisory writs, the defendant argued that the trial court erred in failing to decline jurisdiction in this matter because the parties were not domiciled in Louisiana, that the trial court erred in refusing to set aside the judgment which was signed prior to the conclusion of the trial, and that the court erred in failing to set aside its judgment where the parties entitled to notice were not cited or served with process as required by law.
In her brief, the defendant reasserts the issues argued in connection with the writ application. In addition, she argues that the trial court judgment should be vacated because the court did not have jurisdiction to decide the issue of child custody under the Uniform Child Custody Jurisdiction Act (UCCJA), LSA-R.S. 13:1700, et seq., and because, under the requirements of the UCCJA, there was insufficient notice of the proceedings to the defendant and to the child's grandmother.
JURISDICTION
The defendant has raised two objections regarding the trial court's jurisdiction in this case. First, the defendant claims the trial court lacked jurisdiction to decide the question of child custody under the UCCJA. Second, the defendant argues the trial court lacked jurisdiction to grant a divorce to the nondomiciliary parties.
The plaintiff argues that jurisdiction is determined solely by LSA-C.C.P. Art. 10, subd. A(5) which provides that a court which is otherwise competent under the laws of this state has jurisdiction in a proceeding to obtain the legal custody of a minor if he is domiciled in, or is in, this state.
However, in this case both Louisiana and Texas courts have granted custody of the child to the defendant. When there is a dispute concerning which state properly possesses jurisdiction over a child custody matter, the UCCJA is applied to resolve conflicts.
The UCCJA is applied to interstate custody disputes to avoid jurisdictional competition and conflicts with the courts of other states in matters of child custody and to insure that custody determinations will be made in the state which can best determine the best interest of the child. LSA-R.S. *702 13:1700; Counts v. Bracken, 494 So. 2d 1275 (La.App. 2d Cir.1986).
Because there is a question as to whether Louisiana or Texas properly has jurisdiction over the issue of child custody, the defendant is correct in her assertion that the question of whether the trial court had custody jurisdiction must be determined under the provisions of the UCCJA contained in LSA-R.S. 13:1700 et seq.
LSA-R.S. 13:1702 contains four provisions related to determining whether a court of this state has jurisdiction over a child custody proceeding. It has been suggested that the jurisdictional tests are listed in descending preferential order. Schroth v. Schroth, 449 So. 2d 640 (La.App. 4th Cir.1984); Snider v. Snider, 474 So. 2d 1374 (La.App. 2d Cir.1985). Determining jurisdiction in this case is complicated by the fact that although the child is physically present in Louisiana, neither of the litigants claiming custody is domiciled here.
The first of the four above mentioned provisions regarding jurisdiction is the "home state" test and provides that jurisdiction is proper in Louisiana if this state is the home state of the child at the time of the commencement of the proceeding or had been the child's home state within six months before commencement of the proceeding. Although at first glance, because the child has lived with her grandmother in this state almost since birth, it might appear that Louisiana is the child's home state, under the statutory scheme, this is not true. LSA-R.S. 13:1701(5) defines "home state" as follows:
(5) "Home state" means the state in which the child immediately preceding the time involved lived with his parents, a parent, or a person acting as parent, for at least six months, and in the case of a child less than six months old the state in which the child lived from birth with any of the persons mentioned. Periods of temporary absence of any of the named persons are counted as part of the six-month or other period.
LSA-R.S. 13:1701(9) defines a person "acting as parent" as a person other than a parent who had physical custody of a child and who has either been awarded custody by a court or claims a right to custody. Here, the grandmother has not been awarded custody, nor does she claim a right to custody.
Therefore, under the facts of this case, Louisiana is not the child's home state because, although she is domiciled here, she has not been living with a parent or person acting as parent.
The second possible source of jurisdiction is a "significant connection" between the minor child and this state. LSA-R.S. 13:1702, subd. A(2) provides:
(2) It is in the best interest of the child that a court of this state assume jurisdiction because (i) the child and his parents, or the child and at least one contestant, have a significant connection with this state, and (ii) there is available in this state substantial evidence concerning the child's present or future care, protection, training, and personal relationship; ...
Although the minor in this case has a significant connection with this state by virtue of her domicile here, neither contestant has a similar significant connection as required by the statute.
The third possible source of jurisdiction involves minors abandoned in this state or the existence of an emergency necessitating the exercise of jurisdiction to protect the minor. LSA-R.S. 13:1702, subd. A(3) provides:
(3) The child is physically present in this state and (i) the child has been abandoned or (ii) it is necessary in an emergency to protect the child because he has been subjected to or threatened with mistreatment or abuse or is otherwise neglected or dependent ...
Although in his petition for custody the plaintiff made a conclusory allegation that the defendant had abandoned and neglected the child, no such showing of abandonment or neglect appears in this record. Therefore, this provision does not confer jurisdiction upon the courts of this state.
The fourth possible source of jurisdiction relates to a lack of jurisdiction by a court *703 of any other state under the three provisions just discussed and when exercise of jurisdiction by a court of this state would be in the best interest of the child. LSA-R.S. 13:1702, subd. A(4) provides:
(4)(i) It appears that no other state would have jurisdiction under prerequisites substantially in accordance with Paragraphs (1), (2), or (3), or another state has declined to exercise jurisdiction on the ground that this state is the more appropriate forum to determine the custody of the child, (ii) it is in the best interest of the child that this court assume jurisdiction.
In this case, where the child has not lived with either parent in another state, and has always been domiciled in Louisiana, no other state would have jurisdiction over the issue of custody. We are mindful of the defendant's contention that she has a valid custody decree from the state of Texas. However, LSA-R.S. 13:1713(A) provides:
A. If a court of another state has made a custody decree, a court of this state shall not modify that decree unless it appears to the court of this state that the court which rendered the decree does not now have jurisdiction under jurisdictional prerequisites substantially in accordance with this Part or has declined to assume jurisdiction to modify the decree and the court of this state has jurisdiction.
It does not appear that Texas ever had jurisdiction over the custody question under the jurisdictional prerequisites of the UCCJA. The record shows that at the time the Texas judgment was rendered, the child was not domiciled in Texas. The record does not show that she was even physically present in Texas. Further, even if the Texas court had jurisdiction at the time the judgment was rendered, it no longer has jurisdiction under the provisions of the UCCJA. Texas is not now the child's home state, the child has no significant connection with Texas, as that term is defined in LSA-R.S. 13:1702, subd. A(2) of the UCCJA, the child has not been abandoned or neglected in Texas nor does it appear that the Texas court would be the proper court to determine the child's best interest. Inasmuch as the child has lived in Louisiana all her life, it appears that this state is the proper forum in which to determine the best interest of this child. Therefore, jurisdiction vests in Louisiana under the provisions of LSA-R.S. 13:1702, subd. A(4). The defendant's argument that the trial court lacked jurisdiction to determine child custody is without merit.
Although not related to the main issue of child custody, the defendant also argues that the trial court was without jurisdiction to grant a divorce between the parties in this case who were not domiciled in this state. The plaintiff alleged in his petition for divorce that he is domiciled in California and that the defendant is domiciled in Texas. The defendant argues under LSA-C.C.P. Art. 10, subd. A(7), that in order for a court of this state to have jurisdiction over a divorce proceeding, at least one of the parties must be domiciled in the state. Under the facts of this case, this argument is meritless.
The parties were domiciled in Louisiana in 1982 when a court of this state entered a judgment of separation in favor of the defendant. It has long been recognized that once a Louisiana court enters a judgment of separation, jurisdiction continues for purposes of granting a divorce even if both parties subsequently leave the state. Lukianoff v. Lukianoff, 166 La. 219, 116 So. 890 (1928). Therefore, because the court in this case had jurisdiction when a judgment of separation was rendered, the court still had jurisdiction to grant a divorce under LSA-R.S. 9:302 based upon living separate and apart following a separation judgment even though the parties were no longer domiciled in Louisiana.
However, as will be explained later, the divorce judgment in this case was not valid because the defendant was not properly served with process in these proceedings. We also note that the defendant filed into the record a copy of her divorce judgment rendered in Texas prior to these proceedings. We here make no determination as to the effect of an exception of res judicata *704 to a Louisiana divorce action if such should be filed by the defendant.
NOTICE OF THE PROCEEDINGS
The defendant also argues that the judgment of the trial court should be overturned because she was not given reasonable notice of the proceedings, nor was reasonable notice given to the minor child's grandmother, Beatrice Dykes, who had actual possession of the child. These arguments have merit.
LSA-R.S. 13:1703 provides that before making a decree under the UCCJA, reasonable notice and an opportunity to be heard shall be given to the contestants, any parent whose parental rights have not been previously terminated, and any person who has physical custody of the child. "Physical custody" means actual possession and control of a child. LSA-R.S. 13:1701(8).
As stated above, Beatrice Dykes had physical custody of the child and was therefore entitled to notice of the child custody proceedings. The record shows that Beatrice Dykes was not given the required notice.
We next consider the issue of notice to the defendant. If any person entitled to notice is outside the state, as was the defendant in this case, notice and an opportunity to be heard must be given pursuant to LSA-R.S. 13:1704 which provides:
A. Notice required for the exercise of jurisdiction over a person outside this state shall be given in a manner reasonably calculated to give actual notice, and may be:
(1) By personal delivery outside of this state in the manner prescribed for service of process within this state; or
(2) By registered or certified mail; or
(3) If the party is a nonresident or absentee who cannot be served by the methods provided in paragraphs (1) and (2) above, either personally or through an agent for service of process, and who has made no general appearance, the court shall appoint an attorney at law to represent him.
If the court appoints an attorney at law to represent the party, all proceedings against the party shall be conducted contradictorily against the attorney at law appointed by the court to represent him. The qualifications and duties of such attorney and his compensation shall be governed by the provisions of Articles 5092 through 5096 of the Code of Civil Procedure.
B. Notice under this Section shall be served, mailed and delivered, or last published at least ten days before any hearing in this state.
C. Proof of service outside this state may be made by affidavit of the individual who made the service, or in the manner prescribed by the law of this state, the order pursuant to which the service is made, or the law of the place in which the service is made. If service is made by mail, proof may be a receipt signed by the addressee or other evidence of delivery to the addressee.
D. Notice is not required if a person submits to the jurisdiction of the court.
An attorney was appointed to represent the absentee defendant. Service upon the attorney-at-law appointed to represent the absentee defendant may be made through personal or domiciliary service. LSA-C. C.P. Art. 1235. Service of process must be made on the attorney appointed to represent a defendant, unless he waives citation and accepts service of process. LSA-C. C.P. Art. 5093. In the instant case, there is no showing that the attorney appointed to represent the defendant was ever served with process or that he waived citation and accepted service.
The attorney appointed to represent the defendant did file an answer and general denial on behalf of the defendant. However, this action did not constitute a general appearance by the defendant. LSA-C.C.P. Art. 7.
Also, when the defendant actually appeared in court the day after the hearing, she did so for purposes of objecting to the court's jurisdiction. Therefore, the defendant has not waived the notice requirements *705 nor has she subjected herself to the jurisdiction of the court.
We also note that attorneys appointed to represent absent defendants are charged with using reasonable diligence to communicate with the defendant and to inform him of the nature and pendency of the proceedings. The record contains a copy of a letter purportedly sent by the attorney appointed to represent the defendant in this case that was returned as undeliverable due to an insufficient address. However, this letter was not filed into evidence. The defendant argues that she never lived at the address to which the letter was sent and also argues that her whereabouts were discoverable by the plaintiff.
It is also interesting to note that the trial court record contains what purports to be a letter from the attorney appointed to represent the defendant waiving his own presence at the hearing in this case.
Because there was no reasonable notice to the defendant and to Beatrice Dykes, who had physical custody of the minor, we must vacate the trial court judgment granting custody of the child to the plaintiff.
CONCLUSION
We find that the trial court had, by virtue of the prior separation judgment, continuing jurisdiction over the nondomiciliary plaintiff and defendant to grant a divorce between these parties based upon living separate and apart following a judgment of separation under LSA-R.S. 9:302.
We also find that Louisiana has jurisdiction over the issue of custody of the minor child, Valis Douglas, born of the marriage between the plaintiff and the defendant.
However, we find that because the defendant and her mother were not given reasonable notice of the proceedings as required by law, and because no proper service was made upon the attorney appointed to represent this absentee defendant, the judgment of the trial court granting custody of the minor to the plaintiff, and granting a judgment of divorce, is vacated.
Therefore, we vacate the trial court judgment awarding custody of the child to the plaintiff and granting a divorce between the parties and remand the case to the trial court for further proceedings in accordance with the law.
WRIT MADE PEREMPTORY. JUDGMENT OF TRIAL COURT VACATED; REMANDED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2269602/ | 887 F. Supp. 811 (1995)
FOOD LION, INC., Plaintiff,
v.
CAPITAL CITIES/ABC, INC., ABC Holding Co., American Broadcasting Companies, Inc., Lynne Litt, Richard N. Kaplan, Ira Rosen and Susan Barnett, Defendants.
No. 6:92CV592.
United States District Court, M.D. North Carolina, Winston-Salem Division.
March 21, 1995.
*812 Andrew Copenhaver, Winston-Salem, NC, John J. Walsh, New York City, for plaintiff.
Harrell Hugh Stevens, Jr., Jerry S. Alvis, Raleigh, NC, Randall J. Turk, Washington, DC, for defendants.
MEMORANDUM OPINION
TILLEY, District Judge.
Plaintiff Food Lion has brought this action against Defendant Capital Cities/ABC, Inc. ("ABC") for injuries suffered as a result of ABC's undercover investigation of Food Lion's operational practices and subsequent broadcast on Prime Time Live, an ABC television production. Specifically, Food Lion alleges (1) state tort law violations of intentional misrepresentation, deceit, fraud, negligent supervision, trespass, breach of fiduciary duty, and respondeat superior; (2) civil conspiracy; (3) violations of federal wiretapping laws; (4) unfair and deceptive trade practices in violation of North Carolina General Statute § 75-1.1; and (5) violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.. ABC moved to dismiss all claims, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Additionally, defendant Barnett moved to dismiss all claims against *813 her based on an asserted lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Magistrate Judge Sharp's Recommendation determined that ABC's motion to dismiss should be denied as to Claims One, Three, and Fourteen of the Amended Complaint (Food Lion's state law claims of fraud, trespass, and civil conspiracy) and should be granted as to Claims Six and Seven (Food Lion's wiretapping claims) and Claims Nine through Thirteen (Food Lion's civil RICO claims). As to Claims Two, Four, Five, and Eight (Food Lion's claims of negligent supervision, respondeat superior, breach of fiduciary duty, and unfair and deceptive trade practices), the Magistrate Judge recommended that ABC's motion to dismiss be deferred under Rule 12(d) until trial or summary judgment adjudication. Additionally, it was recommended that Defendant Barnett's motion to dismiss for lack of personal jurisdiction be denied. Both Food Lion and ABC have sought reconsideration by this Court, pursuant to Rule 72(b).
Upon review of the Magistrate Judge's Recommendation, the parties' objections and responses, and after a de novo review of the issues presented, this Court adopts the results recommended as to each of the claims and adopts the reasoning as to Counts One through Eight and Fourteen as well as the result and reasoning as to Defendant Barnett's Rule 12(b)(2) motion. Counts Nine through Thirteen, the civil Rico claims, will be dismissed pursuant to the following discussion.
I.
Defendants seek an order dismissing all claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The 12(b)(6) motion tests only the legal sufficiency of the complaint and does not speak to the plaintiff's ability to prove the facts alleged. In ruling on Defendants' 12(b)(6) motion to dismiss Food Lion's amended complaint, the Court should accept as true all well-pleaded allegations, and, viewing the complaint in a light most favorable to the plaintiff, should not dismiss the case unless it appears certain that the plaintiff can prove no set of facts which would entitle it to relief. Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993), cert. denied, ___ U.S. ___, 114 S. Ct. 1307, 127 L. Ed. 2d 658 (1994).
Plaintiff's complaint in this case is forty-seven pages long. The facts alleged in the complaint and stated in the light most favorable to Food Lion, the non-moving party, depict the following: Food Lion, Inc. ("Food Lion") is a corporation organized under the laws of the State of North Carolina and has its principal office and place of business in Salisbury, North Carolina. Food Lion is an operator of retail food supermarkets throughout the southeastern United States.
Prime Time Live ("PTL") is an ABC network news show. The show airs in prime viewing time in order to capture the largest possible audience. PTL is not a "straight news" program; instead, PTL presents "undercover," "investigative" and "inside" stories of a sensational nature designed to attract large audiences and Nielsen ratings, with the commensurate financial rewards and status within the television industry. PTL first aired in August of 1989. The subject matter and content of PTL broadcasts are subject to the control and supervision of Capital Cities/ABC, Inc., ABC Holding Co., and American Broadcasting Companies Inc. Richard Kaplan was the executive producer of PTL during all relevant time periods. Ira Rosen was the senior producer of PTL during all relevant time periods. Susan Barnett was an associate producer and Lynne Litt was an employee of PTL.
PTL seeks one "amazing" piece per week. Undercover investigations are one important means by which PTL obtains such "amazing" stories as necessary to meet its goal of attracting large prime time audiences. PTL has undertaken as many as thirty-six undercover operations (to the date of the amended complaint) involving the use of hidden cameras. The use of hidden cameras requires the use of falsehoods, misrepresentations and deceit in order to position recording equipment and to entice persons into actions or statements which can be recorded. ABC also produces other programs in which it has aired stories based on undercover operations involving the use of hidden cameras. ABC *814 regularly conducts undercover operations and has procedures and policies to facilitate these efforts. ABC's News Policy Manual provides that "[i]n the course of investigative work, reporters should not disguise their identity or pose as someone with another occupation without prior approval of ABC News Management." The ABC News Policy Manual states that "news gathering of whatever sort does not include any license to violate the law."
In December of 1991, Lynne Litt received a suggestion from persons working on behalf of the United Food & Commercial Workers International Union ("UFCW") that Food Lion might present a subject for investigation. At about the same time, ABC associate producer Susan Barnett received information from a group called the Government Accountability Project ("GAP") suggesting that Food Lion would be a good target for investigation. GAP was closely aligned with the UFCW and the information that GAP gave to Barnett came from UFCW. The UFCW has been trying unsuccessfully to organize Food Lion employees for more than a decade. The UFCW has publicly acknowledged that it has been conducting an intense "corporate campaign" with the stated goal of unionizing Food Lion or putting it out of business. The UFCW has instigated administrative or legislative investigations by various governmental authorities by alleging violations of law or regulations on the part of Food Lion. In addition, it has financially supported litigation against Food Lion, and has courted and utilized the media to get widespread publicity for its charges.
In early 1992, Litt and Barnett submitted, independently, proposals for a PTL story on Food Lion. These proposals were approved by ABC management, and it was determined that undercover or hidden camera work would be necessary to develop the story. Litt and Barnett were told to begin work and to report to Ira Rosen. Rosen emphasized to Litt and Barnett that every step of the undercover work would need to be approved by upper management of ABC.
Litt decided that the best way to obtain the sensational footage they were seeking was for her, Barnett, and others to obtain employment with Food Lion. They would then arrange for tiny video cameras and audio equipment to be secreted on their persons, which they would then use to record the actions and statements of other Food Lion employees. Litt and Barnett were aware that if they used their true identities Food Lion would not hire them.
Litt, Barnett, and others utilized means including the mails and interstate wire facilities to create false identities and backgrounds, complete with supporting documentation. Litt turned to the UFCW, which Litt knew or should have known was engaging in a public campaign against Food Lion, to help her provide references for the background checks that Food Lion would conduct in reviewing applications for employment.
In March 1992, Litt wanted to review a Food Lion employment application prior to the attempt to gain employment for herself and others. Litt, operating from Atlanta, called Nicholas Clark, a Washington, D.C. based in-house lawyer for UFCW. Clark supplied Litt with the name of a former Food Lion employee. The former employee provided Litt with Food Lion employment applications. Litt telecopied copies of the application to New York, so that Barnett could practice filling out the application. Litt also sought Food Lion applications through Neel Lattimore, who did public relations work for UFCW. Litt received additional applications by telecopy in Atlanta from Lattimore in New York.
Later in March 1992, Litt had further conversations with Clark. Litt told Clark that she was an undercover operative for ABC and that her identity and the nature of the story needed to remain secret. Clark suggested that Litt seek employment with Food Lion as a deli clerk, and he or Harry Carter (a colleague of Clark's) arranged for her to view deli workers in a unionized supermarket on a "no questions asked basis."
In another telephone conversation in March 1992, Litt asked Clark to find a supermarket in Pennsylvania that Litt could use as an employment reference. Litt explained to Clark that she needed a store in Pennsylvania to fit the background that she had created *815 for herself. Subsequently, Litt was telephoned by Clark or Carter and given the name of Dale Moss at "Moss Shop 'n Save," in Uniontown, Pennsylvania and an address and telephone number to use as a false reference. Still later, Litt requested that Clark obtain a false letter of recommendation from a supermarket. Litt received such a letter from Moss either through the mails or by Federal Express. The false letter of recommendation was reviewed by Rosen and upper management of ABC.
Litt's dentist, Dr. David Zelby of Atlanta, agreed to give her a false letter of reference stating that she had been employed as Zelby's receptionist. Litt obtained stationary from the doctor's office and typed the letter herself. She then telecopied a copy of the letter to New York for approval by Rosen, ABC management, and the Capital Cities legal department.
Litt first attempted to gain employment at two Food Lion stores in the Savannah, Georgia area. She submitted false references and completed the Food Lion application using a false name, false background, false employment history, and false reasons for seeking work in a Food Lion store. Litt was unsuccessful in her initial attempt to become a Food Lion employee.
Litt then contacted Clark, and together they decided that she should try again, this time seeking employment as a meat wrapper. Clark told Litt to go to a unionized food store in Atlanta where she would be shown and could practice the functions of a meat wrapper. Litt was to meet a man named "Bobby Adams" and to identify herself as "Jane Adams." Bobby Adams is the president of the Atlanta local of the UFCW.
Barnett, with Litt's assistance, also created a false identity, background, and documentation to facilitate her attempt to gain employment with Food Lion. Clark, in another phone conversation with Litt, agreed to provide another false employment reference for Barnett to use. The reference was from a Chicago area supermarket. Litt and Barnett discussed both applications in a series of interstate telephone calls in March and April 1992. Barnett's false persona, documentation and application were reviewed by Rosen and ABC management.
Other than Litt and Barnett, ABC undertook numerous other attempts to infiltrate Food Lion. Litt reviewed and typed a Food Lion employment application for Kenneth Ray Jordan, an Atlanta acquaintance of Litt's. Litt promised Jordan that if he could gain employment at Food Lion, ABC would pay him $100 per day. Litt passed on Jordan's application to a Food Lion employee whose name was given to her by Clark. The Food Lion employee was to pass it on to appropriate personnel at Food Lion. Litt also telecopied a copy of Jordan's application to New York for Rosen and ABC to review.
ABC also attempted to place Ron Hill, a video expert, into a Food Lion warehouse where Hill would surreptitiously film Food Lion activities. Litt assisted Hill in the preparation of his false identity and documentation. Hill provided ABC with the video and sound equipment used by Litt, Barnett, and others to film hidden camera footage in and around Food Lion stores. The arrangements between Hill, Litt, and ABC required numerous phone calls and mailings.
ABC also attempted to plant Steve Bell, a colleague of Hill's, in a Food Lion facility. Litt assisted in the preparation of Bell's false identity and documentation. Clark provided a false reference for Bell from a unionized store called "Magruders," in Maryland. Clark told Litt of this arrangement in a phone call from Washington, D.C. to South Carolina.
In late April 1992, Litt submitted further employment applications to Food Lion using the name Lynne Neufer and/or Neufes ("Neufes"). She applied for the positions of "meat wrapper" or "meat clerk." She did not disclose her full time employment with ABC and PTL. She falsely represented her address. She falsely represented her employment history and gave false references using the pre-arranged information furnished by Clark. She also gave a false statement indicating her reasons for seeking employment. Her intent was to deceive Food Lion into offering her a job so she could gain access to areas not open to the public. Food *816 Lion would not have hired Litt had she revealed her true identity and purpose.
Bill Howard, an area meat department supervisor for Food Lion in Hickory, North Carolina, interviewed Litt on May 1, 1992. Litt maintained her false identity and statements during the interview. Food Lion received a false confirmation of employment from Moss Shop 'n Save. Howard then offered Litt a job with Food Lion which she accepted.
Litt started work on May 4, 1992. She quit on May 15, 1992. During her employment with Food Lion, Litt worked at two different stores. Food Lion undertook efforts to train Litt to perform the job for which she was hired. On the day she quit, Litt stated that her grandfather had died and that she was moving to Pennsylvania to care for her grandmother. She did not inform Food Lion of her association with PTL or about the hidden camera filming that she had done.
While employed at Food Lion, Litt was an unsatisfactory employee. She worked slowly and did not appear to have experience in meat wrapping. Through neglect or hidden motive, she failed to perform her cleaning responsibilities adequately. One evening in particular, Litt was given the task of cleaning the meat cutting and wrapping room after the meat market had closed. Her cleaning responsibilities were to be done while she was alone in the meat market, giving her the opportunity to create camera footage about meat handling and/or sanitation. The next morning the manager noticed that Litt had failed to perform a proper cleaning. She had left scraps of meat and bone dust from the meat saw on the floor, and had failed to clean thoroughly other areas that would normally have been cleaned at the close of a work day.
While employed by Food Lion, Litt concealed and surreptitiously used a video recorder, camera, tape recording device, and/or other video and audio recording devices, including a wireless radio transmitter about Food Lion's premises. Litt's sole purpose during her employment with Food Lion was to conduct an investigation. Litt had no intention of faithfully performing the duties for which she was hired.
Barnett submitted a written application for employment with Food Lion as a deli clerk on April 4, 1992. In the application, Barnett made false statements consistent with the false background that she and Litt had previously prepared. Her intent was to deceive Food Lion into offering her employment. At no time during the application process or during her employment did Barnett inform Food Lion of her true identity and purpose. Food Lion would not have hired Barnett had it known the truth.
Brenda Sparks interviewed Barnett based on the employment application. Barnett maintained her false identity and statements in the interview. After receiving a false confirmation of prior employment, Food Lion offered Barnett a job. Barnett accepted and began work on April 14, 1992 in Myrtle Beach, South Carolina. Food Lion took efforts to train Barnett and put her on the payroll. Barnett worked for eight days and then complained of personal problems. She was given time off and never returned. While employed at Food Lion, while on Food Lion's premises, and, without Food Lion's knowledge or permission Barnett concealed and used various video and audio recording equipment. Barnett never intended to faithfully perform the duties for which she was hired. Instead, her sole purpose was to obtain information for use on PTL.
PTL reviewed more than 50 hours of hidden camera footage taken at the Food Lion stores by PTL agents. Eventually, PTL aired five or six minutes of footage on its November 5, 1992 broadcast. The footage was used to support allegations made by several former Food Lion employees and statements made by PTL anchor Diane Sawyer. Without the footage, PTL would not have broadcast the Food Lion story. More viewers watched the Food Lion episode of PTL than any previous PTL program. Immediately following the broadcast, Food Lion's suffered a drop in retail sales and the value of its publicly traded securities decreased.
II.
Food Lion's amended complaint enumerates fourteen counts which allege a combination *817 of state and federal claims against various defendants. Defendants attack the legal sufficiency of the complaint by arguing, under each count, that Plaintiff has failed to allege facts supporting the respective claims. In addition, Defendants seek dismissal of the entire complaint on First Amendment grounds.
Claims Nine through Thirteen of the amended complaint allege violations of the civil RICO statutes based on the predicate acts of mail and wire fraud. See 18 U.S.C.A. §§ 1961, 1962, 1963, 1964, 1341, 1343. Defendants' brief states, generally, five grounds on which it is argued that Plaintiff's RICO claims should be dismissed: (1) failure to allege parts of the required predicate acts of mail and wire fraud, particularly a failure to allege a "scheme to defraud" Food Lion; (2) failure to allege a "pattern" of racketeering activity; (3) failure to allege a valid RICO "enterprise"; (4) failure to allege a § 1962 violation; and, (5) failure to allege causation of damages from any RICO violation. In addition, Defendants have argued that Plaintiff failed to plead certain points with the specificity necessary to satisfy Rule 9(b). Defendants also argue two other points, first that punitive damages are not available under RICO and that the "pattern" requirement is unconstitutional on its face and as applied to them. Because, as discussed below, Food Lion has failed to allege sufficiently a pattern of racketeering activity, its RICO claims fail. Since they are not necessary, Defendants' other attacks on the claims will not be discussed.
III.
The elements of a civil RICO claim are: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S. Ct. 3275, 3285, 87 L. Ed. 2d 346 (1985); Eastern Pub. & Adv. v. Chesapeake Pub. & Adv., 831 F.2d 488, 491-92 (4th Cir. 1987), cert. granted, judgment vacated, and case remanded on other grounds, 492 U.S. 913, 109 S. Ct. 3234, 106 L. Ed. 2d 582 (1989) (dismissing for failure to allege pattern of racketeering activity). The Plaintiff must allege each element to avoid dismissal under Rule 12(b)(6).
For the purpose of the RICO statute, racketeering activity includes violations of 18 U.S.C. §§ 1341 and 1343, mail and wire fraud respectively. 18 U.S.C. § 1961(1)(B). Plaintiff alleges mail and wire fraud as the predicate acts supporting its civil RICO claims and must allege facts supporting each element of criminal liability under those statutes as well. The elements of a wire fraud offense are (1) a scheme to defraud and (2) the use of wire communications affecting interstate or foreign commerce in furtherance of the scheme. Belt v. United States, 868 F.2d 1208 (11th Cir.1989); see also 18 U.S.C. § 1343. The elements of a mail fraud offense are (1) a scheme to defraud and (2) the use of the mails in furtherance of the scheme. See 18 U.S.C. § 1341. The statutes are construed similarly, and the same substantive analysis is used with both statutes. Carpenter v. United States, 484 U.S. 19, 25 n. 6, 108 S. Ct. 316, 320, 98 L. Ed. 2d 275 (1987).
An essential element of a RICO claim is that defendant engage in a pattern of racketeering activity. See 18 U.S.C. § 1962. The statutory definition of pattern requires at least two acts of racketeering activity. 18 U.S.C. § 1961(5); see also Sedima, 473 U.S. at 496 n. 14, 105 S. Ct. at 3285 n. 14 (two acts of racketeering activity are necessary but may not be sufficient to meet the pattern requirement).
The Supreme Court addressed RICO's pattern requirement in H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S. Ct. 2893, 106 L. Ed. 2d 195 (1989). In H.J., the Court discussed the statutory definition of § 1961(5) and found that it established an outer limit on the definition of pattern. Id. at 237, 109 S. Ct. at 2899. The Court considered the statutory language and relevant legislative history and established a two part test to determine if a pattern exists. First, the predicate acts must be related, and second, the predicate acts must amount to or pose a threat of continued criminal activity. Id. at 239, 109 S. Ct. at 2900.
To be related, predicate acts must have "the same or similar purposes, results, participants, victims, or methods of commission *818 or otherwise are interrelated by distinguishing characteristics and are not isolated events." Id. at 240, 109 S. Ct. at 2901 (quoting 18 U.S.C. § 3575(e)). Defendants do not assert that Food Lion's RICO claims fail to meet the relatedness aspect of the pattern requirement. All the alleged predicate acts of mail fraud and wire fraud either were directed toward Food Lion or were part of schemes to defraud other targets of investigations seeking information for use on PTL and other news shows. These acts share the common purpose of gaining information through fraudulent means. The alleged predicate acts are sufficiently related to establish a pattern of racketeering activity.
The continuity aspect of the pattern requirement may be established by showing either closed or open-ended continuity. The Supreme Court in H.J. stated:
Continuity is both a closed and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition. It is, in either case, centrally a temporal concept and particularly so in the RICO context, where what must be continuous, RICO's predicate acts or offenses, and the relationship these predicate acts must bear one to another, are distinct requirements. A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement: Congress was concerned in RICO with long-term criminal conduct. Often a RICO action will be brought before continuity can be established in this way. In such cases, liability depends on whether the threat of continuity is demonstrated.
H.J., 492 U.S. at 241-42, 109 S. Ct. at 2902 (citations omitted). An assessment of whether a pattern exists does not involve a formulaic approach and, rather, must involve consideration of the facts of each case. Id. at 242, 109 S. Ct. at 2902; see also Menasco v. Wasserman, 886 F.2d 681, 684 (4th Cir.1989).
An evaluation of continuity, whether closed or open-ended, involves an examination of the alleged predicate acts. See H.J., 492 U.S. at 242, 109 S. Ct. at 2902 (stating that RICO's predicate acts or offenses must be continuous). The predicate acts specifically alleged by Food Lion in the amended complaint consist of a series of letters, phone calls, and facsimiles, which Food Lion contends amount to mail and wire fraud, and which occurred over a two month period in March and April of 1992. (Am.Compl. ¶¶ 151-52.) In addition, Food Lion alleges that the scheme to defraud element of mail and wire fraud began in December 1991. (Am.Compl. ¶¶ 23-24, 156.) For the purposes of this motion only, it will be assumed that Food Lion could prove that the defendants engaged in a scheme to defraud Food Lion and that the scheme began in December 1991. Thus, the predicate acts of mail and wire fraud will be considered to have begun in December 1991.
Food Lion postulates that the scheme to defraud continued at least until March 11, 1993 when the latest PTL segment concerning Food Lion aired and that the scheme continues with each subsequent broadcast on the subject. (See Am.Compl. ¶ 156.) This argument is unpersuasive. Food Lion asserts that the purpose of the fraudulent acts was to gain access to areas not open to the public and to gain information about its operations. (See Am.Compl. ¶¶ 58, 61, 62.) Food Lion does not allege that the airing of the PTL segments constituted an act of mail or wire fraud. Any subsequent use of the information does not constitute mail or wire fraud, and as such, cannot be used to establish continuity. The scheme to defraud concluded when its purpose, to collect information, was realized. Accordingly, the predicate acts of mail and wire fraud ceased as of May, 1992 after Defendants Litt and Barnett were no longer employed by Food Lion. For the purposes of this motion and assuming all well-pleaded allegations to be true, it is determined that Defendants engaged in a series of predicate acts directed toward Food Lion which occurred between December, 1991 and May, 1992, a six month span.
*819 Food Lion alleges in its complaint that Defendants ABC and Capital Cities have engaged previously in other acts of mail and wire fraud in investigations similar to that directed toward Food Lion. (See Am.Compl. ¶¶ 18-22.) The allegations of fraud which serve as predicate acts for RICO claims are not exempt from the pleading requirement of Rule 9(b) of the Federal Rules of Civil Procedure, and thus, the circumstances of the fraud must be stated with particularity. Estate of Dearing v. Dearing, 646 F. Supp. 903, 913 (S.D.W.Va.1986); see Fed.R.Civ.P. 9(b). Food Lion provides no details regarding the prior use of any mail or wire fraud by Defendants in investigations, nor does Food Lion identify any other persons defrauded by Defendants. See Menasco v. Wasserman, 886 F.2d 681, 683 (4th Cir.1989) (declining to consider allegation that defendant "committed fraudulent acts against various individuals" in assessing continuity). Food Lion has not alleged with sufficient particularity that Defendants have engaged in other acts of mail and wire fraud directed at persons other than Food Lion. As such, this allegation will not be considered for the purposes of establishing continuity.
As discussed above, a pattern may be found based on either open-ended or closed continuity. Food Lion has attempted to use both types of continuity to establish that Defendants engaged in a pattern of racketeering activity. Open-ended continuity may exist when the predicate acts are "part of an ongoing entity's regular way of doing business." H.J., 492 U.S. at 242, 109 S. Ct. at 2902. Food Lion postulates that it has alleged facts that if proven would establish that open-ended continuity exists. In its answer to the original complaint, the Defendants stated "[a]n undercover investigation, including the use of hidden cameras and microphones, is an important and accepted journalistic technique." (Answer to Original Compl. ¶ 1.) From this statement, Food Lion concludes that Defendants
consider themselves to have the right to commit these crimes and torts [the illegal acts allegedly committed by Defendants].... Thus, the defendants have acknowledged that the predicate acts and offenses alleged herein are part of the regular way of conducting the ongoing otherwise-legitimate business of ABC and Capital Cities.
(Am.Compl. ¶ 156.) Food Lion's conclusion depends on the key assumption that undercover reporting necessarily entails criminal conduct which would qualify as a predicate act such as mail or wire fraud. However, the use of a hidden camera in no way requires the use of the mails or of wire communications. This Court declines to equate the use of hidden cameras and microphones with mail and wire fraud. This said, Food Lion's complaint alleges only that Defendants regularly use hidden cameras and microphones in their regular business activities. The complaint does not allege that Defendants regularly engage in mail and wire fraud, and without that allegation, it is not shown that the predicate acts are a regular way of conducting Defendants' business. Food Lion has not established open-ended continuity.
Food Lion also attempts to establish that Defendants' predicate acts have closed continuity. "Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement: Congress was concerned in RICO with long-term criminal conduct." H.J., 492 U.S. at 242, 109 S. Ct. at 2902. As discussed above, the alleged predicate acts occurred over a span of six months. Although the inquiry into continuity does not involve the application of a formula, cases previously decided in this circuit provide valuable insight into the concept. In Parcoil Corp. v. Nowsco Well Service, Ltd., 887 F.2d 502, 504 (4th Cir.1989), the Fourth Circuit found that the alleged scheme, involving seventeen false reports mailed over a period of four months and directed at one victim, did not have sufficient continuity to apply RICO. Similarly, in Menasco v. Wasserman, 886 F.2d 681, 683 (4th Cir.1989), continuity was found to be lacking in a scheme directed toward two victims and lasting for a period of one year. It is instructive to contrast these opinions with cases in which continuity was found to be present. See, e.g., Busby v. Crown Supply, Inc., 896 F.2d 833, 836 n. 2 (4th Cir.1990) (stating that scheme lasting in *820 excess of ten years and defrauding over 100 salesmen satisfied closed continuity requirement); Walk v. Baltimore and Ohio R.R., 890 F.2d 688, 690 (4th Cir.1989) (holding that activity extending over a ten year period constituted closed continuity). This Court previously has surveyed Fourth Circuit cases addressing continuity. See Andrews v. Fitzgerald, 823 F. Supp. 356, 372-73 (M.D.N.C. 1993). In Andrews, this Court determined that a three year scheme with a single fraudulent goal and directed at ninety-one victims was "in the grey area of the pattern requirement" and declined to dismiss the RICO claims. Id. at 373.
A series of predicate acts occurring over a six month span and directed at one victim cannot be said to possess closed continuity. The acts of mail and wire fraud were part of a limited purpose, to obtain information from Food Lion to be aired on PTL. A survey of case law in the Fourth Circuit indicates that continuity has never been found in a scheme with such a limited duration. Indeed, Food Lion has not cited any cases which involved schemes over a time span less than ten months. As the Fourth Circuit pointed out in Menasco, 886 F.2d at 685, the pattern requirement is designed to prevent the transformation of an ordinary fraud case into a federal RICO claim. Food Lion's alleged claims of predicate acts by the Defendants do not possess continuity. Without continuity, be it closed or open-ended, no pattern exists. Since Food Lion has failed to meet the pattern element, its RICO claims must fail. Therefore, claims Nine, Ten, Eleven, Twelve, and Thirteen of the amended complaint are DISMISSED pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
IV.
In its third claim, Food Lion seeks to recover for trespass under North Carolina law. Judge Sharp has recommended that Defendants' motion to dismiss this claim should be denied. Defendants have objected to this recommendation asserting that Food Lion consented to the entry, and that this consent bars any recovery. Even after assuming that the entry was consensual, the trespass claim is not barred. Under North Carolina law, consent to enter upon real property can be negated by a subsequent wrongful act in excess or in abuse of the authority to enter. See Blackwood v. Cates, 297 N.C. 163, 166, 254 S.E.2d 7 (1979). Food Lion has alleged that defendants Litt and Barnett engaged in fraudulent conduct against it. Assuming that the factual allegations supporting the fraud claim are true, this claim could constitute wrongful conduct which could negate any consent to enter given by Food Lion. It is not certain that Food Lion cannot prove a set of facts which would entitle it to relief on its trespass claim. For this reason and the reasons set forth in the Magistrate Judge's Recommendation, Defendants' motion to dismiss claim Three is DENIED.
Claim One of the amended complaint asserts a claim of common law fraud. In its sixth and seventh claims, Food Lion attempts to recover for violations of federal wiretapping statutes. Food Lion's fourteenth claim asserts a claim for civil conspiracy. The Court adopts the Magistrate Judge's Recommendation as to these claims. Accordingly, Defendants' motions to dismiss claim One and Fourteen are DENIED, and Defendants' motions to dismiss claims Six and Seven are GRANTED. Additionally, the Magistrate Judge has recommended that the motion to dismiss claims Two, Four, Five, and Eight, which assert claims for negligent supervision, respondeat superior liability, breach of fiduciary duty and constructive fraud, and unfair and deceptive trade practices be deferred pursuant to Rule 12(d). The Court adopts this recommendation. The motions to dismiss claims Two, Four, Five, and Eight are DEFERRED.
V.
The Magistrate Judge's Recommendation proposed limiting all of Food Lion's claims to exclude any award of damages to Food Lion resulting from alleged injury to its reputation due to the broadcast of the PTL segment. Food Lion has objected to any such limit on its damages while Defendants have asserted continuously that the entire complaint should be dismissed as violative of the First Amendment.
*821 Food Lion cites the Supreme Court's decision in Cohen v. Cowles Media Co., 501 U.S. 663, 111 S. Ct. 2513, 115 L. Ed. 2d 586 (1991) for the proposition that the First Amendment does not prevent a plaintiff from recovering damages when the press has violated a law of general applicability. ABC does not dispute this reading of Cohen but, instead, argues that Cohen is only the beginning of the analysis. ABC further argues that the Supreme Court's decision in Hustler Magazine v. Falwell, 485 U.S. 46, 108 S. Ct. 876, 99 L. Ed. 2d 41 (1988) applies and that a public figure cannot use a law of general applicability to recover reputation damages without establishing the strict requirements of a defamation claim. For reasons discussed below, under Cohen, the First Amendment does not bar Food Lion's claims for damages under its remaining claims. However, as argued by ABC, this finding does not end the analysis. This Court also finds that under Hustler, Food Lion cannot use its remaining claims to recover damages for injury to its reputation.
In Cohen, during the 1982 Minnesota gubernatorial campaign, the plaintiff (Dan Cohen), who was affiliated with one party, gave information about another party's candidate to two of the defendant publishers' newspapers. Id. at 665, 111 S. Ct. at 2516. Cohen provided the information in return for the newspapers' promises of confidentiality as to his identity. Id. Eventually, both newspapers decided to reveal Cohen's identity as part of their stories. On the same day that the stories were published, Cohen was fired by his employer. Id. Cohen sued the defendant publisher in Minnesota state court, alleging fraudulent misrepresentation and breach of contract.
The trial court rejected the defendant's argument that the First Amendment barred Cohen's cause of action. Subsequently, the jury awarded Cohen $200,000 in compensatory damages and $500,000 in punitive damages. On appeal, the Minnesota Court of Appeals affirmed the compensatory damages award but reversed the punitive damages award. See Cohen v. Cowles Media Co., 445 N.W.2d 248 (Minn.App.1989).
The Minnesota Supreme Court reversed the compensatory damages award, finding that "a contract cause of action is inappropriate for these particular circumstances." See Cohen v. Cowles Media Co., 457 N.W.2d 199, 203 (Minn.1990). Subsequently, the court addressed whether Cohen could assert an action based upon promissory estoppel. The court then determined that "in this case enforcement of the promise of confidentiality under a promissory estoppel theory would violate defendants' First Amendment rights." Id. at 205.
On appeal, the Supreme Court reversed the Minnesota Supreme Court and held that the First Amendment did not prohibit Cohen from recovering damages under promissory estoppel. Cohen, 501 U.S. at 665, 111 S. Ct. at 2516. The Court specifically noted that there is a "well-established line of decisions holding that generally applicable laws do not offend the First Amendment simply because their enforcement against the press has incidental effects on its ability to gather and report the news." Id. at 669, 111 S. Ct. at 2518. The Court in Cohen continued:
As the cases relied on by respondents recognize, the truthful information sought to be published must have been lawfully acquired. The press may not with impunity break and enter an office or dwelling to gather news. It is therefore beyond dispute that the publisher of a newspaper has no special immunity from the application of general laws. He has no special privilege to invade the rights and liberties of others. Accordingly, enforcement of such general laws against the press is not subject to stricter scrutiny than would be applied to enforcement against other persons or organizations.
Id. (internal citations omitted); see also Branzburg v. Hayes, 408 U.S. 665, 691, 692, 92 S. Ct. 2646, 2661, 2662, 33 L. Ed. 2d 626 (1972) (stating that "[i]t would be frivolous to assert ... that the First Amendment, in the interest of securing news or otherwise, confers a license on the [press] to violate valid ... laws. The Amendment does not reach so far as to override the interest of the public in ensuring that [the press] is [not] invading the rights of other citizens through reprehensible conduct forbidden to all other persons."). The Cohen Court then determined that since *822 the doctrine of promissory estoppel was a law of general applicability, "the First Amendment does not forbid its application to the press." Id. at 670, 111 S. Ct. at 2519. Thus, under Cohen, the First Amendment does not protect the press when it violates generally applicable criminal or civil laws in the name of newsgathering.
In this case, Food Lion has alleged that ABC has committed fraud, trespass, and other wrongful acts. Like promissory estoppel, the laws governing this behavior are laws of general applicability which do not "target or single out the press." Cohen, 501 U.S. at 670, 111 S. Ct. at 2518. Therefore, ABC, as a member of the press, has no special immunity from the application of laws such as North Carolina's unfair and deceptive trade practices statute, and the First Amendment does not bar Food Lion's claims against it.
However, the fact that Food Lion's claims are not barred by the First Amendment does not mean that Food Lion may recover all of the damages that it has allegedly suffered. In its amended complaint, Food Lion alleges that it suffered damages as a result of ABC's wrongful or illegal acts as well as damages to its reputation from the publication of Prime Time Live. For reasons discussed above, this Court finds that Food Lion may recover damages caused by ABC's alleged wrongful and illegal acts. However, this Court also finds that based upon the Supreme Court's analysis in Hustler, the First Amendment bars Food Lion from recovering publication damages for injury to its reputation as a result of the Prime Time Live broadcast.[1]
As pointed out in the Magistrate Judge's Recommendation, Food Lion seeks to recover for injuries alleged to have been caused by ABC's Prime Time Live broadcast. These alleged injuries are both reputational and non-reputational in nature. According to Food Lion, these alleged injuries were the result of ABC's unlawful gathering of information and subsequent publication. Food Lion does not allege that any of the alleged unlawfully obtained and published information was false. Instead, Food Lion contends that ABC's alleged wrongful actions in obtaining information about Food Lion are sufficient to allow Food Lion to recover both reputational and non-reputational damages regardless of whether the information published by ABC was true or false. For reasons discussed below, the Court disagrees with this contention. As discussed earlier, the Supreme Court in Cohen determined that the First Amendment did not bar plaintiff's claim for damages under a promissory estoppel theory. In reaching this conclusion, the Court followed a long line of cases which hold that generally applicable laws (such as promissory estoppel) "do not offend the First Amendment simply because their enforcement against the press has incidental effects on its ability to gather and report the news." Cohen, 501 U.S. at 669, 111 S. Ct. at 2518. However, in addition to following a long line of established precedent, the Court in Cohen was also careful to emphasize the nature of Cohen's claim, stating:
Nor is Cohen attempting to use a promissory estoppel cause of action to avoid the strict requirements for establishing a libel or defamation claim. As the Minnesota Supreme Court observed here, "Cohen could not sue for defamation because the information disclosed [his name] was true." Cohen is not seeking damages for injury to his reputation or his state of mind. He sought damages in excess of $50,000 for a breach of a promise that caused him to lose his job and lowered his earning capacity.
Cohen, 501 U.S. at 671, 111 S. Ct. at 2519 (emphasis added) (citation omitted) (quoting Cohen v. Cowles Media Co., 457 N.W.2d 199, 202 (Minn.1990)). Thus, it appears that in determining that the First Amendment does not prohibit a plaintiff from recovery for a defendant's violation of a generally applicable law, the Cohen Court was mindful of the type of damages that the plaintiff sought to recover. *823 Where a plaintiff sought recovery for non-reputational or non-state of mind injuries, the Cohen Court indicated that such a plaintiff could recover these damages without offending the First Amendment. Where, however, a plaintiff seeks to use a generally applicable law to recover for injury to reputation or state of mind while avoiding the requirements of a defamation claim (requiring proof of falsity and actual malice), the Cohen holding does not appear to be applicable. To the extent that Food Lion is attempting to recover reputational damages without establishing the requirements of a defamation claim, this case more closely resembles Hustler. In Hustler, the plaintiff, Reverend Jerry Falwell, sued Hustler Magazine ("Hustler") as a result of a parody in which Hustler portrayed Falwell as having engaged in a drunken sexual encounter with his mother in an outhouse. Falwell brought claims of invasion of privacy, libel, and intentional infliction of emotional distress. Hustler, 485 U.S. at 47-48, 108 S. Ct. at 877. The Court held that when public figures seek damages for intentional infliction of emotional distress for such satirical publications, they must establish the elements of a constitutional defamation claim (actual malice and falsity). Id. at 56, 108 S. Ct. at 882. In reaching its holding, the Court undertook a balancing test and determined that the First Amendment interest of the "fundamental importance of the free flow of ideas and opinions on matters of public interest and concern" outweighed the state's interest in protecting public figures from emotional distress. Id. at 50-56, 108 S. Ct. at 879-82. Thus, in Hustler, the Supreme Court determined that the First Amendment barred the plaintiff from recovering damages under the generally applicable law of intentional infliction of emotional distress.[2]
In this case, this Court agrees with the Magistrate Judge's Recommendation that Food Lion is, at least in part, attempting to recover for injury to its reputation while staying clear of the strict requirements of a defamation claim. As Judge Sharp correctly pointed out, "Food Lion seeks to recover damages for injury to its reputation (the publication damages that are characteristic of defamation actions) while avoiding the First Amendment requirements of showing falsity and actual malice." (Magistrate Judge's Recommendation at p. 30-31.) To the extent that Food Lion's damages are reputational in nature, the Supreme Court's decision in Hustler prevents recovery. Thus, in accordance with Cohen and Hustler, Food Lion may recover only those damages resulting from ABC's alleged trespass, fraud, unfair and deceptive trade practices, as well as those from the other remaining claims. However, Food Lion may not recover any publication damages for injury to its reputation as a result of the Prime Time Live broadcast.[3]
In sum, if Food Lion is ultimately successful in proving its case to a jury, it may recover non-reputational damages under *824 North Carolina's unfair and deceptive trade practices statute and the other laws governing the remaining claims without offending the First Amendment. The laws governing the remaining claims are generally applicable laws which do not target the press. Holding ABC accountable for any damages it allegedly caused Food Lion in violation of these laws would not violate the First Amendment. Food Lion may not, however, under the guise of some other claim, recover publication damages for injury to its reputation without establishing the defamation requirements of actual malice and falsity. Defendants' motion to dismiss all claims as violative of the First Amendment is DENIED.
VI.
Defendant Barnett has filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Judge Sharp has recommended that the motion be denied. Defendant Barnett has not objected to the Recommendation. The Court adopts the Magistrate Judge's recommendation as to the 12(b)(2) motion. Accordingly, Defendant Barnett's motion to dismiss for lack of personal jurisdiction is DENIED.
VII.
In sum, Food Lion's claims of fraud, negligent supervision, trespass, respondeat superior liability, breach of fiduciary duty and constructive fraud, unfair and deceptive trade practices, and civil conspiracy remain, albeit limited by the holding that Food Lion may not recover reputational damages. Food Lion's claims of violations of civil RICO and federal wiretapping statutes have been dismissed.
ORDER
On April 26, 1994, the United States Magistrate Judge's Recommendation was filed and notice was served on the parties pursuant to 28 U.S.C. § 636(b). The Court has considered de novo the motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) and has reviewed the motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2).
For the reasons stated in the Memorandum Opinion filed contemporaneously herewith, the Court hereby adopts the Magistrate Judge's Recommendation as to the Rule 12(b)(2) motion and as to the 12(b)(6) motions on claims one, two, four, five, six, seven, eight, and fourteen. The reasoning of the discussion on claim three is adopted and should be considered with the discussion contained in the memorandum opinion filed contemporaneously with this ORDER.
IT IS THEREFORE ORDERED that Defendants' motion to dismiss Plaintiff's fraud claim is DENIED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's negligent supervision claim is DEFERRED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's trespass claim is DENIED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's respondeat superior claim is DEFERRED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's breach of fiduciary duty and constructive fraud claim is DEFERRED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's wiretapping claims is GRANTED.
IT Is FURTHER ORDERED that Defendants' motion to dismiss Plaintiff' unfair and deceptive trade practices claim is DEFERRED
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's civil RICO claims is GRANTED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss Plaintiff's civil conspiracy claim is DENIED.
IT IS FURTHER ORDERED that Defendants' motion to dismiss all claims on First Amendment grounds is DENIED.
IT IS FURTHER ORDERED that Defendant Barnett's motion to dismiss for lack of *825 personal jurisdiction, pursuant to Rule 12(b)(2) is DENIED.
NOTES
[1] Although Food Lion may not recover publication damages for injury to its reputation, it may recover any non-reputational damages it allegedly suffered to the extent recoverable under North Carolina's unfair and deceptive trade practices statute and other laws governing the remaining claims.
[2] On its face, it might appear that Cohen and Hustler are at odds with one another. However, the Cohen majority expressly noted this distinguishing feature between the two cases, stating:
Cohen [is not] attempting to use a promissory estoppel cause of action to avoid the strict requirements for establishing a libel or defamation claim. As the Minnesota Supreme Court observed here, "Cohen could not sue for defamation because the information disclosed [his name] was true." Cohen is not seeking damages for injury to his reputation or his state of mind. He sought damages in excess of $50,000 for a breach of a promise that caused him to lose his job and lowered his earning capacity. Thus this is not a case like Hustler Magazine v. Falwell where we held that the constitutional libel standards apply to a claim alleging that the publication of a parody was a state-law tort of intentional infliction of emotional distress.
Cohen, 501 U.S. at 671, 111 S. Ct. at 2519 (emphasis added) (internal citations omitted) (quoting Cohen v. Cowles Media Co., 457 N.W.2d 199, 202 (Minn.1990)).
[3] In paragraph 160 of its amended complaint, Food Lion alleges damages such as lost sales, profits, business opportunities and goodwill, a decrease in the value of its securities, and an increase in the cost of obtaining funds. The parties have not had the opportunity to brief the issue of the definition of "reputational damages" and which of Food Lion's alleged damages could be considered "reputational." Since the determination of what type of damages are reputational or non-reputational is not necessary for an adjudication at the 12(b)(6) stage, the Court will defer on such a ruling. Such an adjudication will be made at the time for summary judgment, if raised by the parties. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2432275/ | 456 S.W.2d 896 (1970)
DUN AND BRADSTREET, INC., Petitioner,
v.
Truman O'NEIL, Respondent.
No. B-1929.
Supreme Court of Texas.
June 24, 1970.
Rehearing Denied July 22, 1970.
*897 Stubbeman, McRae, Sealy, Laughlin & Browder, W. B. Browder, Jr., and James G. Noland, Midland, for petitioner.
Rountree, Renner & Snell, Robert B. Snell, Lamesa, for respondent.
HAMILTON, Justice.
Plaintiff-respondent, Truman O'Neil, brought this suit for libel against defendant-petitioner, Dun & Bradstreet, Inc., because as a part of its credit reporting services defendant had erroneously reported by "Special Notice" that plaintiff had filed a voluntary petition in bankruptcy. The "Special Notice" had been sent to fourteen of defendant's subscribers who had requested credit information about plaintiff *898 during the preceding twelve months. Defendant alleged conditional privilege as a defense. At the close of plaintiff's evidence the trial court ordered an instructed verdict for defendant. The Court of Civil Appeals reversed the trial court's judgment, holding that defendant's conditional privilege had not been shown because the evidence did not reveal whether or not the fourteen persons who received the "Special Notice" were interested in plaintiff's financial status at the time the "Special Notice" was sent out. 448 S.W.2d 153. We reverse the judgment of the Court of Civil Appeals and affirm the trial court's judgment.
Defendant is a mercantile agency which provides credit information to its subscribers under a subscription agreement. The credit reports state that such information is furnished in strict confidence. As part of the "arrangement" with its subscribers defendant offers a "continuing service" which means that for a period of twelve months after a subscriber requests credit information about a particular person, defendant will furnish to that subscriber all additional up-dated information about that person.
On March 24, 1965, defendant issued a "Special Notice" declaring that plaintiff had filed a voluntary petition in bankruptcy. This notice was sent to all defendant's subscribers who during the preceding twelve months had requested credit information about plaintiff. There were fourteen such subscribers. The next day defendant issued the following correction notice to the same fourteen subscribers:
"Any report to the effect that Alvin Truman O'Neil filed voluntary petition in bankruptcy is erroneous and should be disregarded.
"A voluntary petition in bankruptcy was filed by Alvin Numan O'Neil, a brother, but this did not in any way involve Alvin Truman O'Neil."
The Court of Civil Appeals stated that plaintiff had been libeled as a matter of law, that defendant relied upon a conditional privilege as a defense, that a credit reporting agency is entitled to a conditional privilege if certain requirements are met, and that once the conditional privilege is shown to exist the burden is on the plaintiff to show that the privilege is lost, that is, plaintiff must then show actual malice. We are in agreement with these statements. Likewise, we are in agreement with the following general rules of law expressed by the Court of Civil Appeals regarding the requirements which defendant had to meet in order to be entitled to the defense of conditional privilege:
"* * * it has been held in the great majority of cases that reports of mercantile or other credit-reporting agencies, furnished in good faith to one having a legitimate interest in the information, are privileged.
"* * * it must have been furnished to persons having an interest in the information reported. * * * But the report of a credit-reporting agency loses its privileged character if it is sent indiscriminately to subscribers generally, or to those not inquiring concerning, or interested in knowing, the condition and financial standing of the person reported upon." 15 Am.Jur.2d, Collection and Credit Agencies, § 22 and § 24 respectively.
"There is general agreement, however, that the privilege is limited by the extent to which the particular subscriber to whom the publication is made has an apparent, present interest in the report; and that in so far as there is general publication to those without such an interest, the risk of false information is one to be borne by the business." Prosser, Handbook of the Law of Torts (Third Edition, 1964) at page 810.
"If an individual voluntarily or for profit give false and injurious information to persons interested in the trade and commercial standing of another at the time the information is given, such *899 communications would be privileged; but if he furnish the same information to others not so interested,to traders and merchants, as a class,the communication would not be privileged." Bradstreet Co. v. Gill, 72 Tex. 115, 9 S.W. 753, at page 757 (1888).
Our disagreement with the Court of Civil Appeals stems from that Court's interpretation of the general rules of law hereinabove quoted as applied to the facts here involved. The Court of Civil Appeals held that defendant's conditional privilege had not been shown to exist because there was no showing that defendant's fourteen subscribers had any interest in the financial status of plaintiff on March 24, 1965, the date on which the "Special Notice" of bankruptcy was sent out, even though it was shown that these fourteen subscribers had inquired about plaintiff's status during the preceding twelve months. Apparently, the Court relied primarily upon the statement "persons interested * * * at the time the information is given" taken from Bradstreet Co. v. Gill, supra.
We hold as a matter of law defendant's conditional privilege was shown to exist. "Such privilege is termed conditional or qualified because a person availing himself of it must use it in a lawful manner and for a lawful purpose. The effect of the privilege is to justify the communication when it is made without actual malice." Buck v. Savage, 323 S.W.2d 363 (Tex.Civ.App.1959) writ ref'd, N.R.E. Defendant did not release credit information to its subscribers in general as was done in Bradstreet Co. v. Gill, supra, nor did defendant publish the information "for general use of subscribing traveling salesmen and persons engaged in merchandising" as was done in R. G. Dun & Co. v. Shipp, 60 S.W.2d 502 (Tex.Civ.App.1933) reversed on issue of damages, 127 Tex. 80, 91 S.W.2d 330. Rather, defendant sent the "Special Notice" of bankruptcy in "strict confidence" only to subscribers who during the preceding twelve months had requested credit information about plaintiff in particular. Under their contractual "arrangement" defendant was obligated to send additional information about plaintiff to the fourteen subscribers who had requested information about plaintiff during the preceding twelve months. When the subscribers paid their subscription price their payment entitled them to defendant's one year "continuing service." Such an arrangement shows that the subscribers were not only interested in information at the time of their initial request but that they were also interested in subsequent information. Defendant's "continuing service" could be for such a long period of time as to be unreasonable but we hold that one year is not unreasonable. Therefore, we hold that defendant's one year "continuing service" policy is sufficient to meet the requirement that the libelous statement be sent only to "persons interested * * * at the time the information is given" and that the libelous statement made by defendant about plaintiff was conditionally privileged.
Our holding hereinabove expressed is supported by statements made by courts in other jurisdictions. Dun & Bradstreet, Inc. v. Robinson, 345 S.W.2d 34 (Ark.Sup. 1961) involved a libel suit wherein Dun & Bradstreet issued a "special notice report" to thirty-six of its subscribers who allegedly had theretofore requested information pertaining to Robinson. The Court stated that it agreed with the trial court that the publications were made upon conditionally privileged occasions. The Court also cited the general rule that "* * * the defense of qualified privilege is available to a mercantile agency relative to reports referring to credit or financial standing and furnished subscribers having an interest in the matter." In A. B. C. Needlecraft Co. v. Dun & Bradstreet, Inc., 245 F.2d 775 (C. C.A., 2nd, N.Y.1957) Dun & Bradstreet had issued a supplemental report to ten of its subscribers who had previously inquired about A. B. C Needlecraft Co. The Court stated that Dun & Bradstreet's "* * * major premisethat the statement was qualifiedly privilegedis undoubtedly correct and was so accepted by the trial *900 court." H. E. Crawford Co. v. Dun & Bradstreet, Inc., 241 F.2d 387 (C.C.A.4th, N.C. 1957) involved a libel suit in which Dun & Bradstreet had mailed a report concerning the H. E. Crawford Co. to forty-three of Dun & Bradstreet's subscribers, "each of whom had specially requested credit reports of and concerning Crawford." The Court held that "The delivery of financial information by Dun & Bradstreet * * * to subscribers, and only to subscribers, specifically requesting reports on Crawford, would prima facie fall within the scope of privileged communications; that is, the occasion was privileged."
Having found that defendant's conditional privilege exists, we now turn to the question of actual malice, such malice being required to overcome defendant's privilege. Plaintiff contends that there is evidence to raise a fact issue on the question of malice. The evidence reveals that defendant's Amarillo file supervisor received a report by telephone from defendant's Lubbock reporter. The reporter informed the supervisor that Alvin Numan O'Neil had filed a voluntary petition in bankruptcy and that he might be connected with Lamesa Mack Sales. The Amarillo file supervisor then pulled defendant's file on Lamesa Mack Sales with which Alvin Truman O'Neil, plaintiff, was connected. This file and the notes taken during the telephone conversation with the Lubbock reporter were taken to Mr. Maddy, defendant's reporting and service manager in the Amarillo office. His duty was to check the bankruptcy information and compose the "Special Notice" of bankruptcy. The telephone notes delivered to him contained the name Alvin Numan O'Neil but not Alvin Truman O'Neil, plaintiff. He made no comparison between the bankruptcy information and plaintiff's financial information recorded in defendant's files approximately five months earlier. He testified that had he made such a comparison of the information it might have raised a question in his mind and that he understood the seriousness of bankruptcy notices. He further testified as follows:
"I didn't look at it, I'm afraid, as carefully as I should, because we had some people ina representative in from our regional office in Dallas, and when you've got an executive breathing down your neck, well I'm afraid you're not as careful."
The telephone notes stated the name of the attorney and the court involved in the voluntary petition in bankruptcy. Maddy testified that in order to verify his information it would have been simple to telephone the attorney and/or the clerk of the court in which the petition in bankruptcy was filed. However, there is no evidence that Maddy or any other employee of defendant knew that the "Special Notice" of bankruptcy was false or had any conscious doubts regarding its truth or falsity.
We hold that there is no probative evidence to raise a fact issue on the question of actual malice. El Paso Times, Inc. v. Trexler, 447 S.W.2d 403 (Tex.1969) was a libel suit involving the question of whether or not the circumstances surrounding the publication of the alleged libelous statements constituted evidence of malice necessary to overcome a privileged publication. In El Paso Times this court defined actual malice the same as did the United States Supreme Court in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686, that is, "with knowledge that it was false or with reckless disregard of whether it was false or not." The New York Times definition of actual malice which this Court applied in El Paso Times is likewise applicable in the instant case, all three cases being libel suits, all three cases involving publishers' privileges and all three cases requiring malice to overcome the privileges. Insofar as the definition of actual malice is concerned we do not think the instant case involving a conditional privilege is distinguishable from the New York Times and El Paso Times cases which involve First *901 Amendment Constitutional privileges. In El Paso Times this Court held:
"Failure to investigate the truth or falsity of a statement before it is published has been held insufficient to show actual malice. Negligence or failure to act as a reasonably prudent man is likewise insufficient."
See New York Times Co. v. Sullivan, and other cases cited in El Paso Times, Inc. v. Trexler. Plaintiff's evidence may establish that defendant was negligent in failing to verify the bankruptcy information but the evidence does not raise a fact issue regarding whether or not the defendant acted "with knowledge that it was false or with reckless disregard of whether it was false or not."
Having found that the evidence shows that defendant's publication was conditionally privileged and having found that plaintiff's evidence fails to raise a fact issue on the question of actual malice, we conclude that the trial court properly ordered an instructed verdict for defendant.
The judgment of the Court of Civil Appeals is reversed and the judgment of the trial court is affirmed.
REAVLEY, Justice (dissenting).
Dun & Bradstreet did enjoy a conditional privilege to publish to inquiring subscribers information on Truman O'Neil. Had it received a report that Truman O'Neil was bankrupt, because of the duty to those subscribers, it could have circulated the reporteven, in the absence of actual malice, if the report were later proved to have been false.
But Dun & Bradstreet received no report on Truman O'Neil. Without any source at all, it published a wholly false statement. I would hold that there is no privilege to generate and publish false reports, even by innocent mistake. In the alternative, I would hold that the privilege is lost by the failure to exercise care in identification of the subject. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2382445/ | 310 S.W.2d 88 (1958)
Carl GLAZE, Appellant,
v.
The STATE of Texas, Appellee.
No. 29343.
Court of Criminal Appeals of Texas.
January 8, 1958.
Woody & Showers, Clyde W. Woody, Houston, for appellant.
*89 L. F. Benson, Dist. Atty., Galveston, William H. Davis, Jr., Asst. Dist. Atty., Galveston, Leon B. Douglas, State's Atty., Austin, for the State.
MORRISON, Presiding Judge.
The offense is the possession of marijuana; the punishment, three years.
Investigator Henson of the staff of the Criminal District Attorney of Galveston County and Assistant Criminal District Attorney Zgourides, armed with a search warrant issued to Henson authorizing him to search the appellant's automobile for narcotics, presented themselves at his apartment and made their presence known; the appellant invited them in and inquired of the nature of their business. Upon being told the nature of the search warrant which Henson possessed, the appellant said, "You have got me. * * * I have got some stuff here in the apartment," and then walked to the kitchen and returned with approximately thirty marijuana cigarettes and a half gallon of bulk marijuana. Following this, the search warrant was read to the appellant, and Henson descended the stairs and searched the appellant's automobile which was located nearby, and there found three marijuana cigarettes.
The appellant did not testify in his own behalf but offered several witnesses who gave testimony concerning his reputation.
We find the evidence sufficient to support the conviction and will discuss those contentions advanced by able counsel in his brief and argument which we deem determinative of this appeal.
He first contends that Henson was not a peace officer who was authorized to execute a search warrant. While the disposition of this case does not necessarily depend upon an answer to this contention, we do observe a fact which we heretofore overlooked; that Article 326k-6, Vernon's Ann.Civ.St., provides that investigators appointed by district and county attorneys shall have the same authority as sheriffs of the county to serve any warrants, and Article 326k-28, Section 3, Vernon's Ann. Civ.St., provides that the Criminal District Attorney of Galveston County shall have the same powers as are by law conferred upon district and county attorneys throughout the State and that it would naturally follow that having such power, an investigator which he might appoint would have the same authority as any other investigator.
This is the fact situation before us, as we see it: An officer approaches the home of an accused and is invited in; he then tells the accused that he has a warrant authorizing him to search the accused's automobile. At this juncture, the accused makes an oral confession which would be admissible under the terms of Article 727, Vernon's Ann.C.C.P., and the contraband is recovered by the officer. This oral confession was admissible as such and constitutes probable cause for the subsequent search of the accused's automobile.
Surely, this evidence was just as admissible as if the appellant had told the officer where he might find the marijuana in the kitchen and the officer had proceeded to recover the same.
The above statement of the case obviates the necessity of discussing other claimed defects in the search warrant and the cases relied upon by the appellant in support of the same.
Appellant complains that the State was not required to elect as to whether they would rely for a conviction upon the marijuana found in the apartment or that found in the automobile.
In Long v. State, 158 Tex. Crim. 651, 258 S.W.2d 818, four loads of whiskey were caused to be deposited at a certain place by the appellant. We held that it was not error for the court to refuse to require the State to elect as to which load they intended to rely for a conviction. See also Jenkins *90 v. State, 114 Tex. Crim. 320, 24 S.W.2d 1092, where the doctrine of election in a case such as the one at bar is fully discussed.
Finding no reversible error, the judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2384631/ | 43 N.J. 453 (1964)
205 A.2d 713
CHRISTOPHER JACKMAN AND WINFIELD CHASMAR, JR., PLAINTIFFS-APPELLANTS,
v.
JOHN M. BODINE, COUNTY CLERK OF WARREN COUNTY; HENRY B. CARR, COUNTY CLERK OF SUSSEX COUNTY; THOMAS J. GRIEVES, COUNTY CLERK OF SALEM COUNTY; BERGEN N. CARTER, JR., COUNTY CLERK OF HUNTERDON COUNTY; HENRY F. ANDERSON, COUNTY CLERK OF CAPE MAY COUNTY; ROBERT J. BURKHARDT, SECRETARY OF STATE OF THE STATE OF NEW JERSEY; FRANK S. FARLEY, PRESIDENT OF THE SENATE OF THE STATE OF NEW JERSEY, AND JOHN W. DAVIS, SPEAKER OF THE GENERAL ASSEMBLY OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS.
The Supreme Court of New Jersey.
Argued November 6, 1963.
Reargued October 5, 1964.
Decided November 25, 1964.
*455 Mr. David Friedland and Mr. Jacob Friedland (November 6, 1963 argument) argued the cause for appellants (Mr. Edward A. Cohen, of counsel; Messrs. Friedland, Schneider & Friedland, attorneys).
Mr. Wesley L. Lance and Mr. James Dorment, Jr. (November 6, 1963 argument) argued the cause for respondent President of the Senate (Messrs. O'Mara, Schumann, Davis & Lynch, of counsel).
Mr. Walter H. Jones (October 5, 1964 argument) argued the cause for respondent Speaker of the General Assembly (Mr. Marvin H. Gladstone, on the brief).
*456 Mr. John T. Madden (October 5, 1964 argument) and Mr. William Martin Cox (November 6, 1963 argument) argued the cause for respondent County Clerk of Sussex County (Messrs. Dolan & Dolan, attorneys).
Mr. Arthur J. Sills, Attorney General of New Jersey (October 5, 1964 argument) argued the cause for respondent Secretary of State (Mr. Alan B. Handler, First Assistant Attorney General, of counsel and on the brief); Mr. Theodore I. Botter, First Assistant Attorney General (November 6, 1963 argument) argued the cause for respondents Secretary of State and Speaker of the General Assembly.
The opinion of the court was delivered by WEINTRAUB, C.J.
In Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962), the Supreme Court of the United States held justiciable the question whether the basis established by a State for election to its legislature denies equal protection of the law in violation of the Fourteenth Amendment to the Federal Constitution. It held also that the federal courts had jurisdiction of the controversy.
The majority opinion expressly refrained from stating a test to measure compliance with the equal protection provision. A view upon that topic appeared but obliquely in the majority's discussion of the claim that the lack of manageable judicial standards made the issue political and nonjusticiable. In that connection the majority opinion said (369 U.S., at p. 226, 82 S.Ct., at p. 715, 7 L.Ed.2d, at p. 691):
"* * * Judicial standards under the Equal Protection Clause are well developed and familiar, and it has been open to courts since the enactment of the Fourteenth Amendment to determine, if on the particular facts they must, that a discrimination reflects no policy, but simply arbitrary and capricious action."
In the matter now before us, plaintiffs sought an adjudication that the provisions of our State Constitution fixing the composition of the State Legislature run afoul of the equal *457 protection clause. On motion the trial court held those provisions are valid because they reflect a rational policy, thus meeting the standard of the equal protection clause suggested by the above quotation from Baker v. Carr. Jackman v. Bodine, 78 N.J. Super. 414 (Ch. Div. 1963).
We certified the ensuing appeal before the Appellate Division considered it. The matter was argued before us on November 6, 1963. Aware of causes pending in the Supreme Court of the United States, we withheld decision in the hope that the opinions in those matters would spell out the demands of equal protection in this area. On June 15, 1964 the Supreme Court decided Reynolds v. Sims, 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d 506; WMCA, Inc. v. Lomenzo, 377 U.S. 633, 84 S.Ct. 1418, 12 L.Ed.2d 568; Maryland Committee for Fair Representation v. Tawes, 377 U.S. 656, 84 S.Ct. 1429, 12 L.Ed.2d 595; Davis v. Mann, 377 U.S. 678, 84 S.Ct. 1441, 12 L.Ed.2d 609; Roman v. Sincock, 377 U.S. 695, 84 S.Ct. 1449, 12 L.Ed.2d 620; Lucas v. Forty-Fourth General Assembly of Colorado, 377 U.S. 713, 84 S.Ct. 1459, 12 L.Ed.2d 632 (1964). We then called for and received further briefs and argument with respect to the impact of those cases.
I.
Counsel for the Speaker of the General Assembly asks that we stay our hand until the Legislature has had an opportunity to act. We do not see how we can do nothing or how such abstention would help.
There are two basic questions involved in this litigation. One is whether the legislative article of our State Constitution is invalid in the respects alleged by plaintiffs. The other, if such invalidity is found, is what must be done to meet the federal demand. Counsel's request that we abstain for the time being may be appropriate with respect to the second question, as to which we shall say more later in this opinion. But as to the first question, we cannot refuse to decide a controversy *458 that is fully accrued and justiciable. Nor, if we delayed, could the legislators conclude the quarrel. If they unanimously resolved the Legislature was validly constituted, surely plaintiffs would not accept their judgment. And if the legislators unanimously resolved their branch was not validly constituted, some citizen or taxpayer would likely demand the Court's judgment upon the issue; indeed, counsel for the President of the Senate urges the Legislature is properly constituted. Hence that critical question would likely persist until settled judicially.
II.
In Reynolds v. Sims, supra, 377 U.S., at p. 568, 84 S.Ct., at p. 1385, 12 L.Ed.2d, at p. 531, the Court, accepting as applicable the aphorism "one person, one vote," concluded:
"We hold that, as a basic constitutional standard, the Equal Protection Clause requires that the seats in both houses of a bicameral state legislature must be apportioned on a population basis. Simply stated, an individual's right to vote for state legislators is unconstitutionally impaired when its weight is in a substantial fashion diluted when compared with votes of citizens living in other parts of the State. * * *"
These two sentences are fused in the companion opinions into the single statement that both houses of a bicameral state legislature must be apportioned "substantially on a population basis." See, e.g., WMCA v. Lomenzo, supra, 377 U.S., at p. 652, 84 S.Ct., at p. 1428, 12 L.Ed.2d, at p. 580.
A.
Ours is a bicameral legislature. Art. IV, § I of the Constitution of 1947 provides that "The legislative power shall be vested in a Senate and General Assembly." Section II, par. 1 reads:
"The Senate shall be composed of one Senator from each county, elected by the legally qualified voters of the county, for a term beginning *459 at noon of the second Tuesday in January next following his election and ending at noon of the second Tuesday in January four years thereafter."
Section III, par. 1 reads:
"The General Assembly shall be composed of members elected biennially by the legally qualified voters of the counties, respectively, for terms beginning at noon of the second Tuesday in January next following their election and ending at noon of the second Tuesday in January two years thereafter. The members of the General Assembly shall be apportioned among the several counties as nearly as may be according to the number of their inhabitants, but each county shall at all times be entitled to one member and the whole number of members shall never exceed sixty. The present apportionment shall continue until the next census of the United States shall have been taken. Apportionment of the members of the General Assembly shall be made by the Legislature at the first session after the next and every subsequent census, and each apportionment when made shall remain unaltered until the following census shall have been taken."
It is at once evident that these provisions of our Constitution, on their face, do not meet the quoted test of Reynolds v. Sims. As to the General Assembly, the apportionment is basically upon population, and it may readily be urged that the apportionment is substantially on population notwithstanding that each county is entitled to one member and the whole number of members may not exceed 60.[1] But as to the Senate, it is perfectly plain that the apportionment basis is indifferent *460 to population. This is true in the literal terms of the constitutional provision; it is equally true in its actual operation because the counties vary widely in population.[2]
If the Senate is malapportioned, we need not consider whether the General Assembly could pass muster. In Lucas *461 the Supreme Court held that if one house is malapportioned, the deficiency vitiates the entire legislative structure, obviating the need for considering whether the second house could withstand an attack upon it if it were the sole legislative body. 377 U.S., at p. 713, 84 S.Ct., at p. 1459, 12 L.Ed.2d, at pp. 646-47. The reason is that a court cannot fairly assume the people would have intended the one house to survive as the lone repository of the legislative power. Hence, if the Senate is fatally constituted, an expression by us upon the General Assembly would be wholly advisory, there being no remedial proposal before us continuing a legislative body structured as is the General Assembly.
In view of the allocation of one senator to each county, none of the parties before us suggests that our Legislature literally meets the quoted standard of Reynolds v. Sims, but counsel for the President of the Senate, while conceding that much, does contend that our constitutional plan is nonetheless beyond the thrust of Reynolds v. Sims for other reasons to which we now turn.
B.
The principal argument upon which Reynolds is sought to be distinguished runs this way: our legislative plan is essentially the same as that of the Congress and is republican in form; the conclusion in Reynolds that both houses must be apportioned upon population stems from the concept of "one person, one vote"; and since the people at a statewide poll approved the present Constitution on the basis of "one person, one vote," it should follow that the demands of equal protection of the law were met.
One component of the argument is that the state and federal legislatures are essentially the same in structure. We think this is correct. As to the Senate, both Constitutions provide for equal representation of people of existing political areas without regard to their numbers, the Federal Constitution providing for two senators "from each State" (Art. I, § *462 3; Seventeenth Amendment), while the State Constitution, quoted above, provides for one member "from each county." (Art. IV, § II, par. 1.) As to the lower house, both Constitutions call for apportionment according to population and both assure one representative to each "State" in the case of the Federal Constitution (Art. I, § 2) and to each "county" in the case of the State Constitution (Art. IV, § III, par. 1). The Federal Constitution does not specify the maximum membership of the House, beyond saying that the number of representatives shall not exceed one for every 30,000 people, while the State Constitution fixes the membership at not more than 60. We see no significance in this difference.[3]
In this connection we note that the counties of our State were established to meet the needs of population centers as they developed, and that whatever partisan advantage may have been thought to reside in the creation of a particular county, county lines have not since been manipulated for such gain. No new counties have been established since 1857, and as a practical matter under our existing Constitution no one today would attempt to gerrymander county lines for partisan purposes. The citizens of each county have a community of interest by virtue of their common responsibility to provide *463 for public needs and their investment in the plants and facilities established to that end. Anciently, and still today, the counties reflect different economic interests, although of course these economic interests are not perfectly contained or separated by any political line, municipal, county or State. So, certain counties have a dominant concern with manufacturing and commerce; others have a large stake in agriculture; still others lean heavily upon the resort industry; and finally a few counties have a special interest in the products of the sea. And of course there may be competing area interests in such matters as highways, taxation, and water supply.
Hence we think it correct to say that our State Legislature does parallel the federal plan. We think it also true that our legislative structure is a republican form of government within the meaning of Article IV, § 4 of the Federal Constitution under which "The United States shall guarantee to every State in this Union a Republican Form of Government." Our present legislative plan is essentially the same as that provided in our Constitution of 1776.[4] The forms of government in the States at the time the Union was formed are deemed to be "republican." Minor v. Happersett, 21 Wall. 162, 88 U.S. 162, 22 L.Ed. 627, 631 (1875).
This brings us to the question whether the comparability of structure of our State Legislature with that of the Federal Congress can be significant in this controversy.
*464 The contending views upon the "federal analogy," as it is called, are well known. On the one hand, it is urged that equal protection requires an equal voice in the selection of legislators to the end that the power to legislate shall reside with the majority of the voters; that both houses, if there are more than one, must be so constituted as to assure the majority will; that the voters' rights are not equal if the amount of their representation depends upon the place where they live or the numbers of their neighbors; that the argument that the minority who elect the majority of one house, being unable to legislate without the concurrence of the popular house, can exercise only a restraining role in the legislative process is of no force because, for protection against the majority, the minority must look to the Bill of Rights and the other limitations upon the popular will to be found in our constitutional plan of government; that area interests receive adequate voice when elections are held in districts rather than at large; and finally that the federal plan cannot be deemed to reflect a different view of the demands of equal protection because the federal structure was devised as a compromise by 13 sovereign States, whereas the counties are mere political divisions or agencies of the State without any sovereignty of their own.
The argument the other way notes that actually the 13 States had already agreed "that the Union shall be perpetual" by the Articles of Confederation, Art. XIII, but nonetheless, if it be granted that the 13 States (perhaps more strictly their inhabitants, i.e., "WE THE PEOPLE of the United States") bargained as sovereigns in the formation of a new constitution, still it does not follow that the "compromise" they reached was an arbitrary invention which denied the people of the United States something so fundamental as equal protection of the law.[5] Rather, it is argued, the States agreed *465 upon that plan because it was well suited to meet the needs of the people, needs which are the same whether the relationship involved is between the people and the Federal Government or between the people and the State Government; that the plan thus accepted was not originated at the Constitutional Convention of 1787, but in fact was an existing form of government, New Jersey for one having that form and of course having adopted it without the pressure of the need for a political union among sovereign entities.
The argument continues that so long as the membership in one house is based on population, the affirmative power to legislate remains in the majority of the people for the reason that the house apportioned on the basis of area can exercise only a veto power; that this veto power is no different in principle from the sundry other restraints upon the majority will which give character to our constitutional plan of government. The point pressed is that no man is a member of the majority upon all issues and hence all the citizens have in common a concern that their interests as members of sundry minorities may not be heard or adequately considered by the majorities of the moment upon a particular issue; that there is no single way for the majority to express its will upon the many topics which arise in the Legislature, even political parties being inadequate to that end; that although county lines surely do not mark the boundaries of most interests, still they reflect enough to permit the majority to vest a veto in a house in which each such area has an equal voice; that despite the constant threats of deadlock and doom which abound in our constitutional system, the necessary statesmanship appears when the need is great, and the experience at the federal level so demonstrates.
Indeed, they argue, the election of State legislators from districts rather than at large from the entire State bespeaks the existence of area interests. More than that, elections by districts involve the same or equal vice, if such it is, of denying a person a meaningful vote because of the place where he *466 lives; that this is so because a man who votes with the minority party in the county casts a vote which, while it will be counted, surely will not count in the election to these State legislative offices, whereas if the legislators were chosen at large in a statewide election, his vote would not be trapped by district lines. Hence, unless all State legislators are elected at large, it must follow in one way or another that a person will be denied a truly equal vote because of the place in which he lives, while others gain a voice on that very account. In fact, as Mr. Justice Stewart points out in WMCA, 377 U.S., at p. 633, 84 S.Ct., at p. 1418, 12 L.Ed.2d, at p. 585, n. 12, districting necessarily means that something less than 50% of the voters may carry the day, and permits a percentage a little over 25 to elect, on party lines, a majority of the legislators.
This debate is not new in our State. The same subject was discussed 120 years ago in like terms and with specific reference to the validity of the "federal analogy." The occasion was the Constitutional Convention of 1844, and the dialogue ran virtually throughout the period of the Convention as reported in Proceedings of the New Jersey State Constitutional Convention of 1844.
The proponents of pure majority rule not only assailed the election of senators on a basis other than population, but also attacked the gubernatorial veto as "anti-republican and antidemocratic" (p. 191), contending it intruded upon the power of a majority to legislate, while defenders of the veto spoke of it as "guarding against hasty legislation" and cited the federal plan to support their position (p. 180). Upon the same majority theme, it was urged that a majority vote should suffice to amend the Constitution, and again the validity of the federal analogy was argued (pp. 57-70). The critical proposal that senators be elected from districts of equal population was finally defeated 37 to 15 (pp. 512-13). It is interesting that the delegates to the Convention, which included many of the distinguished figures of that day, Introduction, Proceedings of the New Jersey State Constitutional Convention *467 1844, p. 1xx, were well selected upon the basis of the population.[6]
We have sketched the argument upon the merits of the federal analogy. We need not express our views upon this lively subject since we are satisfied that the Supreme Court has settled the matter and has held that a State legislature, constituted as is the Congress, denies equal protection of the law.
It is true that in none of the cited cases did the State legislature faithfully accord with the federal pattern. In fact, the majority noted the discrepancy. Nonetheless the majority characterized the discrepancy as merely an additional circumstance[7] and deliberately rejected the federal analogy. Thus in Reynolds the majority, after agreeing that the Alabama plan did not at all match the federal plan, added that it finds "the federal analogy inapposite and irrelevant to state legislative districting schemes." 377 U.S., at p. 573, 84 S.Ct., at p. 1387, 12 L.Ed.2d, at p. 533. The majority expanded upon *468 that statement (377 U.S., at pp. 574-575, 84 S.Ct., at pp. 1388-1389, 12 L.Ed.2d, at pp. 534 and 535):
"The system of representation in the two Houses of the Federal Congress is one ingrained in our Constitution, as part of the law of the land. It is one conceived out of compromise and concession indispensable to the establishment of our federal republic. Arising from unique historical circumstances, it is based on the consideration that in establishing our type of federalism a group of formerly independent States bound themselves together under one national government. Admittedly, the original 13 States surrendered some of their sovereignty in agreeing to join together `to form a more perfect Union.' But at the heart of our constitutional system remains the concept of separate and distinct governmental entities which have delegated some, but not all, of their formerly held powers to the single national government.
* * * * * * * *
Political subdivisions of States counties, cities, or whatever never were and never have been considered as sovereign entities. Rather, they have been traditionally regarded as subordinate governmental instrumentalities created by the State to assist in the carrying out of state governmental functions.
* * * * * * * *
Thus, we conclude that the plan contained in the 67-Senator Amendment for apportioning seats in the Alabama Legislature cannot be sustained by recourse to the so-called federal analogy. Nor can any other inequitable state legislative apportionment scheme be justified on such an asserted basis. This does not necessarily mean that such a plan is irrational or involves something other than a `republican form of government.' We conclude simply that such a plan is impermissible for the States under the Equal Protection Clause, since perforce resulting, in virtually every case, in submergence of the equal-population principle in at least one house of a state legislature.
Since we find the so-called federal analogy inapposite to a consideration of the constitutional validity of state legislative apportionment schemes, we necessarily hold that the Equal Protection Clause requires both houses of a state legislature to be apportioned on a population basis."
The majority then rejected the view that the veto power may be reposed in one house if the other is apportioned on population, saying (377 U.S., at p. 576, 84 S.Ct., at p. 1389, 12 L.Ed.2d, at p. 535):
"* * * Deadlock between the two bodies might result in compromise and concession on some issues. But in all too many cases the more probable result would be frustration of the majority will through minority veto in the house not apportioned on a population basis, * * *."
*469 It may not be clear whether the quoted language means that the federal legislative structure involves a denial of equal protection of the laws which must be tolerated as the perpetual price of the union of 1787, or whether it means that the relationship of the federal government to the people is intrinsically so different from the relationship of the state government to the people that the same legislative system is consistent with equal protection of the laws in the one case but not in the other.[8] Whichever the rationale, the result is dispositive.
This brings us to the final step of the effort to distinguish Reynolds, i.e., that even if a counterpart of the federal legislature does not per se satisfy the doctrine of "one person, one vote," still the majority of our voters fully expressed their will in statewide elections conducted on a "one person, one vote" basis when they voted to hold the Constitutional Convention of 1947 and thereafter to adopt the constitution the Convention proposed.
There are two difficulties with this contention.
The first difficulty is factual. The statute which submitted to referendum the question whether there should be a convention provided "that the convention shall in no event agree upon, propose or submit to vote of the people * * * any provision for change in the present territorial limits of the respective counties, or any provision for legislative representation other than provision for a Senate composed of one Senator *470 from each county and a General Assembly composed of not more than sixty members apportioned among the counties according to population so that each county shall at all times be entitled to at least one member, chosen for, and elected by the legal voters of, the respective counties." L. 1947, c. 8, § 2, p. 25. The delegates were required to take an oath binding them to that limitation. L. 1947, c. 8, § 21, pp. 35-36.
Although it is true that the people voted for the referendum as thus clearly limited and adopted also the constitution the Convention proposed, it would be quite unreal to say the people had a meaningful choice. The alternative was to vote down the program, in which event the identical legislative pattern would have persisted by virtue of the Constitution of 1844.
Nor is the factual claim improved by examining the basis for the selection of delegates to the Convention. The people of each county had as many delegates as they had in a joint session of the Legislature. L. 1947, c. 8, § 4, p. 26. Thus each county had a number equal to its share of assemblymen, plus one. Hence the delegates were not apportioned upon population. In this respect the convention process did not match the process in 1844 when, as already noted, the delegates were allotted on the basis of representation in the lower house only and accordingly were apportioned essentially on a population basis.
The second reason why the vote in 1947 is of no consequence is that the decision of a majority in 1947 could hardly foreclose the right of succeeding majorities to equal protection. The proposition which is sought to be tendered to us could not have arguable substance unless there were continuously available a practical remedy whereby the majority of the people could at reasonable times select another republican form of government. Our State Constitution does proclaim the inherent power in the people to change the Constitution, saying in Article I, par. 2:
"All political power is inherent in the people. Government is instituted for the protection, security, and benefit of the people, and *471 they have the right at all times to alter or reform the same, whenever the public good may require it."
However, there is no machinery in our State, constitutional or statutory, whereby the people can alter the legislative branch of government on their own initiative.
This being so, we are not called upon to say whether a republican form of government plus a continuing feasible opportunity in the people to initiate a change to another republican form would give adequate effect to the doctrine of "one person, one vote."[9]
*472 C.
The remaining point pressed by counsel for the President of the Senate is that New Jersey withdrew its ratification of the Fourteenth Amendment before the Amendment became effective and hence New Jersey retained its "sovereign" right to its own form of government. Plaintiffs dispute the factual premise, but we think it makes no difference whether New Jersey did or did not approve the Amendment.
Counsel of course does not contend for a general proposition that an amendment of the Federal Constitution binds only the ratifying States. Rather he contends the present situation is exceptional and so argues on the basis of so much of Reynolds v. Sims as rejects the federal analogy. The argument is that if the structure of the federal legislature is valid notwithstanding its clash with the concept of equal protection only because 13 sovereigns compromised upon the plan, it ought to follow that each of those sovereigns retained by implication the sovereign power to control its own form of government, subject only to the federal guarantee of a "republican" form of government, under Art. IV, § 4 of the Federal Constitution. Thus New Jersey, as one of the contracting parties, could not be bound by an alteration affecting sovereignty to which it did not agree.
We think the answer is that the Federal Constitution contains all the terms of the "contract," if it be so viewed, and that Constitution restrains the process of amendment in but *473 three respects, of which the form of the state government is not one.[10]
The legislative article of our State Constitution must therefore be adjudged to be invalid insofar as it deals with the apportionment of the members of the Legislature.
III.
We come then to the matter of judicial relief.
We need not explore the abstract question whether a legislature, thus constituted in violation of the equal protection clause, can exercise the legislative power. The answer is provided abruptly by sheer necessity. The familiar doctrine which prevents collateral attack upon past acts of "de facto" officials rests upon an underlying need for governmental order. That need is even more imperative when the spectre proposed is a government without legislative power. The answer must be that the legislators continue in office with the powers of their branch of government, subject however to the duty of the State to bring the legislative branch into harmony with the Federal Constitution with diligence.
The duty to comply with the equal protection clause rests upon the three branches of State Government and upon the people of the State as well. The question is what part must be played by each.
We think it clear that the judiciary should not itself devise a plan except as a last resort. The reasons, simply stated, are that the prescription of a plan of apportionment is laden with political controversy from which the judiciary cannot be too distant, and further, that if the judiciary should devise an interim plan, that plan will likely seem so attractive to some as to impede the search for common agreement. We therefore will confine our role for the present to the minimum *474 demands of the Federal and State Constitutions, retaining jurisdiction, upon applications directly to us and within this cause, to grant further relief if circumstances so require and to resolve such additional issues as may arise.
We think it clear from Reynolds v. Sims that further elections to the Legislature cannot be held upon the existing constitutional plan. It follows that there must be a reapportionment in time for a general election of all legislators in November 1965. As a practical matter the Legislature must be held to have the power to legislate an interim solution in time for that election. The primary dates may, of course, be changed, if need be, to permit a seasonable selection of candidates for both houses. The Legislature may fix the date for the commencement of the terms of the new incumbents, not later, however, than the second Tuesday in January 1966, the time fixed for the commencement of the legislative year in Art. IV, § I, par. 3. The legislators so elected may continue in office until the qualification of their successors elected under a permanent plan, subject to the time limitation hereinafter stated.
The more difficult question is how a permanent plan may be devised, more specifically whether the plan may be proposed only by a constitutional convention or whether the Legislature may initiate some other process to that end.
Our Constitution deals expressly with the process of amendment. It is silent as to constitutional conventions, but it is perfectly clear that the Legislature may provide, as it did in 1844 and in 1947, the machinery whereby the people can meet in convention through their delegates in pursuit of their "right at all times to alter or reform" the government. Constitution of 1947, Art. I, par. 2. Jameson, Constitutional Conventions (4th ed. 1887) § 574d, p. 615; In re Opinion to the Governor, 55 R.I. 56, 178 A. 433 (Sup. Ct. 1935); George, Amendment and Revision of State Constitutions, 2 Proceedings of Constitutional Convention of 1947, 1759, 1762.
It is generally said that amendments deal with limited changes or additions, the convention to be employed to effect *475 a revision. As expressed in Jameson, Constitutional Conventions (4th ed. 1887) § 574c, pp. 610-11:
"* * * Now, it is very clear on the face of the constitutional provisions authorizing amendments through the agency of the legislature, as compared with those authorizing the call of Conventions, that the purpose of the former is different from that of the latter; in other words, the thing authorized to be done by the one class of provisions is a different thing from that authorized to be done by the other. Thus, the purpose of the legislative mode is to bring about amendments which are few and simple and independent; and on the other hand, that of the mode through Conventions is to revise the entire Constitution, with a view to propose either a new one, or, as the greater includes the less, to propose specific and particular amendments to it."
See also In re Opinion to the Governor, supra, 55 R.I., at p. 56, 178 A., at p. 439; Livermore v. Waite, 102 Cal. 113, 36 P. 424, 25 L.R.A. 312 (Sup. Ct. 1894); Rivera-Cruz v. Gray, 104 So.2d 501 (Fla. Sup. Ct. 1958); Ellingham v. Dye, 178 Ind. 336, 99 N.E. 1 (Sup. Ct. 1912), appeal dismissed sub nom. Marshall v. Dye, 231 U.S. 250, 34 S.Ct. 92, 58 L.Ed. 206 (1913); cf. McFadden v. Jordan, 32 Cal.2d 330, 196 P.2d 787 (Sup. Ct. 1948).
Some members of the Court believe that a Constitutional Convention is the sole permissible method of dealing with the problem before us, for the reasons stated in their footnote.[11] The other members of the Court agree a convention is certainly a permissible method. They are concerned, however, with whether, or in what circumstances, this Court can or should declare it to be the sole method. They believe we need not and should not now decide this question or the related one whether the Legislature elected in November 1965 as required above may not itself propose the necessary constitutional *476 changes through another process. Hence they withhold any expression on this phase of the matter.
If the Legislature should decide to call a Constitutional Convention, then all members of the Court agree upon the following: Since the legislative article must be altered, we see no need to submit to the vote of the people the question whether a convention should be called. Nor do we think it necessary to await the election in November 1965 of a properly apportioned legislative body. The present Legislature can start the process, provided the delegates are required to be elected on a basis that is beyond dispute. We take it, for example, that in the light of our traditions, no one would seriously question elections from the counties, provided the representative *477 ratio is the population of the county smallest in population. We think the call for a convention, the election of delegates, the submission of a proposal, a vote thereon by the people, and the nomination of candidates for election to the Legislature should be completed in time for a final election to the Legislature in November 1967. Accordingly, if the convention process is used, the terms of the legislators elected in November 1965 under an interim plan may be permitted to continue until such time as their successors qualify, but not beyond the second Tuesday in January 1968.
If, however, the Legislature does not initiate the convention process by April 1, 1965, then the Court will call for argument as to whether another process may be used, the time *478 limit within which proposals must be submitted to the people, and the impact of the use of another process upon the terms of office of the legislators to be elected in November 1965.
The judgment under review is reversed and a judgment will be entered in this Court:
(1) Adjudging the Legislature to be apportioned in violation of the equal protection clause of the Constitution of the United States;
(2) Enjoining any further elections under the apportionment basis now provided by law;
(3) Declaring that the legislative power may not be exercised after the second Tuesday in January 1966 except by legislators elected not later than November 1965 under a basis consonant with the equal protection clause;
(4) Adjudging that the Legislature may by statute provide an interim basis, consonant with the equal protection clause, for the election of the legislators as provided in (3) above;
(5) Declaring that proposals to amend the State Constitution to comply with the equal protection clause may be submitted by a Constitutional Convention called by the Legislature, the delegates to which Convention shall be apportioned according to population; and reserving the question whether proposals to amend or revise the State Constitution may be submitted by another process by the Legislature elected in compliance with (3) and (4) above;
(6) Adjudging that the legislators elected pursuant to (3) and (4) above may hold office for a period not extending beyond the second Tuesday in January 1968 if the Legislature initiates the convention process by April 1, 1965;
(7) Ordering that if the Legislature does not initiate the convention process by April 1, 1965, there be brought on for argument at such time as the Court may fix, the question reserved in (5) above and the impact of the use of another process upon the terms of office of the legislators to be elected in November 1965;
(8) Reserving jurisdiction in this cause to determine applications for such further or different relief as may be appropriate *479 and to determine such further relevant controversies as may arise.
No costs.
HANEMAN, J. (concurring).
There comes a time in the career of practically every judge when he must embrace a theory of law to which he does not personally subscribe. This occurs by virtue of the establishment thereof by some superior authority. Under our judicial system this is entirely proper because such a mandate is the basis and the essence of the stability of our law. That, however, is not to say that he is rendered mute by force of superior precedents. He continues to have the privilege, and on occasion the obligation, to expose his respectful disagreement while at the same time acceding to administer the letter of the law as so directed. In Reynolds v. Sims, 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d 506, 530 (1964), the United States Supreme Court said that "a denial of constitutionally protected rights demands judicial protection; our oath and our office require no less of us." To paraphrase, I conceive that although I am bound by a construction of the United States Constitution by the United States Supreme Court, my oath and my office as a Justice of the New Jersey Supreme Court require that I express my disagreement where such construction, in my opinion, impinges upon the constitutional rights of the citizens of this State. I now find myself in that position. I therefore vote with the balance of this Court in the matter sub judice because of the interpretation of that document by the United States Supreme Court as delineated in Reynolds v. Sims, supra; WMCA, Inc. v. Lomenzo, 377 U.S. 633, 84 S.Ct. 1418, 12 L.Ed.2d 568; Maryland Committee for Fair Representation v. Tawes, 377 U.S. 656, 84 S.Ct. 1429, 12 L.Ed.2d 595; Davis v. Mann, 377 U.S. 678, 84 S.Ct. 1441, 12 L.Ed.2d 609; Roman v. Sincock, 377 U.S. 695, 84 S.Ct. 1449, 12 L.Ed.2d 620; Lucas v. Forty-Fourth General Assembly of Colorado, 377 U.S. 713, 84 S.Ct. 1459, 12 L.Ed.2d 632 (1964).
*480 My rationalization proceeds in much the same fashion as does that of Justices Harlan and Stewart in their excellent and, to my mind, unanswerable dissents in Reynolds v. Sims, supra, and WMCA, Inc. v. Lomenzo, supra, respectively. Additionally, I base my conclusion upon the singular history of this State's legislative composition and the reasons which have undergirded that composition from early colonial days. My vote in favor of the constitutionality of our presently existing legislative scheme upon such grounds is precluded, however, by the generalization of the United States Supreme Court in Reynolds, supra, which prejudges a conclusion bottomed upon such an approach. The court there stated (377 U.S., at pp. 579-580, 84 S.Ct., at p. 1391, 12 L.Ed.2d, at pp. 537-538):
"But neither history alone, nor economic or other sorts of group interests, are permissible factors in attempting to justify disparities from population-based representation. Citizens, not history or economic interests, cast votes."
Accordingly, while I shall not repeat what has been said by Justices Harlan and Stewart, I shall briefly sketch the historical background out of which our present Legislature emerged and the reasons underlying the adoption of such a legislative device.
The province of New Jersey was included as part of a land grant to the Duke of York by Charles II in 1664 and the area now comprising New Jersey was almost immediately deeded by him to Lord Berkeley and Sir George Carteret. Although the legal right of these two proprietors to assume governmental authority was far from clear, they proceeded to draw up a constitution for the province in 1665. This document became known as "The Concessions and Agreements of the Lords Proprietors." It provided for a governor, a council of from six to twelve men appointed by the governor, and a general assembly composed of two deputies popularly elected by the freeholders of each town. The legislative council and assembly sat as two separate bodies, thus establishing the *481 bicameral system. Lord Berkeley sold his interest in the granted lands in 1674, and New Jersey was divided into the provinces of East Jersey and West Jersey, the boundary between the two being established by the famous Quintipartite Deed of July 1, 1676. The proprietors of West Jersey, a Quaker undertaking under the leadership of William Penn, formulated and adopted a document known as "The Concessions and Agreements of the Proprietors, Freeholders, and Inhabitants of West New Jersey in America," which provided that when the province had been divided into "tenths" there would be ten delegates from each subdivision elected by the proprietors, freeholders and inhabitants of each of the respective tenths. There was no provision for an upper house. The only limitations placed on this legislature were that all acts must be consonant with English law and must not conflict with the Concessions. Sir George Carteret, administrator of the province of East Jersey, died in 1680, and in 1682 his interest in East Jersey was purchased from his widow and eight trustees by William Penn and eleven associates. These twelve proprietors adopted the "Fundamental Concessions" under which the administration of public affairs was vested in 24 proprietors or their proxies and 144 representatives of the people. Although East Jersey was thus acquired by Quakers its population was and continued to be more heterogeneous than West Jersey, the European Quakers generally seeking refuge in West Jersey.
On April 17, 1702 Queen Anne accepted the voluntary surrender of the right of government by deed of the proprietors of East and West Jersey. The two Jerseys were thus reunited to form a single royal province with a single government. Queen Anne gave her "Instructions" to Lord Cornbury, governor of the colony, on November 16, 1702 for the establishment of a governmental system. The legislature consisted of the governor, a council appointed by the governor and drawn from East and West Jersey in equal numbers, and an Assembly of 24 members, 10 chosen at large from each division and two each from Perth Amboy and Burlington, the late capitals *482 of East and West Jersey respectively. The legislature met alternately in Perth Amboy and Burlington. After 1705 each of the then seven counties was allotted two assemblymen, as were the twin capitals and the town of Salem. With the creation of new counties as population expanded the composition of the assembly was altered. By 1775 there were 13 counties, each with two assemblymen and two members each from Burlington and Perth Amboy. The council continued as originally created. The reason for this sectional representation can be gleaned from the following account in McCormick, New Jersey from Colony to State, pp. 56-57 (1964):
"It would be misleading to depict the Jerseys as one general community. In fact, there were sharp contrasts between East and West Jersey, contrasts which have not disappeared even today. The sources of settlement of the two provinces were quite distinct; each had its own government, its own proprietary land system. The fact that each had a separate existence for some three decades was not going to be erased instantly when the provinces were united in 1702. The population of East Jersey was much more varied than that of West Jersey. In the former province the people were compactly settled in townships, whereas in West Jersey the farms were widely dispersed. East Jersey was much more seriously divided by internal quarrels, arising out of the peculiar complexities of the dispute between the early townsmen, with their quit rent obligations, and the proprietors. There was no comparable source of contention in West Jersey. No small factor in emphasizing the cleavage between the two divisions was the growth of the cities of New York and Philadelphia, which rapidly drew within their respective orbits the adjacent sections of New Jersey. Certainly an important and continuing heritage from the proprietary period is the distinction that we presently observe between what we now call North Jersey and South Jersey."
This balancing of legislative power between the two divisions was bottomed upon the desire that neither should be able to force its will upon the other by the mere fortuity of numerical superiority each division having enjoyed some degree of limited sovereignty before 1702, and being composed of peoples with differing economic interests, religious affiliations and national origins. Thus was established the precedent for legislative representation based upon territory as distinguished from population. This colonially-instituted mode of apportionment *483 has been perpetuated in the equal representation of counties in one house of the legislature under our State Constitutions of 1776, 1844 and 1947.
In May of 1776 the citizens of New Jersey elected delegates to the third Provincial Congress. The body convened at Burlington on June 10, 1776, and on June 21 of that year resolved to adopt a new Constitution which was thereupon drafted and became effective on July 2, 1776. It is noteworthy that this was some eleven years before the adoption of the United States Constitution. New Jersey became the third colony to adopt a state constitution, and its new government was practically a replica of that of colonial days. The legislature consisted of two houses, all the members of which were elected annually. The upper house, known as the "Legislative Council," consisted of one member from each county. The lower house, designated the "General Assembly," consisted of three members from each county, with the proviso
"* * * that if a majority of the representatives of this province, in council and general assembly convened, shall, at any time or times hereafter, judge it equitable and proper to add to or diminish the number or proportion of the members of the assembly for any county or counties in this colony, then, and in such case, the same may, on the principles of more equal representation, be lawfully done, anything in this charter to the contrary notwithstanding; * * *."
Thus was re-established, this time in a written constitution, a bicameral legislature representative of political subdivisions, one house of which had one representative from each county, and the second a number depending upon the population of the several counties. Unfortunately, there are no records extant of the debates and discussions preceding the adoption of this article. However, it is recognized that the framers were much influenced by John Adams, who outlined his specifications for such a charter in correspondence with Jonathan Dickinson Sergeant, the principal author of our Constitution. In one of these letters Adams stated: "A single assembly is liable to all the vices, follies, and frailties of an individual * * *." IV Adams, C.F., The Works of John Adams 202.
*484 That our citizens were alert to the effect of a bicameral legislature consisting of two houses representative of county and population, respectively, and intentionally continued that form of government is demonstrated by the many discussions which followed the adoption of the original Constitution. As early as 1799 William Griffith, writing under the pen name of Eumenes, published a series of articles
"Written for the purpose of exhibiting some of the more prominent errors and omissions of the Constitution of New Jersey... and to prove the necessity of calling a convention, for revision and amendment."
Many suggestions for change were made by him, including the manner of apportioning legislative representatives. He stated:
"The equal representation of the people, has been secured upon the ratio, either of taxation or numbers. Massachusetts, New York and Pennsylvania, have introduced a precise and invariable rule of apportionment, which adjusts itself by an easy application to every possible variation of the electoral body; and the people of New Jersey; will never be secure against partial and unjust deviation from the true principle of representation; namely, equal and determinate portions of the taxable inhabitants, until it is made an article of the general constitution. This is a fair, a rational, and practicable principle: if every district is represented in a ratio to its taxable population, no wrong is done; it is conformable to the acknowledged principles of legitimate government. True it is, that hitherto the people of New Jersey have not been represented in the legislature, according to their constituent capacity, but according to certain geographical descriptions; the counties have been represented by equal delegations, without regard to the comparative state of population and property. This is a gross violation of the first maxim of a republican, representative government, which dictates equality in the choice of those who are to make laws, and administer the public functions." Id., at p. 53.
Influenced by these articles, the legislature authorized a referendum on the question of whether to call a constitutional convention. The people voted against a revision and thus rejected, inter alia, such a legislative change.
In 1827 an unofficial convention of prominent men from nine counties met in Trenton and produced a memorial asking the legislature to call a convention. The memorial never *485 came out of legislative committee. As stated by Bebout, The Making of the New Jersey Constitution, p. XXXVIII: "The truth seems to be that despite the words of editors, theorists and elder statesmen there never was an overwhelming demand on the part of the people for revision of the old constitution."
In 1844, pursuant to an act of the legislature, a constitutional convention was called. During the extensive debates upon the article providing for future amendment, the fear that the numerical majority of the population would overbear the minority to the latter's detriment was continually stressed. In the discussions on the creation of the legislature the principal controversy again concerned the protection of minorities. A proposal was made to divide the State into districts to consist of counties adjacent to each other and as nearly equal in population as possible, with each district being entitled to an equal number of senators. The debate upon this issue waxed acrimonious: the fear for the minorities again being stressed and emphasized. The suggestion was ultimately rejected by a vote of 37 to 15 in favor of a Senate composed of one senator from each county, with many delegates from populous sections joining in the vote against the defeated proposal and in favor of a provision which allotted one senator to each county and created a general assembly "* * * apportioned among the said counties as nearly as may be according to the number of their inhabitants. * * * provided, that each county shall at all times be entitled to one member; and the whole number of members shall never exceed sixty." Constitution of 1844, Art. IV, Sec. III(1).
In his annual message to the legislative session of 1873, Governor Joel Parker suggested the calling of a constitutional convention or commission. As a result, the legislature created a commission in 1873 which considered many proposed changes, one of which was the reorganization of the Senate on the basis of senatorial districts of equal population. Although the population of New Jersey had increased some two and a half fold between 1840 and 1870, largely in the urban centers, this suggested change was not adopted by the legislature. In *486 1875, however, 28 other suggested amendments were adopted by referendum.
Constitutional commissions were established in the years 1881, 1894 and 1905 but none of these resulted in a change of the legislative composition from that provided in the 1844 Constitution. In the decade of the 1940's the movement for constitutional revision flourished. Pursuant to L. 1941, J. Res. 2, a "Commission on Revision of the New Jersey Constitution" was appointed. This Commission prepared a draft of a new Constitution which was submitted to the legislature with the suggestion that the draft be submitted to the people as a whole. Again, the legislative article remained as it was written in the Constitution of 1844. The proposed revision was referred to a joint committee of the Senate and General Assembly which held public hearings to ascertain public sentiment on the proposal. A majority of the joint committee recommended that "no action for change in the New Jersey Constitution be taken until after the termination of the present war." By L. 1943, c. 217, the legislature, however, authorized a referendum upon the question:
"Shall the one hundred sixty-eighth Legislature be authorized to agree, by a majority of the members elected to each of the two houses, upon a revised Constitution for the State, which revised Constitution shall include the provisions of Article I of the present Constitution, commonly known as `The Bill of Rights,' and shall include provision for a Senate composed of one Senator from each county and a General Assembly composed of not more than sixty members apportioned among the counties as provided by the present Constitution so that each county shall at all times be entitled to one member, and to submit the same as a whole and in such manner as said Legislature shall prescribe to the people, for their approval and ratification or rejection as a whole, at the general election to be held in the year one thousand nine hundred and forty-four?"
The electorate voted favorably, and in accordance with this mandate the revised instrument was submitted at the election of November 7, 1944 but was rejected by the electorate. Although public pre-election opposition was directed at a number of facets of the proposed instrument, there was practically *487 no objection to the legislative section. It is generally conceded that this provision played no part in the vote for rejection.
By L. 1947, c. 8, a Constitutional Convention was again authorized. This statute provided in part:
"The constitutional convention shall prepare and agree upon a new State Constitution, revising, altering or reforming the present Constitution in such part or parts and in such manner as the convention shall deem in the public interest; provided, however, that the convention in no event agree upon, propose or submit to vote of the people, either separately or included among other provisions, any provision for change in the present territorial limits of the respective counties, or any provision for legislative representation other than provision for a Senate composed of one Senator from each county and a General Assembly composed of not more than sixty members apportioned among the counties according to population so that each county shall at all times be entitled to at least one member, chosen for, and elected by the legal voters of, the respective counties."
The Convention prepared a new Constitution which was adopted by a referendum on November 4, 1947.
It has been argued that the 1947 referendum is not truly demonstrative of a preference by the electorate for a bicameral legislature as presently composed because of the restriction statutorily imposed upon the Convention. The fact remains, however, that the voters of the entire State, including those of the metropolitan areas, did approve this system in that year when they were free, if sentiment was opposed thereto, to reject the entire instrument as they did in 1944 because of objections to other individual provisions.
Thus it is seen that from early colonial days New Jersey has had a legislative body comparable in form to that now being attacked. From 1776 (eleven years before the adoption of the United States Constitution) to 1947, the citizens of New Jersey have continued to approve and to repulse attacks upon a bicameral legislature, one house of which is apportioned to the several counties regardless of their individual population, and the other to the several counties proportionally to their individual population. The roots of this form of government are planted in the differences in the colonial provinces *488 of East and West Jersey, each to a great extent having at one time been sovereign entities. Such a form of government was stimulated by the desire to protect the rights and interests of minorities, whether they be doctrinal, religious, economic or territorial, and so to prevent control of government by force of numbers. The policy so born has continued for 188 years. Nor have the sound reasons for a two-house legislature diminished with the passage of time. The deleterious impact of the equalitarian principle of "one man one vote" as pronounced by the United States Supreme Court, which concerned our citizens in the early days of statehood, is as viable today as then.
The reasons for the protection of minorities against the overpowering and ofttimes hasty and ill-considered actions of the majority continue to have vitality. Metropolitan, and more recently suburban, populations have increased more rapidly than the rural populations. In the latter sections, consisting of separate counties, the economic life of the community revolves around agriculture, fishing and resort activities each one of which contributes substantial and important incomes to the State. The problems of these divisions requiring legislative attention are frequently entirely different and sometimes antagonistic to those of the metropolitan and suburban sections where commerce, industry and finance are of primary concern. Nor are the requisites of municipal and county control identical. The United States Supreme Court has expressed the concern in Reynolds v. Sims, supra, 377 U.S., at p. 576, 84 S.Ct., at p. 1389, 12 L.Ed.2d, at pp. 535-536, that:
"Deadlock between the two bodies might result in compromise and concession on some issues. But in all too many cases the more probable result would be frustration of the majority will through minority veto in the house not apportioned on a population basis, stemming directly from the failure to accord adequate overall legislative representation to all of the State's citizens on a nondiscriminatory basis."
*489 Although we have had similar generalized statements presented on oral argument in the matter sub judice, counsel has failed to specify particular instances. To my knowledge, our system has not resulted in frustration of worthwhile state-wide measures by small county legislators acting by and for themselves. However, if this argument has substance it is as applicable to the federal system which was patterned after the New Jersey Constitution of 1776. Surely it cannot be said that the federal system is at an impasse, or that compromise and concession are not there important stabilizing influences.
Who is to say that so-called "frustration of the majority" is not justice for the minority who is to say that a given measure of state-wide concern is or was defeated solely because of the objection of a minority in the Legislature which does not represent a majority of voters in the State at large or who is to determine that the "majority will" is beneficial for the State at large?
The fallacy with the proposition that legislation desired by the legislators representing the more populous sections is representative of the will of a majority of the public of the State is that it does not follow that such legislators express the will of a combination of the minority in their own election districts and those of similar views residing in the less populous areas. The combination of the latter could well total a state-wide majority, and it is possible for a legislative majority to actually express the sentiments of a state-wide minority.
In Reynolds, supra, 377 U.S., at p. 565, 84 S.Ct., at p. 1383, 12 L.Ed.2d, at p. 529, the court stated:
"Logically, in a society ostensibly grounded on representative government, it would seem reasonable that a majority of the people of a State could elect a majority of that State's legislators. To conclude differently, and to sanction minority control of state legislative bodies, would appear to deny majority rights in a way that far surpasses any possible denial of minority rights that might otherwise be thought to result."
With the premise itself there can be no dispute, nor in fact is the conclusion, as stated, subject to reasonable debate. However, *490 to conclude that the Senate in our State has absolute control of the legislative process is to ignore the potency of the Assembly elected on a proportional basis and theoretically representative of a majority of the public. To deny the less populated counties, whose problems are dissimilar to those of the more populous counties, the braking effect of a bicameral legislature is in effect to create a unicameral legislature elected by the public at large.
To say that ours is a representative government is not to say that minorities should be subjected to the possible tyrannical will of a majority nor that protection against such a contingency is not an important requisite of such government.
Personal experience in the House of Assembly has demonstrated to me the preoccupation of legislators from more populous sections with their problems at the expense and sometimes in utter disregard of the serious concerns of the less populous areas. But for the restraining effect of the Senate this would frequently have resulted in a complete frustration of the minority. Surely the danger to the rights of minorities which is inherent in such a system surpasses the partial restraint imposed on the will of the majority. Any other conclusion ignores the fact that "a citizen, a qualified voter, is no more nor no less so because he lives in the city or on the farm," Reynolds, supra, 377 U.S., at p. 568, 84 S.Ct., at p. 1384, 12 L.Ed.2d, at p. 531, since that minority would not receive any meaningful representation and thus be deprived of any voice in government.
The legislative composition of New Jersey had its genesis eleven years before the adoption of the United States Constitution. The provinces of East and West Jersey enjoyed a limited degree of sovereignty before 1702, as did the counties thereafter. New Jersey was admittedly a sovereign state when it joined in the compact of 1787 and surely did not then agree even implicitly to abandon its legislative composition, a composition after which the United States Constitution was itself patterned. The entire State has continued to flourish under the present legislative distribution.
*491 It is impossible to conclude that had the Fourteenth Amendment been understood to make our legislative body unconstitutional, the advocates of proportional senatorial districts (who were so vocal in the Convention of 1844) would not have, subsequent to 1868, urged this as a ground for constitutional revision. Nor is it conceivable that this same thesis would not have been advanced to the constitutional revision commission of 1873 by proponents of proportional Senate representation. The fact that this basis was not argued by the many brilliant minds of this State interested in constitutional revision over the span of 79 years between 1868 and 1947 demonstrates that the construction of the Fourteenth Amendment now adopted is in reality an extension never intended. The Constitution of this State has now in effect been amended without the consent of its citizens, in a manner not provided by our Constitution but rather by a judicial fiat of the United States Supreme Court and this by a construction inconsistent with history, logic, republican principles and the sovereignty of our State.
For reversal Chief Justice WEINTRAUB, and Justices JACOBS, FRANCIS, PROCTOR, HALL, SCHETTINO and HANEMAN 7.
For affirmance None.
NOTES
[1] The Colonial Constitution of 1776 provided for two houses, one to be based on population and the other upon equal representation from the counties, without regard to population. Art. III. See fn. 4 infra. As to the popular house, the Legislature was authorized from time to time to add to or diminish representation therein "on the principles of more equal representation." Reapportionments did occur, the Assembly being increased from 39 to 58 by 1841. Reock, Population Inequality among Counties in the New Jersey Legislature, p. 10.
The Constitution of 1776 was replaced by the Constitution of 1844, which contained the same provisions that appear in the present Constitution of 1947. No doubt the maximum of 60 in the General Assembly was fixed to keep the membership at a manageable number, although perhaps also to discourage the creation of new counties for purely political ends. The county was used because it represented existing political and area units and its use would block or minimize gerrymandering. In 1844, only one county had fewer inhabitants than the representative ratio obtained by dividing the population of the State by the number of seats. In 1862, for the first time, two counties fell below the representative ratio. That number reached a maximum of eight in 1922. In 1960 there were five counties so situated. Reock, op. cit. supra, pp. 16-17.
Reynolds v. Sims recognized the propriety of using existing counties with an assurance of a minimum of one member to a county, provided the counties are not so numerous and so sparsely settled as to scuttle the population approach in apportionment. 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d, at pp. 537-538.
The present attack upon the General Assembly emphasizes that 21 of 60 seats are allocated without regard to population, a mode of expression which tends to accentuate the imbalance. The Attorney General replies that of the five counties which have less than the representative ratio, three have more than one-half a ratio and the other two are just short of that fraction; that the population of those five counties, if aggregated, would be entitled to 2.71 seats in the General Assembly, so that the allocation of five seats to those counties means that only 2.29 seats out of 60, less than 4%, are required to be apportioned differently from a strict population basis.
Upon the reapportionment in 1962, based on the 1960 census, the average relative population deviation from the theoretical representative ratio was 20.2%; the ratio between the largest and smallest constituencies was 2.96; and the minimum percentage of population in counties theoretically electing a majority of assemblymen was 46.5. Reock, op. cit. supra, p. 11. These figures reflect the impact of the five small counties, rather than the experience as among themselves of the 16 counties which share the remaining 55 seats.
[2] The 1960 census shows:
Atlantic 160,880 Mercer 266,392
Bergen 780,255 Middlesex 433,856
Burlington 224,499 Monmouth 334,401
Camden 392,035 Morris 261,620
Cape May 48,555 Ocean 108,241
Cumberland 106,850 Passaic 406,618
Essex 923,545 Salem 58,711
Gloucester 134,840 Somerset 143,913
Hudson 610,734 Sussex 49,255
Hunterdon 54,107 Union 504,255
Warren 63,220
[3] There is a further difference which we think of no moment in the present context. The Federal and State Constitutions provide for apportionment of the members of the lower house among the States and counties respectively. The federal legislators are elected from single-member districts within a State pursuant to federal statute, whereas our State assemblymen are elected by the voters of the entire county rather than of a district therein. The election of assemblymen from single-member districts within a county was held to violate the State Constitution in State ex rel. Morris v. Wrightson, 56 N.J.L. 126, 201, 28 A. 56, 22 L.R.A. 548 (Sup. Ct. 1893), and Smith v. Baker, 74 N.J.L. 591, 64 A. 1067 (E. & A. 1906). In Lucas the majority characterized elections at large within a county as one of "the most undesirable features" of the Colorado apportionment scheme and as a "debatable feature" (377 U.S. 713, 84 S.Ct. 1459, 1471, 12 L.Ed.2d, at p. 644), but added in fn. 21 that "We do not intimate that apportionment schemes which provide for the at-large election of a number of legislators from a county, or any political subdivision, are constitutionally defective."
[4] The Constitution of 1776, Art. III, provided for equal representation by counties in the Council, which was the upper house, and as to the Assembly provided that each county shall have three members
"* * * provided, always, that if a majority of the representatives of this province, in council and general assembly convened, shall, at any time or times hereafter, judge it equitable and proper to add to or diminish the number or proportion of the members of the assembly for any county or counties in this colony, then, and in such case, the same may, on the principles of more equal representation, be lawfully done, anything in this charter to the contrary notwithstanding; so that the whole number of representatives in assembly shall not, at any time, be less than thirty-nine."
The Legislature did reapportion from time to time, increasing the Assembly from 39 to 58 by 1841. Reock, Population Inequality among Counties in the New Jersey Legislature, p. 10.
[5] In United States v. Cruikshank, 92 U.S. 542, 23 L.Ed. 588, 592 (1875), the Court said that "* * * equality of the rights of citizens is a principle of republicanism. Every republican government is in duty bound to protect all its citizens in the enjoyment of this principle, if within its power."
[6] The delegates were elected on the same basis as assemblymen. L. 1844, p. 112, § 2. As pointed out in fn. 4, supra, the General Assembly had been apportioned according to population pursuant to Art. III of the Constitution of 1776. As of 1844, there were 58 assemblymen and only one county had less than a full representative ratio. Reock, Population Inequality among Counties in the New Jersey Legislature, p. 16. The average relative population deviation from a full representative ratio was 12.8; the ratio between the largest and smallest constituencies was 1.98; and the minimum percentage of population in counties electing a majority of the assemblymen was 47.2. Reock, op. cit. supra, p. 10. The delegates to the Constitutional Convention of 1844 were elected in these numbers from the counties: Atlantic, 1; Bergen, 2; Burlington, 5; Camden, 2; Cape May, 1; Cumberland, 3; Essex, 7; Gloucester, 2; Hudson, 1; Hunterdon, 4; Mercer, 3; Middlesex, 4; Morris, 4; Monmouth, 5; Passaic, 2; Salem, 3; Somerset, 3; Sussex, 3; Warren, 3. Proceedings of the New Jersey State Constitutional Convention of 1844, at pp. 15-17.
[7] Reynolds v. Sims, 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d, at p. 533 n. 49; Maryland Committee v. Tawes, 377 U.S. 656, 1429, 12 L.Ed.2d, at p. 607 n. 21; Lucas v. Colorado General Assembly, 377 U.S. 713, 84 S.Ct. 1459, 12 L.Ed.2d, at p. 648 n. 32.
[8] Earlier in Reynolds, in rejecting legislative schemes in which a minority may elect a majority to both houses and thus capture the power affirmatively to legislate, the majority opinion said (377 U.S., at p. 566, 84 S.Ct., at p. 1384, 12 L.Ed.2d, at p. 530):
"* * * Our constitutional system amply provides for the protection of minorities by means other than giving them majority control of state legislatures. And the democratic ideals of equality and majority rule, which have served this Nation so well in the past, are hardly of any less significance for the present and the future." (Emphasis added)
It would not seem likely that the majority opinion intended to place the federal legislature beyond "the democratic ideals of equality and majority rule."
[9] In Lucas the majority found "the initiative device provides a practicable political remedy to obtain relief against alleged legislative malapportionment in Colorado" (377 U.S., at p. 732, 84 S.Ct., at p. 1471, 12 L.Ed.2d, at p. 645), but concluded (377 U.S., at p. 737, 84 S.Ct., at p. 1474, 12 L.Ed.2d, at pp. 647-48):
"We hold that the fact that a challenged legislative apportionment plan was approved by the electorate is without federal constitutional significance, if the scheme adopted fails to satisfy the basic requirements of the Equal Protection Clause, as delineated in our opinion in Reynolds v. Sims. And we conclude that the fact that a practicably available political remedy, such as initiative and referendum, exists under state law provides justification only for a court of equity to stay its hand temporarily while recourse to such a remedial device is attempted or while proposed initiated measures relating to legislative apportionment are pending and will be submitted to the State's voters at the next election."
In the other cases the majority noted the absence of the initiative but in each instance appended a footnote reading:
"For a discussion of the lack of federal constitutional significance of the presence or absence of an available political remedy, see Lucas * * *."
WMCA v. Lomenzo, supra, 377 U.S., at p. 652, 84 S.Ct., at p. 1427, 12 L.Ed.2d, at p. 579, n. 18; Reynolds v. Sims, supra, 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d, at p. 522, n. 25; Maryland Committee v. Tawes, supra, 377 U.S. 656, 84 S.Ct. 1429, 12 L.Ed.2d, at p. 603, n. 9; Davis v. Mann, supra, 377 U.S. 678, 84 S.Ct. 1441, 12 L.Ed.2d, at p. 616, n. 6; Roman v. Sincock, supra, 377 U.S. 695, 84 S.Ct. 1449, 12 L.Ed.2d, at p. 627, n. 12.
The question is why the absence of a given fact is noted and then followed by a footnote that seems to say its presence would not matter. It may be that since the Court was breaking new ground and avowedly developing the doctrine on a case-by-case basis, see Reynolds v. Sims, supra, 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d, at p. 537, some members of the majority wished to note a fact that might later prove to be material. Since the majority may have felt all the plans before the Court smacked of the "crazy-quilt," the opinions may mean only that a crazy-quilt plus the initiative will not add up to equal protection, and hence the cases may not foreclose the possibility of a holding that equal protection is provided if the majority adopts a republican plan and holds a power to change which does not depend upon the Legislature's will.
[10] Art. V contains the proviso "that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate."
[11] They believe only the convention process may be employed, for several reasons.
Our Constitution authorizes the Legislature only to propose "Any specific amendment or amendments," Art. IX, par. 1. It does not authorize the Legislature to propose a revision. See Dodd, The Revision and Amendment of State Constitutions (1910), p. 260, n. 245.
The purpose of an amendment is to alter, by change or supplement, an existing expression of the people's will. Ordinarily it is not imperative that the people adopt an amendment; they may accept or reject a proposal, and if they reject it, the existing expression continues to prevail. But in the present matter, the people cannot choose whether to act or not to act because there is a fundamental void which must be filled if there is to be a government. As the Constitution now stands, there is a grant of the legislative power to a legislature without structure or body. This is so, not by design, but rather because a structure, fully provided, has been found to be invalid. Stated in other terms, the Constitution is fundamentally incomplete, an unfinished document, and the power to complete it should be exercised by the people through the process suited for such original creation, i.e., a constitutional convention. Cf. Ellingham v. Dye, supra, 178 Ind. 336, 99 N.E., at p. 9.
That the amendatory process is not suited to meet this imperative need is evident from the procedure whereby the Constitution deliberately encumbered that process. If a proposal is "agreed to by three-fifths of all the members of each of the respective houses," it may be submitted to the people, but failing that measure of agreement, the proposal must have the vote of "a majority of all the members of each" house in two successive legislative years. Art. IX, par. 1. The proposal shall be submitted "at the next general election." Par. 4. If a proposed amendment shall not be approved, "neither such proposed amendment nor one to effect the same or substantially the same change in the Constitution shall be submitted to the people before the third general election thereafter." Par. 7.
These restraints, designed to slow the amendatory process to discourage imprudent measures, make the process inappropriate for the urgent need at hand. It might take years to muster the exacting vote required to put a proposal on the ballot, and if the proposal should be rejected by the people, the provision in paragraph 7 quoted above relating to submission of proposals "to effect the same or substantially the same change" might present serious difficulties.
And finally the amendatory process is inappropriate because it cannot give the people the free range of decision which they should have with respect to the organic structure of government. The power to propose a solution may be the virtual power to control it. Cf. RiveraCruz v. Gray, supra, 104 So.2d, at p. 503. As a practical matter, the electorate cannot easily reject a proposal when some proposal must be adopted and it cannot know whether an even less palatable one will follow. The practical power to control the solution would be in the hands of the very branch of government to be affected by it.
A Constitutional Convention could effectively thrash out the many subjects which the present exigency projects. For example, shall there be a bicameral or a unicameral legislature? How large shall the house or houses be? What shall be the terms of office and shall the terms be staggered? Shall elections be by districts, and if so, shall the districts be related to existing county lines? Should a member be elected from a single district or should there be multi-member districts? What provisions can be adopted to deal with the threat of gerrymandering if the districts are to be fixed from time to time? Should the task of periodic reapportionment rest with the Legislature or rest with some other agency, either initially or in the event the Legislature does not act? Should there be a right in the people to initiate changes affecting the Legislature so that the principal's inherent power to change need not depend upon the agent's willingness to submit a proposal?
We have referred to sundry topics, not to suggest that all of them are worthy of resolution by the people, but rather to indicate their range is so great that a convention of delegates specially chosen for the role is the sole, suitable machinery to propose a plan to complete the legislative article of the Constitution. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3098671/ | COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-12-00563-CR
Reginald Dorsey § From the 211th District Court
§ of Denton County (F-2010-1939-C)
v. § September 26, 2013
§ Opinion by Justice Dauphinot
The State of Texas § (nfp)
JUDGMENT
This court has considered the record on appeal in this case and holds that
there was no error in the trial court’s judgment. It is ordered that the judgment of
the trial court is affirmed.
SECOND DISTRICT COURT OF APPEALS
By _________________________________
Justice Lee Ann Dauphinot | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1422358/ | 696 F. Supp. 567 (1987)
Robert E. ABNEY, et al., Plaintiffs,
v.
William R. PATTEN, et al., Defendants.
No. CIV-84-44-A.
United States District Court, W.D. Oklahoma.
August 24, 1987.
Richard R. Thomas, Christopher Lee and Alfred W. Ricciardi, Beus, Gilbert, Wake & Morrill, Phoenix, Ariz., J.R. Randy Baker, McKinney, Stringer & Webster, Oklahoma City, Okl., Michael R. Devitt, Glenn Baylor Jenks and Cathy Holt, Beus, Gilbert, Wake & Morrill, Phoenix, Ariz., for plaintiffs.
Pamela S. Anderson, Sidney G. Dunagan, Oliver S. Howard, Gene C. Buzzard, Gable & Gotwals, Tulsa, Okl., for FDIC.
Lance Stockwell, Boesche, McDermott & Eskridge, Tulsa, Okl., for John L. Paulhamus.
Andrew Coats, Brooke S. Murphy, Harvey D. Ellis, Jr., Crowe & Dunlevy, Oklahoma City, Okl., for Joe Edwards, Eric Gray and Steven Shreder.
Douglas C. McBee and Sally E. Scott, Don G. Holladay, Gretchen A. Harris, Andrews, Davis, Legg Bixler Milsten & Murrah, *568 Oklahoma City, Okl., Rebecca J. Patten, Eglish, Patten, Mitchell & Rife, Norman, Okl., for defendants.
ORDER
ALLEY, District Judge.
The Court is informed that tortuous settlement proceedings have occurred in this case. Plaintiffs' counsel first told the Court it was settled; the case was administratively closed; and then Mr. Paulhamus for FDIC told the Court the settlement was off. If this be so, the FDIC settlement participation in the case is consistent with what the Court has observed in other cases.
The Court filed an Order on July 10, 1987 obliging FDIC as a party to the law suit to explain certain actions in connection with settlement negotiations, and in anticipation of a settlement conference to designate an FDIC representative with authority to approve a settlement.
The FDIC's response, filed August 7, 1987, is in full as follows:
COMES NOW the Defendant, the Federal Deposit Insurance Corporation, as Receiver for Security National Bank and Trust Company of Norman, Oklahoma (the "FDIC"), and for its response to the Court's Order of July 10, 1987 (the "Order"), advises the Court as follows:
1. The FDIC is not unwilling to engage in settlement negotiations in this case. Indeed, the FDIC has already discussed the possibility of settlement of the case with the other parties herein, and welcomes the opportunity to do so in the future along the lines traditionally employed in actions before this Court involving the FIDC.
2. However, the FDIC respectfully submits that it should not be compelled to engage in settlement negotiations on the terms imposed by the Order.
3. Further, the FDIC believes the Order to be in excess of the authority over settlement negotiations conferred on the Court by Fed.R.Civ.P. 16(c)(7).
Accordingly, the FDIC respectfully declines to comply with the Court's July 10, 1987 Order and so advised the Court.
That response raises three questions before the Court: Is the Court's Order of July 10, 1987 valid? If so, has FDIC disobeyed it? If so, what ought to be done about the disobedience?
In view of FDIC intransigence, the first numbered paragraph of the Court's Order of July 10, 1987 serves no further purpose and it is vacated.
1. The Court has the power, and indeed the responsibility, to oblige FDIC to designate a person with settlement authority. Federal Rule of Civil Procedure 16(a)(5) and 16(c)(7), as amended as recently as 1983, recognizes the importance of settlement proceedings in the dispositions of law suits. Obviously the Rule does not permit compelled settlements, nor even the imposition of settlement negotiations on unwilling litigants. See Report of the Advisory Committee on Federal Civil Rules, 97 F.R.D. 165, 211 (1982). However, as the Advisory Committee points out in the same passage: "A settlement conference is appropriate at any time." The horses may be led to water. Whether they drink is up to them.
Federal Rule of Civil Procedure 83 empowers district courts to make and amend rules governing their practices, if not inconsistent with the Federal Rules of Civil Procedure. Local Rule of Court 17(H), as revised on August 11, 1986 after giving appropriate public notice and an opportunity for comment, states in connection with settlement conferences: "The lead attorney who will try the case for each party shall appear, and shall be accompanied by one with full settlement authority. The latter will be ... representatives of parties who are not natural parties.... (emphasis supplied)" Valid Local Rules of Court have the force and effect of law. Smith v. Ford Motor Co., 626 F.2d 784 (10th Cir.1980); Woods Construction Co. v. Atlas Chemical Industries, 337 F.2d 888 (10th Cir. 1964).
The Court's Order of July 10, 1987 does not impose settlement negotiations upon *569 unwilling parties and does not oblige a settlement. It is, in view of FDIC practice concerning settlement conferences and negotiations, merely a means of enforcing against this noncomplying litigant the provisions of Local Rule of Court 17(H). The person with full settlement authority on behalf of FDIC must be known in order to assure that FDIC will comply with the Local Rule when the authorized conference is held. The tacit premise of the FDIC response that it "... welcomes the opportunity to ... [negotiate] in the future along the lines traditionally employed in actions before this Court involving the FDIC" is that the FDIC is traditionally in consistent violation of the Local Rule. It is.
Is FDIC immune by some process of self-selection from the Rules applicable to litigants in general? It is of interest that FDIC is a government corporation (12 U.S. C. § 1812) whose governance is through a Board of Directors (12 U.S.C. § 1812) rather than direct presidential supervision or congressional direction. This case raises no issue of unseemly conflict with the political branches of government. FDIC can "sue and be sued, complain and defend" (12 U.S.C. § 1819 (4th)). Although, as litigant, FDIC enjoys some advantages of substantive law not available to all, see e.g., 12 U.S.C. § 1823(e), nothing in the statutes or case law found by this Court supports the proposition that FDIC may "sue and be sued" only in accordance with such procedures as it unilaterally deigns to accept. One construction of its response to the Court's Order is that it asserts Local Rule of Court 17(H) is invalid as to all litigants. This is untenable. An alternative construction is that FDIC asserts Local Rule 17(H) is invalid only as to it and not to other litigants. This is even more untenable.
Great industrial and marketing firms are litigants before this Court. These include the General Motors Corporation, Mobil Corporation, Sears Roebuck and Company and others in recent cases. The magnitude of their corporate responsibilities at least equates to that of FDIC. These private corporations comply with the law or are held to account. Is FDIC different from these private litigants because it is a government corporation?
The answer must be an emphatic "No!" In Van Bronkhorst v. SAFECO Corporation, 529 F.2d 943 (9th Cir., 1976), the Equal Employment Opportunity Commission was equally defiant of a United States District Court Order to produce someone who could commit the EEOC to a definite decision as regards proposed settlement and a consent decree. The EEOC conduct was described as follows:
"It never asked for more time nor did the Commission ever ask for reconsideration of the Court's Order of November 26, 1974 or oppose the entry of the Court's Findings of Fact and Conclusions of Law of December 20, 1974. It made no motion for relief pursuant to § 60(b) F.R.Civ.P. asserting surprise or misunderstanding of the Order (footnote omitted). If [sic] made no attempt whatever to accommodate the Court in any fashion and presented the Court purely and simply with its failure to cooperate. Bluntly stated, the Commission confronted the Court by its conduct with the implicit assertion that it had the right to deal with the Court on its own terms, as and when it pleased; and this, notwithstanding the pressing circumstances which compelled the Court's action." (529 F.2d 943, 949, 950).
To be sure, in the Van Bronkhorst case there was a history of unsuccessful negotiation between the parties, the Court, and EEOC to bring EEOC into compliance with the preliminary structure the Court had set down for settlement. The Court there was more indulgent than the Court has been here. However, the basic nature of the controversy was the same. A government agency asserted that it was beyond those powers of the Court that could be applied to other litigants and simply disobeyed a lawful order. The result was that EEOC was dismissed from the litigation.
Local Rule of Court 17(H) is valid, and this Court's Order of July 10, 1987 is a valid implementation of Local Rule of Court 17, which itself is based on Federal Rule of Civil Procedure 16.
*570 2. FDIC is in disobedience of the Order. The final paragraph of its response tells the Court that in so many words. This course of action raises ethical as well as legal questions. Disciplinary Rule 7-106(A) of the Code of Professional Responsibility provides: "A lawyer shall not disregard or advise his client to disregard a standing rule of a tribunal or a ruling of a tribunal made in the course of a proceeding, but he may take appropriate steps in good faith to test the validity of such rule or ruling." No request for reconsideration was submitted, nor application for extension of time to work the matter out, nor application for appeal of an interlocutory decision pursuant to 28 U.S.C. § 1292(b). Instead the FDIC posture, as was the agency posture in Van Bronkhorst, is a considered election of total disobedience. No ... "appropriate steps in good faith to test the validity of ... ruling ..." were taken.
3. What should be done? By this order the Court finds that FDIC is in deliberate disobedience of the Court's Order of July 10, 1987. A hearing will be conducted on the 18th day of September, 1987, at 4:00 p.m., to be attended by counsel of record for all parties in the case. At the hearing the Court will consider the appropriate sanctions for FDIC's disobedience. If FDIC is ordered into default because of its deliberate disobedience, at the hearing the Court and counsel will discuss the satisfaction of Federal Rule of Civil Procedure 55(e) if any be needed.
At the hearing Messrs. Edwards, Gray, Shreder, and Paulhamus shall also show cause why they should not personally be held to be in violation of Federal Rule of Civil Procedure 11 with respect to numbered paragraphs 2 and 3 of their response filed August 7, 1987. No statute, case, rule, administrative decision, or any other basis whatsoever is asserted by counsel in support of those propositions. Of course, counsel for FDIC may, as counsel for any other party, present principled arguments to the effect that a previously entered court order is erroneous and may, consistent with Rule 11, argue for a modification, extension or overruling of existing law. The Rule 11 question in this case is whether that was the nature of counsel's response, or whether it was impermissible, unprincipled rogue advocacy. The respondent counsel, and all other counsel in the case, are invited to file briefs on the question of whether a Rule 11 violation has taken place in the August 7th response. These briefs must be filed no later than the 11th day of September, 1987.
The third subject of discussion at the hearing will be whether this Court shall commence action either under Local Rule of Court 4 or the rules of the state bar association for violation of Disciplinary Rule 7-106. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1751288/ | 900 S.W.2d 716 (1995)
TRIPLEX COMMUNICATIONS, INC. d/b/a Radio Station KZZB-95 FM, Petitioner,
v.
James R. RILEY, Mary Gray, and Deep East Texas Self Insurance Fund, Respondents.
No. 94-0567.
Supreme Court of Texas.
Argued January 5, 1995.
Decided June 8, 1995.
Rehearing Overruled July 21, 1995.
*717 Charles K. Kebodeaux, Donean Surratt, Beaumont, for petitioner.
Phillip Babin, III, Thomas A. Peterson, Joe Michael Dodson, Beaumont, for respondents.
SPECTOR, Justice, delivered the opinion of the Court, in which all Justices join.
In this cause we consider whether a radio station may be held liable under theories of joint enterprise, civil conspiracy, and negligent promotion for personal injuries resulting from a nightclub's violations of Texas' Dram Shop Act, TEX.ALCO.REV.CODE § 2.02. The trial court refused to submit the plaintiffs' requested questions and definitions on joint enterprise, negligent promotion, and civil conspiracy. The court of appeals reversed and remanded, holding that the trial court abused its discretion by failing to submit the plaintiffs' tendered questions and definitions. 874 S.W.2d 333. Because we hold that the radio station may not be held liable for the tortious acts of the nightclub under any of the three theories, we reverse the judgment of the court of appeals and order that the plaintiffs take nothing from the radio station.
For about seven years, KZZB-95 FM (B-95), a Beaumont radio station, and the Cowboy Palace, Inc. (the Palace) collaborated on a weekly event known as "B-95 Ladies Night at the Palace." B-95 advertised that Thursday night was Ladies' Night at the Palace, meaning that women aged twenty-one years or older would be admitted at no charge. The Palace pre-screened the radio advertisements, except for occasional promotional spots that it could later change. Consistent with the law and at the Palace's request, B-95 indicated in its spots that persons aged eighteen to twenty would be admitted into the establishment. The Palace's Thursday night bar drinks were ninety-five cents, a price set to correspond with B-95's 95.1 FM frequency.
B-95 and the Palace worked closely to make "B-95 Ladies' Night" successful. The Palace sought to increase patronage and B-95 sought advertising revenue. Toward this end, B-95 assigned a disc jockey to the Palace for live remote broadcasts during Ladies' Night. The on-site disc jockey was responsible for making announcements over the public address system informing patrons of drink specials and other promotions. The announcements encouraged patrons to go to the bar. There was evidence that B-95's disc jockey witnessed people becoming intoxicated at the Palace and was aware of underage drinking at the club. Over the seven-year relationship, there were a number of other promotional activities, including the appearance of B-95's mascot, the "Super Bee," at the Palace during Ladies' Night.
*718 On the evening of June 30, 1988, Michael Edward Poupart, an underage patron of the Palace, was served ten alcoholic beverages. After leaving the Palace on the evening in question, Poupart was involved in a serious automobile accident caused by his intoxication. The Beaumont police responded, and officers James Riley and Mary Gray were responsible for directing traffic off of the freeway approximately 300 to 400 yards north of the accident.
During that same evening, Joseph Wayne Stephens arrived at the Palace sometime between 8:30 and 9:00 P.M. Vernis T. Dartez, a Palace bartender, served Stephens either sixteen or seventeen mixed drinks. Stephens, a regular at the Palace, exhibited signs that he was highly intoxicated while he was being served alcoholic beverages.
Stephens was on his way home and travelling at a high rate of speed when his car hit another car that had stopped at the scene of Poupart's accident. Stephens' car ricocheted off the other car and struck Riley and Gray. Stephens' blood-alcohol content was later determined to be substantially above the legal limit, and it is undisputed that Stephens caused the accident.
Officers Riley and Gray brought this action against the Palace, Dartez, and B-95/Triplex. The trial court refused to submit Riley's and Gray's requested questions relating to joint enterprise and negligent promotion, and submitted a definition of civil conspiracy to which Riley and Gray objected. The jury found that the Palace and Dartez were liable under Chapter 2 of the Texas Alcoholic Beverage Code, but failed to find that Triplex and B-95 were engaged in a civil conspiracy with the Palace.
The trial court rendered judgment in favor of Riley, Gray, and an intervenor, Deep East Texas Insurance Fund (Riley's and Gray's workers' compensation carrier), in the amount of $1,410,837.43to be assessed jointly and severally against the Palace and Dartez. The court also awarded $100,000 in punitive damages against the Palace. Because the jury failed to find the existence of a civil conspiracy, and had no opportunity to consider questions on joint enterprise and negligent promotion, Riley and Gray took nothing from B-95. The judgments against Dartez and the Palace are not before this Court.
The court of appeals reversed the judgment of the trial court, concluding that the trial court erred by failing to submit questions on joint enterprise and negligent promotion, and that the civil conspiracy definition was defective.
I. Joint Enterprise
Triplex first argues that the court of appeals erred in holding that Riley and Gray were entitled to a jury question on the issue of joint enterprise. 874 S.W.2d at 326-47. We agree.
If an issue is properly pleaded and is supported by some evidence, a litigant is entitled to have controlling questions submitted to the jury. See Exxon Corp. v. Perez, 842 S.W.2d 629, 631 (Tex.1992); Moore v. Lillebo, 722 S.W.2d 683, 686-87 (Tex.1986); Tex.R.Civ.P. 278. Here, while Riley and Gray may have properly pleaded joint enterprise liability, the evidence adduced at trial was legally insufficient to support the submission of their tendered question.
Riley's and Gray's requested question asked whether B-95 and the Palace had: (1) an express agreement; (2) a common purpose; (3) a common pecuniary interest; and (4) an equal right to control the enterprise. See Shoemaker v. Estate of Whistler, 513 S.W.2d 10, 16-17 (Tex.1974). Even if the evidence adduced at trial satisfied the first three prongs of this test, there is no evidence of an equal right to direct and control the enterprise to justify the imposition of joint enterprise liability.[1]
Riley and Gray suggest that we define enterprise broadly, to encompass all of *719 the business dealings between the Palace and B-95 relating to Ladies' Night. They argue that this expansive definition would reveal that B-95 exercised some control over the relationship, giving rise to some evidence of a joint enterprise. See Shoemaker, 513 S.W.2d at 15 (equal right of control means that each member of the joint venture must have an authoritative voice, or "must have some voice and right to be heard"); Restatement (Second) of Torts § 491 (1965). Triplex, on the other hand, prefers to characterize its relationship with the Palace as one in which a radio station, through advertising and promotions, conducted ordinary business with a client. Under either characterization, however, whether there was a joint business venture or a simple advertiser-client relationship, there is no evidence that B-95 had an equal right of control that would give rise to joint enterprise liability. See Exxon Corp. v. Tidwell, 867 S.W.2d 19, 23 (Tex.1993) (general right of control insufficient to make defendant responsible for actor's criminal conduct in premises liability action).
To establish that B-95 exercised an equal right to control the business relationship, Riley and Gray place great emphasis on the fact that drink prices corresponded with B-95's FM frequency. Yet, it is undisputed that the Palacenot B-95set drink prices. Drinks were 95 cents on all nights except KYKR night, when they were 93 cents to correspond with that station's FM frequency.
The Palace, which was licensed to sell alcohol, maintained absolute control over the provision of all drinks. The proprietors of the Palace decided who was admitted and ejected from the Palace, controlled how much liquor was served and to whom it was served, and were best positioned to monitor the amount of liquor that patrons consumed. There was no evidence that B-95 had a contractual right of control, or exercised any right of control, over who was served, admitted, or ejected. Similarly, the Palace had no right to control the operation of the radio station.
At most, the evidence at trial indicated that B-95 could make suggestions that the Palace could adopt or reject. There was no evidence that B-95 had a voice in, or an equal right to control, the provision of the alcohol. The evidence of B-95's general participation in the event is legally insufficient to support the submission of a question regarding joint enterprise. See TEX.R.CIV.P. 278.
II. Civil Conspiracy
Riley and Gray contend, and the court of appeals agreed, that the definition of civil conspiracy submitted to the jury was erroneous because it required the jury to find that the parties "intended to accomplish an unlawful or negligent purpose or to accomplish a lawful purpose by unlawful or negligent means." 874 S.W.2d at 348. The gravamen of their argument is that the tortfeasors needed only to intend to engage in the conduct that resulted in the injury. We disagree; civil conspiracy requires specific intent. For a civil conspiracy to arise, the parties must be aware of the harm or wrongful conduct at the inception of the combination or agreement.
Riley and Gray requested the following question and definition regarding civil conspiracy:
At the time in question, were The Cowboy Palace, Inc. and Radio Station KZZB-95 FM engaged in a civil conspiracy in a course of conduct which resulted in the injuries to the Plaintiffs?
You are instructed that a "CIVIL CONSPIRACY" exists when two or more parties consciously or knowingly agree among themselves, or otherwise combine together to engage in a lawful purpose or known course of conduct, and perform some acts to implement the course of conduct by some unlawful means.
The term "unlawful means" may include negligence or the violation of a statute or law. It is not necessary that all co-conspirators engage in unlawful means.
The requested question and definition are inconsistent with this Court's prior decisions relating to civil conspiracy. See, e.g., Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex.1983). This Court has repeatedly defined civil conspiracy as "a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means." See id.; see *720 also Carroll v. Timmers Chevrolet, Inc., 592 S.W.2d 922, 925 (Tex.1979). The elements of the cause of action must be taken in the context of this basic definition stating that the object to be accomplished, or means by which accomplished, is unlawful. Massey, 652 S.W.2d at 934. The "gist of a civil conspiracy" is the injury that is intended to be caused. Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 856 (Tex.1968). One "cannot agree, either expressly or tacitly, to the commission of a wrong which he knows not of." Id. at 857.[2]
Thus, because Riley's and Gray's tendered question and definition would have improperly eliminated the intentional or knowing aspects of civil conspiracy, we hold that the trial court properly refused to submit them to the jury. See Tex.R.Civ.P. 278.
III. Negligent Promotion
Finally, Triplex argues that the court of appeals erred in recognizing a cause of action for negligent promotion. Under the circumstances of this case, we agree.
It is axiomatic that a legal duty must exist before a defendant may be held liable in negligence. See Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex.1990). As a general rule, there is no legal duty in Texas to control the actions of third persons absent a special relationship, such as master/servant or parent/child. See Phillips, 801 S.W.2d at 525; Verdeur v. King Hospitality Corp., 872 S.W.2d 300, 301 (Tex. App.Fort Worth 1994, writ denied); RESTATEMENT (SECOND) OF TORTS § 315 (1965).
To justify a departure from this rule, Riley and Gray rely principally on Weirum v. RKO General Inc., 15 Cal. 3d 40, 123 Cal. Rptr. 468, 539 P.2d 36 (1975). In Weirum, a broadcaster encouraged motorists to pursue the radio station's promotional vehicle to different locations. The broadcasts indicated that the first persons to arrive at those locations would be rewarded with prizes. The broadcasts in Weirum were clearly calculated to incite and encourage imminent reckless behavior that exposed the plaintiffs in that case to an unreasonable risk of injury.
In the present case, there is no evidence that the promotions at issue were calculated to incite reckless or unlawful behavior. B-95's advertisements and promotions never approached the level of culpability at issue in Weirum, giving this Court no reason to depart from well-settled duty rules.
Accordingly, we hold that the trial court correctly refused to submit a question on the tort of negligent promotion.
* * * * * *
Because plaintiffs' requested question on joint enterprise was not supported by some evidence, we conclude as a matter of law that the trial court correctly refused to submit the issue of joint enterprise liability. Further, the trial court properly refused plaintiffs' tendered definition of civil conspiracy because *721 the proposed definition was not substantially correct. Finally, the trial court correctly refused to submit a question on negligent promotion because, under the facts of this case, Triplex owed no duty to the injured officers. Consequently, we reverse the judgment of the court of appeals and order that Riley and Gray take nothing from Triplex.
NOTES
[1] We do not reach Triplex's argument that the Legislature has chosen to impose statutory civil liability on providers of alcoholic beverages, and not on persons who are not in control of the liquor supply. See Tex.Alco.Bev.Code § 2.03; Smith v. Sewell, 858 S.W.2d 350 (Tex.1993). Nor do we reach Triplex's argument that defects in the jury question relating to the Palace's liability under the Dram Shop Act make it improper for liability to be imputed to Triplex.
[2] The trial court submitted the following question and definition on civil conspiracy to the jury:
At the time in question, were The Cowboy Palace, Inc. and Radio Station KZZB-95 FM engaged in a civil conspiracy which resulted in the injuries to the plaintiffs?
A "civil conspiracy" is a combination of two or more persons who agree between themselves to accomplish an unlawful or negligent purpose or to accomplish a lawful purpose by unlawful or negligent means. To establish a civil conspiracy, there must be a meeting of the minds on the object or course of conduct, one or more overt acts in furtherance of the conspiracy, and a preconceived plan and unity of design and purpose to engage in the course of conduct that results in an injury to another. (Emphasis added.)
This definition is also erroneous because it permitted the jury to find that the parties conspired to be negligent. Given the requirement of specific intent, parties cannot engage in a civil conspiracy to be negligent. See generally Reed Tool Co. v. Copelin, 689 S.W.2d 404, 406 (Tex.1985) ("The fundamental difference between negligent injury, or even grossly negligent injury, and intentional injury is the specific intent to inflict injury."). The only precedent to the contrary comes from the Beaumont Court of Appeals. See Rogers v. R.J. Reynolds Tobacco Co., 761 S.W.2d 788, 796 (Tex.App.Beaumont 1988, writ denied). We expressly disapprove of Rogers to the extent that it holds that there can be a civil conspiracy to be negligent. However, because the jury in the present case failed to find the existence of a civil conspiracy under the more liberal standard presented in the erroneous definition, any error in the definition is not dispositive in this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2405379/ | 683 A.2d 37 (1996)
RIBLET PRODUCTS CORPORATION, David Bistricer, and Nachum Stein, Defendants Below, Appellants,
v.
Ernest J. NAGY, Plaintiff Below, Appellee.
No. 139, 1996.
Supreme Court of Delaware.
Submitted: September 10, 1996.
Decided: September 26, 1996.
A. Gilchrist Sparks, III (argued), and David J. Teklits of Morris, Nichols, Arsht & Tunnell, Wilmington; Dennis J. Block, Richard W. Slack and Jason M. Halper of Weil, Gotshal & Manges LLP, New York City, of Counsel, for Appellants.
David C. McBride of Young, Conaway, Stargatt & Taylor, Wilmington; Bernard J. Nussbaum (argued), William T. Barker and Kenneth H. Hoch of Sonnenschein Nath & Rosenthal, Chicago, IL, of Counsel, for Appellees.
Before VEASEY, C.J., WALSH and BERGER, JJ.
VEASEY, Chief Justice:
In this certification proceeding we resolve a question of Delaware law certified to this Court by the United States Court of Appeals for the Seventh Circuit in accordance with Article IV, Section 11(9), of the Delaware Constitution and Supreme Court Rule 41. We consider whether or not majority stockholders of a closely-held Delaware corporation can be found to have breached a fiduciary duty owing to a minority stockholder who is also the chief executive officer ("CEO") of the corporation and thus an employee of the corporation under written contract when the dispute arises solely with respect to that employment contract. We hold that, although majority stockholders have fiduciary duties to minority stockholders qua stockholders, those duties are not implicated when the issue involves the rights of the minority stockholder qua employee under an employment contract. The duties of the corporation to the CEO are contractual. Whether or not the majority stockholders may have breached a fiduciary duty to Nagy qua stockholder or to the corporation is not before us. Accordingly, we answer the certified question in the negative.
*38 Facts
The following undisputed facts are set forth in the opinion of the Seventh Circuit. Nagy v. Riblet Products Corp., 7th Cir., 79 F.3d 572 (1996). We will summarize only those facts which are relevant to the certified question.
Riblet Products Corporation ("Riblet") is a closely-held Delaware corporation with its principal place of business in Indiana. It manufactures components of "site-built" homes and recreational vehicles. In 1981, Riblet entered into an employment contract (the "1981 contract") with Ernest J. Nagy ("Nagy"), then Chairman, President, and CEO of Riblet. Nagy was also the owner of 14% of Riblet's stock. The 1981 contract stated in relevant part that if Nagy should be "discharged for any reason other than theft, disclosure of trade secrets, or `similar dishonest acts,' he would receive 60 percent of his regular salary until he turned 62." Nagy, 79 F.3d at 573.
In 1986, David Bistricer, Nachum Stein, and their relatives (collectively the "Majority Stockholders") acquired an 85% interest in Riblet by means of a leveraged buy out. The new group of investors paid Nagy more than $3 million for his previous 14% interest, and Nagy acquired a 15% interest in the new corporation, the RPC Holding Corporation (the new "Riblet"). The Majority Stockholders also entered into a new employment contract (the "1986 Contract") with Nagy.
The terms of the 1986 Contract provide in relevant part that if Riblet terminated Nagy's employment for "cause" all benefits of the 1986 Contract would cease. The 1986 Contract defines "cause" as "conviction of a felony, fraud, dishonesty, illegal use of federally controlled substances, and/or misappropriation of [Riblet's] funds." The 1986 Contract further provides that if Riblet terminated Nagy's employment "other than for cause as defined herein" Nagy would receive "all salaries, benefits, bonuses, and other direct and indirect forms of compensation" for the remainder of his five-year term.
In 1990, Riblet fired Nagy, allegedly "because Nagy engaged in a series of self-dealing transactions with the firm (for example, he was an undisclosed principal in the group buying Riblet's headquarters building) and refused to follow explicit instructions issued by the board of directors (he wrote checks without the required approval, and he kept his personal secretary on the payroll after the board discharged her.)" Nagy, 79 F.3d at 574.
Nagy challenged the dismissal in the United States District Court for the Northern District of Indiana, alleging nine claims against Riblet and the Majority Stockholders. At the close of the evidence, the District Court permitted two of the claims to be submitted to the jury: a claim against Riblet for breach of Nagy's employment contract, and a claim against the Majority Stockholders for breach of their fiduciary duties as majority stockholders to Nagy, a minority stockholder.
The jury found that Riblet breached Nagy's employment contract, and awarded to Nagy $1,267,747 in compensatory damages. The jury also found that the Majority Stockholders breached their fiduciary duties to Nagy, and held them jointly and severally liable with Riblet for the compensatory damages award and assessed $375,000 in punitive damages against each of them.
The defendants appealed the verdict on both grounds.[1] The Seventh Circuit affirmed the verdict with respect to the breach of contract claim. Nagy, 79 F.3d at 575. Finding that Delaware law applied to the breach of fiduciary duty claim, the Seventh Circuit certified the following question of law to this Court pursuant to Delaware Supreme Court Rule 41(a)(ii):
Whether majority shareholders in a Delaware corporation have a fiduciary duty of loyalty to a minority shareholder, who is also an employee under a written contract, with respect to issues affecting that employment. *39 Nagy, 79 F.3d at 578. The Seventh Circuit noted in its respectful request for certification:
It may be that the Justices of the Supreme Court of Delaware will conclude that this is not the controlling question. In that event, the Justices should feel free to reformulate the question, just as they would when dealing with the issues posed in a case wholly within the state system. It is not our purpose to constrain the state court but only to suggest how we conceive of the issue.
Nagy, 79 F.3d at 578. This Court accepted certification. Riblet v. Nagy, Del.Supr., No. 139, 1996, Veasey, C.J. (Apr. 10, 1996) (ORDER).
In view of the invitation by the Seventh Circuit to reformulate the question, we respectfully suggest that it would be preferable if the question were to be restated as follows:
Whether majority stockholders of a Delaware corporation may be held liable for violation of a fiduciary duty to a minority stockholder who is an employee of the corporation under an employment contract with respect to issues involving that employment.
Standard and Scope of Review
Since this Court is addressing a certified question of law, as distinct from a review of a lower court decision, this Court must review the certified question in the context in which it arises. Rales v. Blasband, Del. Supr., 634 A.2d 927, 931 (1993).
Analysis
The proper starting point of the analysis of this issue is the substantive law of the State of Delaware. No current case law speaks directly to this issue. The Seventh Circuit noted:
The Supreme Court of Delaware has never addressed the question. Ueltzhoffer v. Fox Fire Development Co., 1991 WL 271584 (Del.Ch. Dec. 19, 1991) (Berger, V.C.), affirmed, 618 A.2d 90 (Del.1992) [Del.Supr., No. 208, 1992, Moore, J. (Nov. 24, 1992) (ORDER)], marks its closest approach to the subject....
Nagy, 79 F.3d at 577. In Ueltzhoffer, a minority stockholder and employee of a closely-held corporation brought a breach of fiduciary duty claim against the majority stockholders based on his termination. Ueltzhoffer alleged that "his termination amounted to a wrongful freeze out of his stock interest in Drummond and Fox Fire Co." Ueltzhoffer, mem. op. at 16, 1991 WL 271584. Significantly, Ueltzhoffer did not have an employment contract with the corporation.
The Court of Chancery rejected Ueltzhoffer's arguments "that in close corporations profits frequently are taken out as salary and that termination of a minority stockholder's employment without a valid business purpose has been recognized as a breach of fiduciary duties in other jurisdictions" and should be recognized in Delaware. Ueltzhoffer, mem. op. at 16, 1991 WL 271584. The Court of Chancery reasoned:
There are two problems with the plaintiffs' argument. First, to the extent that there is some sort of "business purpose" test associated with the determination as to whether Ueltzhoffer's termination was wrongful, I find that defendants have established one.... Thus, I am not prepared to conclude that the Martas terminated Ueltzhoffer for the sole and improper purpose of freezing him out of the corporate entities.
[Second,] [a]s a matter of law, I am aware of no Delaware authority following [Wilkes v. Springside Nursing Home, Inc., 370 Mass. 842, 353 N.E.2d 657 (1976)] or applying Wilkes outside of the context of a close corporation.
Ueltzhoffer, mem. op. at 17, 1991 WL 271584. In Wilkes, the Supreme Court of Massachusetts held that majority stockholders of a closely-held corporation breached their fiduciary duty to a minority stockholder when they terminated his employment and refused to reelect him as a salaried officer and director. Wilkes, 353 N.E.2d at 661-64. Wilkes has not been adopted as Delaware law.[2]
*40 This is a case governed by an employment contract. Nagy actively and successfully pursued his contractual rights as an employee. These contractual rights are separate from his rights as a stockholder. See Shaw v. Agri-Mark, Inc., Del.Supr., 663 A.2d 464, 470 (1995) (distinguishing between rights arising from contract and "the rights exclusively reserved for `stockholders' under either Delaware common law or the Delaware General Corporation Law.").
This is not a case of breach of fiduciary duty to Nagy qua stockholder.[3] To be sure, the Majority Stockholders may well owe fiduciary duties to Nagy as a minority stockholder. But that is not the issue here. Nagy does not allege that his termination amounted to a wrongful freeze out of his stock interest in Riblet, nor does he contend that he was harmed as a stockholder by being terminated.[4] Moreover, this is not an attempt to bring a derivative suit by Nagy as a stockholder on behalf of the corporation for actionable injury to it arising out of the termination of the employment agreement.[5]
Conclusion
The certified question is therefore answered in the NEGATIVE.[6]
NOTES
[1] Nagy also cross-appealed with respect to the claims on which he did not prevail. The Seventh Circuit affirmed the District Court's rejection of all claims raised by Nagy in his cross-appeal.
[2] The fact that Riblet is closely-held does not, for this purpose, alter the duties of stockholders inter se from those which prevail for publicly-held corporations. Compare Nixon v. Blackwell, Del. Supr., 626 A.2d 1366, 1380 (1993) ("One cannot read into the situation presented in the case at bar any special relief for the minority stockholders in this closely-held, but not statutory `close corporation' ...") with Stroud v. Grace, Del. Supr., 606 A.2d 75, 86 (1992) (privately-held, non-public, corporation not registered under the Securities Act of 1933 nor subject to proxy requirements of the Securities Exchange Act of 1934 is governed solely by disclosure requirements of 8 Del.C. §§ 222 and 242 regarding amendment to certificate of incorporation).
[3] Nor is this a case determined by a "business purpose" test. This Court rejected the "business purpose" test of Singer v. Magnavox Co., Del. Supr., 380 A.2d 969 (1977), in Weinberger v. UOP, Inc., Del.Supr., 457 A.2d 701 (1983).
[4] "Nagy's own theory is that Bistricer and Stein fired him to reduce their risk under [certain] guarantees." Nagy, 79 F.3d at 575.
[5] Such a derivative suit would be subject to the demand requirements of Court of Chancery Rule 23.1. Grimes v. Donald, Del.Supr., 673 A.2d 1207 (1996). In any event, "as the district court observed, no evidence at all suggests that Bistricer and Stein acted for any reason other than the proper one of increasing the corporation's profits and prospects." Nagy, 79 F.3d at 575-76.
[6] In view of our resolution of the central issue in this case, we need not reach the other contentions argued by counsel in this Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1662584/ | 930 S.W.2d 945 (1996)
Donald S. WINSTON, M.D., Donald S. Winston, M.D., P.A., and Galleria Medical Center, Inc., Appellants,
v.
AMERICAN MEDICAL INTERNATIONAL, INC., Twelve Oaks Hospital, Victorrino G. Cumagun, M.D., R. Andrew Jackson, M.D., Ronald F. Norris, M.D., and Norborne B. Powell, M.D., Appellees.
No. 01-91-01441-CV.
Court of Appeals of Texas, Houston (1st Dist.).
October 3, 1996.
*947 Mike O'Brien, Houston, for Appellants.
Dan McClure, Daniel Hedges, Richard Zook, Houston, Ben Taylor, Dallas, for Appellees.
Before SAM H. BASS,[*] MIRABAL and WILSON, JJ.
OPINION
SAM H. BASS, Justice (Assigned).
In the trial court, Donald S. Winston, M.D., Donald S. Winston, M.D., P.A., and Galleria Medical Center, Inc. (plaintiffs), sued American Medical International, Inc. (AMI), Twelve Oaks Hospital, and various doctors (defendants). Fundamentally, this is a dispute between doctors over two intertwined issues: (1) the business end of their medical practices; and (2) the denial of Dr. Winston's application for staff privileges. The trial judge granted defendants' joint motion for summary judgment, and plaintiffs appeal challenging the adverse ruling. We affirm in part, and reverse and remand in part.
I. Undisputed Facts
In 1981, Dr. Winston opened an industrial medicine practice in the Galleria shopping mall known as Galleria Clinic, Inc., since renamed Galleria Medical Center, Inc. (GMC). In late 1981 and early 1982, and pursuant to the Hospital's by-laws, Dr. Winston applied[1] for, and then received, temporary staff privileges[2] at Twelve Oaks Hospital, a private hospital owned by Twelve Oaks Medical Center, Inc., corporate affiliate of AMI. During the time Dr. Winston held privileges, approximately 15 patients per month were referred from his Galleria office *948 to the Twelve Oaks Hospital for admission and/or treatment.
By letter dated November 4, 1982, Twelve Oaks notified Dr. Winston that the committee examining his application for permanent staff privileges would recommend to the Board of Directors that his request for staff privileges be denied, and that his temporary privileges were suspended pending the Board's decision. A few days later, Dr. Winston was informed by subsequent letter of the charts reviewed by the relevant committee in making its recommendations and of his right to a hearing before the Judicial Review Committee. By letter of November 15, Dr. Winston informed Mr. John Sielert, executive director of the Hospital, that he withdrew his "pending application for active staff privileges at Twelve Oaks Hospital."
Dr. Winston reapplied to Twelve Oaks in March of 1983. The application was referred to the Hospital's credentials committee for consideration, and it in turn appointed an ad hoc committee to review the medical charts of the patients treated by Dr. Winston in 1982. The ad hoc committee's findings were then presented back to the Hospital's credentials committee, of which Dr. Ronald Norris, a defendant, was a member. The credentials committee voted to recommend denial of Dr. Winston's application.
The executive committee, including Dr. Cumagun and Dr. Jackson, also defendants, next considered the matter. The executive committee accepted the decision of the credentials committee and voted to deny the application. The executive committee notified Dr. Winston by letter dated August 4, 1983, of the decision to deny him medical staff privileges.
Dr. Winston then requested the findings of the executive committee be reviewed by the judicial review committee, a committee of five doctors chaired by Dr. Norborne Powell, also a defendant. The judicial review committee met with Dr. Winston on August 30, 1983, and subsequently voted September 7, 1983, to uphold denial of staff privileges as recommended by the executive committee.
The appellate review committee of the board of directors of the Hospital, which included doctors Norris and Powell, met on October 19, 1983, to consider Dr. Winston's appeal of the judicial review committee's decision. The board reaffirmed the denial of Dr. Winston's request for staff privileges and sent him notice by certified mail dated October 24, 1983.
II. Dr. Winston's Factual Contentions
Fundamentally, Dr. Winston claims to have uncovered an illicit scheme by certain Twelve Oaks doctors to allocate industrial medicine patients among themselves to his professional and financial injury. The objective of the alleged conspiracy was the suppression of competition which in turn would enhance profits subsequently shared by members of the scheme. Dr. Winston claims they achieved their objective by denying him staff privileges in the Hospital, not because of any lack of professional competence, but in furtherance of their malicious plan.
Plaintiffs allege each defendant doctor would send a list of companies that the doctor claimed were his clients to the emergency room nurses at Twelve Oaks. If an employee from a listed company came to the emergency room, the doctor who claimed a relationship with that company was called. The patients had no knowledge of this alleged arrangement. Dr. Winston says the doctors had no agreements with these companies, and that these companies, in fact, had never even heard of these doctors.
Dr. Winston states Dr. Cumagun, chief of surgery at Twelve Oaks, was appointed to ad hoc physician review committees to remove potential competitors from the staff. Dr. Winston claims he ran afoul of the scheme when he contracted with many of the companies and became a competitor of Dr. Cumagun. Dr. Winston asserts that after he started competing for patients, the Hospital initiated a malicious peer review process against him.
Dr. Winston claims Twelve Oaks did not follow proper procedures in the review and *949 appeal process according to the Hospital's bylaws. Dr. Winston avers he was not allowed to appear before the ad hoc committee to discuss his medical charts. Further, Dr. Winston says there was no independent review by the credentials or the executive committees, also in violation of hospital bylaws. Although the judicial review committee allowed Dr. Winston to appear, in contrast to other committees, Dr. Winston states he was told he could not be represented by an attorney, even though the sole purpose of the judicial review committee was to ensure that the bylaws were fairly applied.
Dr. Winston asserts he did not learn of the decision of the appellate review committee of the board of directors until November 1983. Dr. Winston also claims corporate counsel for AMI instructed the executive director of Twelve Oaks to alter the minutes of the October 19, 1983, meeting, and that he was unaware of the alleged alteration until after he initiated his federal suit.
Dr. Winston avers that as a result of the denial of his applications for privileges at Twelve Oaks, he cannot get privileges at any other hospital. Due to the damage to his reputation from the events at the Hospital, Dr. Winston states he was unable to obtain staff privileges or admit patients at other hospitals and was forced to close his practice.
He also asserts that in 1984 or 1985, the defendants set up a competing practice in the Galleria area, "The Doctors at the Galleria," and hired his former office manager, who then recruited his former patients.
In summary, Dr. Winston claims that:
1) defendants conspired to "eliminate competition for emergency room patients and to prevent the entry of new physicians into the market at [the Hospital]";
2) he discovered this conspiracy after he obtained his temporary staff privileges;
3) on November 4, 1982, his temporary staff privileges were terminated, and it was recommended that permanent staff privileges be denied because he did not condone the conspiracy;
4) the manner in which his applications for staff privileges were denied, and his temporary staff privileges were terminated, violated the Hospital "bylaws and various contractual agreements between [the Hospital], AMI and [himself]";
5) the denial of staff privileges made it impossible for him to practice medicine, and resulted in his patients going to the Hospital to be treated by defendants;
6) he was unable to obtain "admitting privileges" at other hospitals because of the manner in which he lost his staff privileges at the Hospital;
7) defendants "sought to obtain [his] proprietary information, to confuse [his] patients as to the clinic's identity and to interfere with [his] business relationships by implying that [he] and his clinic had gone out of business";
8) his ex-employee took confidential business information with her when hired by the defendants which was used to, in effect, take over his medical practice; and
9) he discovered the plan to take over his medical practice on January 26, 1987, during a deposition taken during the pendency of the federal lawsuit discussed below.
III. The Appellees' Factual Contentions
The defendants assert Dr. Winston's initial staff privileges were merely temporary. When Dr. Winston reapplied, the ad hoc committee appointed to evaluate his charts criticized them for: (1) inappropriate evaluation of patients; (2) frequent cases of inadequate and inconsistent medical records; (3) repeated examples of inappropriate surgical judgment; and (4) frequent inappropriate preoperative evaluation of patients. The defendants maintain this was the basis for the denial of Dr. Winston's privileges. They assert a total of 31 doctors on various peer review committees participated in the review of Dr. Winston's charts before his staff privileges were denied on October 19, 1983.
IV. Procedural History
Dr. Winston initially sued the defendants in federal court in November 1985, seeking *950 liability under the following statutes and theories:
(1) Sherman Antitrust Act, 15 U.S.C. §§ 1, 15, and 22, and 28 U.S.C. § 1337;
(2) Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq.;
(3) Texas Antitrust laws, TEX. BUS. & COM. CODE ANN. § 15.01 et seq. (Vernon 1987); and
(4) tortious interference with present and prospective contractual and business relationships and prospective advantage.
On May 8, 1990, the federal trial court granted defendants' motion for summary judgment regarding causes of actions pled under the Sherman and RICO acts. Because the only remaining claims were based on state law, the federal court exercised its discretion to dismiss the state claims without prejudice at the time it granted defendants' motion for summary judgment. The federal court clarified by amended order signed July 23, 1990, that its dismissal of the state claims was without prejudice to the state claims being refiled.
Plaintiffs filed suit in state court on July 6, 1990, based on the same facts, asserting the pendent state claims dismissed by the federal court and numerous additional claims. The state suit was based on the following statutes and theories of recovery:
CAUSES OF ACTION IN FEDERAL SUIT RETAINED
(1) Texas Antitrust laws, TEX. BUS. & COM. CODE ANN. § 15.01 et seq. (Vernon 1987);
(2) tortious interference with present and prospective contractual and business relationships and prospective advantage; and
CAUSES OF ACTION ADDED IN STATE COURT
(3) fraud;
(4) negligence;
(5) breach of good faith and fair dealing;
(6) promissory estoppel;
(7) defamation and business disparagement;
(8) negligent misrepresentation;
(9) breach of fiduciary duty;
(10) Texas Deceptive Trade Practice Act;
(11) civil conspiracy;
(12) statutory commercial bribery;
(13) unjust enrichment;
(14) ratification; and
(15) breach of contract.
Defendants filed a joint motion for summary judgment on five distinct grounds: (1) the denial of Dr. Winston's staff privileges was not actionable under Texas law regardless of the cause of action asserted; (2) the conduct of the defendant doctors relative to the rejection of Dr. Winston's application for privileges was statutorily privileged; (3) the actions filed were barred by the applicable statute of limitations; (4) the claims were barred by collateral estoppel; and (5) Dr. Winston failed to state necessary elements of the various causes of action pled. The motion was granted in whole by the trial court on August 19, 1991, without stating the specific grounds upon which it was based.
V. Standard of Review on Appeal from Summary Judgment
Plaintiffs bring five points of error attacking each of the grounds asserted by defendants as a basis for granting of the summary judgment. Accordingly, we will consider the summary judgment evidence in the light most favorable to the nonmovants and indulge every reasonable inference in their favor. Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex.1987); Holbrook v. Guynes, 827 S.W.2d 487, 489 (Tex.App. Houston [1st Dist.] 1992), aff'd sub nom, Guynes v. Galveston County, 861 S.W.2d 861 (Tex.1993). We will affirm if any theory in *951 the summary judgment was meritorious. Fontenot v. NL Industries, 877 S.W.2d 339, 340 (Tex.App.Houston [1st Dist.] 1993, writ denied). Plaintiffs must show that each of the independent grounds alleged in the motion is insufficient to support the order. Crowder v. Tri-C Resources, 821 S.W.2d 393, 396 (Tex.App.Houston [1st Dist.] 1991, no writ).
VI. The Claims Contained in the Federal Complaint
Although we decide below that the statute of limitations does not bar any claim brought by plaintiffs, we consider the claims asserted in the federal suit apart from the "new" allegations first brought in the state petition.
a. The State Antitrust Claim
Defendants contend plaintiffs are collaterally estopped from maintaining the Texas Antitrust Act claim because the federal court decided the merits of that claim. Collateral estoppel precludes the relitigation of identical issues of fact or law that were already litigated and essential to the judgment in a prior lawsuit where the parties were cast as adversaries. Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex. 1990); State v. Approximately $2,000,000.00 in United States Currency, 822 S.W.2d 721, 725 (Tex.App.Houston [1st Dist.] 1991, no writ). There are three requirements which must be met for the federal doctrine of collateral estoppel to apply to a subsequent, related state court proceeding:
(1) the prior federal decision must have resulted in a judgment on the merits;
(2) the same fact issues sought to be concluded must have been actually litigated in the federal court; and
(3) the disposition of those issues must have been necessary to the outcome of the prior federal litigation.
Shell Pipeline Corp. v. Coastal States Trading, Inc., 788 S.W.2d 837, 843 (Tex.App. Houston [1st Dist.] 1990, writ denied). When an issue of fact or law is actually litigated and determined by a valid final judgment, and the determination is essential to the judgment, that determination is conclusive in a subsequent action between the parties, whether on the same or a different cause of action. See Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex. 1984).
Plaintiffs' Texas Antitrust Act claim is brought under section 15.05(a) of the Texas Antitrust Act. TEX. BUS. & COM.CODE ANN. § 15.05(a) (Vernon 1987). The Texas Supreme Court has noted:
Section 15.05(a) [of the Texas Antitrust Act] is comparable to, and indeed taken from, section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1988). Accordingly, we look to federal judicial interpretations of section 1 of the Sherman Act in applying section 15.05(a) of our state antitrust law.
DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 687 (Tex.1990) (footnote omitted). In addition, section 15.04 of the Texas Antitrust Act provides that its provisions "shall be construed in harmony with federal judicial interpretations of comparable federal antitrust statutes" to an extent consistent with maintaining and promoting economic competition in trade and commerce within Texas. TEX. BUS & COM.CODE ANN. § 15.04 (Vernon 1987). See also Red Wing Shoe Co. v. Shearer's, Inc., 769 S.W.2d 339, 343 (Tex.App. Houston [1st Dist.] 1989, no writ) ("[T]he Texas legislature not only used language tracking that of the federal statute ... but it also included a clause [section 15.04] specifying uniformity of construction between the federal and Texas statutes."); Nafrawi v. Hendrick Medical Ctr., 676 F. Supp. 770, 774 (N.D.Tex.1987) ("Establishing a violation of the [Texas Antitrust Act], then, requires the same elements as are required to establish the comparable violation of the Sherman Antitrust Act, 15 U.S.C. § 1.").
To establish a violation of section one of the Sherman Antitrust Act or section 15.05(a) of the Texas Antitrust Act, a plaintiff must prove the challenged restraint of trade is unreasonable and has an "adverse effect on *952 competition" in the relevant market. DeSantis, 793 S.W.2d at 688; see also MJR Corp. v. B & B Vending Co., 760 S.W.2d 4, 22-23 (Tex.App.Dallas 1988, writ denied) ("Without a showing of actual adverse effect on competition, [a plaintiff] cannot make out a case under the antitrust laws.").
Here, the federal court considered the merits of plaintiffs' federal antitrust act claim when it granted the motion for summary judgment. In its memorandum opinion, the federal court held that the claim of conspiracy to purloin patient admissions and referrals (1) could not fall under the "per se rule" of illegality, but must be examined under the "rule of reason,"[3] and (2) under the "rule of reason" analysis, it "could not have had an adverse effect on competition" as a matter of law because Twelve Oaks Hospital dealt with a very small share of the patient market.
Plaintiffs advance the same factual allegations as a basis for the Texas Antitrust Act claim as were advanced in the federal antitrust act claim. Accordingly, we conclude the plaintiffs are collaterally estopped from relitigating the state antitrust act claim in state court. We hold the trial court properly granted summary judgment on the state antitrust act claim on the basis of collateral estoppel.
b. Tortious Interference
Plaintiffs contend the trial court also committed error in granting summary judgment for defendants regarding the claim against AMI and other defendants for tortious interference with the business relations of Dr. Winston, P.A. and GMC. In their federal complaint, plaintiffs claimed defendants tortiously interfered with their actual and prospective contractual and business relationships, made wrongful use of confidential information, and breached a confidential relationship. The first amended complaint filed in federal court alleged AMI used bribes and illegal inducements to establish a physician group, defendants sought and did obtain Dr. Winston's proprietary information, confused Dr. Winston's patients as to the identity of this physician group, and implied that Dr. Winston and GMC had gone out of business.
The original petition filed in state court alleged that AMI used bribes, and other illegal inducements to establish a physician group in the Galleria, and "this group sought to obtain Dr. Winston's proprietary information, to confuse Dr. Winston's patients as to their identity, and to interfere with Dr. Winston's business relationship by implying that Dr. Winston and his clinic had gone out of business." The second amended petition filed in state court more specifically alleged that in the summer of 1984, AMI hired Dr. Winston's GMC office manager, Nelda Barrera, to assist in establishing its medical office at The Doctors at the Galleria. The petition also states that when Barrera left to work for defendants, she took Dr. Winston's rolodex, confidential information concerning price lists and fee agreements, and the names of Dr. Winston's patients. In response to the defendants' motion for summary judgment, plaintiffs submitted Dr. Winston's affidavit setting out these allegations.
The state court summary judgment record also includes excerpts of deposition testimony from Randy Winograd, the head of AMI's physician relations department. The Doctors at the Galleria was funded by AMI. Winograd stated he was involved in recruiting Barrera to work at The Doctors at the Galleria and knew she was working for Dr. Winston at GMC at that time. Winograd also stated he did not ask Barrera to bring patient lists from GMC and Barrera told him she would not consider bringing confidential information to AMI if she was hired by The Doctors at the Galleria. Barrera was hired as office manager for The Doctors at the Galleria.
*953 Excerpts from the deposition of Patricia Claiborne, another employee of GMC, also appear in the record. Claiborne stated Barrera told her she had been hired to work at The Doctors at the Galleria. Claiborne also stated she saw Barrera take the rolodex with names of contact persons, price lists, vendor lists, and other information from GMC, and Barrera told her she was taking such items so that when she left GMC, she would have "everything she needed." Claiborne further stated that after The Doctors at the Galleria opened, patients would arrive at GMC with forms from the other clinic, unaware they were at the wrong clinic.
The elements of a cause of action for tortious interference with contractual relations are: (1) there was a contract subject to interference; (2) the act of interference was willful and intentional; (3) such intentional act was a proximate cause of a plaintiff's damages; and (4) actual damage or loss occurred. Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 926 (Tex.1993); John Masek Corp. v. Davis, 848 S.W.2d 170, 175 (Tex. App.Houston [1st Dist.] 1992, writ denied). Texas law protects existing and prospective contracts from interference. Davis, 848 S.W.2d at 175.
Interference with a business relationship is similar to the tort of contract interference. It is not necessary to establish the existence of a valid contract, but interference with a general business relationship is actionable only if a defendant's interference is motivated by malice. CF & I Steel Corp. v. Pete Sublett & Co., 623 S.W.2d 709, 715 (Tex.Civ.App.Houston [1st Dist.] 1981, writ ref'd n.r.e.). To recover on a cause of action for tortious interference with a prospective business relationship, a plaintiff must show: (1) there was a reasonable probability he would have entered into a business relationship; (2) the defendant acted maliciously by intentionally preventing the relationship from occurring with the purpose of harming the plaintiff; (3) the defendant was not privileged or justified in his actions; and (4) actual harm or damage occurred to the plaintiff as a result. American Medical Int'l, Inc. v. Giurintano, 821 S.W.2d 331, 337 (Tex. App.Houston [14th Dist.] 1991, no writ).
In their motion for summary judgment, defendants argue plaintiffs' claim of tortious interference against AMI is barred by limitations. We disagree. The tortious interference claims against defendants are alleged to have arisen in 1984, when defendants established its clinic and hired Barrera. The plaintiffs filed their federal complaint in 1985, within the two-year limitations period. Although the plaintiffs do not specify the business relationships or actual or prospective contracts of GMC and Dr. Winston, P.A. that were subjected to interference by defendants, such is not their burden to defeat a motion for summary judgment based on limitations. The defendants argued all the plaintiffs' causes of action accrued in October 1983, when Dr. Winston's staff privileges were denied, and so did not present argument or summary judgment evidence sufficient to defeat the claims against defendants for their actions in 1984 as a matter of law. Because of the tolling provisions discussed below, we determine that the trial court could not have properly granted summary judgment on the basis of limitations as to the tortious interference causes of action originally pled in the federal suit.
VII. Statute of Limitations
Next, we consider the question of whether the trial court could have correctly granted summary judgment in part because a portion of the remainder of Dr. Winston's claims were filed outside the applicable statutes of limitations.
Dr. Winston reapplied for staff privileges at Twelve Oaks in March of 1983. He was sent formal notification of the Hospital's denial of his reapplication by certified mail on or about October 25, 1983, however, there was evidence he did not receive the notice until mid-November, 1983. The federal lawsuit was filed on November 4, 1985, and the amended order of dismissal was signed July 23, 1990. The state court lawsuit was filed July 6, 1990.
*954 Notwithstanding that the state lawsuit was filed nearly seven years after the events that predicated Dr. Winston's complaints, plaintiffs argue that the respective statutes of limitations were tolled while their case was pending in federal court, based on TEX. CIV. PRAC. & REM.CODE ANN. § 16.064 (Vernon 1986). Plaintiffs further claim that they could add additional causes of action that were not included in their federal lawsuit pursuant to TEX. CIV. PRAC. & REM.CODE ANN. § 16.068 (Vernon 1986), provided that any new theories of recovery were based on the same facts alleged as a basis for the federal suit.
Defendants respond by arguing that (1) plaintiffs have not complied with the procedural requirements of 16.064; (2) that in any event, plaintiffs could not "save" any causes of action other than those specifically pled in the federal suit; and (3) that certain of the state law claims now pled were barred by the relevant statute of limitations before the federal suit was filed. TEX. CIV. PRAC. & REM.CODE ANN. § 16.064 (Vernon 1986), provides in part:
(a) The period between the date of filing an action in a trial court and the date of a second filing of the same action in a different court suspends the running of the applicable statute of limitations for the period if:
(1) because of lack of jurisdiction in the trial court where the action was first filed, the action is dismissed or the judgment is set aside or annulled in a direct proceeding; and
(2) not later than the 60th day after the date the dismissal or other disposition becomes final, the action is commenced in a court of proper jurisdiction.
a. Procedural Requirements of 16.064
Defendants first note plaintiffs filed the state suit (July 6, 1990) before the federal dismissal became final (July 20, 1990) and thus violated section (a)(2). Defendants argue the statute requires that the state suit can only be filed in a window of 60 days after the federal suit becomes final. Therefore, the defendants claim the state suit was filed too soon to take advantage of the statute. Finally, defendants state that Dr. Winston's construction of the statute "would encourage the filing of a second suit anytime during the pendency of the first suit and lead to an undesirable deluge of simultaneous parallel state and federal litigation." (Emphasis in original.)
However, under the facts of this case, we disagree. Here, the state suit was not filed at anytime, but only after a putative final judgment was signed on May 8, 1990, in the federal case. The tolling provisions are remedial in nature and are to be liberally construed. Vale v. Ryan, 809 S.W.2d 324, 326 (Tex.App.Austin 1991, no writ.). Although defendants are correct that the precise question before us was not answered in the Vale opinion, we do not find the construction of the language in the statute urged on us by defendants independently persuasive, nor consistent with the many cases mandating a liberal construction of the statute. Further, we do not find the filing of the state suit in this case so premature, if it was so filed, as to be devoid of any meaningful relationship with the signing of the final judgment. Accordingly, we do not find the trial judge could have granted the summary judgment because of the plaintiffs' alleged failure to comply with the procedural requirements of 16.064.[4]
b. "Saving" statute
Next, defendants argue that if the state suit was filed consistent with the timeliness requirements of the statute, the only causes of action that can be saved are the ones asserted in the federal suit. Defendants *955 state that the "same action" language of 16.064(a) limits what plaintiffs can file in the state court to exactly what was filed in the federal court. If defendants are correct, then plaintiffs would have a state suit under the Texas Antitrust laws and for tortious interference with present and prospective contractual and business relationships. The remaining causes of action contained in plaintiffs' state pleadings would have been properly dismissed by the trial judge.
Plaintiffs argue that TEX. CIV. PRAC. & REM. CODE ANN. § 16.068 (Vernon 1986) allows Dr. Winston to add additional theories of recovery if the new claims are not grounded in new, distinct, or different transactions or occurrences. Defendants present us with no Texas authority that prohibits litigants from taking advantage of the amending provisions of 16.068 to causes of action saved under 16.064. Defendants do cite us to authority from other states construing statutes similar to 16.064, but not to any authority involving the interaction between statutes like 16.064 and 16.068.
We find that sections 16.064 and 16.068 should be interpreted together so as to achieve the clear purpose of the statutes, which is to toll limitations for a certain period when a case is dismissed for lack of jurisdiction and to allow adding to a petition additional theories of liability or defenses after the lawsuit has been filed if those new theories or defenses are not wholly based on a new, distinct, or different transaction or occurrence. Accordingly, we hold the trial judge could not have granted the summary judgment and eliminated the "new" causes of action pled based on the inapplicability of 16.068 to causes of action "saved" under 16.064.
c. Claims Barred before Federal Suit Filed
When summary judgment is sought on the ground that limitations has expired, it is the movant's burden to conclusively establish the limitations bar, including the negation of a tolling or suspension statute raised by the nonmovant. Zale Corp. v. Rosenbaum, 520 S.W.2d 889, 891 (Tex.1975); Ardila v. Saavedra, 808 S.W.2d 645, 647 (Tex. App.Corpus Christi 1991, no writ). Dr. Winston pled in his second amended petition that "the individual Defendants were absent from the state for several days during the two years following the denial of staff privileges; thereby, tolling the statute of limitations on the tort claims."
The absence from this state of a person against whom a cause of action may be maintained suspends the running of the applicable statute of limitations for the period of the person's absence. TEX. CIV. PRAC. & REM.CODE ANN. § 16.063 (Vernon 1986); Ardila, 808 S.W.2d at 646; Hooper v. Torres, 790 S.W.2d 757, 758-59 (Tex.App.El Paso 1990, writ denied). Because defendants moved for summary judgment, it was their burden to conclusively negate Dr. Winston's reliance on 16.063 and prove the individual defendants were not out of the state as alleged. Ardila, 808 S.W.2d at 647. We find no evidence in the record from the defendants on this issue; thus, the defendants have failed to carry their burden. Therefore, we conclude the trial judge could not have granted summary judgment based on the running of any statute of limitations.[5]
We note that both sides to the litigation have discussed the statute of limitations issue in the context of a suit "for denial of staff privileges." The parties generally agree that the cause of action accrued sometime between late October and late November of 1983 with the receipt by Dr. Winston of the final denial letter sent to him by Sielert, the Hospital's chief administrator. The parties dispute the precise date on which Dr. Winston received the letter. We do not decide whether an accrual date can be determined as a matter of law because plaintiffs pled a *956 tolling statute, which brings into issue when the limitations period ended as distinguished from when it started. Because we cannot determine as a matter of law on what day limitations ran, it is not necessary for the resolution of the limitations questions presented to address or resolve on what day it started.[6]
VIII. Private Hospital Action
The first grounds for summary judgment urged by the defendants was that in 1982 and 1983, the denial of staff privileges at a private hospital was not actionable under Texas law, regardless of the cause of action asserted. It is uncontroverted that Twelve Oaks Hospital is a private hospital. Numerous Texas cases have drawn a distinction between private and public hospitals, consistently holding that the decision of a governing board of a private hospital with regard to staff privileges is not subject to judicial review. Armintor v. Community Hosp. of Brazosport, 659 S.W.2d 86, 88-89 (Tex.App.Houston [14th Dist.] 1983, no writ); Tigua Gen. Hosp. v. Feuerberg, 645 S.W.2d 575, 578 (Tex.App.El Paso 1982, writ dism'd w.o.j.); Hodges v. Arlington Neuropsychiatric Ctr., Inc., 628 S.W.2d 536, 538 (Tex.App.Fort Worth 1982, writ ref'd n.r.e.); Charter Medical Corp. v. Miller, 605 S.W.2d 943, 951 (Tex.Civ.App.Dallas 1980, writ ref'd n.r.e.). See also Grossling v. Ford Memorial Hosp., 614 F. Supp. 1051, 1058 (E.D.Tex.1985). The court in Tigua stated the controlling principles as follows:
Where a hospital excludes or discriminates against a physician or surgeon applying for or seeking to maintain staff membership, the subsequent treatment of the problem by the courts depends primarily upon whether the hospital involved is a public or private institution and it is generally held that a private hospital acts at its own discretion and that its decisions are not subject to judicial review.... Texas follows the rule that the exclusion of a physician from staff privileges is a matter which ordinarily rests with the discretion of the management authorities and is not subject to judicial review. In summary, in the area of private hospitals those cases have held that the doctor in this State has no cause of action against a private hospital for the termination of staff privileges even where the action of the hospital was arbitrary and capricious or where common law rights to procedural or substantive due process were violated. In this situation, the final authority to terminate a doctor-staff privilege rests with the Board of Governors.
645 S.W.2d at 578 (citations omitted).
We agree with defendants that at the relevant time, 1982-1983, Texas law did not permit recovery by a physician against a private hospital or its staff for denial or termination of physician staff privileges, regardless of the name given to the cause of action. Dr. Winston has not cited to this court a single Texas decision to the contrary, and we have found none.
Accordingly, we affirm the summary judgment against Dr. Winston as to all of his causes of action based on certain defendants' denial of Dr. Winston's application for staff privileges and the termination of his temporary privileges.
We reverse the summary judgment as to Dr. Winston's claim of tortious interference with present and prospective contractual and business relationships based on defendants' establishment of a competing practice in the Galleria area, and we remand that portion of the case to the trial court.
NOTES
[*] Justice BASS, who retired on May 31, 1993, continues to sit by assignment for the disposition of this case, which was submitted prior to that date.
[1] The defendants describe Dr. Winston as having received temporary staff privileges while his application for permanent staff privileges was being considered. This application for permanent status was what was later denied and then withdrawn. Dr. Winston notes that he was not unknown to the Hospital when he filed the '81 application. While Dr. Winston was completing his medical residency, he received privileges beginning in April 1979 limited to the Department of Emergency Medicine.
[2] The type of staff privileges sought by Dr. Winston would allow him to admit patients, provide care, and perform certain general types of medical and surgical procedures at the hospital.
[3] See National Soc'y of Professional Eng'rs v. United States, 435 U.S. 679, 688-92, 98 S. Ct. 1355, 1363-65, 55 L. Ed. 2d 637 (1978), for an analysis of the distinction between these types of trade restraints.
[4] Defendants also urge our consideration of Gutierrez v. Lee, 812 S.W.2d 388, 392 (Tex.App. Austin 1991, writ denied). In Gutierrez, the Austin Court found 16.064 inapplicable to the facts of the case before it for substantive reasons. We are not bound by the court's suggestion of how 16.064 would have been unhelpful to the Lees even if it did apply.
[5] Because we resolve the case as to all parties later in the opinion with regard to the causes of action arising from the denial of Dr. Winston's application for staff privileges, it is unnecessary here to distinguish between the corporate and individual defendants relative to application of the tolling statute. Obviously, the corporate defendant had not left the state.
[6] We note that under Dr. Winston's theory of the case, the denial of staff privileges was not an end in itself, but evidence of a broader illegal objective, the taking of his medical business. We have not been asked to discuss other acts allegedly taken in furtherance of the alleged conspiracy, such as the hiring of Dr. Winston's office manager, as they might impact our consideration of the limitations issues. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2519038/ | 33 F. Supp. 2d 769 (1998)
UNITED STATES of America, Plaintiff,
v.
VERTAC CHEMICAL CORP., et al., Defendants.
No. LR-C-80-109.
United States District Court, E.D. Arkansas, Western Division.
October 23, 1998.
*770 *771 Sam Blesi, Department of Justice, Land & Natural Resources Division, Washington, DC, A. Douglas Chavis, III, United States Attorney's Office, Eastern District of Arkansas, Little Rock, AR, for the United States.
Charles L. Moulton, Attorney General's Office, Little Rock, AR, for the State of Arkansas.
V. Robert Denham, Jr., Powell, Goldstein, Frazer & Murphy, Atlanta, GA, Charles L. Schlumberger, Wright, Lindsey & Jennings, Little Rock, AR, for Hercules, Inc.
Steven W. Quattlebaum, Williams & Anderson, Little Rock, AR, for Uniroyal Chemical.
MEMORANDUM OPINION AND ORDER
GEORGE HOWARD, JR., District Judge.
After eighteen years of litigation, and the expenditure of over $102,000,000.00 to date, the United States of America is ready to recover its costs associated with the cleanup of the Vertac Site pursuant to Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9607.[1] The United States has filed a motion for summary judgment on the issue of costs. The two parties found to be jointly and severally liable, Uniroyal Chemical, Ltd. (Uniroyal) and Hercules Incorporated (Hercules), object and argue that the United States is not entitled to recovery of costs as the actions of the United States Environmental Protection Agency (EPA) were arbitrary, capricious and not in accordance with law. They have filed motions for summary judgment with regard to EPA's claims.[2]
The Vertac Plant Site (site) is located in Jacksonville, Arkansas. The site was used for the manufacture of herbicides and other chemicals since the 1940s. As a result of the production, the land, buildings, equipment, groundwater, sewer lines, two sewage treatment plants, and flood plains and adjacent creeks became contaminated with 2,3,7,8-TCDD (dioxin) and other chlorinated carbon compounds. In 1983, EPA placed the site on the National Priority List (NPL) of Superfund cleanup sites established pursuant to Section 105 of CERCLA.
In carrying out the response measures, EPA divided the site into five units Off-Site Areas, Operable Units 1,2 and 3, and the Incineration response action. There were several removal actions that consisted of removing *772 the immediate threat posed by the thousands of drums of waste containing hazardous substances left on the site when it was abandoned. Four remedial actions addressed the long-term solutions for the rest of the site and the surrounding area affected by the site. For each of the remedial actions, the National Contingency Plan (NCP) required the EPA (1) to conduct a "remedial investigation" (RI) of the site conditions, including an "endangerment assessment" (EA) of the threats posed by the contamination at the site; (2) to perform a "feasibility study" (FS) examining the various technical alternatives for remediating the site; (3) to take public comment on EPA's proposed remedial action plan based on the alternatives discussed in the FS; (4) to compile an administrative record for remedial action decision making; and (5) to issue a written ROD explaining the agency decision-maker's (the Regional Administrator) reasoning in selecting the final remedial action plan, and responding to the public comments received. The Court will first discuss the response actions at each of the units and second the arguments raised by the parties.
FACTUAL BACKGROUND
Incineration Response Action
When Vertac abandoned the site, it left behind more than 28,500 drums containing 2,4-D (Dichlorophonoxyacetic Acid) and 2,4,5-T (Trichlorophenoxyacetic Acid) still bottom wastes, dioxin and other hazardous and toxic substances. In addition, bulk storage tanks containing process materials and substantial quantities of contaminated trash remained on-site. According to an August 19, 1987 Action Memorandum, the drums were leaking potentially hazardous material, were stored in deteriorated sheds, on uncurbed concrete pads, and in open fields. Over 15,000 drums were stored outside exposed to the elements. Drums were stacked three high on deteriorating wooden pallets. EPA determined that the wastes on the site posed a threat to public health and welfare and the environment. Residents in the area could be exposed to hazardous substances and should a large release occur, in the event of a tornado, fire, or continued poor maintenance, the toxic waste would contaminate the environment. EPA initiated a removal action in 1987 to stabilize the drums and tanks and to provide site security. By February, 1989, the failed drums had been placed inside new, larger drums (overpacked) and the tanks had been stabilized. However, the corrosive materials in the drums and tanks continued to cause deterioration and drum and tank inspection and maintenance were an ongoing project.
The drummed material was considered acutely hazardous waste and was characterized as "F-listed" waste under applicable Resource Conservation and Recovery Act (RCRA) regulations, 40 C.F.R. Part 261, App. VII.. Because of the characteristics of the wastes involved, EPA chose to dispose of the wastes by incineration. The Arkansas Department of Pollution Control and Ecology (ADPC & E or the State) entered into a contract for the drum incineration, and planned to fiance the cleanup with $10.7 million provided by Vertac.[3]
EPA proposed to conduct a removal action to support the State's incineration efforts. This removal action was performed as a "non-time critical" removal action. EPA performed an Engineering Evaluation/Cost Analysis (EE/CA) in 1989 with regard to the non time-critical action to provide support for the State's incineration project.[4] After the EE/CA was completed, EPA conducted a public meeting and solicited public comments on its proposed support measures.
*773 ADPC & E signed a contract with MRK, Inc. in July, 1989, for the incineration of the 28,500 drums of still bottom wastes. MRK, Inc. subsequently entered into a joint operating agreement with Morris-Knudsen, Inc., creating the venture known as Vertac Site Contractors (VSC). VSC erected a conventional rotating kiln incinerator. The first trial burn was completed in December, 1990. In April, 1991, ADPC & E notified VSC that the trial burn would have to be repeated because of, among other reasons, data gaps, and unacceptable laboratory procedures. After numerous delays, a second trial burn was conducted in October, 1991.[5] Approval of the second trial burn and certification to incinerate dioxin wastes were announced by the State on January 2, 1992.[6]
A dispute developed between the State and VSC regarding compensation for "downtime." Claims by VSC would have used up the amount available from the trust fund. Eventually, the State and VSC signed an agreement for the continued incineration of the wastes. The State agreed to pay VSC for certain "downtime," and also agreed to increase the compensation rate from approximately $850.00 per ton to $2,800.00 for continued incineration until the trust fund was depleted.
The State managed the incineration until June 3, 1993, when the State notified EPA that it was terminating its incineration contract with VSC. Prior to that time, EPA's role had been to support the State by maintaining the drummed waste, moving drums from storage facilities on-site to the incinerator, conducting ambient air monitoring around the site and in residential areas, testing salt and ash residuals and disposal of the delisted ash residue.
When it became apparent that the State was not going to be able to complete the incineration of the drummed waste with the funds it had available, EPA began considering its options for the disposal of the remaining drummed waste. On September 28, 1992, the EPA Regional Administrator for EPA Region VI requested approval of a federal removal action and an exemption from the statutory $2 million ceiling increase and one year time limit for removal actions under CERCLA. 42 U.S.C. § 9604(c)(1)(C). The *774 Regional Administrator determined that immediate federal removal action was necessary to complete the incineration as the state's trust funds were insufficient to complete the incineration and there was the risk of exposure to the population by the threat of release, fire or explosion if the wastes were not incinerated. EPA determined that an imminent threat to the community existed given that over 16,000 drums remained containing highly corrosive and hazardous wastes.[7]
In its September 28, 1992, Action Memorandum, EPA evaluated alternative responses to the threat to public health, welfare, and the environment posed by the onsite drums. EPA evaluated seven options including continued drum maintenance without treatment, on-site incineration, off-site incineration, and stabilization and on-site landfilling of the wastes. Continued drum maintenance was ruled out because it did not eliminate the threat. On-site landfilling was eliminated because it could not be done in compliance with RCRA regulations banning land disposal of F-listed wastes and, in any event, the waste could not be effectively stabilized for landfilling. Off-site incineration was ruled out because the only facility in the country permitted to incinerate dioxin waste was unable to do so because of a limited permit. EPA determined that on-site incineration of the wastes, after also considering the costs, was the preferred method of addressing the threat posed by the drummed wastes.
EPA therefore took over the on-site incineration of the drums to mitigate the threat presented and to avoid any delay in the disposal process. By conducting the incineration as a time-critical removal action, EPA was able to resume incineration of the drummed waste on June 8, 1993.
In August, 1994, EPA continued to find that the on-site drums presented a significant threat to human health, welfare, and the environment. EPA's concern about the threat of fire and explosion had been heightened by a fire that broke out in an on-site office building on May 20, 1994. EPA continued to note the danger presented by the possibility of a tornado.
In August, 1994, EPA became aware that APTUS, a commercial facility located in Coffeyville, Kansas, was permitted to process dioxin wastes. EPA decided to ship the remaining 3,260 drums of 2,4,5-T wastes to APTUS. In an August 15, 1994, Action Memorandum, EPA documented that the cost to incinerate Vertac drummed waste at the APTUS facility would be similar to the on-site incineration costs, and that incineration both on-site and off-site could shorten the time for on-site incineration. Thus, both on-site and off-site incineration was determined to be the preferred removal response.
EPA completed the on-site incineration of the 2,4-D drummed waste in October, 1994. The Vertac on-site incineration activities ceased in January, 1995. Off-site shipment of the 2,4,5-T drums was completed in March, 1996.
After the completion of the on-site incineration, EPA had to arrange for the disposal of the salt and ash residual. Based on sampling, EPA determined that neither the salt *775 nor ash was contaminated with dioxin at concentrations above one part per billion (ppb), the allowable limit for land disposal. While the salt contained levels of other materials (cadmium, chromium or lead) which exceeded allowable concentrations for land disposed wastes, EPA determined that the salts could be treated to be eligible for on-site disposal in a RCRA Subtitle C landfill.
This was done as a non-time-critical removal action. On March 5, 1996, EPA submitted an addendum to the original June 12, 1989 EE/CA and submitted it for public comment. The community expressed concern about the size of the on-site landfill. EPA determined that the ash and shredded pallets could be disposed of in the on-site RCRA landfill because of the low dioxin levels. The salt was sent off-site to a RCRA landfill because of the high volume of the salt (34,000 drums) and concern that the size of the existing on-site landfill not exceed 25 feet, the maximum height which the community was willing to accept.
The incinerator was decontaminated and dismantled for placement in the on-site hazardous landfill. Pursuant to a December 20, 1996, Action Memorandum, EPA decided to issue a unilateral administrative order to Hercules, Uniroyal, and Vertac. The recipients of the order would be required to dismantle the incinerator and its associated structures and debris and decontaminate these materials. The drum disposal removal action was completed during the summer of 1997.
Off-Site Areas
The Off-Site areas consist of the locations near the site where hazardous substances came to be located. The initial RI was performed between the fall of 1983 and spring of 1985. The purpose was to determine if dioxin had migrated beyond the plant site and, if so, to identify contaminated areas. The initial Vertac Offsite FS identifying seven potential alternatives for offsite remediation was completed in June, 1986. A public meeting was held in Jacksonville, Arkansas on July 15, 1986, to explain the results of the FS, answer questions and accept comments.
Because of amendments in 1986 to CERCLA, the selection of a remedy was postponed. EPA completed a supplemental FS in June, 1990. Pursuant to section 117 of CERCLA, 42 U.S.C. § 9617, EPA published notice, in July, 1990, of the completion of FS and of the proposed plan for remedial action for the off-site areas and provided for public comment on he proposed plan.
The ROD was issued in September, 1990 to address contamination in the off-site areas, including sewage collection lines, the old sewage treatment plant, the West Wastewater Treatment Plant, Rocky Branch Creek, and Bayou Meto Flood Plain. The remedy, which was completed in April, 1998, included the excavation of soils from the Rocky Branch Creek flood plain, removal of sediments from the sewage collection lines, removal of sludge from the sludge digester at the sewage treatment plant, and the excavation of dioxin contaminated soil from the banks of the Rocky Branch Creek and replacement with clean soil.
Hercules performed the remedial design and construction work under a CERCLA Unilateral Administrative Order (UAO) with EPA oversight.
On-Site Operable Unit No. 1 (OU #1) (Above Ground Media)
From March, 1987 through April, 1988, EPA performed an inventory of the process vessels (e.g. storage tanks, chemical reaction vessels) in the central process area. A sampling of the vessels in 1991 revealed the presence of dioxin.
The OU #1 FS and RI were finalized at the end of March, 1991, and the proposed plan was released in February 1993. Hercules conducted the RI/FS pursuant to an Administrative Order on Consent (AOC) with EPA. A public comment period was held from February through April, 1993 and the ROD for OU #1 was issued on June 30, 1993.
The ROD addressed the contaminated above-ground structures in the main production area of the Vertac Site. It required that plant equipment be dismantled and salvaged to the extent possible, and that all other nonsalvageable material be placed in an onsite *776 landfill. Any hazardous material not suitable for the landfill was to be incinerated.
Hercules implemented the remedy pursuant to a UAO and completed all work in early 1998.
Operable Unit #2 (OU #2) (Soils, Foundations and Underground Utilities)
Between 1989 and 1992, a RI was conducted to determine the levels of hazardous substances present in the soils at the site. Hercules performed the RI/FS pursuant to an AOC. The RI was finalized in December, 1992, and the FS was finalized in April, 1995.
Following the release of the original proposed plan for OU #2 in May, 1995, and the subsequent community meeting, the EPA Administrator issued a series of administrative reforms for the Superfund Program requiring EPA to revise the proposed plan of action of OU #2. EPA issued a Supplemental Proposed Plan in February, 1996, and presented it to the public. The public objected to the proposed plan, which proposed on-site landfilling of soil contaminated with dioxin in excess of 50 ppb.
In light of community concerns EPA reevaluated the FS and two proposed plans. The ROD for OU #2 was signed in September, 1996, and addressed contaminate on-site soils, foundations, underground utilities at the site, as well as contaminated off-site soils and sediments that had previously been excavated from off-site areas and stored on the site. The remedy selected required the excavation of dioxin contaminated soils, and the disposal of this soil in the on-site containment vault. Hercules performed the remedial design and construction pursuant to a UAO. The work was completed in May, 1998.
Operable Unit No. 3 (OU #3) (Groundwater)
The ROD for OU #3, issued September, 1996, dealt with ground water contamination under the site. During the RI process, additional groundwater monitoring wells were installed to determine the nature and extent of non-aqueous phase liquid contamination. After consideration by EPA of the remedial alternatives set forth in the FS, it selected a remedy that focused on controlling the off-site migration of contaminated groundwater by installation of extraction wells, as well as the continued operation of the french drain system.
The remedy was expected to be completed this year.
The Jacksonville and Rogers Road Landfills
As a result of citizens' complaints, EPA first investigated the Jacksonville and Rogers Road Landfill sites in 1983. Site investigations revealed the presence of rusting drums, strong chemical odors and damage to flora and fauna indicating contamination. Subsequent RIs confirmed that dioxin, 2,4,5-T, 2,4,5-TP and other chemicals had been disposed of and released at both sites. EPA completed its FS, received public comments on the available remedies and held a public meeting in 1990.
EPA issued RODs for the two landfills in September, 1990, which required the excavation of contaminated soils, replacement and capping with clean soil, cleaning and removal of large refuse items. The contaminated soil and drums were incinerated at the Vertac site. EPA began remedial work at each site in 1994, and completed all work in 1995.
ANALYSIS
CERCLA was amended by the Superfund Amendments and Reorganization Act of 1986 ("SARA"). SARA added section 113(j) setting forth the standard for judicial review of a cost recovery action filed under Section 107.
(1) Limitation
In any judicial action under this chapter, judicial review of any issues concerning the adequacy of any response action taken or ordered by the President shall be limited to the administrative record. Otherwise applicable principles of administrative law shall govern whether any supplemental materials may be considered by the court.
(2) Standard
In considering objections raised in any judicial action under this chapter, the court shall uphold the President's decision in selecting the response action unless the objecting party can demonstrate, on the *777 administrative record, that the decision was arbitrary and capricious or otherwise not in accordance with law.
42 U.S.C. § 9613(j).
In performing this narrow review, the Court
looks to whether the agency considered those factors Congress intended it to consider; whether the agency considered factors Congress did not intend it to consider; whether the agency failed entirely to consider an important aspect of the problem; whether the agency decision runs counter to the evidence before it; whether there is such a lack of a rational connection between the factors found and the decision made that the disputed decision cannot "be ascribed to a difference in view or the product of agency expertise."
Downer v. United States, 97 F.3d 999, 1002 (8th Cir.1996).
Pursuant to Section 107(a)(4)(A) of CERCLA, defendants are liable for "all costs of removal or remedial action incurred by the United States government ... not inconsistent with the National Contingency Plan." 42 U.S.C. § 9607(a)(4)(A). Defendants have the burden of demonstrating that the United States' response costs are inconsistent with the NCP. Additionally, defendants must demonstrate that the EPA's choice of response actions was arbitrary and capricious or otherwise not in accordance with the law based on the administrative record. United States v. Gurley, 788 F. Supp. 1473, 1481 (E.D.Ark.1992), aff'd in part, rev'd in part and remanded, 43 F.3d 1188 (8th Cir.1994), cert. denied, 516 U.S. 817, 116 S. Ct. 73, 133 L. Ed. 2d 33 (1995) (citing United States v. Northeastern Pharmaceutical (NEPACCO), 810 F.2d 726, 748 (8th Cir.1986), cert. denied, 484 U.S. 848, 108 S. Ct. 146, 98 L. Ed. 2d 102 (1987)). "To show that the Government's response action is inconsistent with the NCP, a defendant must demonstrate that the EPA acted arbitrarily and capriciously in choosing a particular response action to respond to a hazardous waste site." United States v. Hardage, 982 F.2d 1436, 1442 (10th Cir.1992), cert. denied, 510 U.S. 913, 114 S. Ct. 300, 126 L. Ed. 2d 248 (1993) (citing NEPACCO, 810 F.2d at 748).
Both Uniroyal and Hercules contend that even under the deferential "arbitrary and capricious" standard of review the Court must take a "hard look" at the administrative record. Under this approach, defendants argue that the Court must determine whether EPA used the correct methodology, applied the proper criteria, considered relevant factors, chose from the range of options, relied upon appropriate policies, and found adequate support in the record for material empirical propositions.
Defendants have confused the "hard look" required of agencies in making decisions with the standard of review a federal court must apply in reviewing an agency decision. See Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 374, 109 S. Ct. 1851, 104 L. Ed. 2d 377 (1989) (National Environmental Policy Act of 1969 (NEPA) requires that agencies take "hard look" at the environmental effects of their planned action); Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 356, 109 S. Ct. 1835, 104 L. Ed. 2d 351 (1989); Sierra Club v. U.S. Forest Service, 46 F.3d 835, 838-39 (8th Cir.1995) (under arbitrary and capricious standard, court must affirm agency's decision if the agency took a "hard look" at the project); Audubon Soc'y of Cent. Arkansas v. Dailey, 977 F.2d 428, 434 (8th Cir.1992) (whether agency took "hard look" at the problem is factor to be considered by court in determining whether agency's decision is arbitrary and capricious).
The Court will not expand the standard of review to be used in reviewing EPA's actions in this instance. That standard is clearly spelled out in the CERCLA statute. Furthermore, as the Eighth Circuit stated in NEPACCO,
Because determining the appropriate removal and remedial action involves specialized knowledge and expertise, the choice of a particular cleanup method is a matter within the discretion of the EPA. The applicable standard of review is whether the agency's choice is arbitrary and capricious. As explained in United States v. Ward,
[i]f [appellants] wish the court to review the consistency of [the government's] actions with the NCP, then they are essentially *778 alleging that the EPA did not carry out its statutory duties. The statute provides liability except for costs "not inconsistent" with the NCP. This language requires deference by this court to the judgment of agency professionals. [Appellants], therefore may not seek to have the court substitute its own judgment for that of the EPA.. [Appellants] may only show that the EPA's decision about the method of cleanup was "inconsistent with the NCP in that the EPA was arbitrary and capricious in the discharge of their duties under the NCP".
810 F.2d at 748 (quoting United States v. Ward, 618 F. Supp. 884, 890 (E.D.N.C.1985)). See also United States v. Akzo Coatings of America, Inc., 949 F.2d 1409, 1424-25 (6th Cir.1991) ( reviewing court should not attempt to substitute its judgment for the expertise of EPA officials; task is to search for errors of procedure and serious omissions of substantive evidence, not to reformulate a scientific clean-up program developed over the course of months or years).
Defendants raise a number of issues in support of their position that the United States is not entitled to its costs. The Court will address each of these before deciding the United States' motion for summary judgment on costs.
Cancer Potency Factor
Hercules contends that EPA used too conservative a cancer potency factor in the calculation of dioxin cleanup standards for the soil and sediments at the Vertac site. EPA states that it considered lower standards, and selected the 1 ppb cleanup standard for the off-site residential areas in 1990 and the 5 ppb cleanup standard in the 1996 OU #2 ROD for the on-site areas in which future industrial use could be expected. The cancer potency factor used by EPA was fully explained in the RODs for the Off-site areas and for OU #2, in risk assessments performed for the site, and in an extensive scientific research document issued by EPA in 1985 (Health Assessment document). It specifically considered Hercules' comments, as well as the proposal of Hercules' contractor, ChemRisk.[8] The cancer potency factor was subjected to peer review, discussed in a public forum, and reviewed and approved by the EPA's independent Science Advisory Board.
In selecting remedial actions, the EPA is directed to
establish acceptable exposure levels that are protective of human health and the environment and shall be developed by considering the following ... [f]or systemic toxicants, acceptable exposure levels shall represent concentration levels to which the human population, including sensitive subgroups, may be exposed without adverse effect during a lifetime or part of a lifetime, incorporating an adequate margin of safety.
40 C.F.R. § 300.430(e)(2)(i).
EPA chose to use a cancer potency factor premised on the most conservative assumption, which it opined would provide the greatest protection for the public health and the environment. In light of the scientific uncertainty about a "safe level" for dioxin, EPA's choice was reasonable. While Hercules may disagree with EPA's more conservative number, the Court cannot say that the EPA's decision to use the standards it did was in any way arbitrary, capricious or not in accordance with the law.[9]
Hercules also argues that the EPA's cancer potency factor constitutes a rule under the Administrative Procedures Act (APA) that must be overturned because it was not subject to notice and comment. Courts have established a two-part test to determine whether a particular statement by an agency is a legislative rule or policy: (1) a policy statement, as opposed to a rule, does not have binding effect, that is, it does not impose any rights and obligations, and (2) a *779 policy genuinely leaves the agency and its decision makers free to exercise discretion. McLouth Steel Products Corp. v. Thomas, 838 F.2d 1317, 1320 (D.C.Cir.1988) (citations omitted). See Syncor Int'l Corp. v. Shalala, 127 F.3d 90, 94 (D.C.Cir.1997) (primary distinction between rule and general statement of policy turns on whether agency intends to bind itself to a particular legal position).
The Health Assessment Document which set forth the cancer potency factor does not impose any rights of obligations. It is at most only a technical and advisory report. It did not obligate the agency or public in determining acceptable risks associated with dioxin. See Industrial Safety Equipment Assoc., Inc. v. EPA, 837 F.2d 1115, 1120-21 (D.C.Cir.1988) (guide by EPA and NIOSH recommending certain respirators did not constitute rule). See also Natural Resources Defense Council, Inc. v. EPA, 16 F.3d 1395, 1406-07 (4th Cir.1993) (EPA water quality dioxin criteria document is scientific reference manual and useful guide, but is not binding on any agency and has no legal effect).
With regard to the second element, the Regional Administrator of EPA Region 6 exercised discretion in deciding whether to apply the cancer potency factor to the cleanup of the site. EPA considered the effects of the lower figure proposed by ChemRisk and rejected it. Furthermore, in 1996, the Regional Administrator also reevaluated the toxicity of dioxin based on a 1994 draft Dioxin Reassessment Document. While she ultimately did not select a different cancer potency factor, her consideration of other data establishes that she was not bound by the 1985 document or the cancer potency factor set forth in it.
In addition, Hercules had the opportunity to, and did, comment on EPA's application of the cancer potency factor with regard to the cleanup levels at the site. EPA considered and responded to those comments when issuing its final RODs.
This argument is without merit.
Exposure Assessments
Hercules argues that the exposure assessments used by EPA did not justify a remedial order. Hercules throws out numbers and absurd hypotheticals to support its contention. For example, Hercules posits that EPA's assessments are based on teenagers riding their bicycles on the landfills or people rooted all day to a portion of the sewage treatment plant, eating dirt by the handful. Hercules argues that EPA used "unrealistic" exposure assumptions along with its cancer potency factor to create imaginary risks to justify a remedial order.
For known or suspected carcinogens, acceptable exposure levels under the NCP "are generally concentration levels that represent an excess upper bound lifetime cancer risk to an individual of between 10-4 and 10-6 using information on the relationship between dose and response." 40 C.F.R. § 300.430(e)(2)(i)(A)(2). There is no requirement that a certain number of people be exposed. Rather, the NCP requirement is designed to protect an individual from an increased risk of contracting cancer as a result of exposure to hazardous substances. The numbers may be high, and perhaps, as Hercules implies, a bit overcautious, but the Court cannot find that the assessments are arbitrary and capricious. They are based on observations, discussions with local officials and residents, and review of zoning ordinances. According to reports from site evaluations in the residential areas, children routinely played in the Rocky Branch creek, some of the flood plain areas were used for grazing and crop production, sludge drying beds were being used for vegetable gardens, and a mobile home was located within 1000 feet of the highly contaminated dioxin drums.
EPA was justified in assuming that residents could be exposed to dioxin contaminants from the site. As such, the Court finds that EPA's exposure assessments and cleanup standards were not arbitrary and capricious.
Risks to Workers
In a somewhat innovative, yet unpersuasive, argument, Hercules contends that the remedies were not "cost effective" because EPA failed to consider the risks of injuries and fatalities to workers involved in response activities. According to Hercules, the risk of death to workers involved in the *780 clean up was greater than the risk of death by possible exposure to dioxin.
Hercules cannot point to anything in the Administrative Record to show that EPA did not consider worker safety. Furthermore, assessment of the risks associated with traveling to and working at the Site is not required by the NCP in determining whether the remedial choice is "cost effective."
Incineration of Drummed Wastes
The main argument advanced by both Uniroyal and Hercules is that EPA arbitrarily and capriciously characterized, handled and incinerated the 2,4-D waste. The arguments are basically two-fold: first, that the EPA's decision to treat the drums of 2,4-D waste as F-listed wastes was arbitrary and capricious, and concomitantly, that the EPA arbitrarily and capriciously decided to incinerate the waste; second, that EPA's determination to treat incineration as a removal action rather than remediation was inconsistent with the NCP.
Characterization of the Wastes
In 1980, EPA concluded that the 2,4-D wastes had been contaminated with tetrachlorodiabenzo-o-dioxin ("TCDD"). On February 26, 1980, EPA issued a proposed rule under the Toxic Substances Control Act ("TCSA") to prevent Vertac from disposing of TCDD wastes from the Jacksonville site. The rule became effective March 11, 1980. (45 Fed.Reg. 15592) (proposed Feb. 26, 1980). This regulation, known as the "Vertac Rule," became final in May 19, 1980 (45 Fed.Reg. 32676).
According to testimony at the hearing on the proposed rule, Vertac had approximately 3,200 drums of TCDD-containing wastes resulting from the production of 2,4-D. The wastes contained "TCDD because the equipment used to produce 2,4-D had been used previously to produce 2,4,5-T and the equipment remained contaminated with TCDD after production shifted from 2,4,5-T to 2,4-D." 45 Fed.Reg. 32677. "Vertac testified that it had analyzed three samples from the 700 drums of wastes resulting from the initial production of 2,4-D on the contaminated equipment and found TCDD levels of approximately twenty parts per billion (ppb)." 45 Fed.Reg. 32678.
The 1980 Vertac Rule provided that wastes could be disposed of in a PCB landfill if the wastes contained no "detectable levels of TCDD employing the TCDD detection methodology established by the Dioxin Monitoring Program." 45 Fed.Reg. at 32687. Vertac then sent samples of its 2,4-D wastes to Wright State University and to Monsanto for testing. The analyses by Wright State University found the first 700 drums contained 0.7 ppb 2,3,7,8-TCDD, 1.2 ppb total TCDD. Monsanto was not able to detect any TCDD at limits of detection below 1 ppb.
On April 4, 1983, EPA issued a proposed rule (48 Fed.Reg. 14514) stating its intent to regulate under RCRA "certain chlorinated dioxins, -dibenzofurans, andphenols," and to terminate the TCSA listing made in 1980. The materials were considered acutely hazardous and designated as F-listed wastes. The Final Rule, published at 50 Fed.Reg. 1978 (January 16, 1985) became known as the "Dioxin Listing Rule." The materials contained in the Rule would be the "F-Listed" wastes which ultimately ended up being listed 40 C.F.R. § 261 Ohio App. VII.
Thus, in 1985, the wastes from the production of 2,4-D at the site became F-listed hazardous wastes, designated as F023.
Defendants contend that the 2,4-D wastes were not properly characterized as F-listed wastes. The Court disagrees. The 2,4-D wastes fall within the category F023. That category includes:
Wastes ... from the production of materials on equipment previously used for the production or manufacturing use ... of triand tetrachlorophenols..
40 C.F.R. § 261.31.
There is no dispute that 2,4,5-T wastes were highly contaminated with hazardous substances including 2,3,7,8-TCDD. Equipment used to make 2,4,5-T was also used to make 2,4-D. Thus, the wastes generated were F-listed wastes, regardless of the presence of dioxin. Furthermore, the Court has already found that there was cross-contamination between the 2,4-D and 2,4,5-T wastes and that the equipment was contaminated *781 even after Vertac abandoned the facility. United States v. Vertac Chemical Corp., 966 F.Supp. at 1500.
The Hazardous and Solid Waste Amendments of 1984 ("HSWA") to RCRA, prohibited the land disposal of untreated hazardous wastes after specified dates. As of November 8, 1986, land disposal of dioxin containing hazardous waste number F023 was prohibited. 42 U.S.C. § 9624(e)(2)(A). However, the statute contained a temporary exemption through November 8, 1988, for disposal of contaminated soil or debris from a CERCLA response action. 42 U.S.C. § 9624(e)(3). Thus, after November 8, 1988, no F023 could be land disposed unless it met standards set by EPA.[10]
Under the standards set by EPA, F023 hazardous waste could not be land disposed unless the concentration of each constituent designated in the standard fell below certain levels. 40 C.F.R. § 268.40. These constituents can be just as toxic as dioxin. Wastes that met the applicable treatment standards could be disposed in a RCRA Subtitle C land disposal facility[11]
The 2,4-D waste contained most of the constituents in concentrations greater than the treatment requirements. For example, the analysis of a composite sample from the 700 drums conducted in late 1979 showed total TCDDs of 1.2. ppb, above the treatment requirement of one ppb. Samples collected on July 21, 1990, as part of the first trial burn for the on-site incinerator revealed total TCDFs (tetrachlorodiabenzo-p-furans) in excess of the treatment standard for F023. In addition, one sample contained 320 ppb total TCDDs.
Data from the 1991 test burn showed the presence of 12.6 ppb 2,3,7,8-TCDD in the solid fraction of 2,4-D waste (13.9 ppb total TCDDs) and 3.6 ppb 2,3,7,8-TCDD in the liquid fraction (10.6 ppb total TCDDs) analyzed. In addition, other constituents were present in the 2,4-D waste in excess of the treatment requirement for the constituents.
Uniroyal further argues that because all the drums of waste were not sampled by EPA, it was arbitrary and capricious to treat all of the drums as F-listed wastes. EPA argues that the costs of sampling the drums would have been prohibitive. Each drum would have had to be opened in a special environment with specialized tools by workers dressed in protective gear. The drums would have to be resealed. The United States has demonstrated that the cost of such individualized sampling would rival the cost of incineration. Given what the EPA knew about the content of the drums at the time they were listed, it would have been unreasonable for the EPA to spend millions of dollars to sample drums in hopes of finding ones that did not contain hazardous substances. See United States v. Broderick Inv. Co., 963 F. Supp. 951, 954 (D.Colo.1997) (record supported EPA's assertion that obtaining accurate measure of solid concentration would be prohibitively expensive and time consuming, if not practically impossible. "[M]andating every imaginable study prior to remedy [or removal] selection would hopelessly delay EPA's important activities, and the benefit of such an exacting requirement is unclear.")
All the data available to EPA supported its conclusion that the 2,4-D waste required treatment before it could be land disposed. EPA examined multiple treatment options for the drummed waste and concluded that incineration was the only effective option. EPA states as a result of incineration, the 25,180 drums of 2,4-D wastes were reduced to 6,300 drums of ash and 33,000 drums of salt with no appreciable dioxin content. The ash could be treated and placed at RCRA Subtitle C landfill at minimal additional cost.
The Court concludes that the characterization of the D-wastes as F-listed was not arbitrary and capricious. Contrary to defendants' *782 assertions, the 2,4-D wastes met the requirements of the F023 listing. Furthermore, the 2,4-D waste did not meet the treatment requirements for landfill offsite. Incineration was appropriate under the circumstances.
Response v. Remedial Action
Uniroyal and Hercules further argue that EPA did not follow the requirements of the NCP in disposing of the drummed wastes as a removal action. EPA performed the work as a series of removal actions. This is permitted by the NCP and CERCLA. The United States contends that the incineration is a removal action, and that the requirements of the NCP for remedial actions do not apply.
Whenever there is a release or threat of release of any hazardous substance into the environment, Section 104 of CERCLA authorizes EPA to take response measures not inconsistent with the NCP. 42 U.S.C. § 9604(a). There is no dispute that there was a release of hazardous substances at the Site, as was previously found by the Court.
CERCLA and the NCP distinguish between removal actions and remedial actions.[12] The former are taken to "counter imminent and substantial threats to public health and welfare," while the latter "are longer term, more permanent responses." State of Minnesota v. Kalman W. Abrams Metals, Inc., 155 F.3d 1019, 1024 (8th Cir.1998). "The NCP prescribes more detailed procedures and standards for remedial actions" than for removal actions. Id. See 40 C.F.R. §§ 300.410, 300.415 (requirements for removal actions); 40 C.F.R. §§ 300.420-300.435 (requirements for remedial actions). "However, a removal action is not converted into a remedial action just because it effects a permanent remedy." Hatco Corp. v. W.R. Grace & Co., 849 F. Supp. 931, 962 (D.N.J. 1994). The proper classification of the cleanup is an issue of law. Channel Master Satellite v. JFD Electronics Corp., 748 F. Supp. 373, 386 (E.D.N.C.1990).
EPA is authorized to perform removal actions where it determines that "there is a threat to public health or welfare of the United States or the environment." 40 C.F.R. § 300.415(b)(1). The NCP requires that EPA consider eight factors in determining the appropriateness of a removal action. These are:
(i) Actual or potential exposure to nearby human populations, animals or the food chain from hazardous substances or pollutants or contaminants;
(ii) Actual or potential contamination of drinking water supplies or sensitive eco-systems;
(iii) Hazardous substances or pollutants or contaminants in drums, barrels, tanks, or other bulk storage containers, that may pose a threat of release;
(iv) High levels of hazardous substances or pollutants or contaminants in soils largely at or near the surface, that may migrate;
(v) Weather conditions that may cause hazardous substances or pollutants or contaminants to migrate or be released;
(vi) Threat of fire or explosion;
(vii) The availability of other appropriate federal or state response mechanisms to response to the release; and
*783 (viii) Other situations or factors that may pose threats to public health or welfare or the environment.
40 C.F.R. § 300.415(b)(2) (1990).[13]
When EPA decides to perform a removal action, it documents that decision in an "Action Memorandum" which sets forth the basis for the agency's determination that a threat exists and for the particular removal action selected. EPA also writes Action Memoranda to document a modification of the removal action or the need for additional financing or time.
The action memoranda reveal that before the drums were stabilized EPA was concerned with the risk of fire and explosion, tornadoes, exposure of nearby residents and the environment to the hazardous substances, and the release of contaminants to the soils. These threats, and EPA's concern about them, continued even after completion of the drum stabilization. According to EPA, the mere presence of the drums posed threats of fire and explosion and release of hazardous substances to nearby residents.
Incineration as a removal action was consistent with the NCP. The 1985 NCP, under which EPA stabilized the drums and supported the State incineration efforts, contains the following suggested removal actions: "[r]emoval of drums, barrels, tanks, or other bulk containers that contain or may contain hazardous substances or pollutants or contaminantswhere it will reduce the likelihood of spillage, leakage, exposure to humans, animals or food chain, or fire or explosion." 40 C.F.R. § 300.65(c)(7) (1986). The 1990 NCP, under which EPA took over the incineration of the wastes, contains the same suggestions as the 1985 NCP with the addition of the following: "[C]ontainment, treatment, disposal, or incineration of hazardous materialswhere needed to reduce the likelihood of human, animal, or food chain exposure." 40 C.F.R. § 300.415(d)(8) (1990) (emphasis added).
EPA issued fifteen Action Memoranda for the drum removal action at the site. EPA consistently emphasized the threat of tornados and fire and explosion.
Removal actions, although of shorter duration, do not have to be. Pursuant to 40 C.F.R. § 300.415(b)(5), removals that will take more than a year or cost more than $2 million to complete are permitted where "there is an immediate risk to public health or welfare or the environment." See 42 U.S.C. § 9604(c)(1). In each of the Action Memorandum, EPA made the required findings.
Requiring EPA to use the remedial action process would have delayed the removal of the threat posed by the drums. A remedial action requires a long detailed RI/FS process which may take years to complete. The drums posed an imminent threat, that needed immediate response.
Uniroyal argues, however, that the time removal was chosen (1987) until the actual incineration of the 2,4-D waste was begun (1993) belies the government's argument that the action was taken in response to an immediate threat to public health. Uniroyal contends that within that time frame, EPA would have had an opportunity to do an RI/FS resulting in remedial action after full consideration of disposal alternatives.
Uniroyal's argument is without merit. It ignores the State's incineration efforts. EPA did not sit on its hands during that period of time. The record reflects that it performed a number of response actions to deal with the leaking drums, including overpacking, as well as provided support to the State's incineration efforts. The incineration of the drums *784 encountered significant delays, including lawsuits and problems with the trial burn.
"Even if the Court would have made a different decision regarding the proper action to be taken, the decision of the EPA will not be found to be inconsistent with the NCP unless it is in contravention of the NCP guidelines. Courts are required to uphold the EPA's response decision `unless the objecting party can demonstrate, on the administrative record, that the decision was arbitrary, capricious or otherwise not in accordance with the law.'" EPA v. TMG Enterprises, 979 F. Supp. 1110, 1127 (W.D.Ky. 1997) (citations omitted). The term "removal action" is to be given a broad interpretation. Kelley v. E.I. DuPont de Nemours & Co., 17 F.3d 836, 843 (6th Cir.1994).
Here, performing a removal action with regard to the drums enabled EPA to quickly address and to mitigate the threat posed to human health and the environment by the leaking, deteriorating drums of acutely hazardous waste left behind by Vertac. The drums remained an imminent threat. After EPA's arrival at the site in 1987, it took about 19 months to overpack and stabilize the drums. Even after being overpacked, continuous drum monitoring and maintenance were required as drum failures continued to occur. Furthermore, the fire and exposure threat remained, as did the threat presented by tornados. Incineration was specifically contemplated as an appropriate removal action. See General Electric Co. v. Litton Indus. Automation Systems, Inc., 920 F.2d 1415, 1419 n. 4 (8th Cir.1990), cert. denied, 499 U.S. 937, 111 S. Ct. 1390, 113 L. Ed. 2d 446 (1991) (NCP specifically contemplates excavations as appropriate removal actions).
The Court must defer to the expertise of the governmental agency. Thus, EPA's decision to take removal action in response to an immediate threat is entitled to the deference accorded decisions by a governmental agency. Akzo, 949 F.2d at 1424-1425.
Defendants cite a number of cases in support of their position that the use of a removal action rather than a remedial action was not in accordance with the NCP. However, in those cases there was no finding by a governmental agency of an immediate threat. See Sherwin-Williams Co. v. City of Hamtramck, 840 F. Supp. 470, 475-76 (E.D.Mich. 1993) (city did not demonstrate imminent threat to health or safety and extended and protracted nature of cleanup indicated that city had engaged in remedial action); Channel Master Satellite Sys., Inc. v. JFD Elecs. Corp., 748 F. Supp. 373, 384-86 (E.D.N.C. 1990) (site did not pose immediate risk of harm to public health or environment). See also Minnesota v. Kalman W. Abrams Metals, Inc., 155 F.3d 1019, 1998 WL 635550 (8th Cir. Sept.17, 1998) (state's action did not qualify as removal and state would be held to NCP standards for remedial action because of state's failure to make determination required by § 300.415(b) of the NCP of threat to public health or welfare or the environment, permanent nature of the site cleanup and the leisurely manner in which state dealt with the problem site).
In sum, the Court finds that EPA appropriately performed the response action as a series of removal actions to mitigate the imminent threat posed by the leaking drums. The administrative record adequately documents the continuing risk to human health and environment of the drummed wastes. See TMG Enterprises, 979 F.Supp. at 1130 (length of time or permanency of remedy does not preclude finding that EPA conducted a removal action at the sites). The incineration of the drummed wastes was not arbitrary or capricious and was in accordance with the NCP.
Constitutionality of CERCLA
In one final effort to avoid liability for costs, Uniroyal and Hercules argue that the Court must reexamine the constitutionality of CERCLA in light of the Supreme Court decision in Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S. Ct. 2131, 141 L. Ed. 2d 451 (1998). In that case four justices concluded that the retroactive provisions of the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act), as applied to Eastern Enterprises, violated the Takings Clause of Fifth Amendment. Justice Kennedy concluded that the Coal Act, as applied, violated the Due Process Clause of the Fifth Amendment.
*785 Defendants argue that Eastern Enterprises calls into question the retroactive application of CERCLA. They contend that they did not cause harm and therefore cannot be held to pay the costs of the cleanup associated with harms they did not cause or create. It is clear that defendants want to relitigate liability. They cannot do so. They have been found jointly and severally liable under CERCLA for the costs of the cleanup.
The Court has previously found CERCLA constitutional in the face of a retroactivity argument by Hercules. There is no basis to warrant reconsideration of the constitutionality of CERCLA. Both Uniroyal and Hercules have been found liable for the contamination at the Site. Therefore, they are responsible, jointly and severally, for the costs of the cleanup. See NEPACCO, 810 F.2d at 732-734 (retroactive application of CERCLA to impose liability for cost of cleanup not unconstitutional). See also United States v. Olin Corp., 107 F.3d 1506, 1511-1515 (11th Cir.1997) (same). Eastern Enterprises is not applicable.
Government's Request for Costs
CERCLA provides that responsible persons are liable for "all costs of removal or remedial action incurred by the United States Government .... not inconsistent with the [NCP]." 42 U.S.C. § 9607(a). The government seeks reimbursement of response costs from defendants in the amount of $102,878,641.35 including prejudgment interest, plus any additional response costs incurred by the United States through the date of judgment.[14]
In support of its motion for summary judgment, the government submitted the affidavits of Rick Ehrhart, Phillip Allen, and Kathleen Aisling. All three individuals are Remedial Project Managers (RPM) at the site and have personal knowledge regarding the response actions.
Defendants have moved to strike the affidavits of Ehrhart, Allen and Aisling on the basis that they contain matters beyond the administrative record, are inadmissible hearsay and are irrelevant..
The government states that the affidavits are admissible as summaries under Fed. R.Evid. 1006. The RPMs can also present testimony based on their personal knowledge of the actions taken as well as EPA practices.
The affidavits essentially summarize the actions taken as set forth in the administrative record and state that costs were incurred. Thus, they constitute summaries under Fed.R.Evid. 1006. They do not contain inaccurate or misleading information. The Court finds them relevant and admissible. To the extent they contain conclusions on matters that are left to the Court (such as a declaration that EPA followed the requirements of the NCP), the Court has disregarded those portions.[15]
Therefore the motions to strike the affidavits of the RPMS are denied.
Defendants do not dispute that EPA incurred costs. They have primarily argued that the actions taken by EPA were arbitrary, capricious and not in accordance with the NCP.[16] The Court has rejected those arguments, finding that EPA's actions were reasonable, and not inconsistent with the NCP.
Congress intended that the government recover all costs incurred in a remedial or removal action. "As long as the government's choice of action was not inconsistent with the NCP, its costs are presumed to be *786 reasonable and therefore recoverable." Hardage, 982 F.2d at 1443. "The only way a responsible party can escape liability for the government's costs incurred at a particular site is to demonstrate that the government's response actionsi.e., removal or remedial actionsunderlying the costs are inconsistent with the NCP." Id. As discussed above, defendants have failed to meet their burden of showing that the actions were not consistent with the NCP and therefore that costs are not recoverable.
CERCLA provides for the recovery of all costs incurred by the United States not inconsistent with the NCP. 42 U.S.C. § 9607(a). See NEPACCO, 810 F.2d at 747-48. These include recovery for cost of investigating and monitoring the site; costs of designing and implementing removal and remedial actions; legal and enforcement expenses incurred in seeking to recover costs from a responsible party; and prejudgment interest. See 42 U.S.C. §§ 9601(23) and (24); 9604(a) and (b), 9607(a). The broad remedial purpose of CERCLA supports a liberal interpretation of recoverable costs, both indirect and direct costs are recoverable. United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1503-1504 (6th Cir.1989), cert. denied, 494 U.S. 1057, 110 S. Ct. 1527, 108 L. Ed. 2d 767 (1990).
The government has requested costs (to date) as follows:
(a) Expenditures for contracts and other response costs in the amount of $76,256,312.35. These include work performed under federal contracts for activities such as the incineration of the wastes, handling, maintenance and storage of the drummed waste, sampling and laboratory analysis of samples from the site, remedial investigations, remedial planning, and feasibility studies, and community relations.
(b) EPA payroll and travel costs in the amount of $2,027,263.83.
(c) EPA indirect costs in the amount of $4,224,031.55. These include costs necessary to operate the Superfund program, but cannot be attributed directly to specific sites.
(d) State Cooperative Agreement costs in the amount of $205,503.00.
(e) Costs incurred by Agency for Toxic Substance and Disease Registry (ATSDR) in the amount of $927,661.59. ATSDR provides health studies and testing in the Vertac area communities affected by toxic substance contamination.
(f) Prejudgment interest in the amount of $17,332,509.10. Interest began accruing as of March 2, 1992, when the United States demanded payment of unreimbursed response costs incurred in connection with the site.
(g) Department of Justice (DOJ) costs in the amount of $1,904,759.93. These include payroll and travel costs, indirect costs, and prejudgment interest.
The total for costs incurred by the United States and prejudgment interest accrued is $102,878,641.35.
Hercules argues that the United States cannot recover any costs it reimbursed to ADPC & E as the State had settled its CERCLA claim against Hercules in a 1982 Consent Decree. Thus, any costs expended by ADPC & E cannot be charged to Hercules.
Hercules has failed to show how the settlement agreement between Hercules and the State is related to the costs the United States seeks from the State. They involve separate, unrelated matters, and the United States is entitled to recover its costs from the State.
Hercules also contends that certain costs are not recoverable because they are RCRA costs. The United States contends that all costs charged to the site are recorded under Superfund appropriation codes, and all enforcement activities taken were properly identified as CERCLA related costs. Hercules has not pointed to any specific item in the cost package which is a RCRA cost as opposed to a CERCLA cost. Thus, there is no basis to disallow any of the costs incurred prior to November 13, 1985.[17]
*787 Hercules argues that the enforcement costs should be reduced to reflect DOJ attorney time spent on efforts to obtain a receiver for Vertac in the 1980s. Hercules contends that the attorneys' failure to obtain service over the Phoenix parties amounted to malpractice and resulted in the government agreeing to a "cheap" settlement with the Phoenix parties.
The Court disagrees. The government attorneys did not engage in misconduct, or malpractice. Ultimately, the Phoenix parties were brought into the action and the Court approved a settlement with them as "fair and reasonable." The government is entitled to recover the DOJ costs, including its attorney fees. See United States v. Chapman, 146 F.3d at 1176 (United States entitled to its reasonable attorney's fees).
In sum, defendants have failed to demonstrate that the costs incurred by the United States are inconsistent with the NCP. Thus, the United States is entitled to judgment against the defendants in the amount of $102,878,641.35 plus any additional response costs incurred and to be incurred in this case.
CONCLUSION
Accordingly, Hercules' motion for partial summary judgment (document no. 2273) is denied; Uniroyal's motion for partial summary judgment (document no. 2280) is denied; the United States' motion for summary judgment for costs against Hercules and Uniroyal (document no. 2283) is granted; Uniroyal's and Hercules' motions to strike the declarations of Ehrhart, Allen and Aisling (document nos. 2297 and 2301) are denied; and the United States' petition to exclude the expert testimony of Renate Dora Kimbrough (document no. 2337) is denied as moot. The allocation phase will begin November 2, 1998, at 9:30 a.m.
NOTES
[1] The history of the Vertac Site and Off-Site areas has been discussed in a number of decisions. See United States v. Vertac Chemical Corp., 966 F. Supp. 1491, 1494 n. 1 (E.D.Ark. 1997).
[2] Uniroyal and Hercules have adopted each other's motion for summary judgment.
[3] The $10.7 million consisted of a $6.7 million trust fund established by Vertac and a $4 million letter of credit provided by Vertac.
[4] Under the 1990 National Contingency Plan (NCP), EPA must complete an environmental evaluation cost analysis (EE/CA) when it determines that "a planning period of at least six months exists before onsite activities must be initiated ..." Removal actions having such a planning period are referred to as "non-time critical removal actions." The term "time critical removal actions" refers to removal actions which do not allow for a six month planning period. The NCP does not require an EE/CA for time-critical removal actions. 40 C.F.R. § 300.415(b)(4)(i). The incineration support action was not a "time-critical" action, while the incineration itself was.
[5] The delays include a citizens' lawsuit in federal court, National Toxics v. Arkansas Pollution Control & Ecology, LR-C-91-194 (filed April 1, 1991) attempting to stop the trial burn.
[6] Incineration drew community opposition based on the assertion that it was not safe. In a complaint filed by the Arkansas Peace Center, Environmental Health Association of Arkansas, Jacksonville Mothers' and Children's Defense Fund, Veterans of America, Arkansas State Chapter, and Mothers Air Watch, the plaintiffs challenged incineration on the basis that the State had not demonstrated that the incinerator could achieve a 99.9999% destruction and removal efficiency ("DRE") on the dioxin (the "six nines" requirement). 40 C.F.R. § 264.343. The plaintiffs sought injunctive relief to stop the incineration and to require EPA and ADPC & E to prepare a RI/FS to determine treatment and disposal options other than incineration for the hazardous wastes stored at the site. In that case, then Chief Judge Reasoner allowed two scheduled test burns of the T-wastes to go forward, but enjoined VSC from further incineration of the T-wastes until a hearing on the request for a preliminary injunction. At a subsequent hearing, the court extended the injunction to prohibit the incineration of D-wastes. On March 17, 1993, Judge Reasoner entered a preliminary injunction barring all incineration of drums of hazardous wastes that had not already been shredded in preparation for incineration. The court concluded that the regulation requires that the incinerator demonstrate a six nines DRE on dioxin itself rather than on a surrogate principal organic hazardous constituent. See Arkansas Peace Center v. Arkansas Dept. of Pollution, Control and Ecology, 1993 WL 95654 (E.D.Ark.1993). The Eighth Circuit Court of Appeals reversed, finding that the court did not have jurisdiction to challenge a removal action pursuant to 42 U.S.C. § 9613(h). Arkansas Peace Center v. Arkansas Dept. of Pollution, Control and Ecology, 999 F.2d 1212 (8th Cir.1993), cert. denied, 511 U.S. 1017, 114 S. Ct. 1397, 128 L. Ed. 2d 70 (1994). In dicta, the court found that the district court erred in finding that the regulation required demonstration of six nines DRE on dioxin.
In its prior order staying the preliminary injunction, which was subsequently reversed, the Eighth Circuit noted the risks of allowing the hazardous wastes to remain untreated. "We think granting the stay, and allowing the incinerator to operate, serves the public interest because doing nothing to the thousands of drums of hazardous wastes involves substantial risks of accidental and uncontrolled releases of toxic substances into the environment, whereas incineration destroys the toxic substances." Arkansas Peace Center v. Arkansas Dept. of Pollution, Control and Ecology, 992 F.2d 145, 147 (8th Cir. 1993).
[7] In describing the threats to public health or welfare of the remaining drums, EPA stated in the September 28, 1992, action memorandum:
The drum contents are highly corrosive and some drums have been overpacked a number of times. Drum failures could cause exposure to nearby residents. The threat of an onsite fire causing the drum contents to ignite is significant. Neighborhoods are within 300 yards of the material and dibenzo-p-dioxins and furans would be expected to be released both directly and as products of incomplete combustion if burned under uncontrolled circumstances.
. . . . .
The drums contain high volumes of flammable solvents. Weather conditions in the vicinity of Jacksonville include frequent thunderstorms and lightning strikes, and the area has a high incident of tornadoes. A fire on the site could ignite the drummed waste which could spread chlorinated dioxins above the action level to nearby residential areas. The entire east and south perimeters of the site are residential areas. The Little Rock Air Force Base is a relatively short distance to the northwest. Some residences are within a few hundred yards of the largest concentration of the drums.
September 28, 1992 Action Memorandum at 11-12 (Administrative Record 03358632-03358633).
[8] ChemRisk suggested that EPA use a lower cancer potency factor based on its evaluation of some new scientific papers that had been issued subsequent to EPA's Health Assessment. ChemRisk proposed cleanup standards of 28 ppb for residential areas and 113209 ppb for industrial areas.
[9] As the Court has previously stated, it will not turn the cost phase of the proceedings into a scientific debate over the dangers of dioxin.
[10] Uniroyal argues that EPA could have sent the drums to a landfill prior to the November, 1988 date. However, no facility would accept the waste, nor were containers available to ship it. Furthermore, EPA had not even finished stabilizing the drums.
[11] There is no treatment standard for 2,3,7,8-TCDD itself. The treatment standard is for total TCDDs. Thus, a waste with no 2,3,7,8-TCDD but with total TCDDs greater than one ppb cannot be land disposed.
[12] CERCLA defines removal actions as:
the cleanup or removal of released hazardous substances from the environment, such actions as may be necessary taken in the event of the threat of release of hazardous substances into the environment, such actions as may be necessary to monitor, assess, and evaluate the release or threat of release of hazardous substances, the disposal of removed material, or the taking of such other actions as may be necessary to prevent, minimize, or mitigate damage to the public health or welfare or to the environment, which may otherwise result from a release or threat of release.
42 U.S.C. § 9601(23).
Remedial actions are defined as:
actions consistent with permanent remedy taken instead of or in addition to removal actions in the event of a release or threatened release of a hazardous substance into the environment, to prevent or minimize the release of hazardous substances so that they do not migrate to cause substantial danger to present or future public health or welfare or the environment.
42 U.S.C. § 9601(24).
[13] EPA's decision to utilize its removal action authority must be judged by the NCP in effect at the time the action was taken. See United States v. Chapman, 146 F.3d 1166, 1170 n. 3 (9th Cir. 1998). When EPA began its removal action, the 1985 NCP was in effect. See 50 Fed.Reg. 47912 (1985). On April 4, 1990, revisions to the NCP went into effect (the 1990 NCP). See 50 Fed. Reg. 8666(1990). While the 1985 NCP was substantially revised by the 1990 NCP, the core requirements with regard to removal actions remained substantially the same. In the 1985 NCP, the factors to be considered in determining the appropriateness of a removal action are set forth in 40 C.F.R. § 300.65(b)(2), and the only difference is the first factor which is stated in the 1985 NCP as follows: "Actual or potential exposure to hazardous substances or pollutants or contaminants by nearby populations, animals, or food chain."
[14] The figure includes principal and interest incurred through July 31, 1997. Amounts included for the Jacksonville and Rogers Road Municipal Landfill sites are not applicable to Uniroyal. The total amount will also be subject to set off by any amounts collected by the government pursuant to prior settlements and various trust accounts associated with the Vertac site.
[15] The Court agrees with Uniroyal and Hercules that the affidavits are not admissible as expert testimony under Fed.R.Evid. 702.
[16] For example, Hercules has submitted a 110-page statement of material facts in dispute regarding the United States' claim for costs. Almost all the facts in dispute pertain to Hercules' arguments that EPA's choices were arbitrary and capricious. With respect to the specific issue of costs, Hercules contends that certain ADPC & E and RCRA costs are not recoverable and that costs associated with actions by Department of Justice's attorneys in litigation against the Phoenix parties are not recoverable. These latter two issues will be discussed infra.
[17] The United States also notes that RCRA costs are recoverable under CERCLA NEPACCO, 810 F.2d at 737. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541877/ | 76 B.R. 176 (1987)
In re Dee Albert BRINEGAR and Evelyn Patricia Brinegar, Debtors.
Dee Albert BRINEGAR and Evelyn Patricia Brinegar, Plaintiffs,
v.
UNITED STATES of America and Tom H. Connolly, Trustee, Defendants.
Bankruptcy No. 84 B 03203 J, Adv. No. 86 C 0960.
United States Bankruptcy Court, D. Colorado.
July 23, 1987.
*177 William H.T. Frey, Grand Junction, Colo., for plaintiffs.
John D. Steffan, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., for defendants.
ORDER ON COMPLAINT TO DETERMINE AMOUNT, PRIORITY AND DISCHARGEABILITY OF CLAIM
PATRICIA ANN CLARK, Bankruptcy Judge.
The matter before the Court is a complaint to determine the amount, priority and dischargeability of a United States tax claim. The debtors Dee Albert and Evelyn Patricia Brinegar (the Brinegars) filed this action under 11 U.S.C. § 523(a)(1) and (7) and 11 U.S.C. § 507(a)(7), contending that the proof of claim filed by the Internal Revenue Service (IRS) for the tax years 1975, 1977, 1980, 1981 and 1982 is erroneous. Pursuant to a stipulation filed April 24, 1987, the parties resolved various factual matters, leaving certain legal issues to be determined.
The remaining issues are as follows: (1) whether post-petition interest on taxes is dischargeable in this bankruptcy proceeding; (2) whether pre-petition interest on taxes is dischargeable in this bankruptcy proceeding and (3) what is the appropriate amount and method of set-off in regard to the Brinegars' 1985 tax refund.
The issue of the dischargeability of post-petition interest is currently before the United States District Court for the District of Colorado in Reich v. United States, Civil Action No. 86-C-2402, a case on appeal from the bankruptcy court. The parties have stipulated that they will be bound by the decision of that case. Such a resolution of this dischargeability issue is acceptable to the Court. Within 20 days after the Reich decision is entered by the District Court, the parties shall file a stipulation outlining the effect of Reich on this bankruptcy proceeding.
The next issue to be addressed is whether pre-petition interest assessed by the IRS is dischargeable. The Brinegars have incurred tax liability for the tax years 1975, 1976, 1977, 1979, 1980, 1981 and 1982, with total pre-petition interest on that tax liability due of approximately $24,000.[1] Although the Brinegars admit that this pre-petition interest is entitled to priority under 11 U.S.C. § 507(a)(7)(G), they argue that this priority claim remains dischargeable because it does not fall under any of the listed exceptions to discharge. See 11 U.S.C. § 523. In response, the IRS agrees that the pre-petition interest is entitled to priority status under 11 U.S.C. § 507(a)(7)(G) but contends that this priority claim is non-dischargeable pursuant to 11 U.S.C. § 523(a)(1)(A).
The question of the priority and dischargeability of pre-petition interest on taxes has previously been addressed in this jurisdiction in In re Reich, 66 B.R. 554 (Bankr.D.Colo.1986). In Reich the principal amount of an IRS claim was not in dispute but the parties contested, among *178 other things, the classification of pre-petition interest. The Court stated:
The first issue before the Court is whether the pre-petition interest of $22,296.05 should be given the same priority status as the tax itself. If the interest has the same priority, it, like the tax, is non-dischargeable pursuant to 11 U.S.C. § 523(a). If the interest does not receive priority, it constitutes a general unsecured claim and would normally be dischargeable. In re Frost, 19 B.R. 804, 810 (Bankr.Kan.1982).
66 B.R. at 555.
After discussing the pertinent law, the Court found that the portion of the claim of the IRS for pre-petition interest (1) constituted a pecuniary loss "penalty," (2) met the priority requirements of 11 U.S.C. § 507(a)(7)(G) and (3) was non-dischargeable pursuant to 11 U.S.C. § 523(a)(1)(A).[2]
Neither the Brinegars nor the IRS dispute the Reich finding that pre-petition interest constitutes a penalty with a priority classification under Section 507(a)(7)(G). Indeed, both parties have stipulated to the priority status but dispute its effect on the dischargeability of the debt. Yet, this Court cannot approve the stipulation as it disagrees with the classification in Reich of pre-petition interest as a pecuniary loss "penalty."
A penalty assessment is separate and distinct from the imposition of interest. Interest is assessed by the IRS to compensate for lost monetary value while a penalty is ordinarily charged for failure to act by a certain deadline. These two charges are calculated and assessed independently, as shown by the tax notices sent to the Brinegars.[3] Interest does not penalize and therefore does not meet the clear requirements of Section 507(a)(7)(G). See In re Young, 70 B.R. 43 (Bankr.S.D.Ind.1987).
Although pre-petition interest on taxes does not constitute a pecuniary loss penalty, it is entitled to priority treatment. The interest obligation meets the requirements of Section 507(a)(7)(A) as it is part of a "claim for a tax."[4] The term "claim" is broadly defined in Section 101(4) to include a "right to payment," which is read to include pre-petition interest. See In re Treister, 52 B.R. 735 (Bankr.S.D.N.Y.1985). As stated in In re Young, 70 B.R. at 45,
The pre-petition interest assessment is an integral portion of and is indeed "for" the underlying principal tax liability for the applicable taxable year(s). (citations omitted). Absent priority treatment for the pre-petition interest claim a debtor would receive a windfall as the taxpayer would benefit and the IRS would suffer from the significant time value of the unpaid and delinquent tax obligation.
The applicable legislative history supports such an interpretation of Section 507(a)(7)(A). Originally, the Senate version of 11 U.S.C. § 726, pertaining to distribution *179 of property of the estate, expressly provided that
[I]nterest accrued on all claims (including priority and nonpriority tax claims) which accrued before the date of the filing of the title 11 petition is to be paid in the same order of distribution of the estate's assets as the principal amount of the related claims.
S.Rep. No. 95-989 (July 14, 1978), 95th Cong., 2nd Sess. 97, U.S.Code Cong. & Admin.News 1978, pp. 5787, 5883. The House deleted that language finding it unnecessary "since a right to payment for the interest due is a right to payment which is within the definition of `claim' in section 101(4). . . ." 124 Cong.Rec.H. 11,098 (Sept. 28, 1978). Accord 3 Collier on Bankruptcy, ¶ 523.06 (15th ed. 1984) (where, in a discussion of interest on pre-petition taxes, it is stated, "The Code does not provide that the term `claim' includes interest due before the date of the petition because a right to payment for interest due is a right to payment which is within the definition of `claim' in Section 101."). Therefore, based on the applicable case law and supporting legislative history, the Court finds that the pre-petition interest associated with the priority tax claims will be afforded priority under Section 507(a)(7)(A).
The next question is whether the portion of claim of the IRS which represents pre-petition interest is dischargeable. Clearly, even though the interest is given priority, it must also fall under one of the listed exceptions in 11 U.S.C. § 523 to be declared non-dischargeable. The Court finds that the interest should be found non-dischargeable under Section 523(a)(1)(A), which excepts from discharge any "debt" for a tax of the kind specified in Section 507(a)(7).
The parties do not dispute that the underlying tax is of the kind specified in Section 507(a). Consequently, the focus becomes whether the word "debt" in Section 523(a)(1)(A) includes the interest obligation in question. Section 101(11) of the Bankruptcy Code defines debt as a "liability on a claim." As previously discussed, the term "claim" includes pre-petition interest. Because the plain intent of Congress was to make the word "debt" inclusive of the word "claim," the Section 523(a)(1) debt should include the interest obligation. See also Kelly v. Robinson, ___ U.S. ___, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986), ft. 12, (where the Court recognizes that the Code's definition of "debt" is broadly drafted and that the legislative history, as well as the Code's various priority and dischargeability provisions, support a broad reading of the definition). Therefore, the pre-petition interest associated with the Section 507(a)(7)(A)(iii) priority taxes is non-dischargeable under Section 523(a)(1). Compare In re Coleman, 56 B.R. 179 (Bankr.N.D.Ind.1986) (interest included in "debt" due for child support under Section 523(a)(5)).
The final matter to be resolved is whether the amount and method of set-off of a 1985 tax refund was proper. In the stipulation presented to the Court, the parties state that they anticipate a settlement concerning the correct amount of the set-off and request additional time to reach a resolution. The Court shall allow the parties to proceed with settlement negotiations on that issue. The parties shall inform the Court within 20 days of the date of this Order on the status of their negotiations concerning the correct set-off amount.
The remaining question then is whether the set-off taken by the IRS was appropriate. The IRS set off approximately $20,000 of the Brinegars' 1985 tax refund against the Brinegars' 1975 tax deficiency as follows: $8,017 in taxes, $8,337 in pre-petition interest, and $4,129.57 in post-petition interest. The Brinegars apparently concede that the set-off against the 1975 taxes and corresponding pre-petition interest was correct but argue that the set-off against any post-petition interest was erroneous.
Resolution of this set-off issue requires a determination of whether post-petition interest is dischargeable. Because the parties have agreed to be bound by the district court's decision in Reich on post-petition interest, the most efficient resolution of this matter, as suggested by the IRS, is to *180 await the Reich determination. Therefore, within 20 days of the entry of the Reich order by the district court, the parties shall petition this Court for a review of this issue, if necessary.
It is ORDERED that the pre-petition interest claimed by the IRS is entitled to priority 11 U.S.C. § 507(a)(7)(A) and is non-dischargeable pursuant to 11 U.S.C. § 523(a)(1)(A).
It is FURTHER ORDERED that a determination of the post-petition interest issue and set-off of the 1985 tax refund issue shall await determination of the district court in Reich v. United States, No. 86-C-2402 and the parties shall petition the Court within 20 days of the date of the Reich order for a review of the remaining issues.
It is FURTHER ORDERED that the parties shall continue settlement negotiations on the issue of the amount of set-off for the tax year 1985 and shall file a status report within 20 days of the date of this Order.
NOTES
[1] Pre-petition interest on the 1976 tax liability has not yet been calculated.
[2] The decision in In re Reich was appealed by the IRS on the question of dischargeability of post-petition interest. The debtor in Reich cross-appealed on the issue of pre-petition interest but later moved to withdraw that cross-appeal. The motion to withdraw was granted. Therefore, the bankruptcy court's decision on pre-petition interest will not be affected by the decision on appeal.
[3] The notices list separate charges for interest and penalties. In fact, as the IRS notice points out, penalties assessed may be eliminated upon a showing of reasonable cause. No similar relief exists for interest, illustrating the distinction recognized between the two.
[4] Section 507(a)(7)(A) lists, as a priority claim:
Seventh, allowed unsecured claims of governmental units, only to the extent that such claims are for
(A) a tax on or measured by income or gross receipts
(i) for a taxable year ending on or before the date of the filing of the petition for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition;
(ii) assessed within 240 days, plus any time plus 30 days during which an offer in compromise with respect to such tax that was made within 240 days after such assessment was pending before the date of the filing of the petition; or
(iii) other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case;. . . .
The parties agree that the actual taxes at issue receive priority under Section 507(a)(7)(A)(iii). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/811640/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-5210
UNITED STATES OF AMERICA,
Plaintiff – Appellee,
v.
OMAR M. NIJIM,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Greenville. Malcolm J. Howard,
Senior District Judge. (4:11-cr-00012-H-5)
Submitted: October 31, 2012 Decided: November 8, 2012
Before MOTZ and GREGORY, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Jason R. Harris, WELCH AND HARRIS, LLP, Jacksonville, North
Carolina, for Appellant. Thomas G. Walker, United States
Attorney, Jennifer P. May-Parker, Yvonne V. Watford-McKinney,
Assistant United States Attorneys, Raleigh, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Omar Nijim was convicted of conspiracy to traffic in
contraband cigarettes, in violation of 18 U.S.C. § 371 (2006),
and was sentenced to thirty-three months in prison. Nijim now
appeals, raising three issues. We affirm.
I
As part of an investigation into transactions
involving contraband cigarettes, Special Agent Michael Anderson
of the Bureau of Alcohol, Tobacco, Firearms and Explosives
(“ATF”) operated an undercover warehouse in North Carolina.
Cigarettes -- allegedly illegally obtained -- were stored at the
warehouse and sold to various individuals. Over the course of
the investigation, over one million cartons of cigarettes were
sold for approximately $21 million.
In November 2009, Anderson met with one of his
customers, Nafiz Mustafa, to prepare for a shipment of
cigarettes to New Jersey. In accordance with the plan, Mustafa
flew to New York on December 1. Iyas Leqyana picked him up in a
minivan containing money to be used to pay for the cigarettes.
Nijim joined them. They dropped off Leqyana and drove to a rest
area in New Jersey, where they were to take possession of the
cigarettes.
2
ATF Special Agent Edwin Killette, who was driving a
Penske truck containing 9540 cartons of contraband cigarettes,
arrived at the rest area, as did Anderson, who had flown in from
North Carolina. Mustafa handed Anderson a bag containing
$55,000 in cash. Nijim then drove the Penske truck to a storage
room, followed by Mustafa in the minivan. Leqyana joined them,
and the three men unloaded the truck. Nijim and Mustafa
returned to the rest area. Mustafa gave Anderson an additional
$20,000 and agreed to pay him the balance due upon their return
to North Carolina. Mustafa and Nijim left in the minivan, which
was registered to Nijim.
A similar transaction occurred on January 13, 2011.
Mustafa flew to New York, Leqyana picked him up in the minivan,
they were joined by Nijim, and they drove to the rest area.
Killette drove to the rest area in a Penske truck containing
9000 cartons of contraband cigarettes. Anderson again arrived
separately. After Killette exited the truck, Nijim got in and
drove to the storage room, with Leqyana following in the
minivan. After unloading the cigarettes, they returned to the
rest area, where Mustafa gave Anderson $102,000 in cash as
partial payment for the cigarettes.
According to Nijim’s presentence investigation report
(“PSR”), his base offense level was 20 because the amount of
loss was $500,580. See U.S. Sentencing Guidelines Manual
3
(“USSG”) §§ 2E4.1(a)(2), 2T4.1(H) (2011). There were no
adjustments, and the total offense level accordingly was 20.
Nijim’s criminal history category was I, and his Guidelines
range was 33-41 months. The district court overruled Nijim’s
claims that he should have received a reduction in his offense
level based on his limited role in the offense, USSG § 3B1.2,
and that the amount of loss was less than $400,000. The court
sentenced Nijim to thirty-three months in prison.
II
Nijim first argues that the district court erroneously
refused to instruct the jury on N.J. Stat. Ann. § 54:40A-16.
The statute generally prohibits wholesale and retail dealers
from accepting deliveries of cigarettes that do not bear proper
New Jersey tax stamps, which signify the payment of applicable
New Jersey excise taxes. The statute provides an exception to
this prohibition:
The director [of the New Jersey Division of Taxation]
may, however, . . . authorize wholesale dealers and
retail dealers to acquire and have in their possession
cigarettes bearing cigarette revenue stamps of other
states, provided such cigarettes are intended for sale
or other disposition in those states.
N.J. Stat. Ann. § 54:40A-16.
Nijim contends that the cigarettes involved in the
December 1 and January 13 transactions, which bore no tax
4
stamps, were intended for distribution in one of the three
states that do not require the affixation of tax stamps to
cigarettes. Under the above provision, he argues, possession of
unstamped cigarettes would be legal if they were destined for
any of those states. An instruction on the statute would, if
the jury believed that he possessed the cigarettes for transfer
to a non-tax state, require acquittal.
The decision to give or refuse to give a jury
instruction is reviewed for abuse of discretion. United
States v. Sarwari, 669 F.3d 401, 410-11 (4th Cir. 2012). “A
court’s failure to give a proposed instruction does not
constitute reversible error unless it dealt with some point in
the trial so important, that failure to give the requested
instruction seriously impaired the defendant’s ability to
conduct his defense.” Id. at 411 (internal quotation marks
omitted).
We conclude that the district court did not abuse its
discretion in refusing the requested instruction because the
statutory exception was inapplicable. Testimony at trial
established that Nijim was, during the relevant period, employed
at two stores: one that sold Disney products and one that sold
clothing. Neither Nijim nor either store was a licensed
stamping agent, nor had he or either store received the
authorization contemplated by the statute. Further, Nijim
5
denied having worked for a cigarette dealer, wholesaler, or
manufacturer. The statute simply was inapplicable.
III
Nijim next contends that, pursuant to USSG § 3B1.2, he
should have received a reduction in his offense level based on
his role in the offense. To qualify for a reduction under the
Guideline, a defendant must show that he was a “minimal” or
“minor” participant in the offense. USSG § 3B1.2; United
States v. Akinkoye, 185 F.3d 192, 201-02 (4th Cir. 1999). In
deciding whether a defendant’s role was minimal or minor, the
“critical inquiry is . . . not just whether the defendant has
done fewer bad acts than his co-defendants, but whether the
defendant’s conduct is material or essential to committing the
offense.” United States v Pratt, 239 F.3d 640, 646 (4th Cir.
2001) (internal quotation marks omitted).
We hold that the district court did not abuse its
discretion in denying the reduction because Nijim’s role in the
offense was neither minimal nor minor. On two occasions, he
transported coconspirators, cigarettes, and cash to pay for the
cigarettes in his minivan. He also unloaded contraband
cigarettes and placed them in the storage room. All this
establishes his material role in the offense.
6
IV
Finally, Nijim claims that the amount of loss was
incorrectly calculated; his position is that the proper amount
was less than $400,000. Testimony at trial established that:
the December 1 delivery involved 9540 cartons of contraband
cigarettes; the January 13 shipment involved 9000 cartons; and
the New Jersey excise tax on a carton of cigarettes was $27.
Accordingly, the amount of loss was properly determined to be
$500,580.20.
V
We therefore affirm Nijim’s conviction and sentence.
We dispense with oral argument because the facts and legal
contentions are adequately presented in the materials before the
court and argument would not aid the decisional process.
AFFIRMED
7 | 01-03-2023 | 11-08-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1206470/ | 575 P.2d 158 (1978)
281 Or. 441
PROGRESS QUARRIES, INC., an Oregon Corporation, Respondent,
v.
Gary M. LEWIS and Margaret Lewis, Appellants.
Supreme Court of Oregon, Department 2.
Argued and Submitted January 11, 1978.
Decided February 28, 1978.
*159 Fred A. Anderson, of Anderson, Dittman & Anderson, Tigard, argued the cause and filed the briefs for appellants.
Thomas J. Moore, of Brink, Moore, Brink & Peterson, Hillsboro, argued the cause for respondent. With him on the brief were Rives, Bonyhadi & Drummond, Portland.
Before DENECKE, C.J., TONGUE and LINDE, JJ., and RICHARDSON, J. Pro Tem.
TONGUE, Justice.
This is an action by the assignee of a guaranty agreement to enforce the terms of that agreement against the original guarantors. The case was tried before the court, without a jury. Defendants appeal from a judgment in favor of plaintiff in the sum of $6,438.92, plus $10,895 in attorney fees. We affirm.[1]
Because defendants, by their appeal in this case, challenge the findings of fact and conclusions of law by the trial judge, we begin with the well-established rule that in an action at law we must affirm the findings of fact and conclusions of law of the trial court and the judgment based upon them if they are supported by any evidence. See Cronn v. Fisher, 245 Or. 407, 415, 422 P.2d 276 (1966). Those findings and conclusions are as follows:
"FINDINGS OF FACT
"The Court finds that Gary Lewis on behalf of his company Lewis Construction Company (Company) was having difficulty financing his quarry operations and requested assistance from his lessor. Morrison Conway, Jr., President of Progress Quarries, Inc. (Progress), the lessor, offered to help.
"As of October 4, 1972, the company owed about $48,000 to the U.S. National Bank of Oregon (Bank). The Court finds that Gary Lewis and his wife Margaret had earlier executed an unlimited and personal guarantee to the Bank of corporate notes. These notes were secured by a document titled: Security Agreement Covering Accounts, Contract Rights and Chattel Paper which essentially pledged the company's receivables to the Bank.
"Shortly before October 4, 1972 the Bank had notified both the Company and Progress that the notes would be called in and further financing would have to be obtained elsewhere. The Court finds that Gary Lewis requested Morrison Conway to finance the Company through Progress. Mr. Conway had agreed to this by an offer to take over for the Bank. In this setting a meeting was held at the Bank, among the Bank, the Company and Progress on October 4, 1972.
"The Court finds that it was the intent of Gary Lewis, Morrison Conway and officers of the Bank to have Progress take an assignment of all the Bank held relative to the Company. As a result of the meeting, Progress drew a check for $30,000 in favor of the Company; the Company drew a check in favor of the Bank for $24,169.02 which with the addition of an approximate $26,000 in a Cash Collateral Account satisfied the Bank. The Bank attempted to assign the notes, security agreements, securities, personal guarantee and all other related documents over to Progress. Further the Bank took the balances of all the notes and reduced them to zero but neither stamped them paid or returned them to the borrower as is their practice. The Court finds that the notation of a zero balance on the notes was a mistake and none of the three parties intended that the notes be retired.
"The Court finds that there were certain set offs and credits which should have been applied to the Company notes to reduce their balance to $22,800.94 as of *160 October 4, 1972. Further, a past due sum of $258.95 was owing as of that date. Likewise due was $800, the agreed value of the Company's work at the private residence of Progress' president. While this work at the residence may have been done in furtherance of an existing good relationship between the Company and Progress, it became a claim which both parties recognized when the relationship broke down.
"When the $30,000 check mentioned above was written, Mr. Conway made a note in his checkbook: $12,000 Embankment (17¢ X ?) 18,000 loan. The Court finds that Mr. Conway's intent was to advance an immediate $30,000 to the Company but at the same time recognize a credit of approximately $12,000 which was owing but not yet precisely figured. The `17¢ X ?' indicated the formula for determining the credit which was the 17¢ rate per cubic yard of quarry material. Subsequently, this figure was determined to be $10,150, not the estimated $12,000.
"This Court finds that the Company did not direct the application of payments or credits.
"CONCLUSIONS OF LAW
"The intent of the parties governs the transactions at the October 4, 1972 meeting. The intent of all was that Progress would take all rights and duties of the Bank. It would be a hardship and certainly contrary to reason and logic to rule that the $30,000 check to the Company followed by an essentially simultaneous check to the Bank would defeat the creditor. It would also be inappropriate judicial interference for the Court to find this transaction retired the notes and left the creditor unsecured. The intent of the parties also leads to the inescapable conclusion that a note teller made a mistake in reducing the note balance to zero.
"The Court further concludes that the intent of Mr. Conway was to have Progress advance $30,000 to the Company but recognize that part of that would be paid by credit of approximately $12,000, the exact dollar amount to be determined later. The effect of the checkbook notation was to assign the later determined $10,150 payment to stop the interest as of October 4, 1972. The Court also concludes that the claim for $800 for residence work and $258.95 past due were assignable to October 4, 1972.
"The Court notes that the Company did not request any particular application of its payments of credits. The payee then has the right to apply them to their best advantage. The Court finds that Progress applied the $10,150 embankment credit to the $30,000 advance. Accordingly, that portion of the advance which was not secured through notes or other security was retired first. Since this reduced the balance below the assigned notes, it is unnecessary to consider defendant's arguments that the difference between $30,000 and the Bank notes is not covered by the Lewis' personal guarantee.
"The following accounting should illustrate the Court's conclusions:
"10/4/72 $30,000 Advance
10,150 Embankment Credit
______
$19,850 Total
800 Residence Credit
______
19,050 Total (Carried Forward)
258.95 Past Due Account
_________
18,791.05 Total
10/20 1,790.58 Royalty Credit
_________
17,072.55 Total
72.08 8 3/4% interest, 16 days
_________
17,072.55 Total
10/24 10,650.00 Ross Bros., payment
_________
6,422.55 Total
16.34 8 3/4% interest, 4 days
_________
6,438.92 Total covered by Gary
& Margaret Lewis'
personal guaranty.
"Accordingly, plaintiffs will have judgment for $6,438.92 and interest from October 24, 1972, together with their costs, disbursements and reasonable attorney fees."
Defendants' principal contention is that the "[t]rial court erred by disregarding rules of law binding upon the parties and upon the court in holding that the special Guaranty in favor of the Bank was not extinguished through payment of all obligations to Bank by Lewis Construction Company."
*161 These "rules of law" are contended by defendants to be as follows:
"(a) That as a matter of law the special Guaranty (Ex. 8) by defendants to the United States National Bank in 1969, by its express terms applied only to monies loaned by the Bank to Lewis Construction Company and not to monies loaned to Lewis Construction Company by Progress Quarries, Inc., or any other lender.
"(b) That Lewis Construction Company's check of October 4, 1972 (Ex. 13), drawn payable and delivered to U.S. National Bank represented full payment by Lewis Construction Company of all obligations and more to the Bank, thereby, as a matter of law, discharging defendants as guarantors under the special Guaranty agreement (Ex. 8).
"(c) That as a matter of law, plaintiff, Progress Quarries, was bound by its own recorded acts and recorded intentions, as reflected on its records (Ex. 12) and as testified by its chief officer Conway, that its check for $30,000 (Ex. 14) drawn payable to Lewis Construction Company constituted $12,000 embankment (17¢ X ?) payment on debt due Lewis Construction plus `$18,000 loan' to Lewis Construction Company, and said payment was intentionally not made to the Bank (Tr. 1A-28), and no purchase of anything from Bank by plaintiff resulted, and no transaction resulted therefrom between Bank and Progress Quarries as a matter of law.
"(d) That as a matter of law, the fact that Progress Quarries, Inc. was indebted to Lewis Construction Company on October 4, 1972, in a sum not less than $13,499.53, including the $10,150 net embankment payment, and Lewis Construction owed Progress Quarries no sum whatsoever, Lewis Construction Company was entitled to apply such amounts of Progress Quarries' $18,000 loan against the remaining indebtedness after four other notes to U.S. Bank were fully paid and discharged from the Lewis Construction's cash collateral account on October 4, 1972, thereby extinguishing all obligations to which Guaranty agreement (Ex. 8) had previously been applicable."
Defendants also contend, among other things, after reference to various portions of the transcript of testimony and other evidence, that:
"Intentions in many cases are reliably determined by actions of the parties and written documents in evidence rather than their words, and if a mistake as to the legal effect of the action taken occurred, it is not chargeable to defendants or either of them. * * *"
and that:
"* * * [W]hatever may have been the accommodation of Progress Quarries intended by the Bank in assigning paid paper to Progress Quarries its president, Conway, intended, as he testified, only to pay an account due Lewis Construction Company and to loan $18,000.00 additional, and not make any payment to the Bank in exchange for the fully acquitted notes and discharged guarantee. * *"
It is true, as contended by defendants that there was evidence which would have supported such findings of fact by the trial court. We find, however, upon examination of the record in this case, that the evidence on the controlling question of the intent of the parties was conflicting and that the findings of fact of the trial court to the contrary are supported by substantial evidence. Among that evidence is the following.
Mr. Conway, president of plaintiff Progress Quarries, Inc., testified that:
"A. Lewis asked me on behalf of Lewis Construction company if I would take the bank's place.
"* * *
"A. Well, he said that he had been to the bank and that they were not going to give him any more money. That he had given his personal guarantee and some other collateral and his account receivables to the bank and felt that it was a reasonably safe investment and he asked me if I would take the bank's place because they weren't going to give him any more money."
*162 He also testified that when he entered into the transaction of October 4, 1972:
"A. My intent was to step into the bank's shoes.
"Q. In other words, Progress Quarries?
"A. Progress Quarries. And to make advances on receivables and collect funds as they were collected, and I would have the same security as the bank had.
"Q. Namely ____?
"A. The note, the guaranty, the stock collateral whatever the bank had. That's what I was to have."
He also testified that on a subsequent occasion Mr. Lewis "reminded me at that time * * * that I had his personal guarantee * * *" and that in subsequent conversations he never denied liability under the guaranty agreement.
Mr. Jensen, who represented the bank at the meeting on October 4, 1972, testified that:
"The intent was to put Mr. Conway of Progress Quarries in the bank's position with respect to these obligations and security."
The guaranty agreement, by its terms, was a guaranty and promise to pay to the bank, "its successors and assigns" all indebtedness of the Lewis Construction Company to the Bank. At the meeting of October 4, 1972, that guaranty agreement was assigned in writing "without recourse to Progress Quarries Inc." Each of the promissory notes secured by it was also endorsed "without recourse pay to the order of Progress Quarries Inc." Both the guaranty and the note were delivered to plaintiffs.
It is true, however, that at or about the same time notations were made on each of these notes showing no balance payable on them. Mr. Cook, who also represented the bank at that meeting, testified that these notations were "pure error" by the note teller; that he would not assign a note if nothing was owing on it; that the normal practice when a note is paid in full is to stamp it as "paid" and return it to the borrower and that this was not done in this case. Other bank employees testified to the same effect.
The following testimony on deposition by defendant Gary M. Lewis was also received in evidence:
"Q. And it was your understanding that the guarantee which you and Mrs. Lewis had given to the bank would then become a guarantee to Progress Quarries?
"A. Well, it would be signed over to Progress Quarries, yes.
"MR. MOORE:
"But my question is relating specifically now to the personal guarantee, was it not your understanding and your intention that by whatever means it would be accomplished the personal guarantee which you and Mrs. Lewis had given to the bank would end up being given to Progress Quarries?
"A. Well, I knew that was going to happen along with the stocks, yes.
"* * *
"Q. So, after the bank's paid off by Progress Quarries, Progress Quarries would hold the notes?
"A. Have the notes, that's right.
"Q. And was it not your understanding that as a result of that transaction, to put it another way, Progress Quarries would hold the notes and be in a position of asserting them against you, it rather, the matter of the note, of the construction company?
"A. Yes, sir.
"Q. So, at the time your discussions with Mr. Conway and at the time of the arrangement as it was actually made with the bank, you never had the understanding that the notes were being paid and retired did you?
"A. No. The bank was paid and retired, that's right, but the notes were transferred also."
It would serve no useful purpose to summarize the facts in further detail. Based upon our examination of the record, however, we hold that the findings of fact, conclusions of law and judgment by the *163 trial court were supported by substantial evidence.
The "rules of law" which, according to defendants, were "disregarded" by the trial court rest upon the assumption that, as a matter of law, the pre-existing promissory notes from Lewis to the bank were all "extinguished" and that, as a matter of law, this also extinguished the guaranty agreement and discharged the defendants as guarantors under the agreement.[2] We hold, on the contrary, that there was substantial evidence to support the findings of fact and conclusions of law by the trial court to the effect that neither these notes nor the guaranty agreement were extinguished, but that they were assigned to plaintiff so as to place it in the same position as the bank had been as the previous holder of the notes and guaranty agreement.[3]
Defendants also assign as error the award by the trial court to plaintiff of attorney fees in the sum of $10,895. Defendants contend that the trial court abused its discretion in allowing so large an amount as attorney fees to collect a debt of $6,438.92.
An award of attorney fees is not a matter of discretion, subject to reversal only for abuse. Instead, the question of what is a reasonable attorney fee to be awarded in a particular case is an issue of fact to be determined as any other issue of fact. Thus, an award of attorney fees by a trial court must be affirmed by this court if supported by substantial competent evidence. Waggoner v. Oregon Auto Ins. Co., 270 Or. 93, 100, 526 P.2d 578 (1974).
Upon examination of the record we find, among other things, that numerous motions were filed by both parties; that the case finally went to trial on plaintiff's sixth amended complaint; that each of the two defendants, by their answers, asked for an award of $7,500 in attorney fees; that the trial of the case took three days; that, according to the records of plaintiff's attorneys, they devoted a total of 232.5 hours to this case, and that, according to the testimony of another attorney, as an expert witness, an award of approximately $48 per hour, or a total of $10,895, as billed to plaintiff by its attorneys, is a reasonable attorney fee under the facts and circumstances of this case. Although the award by the trial court was large, in relation to the amount involved in this litigation, and although another attorney testified that $3,000 would be a reasonable attorney fee, we cannot say that the award of attorney fees by the trial court was not supported by substantial evidence.
The judgment of the trial court is affirmed.
NOTES
[1] Plaintiff cross-appealed from the striking from plaintiff's complaint of allegations of loans made after assignment of the guaranty agreement. We also affirm that ruling by the trial court.
[2] We have examined the various cases cited by defendants in support of these "rules of law" and find that none of them are controlling so as to require a holding in favor of defendants "as a matter of law," as contended by them.
[3] Defendants also assign as error the refusal of the trial court "to hear defendants' objections to trial court findings, timely filed, in refusing to consider defendants' requests for other and different findings timely filed, and in summarily entering judgment as requested by plaintiff." It appears from the record, however, that the trial court did consider and reject defendants' objections and proposed findings. It also appears that the trial judge "summarily" entered judgment as requested by plaintiff, but did so because that judgment "conformed" to his previous memorandum opinion.
As for the assignment of error on cross-appeal by plaintiff that the trial court erred in striking from plaintiff's complaint allegations of loans made after the assignment, we agree with defendants that the guaranty agreement was limited to loans made by the bank and did not extend to such subsequent loans and that the case of Meader v. Orbit Inn Corporation, 276 Or. 921, 556 P.2d 1365 (1976), cited by plaintiff, is not controlling on this point. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2306624/ | 651 F.Supp. 276 (1987)
RIVER AND OFFSHORE SERVICES COMPANY, INC.
v.
UNITED STATES and Marine Transport Lines, Inc., a/k/a Marine Transport Management, Inc.
Civ. A. No. 85-3913.
United States District Court, E.D. Louisiana.
January 2, 1987.
*277 William P. Schuler, Chalmette, La., Fred Israel, Charles Raley, James Phillips, Israel and Raley, Washington, D.C., for plaintiff.
William F. Baity, Asst. U.S. Atty., New Orleans, La., Thomas L. Jones, Sr. Admiralty Counsel, U.S. Dept. of Justice, Washington, D.C., for defendants.
MEMORANDUM AND ORDER
SEAR, District Judge.
I. Introduction and Prior Proceedings
Marine Transport Lines (MTL) operates a tanker, the USNS SEALIFT ATLANTIC, under a contract with the United States Navy Military Sealift Command. There is no dispute that this vessel is a "public vessel" within the meaning of the Public Vessels Act, 46 U.S.C. § 781 et seq. (PVA). On August 5, 1985 MTL solicited bids for repair and maintenance work on the USNS SEALIFT ATLANTIC. River and Offshore Services Company (ROSCO) submitted a fixed-price bid of $1,555,427.00 for the work and was awarded the contract, which was formalized by a purchase order dated September 9, 1983. ROSCO then awarded a subcontract to Sabine Coating Services (Sabine) to do sandblasting and coating work for $915,000.00.
As work on the vessel proceeded, a series of disputes arose over changes in and the progress of the work. As a consequence MTL allegedly forced ROSCO to replace Sabine with Marine Coatings, Inc. Marine Coatings was more expensive and changing subcontractors allegedly delayed completion of the work. Work on the vessel was not finished within the contractually-specified period. On December 3, 1983 MTL assessed liquated damages against ROSCO in the amount of $522,300.00. After attempting to resolve the matter with MTL, ROSCO brought suit against MTL and the United States seeking return of the liquidated damages, a $736,170.00 unpaid balance under the contract, and $183,870.00 as an "undisputed" contractual obligation.
*278 ROSCO asserts four causes of action against the defendants: (1) for a maritime lien under 46 U.S.C. § 971 and 46 U.S.C. § 742 for materials, labor, services, and other items provided in connection with repair of the vessel; (2) for breach of contract resulting from a failure of the defendants to adjust the contract price because of changes and unavoidable delays; (3) for tortious interference with ROSCO's contract with Sabine; and (4) for prejudgment interest on payments wrongfully withheld. The defendants have filed a motion to dismiss for want of subject matter jurisdiction.
II. May Marine Transport Lines be Sued by ROSCO?
A. Contract and Maritime Lien Claims
The defendants begin their argument by contending that under the Suits in Admiralty Act (SAA) and the PVA the plaintiffs are barred from suing MTL. The PVA is subject to § 5 of the SAA. 46 U.S.C. § 782. Section 745 provides that the remedy provided by the SAA "shall ... be exclusive of any other action by reason of the same subject matter against the agent or employee of the United States ... whose act or omission gave rise to the claim" (emphasis added). The defendants contend that MTL is an agent of the United States, and that therefore PVA § 782,[1] incorporating SAA § 745, bars suit against MTL.
A long line of cases establishes that a contract operator of a naval vessel such as MTL is an agent of the United States for purposes of SAA § 745. See, e.g., Doyle v. Bethlehem Steel Corp., 504 F.2d 911, 913-14 (5th Cir.1974). Of particular relevance is Smith v. United States, 346 F.2d 449 (4th Cir.), cert. denied, 382 U.S. 878, 86 S.Ct. 163, 15 L.Ed.2d 119 (1965), which finds an agency relationship in an operating contract (with MTL, in fact) which is quite similar to the operating contract in this case. Id. at 451-452. See also Saffrhan v. Buck Steber, Inc., 433 F.Supp. 129, 133 (E.D.La.1977) (Rubin, J.); The Mission SantaYnez, 1967 A.M.C. 25, 26-29 (C.D.Cal.1966). These cases uniformly hold contract operators to be agents of the United States so as to bar suit against them under SAA § 745.
There is nothing about the contract between MTL and the U.S. which requires me to treat MTL differently. The contract gives MTL the authority to possess and operate the USNS SEALIFT ATLANTIC on behalf of the government, according to the government's regulations and directions. While no specific clause in the contract identifies MTL as an "agent" (the term "contractor" is used throughout), the contract establishes an agency relationship.
Entering into subcontracts on behalf of the government is within the scope of MTL's agency. ROSCO admits this in paragraph number seven of its complaint. Under the contract, MTL is permitted to arrange for subcontractors to do repair and maintenance work on the USNS SEALIFT ATLANTIC. Article 22, section (a) of MTL's contract with the Navy, entitled "Maintenance and Repair," states "Except as herein specifically provided the Contractor [MTL] shall be charged with full responsibility and costs for maintenance and repair of each tanker throughout the period of this Contract...." Section (h) of Article 22 provides:
The Contractor shall be responsible for the full cost of maintenance and repairs which can reasonably be accomplished by the tanker's crews, including the special maintenance riding crews, taking into account the nature of the work, availability of such crews and the operational commitments of the tankers.... Further, the Government shall pay for the cost of all other maintenance and repairs, including parts, which are required to be performed with industrial assistance. The Contractor shall not make repair or maintenance *279 subcontracts, except for special maintenance riding crews, in excess of $10,000 without the prior approval of the Government. The Contractor shall submit to the Government for review and approval all repair specifications prior to issuing to shipyards for bidding....
Article 33, entitled "Default," provides in section (c) that MTL will be liable for the defaults of subcontractors. However, section (g) of the same article provides that this is not the case for subcontractors "with whom the Contractor executes subcontracts at the direction of the Government in accordance with Article 22(h)." The Article 22(h) procedure was used to hire ROSCO. These provisions plainly demonstrate that MTL operated as an agent of the government in contracting with ROSCO.
The suit against MTL with respect to the maritime lien and contract claims is therefore barred by SAA § 745. The consequence of finding an agency relationship between MTL and the government is to place the subcontractor ROSCO in privity of contract with the government. This result conflicts with a well-established line of cases under the Tucker Act upon which the plaintiffs rely. Those cases permit a finding of privity between the federal government and a subcontractor under extremely limited circumstances. Under the Tucker Act privity exists between a subcontractor and the government when the prime contractor "(1) act[s] as a purchasing agent for the government, (2) the agency relationship between the government and the prime contractor [is] established by clear contractual consent, and (3) the contract state[s] that the government would be directly liable to the vendors for the purchase price." United States v. Johnson Controls, Inc., 713 F.2d 1541, 1551 (Fed. Cir.1983) (emphasis in original). Except for perhaps the second, none of these factors is present in this case.
The conflict between the Tucker Act and admiralty law has an impact on the Contract Disputes Act of 1978 (CDA).[2] 41 U.S.C. § 601 et seq. The CDA applies to contracts between the government and "a party to a Government contract other than the Government." 41 U.S.C. §§ 601, 602. In determining to whom the CDA applies, the Federal Circuit held that Congress intended to continue prior Tucker Act law limiting government privity with subcontractors to special situations, and that Congress may have meant to bar subcontractor suits altogether. Johnson Controls, 713 F.2d at 1549-50. Therefore, were this a Tucker Act claim, ROSCO would be unable to make use of the CDA procedures. Accepting the Federal Circuit's analysis of Congressional intention in Johnson Controls as correct, the Congressional desire to limit the government's expense and trouble in defending contract claims by using primary contractors as a buffer between the government and subcontractors[3] conflicts with the SAA policy of shielding from liability those who operate ships on behalf of the government. In resolving conflicting congressional intentions, the longstanding policy of the SAA should not be disturbed. In passing the CDA Congress gave no indication that it intended to alter federal agency law under the SAA. I see no compelling reason why the Tucker Act and the SAA must use the identical test for determining who is an agent of the United States.
Because suit is barred by the SAA, MTL is entitled to summary judgment,[4] dismissing plaintiff's contract and maritime lien claims against MTL.
B. Tort Claim
I reach the same conclusion with respect to the tort claim. ROSCO points *280 out that the government may not be bound by the actions of its agents acting beyond the scope of their authority. See, e.g., Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 383, 68 S.Ct. 1, 2, 92 L.Ed. 10 (1947). Then ROSCO asserts, without citing authority, that if the government were to defend against the tort claim by asserting MTL's lack of authority to commit torts, I could not dismiss the tort claim against MTL, which would proceed based on diversity and/or admiralty jurisdiction. While it may seem unfair for the government to bar suit against its agents and then use the agent's lack of authority to defend the suit against itself, the plaintiffs have not demonstrated that Congress could not or has not dictated that result. MTL is entitled to summary judgment on the tort claim as well.[5]
III. Suit Against the United States
A. Contract Claim
The first step in analyzing a claim against the United States is to determine whether the United States has waived its soverign immunity and, if so, on what terms.
ROSCO does not make clear whether it relies upon the waiver of sovereign immunity in the PVA or the SAA as permitting its suit for contract damages. There is a substantial controversy over whether the PVA provides a waiver of sovereign immunity for contract claims arising out of the operation of public vessels. See C. Black and G. Gilmore, The Law of Admiralty 980-86 (2d Ed.1975). The difficulty is the language of the PVA, which waives sovereign immunity for damages "caused" by a public vessel. 46 U.S.C. § 781. It is hard to imagine how a vessel can cause a breach of contract. However, if the PVA does not provide the waiver, the SAA will, because the statutes should be read together as placing the government on roughly the same footing as private persons in the maritime industry. Aliotti v. United States, 221 F.2d 598, 602 (9th Cir.1955).
Despite this apparent waiver of sovereign immunity, Congress has conditioned the waiver of sovereign immunity with respect to contract claims on compliance with the Contract Disputes Act. Fidelity Construction Co. v. United States, 700 F.2d 1379, 1383-84 (Fed.Cir.1983). Under the CDA, disputes between the government and parties to contracts with the government must be submitted to the government contracting officer in charge of the contract. 41 U.S.C. § 605(a). All government contracts, with certain specific exceptions, are subject to the CDA. 41 U.S.C. § 602. Section 605(c) requires that claims over $50,000 be accompanied by certification that the claim is in good faith, that the supporting data are accurate and complete to the best of the claimant's knowledge, and that the amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable. If this certification is not made, there is no jurisdiction at any level to consider the claim. Fidelity Construction Co., 700 F.2d at 1383-84.
While ROSCO did make a claim for equitable adjustment of the contract price to MTL, it plainly does not meet the requirements of § 605(c). The government contends that ROSCO is thereby barred from bringing this action until it complies with CDA requirements.
ROSCO argues that the CDA does not apply to claims brought under the district court's exclusive admiralty jurisdiction. The Senate Report on the CDA suggests this may be so:
Consideration was also given to having the bill apply to maritime contracts for employment, use, restoration, repair, or salvage of vessels and aids to navigation. Jurisdiction over these contracts arise in Admiralty and presently reside wholly within the Federal district courts. This jurisdiction is not shared by the Court of Claims. A variety of factors militated *281 against the inclusion of such contracts within the bill.
Jurisdiction over matters arising in admiralty including maritime contracts has vested exclusively with the Federal district court since 1920. As a result, the district courts have developed an expertise in admiralty matters, which has resulted in a common body of procedural and substantive law, applicable to private litigants and the United States alike. Inclusion of marine contracts within the bill would have created an exception to the district courts' otherwise exclusive admiralty jurisdiction and divided maritime contract disputes between the Court of Claims and district courts depending on whether the United States was a party plaintiff or defendant. Admiralty matters sounding in contract involve issues and procedural questions considered sufficiently unique so as to warrant the continued maintenance of these actions within the exclusive jurisdiction of the district court.
S.Rep. No. 95-1118, 95th Cong., 2d Sess. 18, reprinted in 1978 U.S.Code Cong. & Ad.News 5235, 5252 (citations omitted).
While this passage may appear to conclude the issue in favor of ROSCO, the section of the bill to which the passage refers reads "Appeals under paragraph (g) of section 607 of this title and suits under section 609 of this title, arising out of maritime contracts, shall be governed by chapter 20 [SAA] or chapter 22 [PVA] as applicable, to the extent that those chapters are not inconsistent with this chapter." 41 U.S.C. § 603. Section 607 (g) vests appeals from agency boards of contract review in the United States Court of Appeals for the Federal Circuit. Section 609 permits one to bypass agency boards of contract review and appeal contract claims from lower administrative bodies directly to the United States Claims Court. Therefore, this section, rather than completely excluding maritime contracts from the CDA, simply vests appeals from the administrative determinations of claims in the district courts, rather than in the Court of Claims or the Court of Appeals for the Federal Circuit. Whitey's Welding & Fabrication, Inc. v. United States, 5 Cl.Ct. 284 (1984); Brennan v. United States, 641 F.Supp. 245 (D.C.D.C., 1986); but see Boston Shipyard Corp. v. United States, 9 Cl.Ct. 450 (1986).
This reading of § 603 is buttressed by the language of § 602(b) which states in part "Notwithstanding any other provision of this chapter, contracts of the Tennessee Valley Authority for the sale of fertilizer or electric power or related to the conduct or operation of the electric power system shall be excluded from the chapter." When Congress meant to exclude a whole class of contracts from the CDA, it knew precisely how to do so.
Because ROSCO failed to provide a certified claim to the contracting officer as required by the CDA, ROSCO's contract claim against the government is dismissed for want of subject matter jurisdiction.[6]
B. Maritime Lien Claim
The maritime lien claim may proceed only under the PVA. I find that the USNS SEALIFT ATLANTIC is a public vessel of the United States as defined in the PVA. I further hold that because a maritime lien arises on the theory that the vessel is the "offending thing," the USNS SEALIFT ATLANTIC "caused" the damages complained of within the meaning of the PVA. Thus, the plaintiff has a remedy under the PVA. The PVA remedy is exclusive and suit may not be pursued under the SAA. United States v. United Continental Tuna Corp., 425 U.S. 164, 181, 96 S.Ct. 1319, 1328, 47 L.Ed.2d 653 (1976).
46 U.S.C. § 788 forbids liens against public vessels. Section 788 provides "Nothing contained in this chapter shall be construed to recognize the existence of or as creating a lien against any public vessel *282 of the United States." Therefore, the United States is entitled to summary judgment[7] dismissing the maritime lien claim against the United States.
C. Tort Claim
ROSCO alleges that MTL tortiously interfered with its contract with its subcontractor Sabine. The government contends that ROSCO's claim is not a maritime tort and therefore that it is barred by the Federal Tort Claims Act (FTCA), 28 U.S.C. § 2680(h) which forbids suit against the United States on claims arising out of interference with contract rights. ROSCO argues that the tort is maritime, and that therefore the FTCA is inapplicable.
There is a two-part test for determining whether a tort is maritime or not. The injury complained of must occur on navigable waters and must be related to traditional maritime activities. Executive Jet Aviation, Inc. v. City of Cleveland, 409 U.S. 249, 93 S.Ct. 493, 34 L.Ed.2d 454 (1972). The second part of this test is easily satisfied in this case. The making of contracts to repair ships is a traditional maritime activity. North Pac. S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co., 249 U.S. 119, 126-28, 39 S.Ct. 221, 223, 63 L.Ed. 510 (1919).
More difficult to establish is the "location" of this tort. The government argues that the only harm caused by this "tort" was suffered by ROSCO, and that ROSCO is not on navigable waters. Nevertheless, a tort may be maritime if its effects are felt on navigable waters. Carroll v. Protection Maritime Insurance Co., 512 F.2d 4, 6-7 (1st Cir.1975). The location test has been stretched far enough to encompass a claim by seamen against an insurance company for "blacklisting" them for making injury claims. Id.
ROSCO alleges at least as significant an impact in the admiralty jurisdiction. It claims that the change demanded in subcontractors delayed the completion of the work on the SEALIFT ATLANTIC, thereby keeping it off navigable waters, just as the blacklisted seamen were kept from navigable waters in Carroll. Given the broad definition given to the locality test, this impact is enough to satisfy it.
Furthermore, The Poznan, 276 Fed. 418 (S.D.N.Y.1921) (L. Hand, J.), holds that tortious interference with a maritime contract is always within the admiralty jurisdiction. This case predates Executive Jet, but it forms the basis for a small but growing line of authority providing an exception to the locality test for intentional torts tightly "interwoven" with a maritime contract. Kuehne & Nagel (AG & Co.) v. Geosource, Inc., 625 F.Supp. 794, 799 n. 6 (S.D.Tex. 1986); 2 Benedict on Admiralty 1-51 (1985).
The tort alleged by ROSCO is a maritime tort. The FTCA does not apply, whether this claim is brought under the SAA or the PVA.[8] 28 U.S.C. § 2680; McCormick v. United States, 680 F.2d 345 (5th Cir.1982).
Tortious interference with contracts is a cause of action under the federal maritime law. The Poznan, 276 Fed. at 433-34. ROSCO alleges an unusual form of the tort. One would expect Sabine to complain about interference with contractual relations, not ROSCO. Nevertheless, this tort does exist, at least in theory, under Restatement (Second) of Torts § 766A. The argument is that MTL prevented ROSCO from performing its contract with Sabine, which prevented Sabine from performing *283 its contract with ROSCO, which resulted in the substitution of Marine Coatings, which cost ROSCO money. ROSCO cites no authority for this somewhat novel use of § 766A, and I suspect ROSCO has failed to state a cause of action in tort. Nevertheless, on this record I cannot say that ROSCO could not make out some set of facts that would entitle them to relief on a tort theory.[9]
IV. Conclusion
In accordance with the foregoing reasons, the motion of the defendants is GRANTED IN PART and DENIED IN PART.
NOTES
[1] ROSCO does not make clear whether its suit is brought under the SAA or the PVA. Since both statutes bar suit against agents of the United States, I need not concern myself with which applies at this point.
[2] The CDA applies to maritime contract disputes. 41 U.S.C. § 603. See, infra pp. 280-281.
[3] See S.Rep. No. 95-1118, 95th Cong., 2d Sess. 16-17 reprinted in 1978 U.S. Code Cong. & Ad. News 5235, 5250-51.
[4] Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946).
[5] Bell, 327 U.S. at 682-83, 66 S.Ct. at 776. Dismissal of the tort, contract and maritime lien claims necessarily results in dismissal of the claim for prejudgment interest against MTL.
[6] See, Fidelity Construction Co., 700 F.2d at 1383-84; Stanley v. Central Intelligence Agency, 639 F.2d 1146, 1156-57 (5th Cir.1981).
[7] See Marine Coatings of Alabama, Inc. v. United States, 792 F.2d 1565, 1567 (11th Cir.1986).
[8] The same problem arises with respect to an intentional maritime tort as arose with respect to the contract claim. It is not obvious how a vessel can intentionally interfere with a contract. If the vessel did not cause the tort, however, the shoreside employees or agents of the government did, and the SAA provides a remedy where there would be one against a private person. Therefore, if the PVA does not provide a waiver of sovereign immunity in this situation, the SAA would. See Olympia Sauna Compania Naviera, S.A. v. United States, 604 F.Supp. 1297, 1300-03 (D.Or.1984), remanded without opinion, 774 F.2d 1174 (9th Cir.1985).
[9] Although ROSCO is entitled to proceed on its maritime tort claim, 46 U.S.C. § 745 bars the granting of prejudgment interest against the United States. Accordingly, the claim for prejudgment interest against the United States must be dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1773372/ | 3 S.W.3d 522 (1999)
Joseph Andrew PRYSTASH, Appellant,
v.
The STATE of Texas.
No. 72572.
Court of Criminal Appeals of Texas, En Banc.
September 15, 1999.
*524 Jan Morrow, Robert Morrow, Houston, for appellant.
Kimberly Aperauch Stelter, Asst. Dist. Atty., Houston, Matthew Paul, State's Atty., Austin, for State.
Before the court en banc.
*525 WOMACK, J., delivered the opinion of the Court, in which McCORMICK, P.J., and MANSFIELD, KELLER, and KEASLER, JJ., joined.
The appellant, who had agreed to murder Robert Fratta's wife for remuneration, engaged Howard Guidry to do the shooting. He provided Guidry with a gun, and on November 9, 1994, he transported Guidry to and from Fratta's house where the killing was done. The appellant was convicted of capital murder in July 1996. Penal Code § 19.03(a). Pursuant to the jury's answers to the special issues set forth in Code of Criminal Procedure article 37.071, sections 2(b) and 2(e), the trial judge sentenced the appellant to death. Article 37.071, § 2(g).[1] Direct appeal to this Court is automatic. Article 37.071, § 2(h). The sufficiency of the evidence is not challenged. The appellant raises seventeen points of error and a "point for review." We shall affirm.
I. Voir Dire
In point of error number seventeen, the appellant complains that the trial court erroneously denied a challenge for cause against Venire Member William Brittain. The appellant claims that Mr. Brittain was biased against a phase of the law in violation of article 35.16(c)(2). He argues that Mr. Brittain refused to acknowledge that the society in the future dangerousness special issue[2] includes prison society. A close reading of the voir dire transcript, with the relevant parts underscored, reveals that Mr. Brittain understood that the appellant might be less of a threat while in prison.
Q: You have a forty-year-old man gets a life sentence. You know Judge is telling you that he's going to do 40 years minimum. So, now he's eighty years old. You think, I don't really want him out as my neighbor. I think he might be a threat to me out here. But if he's in the penitentiary for the next forty years, he may not be a threat in that society in there?
A: Right.
Q: So, I might answer the question one way for a 17-year-old kid. And I might answer it the opposite way for a guy when he's 40 when he goes in. See that way of thinking?
A: Yes.
Q: Does that make sense to you?
A: It makes sense.
From this portion of the voir dire, it is clear that the venire member understood the prison versus free-world dichotomy that the appellant complains the venire member refused to consider. However, the voir dire questions that the appellant was asking involved more than the distinction between prison society and civilian society. His inquiry also included the idea that the advanced age of the prisoner would lessen his future dangerousness after release.
Q: Would you be willing to consider that here's my 20 minute question. When you look at society would you be willing to consider the age of the person and the length of sentence when you're deciding if somebody is a threat to society or not?
A: No, not on the age if they've committed it.
Q: And tell me why you wouldn't?
A: Why I wouldn't?
Q: Right.
A: I think that they should have thought about that before they committed the crime. I wouldn't worry about the age.
Q: Okay. And that's what you're deciding in the first phase, guilty or not guilty?
*526 A: Right.
Q: But now I'm talking about in the context of the first special issue. And you are trying to decide whether that person is a threat to society. What would you want to know about when you look at whether they are a threat or not to society.
A: Their background, you know. If they committed crimes or things before.
Q: Okay. And what are you thinking about when you think about society? What, were you analyzing that threat?
A: Just want him on the street or not.
Q: Exactly. He ain't going to be on the street.
A: Right.
This part of the voir dire shows that the venire member understood that some offenders may be older than others when they go to prison, but that he refused to acknowledge the age of the offender to be relevant to an assessment of guilt. It does not reflect that he had discarded the prison versus free-world dichotomy. When the defense counsel focused the venire member's attention onto the punishment issues, he maintained that he would not consider age in deciding future dangerousness.
Q: So, that's what, the point I'm trying to get across to you. And I know it's a new concept and I appreciate you working through it with me. But he's not coming back on the street for 40 calendar years minimum. So, it wouldn't be fair, would it, for you to answer that first special issue thinking he's going to get out tomorrow that he may be a threat but wouldn't be in the penitentiary? See what I'm saying?
A: I see what you are saying.
Q: Would you be willing to consider society to include the penitentiary in this context?
A: No, I still have to listen to the case, you know.
Q: Right.
A: To me, age doesn't make the difference.
Q: You would not be willing to consider it in answering the first special issue?
A: No.
The venire member repeated that he understood the dichotomy the defense had presented, but he rejected the notion that the age of the offender when he went into prison would be relevant. When he answered the question of whether he would be willing to consider society to include the penitentiary, he simply reserved the right to make his determination of future dangerousness based on the particularized facts with which he would be presented. Considering the entirety of his testimony on the topic, it seems clear that he understood that society included prison, but that he refused to consider the age of an offender when determining future dangerousness.
A juror is not challengeable for cause because he refuses to give mitigating effect to particular evidence. Morrow v. State, 910 S.W.2d 471, 473 (Tex.Cr.App. 1995), cert. denied, 517 U.S. 1192, 116 S. Ct. 1683, 134 L. Ed. 2d 784 (1996). In Soria v. State, 933 S.W.2d 46, 65-66 (Tex.Cr.App. 1996), cert. denied, 520 U.S. 1253, 117 S. Ct. 2414, 138 L. Ed. 2d 179 (1997), we held that although a juror in a capital case "would give no weight to age in considering punishment [that] does not subject him to a challenge for cause." Id. at 66; see also Massey v. State, 933 S.W.2d 141, 150 (Tex. Cr.App.1996) (holding that venire members were not challengeable for cause based on a refusal to consider age as mitigating evidence in capital case). Point of error number seventeen is overruled.
II. Guilt Phase
In a "point for review," the appellant asks us to review employment records of a witness, which the trial court sealed after inspecting them in camera. The witness was a sheriff's deputy who participated in the custodial interrogation that led to the *527 appellant's written statement. The appellant subpoenaed the records because he thought they would contain favorable evidence about the witness's "interrogation practices." The trial court, finding no evidence favorable to the appellant, ruled that the records would not be given to him. We have examined the records, and we find that the trial court did not abuse its discretion in denying the appellant access to them.
III. Punishment Phase Testimony
In the appellant's third point of error, he argues that the trial court erred by excluding from the jury during the punishment phase of his trial the prosecutor's plea offer of 55 years. He argues that a plea offer of 55 years, as opposed to an offer of life, is mitigating evidence relevant to the jury's determination of special issue number two in that it reflects that the prosecutor did not believe the appellant to be a continuing danger to society. The State counters that the plea offer was solely motivated by the State's desire for evidence against the appellant's co-defendants, and the offer did not reflect the prosecutor's evaluation of the appellant's death-worthiness.
The trial judge excluded the evidence without reference to any particular rule of evidence, nor did he require the prosecutor to state the specific grounds for the State's objection to the introduction of this evidence. The trial judge excluded the evidence because he was concerned that if the plea agreement was made public, it might affect the trial of the appellant's co-defendant. Concern for the impact on a subsequent trial should be dealt with in that case through the voir dire of prospective jurors, see Rideau v. Louisiana, 373 U.S. 723, 83 S. Ct. 1417, 10 L. Ed. 2d 663 (1963); Adami v. State, 524 S.W.2d, 693, 704 (Tex.Cr.App.1975), a continuance, see Hernandez v. State, 643 S.W.2d 397, 399 (Tex.Cr.App.1983), cert. denied, 462 U.S. 1144, 103 S. Ct. 3128, 77 L. Ed. 2d 1379 (1983), or a venue change, see, e.g., Brimage v. Texas, 918 S.W.2d 466, 508 (Tex.Cr.App.1996).
However, if the trial court's decision was correct on any theory of law applicable to the case, we will sustain it. McFarland v. State, 845 S.W.2d 824, 846 n. 15 (Tex.Cr.App.1992), cert. denied, 508 U.S. 963, 113 S. Ct. 2937, 124 L. Ed. 2d 686 (1993). This is true even if the trial judge failed to give any reason or used the wrong reason for the ruling. Romero v. State, 800 S.W.2d 539, 543 (Tex.Cr.App. 1990). Our standard of review for evidentiary decisions by the trial judge is the abuse of discretion standard. Montgomery v. State, 810 S.W.2d 372, 378 (Tex.Cr. App.1990); Marras v. State, 741 S.W.2d 395, 404 (Tex.Cr.App.1987).
In Smith v. State, 898 S.W.2d 838 (Tex. Cr.App.), cert. denied, 516 U.S. 843, 116 S. Ct. 131, 133 L. Ed. 2d 80 (1995), this Court upheld the trial court's exclusion of the State's plea bargain offer of life imprisonment. The State had argued in Smith that the excluded evidence of the plea bargain was inadmissible under Rule 408.[3] After ruling that Rule 408 is inapplicable to plea offers, we evaluated the trial court's decision under Rule 403. Id. at 843. We admitted that the plea bargain "may be minimally relevant to a State *528 District Attorney's office belief that the defendant was not a future danger." Id. at 844. However, we found that the probative value of such evidence is substantially outweighed by the danger of both unfair prejudice and of misleading the jury. Id. at 843-44; Tex.R. Evid. 403. The multitude of motivations that a prosecutor may have in offering a life sentence in a capital case dilute the probative value of that offer and may mislead the jury as to the true motivations of the prosecutor. See id. at 844.
We also identified a policy rationale for excluding plea offers by the government. Public policy favors the conclusion of litigation by compromise and settlement, both in criminal and civil cases, and allowing a criminal defendant to introduce evidence about a sentence offered by the State during plea negotiations clearly militates against this policy. See generally id. at 844 n. 6. If evidence of plea bargain offers were admissible, "the State would be ably discouraged from making such offers in the future, and plea bargaining is essential to the administration of justice in America." Id. The decision to admit or exclude this evidence was soundly within the discretion of the trial judge. We cannot say that the trial court abused its discretion in excluding this evidence. The appellant's third point of error is overruled.
In point of error number four, the appellant complains that the trial court excluded part of the testimony of Dr. Walter Quijano from the jury during sentencing. The proposed testimony of Dr. Quijano would have been that he would not consider the appellant to be a continuing threat while in prison. Dr. Quijano based his opinion on the appellant's current jail classification as nonviolent, the offense with which the appellant was charged, and the level of resources that the prison system possesses to control the danger of inmates. This testimony would have been used to convince the jury that under the special issue the appellant was not a continuing threat posing a future danger to society.
The trial court ruled that Dr. Quijano might talk about the prison system classification and level of resources, but he might not speculate how the classification might apply to the appellant. The trial judge also ruled that Dr. Quijano could not mention the appellant's current jail classification, but he could state that he had reviewed the jail records of the appellant in forming his opinion. The appellant made a timely objection when the trial judge restricted the testimony, and the issue was properly preserved for appeal. The appellant argues that these restrictions on the testimony of Dr. Quijano were an abuse of discretion by the trial judge. We will uphold evidentiary rulings on appeal if the trial court's decision was correct on any theory of law applicable to the case. See McFarland, 845 S.W.2d at 846 n. 15.
The trial court prohibited Dr. Quijano from hypothesizing as to the application of the prison classification system to the appellant. However, Dr. Quijano stated that he was unable to predict the classification that the prison system would assign to the appellant. The testimony of Dr. Quijano concerning the prison classification system was not particularized to the appellant, and Dr. Quijano did not establish that the current jail classification would dictate his classification in prison. Therefore, this restriction on the testimony of Dr. Quijano cannot have prevented Dr. Quijano from testifying that he did not consider the appellant to be a continuing threat to society. The appellant cannot complain about the restriction of the trial court on the application of the prison classification system to the appellant because Dr. Quijano had no opinion as to that application.
The other restriction on the testimony of Dr. Quijano was that the trial court prohibited Dr. Quijano from testifying as to the current jail classification of the appellant. The jail classification of the appellant as nonviolent was inadmissable hearsay. The jailer's opinion of the dangerousness *529 of the appellant was hearsay because it was a statement not made by Dr. Quijano that would have been offered to prove the truth of the matter asserted, that the defendant was not dangerous. However, the opinion of an expert witness may be informed by the opinion of others. Dr. Quijano was properly permitted to state that he had reviewed the jail classification as a basis for his expert testimony, but the classification itself remained inadmissable. See Tex.R. Evid. 703, 705(a).[4] The trial court did not abuse his discretion in excluding the hearsay underlying the opinion of Dr. Quijano.
The appellant argues that Dr. Quijano was prohibited from stating his opinion that the appellant would not pose a continuing threat because the trial court excluded the underlying bases for his opinion. As we have said, the trial court was within its discretion in excluding the jail classification of the appellant. Never did the trial court prevent Dr. Quijano from stating his opinion of the continuing threat posed by the appellant. The notion that Dr. Quijano was unable to testify that he thought the appellant did not pose a continuing threat without also stating the current jail classification is without merit, because the trial court permitted Dr. Quijano to state that he had reviewed the jail records. Dr. Quijano testified that the prison system had sufficient resources to control the dangerousness of the inmates. Dr. Quijano was free to elaborate as to the threat posed by the appellant, but the appellant never inquired beyond this general question. The trial court never prevented defense counsel from asking Dr. Quijano if he thought that the appellant posed a continuing threat. Since we find no reversible error, point of error number four is overruled.
IV. Punishment Phase Instructions
Although the evidence showed that Howard Guidry engaged in the conduct of murder, the court's charge at the guilt stage of the trial authorized the jury to find the appellant criminally responsible for Guidry's conduct as a party.[5] In such cases, article 37.071, section 2(b)(2) requires that at the punishment stage "the court shall submit the following issue[ ] to the jury: . . . whether the defendant actually caused the death of the deceased or did not actually cause the death of the deceased but intended to kill the deceased or another or anticipated that a human life would be taken."[6]
Before trial the appellant moved the court to hold the issue unconstitutional. Counsel said, "Judge, the defendant's position *530 is that we would waive that [issue], if at all possible. We consider Special Issue No. 2 to be unconstitutional and on those grounds as previously stated to the Court, we don't want that question." Although the court did not agree that the issue was unconstitutional, it did agree to omit the issue from the jury charge and to forbid the State from asking the prospective jurors about it in voir dire examination.
Now in points of error one and two the appellant argues that the trial court erred in failing to submit the issue in the jury charge and in accepting the verdict without an answer to the issue. He relies on Powell v. State, 897 S.W.2d 307 (Tex.Cr.App.1994).
In Powell we considered a capital case which had been retried after a reversal on appeal. During the pendency of that appeal, an amendment of article 37.071 had changed the requirements for the court's charge at the punishment stage. The amendment deleted a requirement that the charge include an issue on "deliberateness,"[7] substituting an issue for cases that were tried on the law of parties.[8] The amendment did not require any change of the charge in Powell's trial because he committed his offense before the effective date of the amending act, which had a savings clause that continued in effect the former law.[9] Nevertheless Powell requested that the trial court submit the new issue rather than the former one, and the court did so. We held that this was a reversible error.
The Powell analysis was done in terms of preservation of error. It began with Marin v. State, 851 S.W.2d 275 (Tex.Cr. App.1993), in which we set out the basic concept that in preserving error for appellate review there are three classes of rules: forfeitable rights which require that a party request the court to act, waivable rights which must be implemented unless affirmatively waived by the party, and absolute requirements which cannot be waived or forfeited. Powell, 897 S.W.2d at 316. The Court found that Powell's "case is analogous to those cases addressing the waiver of statutorily required sentences and sentencing procedures." Ibid.[10] The analysis ended thus (id. at 317):
We cannot allow trial courts and criminal defendants to mutually consent to usurp the powers of the legislature. Thus, we must affirm the principle of absolute requirements and prohibitions which are not optional, waivable, or forfeitable, stating that neither a capital murder defendant nor a trial court may ignore the statutory scheme mandated by the effective dates of Article 37.071. The effective dates of statutes are absolute requirements, non waivable and nonforfeitable; criminal defendants may not in Texas legislate the law to be applied in their case.[11]
*531 The analysis of the question in terms of the rules for waiver ignores the crucial distinction between those rules and the law of invited error. The question was not whether Powell could waive a right, it was whether he could complain of an action he requested; this is more than, and different from, waiver.
Waiver might usefully be distinguished from what is sometimes called "invited error." If a party affirmatively seeks action by the trial court, that party cannot later contend that the action was error. This is not really a waiver of error previously committed. Rather, it is part of the definition of what can constitute error, and quite reasonably defines error of which a party may complain as excluding those actions of the trial court actually sought by the party in that tribunal.
George E. Dix and Robert O. Dawson, 43 Texas PracticeCriminal Practice and Procedure § 42.141 (Supp.1999) (footnote omitted).
The doctrine of invited error is properly thought of, not as a species of waiver, but as estoppel. This Court first pointed out the relationship between the doctrines of estoppel and invited error in jury charges in Carbough v. State, 49 Tex. Crim. 452, 455-56, 93 S.W. 738 (1906):
In the later case of M., K. & T. Ry. v. Eyer et al., [96 Tex. 72, 74-75, 70 S.W. 529, 529-30 (1902),] supra, the question again came under review before the Supreme Court. Speaking of invited error, Chief Justice Gaines, delivering the opinion of the court, said: "The rule in question is but a deduction from the doctrine of estoppel. Where a party by a request for a ruling leads the court into error, he should be precluded from claiming a reversal of the judgment by reason of the error so committed. To hold otherwise would be to permit him to take advantage of his own wrong. Where the court, upon the trial is requested to affirm a proposition of law in the charge, and it is so affirmed the rule applies. Such was the case of Railroad Co. v. Sein, 89 Tex. 63, 33 S.W. 215, 216." This is the last enunciation of this doctrine that has been called to our attention at the hands of the Supreme Court. Numerous decisions have been cited supra, from this and the Courts of Civil Appeals of this state, affirming the doctrine laid down by these decisions. If the rule is correct, and it seems the authorities cited settle it, it is not reversible error that there may be some omission or some defect in the requested charge given, and the authorities seem to place it upon the ground that the party complaining is estopped, and by asking the special charge, whether given or refused, affirms the proposition laid down by the court in the charge given.
Just as the law of entrapment estops the State from making an offense of conduct that it induced, the law of invited error estops a party from making an appellate error of an action it induced.
The rule of invited error in jury charges is one of long standing, and it applies to the improper submission of jury charges at the punishment stage of a capital trial.[12] The rejection of it in Powell was not justified by the analysis which asked whether a statutory requirement could be waived.
The Powell Court gave another reason for reversal.[13] It said that a waiver of trial *532 by jury, which is forbidden in a capital case in which the State sought the death penalty,[14] occurred when the verdict did not include a special issue which was required by the applicable statute. There are several fatal flaws in this reasoning. To begin with, if this were an improper waiver, the doctrine of invited error estops the appellant from complaining of it. Second, it is untrue on its face; the case was tried to a jury. The worst that can be said is that the jury returned a verdict which did not answer one issue. Third, if an omission of a punishment issue amounted to waiver of trial by jury, then any omission of an element from the jury charge at the guilt stage of any criminal case would amount to a waiver of trial by jury on guilt. Just as a statute requires a jury verdict on the punishment issues in a capital trial, the United States Constitution requires a jury verdict on each element of the offense at the guilt stage of every criminal trial. See Richardson v. United States, 526 U.S. 813, ___, 119 S. Ct. 1707, 1711, 143 L. Ed. 2d 985, 994 (1999). But we do not treat omissions of the elements of offenses as waivers.[15]See Almanza v. State, 686 S.W.2d 157, 172-74 (Tex.Cr.App. 1984) (holding that the omission of an element from the authorization paragraph in a non-capital case is error subject to a harm analysis in which the appellate court reviews the entire jury charge and the state of the evidence in the case to decide whether the error requires reversal). They are subject to the normal requirements for preservation of error. And the same should be true for the punishment issues in a capital case.
We should not have permitted Powell to raise as error an action that he procured. Insofar as we did so, our decision in Powell v. State, 897 S.W.2d 307, 314-19 (Tex.Cr. App.1994), is overruled.
Just as we should not have permitted Powell to complain of the trial court's submitting a jury charge as he requested, we will not permit this appellant to complain of the trial court's deleting a jury charge as he requested. The appellant's first and second points of error in this case are overruled under the doctrine of invited error.
In point of error number nine, the appellant asserts that the refusal of the trial court to instruct the jury that a life sentence would be imposed if they failed to answer a special issue is reversible error. There is no constitutional prohibition to concealing from the jurors the consequences of their deliberations, so long as they are not misled into believing that ultimate responsibility for the verdict rests elsewhere. McFarland v. State, 928 S.W.2d 482, 519 (Tex.Cr.App.1996); Draughon v. State, 831 S.W.2d 331, 338 (Tex.Cr. App.1992), cert. denied, 509 U.S. 926, 113 S. Ct. 3045, 125 L. Ed. 2d 730 (1993). "The jury is not informed of the consequences of a hung jury, but each juror will know that without his or her vote the death sentence cannot be imposed." Lawton v. State, 913 S.W.2d 542, 559 (Tex.Cr.App.1995) cert. denied, 519 U.S. 826, 117 S. Ct. 88, 136 L. Ed. 2d 44 (1996). Point of error number nine is overruled.
The appellant complains in point of error number ten that the trial judge erroneously refused to instruct the jury that they could not consider unadjudicated offenses during the punishment phase unless the prosecution had proven them beyond a reasonable doubt. The charge to the jury stated that the State was required *533 to prove each of the special issues beyond a reasonable doubt. The charge to the jury adequately protected the appellant because the charge comprehends the burden of proof that the State bears for the entirety of evidence introduced during the punishment phase. We have consistently held that it is not error for the trial judge to refuse to give a separate instruction concerning unadjudicated offenses when the State is required to prove the punishment issues beyond a reasonable doubt. Burks v. State, 876 S.W.2d 877, 911 (Tex. Cr.App.1994), cert. denied, 513 U.S. 1114, 115 S. Ct. 909, 130 L. Ed. 2d 791 (1995); Coble v. State, 871 S.W.2d 192, 208 (Tex. Cr.App.1993), cert. denied, 513 U.S. 829, 115 S. Ct. 101, 130 L. Ed. 2d 50 (1994); Lewis v. State, 815 S.W.2d 560, 567 (Tex.Cr. App.1991), cert. denied, 503 U.S. 920, 112 S. Ct. 1296, 117 L. Ed. 2d 519 (1992); Santana v. State, 714 S.W.2d 1, 11-12 (Tex.Cr. App.1986).
The appellant argues that our decision in Mitchell v. State, 931 S.W.2d 950 (Tex. Cr.App.1996), amends this line of decisions. Mitchell held that in a noncapital case, a defendant is entitled to a limiting instruction that informs the jury that unadjudicated offenses offered during the punishment phase must be proven beyond a reasonable doubt. Id. at 954. However, Mitchell does not take into account the instruction in a capital case that the State must prove the special issues beyond a reasonable doubt. Mitchell, therefore, is inapplicable to the capital sentencing structure, and the appellant's point of error is overruled.
In point of error number eleven, the appellant argues that the trial court erred in refusing to give an instruction to the jury that limited their consideration of other bad acts to the future dangerousness special issue. In point of error number twelve, the appellant argues that the trial court erred in refusing a limiting instruction that the jury disregard evidence of the commission of the primary offense in deciding whether he had committed the other bad acts. The other bad acts to which the appellant refers are an aggravated robbery of a car salesperson, a dismissed charge of attempted murder of his brother-in-law, and the burglary of the victim's home and assault on the victim before the instant murder.
The trial court refused to limit the jury's consideration of the appellant's other bad acts to the future dangerousness special issue. Because the other bad acts of the appellant were also relevant to the mitigation special issue, which was the only other special issue before the jury at punishment, the trial court did not err in refusing to give the limiting instruction. A "limiting instruction is not required where evidence can be considered on any relevant issue in the case." Lane v. State, 822 S.W.2d 35, 40 (Tex.Cr.App.1991) (upholding the refusal to give a limiting instruction that would have restricted the jury's consideration of other bad acts to the future dangerousness special issue because the other bad acts were arguably relevant to the deliberateness special issue). Appellant's eleventh point of error is overruled.
When evidence is offered and admitted for a limited purpose, the party who opposes admission of that evidence bears the burden to request a limiting instruction. Garcia v. State, 887 S.W.2d 862, 878 (Tex.Crim.App.1994), cert. denied, 514 U.S. 1021, 115 S. Ct. 1368, 131 L. Ed. 2d 223 (1995). The appellant made a general objection when the State introduced the evidence that presumed to restate any objections made at trial, but he did not object to the introduction of the primary offense and did not request any limiting instructions. The failure of the appellant to object to the introduction of the primary offense at punishment or to request a limiting instruction when the evidence was offered forfeited any error on that issue. The appellant's twelfth point of error is overruled.
*534 The appellant argues in his thirteenth point of error that the trial court erred in refusing to submit special-verdict forms to the jury that would specify whether they had found each of the unadjudicated offenses to have been committed. The appellant claims that this Court cannot perform a meaningful sufficiency review of the jury's answer to the future dangerousness special issue without answers to the requested special-verdict forms. Setting aside that the appellant has not challenged the sufficiency of the jury's answer to the future dangerousness special issue, we observe that there is no requirement that the State prove all of the elements of unadjudicated offenses submitted at the punishment phase before the trial court can admit the evidence. See Spence v. State, 795 S.W.2d 743, 758-59 (Tex.Cr.App.1990), cert. denied, 499 U.S. 932, 111 S. Ct. 1339, 113 L. Ed. 2d 271 (1991). In Matchett v. State, 941 S.W.2d 922 (Tex.Cr.App.1996), cert. denied, 521 U.S. 1107, 117 S. Ct. 2487, 138 L. Ed. 2d 994 (1997), we held that the lack of this requirement meant that the trial court is under no obligation to submit to the jury special-verdict forms listing the elements of unadjudicated offenses alleged by the State at punishment. See id. at 937. Nor do we think that the future dangerousness special issue necessitates special-verdict forms as to the commission of unadjudicated offenses alleged at punishment. Point of error thirteen is overruled.
In point of error number fourteen, the appellant complains that the trial court erroneously refused his request that the jury be charged that they may consider any evidence to be mitigating even if irrelevant to the moral culpability of the defendant. He claims that his requested charge was necessary to correct the definition of mitigating evidence in article 37.071, section 2(f)(4), which unconstitutionally limits the definition of mitigating evidence to evidence that reduces the appellant's moral blameworthiness. Faced with a similar challenge in Cantu v. State, 939 S.W.2d 627, 648 (Tex.Cr.App.), cert. denied, ___ U.S. ___, 118 S. Ct. 557, 139 L. Ed. 2d 399 (1997), we held that article 37.071, section 2(e) solves any potential narrowing problem in section 2(f)(4). Article 37.071, section 2(e) instructs the trial court to charge the jury that they must "take into consideration `all of the evidence, including the circumstances of the offense, the defendant's character and background, and the personal moral culpability of the defendant' in determining whether sufficient mitigating circumstances exist to warrant a life sentence" Cantu, 939 S.W.2d at 648-49 (emphasis added in Cantu). Although mitigating evidence is statutorily defined as that evidence which "a juror might regard as reducing a defendant's moral blameworthiness," article 37.071, section 2(f)(4), the trial court's instructions pursuant to section 2(e) provide the jury with a vehicle to respond to a broader range of mitigating evidence. See Cantu, 939 S.W.2d at 648-49; Lawton, 913 S.W.2d at 555-56; Goff v. State, 931 S.W.2d 537, 556 (Tex.Cr.App. 1996), cert. denied, 520 U.S. 1171, 117 S. Ct. 1438, 137 L. Ed. 2d 545 (1997).
However, "in order for mitigating evidence to have relevance beyond the scope of the special issues, there must be relevance between the mitigating evidence and the circumstances surrounding the crime that tends to excuse or explain the criminal act, so as to make that particular defendant less deathworthy." Goff, 931 S.W.2d at 556. Although article 37.071, section 2(e) allows the consideration of background and character evidence in addition to the personal moral culpability of the defendant, section 2(e) does not necessarily permit the introduction of any evidence that the defense believes may sway a jury to render a life verdict. We have held that evidence that relies on mere sympathy or emotional response is irrelevant to the jury's consideration of the deathworthiness of the defendant. See Rhoades v. State, 934 S.W.2d 113, 126 (Tex.Cr.App.1996) (ruling that photographs *535 of the defendant which depict a cheerful early childhood are irrelevant because such evidence has no relationship to his conduct); Goff, 931 S.W.2d at 555-56 (ruling that the homosexuality of the victim, if unknown to the defendant and unrelated to the crime, is irrelevant to the jury's ability to consider and give mitigaing effect to the background or character of the defendant); accord McFarland, 928 S.W.2d at 522 (upholding an anti-sympathy charge as properly focusing the attention of the jury on those factors relating to a moral inquiry into the culpability of the defendant).
The instruction that the appellant requested attempted to change the statutory balance between the definition of mitigating evidence in section 2(f)(4) and the broader evaluation of the deathworthiness of the defendant in section 2(e). The wording of the instruction that the trial court denied would have provided an alternate definition of mitigating evidence, which we have previously held is "contrary to the law." Skinner v. State, 956 S.W.2d 532, 542 (Tex.Cr.App.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 1526, 140 L. Ed. 2d 677 (1998). The jury in the appellant's case was instructed that a mitigating circumstance may include, but is not limited to, any aspect of a defendant's character, background, record, emotional instability, intelligence or circumstances of the crime which could make a death sentence inappropriate. The appellant does not complain of any evidence to which the jury could not give effect; therefore, "even if the statute is deficient in the way that he suggests, he did not suffer the deficiency." McFarland, 928 S.W.2d at 518. The appellant's fourteenth point of error is overruled.
V. Special Issues Challenges
In the appellant's fifth through seventh points of error, he claims that the mitigation issue at punishment, article 37.071, section (2)(e), violates the Eighth Amendment of the United States Constitution. In his fifth point of error, the appellant contends that the mitigation issue unconstitutionally omits a burden of proof. We have held that because there are no constitutional limits on the jury's discretion to consider mitigating evidence, the constitution does not require a burden of proof. Anderson v. State, 932 S.W.2d 502, 508 (Tex.Cr.App.1996) cert. denied, 521 U.S. 1122, 117 S. Ct. 2517, 138 L. Ed. 2d 1019 (1997). The appellant acknowledges the case law against him, but presents an argument that he claims this court has overlooked in previous decisions. The appellant argues that the mitigation special issue permits the introduction of nonstatutory aggravating evidence in addition to mitigating evidence, and this nonstatutory aggravating evidence is not subject to a burden of proof in violation of Walton v. Arizona, 497 U.S. 639, 110 S. Ct. 3047, 111 L. Ed. 2d 511 (1990). The nonstatutory evidence of which the appellant primarily complains is the introduction of victim impact evidence.
However, the appellant's reliance on Walton is misplaced. Walton ruled that the allocation of the burden of proof as to mitigating factors cannot remove the burden of proof that the State must bear in proving elements of the crime or statutory aggravators. Walton, 497 U.S. at 650, 110 S. Ct. 3047. The lack of a burden of proof in the mitigation special issue does not lessen the State's burden to prove the elements of capital murder, which include the statutory aggravators. The jury does not decide the mitigation special issue until after the State has proven the elements of capital murder and that the defendant is a future danger, article 37.071, section 2(b)(1); therefore the concerns of Walton are not implicated. The relevance of victim impact evidence to mitigation evidence was countenanced by the United States Supreme Court in Payne v. Tennessee, 501 U.S. 808, 111 S. Ct. 2597, 115 L. Ed. 2d 720 (1991), accord Ford v. State 919 S.W.2d 107, 115-16 (Tex.Cr.App.1996).
*536 In Payne, the Supreme Court explained "that a State may properly conclude that for the jury to assess meaningfully the defendant's moral culpability and blameworthiness, it should have before it at the sentencing phase evidence of the specific harm caused by the defendant." Payne, 501 U.S. at 825, 111 S. Ct. 2597. The thrust of Payne is that victim impact evidence is relevant to counteract "the mitigating evidence which the defendant is entitled to put in," id., that is, victim impact evidence is relevant to the normative decision of the jury under section 2(e). Victim impact evidence is not subject to a burden of proof because it is relevant to the mitigation special issue instead of to a statutory aggravator found in the definitions of capital murder. The appellant's fifth point of error is overruled.
In the appellant's sixth point of error, he claims that the mitigation special issue is unconstitutional because it fails to provide meaningful appellate review of the jury's decision. We previously have ruled that the normative decision of the jury as to the mitigation special issue is not amenable to appellate review. See McFarland, 928 S.W.2d at 498-99; Morris v. State, 940 S.W.2d 610, 614 (Tex.Cr.App. 1996). Point of error number six is overruled.
In the appellant's seventh point of error, he argues that article 44.251(a) requires that the mitigation special issue be subject to appellate review. We have ruled before that article 44.251(a) does not require us to undertake a sufficiency review of the jury answers to the special issues. See Eldridge v. State, 940 S.W.2d 646, 652-53 (Tex.Cr.App.1996); McFarland, 928 S.W.2d at 498-99. "Our inability to effectuate Article 44.251 in relation to the second special issue does not, however, make Article 37.071 § (2)(e) constitutionally infirm. We conduct legal sufficiency reviews of a guilty verdict and of the first special issue. We do not think that the Constitution requires any further appellate review of Article 37.071 § 2(e)." Eldridge, 940 S.W.2d at 653. The appellant's seventh point of error is overruled.
In point of error number eight, the appellant argues that requiring ten votes for the jury to return a negative answer to the first special issue and an affirmative answer to the third special issue violates the Eighth Amendment. The appellant complains that the majority of the jury could improperly pressure an individual juror who wants to vote for life to instead vote for death. This court has consistently upheld as constitutional the instructions in article 37.071, sections 2(d) and 2(f), known as the "10-12" rule. See McFarland, 928 S.W.2d at 519; Lawton, 913 S.W.2d at 558-59; Nobles v. State, 843 S.W.2d 503, 509-10 (Tex.Cr.App.1992). The instructions on answering the special issues do not mislead the jury into thinking that an affirmative answer should be given unless ten or more jurors agree to give a negative one. Draughon, 831 S.W.2d at 337-38; McFarland, 928 S.W.2d at 519; Lawton, 913 S.W.2d at 559. Any juror who wishes to vote life contrary to the votes of the majority is "given an avenue to accommodate the complained-of potential disagreements," McFarland, 928 S.W.2d at 519; see also Lawton, 913 S.W.2d at 558-59, for "every juror knows that capital punishment cannot be imposed without the unanimous agreement of the jury on all three special issues." Lawton, 913 S.W.2d at 559.
The frequency of attack on the constitutionality of the "10-12" rule leads us to discuss the merits of the procedure. In Caldwell v. Mississippi, 472 U.S. 320, 105 S. Ct. 2633, 86 L. Ed. 2d 231 (1985), the United States Supreme Court held that a prosecutor may not mislead the jury into thinking that the responsibility for imposing the death penalty lay not with the jury but with the appellate courts who review the case. Id. at 341. The Supreme Court reasoned that the jury might improperly "delegate" its decision whether to impose the death penalty to the appellate courts. *537 Id. at 331-33. One of the underlying values of the Caldwell decision is to ensure the proper level of juror deliberation. The "10-12" rule serves this value by not giving the jury the consequences of a nonverdict, while at the same time it ensures that the death penalty will not be imposed without the unanimous consent of the jury. Accord Davis v. State, 782 S.W.2d 211, 221-22 (Tex.Cr.App.1989), cert. denied, 495 U.S. 940, 110 S. Ct. 2193, 109 L. Ed. 2d 520 (1990) (quoting Barfield v. Harris, 540 F. Supp. 451, 472 n. 17 (E.D.N.C.1982), affirmed, 719 F.2d 58 (4th Cir.1983), cert. denied, 467 U.S. 1210, 104 S. Ct. 2401, 81 L. Ed. 2d 357 (1984)). The appellant's point of error number eight is overruled.
VI. Post-trial
The appellant complains in his sixteenth point of error that the trial court denied the appellant effective assistance of counsel by advising the jurors that they were under no obligation to answer any questions regarding their service. In his fifteenth point of error, the appellant argues that the trial court denied him effective assistance of counsel by releasing the jurors from defense subpoenas issued for a motion for a new trial. The jury members are under no duty to speak to defense counsel about their service or deliberations. Phillips v. State, 511 S.W.2d 22, 30-31 (Tex.Cr.App.1974); Graves v. State, 382 S.W.2d 486, 489 (Tex. Cr.App.1964), cert. denied, 380 U.S. 967, 85 S. Ct. 1114, 14 L. Ed. 2d 157 (1965). Point of error number sixteen is overruled.
The trial court released the jurors from the defense subpoenas on the ground that the affidavit that supported the motion by the appellant had alleged no misconduct by the jury. Our case law is clear that to sustain a motion for a new trial based on juror misconduct, the appellant was required to have alleged facts that amounted to misconduct through the affidavit of a juror or another person who was in a position to know the facts. Dugard v. State, 688 S.W.2d 524, 528 (Tex.Cr.App. 1985). This Court has required "something more than a mere allegation" of juror misconduct to avoid "fishing expeditions" by defendants. Stephenson v. State, 494 S.W.2d 900, 909 (Tex.Cr.App.1973). The underlying affidavit by the appellant's investigator revealed that four of the jurors talked with the investigator and gave differing accounts of how the members read the charge. Nothing in the affidavit alleges facts that amount to jury misconduct, and therefore the trial judge was within his discretion in releasing the jury members from the defense subpoenas. Point of error number fifteen is overruled.
The judgment of the trial court is affirmed.
KELLER, J., filed a concurring opinion.
HOLLAND, J., filed a dissenting opinion, in which MEYERS and PRICE, JJ., joined.
JOHNSON, J., filed a dissenting opinion.
KELLER, J., filed a concurring opinion in which KEASLER, J., joined.
Appellant was convicted of capital murder under the "murder for remuneration" provision. See Texas Penal Code § 19.03(a)(3). Although the law of parties was contained in the guilt/innocence charge, the punishment charge did not contain the anti-parties special issue required by law. The question presented is whether the death sentence must be reversed as a result of this omission.
A similar but not identical situation was addressed in Powell v. State, 897 S.W.2d 307 (Tex.Crim.App.1994). That case involved the trial court's failure to submit the "deliberateness" special issue, submission of which was required by the law in effect at the time. Id. at 314-315. The deliberateness special issue asked:
whether the conduct of the defendant that caused the death of the deceased was committed deliberately and with *538 reasonable expectation that the death of the deceased or another would result.
Id. at 315 (quoting 1978 version of Texas Code of Criminal Procedure, Article 37.07(b)(1)).[1] We held that a "sentence of death could not be pronounced without an affirmative answer to the `deliberateness' question." Id. at 315 (plurality opinion); see also Id. at 318 (Clinton, J. concurring). We followed Powell in another case involving the failure to submit the deliberateness special issue. Smith v. State, 907 S.W.2d 522, 534 (Tex.Crim.App.1995). In Smith, we stated: "By failing to give this question at trial, the court received an incomplete verdict and thus was without authority to sentence appellant to death." Id.
Neither Powell nor Smith conducted a harm analysis; in fact, neither of the opinions in those cases even raised the issue of whether a harm analysis would apply. So, those cases implicitly held either (1) that the error was not subject to a harm analysis or (2) that the error was necessarily harmful. To the extent that Powell and Smith could be interpreted to hold that the failure to submit a deliberateness instruction is immune from a harmless error analysis, those cases have been overruled by our subsequent decision in Cain v. State, 947 S.W.2d 262 (Tex.Crim.App.1997) and undercut by the United States Supreme Court's recent decision in Neder v. United States, ___ U.S. ___, 119 S. Ct. 1827, 144 L. Ed. 2d 35 (1999). To the extent that Powell and Smith could be interpreted to hold that the failure to submit a deliberateness instruction is necessarily harmful, that holding has been undercut by Neder and, at any rate, can be distinguished from the case at bar.
1. Harm analysis applies
In Cain, this Court held:
Except for certain federal constitutional errors labeled by the Supreme Court as "structural," no error, whether it relates to jurisdiction, voluntariness of a plea, or any other mandatory requirement, is categorically immune to a harmless error analysis.
Id. at 264 (footnote omitted). The error at issue here is not of federal constitutional origin. Neither Powell nor Smith relied upon federal constitutional law for their holdings; both relied merely upon the text of Article 37.071. See Powell, 897 S.W.2d at 314-318; Smith, 907 S.W.2d at 534. And no constitutional error is apparent. When an element of an offense is not submitted to the jury, the federal constitution is involved because of the defendant's Sixth Amendment right to a jury trial. United States v. Gaudin, 515 U.S. 506, 510-511, 115 S. Ct. 2310, 132 L. Ed. 2d 444 (1995); Neder, at ___, 119 S. Ct. 1827. However, there is no Sixth Amendment right to a jury trial at the punishment stage of a death penalty case. Clemons v. Mississippi, 494 U.S. 738, 110 S. Ct. 1441, 108 L. Ed. 2d 725 (1990). And although the Eighth Amendment requires a finding of personal culpability for a murder before the death sentence may be imposed, Tison v. Arizona, 481 U.S. 137, 157-158, 107 S. Ct. 1676, 95 L. Ed. 2d 127 (1987), the parties instruction in the present case satisfies that requirement, as will be discussed below. And while Due Process may require a trial court to submit a special issue to which a defendant is entitled under state law, see Gaudin, 515 U.S. at 509-510, 115 S. Ct. 2310, an express waiver of the issue negates any generalized due process violation. See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-705, 102 S. Ct. 2099, 72 L. Ed. 2d 492 (1982).[2] Because the error *539 in the present case is not of federal constitutional origin, Cain dictates that it must be subjected to a harm analysis. To the extent that Powell and Smith conflict with Cain's holding, they were overruled by Cain. See Cain, 947 S.W.2d at 264.
But even if we were to hold the error to be of federal constitutional origin, under Supreme Court precedent such an error would not be structural. In Neder, the Supreme Court addressed a trial court's complete failure to submit an element of the offense to the jury. The Supreme Court held that such an error "differs markedly from the constitutional violations we have found to defy harmless error review." 119 S.Ct. at 1833-34. The Supreme Court concluded that the complete omission of an element of an offense was not structural error but was subject to harmless error review. Id. 119 S.Ct. at 1833-37. If the omission of an element of an offense is not structural, the omission of a punishment issue would not seem to be structural error either. And, more to the point, the Supreme Court has not labeled it as structural. Hence, Cain would control, and the error would be subject to a harm analysis.
2. Error is harmless
Because the error in question is non-constitutional and relates to the jury charge, the standard of harm is found in Almanza v. State, 686 S.W.2d 157 (Tex. Crim.App.1984). Having failed to object to the absence of the special issue, appellant must show "egregious harm," that is, that he "has not had a fair and impartial trial." Id. at 171.
The Supreme Court's discussion of harm in Neder is helpful in evaluating whether harm occurred. In determining whether the omission of an offense element was harmless, the Supreme Court considered two competing harm tests: (1) the functional equivalence test and (2) the uncontested issue/overwhelming evidence test. Both tests were considered within the framework of the "beyond a reasonable doubt harmless" standard announced in Chapman v. California, 386 U.S. 18, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967). The defendant in Neder advocated the use of the functional equivalence test to evaluate whether the omission of an element was harmful. As articulated by the defendant, that test would find the omission harmless "where other facts necessarily found by the jury are the `functional equivalent' of the . . . omitted element." Neder, 119 S.Ct. at 1835-36 (ellipsis inserted). The Supreme Court postulated the possibility of a broader functional equivalence test: that the omission of an offense element would be harmless "where other facts found by the jury are `so closely related' to the omitted element `that no rational jury could find those facts without also finding' the omitted element." Neder, 119 S.Ct. at 1836. (quoting from Sullivan v. Louisiana, 508 U.S. 275, 281, 113 S. Ct. 2078, 124 L. Ed. 2d 182 (1993)).
However, the majority opinion in Neder rejected the functional equivalence test as the sole test for harm on the ground that such a test was too narrow, and held that error could also be rendered harmless under an uncontested issue/overwhelming evidence test. Id. 119 S.Ct. at 1836-38. The latter test would hold an error harmless "where a reviewing court concludes beyond a reasonable doubt that the omitted element was uncontested and supported by overwhelming evidence, such that the jury verdict would have been the same absent the error." Id. 119 S.Ct. at 1837-38.
In a dissenting opinion, Justice Scalia advocated the functional equivalence test as the sole test for harm, believing that an error in omitting an offense element could be harmless only "if the elements of guilt that the jury did find necessarily embraced the one omitted." Id. 119 S.Ct. at 1846-47 *540 (Scalia, J. dissenting). "Where the facts necessarily found by the jury (and not merely discerned by the appellate court) support the existence of the element omitted. . . the omission . . . is harmless." Id. (ellipsis inserted).
We have yet to decide whether the method articulated by the Supreme Court majority or by Justice Scalia's dissent is the correct method for evaluating harm under Almanza in a case such as this.[3] At any rate, the most favorable (to a defendant) method for determining whether the error is harmful is the narrow form of the functional equivalence test advocated by Justice Scalia. The application of the functional equivalence test to the present case shows the error to be harmless.
The anti-parties issue requires a jury to find that the accused caused the victim's death, intended to kill a person, or anticipated that a human life would be taken:
in cases in which the jury charge at the guilt or innocence stage permitted the jury to find the defendant guilty as a party under Sections 7.01 and 7.02, Penal Code, whether the defendant actually caused the death of the deceased or did not actually cause the death of the deceased but intended to kill the deceased or another or anticipated that a human life would be taken.
Article 37.071 § 2(b)(2). If a defendant were convicted as the primary actor, he would have necessarily caused the death of the deceased. However, if the accused were convicted under a parties liability theory, then the possibility is raised that the accused did not actually cause the deceased's death. The anti-parties issue ensures that a defendant is not given the death penalty after being convicted on the basis of a parties liability theory unless the jury also finds that the defendant intended death or anticipated that a human life would be taken. In the present case, that function is fulfilled by appellant's conviction.
The theory of parties liability contained in the jury charge on guilt/innocence required the State to show that appellant intended the victim's death. The charge instructed on the "intent to promote or assist" theory of party liability, which was set out as follows:
A person is criminally responsible for an offense committed by the conduct of another if, acting with intent to promote or assist the commission of the offense, he solicits, encourages, directs, aids, or attempts to aid the other person to commit the offense.
(Emphasis added); see also Texas Penal Code § 7.02(a)(2). A subsequent explanation paragraph in the charge required even more explicitly that appellant must have intended the victim's death in order to be convicted:
Before you would be warranted in finding the defendant guilty of capital murder, you must find from the evidence beyond a reasonable doubt that on the occasion in question . . . the defendant, Joseph Andrew Prystash, with intent to promote or assist the commission of the offense of murder of Farah Fratta, solicited, directed, aided or attempted to aid Robert Alan Fratta and/or Howard Guidry in shooting Farah Fratta with the specific intention of thereby killing Farah Fratta.
(Ellipsis inserted and emphasis added). The "intent to promote or assist" theory of parties liability was also incorporated into a separate application paragraph of the charge.
As a result, when the jury convicted appellant of capital murder, it necessarily found that appellant was guilty either (1) as a primary actor, or (2) as a party who *541 intended the victim's death. So the jury found everything that was required by the anti-parties charge. Because the guilty verdict ensured that the jury actually made a factual determination that necessarily embraces an affirmative answer to the anti-parties issue, appellant was not deprived of a fair and impartial trial.[4]
And to the extent that Powell held that the error in its case (the omission of the deliberateness issue) was necessarily harmful, Powell is distinguishable. We have held repeatedly that the term "deliberately" means something beyond "intentionally" or "knowingly." Ramirez v. State, 815 S.W.2d 636, 653-654 (Tex.Crim. App.1991); Tucker v. State, 771 S.W.2d 523, 537 (Tex.Crim.App.1988), cert. denied, 492 U.S. 912, 109 S. Ct. 3230, 106 L. Ed. 2d 578 (1989); Heckert v. State, 612 S.W.2d 549, 552-553 (Tex.Crim.App.1981). So, a jury finding of guilt would not itself constitute a finding of deliberateness.
But while the Legislature may have intended, when it formulated the deliberateness special issue, to require something in addition to intent or knowledge for assessment of the death penalty, the anti-parties issue appears to be included in the statute merely to require that the defendant be found to bear personal moral culpability for the victim's death. Although the deliberateness charge was required in every case, the anti-parties charge is required only when the jury charge permits conviction upon the law of parties. And while the word "deliberately," in common usage, appears to encompass more than mere intentional conduct, the words "intended" and "anticipated" (in the anti-parties issue) appear to encompass the same or less culpability than the culpable mental states required for establishing the offense of capital murder. So, in some cases, a jury's finding of guilt will be the functional equivalent of an affirmative answer to the antiparties special issue.[5] Such is the case before us.
With these comments, I join the Court's opinion.
HOLLAND, J., delivered a dissenting opinion in which MEYERS, J. and PRICE, J., joined.
Today, the majority uses the "doctrine of invited error" to "estop" appellant from challenging on appeal the trial court's authority to sentence him to death. Specifically, the majority refuses to allow appellant to challenge any errors arising from the absence of a jury finding on the "anti-parties" special issue because the trial court omitted the special issue from the punishment jury charge at appellant's request. Because the majority insists this Court neither need address the propriety of a request that a special issue be omitted *542 nor the effect of omitting a special issue, I must respectfully dissent. I write separately because although the majority is correct in that appellant invited the error, I cannot condone ignoring the fact that without a jury finding on the "anti-parties" special issue, the jury's verdict on punishment was incomplete, and thus, the trial court had no authority to assess appellant's punishment at death.
I. Punishment Phase
In point of error one, appellant asserts the trial court erred in failing to submit to the jury at the punishment stage the "anti-parties" charge required by Article 37.071 § 2(b)(2). He further submits in point two that the absence of this special issue rendered the verdict illegal and incomplete, and therefore, appellant's death sentence was not authorized.[1] The State contends appellant waived any right to complain about the absence of this issue because appellant affirmatively requested that it be omitted.
A. Powell v. State
In Powell v. State, 897 S.W.2d 307, 314-18 (Tex.Crim.App.1994), the trial court, at the appellant's request, failed to submit to the jury the "deliberateness" special issue required by the version of Article 37.071(b)(1) applicable to his case. On appeal, appellant claimed the trial judge erred in the charge to the jury, in accepting an incomplete and illegal verdict, and in sentencing Powell to death without the authority to do so. He insisted that since the jury never answered the requisite issue, the verdict was incomplete and illegal, and the sentence of death was not authorized. We agreed.
We noted that Article 37.071 had been amended just prior to the time of Powell's trial. Among other changes, the "deliberateness" issue had been deleted and a new issue, the "anti-parties" issue, had been added. Powell, 897 S.W.2d at 315. In changing the statute, however, the Legislature mandated that the changes only applied to offenses committed on or after September 1, 1991. Powell committed his offense in May 1978. Nonetheless, at his trial, Powell requested that the trial court substitute the "anti-parties" issue for the "deliberateness" issue. The trial court did as Powell requested and the State failed to object. On direct appeal, the State claimed that Powell could not complain about the substitution because he had requested it. Id.
We held in Powell that a defendant may not waive, and a trial court cannot ignore, the "effective dates of Article 37.071." Id. at 316. We explained that this is so because the effective dates of statutes are absolute requirements which are independent of litigants' wishes. Specifically, in the case of Article 37.071, we held that its effective dates define the offense and "determine what elements a jury must find to establish a capital murder punishable by death." Id. at 316. By substituting Powell's requested issue for the one legislatively prescribed, the trial court effectively removed an element the jury was required to find before a death sentence could be authorized.
*543 In a concurring opinion in which he joined the Court's opinion with a "qualification," Judge Clinton noted that while the Court's opinion framed the issue as whether the "effective dates of statutes are absolute requirements," this phraseology was actually a "subtle but significant distortion of the true issue" in the case. Judge Clinton posited that a jury answer to the deliberateness issue was absolutely required and unwaivable because the law prohibits a defendant from waiving a trial by jury in a death penalty case. See Arts. 1.13 and 1.14. Thus, without a jury's answer to that specific issue, the punishment verdict would be incomplete, and a death sentence would not be authorized.[2]
B. Majority's Overruling of Powell
The majority insists "[t]he Powell Court should not have permitted Powell to raise as error an action that he procured," and thus, overrules it "insofar as it did so." (ante at 532). The majority claims the Powell Court, by analyzing the question in terms of the rules for waiver, "overlooked the crucial distinction between rules [for waiver] and the law of invited error." The majority insists the question in Powell was "not whether he could waive a right, it was whether he could complain of an action he requested." Contrary to the majority, however, the Powell Court did address whether a defendant may challenge the trial court's authority to assess his punishment at death even though the error arose from an action he procured.
The defendant in Powell, like appellant, requested that a special issue be omitted from the jury charge on punishment. Although the Powell Court addressed the matter in terms of whether the defendant could request that the special issue be omitted, its reasoning demonstrates a willingness to permit a defendant to challenge the trial court's authority to assess the death penalty despite the fact that it was the defendant who procured the error. Even though the defendant invited the error in Powell, this Court refused to ignore the fact that by granting the defendant's request it omitted an element the jury had to find beyond a reasonable doubt before the trial court had the authority to assess punishment at death. Art. 37.071(2)(b).[3]*544 Today, the majority avoids addressing this consequence by concluding the matter need not be addressed because "we resolve the points before us with the doctrine of waiver."
Although her reasoning differs somewhat from the majority, Judge Keller also avoids addressing the effect of omitting a special issue. In her concurring opinion, Judge Keller claims Powell was overruled by Cain v. State, 947 S.W.2d 262 (Tex. Crim.App.1997) because the omission of a special issue is statutory error. Op. at 539. Under Cain all statutory errors are subject to a harmless error review. Nonconstitutional error requires a reviewing court to examine the impact of the error on the jury's verdict to determine whether it affected the "substantial rights" of the defendant. Tex.R.App. P. 44.2(b). The error in the instant case, however, is not amenable to harmless error review because there is no jury verdict on punishment. It is for this reason that Cain neither overrules Powell nor applies to the instant case.
She also claims this error did not result in egregious harm to appellant, because "the guilt/innocence charge in the present case required the State to show that appellant intended the victim's death. The guilt/innocence charge instructed on the `intent to promote or assist' theory of party liability." Op. at 540. The only punishment charge instruction relating to parties specifically prohibited the jury from considering the party liability instructions given at guilt/innocence in answering the special issues:
However, in this punishment phase of the trial you should not consider the instructions given you in the first phase of the trial that relate to the law of parties and the responsibility of the parties for the acts of others in the commission of the offense. You shall consider only the conduct and state of mind of this defendant in determining what your answers to the Special Issues shall be.
Judge Keller is essentially arguing that the guilt/innocence parties instruction, which the jury was not allowed to apply at punishment, somehow makes the omission of the special issue harmless. This reasoning is faulty because it requires the jury to consider parties liability at punishment in violation of the capital punishment statute. Art. 37.071 § 2(b)(2).
Both the majority's use of this equitable doctrine, and Judge Keller's use of Cain, fail to appreciate the unique role special issues play.[4] In Texas, the "anti-parties" special issue plays a vital role in determining whether a defendant is death eligible. In a capital case, the question the jury must answer during the guilt/innocence phase is whether a capital offense was committed and whether the defendant committed it. During the punishment phase, however, the jury must determine the defendant's death worthiness. That is, the jury must determine whether death is an appropriate punishment for the defendant. Tuilaepa v. California, 512 U.S. 967, 114 S. Ct. 2630, 129 L. Ed. 2d 750 (1994); see also Zant v. Stephens, 462 U.S. 862, 879, 103 S. Ct. 2733, 77 L. Ed. 2d 235 (1983) (at punishment jury makes "an individualized determination on the basis of the character of the individual and the circumstances of the crime"). When the charge at guilt/innocence authorizes the jury to find a defendant guilty on a theory of party liability, the trial court must given an "anti-parties" special issue to prevent a defendant, found guilty as a party, from being sentenced to death.[5] Art. 37.071 § 2(b)(2).
*545 The Powell Court recognized that a trial court cannot eliminate a special issue created by our Legislature, in response to the dictates of the United States Supreme Court, although the defendant requests that it be omitted. A contrary holding would have invited the judicial branch to ignore the legislature's directives in matters of capital punishment procedure. In our legal system, the parties are adversaries, the trial judge is not. It is the trial judge who must carry out the duties imposed upon him or her by law. The majority's holding today which "estops" appellant from challenging the trial court's lack of authority to assess his punishment at death transforms what the Legislature has enacted as a mandatory duty, in response to the dictates of the Supreme Court, into a discretionary act.
II. Waiver of Jury Trial
Also, the majority insists the absence of a jury finding on a special issue from the jury's verdict does not violate the legislature's prohibition against allowing a capital defendant to waive a jury trial. Instead, the majority claims "the worst that can be said is that the jury returned a verdict which did not answer one issue." (ante at 532). It is, however, precisely the absence of a finding on an issue legislatively assigned to the jury which violates the waiver prohibition. See TEX.CODE.CRIM. PROC. Art. 1.14(a); See Art. 37.071 § 2(b)(2). By upholding appellant's sentence of death despite the lack of a jury finding on a special issue authorizes the waiver of a finding essential to a determination of death worthiness.
The majority attempts to diminish the significance of omitting a special issue from the jury charge at punishment in a capital case by likening it to the omission of an element of an offense in the jury charge at guilt/innocence. (ante at 532. Such a comparison is invalid because if an element is omitted from the jury charge at guilt/innocence, the sufficiency of the evidence presented at trial can be examined to determine whether the State proved up that element. See Malik v. State, 953 S.W.2d 234 (Tex.Crim.App.1997) (sufficiency of evidence is not measured by the elements of the offense set out in the jury charge, but the elements of the offense as defined by the "hypothetically correct" jury charge). When a special issue is omitted in the charge on punishment, however, the evidence cannot be reviewed to determine whether a sentence of death was appropriately assessed because there is no jury verdict in on punishment. Consequently, the effect of not having a jury finding on a special issue is that it renders the verdict incomplete.
*546 III. Conclusion
In the instant case, there is no question that in order for the jury to have determined appellant death worthy, it had to return an affirmative finding on the "anti-parties" special issue. Thus, the special issue was an "element [the] jury [had to] find to establish a capital murder punishable by death." Boykin v. State, 818 S.W.2d 782, 785 (Tex.Crim.App.1991); Powell, 897 S.W.2d at 316.[6] Accordingly, because there was no jury finding on the "anti-parties" special issue the trial court had no authority to assess appellant's sentence at death. With these concerns in mind, I must respectfully dissent.
JOHNSON, J., filed a dissenting opinion.
During the punishment phase of appellant's trial, the trial court, at appellant's request, omitted from the jury charge the "anti-parties" charge required by TEX. CODE CRIM. PROC. art. 37.071, § 2(b)(2). Today the majority overrules this point of error on the basis of the doctrine of "invited error." Ante, at 529-533.
As we have recognized on several occasions, art. 37.071 was enacted by our legislature as a response to Furman v. Georgia, 408 U.S. 238, 239-240, 92 S. Ct. 2726, 2727, 33 L. Ed. 2d 346 (1972) (decided in conjunction with Branch v. Texas), in which the United States Supreme Court held that the prior Texas death penalty scheme was unconstitutional. See, e.g., Barefield v. State, 784 S.W.2d 38, 45 (Tex. Crim.App.1989), cert. denied, 497 U.S. 1011, 110 S. Ct. 3256, 111 L. Ed. 2d 766 (1990); Mead v. State, 645 S.W.2d 279, 280-281 (Tex.Crim.App.1983), cert. denied, 465 U.S. 1041, 104 S. Ct. 1318, 79 L. Ed. 2d 714 (1984); Staley v. State, 887 S.W.2d 885, 899 (Tex.Crim.App.1994) (Baird, J., concurring), cert. denied, 514 U.S. 1020, 115 S. Ct. 1366, 131 L. Ed. 2d 222 (1995). The legislature subsequently amended art. 37.071, including § 2(b)(2), in response to Penry v. Lynaugh, 492 U.S. 302, 109 S. Ct. 2934, 106 L. Ed. 2d 256 (1989). See 42 GEORGE E. DIX & ROBERT O. DAWSON, TEXAS PRACTICE: CRIMINAL PRACTICE AND PROCEDURE § 31.70 (1995). It is clear, then, that the legislature has set up a delicate scheme in order to accommodate concerns when there is the possibility that the "ultimate" punishment will be meted out: the taking of a defendant's life.
Today, however, the majority helps to effectively dismantle this carefully enacted scheme, by relying on a decision from this court which is more than ninety years old, and which itself is based on a line of civil cases. Ante, at 531. Whether stated in terms of "waiver" or "invited error," it defies common sense to allow the penalty of death to be imposed, despite the failure of the jury to determine the very issues which the legislature has mandated shall be answered in order for that punishment to be authorized. Given the circumstances under which our current capital sentencing scheme was enacted and the concerns addressed by that scheme, such a decision can only be described as reckless.
It is also curious that the majority chooses to ignore the state's participation in the "invited error." What is sauce for the gander is sauce for the goose. The statements of defense counsel as noted by the majority are found at S.F. vol. VI, at 181. The trial court agreed to delete special issue No. 2, without objection by the state (S.F., vol. VI, at 182). I am unable to discover anything in the record to support the majority's statement that the trial court "[forbade] the State from asking the *547 prospective jurors about [the anti-parties charge] in voir dire examination."
During the punishment-charge conference, the following exchange took place:
THE COURT: Anything from the State as to any objections to the Court's, proposed Court's charge?
MS. SIEGLER: No, sir.
THE COURT: Any specially requested charges?
MS. SIEGLER: No, sir.
(S.F. vol. XXII, at 1275.) If appellant invited error, then the state is equally culpable in that invitation. If appellant must suffer the consequences of invited error, then so must the state. Because the state did not object to the deletion of the required instruction at the time the trial court agreed to delete it or when specifically queried by the trial court as to possible objections, I would hold that in not objecting to the error the state thereby elected to waive the death penalty, as it may do in any capital case. The appropriate resolution would then be for this Court to reform the sentence to life. I dissent.
NOTES
[1] Unless otherwise indicated all future references to Articles refer to the Code of Criminal Procedure.
[2] "[W]hether there is a probability that the defendant would commit criminal acts of violence that would constitute a continuing threat to society." Article 37.071, § 2(b)(1).
[3] "Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for anther purpose, such as proving bias or prejudice or interest of a witness or a party, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution." TEX.R. EVID. 408.
[4] "The facts or data in the particular case upon which an expert bases an opinion or inference may be those perceived by or made known to him at or before the hearing. If of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject, the facts or data need not be admissible into evidence." Tex.R. Evid. 703. "The expert may testify in terms of opinion or inference and give his reasons therefore without prior disclosure of the underlying facts or data, unless the court requires otherwise. The expert may in any event disclose on direct examination, or be required to disclose on cross-examination, the underlying facts or data, subject to subparagraphs (b) through (d)." TEX.R. EVID. 705(a).
[5] See TEX. PENAL CODE §§ 7.01 ("Parties to Offenses"), 7.02 ("Criminal Responsibility for Conduct of Another"), and 7.03 ("Defenses Excluded").
[6] The issue was added to the article by the Act of June 16, 1991, 72d Leg., R.S., ch.838, § 1, 1991 Tex. Gen. Laws 2898, 2899. Compare Enmund v. Florida, 458 U.S. 782, 797, 102 S. Ct. 3368, 73 L. Ed. 2d 1140 (1982) (Eighth Amendment does not permit imposition of the death penalty on "one who aids and abets a felony in the course of which a murder is committed by others but who does not himself kill, attempt to kill, or intend that a killing take place or that lethal force will be employed"), with Tison v. Arizona, 481 U.S. 137, 152, 107 S. Ct. 1676, 95 L. Ed. 2d 127 (1987) (Eighth Amendment does not prohibit the death penalty in the case of "the defendant whose participation is major and whose mental state is one of reckless indifference to the value of human life").
[7] "[W]hether the conduct of the defendant that caused the death of the defendant was committed deliberately and with the reasonable expectation that the death of the deceased or another would result." Act of June 14, 1973, 65th Leg., R.S., ch. 426, art. 1, § 1, 1973 Tex. Gen. Laws 1122, 1125, repealed by Act of June 16, 1991, 72d Leg., R.S., ch.838, § 1, 1991 Tex. Gen. Laws 2898, 2899.
[8] See n. 6 and accompanying text, supra.
[9] See Act of June 16, 1991, 72d Leg., R.S., ch.838, § 5, 1991 Tex. Gen. Laws 2898, 2901.
[10] The principal case that the Court found analogous, Ex parte Sims, 868 S.W.2d 803 (Tex.Cr.App.1993), held that a statutorily required sentencing procedure was an absolute requirement which was not waivable. That holding has since been overruled as incorrect. See Ex parte McJunkins, 954 S.W.2d 39 (Tex. Cr.App.1997). Because we resolve the points before us with the doctrine of invited error, we shall not further address the particular question of whether parties may waive the statutory requirements for jury charges or the general question of why a statutory requirement may be said to be absolute.
[11] This focus on effective dates of statutes and usurpation of legislative power introduced "a subtle but significant distortion of the true issue." Powell v. State, 897 S.W.2d at 318 (Clinton, J., concurring). Although the issue that Powell asked to be submitted was taken from a subsequent act of the legislature, that was irrelevant to the decision of the case. The true question was the omission of the issue that was required by the applicable statute. The result and the reasons for it would have been the same if Powell had requested that an issue of his own creation, or no issue at all, be substituted.
[12] Livingston v. State, 739 S.W.2d 311, 341 (Tex.Cr.App.1987), cert. denied, 487 U.S. 1210, 108 S. Ct. 2858, 101 L. Ed. 2d 895 (1988).
[13] The bare majority of five judges in Powell did not speak with one voice. Judges Clinton and Maloney filed concurring opinions which said they "joined" Judge Meyers' opinion, but which did not embrace its central holding. Judge Clinton said that the issue of whether an absolute requirement could be waived was "a subtle but significant distortion of the true issue," which he identified as waiver of the right to trial by jury. Powell v. State, 897 S.W.2d at 318. Judge Maloney identified that issue as well. See id. at 319. Judge Meyers' opinion adopted their reasoning in a footnote. See id. at 317 n. 6.
[14] See TEX.CODE CRIM. PROC. article 1.14(a).
[15] Nor do the federal courts. See Neder v. United States, 527 U.S. ___, 119 S. Ct. 1827, 144 L. Ed. 2d 35 (1999).
[1] All further references to Articles are to the Texas Code of Criminal Procedure unless otherwise indicated.
[2] Appellant concedes that defense counsel requested that the anti-parties special issue not be given. Under Powell, such a waiver was ineffective. Judge Clinton opined that waiver was ineffective because a statute prevents a capital murder defendant facing the death penalty from waiving a jury trial. 897 S.W.2d at 318 (Clinton, J. concurring); see also Article 1.13(a) & (b), 1.14(a). As explained above, however, the right to a jury trial at punishment is not a federal constitutional right.
[3] While the Chapman standard appears to be more favorable to criminal defendants than the standard announced in Almanza, this Court does have the power to interpret the Almanza standard more favorably to criminal defendants if we decide that a subsequent Supreme Court case interpreting the federal harmless error standard does not reflect the Legislature's intent in enacting Article 36.19, from which Almanza was derived.
[4] There is a theory of parties liability under Texas law that is not the functional equivalent of the anti-parties special issue. "Conspiracy liability" under Texas Penal Code § 7.02(b) does not require that the actor intend or even anticipate the object crime:
If, in the attempt to carry out a conspiracy to commit one felony, another felony is committed by one of the conspirators, all conspirators are guilty of the felony actually committed, though having no intent to commit it, if the offense was committed in furtherance of the unlawful purpose and was one that should have been anticipated as a result of the carrying out of the conspiracy.
(Emphasis added). That theory, however, was not submitted in the jury charge in the instant case.
[5] In her dissent, Judge Holland contends that my reliance upon the parties charge in the guilt phase to show a lack of harm is faulty because the punishment charge instructed the jury not to consider the parties instructions given in the guilt phase. She misses my point. The parties instructions in the guilt phase incorporated the essential elements of the anti-parties special issue. When the jury returned a verdict of guilt then, it necessarily answered the anti-parties issue affirmatively in the guilt phase of the trial. For the same reason, Judge Holland's "incomplete verdict" contention also misses the mark: the anti-parties issue was submitted, and that issue was answered affirmatively by the jury. But the issue was submitted at the wrong time (the guilt phase of trial) and in the wrong form (as a component of the guilt determination).
[1] The guilt/innocence charge in the instant case set out the following:
All persons are parties to an offense who are guilty of acting together in the commission of the offense. A person is criminally responsible as a party to an offense if the offense is committed by his own conduct, by the conduct of another for which he is criminally responsible, or by both.
A person is criminally responsible for an offense committed by the conduct of another if, acting with intent to promote or assist the commission of the offense, he solicits, encourages, directs, aids, or attempts to aid the other person to commit the offense.
This definition, which tracks the language of Texas Penal Code §§ 7.01 and 7.02, was applied to the facts of the case in the application paragraph of the charge. Under the version of Article 37.071 in effect at the time of his trial, whenever a charge at guilt/innocence authorized the jury to find a defendant guilty as a party under Texas Penal Code §§ 7.01 and 7.02, a trial judge was required to submit the "anti-parties" charge to the jury.
[2] Powell, 897 S.W.2d at 318 (Clinton, J., concurring); see also Simpson v. State, 991 S.W.2d 798, at 3 (Tex.Crim.App. 1998) (citing to Judge Clinton's concurrence in Powell with approval). An unauthorized sentence is void. Ex parte Beck, 922 S.W.2d 181, 182 (Tex. Crim.App.1996); Levy v. State, 818 S.W.2d 801, 802 (Tex.Crim.App.1991).
[3] The pertinent parts of Article 37.071 § 2 read as follows:
(b) On conclusion of the presentation of the evidence, the court shall submit the following issues to the jury:
(1) whether there is a probability that the defendant would commit criminal acts of violence that would constitute a continuing threat to society; and
(2)in cases in which the jury charge at the guilt or innocence stage permitted the jury to find the defendant guilty as a party under Sections 7.01 and 7.02, Penal Code, whether the defendant actually caused the death of the deceased or did not actually cause the death of the deceased but intended to kill the deceased or another or anticipated that a human life would be taken.
(c) The state must prove each issue submitted under Subsection (b) of this article beyond a reasonable doubt, and the jury shall return a special verdict of "yes" or "no" on each issue submitted under Subsection (b) of this article.
(d) The court shall charge the jury that:
* * * * * *
(2) it may not answer any issue submitted under Subsection (b) of this article "yes" unless it agrees unanimously and it may not answer any issue "no" unless 10 or more jurors agree; . . .
* * * * * *
(e) The court shall instruct the jury that if the jury returns an affirmative finding to each issue submitted under Subsection (b) of this article, it shall answer the following issue:
Whether, taking into consideration all of the evidence, including the circumstances of the offense, the defendant's character and background, and the personal moral culpability of the defendant, there is a sufficient mitigating circumstance or circumstances to warrant that a sentence of life imprisonment rather than a death sentence be imposed.
(Emphasis added).
[4] In her concurring opinion, Judge Keller claims that even if the omission of a special issue was of federal constitutional origin, according to Neder v. United States, ___ U.S. ___, 119 S. Ct. 1827, 144 L. Ed. 2d 35 (1999) the error is not structural. Neder is inapplicable to the instant case because it examines the omission of an element of the offense at the guilt phase of a defendant's trial.
[5] Effective September 1, 1991, the Texas Legislature deleted the "deliberateness" special issue from Article 37.071 and added the "anti-parties" special issue. Prior to this time, an "anti-parties" charge was only required when requested by a defendant. We have noted in several opinions that the purpose of an "anti-parties" charge is to protect a defendant's constitutional rights by ensuring that a jury's punishment-phase deliberations are based solely upon the conduct of the defendant and not that of another party. See Martinez v. State, 899 S.W.2d 655, 657 (Tex.Crim.App. 1994), cert. denied, 516 U.S. 942, 116 S. Ct. 378, 133 L. Ed. 2d 301 (1995). In other words, to ensure that a defendant is not sentenced to death merely for being a party to the offense.
We noted in these early cases that when the law of parties is presented to the jury in the guilt phase of a trial, a trial court should give an "anti-parties" charge at punishment when requested. Belyeu v. State, 791 S.W.2d 66, 73 (Tex.Crim.App.1989), cert. denied, 499 U.S. 931, 111 S. Ct. 1337, 113 L. Ed. 2d 269 (1991). However, absent such a request or an objection, an "anti-parties" charge was not required by statute or by the constitution. Id.; Johnson v. State, 853 S.W.2d 527, 536 (Tex. Crim.App.1992), cert. denied, 510 U.S. 852, 114 S. Ct. 154, 126 L. Ed. 2d 115 (1993). We even went so far as to say that it would be inappropriate to have a blanket rule that each time a charge on the law of parties is given at the guilt/innocence stage of a capital murder case, an "anti-parties" charge must be given on request at the punishment stage. Belyeu, 791 S.W.2d at 72-73. The 1991 amendments to Article 37.071, however, appear to be the Legislature's response to those cases in that the plain language of the amended statute indicates that such a blanket rule is appropriate.
[6] In Mosley v. State, 983 S.W.2d 249, No. 72,281, slip op. at 90-91 (Tex.Crim.App. July 1, 1998)(op. on motion for reh'g), this Court stated that a defendant can waive reliance on and submission of the mitigation issue. See Art. 37.071 § 2(e). The opinion distinguishes the mitigation issue from the "deliberateness" issue in Powell on the basis that the mitigation issue has no burden of proof to be carried by the State. The "anti-parties" issue, like the deliberateness issue in the prior statute, has to be proven beyond a reasonable doubt by the State. See Art. 37.071 § 2(c). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1787464/ | 746 So. 2d 940 (1999)
Jose A. GUERRERO, Appellant,
v.
STATE of Mississippi, Appellee.
No. 97-KA-00387 COA.
Court of Appeals of Mississippi.
March 9, 1999.
Rehearing Denied June 29, 1999.
Certiorari Denied October 14, 1999.
William B. Sullivan, Laurel, Attorney for Appellant.
Office of the Attorney General by Deirdre McCrory, Attorney for Appellee.
BEFORE THOMAS, P.J., DIAZ, AND SOUTHWICK, JJ.
THOMAS, P.J., for the Court:
¶ 1. Jose Guerrero was convicted of possession of more than a kilogram of marijuana and sentenced to twenty years with five years suspended and was ordered to pay a fine of $30,000 with $20,000 suspended. On appeal, Guerrero assigns the following issues, listed verbatim, as error:
I. IS DRIVING AFTER MIDNIGHT WHILE MEXICAN PROBABLE CAUSE TO STOP A VEHICLE?
II. IF THE ABOVE IS AFFIRMATIVE, DOES FAILURE TO HAVE A VALID DRIVERS LICENSE JUSTIFY CALLING AHEAD TO ANOTHER JURISDICTION TO BE ON THE LOOK OUT FOR THE VEHICLE?
III. IS OUR STATUTE ON CARELESS DRIVING TOO VAGUE?
IV. DOES STOPPING THE SUBJECT VEHICLE IN THE ALERTED JURISDICTION JUSTIFY DETAINING THE DRIVER UNTIL A CANINE UNIT ARRIVES?
*941 V. IF NO CONTROLLED SUBSTANCE IS NOT FOUND NEAR THE RIGHT FRONT TIRE OF THE SUBJECT VEHICLE WHERE THE "DOPE DOG" WAS SAID TO HAVE "ALERTED", JUSTIFY TAKING THE VEHICLE APART?
VI. IS A CONTROLLED SUBSTANCE LOCATED IN ONE OF THE GAS TANKS OF THE SUBJECT VEHICLE TO BE IMPUTED TO GUERRERO WHO DID NOT OWN THE VEHICLE?
VII. HOW MUCH PERSONAL FREEDOM ARE WE WILLING TO LOSE TO THE MILITARY ARM OF OUR CITIES IN QUEST OF PROTECTION?
VIII. THE LOWER COURT ERRED IN FAILING TO SUPPRESS THE EVIDENCE OBTAINED BY SEARCH OF THE SUBJECT VEHICLE.
IX. THE LOWER COURT ERRED IN FAILING TO DIRECT A VERDICT OF ACQUITTAL.
Finding no error, we affirm.
FACTS
¶ 2. During the early morning hours of June 18, 1995, Jose Guerrero was pulled over for a traffic violation. Acting on a tip received from the Smith County Sheriff's Department via radio dispatch, Officers Doug Hill and Kevin Flynn of the Laurel Police Department set up surveillance near the Laurel city limits. The dispatch advised Hill and Flynn that a white Ford pickup truck with Florida license plates was headed south on Highway 15 to Jones County and that the vehicle had been previously stopped by a Smith County deputy sheriff. The dispatch also advised that the vehicle appeared suspicious and was possibly carrying contraband.
¶ 3. As Guerrero entered the Laurel city limits, Officers Hill and Flynn pulled in behind Guerrero and followed him for approximately two miles, during which time Guerrero broke the center line two to three times. Officers Hill and Flynn stopped the vehicle and asked the driver, Guerrero, for his driver's license. Guerrero stated that he did not have a driver's license and produced a Texas identification card which indicated Guerrero was seventeen years of age. Guerrero was then placed under arrest for driving without a driver's license. When asked his point of origin and destination, Guerrero responded that he was traveling from Houston, Texas to Florida. Guerrero also stated that the vehicle belonged to his brother and that he had borrowed the truck for the weekend, but that his brother did not know where he was going in the vehicle.
¶ 4. Officer Hill testified that given the fact that Guerrero was traveling the "back roads" instead of the interstate and that Guerrero had few items of clothing with him, a K-Nine unit was called to the scene to conduct a scan of the vehicle for drugs. K-Nine Officer Ken Williams arrived a short time later with his K-Nine partner Bycal, a five-year-old German Shepard. As Officer Williams and Bycal were conducting their scan of the vehicle, Bycal indicated the presence of drugs near the right front wheel area of the vehicle. However, a preliminary search of the vehicle failed to produce any drugs.
¶ 5. A wrecker was called to remove the vehicle from the scene. Officer Roy Watson, the shift commander that night, arrived and examined the vehicle. Officer Watson observed that the vehicle had duel fuel tanks. Further examination by Officer Watson revealed discrepancies in the fuel gauge as the tow truck raised and lowered the vehicle, which indicated to Officer Watson the presence of an obstruction in the fuel tank which was interfering with the fuel gauge reading. The vehicle was towed and impounded in an enclosed building until the following morning. Since Guerrero was a juvenile, he was placed in detention until members of his family could arrive.
¶ 6. A subsequent inspection the following morning by Officer Randy Dearman *942 and C.D. Farris, a City of Laurel mechanic, revealed that the bolts securing the bed of the truck showed signs of tampering. Further inspection revealed that an object or objects were in the fuel tanks. Farris and Officer Dearman removed the fuel tanks and discovered several sealed PVC pipes within the fuel tanks. Sealed within the PVC pipes was approximately 55 pounds of marijuana.
ANALYSIS
¶ 7. We must note from the outset that Guerrero has presented a barrage of issues, nine all totaled, in a shotgun brief to this Court for review. Of the nine assignments, previously listed verbatim, only two issues are properly before this Court. Guerrero has advanced convoluted arguments and cites no legal authority to support seven of his nine assignments. We have held "that it is the duty of an appellant to provide authority and support of an assignment." Hoops v. State, 681 So. 2d 521, 526 (Miss.1996); see also Kelly v. State, 553 So. 2d 517, 521 (Miss.1989); Brown v. State, 534 So. 2d 1019, 1023 (Miss. 1988); Harris v. State, 386 So. 2d 393 (Miss.1980). Further, "if a party does not provide this support this Court is under no duty to consider assignments of error when no authority is cited." Hoops, 681 So.2d at 526; see also Kelly, 553 So.2d at 521; Brown, 534 So.2d at 1023.
¶ 8. We will address only the issues properly presented before this Court; first, the issue of whether Guerrero was in constructive possession of the marijuana and second, the issue of whether Officers Hill and Flynn had probable cause to make the initial stop of Guerrero. We now turn to the issues properly presented to this Court.
I.
THE LOWER COURT ERRED IN FAILING TO SUPPRESS THE EVIDENCE OBTAINED BY SEARCH OF THE SUBJECT VEHICLE
¶ 9. Guerrero challenges the trial court's ruling admitting the evidence obtained by the search of the vehicle he was driving the night in question. Guerrero argues that he was stopped without probable cause and that the only reason he was stopped was due to a radio dispatch received from the Smith County Sheriff's Office advising the Laurel Police Department of Guerrero's presence and the possibility he was carrying contraband without any reasonable foundation to support the dispatch. Guerrero likewise, without expressly stating so, argues that the evidence seized as a result of the initial stop is inadmissible as fruit of the poisonous tree. Guerrero cites Boches v. State, 506 So. 2d 254 (Miss.1987) in support of his argument.
¶ 10. The initial stop of Boches was prompted by Boches's attempted evasion of an investigatory roadblock. The question put forth in Boches was whether such an evasion warranted probable cause to pursue and stop the evading driver. The Boches court noted that "when a motorist evades a police roadblock ... [the] police may stop them and check the validity of their license, tag, and inspection sticker." Boches, 506 So.2d at 264. The court further discussed the issue of the resulting detention of Boches by citing to United States v. Sharpe, 470 U.S. 675, 105 S. Ct. 1568, 84 L. Ed. 2d 605 (1985). In Sharpe, the United States Supreme Court held that in evaluating the reasonableness of investigatory stops, the appropriate inquiry is "whether the officer's action was justified at its inception, and whether it was reasonably related in scope to the circumstances which justified the interference in the first place." Sharpe, 470 U.S. at 682, 105 S. Ct. 1568 (quoting Terry v. Ohio, 392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968)).
¶ 11. A distinction is readily apparent between the case sub judice and the circumstances in Boches. Guerrero's initial stop was the result of a traffic violation and not that of an investigatory stop as *943 was at issue in Boches. Therefore, we are not persuaded that Boches is the correct avenue with which to evaluate the issue of whether probable cause existed in the initial stop of Guerrero. However, as we will discuss in Guerrero's second assignment of error, Boches is applicable to the issue of whether Guerrero was in constructive possession of marijuana discovered within the vehicle's fuel tanks. We turn now to Whren v. United States, 517 U.S. 806, 116 S. Ct. 1769, 135 L. Ed. 2d 89 (1996) to resolve this issue.
¶ 12. In Whren, plainclothes policemen, patrolling a "high crime area" in an unmarked police car, observed a Nissan Pathfinder truck with temporary license plates and youthful occupants waiting at a stop sign for an unusually long period of time. As the officers executed a u-turn to investigate the suspicious activity, the Pathfinder turned suddenly to the right without signaling, and sped off at an "unreasonable" rate of speed. The officers soon overtook the Pathfinder at a later traffic light. When the officers approached the vehicle they immediately observed two large plastic bags with what appeared to be crack cocaine.
¶ 13. Whren accepted that the officer had probable cause to believe that various provisions of the traffic code had been violated. However, Whren argued unsuccessfully that "in the unique context of civil traffic regulations" probable cause is not enough. Whren, 517 U.S. at 810, 116 S. Ct. 1769. Guerrero similarly argues that probable cause was nonexistent in his initial stop by the Laurel Police Department. Specifically, Guerrero states in his brief that Mississippi's careless driving statute, Miss.Code Ann. § 63-3-1213 (Rev.1996), "is too vague to have any clear meaning and the statute should be stricken." We similarly are unpersuaded by this argument.
¶ 14. The Court in Whren stated that "[a]s a general matter, the decision to stop an automobile is reasonable where the police have probable cause to believe that a traffic violation has occurred." Whren, 517 U.S. at 810, 116 S. Ct. 1769. It is readily apparent from the record that as Guerrero was driving through the Laurel city limits, Officers Hill and Flynn "observed the truck [Guerrero] cross over into the turning lane two to three times over the yellow line" before pulling back into his lane each time. Despite the dispatch concerning Guerrero's previous stop in Smith County and his suspicious nature as implied in the dispatch, Guerrero committed a traffic violation in the presence of Officers Hill and Flynn, thereby justifying their initial stop of Guerrero. This assignment of error is without merit.
II.
THE LOWER COURT ERRED IN FAILING TO DIRECT A VERDICT OF ACQUITTAL
¶ 15. Guerrero argues that his conviction was against the overwhelming weight of the evidence. Guerrero argues that the State failed to prove he had either dominion and control or additional incriminating circumstances connecting him with the contraband and that, for this reason, the jury's verdict was against the overwhelming weight of the evidence.
¶ 16. Our standard of review is well settled. In determining whether the jury's verdict is against the overwhelming weight of the evidence, we are bound to consider "all of the evidence in the light [most] consistent with the verdict and give the State all favorable inferences which may be drawn from the evidence." Strong v. State, 600 So. 2d 199, 204 (Miss.1992) (citing Corley v. State, 584 So. 2d 769, 773 (Miss.1991)); see also Jackson v. State, 580 So. 2d 1217, 1219 (Miss.1991).
¶ 17. The theory of constructive possession has been explained, in Curry v. State, 249 So. 2d 414, 416 (Miss.1971), as follows:
[T]here must be sufficient facts to warrant a finding that defendant was aware of the presence and character of the *944 particular substance and was intentionally and consciously in possession of it. It need not be actual physical possession. Constructive possession may be shown by establishing that the drug involved was subject due to his dominion or control. Proximity is usually an essential element, but by itself is not adequate in the absence of other incriminating circumstances.
¶ 18. The theory was further defined in Hamburg v. State, 248 So. 2d 430, 432 (Miss.1971), that "one who is the owner in possession of the premises ... is presumed to be in constructive possession of the articles found in or on the property possessed." This presumption is rebuttable, however, and does not relieve the State of its burden to prove guilt beyond a reasonable doubt. Id. Thus, "[w]here the premises upon which contraband is found is not in the exclusive possession of the accused, the accused is entitled to acquittal, absent some competent evidence connecting him with the contraband." Powell v. State, 355 So. 2d 1378, 1379 (Miss.1978). See also Keys v. State, 478 So. 2d 266, 268 (Miss.1985).
¶ 19. In support of his assignment, Guerrero argues that his circumstances are properly correlative of the holdings in Ferrell v. State, 649 So. 2d 831 (Miss.1995) and Fultz v. State, 573 So. 2d 689 (Miss. 1990). Ferrell was stopped for speeding and was asked to produce a driver's license. Ferrell admitted that his license was suspended and was arrested for speeding and driving with a suspended license. The officer returned to the vehicle Ferrell was operating to retrieve the car keys and discovered a suspicious yellow pill next to two match boxes. A search of the match boxes revealed nine rocks of crack cocaine in one of the boxes. Ferrell stated that he was unaware of the crack cocaine and that he had only borrowed the car.
¶ 20. In Ferrell, the Mississippi Supreme Court quoted from Cunningham v. State, 583 So. 2d 960, 961 (Miss.1991), another case where the court overturned a conviction of possession where cocaine was found on the floor of the vehicle.
A presumption of constructive possession arises against the owner of premises upon which contraband is found. Hamburg v. State, 248 So. 2d 430, 432 (Miss.1971); Pool v. State, 483 So. 2d 331, 336-37 (Miss.1986). However, when contraband is found on premises which are not owned by a defendant, mere physical proximity to the contraband does not, in itself, show constructive possession. As we stated in Fultz v. State, 573 So. 2d 689, 690 (Miss.1990), "the state must show additional incriminating circumstances to justify a finding of constructive possession."
Ferrell, 649 So.2d at 834.
¶ 21. The court in Ferrell rejected the State's argument that the location of the matchbox next to the driver's seat and the fifteen hours which Ferrell had possession of the car amounted to additional incriminating circumstances.
¶ 22. In Fultz v. State, 573 So. 2d 689 (Miss.1990), the Mississippi Supreme Court similarly reversed a conviction based on constructive possession and held that the evidence was insufficient to establish that Fultz constructively possessed marijuana found in the trunk of the vehicle he was driving. Fultz was stopped for driving erratically and subsequently failed three field sobriety tests. He was arrested and taken into custody. The vehicle was owned by Fultz's sister. While conducting an inventory search, seven and a half ounces of marijuana were discovered in a duffel bag located in the trunk of the car. Fultz was convicted of possession with intent to distribute.
¶ 23. In reversing Fultz's conviction, the court noted that absent additional competent evidence, the only additional incriminating circumstance was that Fultz had a small amount of marijuana on his person at the time of his arrest. The court held that "this factor, standing alone, is insufficient *945 to prove any connection between the contraband and this defendant." Id. at 691.
¶ 24. Guerrero's argument that both Ferrell and Fultz contain applicable similarities to his present situation and, therefore, warrants reversal, fails upon a review of the facts and holding in Boches v. State, 506 So. 2d 254 (Miss.1987). We are persuaded by the facts and holding in Boches in reviewing Guerrero's circumstances as compared to those found in Ferrell and Fultz.
¶ 25. Boches was traveling from Miami, Florida to Memphis, Tennessee in a white Pontiac when he attempted to avoid a roadblock. This action aroused the suspicion Highway Patrolman McDaniel. Officer McDaniel stopped the white Pontiac driven and occupied solely by Boches. During the stop, Officer McDaniel smelled a strong odor of marijuana coming from the vehicle. A subsequent search of the vehicle resulted in the discovery of 348 pounds of marijuana in the trunk of the vehicle. Boches was convicted of felony possession of more than one kilogram of marijuana with intent to distribute.
¶ 26. At trial, Boches testified that his roommate called him and offered him $300 to fly to Miami and drive a sick friend's car back to Memphis. Boches and his roommate, Donnie Floyd, were traveling in convoy from Miami to Memphis in separate vehicles. When the two men approached the roadblock near Corinth, Mississippi, Boches testified that Floyd flagged him to stop and informed him that the registration and title were not in the vehicle driven by Boches and that the two should find an alternative route around the roadblock. Boches denied any knowledge of the marijuana and further denied noticing any smell of marijuana or that the car was heavy in the rear.
¶ 27. In upholding the conviction in Boches, the Mississippi Supreme Court noted the additional incriminating factors were offered into evidence against Boches to support finding him in constructive possession. The State offered the following factors tending to show additional incriminating circumstances and constructive possession:
1. Boches had exclusive possession and control of the automobile (dominion and control);
2. The length of the trip (over 8 hours) and the distance [traveled] (over 1000 miles);
3. Testimony by the officers that they smelled marijuana (denied by Boches);
4. Sensitive steering testified to by Officer Holder (denied by Boches).
Additional incriminating factors were offered into evidence which the prosecution contends supports the jury's decision:
1. Boches flew to Miami on short notice, immediately drove back and made no stops along the way;
2. Boches' lack of knowledge as to the owner of the vehicle;
3. Boches' failure to inquire about where he was going or who owned the vehicle;
4. Boches' actions after encountering the roadblock. From these factors the State contends that a jury could reasonably conclude the Boches was either in actual or constructive possession of the marijuana.
Boches, 506 So.2d at 259.
¶ 28. In the instant case, Guerrero's circumstances, while not identical to those in Boches, are similar. They are listed as follows:
1. Guerrero had exclusive possession and control of the automobile (dominion and control);
2. The length of the trip (over 6 hours) and the distance traveled (over 450 miles);[1]
*946 3. The scarce amount of clothing Guerrero had with him (Guerrero stated he was going to Florida for the weekend);
4. Guerrero's deviation from the I-10 Interstate system, the quickest route between Houston, Texas and Florida. (Guerrero was using the back roads in rural Mississippi instead of the Interstate);
5. The lack of explanation by Guerrero as to the scarce amount of clothing with him and his route; and
6. Guerrero's statement that he had filled both tanks up prior to leaving Houston and had just switched to the other tank, despite the fact that both fuel tanks contained numerous sealed PVC containers filled with 55 pounds of marijuana which would have greatly limited the vehicles's fuel capacity and economy (miles per gallon).
¶ 29. Under these circumstances, Guerrero has failed to show error in the trial court's ruling. In reviewing the record and the evidence presented at trial we must consider "all of the evidence in the light [most] consistent with the verdict and give the State all favorable inferences which may be drawn from the evidence." Strong, 600 So.2d at 204 (citing Corley v. State, 584 So. 2d 769, 773 (Miss.1991)); see also Jackson v. State, 580 So. 2d 1217, 1219 (Miss.1991). Therefore, we cannot say that the trial court erred in denying Guerrero's motion to direct a verdict of acquittal as against the overwhelming weight of the evidence. This assignment is without merit.
¶ 30. THE JUDGMENT OF THE CIRCUIT COURT OF JONES COUNTY OF CONVICTION OF POSSESSION OF MORE THAN ONE KILOGRAM OF MARIJUANA AND SENTENCE OF TWENTY YEARS IN THE CUSTODY OF THE MISSISSIPPI DEPARTMENT OF CORRECTIONS WITH FIVE YEARS SUSPENDED LEAVING FIFTEEN YEARS TO SERVE AND A FINE OF $30,000 WITH $20,000 BEING SUSPENDED LEAVING A BALANCE OF $10,000 FINE IS AFFIRMED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO JONES COUNTY.
McMILLIN, C.J., KING AND SOUTHWICK, P.JJ., BRIDGES, DIAZ, IRVING, LEE, AND PAYNE, JJ., CONCUR.
COLEMAN, J., DISSENTS WITH SEPARATE WRITTEN OPINION.
COLEMAN, J., dissenting:
¶ 31. With utmost deference to my colleagues in the majority, I respectfully dissent because in my opinion, while Officers Doug Hill and Kevin Flynn had cause to stop Guerrero because he "broke the center line two to three times," Guerrero's "traveling the `back roads' instead of the interstate" and having "few items of clothing with him," without more, was not probable cause to detain him solely to allow a "K-Nine unit" to be "called to the scene to conduct a scan of the vehicle for drugs." (majority opinion p. 941). In Rooks v. State, 529 So. 2d 546, 555 (Miss.1988), the Mississippi Supreme Court provided the following explanation of "probable cause":
[Probable cause] is not what some officer thought, it is not some conduct that was simply unusual, not some conduct which simply roused the suspicion that illegal activity could be afoot when there was at the same time just as likely a possibility that nothing at all illegal was transpiring. Rather, it must be information reasonably leading an officer to believe that then and there contraband or evidence material to a criminal investigation would be found.
I respectfully submit that Guerrero's "traveling the `back roads' instead of the interstate" and having "few items of clothing with him" was at best "some conduct that was simply unusual" and/or "some *947 conduct which simply roused the suspicion that illegal activity could be afoot." Because I view these factors as insufficient probable cause to search the truck Guerrero was driving, I would reverse the trial court's admitting the evidence obtained by the search of the truck that Guerrero was driving that night, the consequence of which necessitates the dismissal of the charge of possession of more than one kilogram of marijuana for which the grand jury had indicted Guerrero.
¶ 32. The majority does not base the search of the truck as being incidental to Guerrero's arrest for driving without a driver's license. Even if the search were incident who Guerrero's arrest, the United States Supreme Court has permitted only "a full search of the passenger compartment, including any containers therein, pursuant to a custodial arrest." Knowles v. Iowa, 525 U.S. 113, ___, 119 S. Ct. 484, 488, 142 L. Ed. 2d 492 (1998) (citing New York v. Belton, 453 U.S. 454, 460, 101 S. Ct. 2860, 69 L. Ed. 2d 768 (1981)).
NOTES
[1] We note that the record is silent as to Guerrero's final destination in Florida and have figured the approximate time and distance from Houston, Texas to Laurel, Mississippi. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1648194/ | 870 F. Supp. 715 (1994)
Brian A. LANDRY
v.
A-ABLE BONDING INC., et al.
No. 1:92-CV-0257.
United States District Court, E.D. Texas, Beaumont Division.
November 18, 1994.
*716 Shimon Kaplan, East Texas Legal Services, Beaumont, TX, for plaintiff.
Thomas Mulvaney, Strong, Pipkin, Nelson & Bissell, George Jamail, Bernsen, Jamail & Goodson, Beaumont TX, for defendants.
MEMORANDUM CONCERNING PLAINTIFF'S MOTION TO ALTER OR AMEND JUDGMENT
HINES, United States Magistrate Judge.
Pending is Plaintiff's Motion to Alter or Amend Judgment.
*717 I. NATURE OF THE CASE
This case began with the Louisiana felony arrest of plaintiff Brian Landry in October of 1990. Landry arranged bond with defendant A-Able Bonding, Inc., and its owner, defendant Gerald Burrow. In November of 1990, plaintiff left Louisiana, defaulted on the balance of his bond premium, and did not appear for his scheduled court date. The Louisiana court of prosecution issued an arrest warrant. This warrant permitted seizure of plaintiff by A-Able Bonding "wherever found."
Defendants later located plaintiff in Port Arthur, Texas. On July 13, 1991, Burrow and two employees drove to Port Arthur, approximately 135 miles from Lafayette, Louisiana, their principal place of business. Upon finding plaintiff in the home of Norman Boudreaux, Landry's roommate and landlord, they handcuffed plaintiff without exhibition of the warrant and transported him back to Lafayette Parish Jail. Plaintiff's car, with personal possessions stowed inside, was towed from his Port Arthur residence the following day by unknown persons. This action ensued.
Plaintiff asserted claims under Title 42 U.S.C. § 1983 for the deprivation of liberty and property without due process of law. He invoked supplemental jurisdiction and furthered state law claims of conversion of property and false imprisonment or kidnapping.
On May 9, 1994, this court issued an opinion in which it found the § 1983 claims failed because defendants were purely private actors, and had proceeded without color of state law. Plaintiff's claim of conversion also failed because he could not prove by a preponderance of the evidence that any defendant towed his car from Port Arthur. Lastly, plaintiff's false imprisonment claim failed for the proof of actual damages.
II. PLAINTIFF'S MOTION TO ALTER OR AMEND THE JUDGMENT
The motion to alter or amend the judgment with regard to plaintiff's state law claim for false imprisonment, pursuant to Federal Rule of Civil Procedure 59(e), followed. Plaintiff argues entitlement to nominal damages under Texas law for the imposition of an intentional tort. Defendants concede intentional torts are compensable in this manner under Texas state law, but attack jurisdiction of this court to determine the claim.
III. DISCUSSION
A. Jurisdiction
Defendants argue this court lacks jurisdiction pursuant to Title 28 U.S.C. § 1332. They advance a rationale premised on plaintiff's citizenship as stated in the Louisiana criminal record and the ultimate recovery, which was less than the $50,000 jurisdictional amount required by federal statute. While this court concluded in its September 28, 1992 memorandum that plaintiff properly invoked diversity jurisdiction, a challenge at this late juncture certainly is within defendants' rights. See Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S. Ct. 2099, 2104, 72 L. Ed. 2d 492 (1982).
Ascertaining federal diversity jurisdiction is two part process. See 28 U.S.C. § 1332(a)(1). First, the parties must have diverse citizenship, and second, there must exist an amount in controversy in excess of $50,000. Id. The relevant time for establishing both citizenship and the amount in controversy is the commencement of the action. Freeport-McMoRan Inc. v. K.N. Energy, Inc., 498 U.S. 426, 111 S. Ct. 858, 112 L. Ed. 2d 951 (1991); St. Paul Mercury Indem. Co. v. Red Cab Co. 303 U.S. 283, 289, 58 S. Ct. 586, 82 L. Ed. 845 (1938).
Citizenship and domicile are equivalent terms in the jurisdictional determination. Stine v. Moore, 213 F.2d 446 (5th Cir.1954). "The definition of `domicile' has not changed from that set forth more than a century ago by the Supreme Court: `"[a] residence at a particular place accompanied with positive or presumptive proof of an intention to remain for an unlimited time."'" Freeman v. Northwest Acceptance Corp., 754 F.2d 553, 555 (5th Cir.1985) (citing Mitchell v. United States, 88 U.S. (21 Wall.) 350, 352, 22 L.Ed. *718 584 (1875) (quoting Guier v. O'Daniel, 1 Binn. 349, n.)).
Defendants, as a corporation with a principal place of business in Louisiana and an individual with all substantial contacts therein, are clearly Louisiana citizens. Characterization of plaintiff's citizenship might be somewhat more difficult if the parties had not stipulated prior to trial that Landry was a citizen and resident of the State of Texas. See Joint Final Pretrial Order at 6. Challenge of this stipulation is unwarranted. Complete diversity continues to exist between the parties.
The amount in controversy in a diversity action must exceed $50,000. 28 U.S.C. § 1332. Because jurisdiction is determined at the onset of litigation, subsequent events, including actual recovery, do not divest the court of jurisdiction. See Carlton v. BAWW, Inc., 751 F.2d 781, 785 (5th Cir.1985).
The correct test is whether it appears "to a legal certainty that the claim is really for less than the jurisdictional amount." St. Paul Mercury Indem. Co, 303 U.S. at 288, 58 S.Ct. at 590; Burns v. Anderson, 502 F.2d 970 (5th Cir.1974).
Plaintiff initiated suit for $150,000, plus punitive or exemplary damages, costs, and attorneys' fees. Based on the magnitude of his constitutional violation claims, and the conversion of his property, valued at $4500, it is not inconceivable the plaintiff could have recovered more than $50,000. See, e.g., Brown v. Robinson, 747 S.W.2d 24, 27 (Tex. App.El Paso 1988, no writ) ($120,000 awarded for mental anguish incurred during false imprisonment); Montgomery Ward & Co. v. Garza, 660 S.W.2d 619 (Tex.App. Corpus Christi 1983, no writ) ($50,000 recovered more than a decade ago in false imprisonment claim).
B. The Choice of Law
A federal court sitting in diversity jurisdiction must apply substantive state law. See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). In its opinion of May 9, 1994, this court assumed without deciding Texas law governed this action because "[n]o prejudice results [with such a choice of law] because plaintiff receives the benefit of the doubt, while defendant ultimately prevails." Landry v. A-Able Bonding, No. 1:92-CV-0257, at 18, 1994 WL 575480, at *8 (E.D.Tex. filed May 9, 1994). Such an approach now is inappropriate. The court definitively must decide whether Texas or Louisiana law governs the parties.
The first premise of a conflicts of law analysis is the application of the forum state's own choice of law rules. Brown v. Cities Serv. Oil Co., 733 F.2d 1156 (5th Cir. 1984). Texas applies the substantive law of the state with the most significant relationships to the facts and circumstances surrounding the litigation. Id.; Gutierrez v. Collins, 583 S.W.2d 312 (Tex.1979). Sections 6 and 145 of the Restatement (Second) of Conflicts delineate the parameters of choosing the state with the most significant relationship in a tort action. Thomas v. NA Manhattan Bank, 994 F.2d 236 (5th Cir. 1993), reversed in part on other grounds, 1 F.3d 320 (5th Cir.1994). Section 145 counsels the court to consider the place where the injury occurred, the place where the conduct that caused the injury occurred, the domicile, residence, nationality, place of incorporation and place of business of the parties, and the place where the parties' relationship was centered. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145 (1971). Section 6 considers the application of these factors to several policy considerations including:
(1) The needs of the interstate and international system;
(2) The relevant policies of the forum;
(3) The relevant policies of other interested states and the relative interests of those states in the determination of a particular issue;
(4) The protection of the justified expectations of the parties;
(5) The basic policies underlying the particular field of law; and
(6) Certainty, predictability, and uniformity of result.
Id. § 6.
Clearly, the injury and conduct occurred in the forum state and home of the plaintiff, Texas. Louisiana is the center of the parties relationship, the situs of the contract *719 execution and negotiation, and defendants' state of citizenship.
With regard to the relevant policies of each state, Louisiana has a significant interest in ensuring fugitives from its justice system are retrieved and brought before its courts to answer for their crimes. This interest has expanded significantly in recent years. Many states have turned to modern media and popular television programs to apprehend their "most wanted" fugitives. Others have begun discussion of the abolition of court directives which allow only ten percent bond deposits. See, e.g., Jay Romano, Defendants Increasingly Skip Bail, N.Y. TIMES, Dec. 22, 1991, at NJ1 (documenting New Jersey's surging fugitive rate, which averages 56% of the state's total criminal case load and over 70% in some counties). Furthermore, Louisiana has an interest in insuring parties engaging in bail contracts realize their legitimate contractual expectations.
Texas' interest centers on the protection of the homes and personage of its citizens from seizure by others without resort to judicial intervention. Such a consideration is of great historical import, one that began with the authorship of our United States Constitution. See U.S. CONST. amend IV. Modern concerns for efficiency in law enforcement and the rising tide of crime make the balance of the remaining concerns of Louisiana with that of Texas a close question. However, upon review of the issue and consideration of the historical and modern import of both, there exists a narrow margin in favor of the forum's interest.
In addition, other courts have found that in cases of false imprisonment, the state where the imprisonment occurred was more significant than other states. See, e.g., King v. Otasco, Inc, 861 F.2d 438 (5th Cir.1988) (application of Mississippi's most significant relationship test favors application of California law, as arrest giving rise to action occurred in California); Clark v. Skaggs Cos., Inc., 724 S.W.2d 545 (Mo.Ct.App.1986) (same result under Missouri most significant relationship test). Application of Texas law also will support uniformity and certainty of result, as the situs of the alleged wrong is an easily ascertained and singular site, as opposed to the many places where a contract may be negotiated and executed over the course of dealing.
Texas therefore has the most significant relationship to the parties and its law will govern the decision of this motion.
C. The Conduct and Damages
This court, in its May 9 decision, found the plaintiff's claim for false imprisonment failed for proof of actual damages. This conclusion was based on Gladden v. Roach, 864 F.2d 1196 (5th Cir.), cert. denied, 491 U.S. 907, 109 S. Ct. 3192, 105 L. Ed. 2d 700 (1989), which stated absent actual damages for false imprisonment, plaintiff could not prevail.
The pending motion has brought to this court's attention that a plaintiff who brings an action under Texas law for false imprisonment may recover nominal damages upon proof of unlawful restraint. Whirl v. Kern, 407 F.2d 781 (5th Cir.), cert. denied, 396 U.S. 901, 90 S. Ct. 210, 24 L. Ed. 2d 177 (1969). Whirl v. Kern conflicts with the later decision of the Fifth Circuit in Gladden in that Whirl holds nominal damages are recoverable for the intentional tort of false imprisonment. Id. at 798 (stating nominal damages are recoverable for false imprisonment and "perhaps in some circumstances that is all a man's freedom is worth, but though the pricetag be a bargain, freedom is never valueless."). However, only an en banc panel of the Fifth Circuit may overrule another panel. See Paura v. United States Parole Comm'n, 18 F.3d 1188, 1190 (5th Cir.1994) (stating "[n]o rule is more firmly settled in our Circuit"); Smith v. Penrod Drilling Corp., 960 F.2d 456, 459 n. 2 (5th Cir.1992); Pruitt v. Levi Strauss & Co., 932 F.2d 458 (5th Cir. 1991). Because an en banc panel did not decide Gladden, Whirl remains the controlling precedent. See Smith, 960 F.2d at 459 n. 2.
Because plaintiff may recover nominal damages under Texas law for false imprisonment, this court must resolve whether such an imprisonment took place. In Texas, false imprisonment transpires when there is a willful detention, without consent of the detained, and without authority of law. Sears, Roebuck & Co. v. Castillo, 693 S.W.2d *720 374, 375 (Tex.1985); Pizza Inn, Inc. v. York, 658 S.W.2d 274, 276 (Tex.App.1st Dist. 1983, no writ).
The first two elements of false imprisonment easily are satisfied by the facts before the court. There was a willful detention of plaintiff via his seizure and transport. The presence of handcuffs and denial of plaintiff's request for his shoes before leaving the Port Arthur residence indicate he did not consent to travel with defendants. See Linder v. State, 734 S.W.2d 168, 170 (Tex.App. Waco 1987, no writ) (presence of handcuffs and shotgun vitiate proffer of consent as defense to criminal imprisonment). The ultimate issue therefore is whether a person with a valid out-of-state arrest warrant and contract executed by the parties authorizing surrender, acts with lawful authority when he seizes a person without resort to the procedures of this state. See WILLIAM V. DORSANEO, 14 TEXAS LITIGATION GUIDE § 331.04(2)(b) (1977 and Supp.1994) ("A valid warrant or subpoena is not ... an impervious shield. Even clothed with a legal warrant, a peace officer or other authorized person may be guilty of false imprisonment by executing the warrant in an unlawful manner.").
Defendants possessed a lawfully obtained Louisiana arrest warrant when they took Landry into their custody. See LA.CODE CRIM.PROC.ANN. art. 338 (West 1994) (authorizing a surety to arrest a bond principal for surrender to authorities); LA.CODE CRIM. PROC.ANN. art. 214 (authorizing a private citizen to conduct an arrest). Defendants also submit the contract executed between plaintiff and A-Able Bonding authorized seizure in the event of default. See Exhibit 27, International Fiduciary Insurance Co. Application for Appearance Bond (stating "principal ... shall have the right to apprehend, arrest, and surrender the principal to the proper officials at any time as provided by law.").
This court concluded in its May decision that "[a]lthough Louisiana law authorized Burrow's conduct, and a Louisiana court issued a bench warrant, the state's nexus with the challenged action stopped there." Landry, at 15, 1994 WL 575480, at *6. Consequently, defendants had not acted under the color of state law. The ensuing analysis, which concludes the presence of the warrant and application of Texas statutes arguably indicates the authority of law, does not alter in any way disposition of plaintiff's federal civil rights claims. Clearly, whether one operates "under the color of state law" is measured by a federal standard, while acting "without authorization of law" involves a state analysis. Therefore, the two are not necessarily mutually exclusive.
Texas law contains a myriad of statutes applicable to sureties, warrantless arrests by private persons, and extradition. Arrest of principal in Texas may be effectuated in two ways. The first is utilized when the principal consents to surrender. See TEX.CODE CRIM. PROC.ANN. art. 17.16 (Vernon 1977 & Supp. 1994). When the principal is unwilling, Texas state law requires the bond surety to obtain permission from a Texas court to surrender the principal. If permission is granted, the court issues a warrant for the arrest of the accused. Execution of the warrant by a peace or security officer or a licensed private investigator must ensue. See id. art. 17.19.
This court stated in its May 9 opinion that "[p]laintiff's evidence at best may demonstrate that he was taken into custody by means of procedures not in compliance with state law technicalities embodied by TEX. CODE CRIM.PROC. art. 17.19." Plaintiffs proffer two Texas cases in support of their motion for amendment of the judgment about this statement. See Linder, 734 S.W.2d 168; Austin v. State, 541 S.W.2d 162 (Tex.Crim. App.1976). These cases are distinguishable from the one at hand for several reasons. Both deal with in-state sureties. In Austin, the bail bondsman did not procure an arrest warrant from any sovereign. See Austin, 541 S.W.2d at 162. In Linder, the warrant secured failed to name the bail bondsman as a person authorized to arrest the surety. Linder, 734 S.W.2d at 169. Neither of these situations present themselves and thus render these precedents inapplicable.
The Texas Code of Criminal Procedure, Art. 17.19(a) states, "Any surety, desiring *721 to surrender his principal, may file an affidavit of such intention before the court or magistrate before which the prosecution is pending." TEX.CODE CRIM.PROC.ANN. art. 17.19(a) (emphasis added). If the magistrate is unavailable, the action may proceed before "any other magistrate in the county." TEX. CODE CRIM.PROC.ANN. art. 17.19(c) (emphasis added). Because no Texas prosecution was pending against plaintiff, one must wonder where defendants could have complied with this statute. This logic, coupled with the dearth, or rather, void of case law applying art. 17.19 to out-of-state bail bondsmen, leads this court to conclude this provision of Texas law is not applicable to out-of-state bail bondsmen.
Defendants acted upon a valid Louisiana arrest warrant and contract authorizing the return of Landry to Louisiana. Clearly, had defendants arrested plaintiff in Louisiana, they would have been authorized by law. See, e.g., Patin v. Duplessis Pontiac-Buick-GMC Trucks, Inc., 632 So. 2d 790 (La.Ct.App. 1993) (false imprisonment may only occur without legal process of under a warrant that is void on its face). In Texas, a private person may effectuate an arrest if probable cause exists to believe the arrested is wanted for a felony or capital crime in another state. See TEX.CODE CRIM.PROC.ANN 51.13 §§, 14. The Texas Uniform Criminal Extradition Code authorizes these warrantless arrests and delineates the extradition proceedings when a fugitive is arrested in Texas. It is questionable, however, whether the failure to institute extradition proceedings in this case vitiates the authority of law.
One published case addresses analogous facts but dissimilar state law. See Commonwealth v. Wilkinson, 415 Mass. 402, 613 N.E.2d 914 (1993). In Wilkinson, the Massachusetts Supreme Court found that an Oklahoma bail bondsman violated the Massachusetts Uniform Criminal Extradition Act when he failed to institute extradition proceeding, even though a valid Oklahoma warrant existed. Most notably, the state court unequivocally stated Massachusetts's failure to adopt § 14 should lead the court to "read the exclusion of `private persons' from [the Act] as evidence that the Legislature intended to require foreign bondsmen to seek assistance of an `officer authorized to serve warrants' in apprehending fugitives." Id. at 405 n. 4, 613 N.E.2d 914. Furthermore, the holding in Wilkinson was of such novel origin that the court realized its interpretation did not afford the public adequate notice that the behavior described was prohibited and therefore did not apply it to the defendant. Because Texas has adopted § 14, it is not illogical to conclude the opposite result is true in this state.
This court's analysis must answer the following question: if defendants were authorized by Louisiana law, via the contract, the warrant, and by Texas's § 14, then were defendants acting contrary to Texas law when they drove plaintiff to Louisiana, rather than initiating extradition proceedings?[1] Case law indicates resort to extradition procedures may be unnecessary under § 14, as the statute states the arrested must merely be brought before a magistrate judge within a reasonable time. In Heard v. State, 701 S.W.2d 298 (Tex.App. 14th Dist.1985, writ ref.), the arrest of a fugitive on a warrant issued by the Alabama Board of Corrections for the violation of parole, absent a Texas warrant and formal extradition procedures, was held to be authorized by art. 51.13, § 14.
No precedent can be found to support the position that the procedure employed by defendants was clearly contrary to law, nor have the parties provided any for the consideration of this motion. Consequently, plaintiff has not shown by a preponderance of the evidence that the arrest and transport was not without adequate legal justification. See Avalos v. Mejia, 788 S.W.2d 645, 646 (Tex.App.1990) (plaintiff bears burden of proving imprisonment was not under valid legal process); Tandy Corp. v. McGregor, 527 S.W.2d 246, 248 (Tex.Civ.App.Texarkana 1975, writ. ref. n.r.e) (same).
*722 It has not been shown that absence of extradition proceedings and arguably, the failure to bring plaintiff before a Texas magistrate, vitiated the authority of law for the arrest and gave rise to a cause of action for false imprisonment. Therefore, the motion to alter or amend must be denied.
NOTES
[1] Plaintiff argues that Louisiana would not consider the procedure followed by the defendants as "authorized by law" and submits a Louisiana Attorney General's opinion supporting the contention. See La.Atty' Gen.Op. 81-253 (1981). The opinion concludes that a non-Louisiana bail bondsman may not transport a fugitive found in Louisiana without the surrender to Louisiana authorities for extradition. Because the relevant inquiry is whether Texas considers the facts at issue to be authorized, the court finds this argument unpersuasive. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1700617/ | 361 So.2d 292 (1978)
The BOARD OF TRUSTEES OF the EAST BATON ROUGE MORTGAGE FINANCE AUTHORITY, acting as the Governing Body of Said Authority
v.
ALL TAXPAYERS et al.
No. 12113.
Court of Appeal of Louisiana, First Circuit.
July 10, 1978.
*294 Steve E. Hicks, John H. Taylor, Parish Atty., Joseph F. Keogh, Baton Rouge, of counsel for plaintiff appellee.
Jonathan C. Harris, Baton Rouge, of counsel for defendant All Taxpayers, et al.
Before LOTTINGER, EDWARDS and PONDER, JJ.
LOTTINGER, Judge.
This appeal arises out of the trial court's denial of a motion to compel delivery of funds in the hands of the garnishee[1], and recalling, vacating, and setting aside a rule against the clerk of court for refund of cost deposits. The motion to compel and the rule for refund were brought by Jonathan Harris, one of the defendants in the original suit, Board of Trustees of the East Baton Rouge Mortgage Finance Authority, Acting as the Governing Body of said Authority v. All Taxpayers, et al., 336 So.2d 306 (La.App. 1st Cir. 1976), wherein both the trial court and this court found in favor of the defendants and assessed court costs against the plaintiff. This judgment is now final.
In attempting to execute on his judgment the defendant filed a petition for garnishment against the attorneys for the plaintiff of the original suit. Based on interrogatories in the garnishment proceeding, defendant, plaintiff-in-rule, requested a motion to compel delivery of funds to the sheriff which were in the hands of the attorneys. Along with the garnishment proceeding, Harris also filed a rule against the clerk of court for refusal to refund his security of cost deposits.
On appeal, Harris argues that the trial judge erred in (1) failing to order the garnishee to deliver the funds held for the original plaintiff, (2) holding the garnishee to have a lien or right of retention affecting the cash deposit against the seizing creditor, (3) failing to decree the garnishee not to be entitled to the attorney fee deposit provided by LSA-R.S. 13:3927, and (4) failing to order the clerk of court to refund his cost deposits.
The trial judge, in denying the motion to compel delivery of funds and recalling, vacating and setting aside the rule for refund, assigned oral reasons for judgment; however, the record is void of any transcribed oral or written reasons.
ERRORS NOS. 1 & 2
In attempting to execute on a judgment, it must first be established that the party requesting the issuance of a writ of fieri facias is a judgment creditor based on a valid and final judgment. This court views the defendant-Harris as a judgment creditor for the court costs assessed against the plaintiff, the judgment debtor, to the extent of funds expended by Harris.
*295 Cases are too legion to require citation that a successful plaintiff who is awarded a money judgment along with the assessment of court costs is entitled to the collection of a monetary amount equal to the money awarded plus the court costs the plaintiff expended in litigating the matter. The same must hold true for a successful defendant where the plaintiff is cast for costs. The award of court costs against the judgment debtor is a money judgment in favor of that party who incurred court costs in participating in the litigation.
Since Harris expended court costs and was eventually successful, then the assessment of court costs against the plaintiff is in and of itself a money judgment against that plaintiff executable by Harris.
Upon concluding that the plaintiff-in-rule has a money judgment for court costs, the issue then is whether the garnishee has in his possession or under his control property belonging to the judgment debtor which is subject to seizure under a writ of fieri facias. LSA-C.C.P. art. 2411. An attorney at law who possesses property for his client is subject to garnishment proceedings by the judgment creditor. White v. Bird, 20 La.Ann. 188 (1868), Shanghnessy v. Fogg, 15 La.Ann. 330 (1860), 38 C.J.S. Garnishment § 58 (1943).
In Butchers' Union Slaughter-House & Live-Stock Landing Co. v. Crescent City Live-Stock Landing & Slaughter-House Co., 41 La.Ann. 355, 6 So. 508 (La.1889), our early Supreme Court analyzed the right of an attorney to funds placed in his hands in the common law terms of a "solicitor's retaining lien". Under the common law, there are two kinds of attorneys' liens: (1) a charging lien, the right to compensation for services from the funds or judgment which the attorney has recovered for the client because of his professional services rendered and (2) a retaining lien, the right to retain possession of a client's documents, money, etc., until paid for his professional services. 7 C.J.S. Attorney and Client § 207 et seq. (1937).
The right of retention has also been recognized in the civil law and extended to mandataries or administrators of affairs for expenses incurred on behalf of another. Planiol, Civil Law Treatise (An English Translation by the Louisiana State Law Institute), vol. 2, no. 2514 et seq.
Louisiana has provided for both the charging lien and retaining lien under LSA-R.S. 9:5001 and LSA-C.C. arts. 3022 and 3023[2]. LSA-R.S. 9:5001 embodies the same characteristics and effects as that of a charging lien in the common law and under LSA-C.C. arts. 3022 and 3023 interpreted in pari materia by the court in Butchers' Union, supra, establishes the retaining lien for the attorneys' fees.
Appellant argues that for the attorneys' fees to be set-off, they must be liquidated prior to the garnishment. We disagree. In Butchers' Union, supra, the court's interpretation of LSA-C.C. art. 3023 states that:
"The debts referred to in the final clause of article 3023, and which must be liquidated in order to be offset, are obviously debts other than such commissions or fees."
*296 It is clear from the answers to the interrogatories that the Authority is indebted to the attorneys for their fees, and thus the trust deposit being held by the attorneys for the judgment debtor is subject to retainage in payment of fees, though they are not liquidated. LSA-C.C. arts. 3022 and 3023.
This Court recognizes the well established principle of law that a garnishing creditor acquires no greater right against the garnishee than the judgment debtor would have had if he had sought recovery directly against the garnishee. Oakey v. Mississippi and Alabama Railroad Company, 13 La. 567 (1839); Walker v. Townsend, 127 So.2d 224 (La.App. 3rd Cir. 1961); 38 C.J.S. Garnishment § 176 (1943).
Therefore, since we have concluded that the attorney-garnishee can retain those funds in his possession as against the client, judgment debtor, the same is true as against the garnishor, and thus there is no error on the part of the trial judge in denying garnishment.
ERROR NO. 3
LSA-R.S. 13:3927 provides:
"Whenever a plaintiff suing out a writ of garnishment shall apply to the court for the issuance of such writ, the plaintiff shall deposit with the clerk of court the sum of fifteen dollars, as a fee for the attorney for the employer who answers such interrogatories. This sum may be charged and collected as other costs. If no answer is filed by the garnishee, within the time provided by law, the attorney's fee so deposited shall be returned to the seizing creditor. If the court in its discretion should rule that no fee should be charged to the costs by such attorney for the employer, the fee shall likewise be returned to the seizing creditor. If the court should rule that a fee greater than fifteen dollars should be assessed, the court may fix the amount of such fees, which shall be charged to the costs of the suit."
This particular section is found in that part of Title 13 entitled Garnishment of Wages, Salaries and Commissions. The fee to be awarded at the discretion of the trial court is "for the attorney for the employer who answers such interrogatories". The title of Act 181 of 1932, Regular Session, the source of LSA-R.S. 13:3927 reads as follows:
"Providing the procedure by which the non-exempt portion of all wages, salaries, commissions or other compensation of employees of every nature and kind, whether skilled or unskilled, may be seized and garnisheed; providing for a continuing garnishment until judgment debts are liquidated; providing for the procedure and rights of the parties where the judgment debtor is indebted unto the garnishee; providing for the hearings to be had before courts of competent jurisdiction and the nature of the judgments to be rendered by such courts and the manner in which payments shall be made under such garnishment process; and providing for a fee to be paid as costs for the attorney answering garnishment interrogatories."
We are of the opinion that the legislature only intended to concern itself with the garnishment of "wages, salaries, commissions or other compensation of employees", and thus, LSA-R.S. 13:3927 cannot act as authority for the awarding of a fee to the attorney for the garnishee answering interrogatories unless the garnishee is the employer of the judgment debtor.
The well established rule is that attorney fees are not recoverable absent contract or statutory authority. We have not been cited any authority, nor do we know of any allowing the awarding of attorney fees for the answering of interrogatories in connection with garnishment, other than LSA-R.S. 13: 3927. Necessarily then, it must follow that no fee is due for the answering of these interrogatories, and the fifteen dollars deposited for such fee shall be returned to the appellant.
*297 ERROR NO. 4
LSA-R.S. 13:843[3] recognizes that the clerk of court may demand security from the party litigant primarily responsible for the costs incurred. Normally this is the plaintiff even though the defendant may have been assessed all costs. In Stewart v. Avery, 341 So.2d 590 (La.App. 2nd Cir. 1977), our brethren on the Second Circuit stated:
"The casting of defendants with costs in a signed judgment does not operate to relieve the plaintiff from his primary liability to the Clerk of Court for accrued cost. The effect is only to place the ultimate liability upon the party cast, and to allow plaintiff to obtain reimbursement for his cost by execution of his judgment.
"This result is essential. The Clerk must have the right to hold plaintiff, even after judgment assessing costs has been rendered, in order to provide maximum assurance that the court costs will be paid. There is always the very real possibility a defendant judgment debtor cast for cost will be insolvent or reluctant to pay (as was the case here). These are risks which must be assumed by the party provoking the lawsuit, and not by the Clerk.
"Further, the right to collect the costs under the terms of the judgment belong to the party in whose favor it was rendered."
This case dealt with a rule brought by the clerk under LSA-R.S. 13:843 in order to obtain accrued costs from the plaintiff even though the defendant was assessed costs.
The appellant-Harris by enlisting as defendant and provoking an appeal to this court became the party primarily responsible for certain costs. Apparently all costs due the clerk of court have been paid, but since the appellee has been assessed all costs, defendant, plaintiff-in-rule, seeks a refund from the clerk of court for those costs which he has paid.
We know of no rule, nor do we deem to establish one herein, that a judgment casting one party for costs operates as a mandate to the clerk of court to refund to the party not assessed costs, the costs advanced.
Clerks' offices operate on self generated funds collected in the form of fees. These funds are used to pay salaries as well as normal operating expenses. Included in the fees collected are those fees due the sheriffs' offices and court reporters. The clerks' offices necessarily then do not retain these fees collected, but merely pass them on. If the clerk would be required to refund costs paid to the party not assessed without receiving from the party assessed these same costs, it is more probable than not that the clerk's office would operate at a deficit.
The solution to the party not assessed for costs obtaining a refund of costs he has paid is that suggested by Stewart v. Avery, supra, execution of the judgment against the party assessed for costs. Therefore, we find no error on the part of the trial judge in refusing to order a refund.
Therefore, for the above and foregoing reasons the judgment of the trial court is amended to order the return of the fifteen dollar deposit made in connection with the *298 garnishment, and as amended it is affirmed at appellant's costs.
AMENDED AND AFFIRMED.
NOTES
[1] McCollister, Belcher, McCleary, Fazzio, Mixon, Holiday and Jones (now McCollister, McCleary, Fazzio, Mixon, Holiday and Jones).
[2] LSA-R.S. 9:5001:
"A special privilege is hereby granted to attorneys at law for the amount of their professional fees on all judgments obtained by them, and on the property recovered thereby, either as plaintiff or defendant, to take rank as a first privilege thereon."
LSA-C.C. Art. 3022:
"The principal ought to reimburse the expenses and charges which the agent has incurred in the execution of the mandate, and pay his commission where one has been stipulated.
"If there be no fault imputable to the agent, the principal can not dispense with this reimbursement and payment, even if the affair has not succeeded; nor can he reduce the amount of reimbursement, under pretense that the charges and expenses ought to have been less."
LSA-C.C. Art. 3023:
"The mandatary has a right to retain out of the property of the principal in his hands, a sufficient amount to satisfy his expenses and costs.
"He may even retain, by way of offset, what the principal owes him, provided the debt be liquidated."
[3] LSA-R.S. 13:843:
"The clerk of court may demand security for costs at the time the suit is filed.
"After any cost advance furnished under R.S. 13:842 has been exhausted, all accrued costs shall be paid by the party primarily responsible therefor, or by the surety on any bond for costs furnished by him, upon receipt of the clerk's demand for payment thereof supported by an itemized account of these accrued costs approved by the judge. If these accrued costs are not paid within ten days of the demand for payment, judgment therefor may be rendered against the party, and against the surety on any cost bond furnished by him, by rule returnable not less than two judicial days from the date of service upon the defendants in rule and the clerk may employ an attorney at law to assist him in filing and trying said rule or rules, and the fee of the attorney employed for that purpose shall be fixed by the district judge before whom the rule is tried and shall be taxed as costs along with the cost of hearing the rule. As amended Acts 1958, No. 349, § 1." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2984916/ | Order filed, January 28, 2014.
In The
Fourteenth Court of Appeals
____________
NO. 14-13-00959-CR
____________
ROBERT DALE HARGER, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 182nd District Court
Harris County, Texas
Trial Court Cause No. 1383086
ORDER
The reporter’s record in this case was due December 27, 2013. See Tex. R.
App. P. 35.1. The court has not received a request to extend time for filing the
record. The record has not been filed with the court. Because the reporter’s record
has not been filed timely, we issue the following order.
We order Roxanne Wiltshire, the official court reporter, to file the record in
this appeal within 30 days of the date of this order.
PER CURIAM | 01-03-2023 | 09-22-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2196919/ | 451 B.R. 897 (2011)
In re RED MOUNTAIN MACHINERY COMPANY; Red Mountain Holdings, LLC; Red Mountain Pacific LLC, and BTH, LLC, Debtors.
No. 2:09-bk-19166-RJH.
United States Bankruptcy Court, D. Arizona.
June 2, 2011.
*899 Steven N. Berger, Engelman Berger, P.C., Phoenix, AZ, for Debtor.
OPINION AND ORDER DENYING STAY PENDING APPEAL
RANDOLPH J. HAINES, Bankruptcy Judge.
Secured creditor Comerica Bank has appealed the Order confirming the Debtor's First Amended Plan of Reorganization, and has moved for a stay pending appeal pursuant to Bankruptcy Rule 8005. The Court granted Comerica an emergency hearing on its motion, and the Debtor has objected to the stay pending appeal. After consideration of the memoranda and oral arguments, the Court denies the stay pending appeal.
Legal Standard for Stay Pending Appeal
It appears that even after the Supreme Court's opinion in Nken,[1] the Ninth Circuit essentially adheres to its "sliding scale" balancing of the traditional four factors:
(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits;
(2) whether the applicant will be irreparably injured absent a stay;
(3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and
(4) where the public interest lies.[2]
The "sliding scale" or "continuum" aspect of this balancing requires a stronger showing of likelihood of success on appeal if there is a weaker showing of likelihood of irreparable injury.[3] Thus while the "strong showing" of likely success on the appeal need not require a demonstration that the appellant is more likely than not to win on the merits[4] if the *900 probability of irreparable injury is high, the mere "reasonable probability" of success on appeal or the raising of a "serious legal question" do not suffice if the likelihood of irreparable injury is not high or the balance of hardships does not tip sharply in the appellant's favor.[5]
But both the Supreme Court and the Ninth Circuit have raised the bar on the showing of irreparable injury, now requiring a showing that "an irreparable injury is the more probable or likely outcome" if the stay is not granted,[6] and have noted that the trial court "is in a much better position to predict the likelihood of harm than the likelihood of success."[7]
Factual and Procedural Background
The Debtor is an Arizona corporation formed in 1986 by Owen and Linda Cowing, who are the Debtor's only shareholders. The Debtor's business consists of the rental of large earth moving equipment, primarily Caterpillars often referred to as "yellow iron," almost exclusively to licensed contractors.
The Debtor's business model is to purchase and rent out older, used equipment but to maintain it extremely well according to regular maintenance schedules. In addition, the Debtor has maintenance staff that can respond quickly if a machine breaks down on the job, either to repair it or to substitute replacement equipment. Over the past quarter century the Debtor has built a reputation for reliability and minimal downtime, and because it does not buy or use new equipment it can charge lower rental rates than its principal competitor.
By 2001, the Debtor had expanded its operations both into southern California and southern Nevada, owned more than 300 machines, employed more than 140 people, and produced annual gross revenues in excess of $43 million. As a result of the economic downturn beginning in 2007, however, its annual revenues declined to $10 million for 2008.
Since 2003, the Debtor has been financed by a revolving line of credit with Comerica Bank. By the time the Chapter 11 was filed in August, 2009, the Comerica debt was approximately $33 million. The debt is guaranteed by Owen and Linda Cowing.
In the spring of 2008, the decline in revenues caused non-monetary defaults in the Comerica debt, which led to a series of forbearance agreements and workout negotiations. At about that same time Owen Cowing was diagnosed with leukemia, and *901 therefore turned over primary responsibility for the workout negotiations to the Debtor's then-Chief Financial Officer Darren Dierich. Dierich continually advised that no workout solution could be negotiated with Comerica, and that Comerica insisted that the Debtor wind down its business operations, substantially reduce the amount of equipment it owned, and that it prepare for liquidation.
The Debtor contends that in June, 2009, Owen Cowing discovered that Comerica had published a notice of the UCC sale of the Debtor's business. Subsequently, he discovered secret e-mails between Comerica and his CFO Dierich that revealed a plan for Comerica to sell the Debtor's assets to an entity owned and controlled by Dierich, with the purchase to be financed by Comerica, so that Dierich could take over the Debtor's business for his own benefit. Comerica and Dierich had agreed to keep their plan secret from the Cowings, according to the Debtor.
In June, 2009, the Debtor advised Comerica of its discovery of the secret sale plan and that it might have claims against Comerica as a result. In August, 2009, Comerica advised that it would not approve payment of any weekly expenses, including payroll, that had routinely been paid out of Comerica's revolving line. Because it could not fund payroll or pay trade vendors, the Debtor filed this Chapter 11 petition on August 11, 2009.
Although the Debtor had been downsizing in 2007 and 2008, by the petition date it owned approximately 180 items of major equipment. About two months after the filing, the Debtor received a bid from an auction company to purchase approximately 50% of the Debtor's equipment for a little over $5 million. After initially opposing the sale, Comerica eventually consented to the sale and made a credit bid of $7 million for the equipment. After the sale, the Debtor's remaining equipment was approximately 83 pieces of major equipment along with approximately 50 attachments and tools.
The Debtor filed its plan of reorganization in December, 2009, and filed its first amended plan in October, 2010. In November, Comerica filed an election pursuant to Bankruptcy Code § 1111(b), seeking to have its approximate $25 million claim treated as fully secured. The Debtor objected pursuant to Code § 1111(b)(1)(B)(ii), arguing that the § 1111(b) election is not available when the property has been sold under § 363. The parties briefed and argued the issues of whether the Code's language "is sold" may include a sale prior to confirmation and how the exception to the election applies when only some of "such property is sold." The Court concluded that "is sold" includes sales made prior to the election deadline, because "or is to be sold under the plan" refers to sales to be made after the election deadline. The Court also held that when there is a sale of only a portion of the property there must be a pro rata exclusion from the election. Pursuant to that ruling, for purposes of confirmation the parties stipulated that the value of Comerica's collateral is $10 million, and that Comerica's total secured claim pursuant to § 1111(b) is $15.9 million (based on the $5.9 million deficiency pertaining to the collateral that was not sold). They also stipulated that Comerica had an unsecured claim of $9.8 million, based on the deficiency pertaining to the collateral that was sold and the Court's determination that it could not make the § 1111(b) election as to such collateral.
The plan classifies Comerica's $15.9 million allowed secured § 1111(b) claim in Class 2. Pursuant to § 1129(b)(2)(A)(i)(II), although the principal amount of the claim is $15.9 million it need be paid only a present value of $10 million. The allowed *902 secured claim will be paid with interest on $10 million at 6.5%, the rate the Court determined necessary to provide present value. For the first year it will be paid in 12 monthly interest-only payments, and thereafter will be paid semiannual principal and interest payments based on a 20 year amortization, with the full balance due in 15 years.
The plan classifies Comerica's deficiency claim arising from the portion of its collateral that was sold, in the approximate amount of $9.8 million, in Class 7. All other unsecured claims, in the approximate amount of $4.5 million, are classified in Class 8. All 42 ballots cast in Class 8 accepted the plan. The allowed claims in Class 7 and 8 will share pro rata in a $100,000 pot to be funded on the effective date of the plan.
Both Comerica's secured and unsecured deficiency claims are treated as disputed claims under the plan. Until entry of a final order in the adversary proceeding, all payments due to Comerica on these claims will be deposited in a creditor reserve account.
Class 3 consists of the secured property tax claims in the estimated amount of approximately $140,000. This class unanimously voted to accept the plan, as a result of the ballots cast by Maricopa County and Riverside County, California.
Class 4 consists of priority employee claims in the approximate amount of $12,000. All four ballots cast in this class voted to accept the plan.
Class 5 consists of priority unsecured tax claims that the Debtor estimates to be approximately $13,000. The Arizona Department of Revenue stipulated to withdraw its objection to the plan and to vote its Class 5 priority claim in the amount of $5,663 in favor of the plan, as a result of which Class 5 unanimously accepted the plan.
Class 6 is the consignment claims that Debtor estimates to total approximately $196,000. The plan provides that the consignment agreements giving rise to these claims will be rejected, the Debtor will enter into new consignment agreements, and the creditors will be paid 90% of any monetary arrearage on the effective date. All four ballots cast in this class voted to accept the plan, in the approximate amount of $208,000.
Class 10 consists of the equity ownership of Owen and Linda Cowing. The plan provides that their equity ownership shall be extinguished and that on the effective date the Cowings shall contribute the $480,000 cash payable on their administrative claim in exchange for 100% of the equity of the reorganized debtor. In addition, there is an exit loan facility in the amount of $1.25 million to be funded by the Cowings. Together with cash on hand, this will be much more than sufficient to pay all administrative claims, including the Cowings', which will enable them to make their cash contribution to the Debtor, and also to fund a capital reserve.
The only rejections of the plan were cast by Comerica, both in Class 2 and Class 7.
The Court issued an opinion that the plan was confirmable, and should be confirmed,[8] and on May 24 entered a final order of confirmation. Comerica immediately appealed the confirmation order and filed the motion for stay pending appeal.
The Legal Question of Denial of a Portion of Comerica's § 1111(b) Election.
Comerica's principal argument, and the only significant "legal" question that it raises, is the denial of its § 1111(b) election[9]*903 as to the portion of the collateral Comerica purchased by a credit bid at a § 363 sale. That objection raised essentially two legal, questions: (1) does the sale exception to the election apply when the sale occurred prior to the election and prior to confirmation, and (2) how does the sale exception apply when only some, but not all, of the collateral is sold?
Although it is true there is no case law addressing either of these questions, there are two strong reasons why they do not raise serious legal questions. First, the language of the sale exception is clear that it applies either to a future sale under the plan or to any sale under § 363.[10] The language "to be sold under the plan" clearly refers to an event to occur in the future. Indeed, because Bankruptcy Rule 3014 requires the § 1111(b) election to be made at the conclusion of the hearing on the disclosure statement for a plan, the confirmation hearing on such a plan is usually the very next event to occur in the bankruptcy case. By contrast, therefore, the language "is sold under § 363" is not similarly limited to a sale in the future. "Is sold" must refer to any sale that occurs during the pendency of the case. Had the drafters intended to refer only to a future sale they would have used a construction parallel to their reference to sales under a plan, such as "is to be sold under § 363." And the drafters of such language certainly could not be interpreted as referring only to the extremely rare if not unheard of event of a sale occurring simultaneously with the making of the election, which as noted occurs at the conclusion of a disclosure hearing rather than at a sale hearing.
More importantly, however, is the purpose of the § 1111(b) election. It is universally recognized that the purpose of the § 1111(b) election is to allow the secured creditor to protect its interest in collateral that might appreciate in value or be worth more than the court determined when a debtor's plan permits a "cash out" at a depressed value. That is what occurred in Pine Gate,[11] which Congress sought to rectify by adopting § 1111(b).[12]*904 Thus the purpose of the election is to give the lien holder the same ability to realize on the future appreciation of its collateral as it would have if it could make a credit bid for the collateral at a public sale:
If the property is valued by the bankruptcy court and effectively "sold" to the debtor outright at the valuation price, the worth of the undersecured lien is reduced to the current market value of the property, and, unlike the situation where he can be a successful bidder, the lien holder is unable to benefit from any unanticipated post-valuation appreciation.[13]
As noted, this is universally recognized to be the sole purpose of § 1111(b): "In § 1111(b), Congress sought to give creditors the opportunity to capture future appreciation in the value of their collateral."[14] "The creditor thus retains a right to enjoy future appreciation in the collateral or to compensate for an initially low appraisal."[15]
Obviously, this purpose to protect an undersecured creditor's interest in future appreciation of the collateral is unnecessary where the creditor has already purchased the collateral by a credit bid.[16] That is precisely what happened here. The Debtor noticed a § 363 sale for approximately half of Comerica's collateral, and Comerica made a credit bid and purchased that equipment. As the current owner of that equipment, Comerica already has the ability to enjoy any future appreciation in its value, and is not subject to any risk of an artificially low valuation by the bankruptcy court. Therefore with respect to the collateral that Comerica has purchased, the § 1111(b) election could not serve any purpose for which it was intended. That remains just as true regardless of whether the sale is held before or after the deadline for the creditor to make the election.
Consequently the Court must conclude that there really is no "serious legal question" arising from the denial of the *905 § 1111(b) election as to the collateral that Comerica has already purchased. As to that collateral, Comerica's rights and interests are fully protected by allowance of its stipulated $9.8 million deficiency claim as an unsecured claim. And even allowance of that unsecured claim permits Comerica a double recovery to the extent the collateral that it purchased for its $7 million credit bid actually had more value than that or appreciates in value.
No Likelihood of Irreparable Injury From Partial Denial of the § 1111(b) Election.
But even if this were deemed a "serious legal question" on which Comerica might have some chance of success on appeal, there has been absolutely no showing of any likelihood of irreparable injury, nor could there be. The parties have stipulated that the value of Comerica's remaining collateral is approximately $10 million. And they have agreed that because Comerica was entitled to make, and did make, the § 1111(b) election as to the remaining collateral, its total lien against that collateral under the plan is $15.9 million, even though it is only worth $10 million today.
Comerica has made no showing, nor could it really do so with a straight face, that it is likely to be irreparably injured because the remaining collateral could appreciate by more than 60% before its appeal is decided. Comerica cannot possibly be injured, as a practical matter, irreparably or otherwise, by the denial of a portion of its § 1111(b) election, when it already owns all of the collateral as to which that portion of the election was denied, and it made the election as to the remainder. Any argument that irreparable injury can arise from this Court's error in deciding this allegedly serious legal question is fanciful at best.
Comerica's Other Objections Raise Factual Issues, Not Serious Legal Questions
None of Comerica's other arguments for a likelihood of success on appeal raise any "legal questions" at all, much less "serious legal questions." Comerica's objections to feasibility,[17] adequacy of the new value contribution,[18] the appropriate interest rate,[19] classification,[20] the fair and equitable requirement[21] and the best interest test all raise only factual issues, not "serious legal questions." And the likelihood of Comerica convincing an appellate court that this Court made "clear error" in those factual findings is certainly not great. Most importantly, Comerica's chances of success on appeal of these factual *906 findings must be deemed slim because it presented no evidence on any of them.
As noted in the confirmation order, Comerica's expert presented no evidence that the plan was not feasible.[22] Indeed, to the contrary, Comerica's expert admitted the plan was feasible if Comerica could meet its projections, admitted that Comerica had exceeded its projections in most of the recent months, and admitted that the assumptions underlying the projections were reasonable.
Comerica's expert provided no testimony, analysis or report on the adequacy[23] of the Cowings' $480,000 (or $1.2 million) new value contribution.
Comerica presented no evidence on how the plan might not be fair and equitable as to Comerica (other than the increased interest on its remaining debt), or how the plan failed to provide Comerica at least as much as it would recover in a Chapter 7 liquidation. Indeed, Comerica could hardly present any such evidence given its stipulation as to the value of its collateral, while the plan promises to pay it precisely that much, plus more on its unsecured claim that would yield nothing in a Chapter 7 liquidation, while retaining Comerica's lien in an amount far in excess of that liquidation value.
Comerica presented no evidence, objection or legal argument how the classification of Comerica's deficiency claim in Class 7, instead of with other unsecured claims in Class 8, would make any difference much less how it caused any harm to Comerica, since Class 7 and Class 8 receive the identical treatment under the plan. At oral argument on its motion for stay pending appeal Comerica's counsel argued that if the claims had been classified in the same class that class would have rejected the plan, and that therefore there would have been no accepting impaired class to satisfy the confirmation requirement of § 1129(a)(10). But in objecting to confirmation Comerica did not object that § 1129(a)(10) was not satisfied, did not object to the plan's designation of accepting Classes 3, 4, 5, 6 as impaired classes, and did not object to the Debtor's ballot report identifying each of them as accepting classes.[24] Nor did the parties' joint pretrial statement identify satisfaction of § 1129(a)(10), or the impairment or acceptance by Classes 3, 4, 5 and 6, as either a factual issue or a legal issue for the evidentiary confirmation hearing.[25] Comerica *907 has not preserved for appeal any argument that if its deficiency claim were classified in Class 8, confirmation of the plan had to be denied due to a failure to satisfy § 1129(a)(10). Consequently even if there is a technical legal question as to the propriety of the classification, it makes no practical difference and is therefore harmless error that cannot possibly raise either a serious legal question or a basis for any irreparable injury to Comerica.
And on the one factual issue as to which Comerica did submit expert opinion evidencethe appropriate interest rate to provide a present value of Comerica's secured debtComerica's expert provided no testimony as to the factors, and the only factors, that the Supreme Court has held to be relevant.[26] The most that Comerica can do now is to cite a bankruptcy court opinion from Pennsylvania suggesting that the Supreme Court's holding "is instructive, but it is not controlling . . . in every Chapter 11 case."[27] That hardly demonstrates a strong likelihood of success on appeal.
Comerica Has Demonstrated No Likelihood of Irreparable Injury
More significantly, however, Comerica has failed to demonstrate any likelihood of irreparable injury, or that the balance of hardships tips in its favor. Even if Comerica were to prevail on appeal, it is difficult to see how it could have been injured by the absence of a stay in the meantime.
Even without a stay, Comerica remains secured by a lien on all of the Debtor's equipment, and its debt remains guaranteed by the Cowings, who Comerica admits are solvent. Comerica has made no showing, either at the lift stay hearing, the confirmation hearing, or in its motion for stay pending appeal, that the value of that collateral is likely to decline while the appeal is pending. Indeed, to the contrary, Comerica's complaint about the denial of a portion of its § 1111(b) election is premised on the belief that the value of the collateral will appreciate, not depreciate. Debtor has pointed out that the value of the collateral pool stipulated to by the parties at the outset of the case was less than $14 million. Yet by the time of confirmation and after selling $7 million of the equipment, Comerica stipulated that the remaining collateral was worth $10 million. So in the approximate one year between the sale and the confirmation hearing, the remaining collateral appreciated from $7 million to $10 million. That increase in the value of Comerica's collateral more than compensates for any decrease in the value of Comerica's cash collateral, and in any event Debtor has demonstrated that the cash collateral is preserved under the plan because the payments required to be made on the effective date are derived from the exit financing provided by the Cowings, not from Comerica's cash collateral.
Even if there were a diminution of the cash that serves as Comerica's collateral there has been no showing, or even argument, that such a diminution is either injurious to Comerica or irreparably so. That would require a showing of a likelihood of default while Comerica's collateral pool is diminished. But since Comerica presented no evidence of a lack of feasibility, it has made no showing of such a likelihood of default before its appeal is heard. And the evident appreciation in the value of the equipment collateral likely more than offsets any diminishment of the cash position. *908 The Cowings' cash infusion of $1.25 million similarly minimizes the likelihood of default while the appeal is pending. In short, there has been no showing of irreparable injury even if Comerica can demonstrate that its cash collateral will be diminished.
And unlike many Chapter 11 plans, confirmation of this plan does not "strip" Comerica's lien. Because it took advantage of the § 1111(b) election with respect to all of the collateral that the Debtor retains, Comerica's lien remains fully intactit has not been stripped down in amount as Code § 506(a)(1) ordinarily permits. Confirmation of the plan therefore has no effect on the amount of Comerica's lien, so there can be no irreparable injury on that basis.
Nor can there be any irreparable injury arising from modification of Comerica's debt. Under the plan, Comerica's secured debt will be fully repaid with interest at 6.5%, which is an increase from its current contract rate of approximately 4.25%. Comerica can hardly complain it is being injured by this increase in the interest rate on its debt. And even if an appellate court should conclude that the increase should be even greater to provide present value in light of the current market and the relevant risks, such a modification on appeal would not prevent confirmation of the plan. This is because Comerica's own expert testified that the plan was feasible even if the interest rate were as much as 10.7%, higher than the highest rate that Comerica even argued for.
There can be no injury from any error in approving the classification of unsecured claims. The treatment of claims in Class 7 and Class 8 is identical. The confirmation requirement of § 1129(a)(10) would still be satisfied if Comerica's deficiency claim were classified in Class 8 resulting in rejection of the plan by that Class, because the acceptances by Classes 3, 4, 5 and 6 would each satisfy the requirement for at least one accepting impaired class. And the rejection by Class 8 would make no difference in requiring confirmation to be by "cram down" under § 1129(b), because that was already required as a result of the rejection by Class 7, the Comerica deficiency claim.
Comerica cannot be injured by any inadequacy of the "new value" being contributed by the equity holders. There is no evidence anyone would have contributed any more, the Debtor actively solicited third party investors, and exclusivity had been terminated for more than a year for anyone to propose a better plan. The new value that is being contributed provides the source of payment on unsecured debt, including Comerica's deficiency claim, which would receive nothing on liquidation. And, as noted, at the confirmation hearing Comerica failed to submit any evidence that the new value contribution was insufficient, which belies any attempt to argue now that Comerica is being irreparably injured by any theoretical deficiency that might be argued on appeal.
Indeed, the only attempt that Comerica makes to argue that it will be irreparably injuredonly one paragraph in a 19 page motion[28]is to suggest that its appeal "may become moot absent a stay" (emphasis added). But "It is well settled that an appeal being rendered moot does not itself constitute irreparable harm."[29] The law is clear in the Ninth Circuit that "irreparable injury cannot be shown solely from the *909 possibility that an appeal may be moot."[30]
Conclusion
While it is questionable whether Comerica has raised any "serious legal questions," it has certainly not made a "strong showing" of likelihood of success on appeal. But even if there were a sufficient showing of likelihood of success on appeal, it does not justify a stay pending appeal in the absence of any showing of a likelihood of irreparable injury. It is a "bedrock requirement that stays must be denied to all petitioners who did not meet the applicable irreparable harm threshold, regardless of their showing on the other stay factors."[31]
Comerica has not shown any likelihood of irreparable injury in the absence of a stay, nor has it shown that the balance of hardships tips sharply in Comerica's favor. Because Comerica has not made a strong showing of likelihood of success on appeal, and more importantly because Comerica has failed to demonstrate any likelihood of irreparable injury, its motion for stay pending appeal is denied.
Comerica alternatively seeks "a brief administrative stay so that Comerica may petition the District Court for a stay pending appeal." Comerica provides no authority for a Bankruptcy Court to grant "a brief administrative stay" if it is something other than a stay pending appeal pursuant to Bankruptcy Rule 8005. Nor has Comerica identified the showing that must be made for the issuance of such an "administrative" stay. The Ninth Circuit's "bedrock requirement that stays must be denied to all petitioners who did not meet the applicable irreparable harm threshold" would seem to apply as well to a petitioner for a "brief administrative stay." Because Comerica has not satisfied that threshold requirement for any stay, the "brief administrative stay" must be denied as well.
NOTES
[1] Nken v. Holder, ___ U.S. ___, 129 S. Ct. 1749, 173 L. Ed. 2d 550 (2009).
[2] Leiva-Perez v. Holder, 640 F.3d 962, 964 (9th Cir.2011). Although Nken and Leiva-Perez were decided under the statute permitting courts of appeal to stay an order for removal of an alien, 8 U.S.C. § 1252(b)(3)(B) (2006), courts in the Ninth Circuit apply the same standards to motions for preliminary injunctive relief, Abbassi v. INS, 143 F.3d 513 (9th Cir.1998), and to stays pending appeal under Bankruptcy Rule 8005, In re Dexter Distributing Corp., No. CV09-1099-PHX-JAT, 2009 WL 2154538, at *2 (D.Ariz. July 14, 2009).
[3] Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir.2011) ("a stronger showing of one element may offset a weaker showing of another," so that an injunction could issue based on mere showing that "serious questions going to the merits were raised and the balance of hardships tips sharply in [plaintiff's] favor," citing Clear Channel Outdoor, Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir.2003)).
[4] Leiva-Perez, 640 F.3d at 966.
[5] "At one end of the continuum, the moving party is required to show both a probability of success on the merits and the possibility of irreparable injury.... At the other end of the continuum, the moving party must demonstrate that serious legal questions are raised and that the balance of hardships tips sharply in its favor." Lopez v. Heckler, 713 F.2d 1432, 1435 (9th Cir.1983), rev'd in part on other grounds, 463 U.S. 1328, 104 S. Ct. 10, 77 L. Ed. 2d 1431 (1983). Accord, In re First S. Sav. Ass'n, 820 F.2d 700, 704 (5th Cir. 1987) ("the movant need only present a substantial case on the merits when a serious legal question is involved and show that the balance of the equities weighs heavily in favor of granting the stay"); In re Pac. Gas and Elec. Co., No. C-02-1550-VRW, 2002 WL 32071634, at *2 (N.D.Cal. Nov. 14, 2002) ("or, in an alternative formulation of the same standard, serious legal questions and a balance of hardships were the stay denied"); WCI Cable, Inc. v. Alaska R.R. Corp., 285 B.R. 476, 478 (D.Or. 2002) ("At the other end of the continuum, the moving party must demonstrate that serious legal questions are raised and that the balance of hardships tips sharply in its favor," citing Lopez v. Heckler).
[6] Leiva-Perez, 640 F.3d at 967.
[7] Id. at 968 (quoting Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1139 (9th Cir.2011) (Mosman, D.J., concurring)).
[8] In re Red Mountain Machinery Co., 448 B.R. 1 (Bankr.D.Ariz.2011).
[9] 11 U.S.C. § 1111(b) provides:
(1)(A) A claim secured by a lien on property of the estate shall be allowed or disallowed under section 502 of this title the same as if the holder of such claim had recourse against the debtor on account of such claim, whether or not such holder has such recourse, unless
(i) the class of which such claim is a part elects, by at least two-thirds in amount and more than half in number of allowed claims of such class, application of paragraph (2) of this subsection; or
(ii) such holder does not have such recourse and such property is sold under section 363 of this title or is to be sold under the plan.
(B) A class of claims may not elect application of paragraph (2) of this subsection if
(i) the interest on account of such claims of the holders of such claims in such property is of inconsequential value; or
(ii) the holder of a claim of such class has recourse against the debtor on account of such claim and such property is sold under section 363 of this title or is to be sold under the plan.
(2) If such an election is made, then notwithstanding section 506(a) of this title, such claim is a secured claim to the extent that such claim is allowed.
[10] Bankruptcy Code § 363(b) authorizes a Chapter 11 debtor in possession to sell property other than in the ordinary course of business, after notice and a hearing. Code § 363(k) provides that at any sale under § 363(b), a creditor secured by a lien on the property being sold may purchase the property by a credit bid, unless the court for cause orders otherwise.
[11] In re Pine Gate Assocs., Ltd., 2 Bankr.Ct. Dec. (LRP) 1478 (Bankr.N.D.Ga. 1976).
[12] "Congress did perceive the result in Pine Gate to be unfair, and did enact § 1111(b) to remedy that unfairness." Ronald Barliant, Bad Medicine: Cram Down, § 1111(B)(2) Elections and Federal Regulations, 2008 Norton Bankruptcy Law Adviser No. 7 (July 2008). Accord, 5 NORTON BANKR.LAW AND PRACTICE 3D § 102:3, at 102-9 to-10 (2011); Tampa Bay Assocs., Ltd. v. DRW Worthington, Ltd. (In re Tampa Bay Assocs., Ltd.), 864 F.2d 47, 49 (5th Cir.1989) (Section 1111(b) was "enacted by Congress to cure the harsh result of" Pine Gate); See also, In re SubMicron Systems Corp., 432 F.3d 448, 460 n. 15 (3d Cir.2006) (quoting Tampa Bay).
[13] 680 Fifth Ave. Assocs. v. Mut. Benefit Life Ins. Co. (In re 680 Fifth Ave. Assocs.), 29 F.3d 95, 97 (2nd Cir.1994) (citing 5 L. King, COLLIER ON BANKRUPTCY ¶ 1111.02[2], at 1111-22 (15th ed. 1993)). Accord, 5 NORTON BANKRUPTCY LAW AND PRACTICE 3D, § 102:2 at 102-7 ("The § 1111 (b)(2) election gives the secured creditor, whose collateral the debtor has determined to retain, the ability both: (a) to avoid an unfavorable hypothetical valuation of the collateral under Code § 506(a), which value is speculative since the property will not have been exposed to the market, and (b) to seek to capture any future appreciation of the property securing creditor's claim.").
[14] Tuma v. Firstmark Leasing Corp. (In re Tuma), 916 F.2d 488, 491 (9th Cir.1990) (citing 124 CONG. REC. 32392, 32408 (Sept. 28, 1978) (Statement of Rep. Edwards)).
[15] Theodore Eisenberg, The Undersecured Creditor in Reorganizations and the Nature of Security, 38 Vand. L. Rev. 931, 939 (1985).
[16] "Because an undersecured . . . creditor is protected to the full extent of its claim by virtue of its ability to bid up to the full value of that claim under § 363(k), Congress concluded that § 1111(b)(1)(A) need not apply to § 363(k) sales." SubMicron Systems, 432 F.3d at 460 n. 15. "[If there is a sale of the collateral,] There is no need to give the recourse secured creditor the additional protection of the § 1111(b)(2) election, because the recourse creditor through the sale can obtain the full benefit of its bargain and will not be disadvantaged by an artificially low judicial valuation." 5 NORTON BANKRUPTCY LAW AND PRACTICE, § 102:9, at 102-26.
[17] "[F]airness, and feasibility [of a chapter 11 plan of reorganization] present questions of fact which we review under the clearly erroneous standard." Acequia, Inc. v. Clinton (In re Acequia, Inc.), 787 F.2d 1352, 1358 (9th Cir. 1986).
[18] "[W]hether a particular plan gives old equity a property interest `on account of' its old ownership interests in violation of the absolute priority rule or for another, permissible reason is a factual question." Bonner Mall P'ship v. U.S. Bancorp Mortgage Co. (In re Bonner Mall P'ship), 2 F.3d 899, 911 (9th Cir. 1993), appeal dismissed as moot, 513 U.S. 18, 115 S. Ct. 386, 130 L. Ed. 2d 233 (1994).
[19] "A bankruptcy court should be accorded substantial deference in making cramdown interest rate determinations." Farm Credit Bank of Spokane v. Fowler (In re Fowler), 903 F.2d 694, 696 (9th Cir. 1990).
[20] "[A] bankruptcy court's finding that a claim is or is not substantially similar to other claims [for purposes of classification in a chapter 11 plan], constitutes a finding of fact reviewable under the clearly erroneous standard." Steelcase Inc. v. Johnston (In re Johnston), 21 F.3d 323, 327 (9th Cir. 1994).
[21] "[F]airness, and feasibility [of a chapter 11 plan of reorganization] present questions of fact which we review under the clearly erroneous standard." Acequia, 787 F.2d at 1358.
[22] Although the Code does not use the terms "feasible" or "feasibility," the feasibility requirement is Code § 1129(a)(11), which requires a showing that "confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor. . . ." It does not require a guarantee of success, but merely a "reasonable probability of success." Acequia, 787 F.2d at 1364; In re Patrician St. Joseph Partners Ltd. P'ship, 169 B.R. 669, 674 (D.Ariz.1994).
[23] To satisfy the "new value corollary" to the absolute priority rule, and to satisfy § 1129(b)(2)(B)(ii) notwithstanding the objection by an unsecured class that is not paid in full, former equity owners are "required to offer value that was 1) new, 2) substantial, 3) money or money's worth, 4) necessary for a successful reorganization and 5) reasonably equivalent to the value or interest received." Bonner Mall, supra note 19, at 908, citing Case v. Los Angeles Lumber, 308 U.S. 106, 121-22, 60 S. Ct. 1, 84 L. Ed. 110 (1939). The "adequacy" of the new value contribution refers to both elements 2 and 5. Comerica presented no factual evidence or expert opinion on any of the five elements, and at closing argument Comerica's counsel admitted that elements 1 and 3 were satisfied.
[24] See Comerica's Objection to Confirmation of Debtor's First Amended Plan of Reorganization (Dec. 29, 2010, docket # 424).
[25] See Joint Pre-Trial Statement Relating to Final Hearing on Plan Confirmation (April 1, 2011, docket # 568).
[26] See Till v. SCS Credit Corp., 541 U.S. 465, 124 S. Ct. 1951, 158 L. Ed. 2d 787 (2004).
[27] Comerica's Emergency Motion for Stay Pending Appeal at 11, ¶ 25 (quoting In re Prussia Assocs., 322 B.R. 572, 585 (Bankr. E.D.Pa.2005)).
[28] In excess of the 15 pages permitted by Local Bankruptcy Rule 9013-1(b).
[29] Ohanian v. Irwin (In re Irwin), 338 B.R. 839, 853 (E.D.Cal.2006).
[30] Acton v. Fullmer (In re Fullmer), 323 B.R. 287, 304 (Bankr.D.Nev.2005).
[31] Leiva-Perez, 640 F.3d at 962. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2347461/ | 457 F. Supp. 682 (1978)
SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
NATIONAL STUDENT MARKETING CORP. et al., Defendants.
M.D.L. No. 105. Civ. A. No. 225-72.
United States District Court, District of Columbia.
August 31, 1978.
*683 *684 *685 *686 Theodore Sonde, Bobby C. Lawyer, Richard O. Patterson, Edward B. Horahan, III, Washington, D. C., for Securities and Exchange Commission.
Sherwin J. Markman, Jean S. Moore, Peter Raven-Hansen, Hogan & Hartson, Washington, D. C., for Lord, Bissell & Brook, Max E. Meyer and Louis F. Schauer.
David Ginsburg, Lee R. Marks, Martha Jane Shay, Ginsburg, Feldman & Bress, Washington, D. C., for Cameron Brown.
MEMORANDUM OPINION
BARRINGTON D. PARKER, District Judge:
This opinion covers the final act in a civil proceeding brought by the Securities and Exchange Commission (Commission or SEC) seeking injunctive sanctions against numerous defendants as a result of their participation in alleged securities laws violations relating to the National Student Marketing Corporation (NSMC) securities fraud scheme.[1] The original defendants included the corporation and certain of its officers and directors; the accounting firm of Peat, Marwick, Mitchell & Co. (Peat Marwick) and two of its partners; several officers and directors of Interstate National Corporation (Interstate); the law firm of White & Case and one of its partners; and the law *687 firm of Lord, Bissell & Brook (LBB) and two of its partners. The majority of these defendants are not now before the Court. As discovery progressed during the pre-trial stages of this litigation, NSMC and other principal defendants consented to the entry of final judgments of permanent injunction or otherwise reached a resolution of the charges against them.[2] The only defendants remaining are Lord, Bissell & Brook; its two partners, Max E. Meyer and Louis F. Schauer; and Cameron Brown, a former president and director of Interstate, and presently a director of and consultant to NSMC.
The focal point of the Commission's charges against these defendants is the corporate merger of Interstate with NSMC on October 31, 1969. The principal question presented is whether the defendants violated or aided and abetted the violation of the anti-fraud provisions of the federal securities laws in two instances: (1) consummation of the NSMC merger; and (2) the immediately following sale of newly acquired NSMC stock by former Interstate principals, including certain of the defendants. These transactions are alleged to have occurred despite the prior receipt by the defendants of information which revealed that NSMC's interim financial statements, used in securing shareholder approval of the merger and available to the investing public generally, were grossly inaccurate and failed to show the true condition of the corporation. The information was included in a comfort letter prepared by NSMC's accounts. The Commission contends that these violations demonstrate a reasonable likelihood of future misconduct by the defendants, thereby justifying the requested permanent injunctive relief.
The matter was tried without a jury. After reviewing the extensive record in this case, the Court concludes, for the reasons stated below, that while each of the defendants violated the securities laws in specific instances, the Commission has not fulfilled its obligation of demonstrating a reasonable likelihood that they will do so in the future. Accordingly, the Commission's request for injunctive relief must be denied.
This opinion contains the findings of fact and conclusions of law required by Rule 52 of the Federal Rules of Civil Procedure. Initially it will present the background events of this proceeding, including details of the October 31 merger of Interstate and NSMC, and the stock sales by Interstate principals. The Court then will review the Commission's allegations against the defendants in light of the applicable legal principles. Finally, the Court will address the factors involved in its determination that injunctive relief is not warranted in this instance.
I. BACKGROUND
A. The Companies
National Student Marketing Corporation was incorporated in the District of Columbia in 1966. The company enjoyed early prosperity; it grew rapidly and experienced a steady increase in assets, sales and earnings. Its common stock, which was registered with the SEC and traded on the over-the-counter market, rose from an initial public offering of $6 per share in the spring of 1968 to a high of $144 per share in mid-December 1969.[3] The financial community held the company and its potential in high regard, and in anticipation of continued *688 high market performance, it was seen as a good "buy" prospect. Its management was considered aggressive, imaginative and capable; if there was a question of its integrity and honesty, it did not surface in the public arena until a later period. During this period, White & Case served as its outside legal counsel, with Marion J. Epley, III, as the partner immediately in charge of the firm's representation. Peat Marwick served as its outside accountant.
Interstate National Corporation, a Nevada corporation, was an insurance holding company. Its principal assets were several wholly-owned subsidiary insurance companies. The company's common stock was traded on the over-the-counter market and owned by approximately 1200 shareholders. Cameron Brown was president, chief executive officer, principal shareholder and a director of the company.[4] Other Interstate principals and directors included Robert P. Tate, chairman of the board; William J. Bach, general counsel; Paul E. Allison, secretary; Louis W. Biegler; and Max E. Meyer. Between board meetings, all management authority was delegated to an executive committee composed of Brown, Tate, Bach, Allison and Biegler. Max E. Meyer, a director and shareholder, was a partner in the Chicago law firm of Lord, Bissell & Brook, which had long represented Interstate and served as its outside legal counsel in all matters relating to the merger of the corporation with NSMC. Meyer, a personal friend and legal advisor to Cameron Brown, served as the contact partner for the Interstate account and was otherwise in overall charge of his firm's representation.[5] Another partner of the firm, Louis F. Schauer, was also involved in the merger transaction due to his experience in corporate and securities law. Peat Marwick served as Interstate's outside accountant during the period in question.
B. The Merger Negotiations
National Student Marketing Corporation developed a reputation for having a unique and successful marketing network for selling its own and other products to college and high school students. Commencing in 1969, it undertook a highly active program to acquire companies specializing in selling goods and services to students. It was in this connection that NSMC first approached representatives of Interstate.
Initially, NSMC discussed the possibility of acquiring an Interstate subsidiary that specialized in selling insurance to students. After Interstate indicated an unwillingness to dispose of a single subsidiary, NSMC expressed interest in acquiring its entire insurance holding company operation. Cortes W. Randell, NSMC's president and chief executive officer, proposed a merger of the two corporations, offering one share of NSMC stock for every two shares of Interstate stock.
On June 10, 1969, NSMC representatives, including Randell and James F. Joy, a senior vice president and finance committee member, were invited before the Interstate directors to make a presentation concerning the proposed merger. The directors were provided with NSMC's 1968 annual report and its financial report for the first half of 1969. Randell discussed the company's acquisition program, reviewed several pending corporate acquisition commitments, and made certain earnings predictions for the fiscal year ending August 31, 1969. He also increased the earlier offer to two shares of NSMC common for every three shares of Interstate common. When certain Interstate directors expressed a desire to sell a portion of the NSMC stock which they expected to acquire in the merger, Randell responded that a registered public offering was planned for the fall of 1969, at which time the former Interstate shareholders *689 could sell up to 25 percent of their shares.[6] Very few questions were asked by Randell or Joy about the business and financial affairs of Interstate, an aspect of the meeting which surprised several of Interstate's representatives.
This meeting resulted in an agreement in principle for the merger. Essentially identical press releases were then issued by the companies, announcing the agreed upon stock exchange ratio, the estimated value of the transaction as $37 million based on the current market value of NSMC stock, and the fact that the transaction represented approximately a 100 percent premium for the Interstate shares based on their market value at the time.[7] Representations were also made in the releases as to NSMC's earnings for the first six months of fiscal 1969, which ended February 28, 1969.
The two corporations' efforts to finalize the merger agreement were not uneventful. The initial proof of the Merger Agreement, prepared by NSMC's outside counsel, failed to provide for parallel rights and obligations of the parties. In fact, as to such matters as warranties and representations, a comfort letter from independent accountants, and counsel opinion letters on legal aspects of the merger, far more was required of Interstate than of NSMC. After insistence by Interstate, however, there was agreement to substantially parallel and mutual provisions covering those matters. On August 12, the Interstate directors met to review the final version of the agreement. A copy of a report from White, Weld & Co. (White Weld), a stock brokerage and investment consultant firm retained by Interstate to prepare an in-depth study of NSMC and the proposed merger, was made available to each director. A White Weld representative explained various aspects of the report, answered questions about NSMC's accounting procedures, and recommended the merger. Following that presentation, Louis F. Schauer, who had broad experience in corporate and securities law, reviewed and explained the agreement. A proof copy of the NSMC proxy statement was also available and examined by the directors then present. Although prepared for use in connection with the merger, that statement contained no entries in the spaces for NSMC's unaudited consolidated income statement for the nine-month period ending May 31, 1969. Because of the omission, Interstate's board chairman, Tate, refused to sign the agreement. After numerous efforts at attempting to obtain the missing proxy statement data and satisfactory answers to questions concerning the omitted data, the information was finally received by telephone. The remaining directors, including Tate, then signed the merger agreement on August 15. The added information, however, was not then analyzed or reviewed to any extent by any Interstate representative.
The Merger Agreement set forth fully the terms and conditions of the understanding between the two corporations. Among other things, both corporations represented and warranted that the information "contained in Interstate's and NSMC's Proxy Statements relating to the transactions contemplated by this Agreement will be accurate and correct and will not omit to state a material fact necessary to make such information not misleading,"[8] and that the financial statements included among the provisions "are true and correct and have been prepared in accordance with generally accepted accounting principles *690 consistently followed throughout the periods involved."[9] NSMC specifically referred to its 1968 year-end and May 31, 1969, nine-month financial statements and represented that those statements:
fairly present the results of the operations of NSMC and its subsidiaries for the periods indicated, subject in the case of the nine month statements to year-end audit adjustments.[10]
The Agreement also provided several conditions precedent to the obligations of the two corporations to consummate the merger. One required the receipt by NSMC of an opinion letter from Interstate's counsel LBB to the effect, inter alia, that Interstate had taken all actions and procedures required of it by law and that all transactions in connection with the merger had been duly and validly taken, to the best knowledge of counsel, in full compliance with applicable law; a similar opinion letter was required to be delivered from NSMC's counsel to Interstate.[11] Another condition was the receipt by each company of a "comfort letter" from the other's independent public accountants. Each letter was required to state: (1) that the accountants had no reason to believe that the unaudited interim financial statements for the company in question were not prepared in accordance with accounting principles and practices consistent with those used in the previous year-end audited financials; (2) that they had no reason to believe that any material adjustments in those financials were required in order fairly to present the results of operations of the company; and (3) that the company had experienced no material adverse change in its financial position or results of operations from the period covered by its interim financial statement up to five business days prior to the effective date of the merger.[12] Although setting forth these specific conditions to consummation of the merger, the final paragraph of the Agreement also provided that:
Anything herein to the contrary notwithstanding and notwithstanding any stockholder vote of approval of this Agreement and the merger provided herein, this Agreement may be terminated and abandoned by mutual consent of the Boards of Directors of NSMC and Interstate at any time prior to the Effective Date and the Board of Directors of any party may waive any of the conditions to the obligations of such party under this Agreement.[13]
Finally, the Agreement specified that "[t]he transactions contemplated herein shall have been consummated on or before November 28, 1969."[14]
Both NSMC and Interstate utilized proxy statements and notices of special stockholder meetings to secure shareholder approval of the proposed merger. Interstate's materials included a copy of the Merger Agreement and NSMC's Proxy Statement; the latter contained NSMC's financial statements for the fiscal year ended August 31, 1968, and the nine-month interim financial statement for the period ending May 31, 1969. Interstate shareholders were urged to study the NSMC Proxy Statement:
The NSMC Proxy Statement contains a description of each company, relevant financial statements, comparative per share data and other information important to your consideration of the proposed merger. You are urged to study the NSMC Proxy Statement, hereby incorporated as part of this Proxy Statement, prior to voting your shares.[15]
*691 The boards of both companies recommended approval of the merger and at special shareholder meetings that approval was secured by large majorities.[16]
In mid-October, Peat Marwick began drafting the comfort letter concerning NSMC's unaudited interim financials for the nine-month period ended May 31, 1969. As issued by NSMC, those financials had reflected a profit of approximately $700,000.
Soon after beginning work on the comfort letter, Peat Marwick representatives determined that certain adjustments were required with respect to the interim financials. Specifically, the accountants proposed that a $500,000 adjustment to deferred costs, a $300,000 write-off of unbilled receivables, and an $84,000 adjustment to paid-in capital be made retroactive to May 31 and be reflected in the comfort letter delivered to Interstate. Such adjustments would have caused NSMC to show a loss for the nine-month period ended May 31, 1969, and the company as it existed on May 31 would have broken even for fiscal 1969. Although Peat Marwick discussed the proposed adjustments with representatives of NSMC, neither the accountants nor NSMC informed Interstate of the adjustments prior to the closing.[17] A draft of the comfort letter, with the adjustments, was completed on October 30 and on the next day, the morning of the closing, it was discussed among senior partners of Peat Marwick.
C. The Closing and Receipt of the Comfort Letter
The closing meeting for the merger was scheduled at 2 p.m. on Friday, October 31, at the New York offices of White & Case. Brown, Meyer and Schauer were present in addition to Interstate directors Bach, Allison and Tate. The representatives of NSMC included Randell, Joy, John G. Davies, their attorney Epley and other White & Case associates.
Although Schauer had had an opportunity to review most of the merger documents at White & Case on the previous day, the comfort letter had not been delivered. When he arrived at White & Case on the morning of the merger, the letter was still not available, but he was informed by a representative of the firm that it was expected to arrive at any moment.
The meeting proceeded. When the letter had not arrived by approximately 2:15 p. m., Epley telephoned Peat Marwick's Washington office to inquire about it. Anthony M. Natelli, the partner in charge, thereupon dictated to Epley's secretary a letter which provided in part:
[N]othing has come to our attention which caused us to believe that:
1. The National Student Marketing Corporation's unaudited consolidated financial statements as of and for the nine months ended May 31, 1969:
a. Were not prepared in accordance with accounting principles and practices consistent in all material respects with those followed in the preparation of the audited consolidated financial statements which are covered by our report dated November 14, 1968;
b. Would require any material adjustments for a fair and reasonable presentation of the information shown except *692 with respect to consolidated financial statements of National Student Marketing Corporation and consolidated subsidiaries as they existed at May 31, 1969 and for the nine months then ended, our examination in connection with the year ended August 31, 1969 which is still in process, disclosed the following significant adjustments which in our opinion should be reflected retroactive to May 31, 1969:
1. In adjusting the amortization of deferred costs at May 31, 1969, to eliminate therefrom all costs for programs substantially completed or which commenced 12 months or more prior, an adjustment of $500,000 was required. Upon analysis of the retroactive effect of this adjustment, it appears that the entire amount could be determined applicable to the period prior to May 31, 1969.
2. In August 1969 management wrote off receivables in amounts of $300,000. It appears that the uncollectibility of these receivables could have been determined at May 31, 1969 and such charge off should have been reflected as of that date.
3. Acquisition costs in the amount of $84,000 for proposed acquisitions which the Company decided not to pursue were transferred from additional paid-in capital to general and administrative expenses. In our opinion, these should have been so transferred as of May 31, 1969.
2. During the period from May 31, 1969 to October 28, 1969 there has been no material adverse change in the consolidated financial position of National Student Marketing Corporation and its consolidated subsidiaries, or any material adverse change in results of operations of National Student Marketing Corporation and its consolidated subsidiaries as compared with the nine month period ended May 31, 1969 after giving retroactive effect at May 31, 1969 of the adjustments disclosed above.[18]*693 Epley delivered one copy of the typed letter to the conference room where the closing was taking place. Epley then returned to his office.
Schauer was the first to read the unsigned letter. He then handed it to Cameron Brown, advising him to read it. Although there is some dispute as to which of the Interstate representatives actually read the letter, at least Brown and Meyer did so after Schauer. They asked Randell and Joy a number of questions relating to the nature and effect of the adjustments. The NSMC officers gave assurances that the adjustments would have no significant effect on the predicted year-end earnings of NSMC and that a substantial portion of the $500,000 adjustments to deferred costs would be recovered. Moreover, they indicated that NSMC's year-end audit for fiscal 1969 had been completed by Peat Marwick, would be published in a couple of weeks, and would demonstrate that NSMC itself had made each of the adjustments for its fourth quarter. The comfort letter, they explained, simply determined that those adjustments should be reflected in the third quarter ended May 31, 1969, rather than the final quarter of NSMC's fiscal year. Randell and Joy indicated that while NSMC disagreed with what they felt was a tightening up of its accounting practices, everything requested by Peat Marwick to "clean up" its books had been undertaken.[18A]
At the conclusion of this discussion, certain of the Interstate representatives, including at least Brown, Schauer and Meyer, conferred privately to consider their alternatives in light of the apparent nonconformity of the comfort letter with the requirements *694 of the Merger Agreement.[19] Although they considered the letter a serious matter and the adjustments as significant and important, they were nonetheless under some pressure to determine a course of action promptly since there was a 4 p.m. filing deadline if the closing were to be consummated as scheduled on October 31.[20] Among the alternatives considered were: (1) delaying or postponing the closing, either to secure more information or to resolicit the shareholders with corrected financials; (2) closing the merger; or (3) calling it off completely.
The consensus of the directors was that there was no need to delay the closing. The comfort letter contained all relevant information and in light of the explanations given by Randell and Joy, they already had sufficient information upon which to make a decision. Any delay for the purpose of resoliciting the shareholders was considered impractical because it would require the use of year-end figures instead of the stale nine-month interim financials. Such a requirement would make it impossible to resolicit shareholder approval before the merger upset date of November 28, 1969, and would cause either the complete abandonment of the merger or its renegotiation on terms possibly far less favorable to Interstate. The directors also recognized that delay or abandonment of the merger would result in a decline in the stock of both companies, thereby harming the shareholders and possibly subjecting the directors to lawsuits based on their failure to close the merger. The Interstate representatives decided to proceed with the closing. They did, however, solicit and receive further assurances from the NSMC representatives that the stated adjustments were the only ones to be made to the company's financial statements and that 1969 earnings would be as predicted. When asked by Brown whether the closing could proceed on the basis of an unsigned comfort letter, Meyer responded that if a White & Case partner assured them that this was in fact the comfort letter and that a signed copy would be forthcoming from Peat Marwick, they could close. Epley gave this assurance. Meyer then announced that Interstate was prepared to proceed, the closing was consummated, and a previously arranged telephone call was made which resulted in the filing of the Articles of Merger at the Office of the Recorder of Deeds of the District of Columbia.[21] Large packets of merger documents, including the required counsel opinion letters, were exchanged.[22] The closing was *695 solemnized with a toast of warm champagne.
Unknown to the Interstate group, several telephone conversations relating to the substance of the comfort letter occurred on the afternoon of the closing between Peat Marwick representatives and Epley. The accountants were concerned with the propriety of proceeding with the closing in light of the adjustments to NSMC's nine-month financials. One such conversation occurred after Epley delivered the unsigned letter to the Interstate participants but before the merger had been consummated. At that time Epley was told that an additional paragraph would be added in order to characterize the adjustments. The paragraph recited that with the noted adjustments properly made, NSMC's unaudited consolidated statement for the nine-month period would not reflect a profit as had been indicated but rather a net loss, and the consolidated operations of NSMC as they existed on May 31, 1969, would show a break-even as to net earnings for the year ended August 31, 1969. Epley had the additional paragraph typed out, but failed to inform or disclose this change to Interstate. In a second conversation, after the closing was completed and the Interstate representatives had departed, Epley was informed of still another proposed addition, namely, a paragraph urging resolicitation of both companies' shareholders and disclosure of NSMC's corrected nine-month financials prior to closing. To this, he responded that the deal was closed and the letter was not needed. Peat Marwick nonetheless advised Epley that the letter would be delivered and that its counsel was considering whether further action should be taken by the firm.
The final written draft of the comfort letter arrived at White & Case late that afternoon. Peat Marwick believed that Interstate had been informed and was aware of the conversations between its representatives and Epley and of its concern about the adjustments.[23] Because of this belief and especially since the merger had been closed without benefit of the completed letter, Peat Marwick's counsel perceived no obligation to do anything further about the merger. Nonetheless, a signed copy of the final letter was sent to each board member of the two companies, presumably in an effort to underline the accountants' concern about consummation of the merger without shareholder resolicitation.
The signed comfort letter was delivered to the Interstate offices on Monday, November 3. It was first seen and read by Donald Jeffers, Interstate's chief financial officer. He had not been present at the October 31 closing or informed of the adjustments to the interim financials. Concerned, he contacted Brown immediately and read the letter to him. Since a meeting with other Interstate principals was scheduled for the next morning the letter was added to the other matters to be discussed.
The signed letter was virtually identical to the unsigned version delivered at the closing, except for the addition of the following two paragraphs:
Your attention is called, however, to the fact that if the aforementioned adjustments had been made at May 31, 1969 the unaudited consolidated statement of earnings of National Student Marketing Corporation would have shown a net loss of approximately $80,000. It is presently estimated that the consolidated operations *696 of the company as it existed at May 31, 1969 will be approximately a break-even as to net earnings for the year ended August 31, 1969.
In view of the above mentioned facts, we believe the companies should consider submitting corrected interim unaudited financial information to the shareholders prior to proceeding with the closing.[24]
The only other change was the reduction in the write-off to receivables from $300,000 to $200,000, making total negative adjustments to NSMC's nine-month financials in the amount of $784,000.
At the meeting the following day, the matter was fully discussed by the former Interstate principals. Of particular concern were the additional "break-even" and "resolicitation" paragraphs.[25] Brown explained what had occurred at the closing and the reasons for the decision to consummate the merger. He called Meyer at LBB, who by that time was also aware of the letter. After some discussion, it was decided that more information was needed. Brown and Jeffers agreed to contact Peat Marwick and Meyer agreed that his firm would contact Epley at White & Case.
On that afternoon, Schauer contacted Epley by telephone. Epley stated that he had not known of the additional paragraphs until after the closing. He added that in any case the additions did not expand upon the contents of the earlier unsigned letter; the "break-even" paragraph simply reflected the results of an arithmetic computation of the effects of the adjustments, and the "resolicitation" paragraph was gratuitous and a matter for lawyers, not accountants. While Schauer disagreed, Epley again responded that the additional paragraphs made no difference and that NSMC regarded the deal as closed.
Brown and Jeffers fared no better with Peat Marwick. That company's representative, Cormick L. Breslin, met briefly with several Interstate representatives on November 4. He could give no information concerning the matter other than that he had not seen a similar letter before and thought it was rather unusual.[26] Later, when contacted again by Brown, Breslin stated that the letter would have to speak for itself and his company would provide no additional information, comment or advice.
Over the next several days the Interstate directors continued their discussion of the matter, consulting frequently with their counsel, Meyer and Schauer. As they viewed it, the available options were to attempt to undo the merger, either permanently or until the shareholders could be resolicited, or to leave things as they were. The attorneys indicated that rescission would be impractical, if not impossible, since Interstate no longer existed and NSMC had indicated that it would oppose any effort to undo the merger. Meanwhile, the market value of NSMC stock continued to increase, and the directors noted that any action on their part to undo the merger would most likely adversely affect its price. By the end of the week, the decision was made to abstain from any action. Thereafter, Brown issued a memorandum to all Interstate employees announcing completion of the merger. No effort was ever made by any of the defendants to disclose *697 the contents of the comfort letter to the former shareholders of Interstate, the SEC or to the public in general.
D. The Stock Sales
Early in the negotiations the principal Interstate shareholders understood that they would be able to sell a portion of the NSMC stock received in the merger through a public offering planned for the fall of 1969. Various shareholders, including Brown, Tate, Allison, Bach and Meyer, intended to profit by this opportunity and sell up to 25 percent of their newly acquired stock. The opportunity did not materialize, however, because within several days of the merger the NSMC operating committee decided to postpone the registration. Brown was advised that the shareholders could still sell up to 25 percent of their shares in a private placement under SEC Rule 133.[27] If they so decided, he was urged to have all use the same broker to avoid upsetting the market for the stock.
Brown then contacted Henry Meers, a personal friend and a partner in the White Weld brokerage firm, advised him of their desire to sell and inquired as to whether he could handle the transaction. Meers reported back that his firm could proceed. Brown then received the necessary authorization from the other shareholders and agreed with Meers that the sale would take place on the day of the merger closing. Meers indicated that the sale price could only be determined the day before the closing due to price fluctuations and, on October 30, the two agreed on a price of $49.50 per share.[28]
Two matters of significance to the stock sales occurred on the day of the closing. First, certain of the Interstate principals, including Brown, were informed that the amount of NSMC shares they could sell following the merger was limited due to a restriction on their Interstate stock. As a result, Brown was limited to selling only about seven percent of his newly acquired NSMC stock instead of the 25 percent previously planned.[29] Second, NSMC's inhouse *698 counsel Davies told Schauer that NSMC wanted an opinion from LBB in connection with the stock sales. As outlined in a memorandum prepared by White & Case for NSMC, the requested opinion was to state that LBB had made initial factual determinations as to whether the sales comported with the requirements of Rule 133(d).[30] White & Case would then consult with NSMC and prepare its own final opinion letter as to the validity of the sales under the rule. After discussing the matter with Davies, Schauer indicated that there would be no problem delivering the letter in the form and language requested.
White Weld began processing the sales on the afternoon of October 31. It subsequently sold a total of 59,500 shares of NSMC stock. The gross received was slightly less than $3 million. Brown received approximately $500,000 for his shares and Meyer received approximately $86,000 for the shares he held, including $10,000 for shares he owned and the balance for shares he held in trust for the benefit of Brown and Brown's family. White Weld was never informed of the comfort letter adjustments before it undertook the sale as agents for the Interstate principals.
Later that week a letter from Brown to NSMC and an opinion letter from LBB to NSMC, both of which addressed the Rule 133 matters, were drafted and delivered to NSMC.[31] Though prepared sometime during *699 the week of November 3, the papers were dated October 31.
E. Subsequent Events
Following the acquisition of Interstate and several other companies NSMC stock rose steadily in price, reaching a peak in mid-December. However, in early 1970, after several newspaper and magazine articles appeared questioning NSMC's financial health, the value of the stock decreased drastically. Several private lawsuits were filed and the SEC initiated a wide-ranging investigation which led to the filing of this action.
II. THE PRESENT ACTION
The Court has jurisdiction of this proceeding under ง 22(a) of the Securities Act of 1933 (1933 Act)[32] and ง 27 of the Securities Exchange Act of 1934 (1934 Act).[33] In seeking injunctive relief against the defendants, the Securities and Exchange Commission relies upon ง 21(e) of the 1934 Act which in relevant part provides:
Whenever it shall appear to the Commission that any person is engaged or is about to engage in acts or practices constituting a violation of any provision of this chapter [or] the rules or regulations thereunder, . . . it may in its discretion bring an action . . . to enjoin such acts or practices, and upon a proper showing a permanent or temporary injunction or restraining order shall be granted . . ..[34]
Section 20(b) of the 1933 Act, also relied upon by the Commission, is to the same effect.[35] Each statutory provision requires the Commission to make a "proper showing" that an injunction is warranted, a showing that the Commission attempts to make in this case by proving two instances of past violations by the defendants from which future violations can be inferred and injunctive relief justified.[36] Specifically, the Commission alleges that the defendants, both as principals and as aiders and abettors, violated ง 10(b) of the 1934 Act,[37] Rule 10b-5 promulgated thereunder,[38] and *700 ง 17(a) of the 1933 Act,[39] through their participation in the Interstate/NSMC merger and subsequent stock sales by Interstate principals, in each instance without disclosing the material information revealed by the Peat Marwick comfort letter.[40]
The Commission, in what appears to be typical fashion, see SEC v. Barraco, 438 F.2d 97, 99-100 (10th Cir. 1971), makes little effort to distinguish between principals and aiders and abettors in its charges against the defendants. Although the significance of the distinction between primary and secondary liability may be dwindling in light of recent developments, see Note, Rule 10b-5 Liability after Hochfelder: Abandoning the Concept of Aiding and Abetting, 45 U.Chi.L.Rev. 218 (1977), the distinction nonetheless provides a means by which the violations can be specified and the defendants' conduct qualified. Thus, the Court will attempt to sort through the SEC allegations and delineate which charge principal violations of the antifraud provisions and which charge aiding and abetting.
The Commission charges Brown and Meyer with responsibility for proceeding with the merger of Interstate and NSMC. Since shareholder approval of the merger was secured in part on the basis of the nine-month financials which the comfort letter indicated were inaccurate, the SEC contends that Brown and Meyer should have refused to close until the shareholders could be resolicited with corrected financials. The Commission also charges the two directors with effecting the sale of NSMC stock following the merger, without first disclosing the information contained in the comfort letter. These allegations clearly constitute charges of principal violations of the antifraud provisions. See 3 A. Bromberg, Securities Law: Fraud ง 8.5 (515) (1970). In addition, Brown is specifically charged with aiding and abetting sales of NSMC stock by Interstate principals through his issuance, with Schauer's assistance, of the Rule 133 letter to NSMC.
Numerous charges, all of which appear to allege secondary liability, are leveled against the attorney defendants. Schauer is charged with "participating in the merger between Interstate and NSMC,"[41] apparently referring to his failure to interfere with the closing of the merger after receipt of the comfort letter. Such inaction, when alleged to facilitate a transaction, falls under the rubric of aiding and abetting. See Kerbs v. Fall River Industries, Inc., 502 F.2d 731, 739-40 (10th Cir. 1974). Both Schauer and Meyer are charged with issuing false opinions in connection with the merger and stock sales, thereby facilitating each transaction, and with acquiescence in the merger after learning the contents of the signed comfort letter. The Commission contends that the attorneys should have refused to issue the opinions in view of the adjustments revealed by the unsigned comfort letter, and after receipt of the signed version, they should have withdrawn their *701 opinion with regard to the merger and demanded resolicitation of the Interstate shareholders. If the Interstate directors refused, the attorneys should have withdrawn from the representation and informed the shareholders or the Commission. The SEC specifically characterizes the attorneys' conduct in issuing the Rule 133 opinion as aiding and abetting, and because their alleged misconduct with regard to the merger also appears sufficiently removed from the center of that transaction, it too will be considered under a charge of secondary liability. See SEC v. Coven, 581 F.2d 1020 (2d Cir. 1978); SEC v. Spectrum, Ltd., 489 F.2d 535, 541 (2d Cir. 1973); 3 A. Bromberg, supra. And finally, LBB is charged with vicarious liability for the actions of Meyer and Schauer with respect to the attorneys' activities on behalf of the firm.[42]
Since any liability of the alleged aiders and abettors depends on a finding of a primary violation of the antifraud provisions, the Court will first address the issues relating to the Commission's charges against the principals. If the evidence presented demonstrates that there was a violation in either instance the Court will then proceed to discuss whether the conduct of the various defendants also constituted aiding and abetting. In determining whether the Commission has shown violations of the securities laws by the defendants, the Court will employ a preponderance of the evidence standard of proof.[43]
III. PAST VIOLATIONS
The antifraud provisions effectuate the federal securities laws' purpose of full disclosure and prevention of unfair practices by proscribing the sale or purchase of any security through fraud, or through the use of materially false or misleading statements or omissions. If the requisite level of culpability is demonstrated, any material misstatement or omission with a sufficient nexus to the transfer of a *702 security constitutes a violation.[44] Each of these principal elements will be examined separately in the context of the allegations made by the Commission. The requirement that there be a nexus between the defendants' conduct and a sale of a security will be discussed first, followed by consideration of materiality and scienter.
A. Nexus with a Sale
For the SEC to prove a violation of the antifraud provisions, it must demonstrate that the alleged misconduct was "in the offer or sale" of a security under ง 17(a) or "in connection with the purchase or sale" of a security under ง 10(b) and Rule 10b-5. The Commission has made the requisite showing for each of the provisions with respect to the defendants' activities leading to the closing of the merger. SEC v. National Securities, Inc., 393 U.S. 453, 467, 89 S. Ct. 564, 21 L. Ed. 2d 668 (1969); see SEC v. Savoy Industries, Inc., 190 U.S.App.D.C. ___, at ___, 587 F.2d 1149, at 1171 (1978). However, the defendants[45] contest the SEC's evidence with respect to the nexus between the defendants' conduct and the stock sales by Interstate principals, and between the defendants' conduct during the week of November 3 and either of the "sales" alleged by the Commission.
The defendants' principal argument is directed to the alleged nexus between their conduct and the stock sales. They contend there is no nexus between their actions and the stock sales since the Interstate principals committed themselves to sell the NSMC stock before receiving the unsigned comfort letter on October 31. Because the time of commitment is the "sale" for purposes of the antifraud provisions, they assert that their failure to disclose after-acquired information does not fall within the statutory proscription. Their second contention, that there was no connection between their conduct during the week following the merger and the merger or stock sales, is similar. Their position is that both "sales" occurred prior to their actions or inaction during that week, and therefore could not be affected by their alleged misconduct at that time.[46]
The Commission's response is primarily directed to the first of the defendants' contentions. It argues that no valid commitment could have been made with respect to the stock sales since White Weld was not a purchaser of the NSMC stock, but only an agent for the defendants. Further, even if a commitment could have been made with their agent, the defendants could not and did not make such a commitment prior to the time they received the unsigned Peat Marwick comfort letter at the closing. The Court finds the latter argument persuasive.[47]
*703 In the seminal case of SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976, 89 S. Ct. 1454, 22 L. Ed. 2d 756 (1969), the Second Circuit held that liability for insider trading violations of Rule 10b-5 attaches at the time the commitment to buy or sell is made and not when the transaction is ultimately consummated. 401 F.2d at 853 n. 17. The rationale for using the moment of commitment as the critical point in time derives from the underlying purpose of the antifraud provisions to protect the investment decision from inadequate disclosure and misrepresentations. Once the decision is made and the parties are irrevocably committed to the transaction, there is little justification for penalizing alleged omissions or misstatements which occur thereafter and which have no effect on the decision.
A party does not, within the intendment of Rule 10b-5, use material inside information unfairly when he fulfills contractual commitments which were incurred by him previous to his acquisition of that information, for . . . the Rule imposes "no obligation to pull back from a commitment previously made by the buyer and accepted by the seller because of after acquired knowledge." The goal of fundamental fairness in the securities marketplace is achieved by such a determination.
Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 891 (2d Cir. 1972). Accord, Pittsburgh Coke & Chem. Co. v. Bollo, 421 F. Supp. 908, 923 (E.D.N.Y.1976) (dicta), aff'd on other grounds, 560 F.2d 1089 (2d Cir. 1977); Goodman v. Poland, 395 F. Supp. 660, 689-91 (D.Md.1975).
In view of this authority the Court must focus its attention on the point in time, relative to receipt of the unsigned comfort letter, when the Interstate principals committed themselves to sell their NSMC stock.[48] This commitment has been defined as "the point at which, in the classical contractual sense, there was a meeting of the minds of the parties . . .." Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d at 891.
The defendants urge that the "meeting of the minds" occurred prior to the receipt of the comfort letter, specifically on October 30 when Brown and Meers agreed on the price to be paid for the stock. As support they point to the price paid for the stock โ $49.50 per share[49] โ and a telephone conversation between Brown and Tate on November 3, during which Brown stated that he expected Tate to abide by the commitment made on October 30.[50] The Commission, on the other hand, argues that no valid commitment could have been made until the merger was consummated and the defendants had received their NSMC stock. In addition, it relies on the testimony of the defendants, that they did not intend to sell NSMC stock unless the merger took place, as support for the lack of a commitment as a factual matter. Under these circumstances, *704 asserts the Commission, no commitment was made by the defendants until the merger was consummated and they had received their NSMC stock.[51]
The Commission's position is persuasive and indeed the evidence supports that conclusion. While the defendants may have felt committed on October 30 to the price and number of shares to be sold following the merger, the evidence clearly shows that they had no expectation or duty to proceed with the sales if the merger was aborted.[52] Such a conditional commitment is not what the courts had in mind when setting the time of commitment as the critical point for antifraud analysis. It is not some magical incantation of "commitment" that sets the point at which disclosure is no longer mandated, but rather the nature of the commitment. In order to prevent the unfair use of material inside information, the commitment must irrevocably bind the parties to their agreement, without regard to further action or inaction on their part. See Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d at 890-91; SEC v. Texas Gulf Sulphur Co., 401 F.2d at 853 n. 17.
Goodman v. Poland, supra, illustrates the type of commitment required to terminate the duty to disclose material information. The defendants in that case had entered into oral stock purchase agreements with various stockholders during the period from February 28 through March 5. Each of the agreements was subject to certain conditions, with the last being expressly conditioned on all minority stockholders agreeing to sell their securities. Specific terms of a final agreement were left to be worked out by counsel. Although the defendants signed the completed agreement on March 15, it was not until March 25 that all parties had signed, and not until April 15 that the signed agreements were exchanged and the securities delivered. The court, following the reasoning of Radiation Dynamics, first concluded that the duty to disclose terminated on the date of commitment. It then looked to the relevant dates to determine which one met the requirements of a commitment:
While it is true that the [defendants] had entered into oral agreements with certain of the plaintiffs herein, those agreements were contingent upon a certain number, or upon all, of the dissident minority stockholders agreeing to sell their securities. That condition was repeatedly emphasized by the [defendants], and the written Agreement of March 15, 1968 itself provided that it would not be binding until all the minority stockholders had signed. This Court, therefore, finds that the parties were not committed to one another until March 25, 1968, when all of the dissident minority stockholders had signed the written Agreement of Purchase and Sale.
395 F.Supp. at 691.
The circumstances here are virtually identical. Although Brown, Meyer and the other Interstate principals had agreed to certain aspects of the stock sale prior to receipt of the comfort letter, they had no intention or obligation to proceed with the sale absent the consummation of the merger of the two companies.[53] The Merger Agreement specifically stated that the obligation of either company to proceed with the merger was subject to the performance of certain conditions. Those conditions, and the recognition by the defendants that the stock sale would not occur unless the merger was consummated, barred the existence of a binding, irrevocable commitment. The earliest point at which such a commitment could have been made was after the closing *705 on October 31, when the merger had been completed and the conditions removed.
This conclusion is particularly justified here, where the defendants themselves played a significant role with respect to fulfilling the conditions for the merger and stock sale. Antifraud liability should not be foreclosed under such circumstances; otherwise, an insider could remain silent upon receiving material information, secure in the knowledge that he is free either to let the merger and sale proceed or to cancel them both by exercising his control over previously set conditions, whichever course appears financially more beneficial. It is this opportunity for unfair advantage that the securities laws prohibit. See Radiation Dynamics, Inc. v. Goldmuntz, supra; SEC v. Texas Gulf Sulphur Co., supra. The defendants having received the unsigned comfort letter prior to the "sale" of NSMC stock by the Interstate principals, their initial contention that the failure to disclose did not have a sufficient nexus with the transactions must be rejected.
Their second argument, however, concerning the lack of a causal relationship between the events of the week of November 3 and either of the "sales" alleged by the Commission, presents a different situation. The SEC has limited its charges against the present defendants to alleged violations with respect to the merger and the sale of NSMC stock by the Interstate principals.[54] Each of these "sales" occurred on October 31, immediately following the consummation of the merger. The events of the following week could not have had any effect on either of the transactions and thus fail to meet the nexus requirement. Nevertheless, they may be considered on a limited basis as "relevant to showing non-disclosure or fraud with respect to events before that date." Goodman v. Poland, 395 F.Supp. at 691.
B. Materiality
Also essential to an alleged violation of the antifraud provisions is that the omission or misstatement be material. In TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S. Ct. 2126, 48 L. Ed. 2d 757 (1976), the Supreme Court articulated the legal standard of materiality with respect to misleading proxy statements.[55] The Court emphasized that "[t]he question of materiality . . . is an objective one, involving the significance of an omitted or misrepresented fact to a reasonable investor." 426 U.S. at 445, 96 S.Ct. at 2130. Elaborating further, the Court stated:
An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. This standard is fully consistent with Mills' [Mills v. Electric Auto-Lite Co., 396 U.S. 375, 384, 90 S. Ct. 616, 24 L. Ed. 2d 593 (1970)] general description of materiality as a requirement that "the defect have a significant propensity to affect the voting process." It does not require proof of a substantial *706 likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote. What the standard does contemplate is a showing of a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder. Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.
426 U.S. at 449, 96 S. Ct. at 2132 (footnote omitted). Thus, the trier of fact must consider all the circumstances surrounding the transaction and then objectively must assess the inferences a reasonable shareholder would draw from the omitted or misrepresented facts and the significance of those inferences to him in his investment decision.
In the present case, the alleged misstatement or omission is the failure to disclose, either to the Interstate shareholders or to the purchasers of the NSMC stock sold by Interstate principals following the merger, the adjustments contained in the unsigned comfort letter delivered at the October 31 closing.[56] Although the defendants contend that the adjustments were not material, and make several arguments in support of that position, the Court concludes that the defendants have misconceived the legal standard of materiality and that the evidence presented clearly demonstrates that the comfort letter adjustments would have assumed "actual significance in the deliberations of the reasonable shareholder" or investor, and were therefore material.
Initially, the sheer magnitude of the adjustments supports a finding that they were material. The interim financials issued by NSMC reflected a profit of $702,270 for the nine-month period ended May 31, 1969. Peat Marwick, NSMC's independent accountants, determined that significant negative adjustments were required to be made in those financials to make them not misleading.[57] Those adjustments, contained in the unsigned comfort letter and referred to therein as "significant", included a $500,000 adjustment to deferred costs, a $300,000 write-off of unbilled receivables, and an $84,000 adjustment to paid-in capital, all of which were retroactive to May 31, 1969.[58] The aggregate adjustments amounted to $884,000, thereby reducing the reported profit by 125 percent and resulting in a net loss for the nine-month period of approximately $180,000. Viewing these figures alone, it is difficult to imagine how the adjustments could not be material.[59]
*707 The defendants, however, disagree. Among other things, they argue that the comfort letter adjustments were not material to the merger transaction because they failed to reflect accurately the financial status of NSMC as it existed on October 31, the date of the closing and the time at which Brown, Meyer and the other Interstate principals were required to decide whether to proceed with the closing or to abandon the merger, at least on its existing terms.[60]
In making this argument, the defendants ignore the fact that the Interstate shareholders made their investment decision to approve the merger a few weeks before the date of the closing, and on the basis of information provided them at that time, largely consisting of the Interstate proxy materials. Therefore, in determining whether the comfort letter adjustments were material, consideration must be given to the information available to the shareholders at the time they approved the merger, not to whatever additional information was available to the Interstate representatives at the closing. See TSC Industries, Inc. v. Northway, Inc., supra; Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S. Ct. 616, 24 L. Ed. 2d 593 (1970);[61]SEC v. Texas Gulf Sulphur Co., 401 F.2d at 862.
In a merger transaction such as that presented here, accurate financial information is necessary in order for a shareholder fairly to be able to vote. "Perhaps nothing is more relevant to a vote on whether or not to approve a merger than the earnings picture of the acquiring company, at least to the stockholder of the company being acquired." Republic Technology Fund, Inc. v. Lionel Corp., 483 F.2d 540, 547 (2d Cir. 1973), cert. denied, 415 U.S. 918, 94 S. Ct. 1416, 39 L. Ed. 2d 472 (1974). "Accordingly, failure to convey these earnings accurately, if the discrepancy is at all substantial, has to be material to the person being misled." 483 F.2d at 551; see Kaiser-Frazer Corp. v. Otis & Co., 195 F.2d 838, 840 (2d Cir.), cert. denied, 344 U.S. 856, 73 S. Ct. 89, 97 L. Ed. 664 (1952).
The interim financials issued by NSMC for the nine-month period were included in the proxy materials sent to the shareholders of Interstate and NSMC. Although the shareholders were also sent audited year-end financials for 1968, the interim statements were NSMC's most current earnings statements available to the Interstate shareholders at the time they approved the merger. As such, they would clearly be of importance to the shareholders of the acquired company in deciding whether to approve the merger.
Moreover, in this instance the Interstate shareholders were specifically informed of the importance of the NSMC financial statements by the proxy materials sent them in connection with the proposed merger. They were advised "to study the NSMC Proxy Statement, hereby incorporated as part of this Proxy Statement, prior to voting your shares," because the NSMC *708 Proxy Statement contained, among other things, "relevant financial statements . . important to your consideration of the proposed merger."[62] The proxy materials also contained copies of the Merger Agreement, which not only represented and warranted that the financial statements of NSMC were accurate and truthful, but in addition, provided a specific requirement of a comfort letter from NSMC's independent accountants to the effect that they had no reason to believe that the unaudited interim financial statements for the nine months ended May 31, 1969, were not prepared in accordance with generally accepted accounting principles or that any material adjustments were necessary to present accurately the results of NSMC's operations. These provisions effectively assured the Interstate shareholders that the financial statements would be accurate. The comfort letter requirement provided an extra measure of assurance, since its receipt by Interstate was a condition precedent to effectuation of the shareholders' investment decision.[63]
The defendants also urge that the conduct of Brown, Meyer and other Interstate representatives at the closing evidences the lack of materiality with respect to the comfort letter adjustments. Those actions, however, are not determinative of materiality since, as noted, that question "is an objective one, involving the significance of an omitted or misrepresented fact to a reasonable investor," TSC Industries, Inc. v. Northway, Inc., 426 U.S. at 445, 96 S. Ct. at 2130 (emphasis added), not the significance of the information to various individual investors.[64]
In any event, even if their conduct and the information available to them at the time of the merger were determinative of materiality, the evidence presented reveals that though the Interstate representatives may not have considered the adjustments decisive to their decision to close the merger, they clearly considered them important and significant โ in other words, material. Upon receipt of the comfort letter, Schauer read it and immediately gave it to Brown, advising him to read it as well. Thereafter, the Interstate representatives questioned those present from NSMC concerning the meaning and effect of the adjustments. They then caucused privately to consider their course of action in light of the information in the letter. They discussed various options, including postponement or calling off the merger. Returning to the conference room, they asked further questions of the NSMC representatives *709 about the adjustments. After receiving assurances as to the accuracy of the year-end earnings estimates and that the adjustments in the comfort letter were the only ones required to be made in the interim financials, the Interstate representatives decided to proceed with the closing. The fact that, after taking these various precautions, Brown, Meyer, and other Interstate representatives made a business judgment that the merger was still in the best interests of the Interstate shareholders does not mean that the adjustments were not material. Decisiveness is not equivalent to materiality.
[Materiality] does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonable investor to change his vote. What the standard does contemplate is a showing of a substantial likelihood that . . . the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder.
TSC Industries, Inc. v. Northway, Inc., 426 U.S. at 449, 96 S. Ct. at 2132; see Mills v. Electric Auto-Lite Co., 396 U.S. at 384-85, 90 S. Ct. 616 (1970). Despite their business judgment to proceed, the conduct of the Interstate representatives clearly demonstrates that they considered the adjustments significant and important in their deliberations. The adjustments would be no less important in the deliberations of the reasonable investor. At the very least, the reasonable shareholder would likely have been disturbed by the adjustments, just as were the defendants, and therefore might have sought further explanation before deciding to approve the merger. Cf. Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1302-03 (2d Cir. 1973).[65]
In summary, the Court concludes that the adjustments contained in the unsigned comfort letter would have altered the total mix of information available and would have assumed actual significance in the deliberations of the reasonable Interstate shareholder. Although it is arguable whether the better business decision under the circumstances was to proceed with the merger, the antifraud provisions prohibit such a course of action when a material misrepresentation or omission has occurred, regardless of the business justification for closing the merger. There is no doubt that the adjustments were material, and therefore Brown and Meyer should have refused to proceed with the merger absent disclosure to and resolicitation of the shareholders.
The adjustments were equally material with respect to the decisions of those purchasing NSMC stock from the Interstate principals. Although the proxy materials were prepared in connection with the merger, they also provided the general investing public, including those purchasers, with the most current information as to the financial condition of NSMC. The revelations in the unsigned comfort letter that the nine-month financials were inaccurate and misleading clearly would have assumed actual significance in the deliberations of those purchasing the NSMC stock from Brown, Meyer and other Interstate principals. As such, Brown and Meyer were prohibited from selling their newly acquired NSMC shares without first disclosing the comfort letter information.
C. Scienter
Finally, there must be proof that Brown and Meyer acted with the requisite degree of culpability. Unfortunately, the level of culpability required in an SEC injunctive *710 action is far from certain. Negligence or the lack of due diligence was previously considered sufficient. E.g., SEC v. Spectrum, Ltd., 489 F.2d 535, 541 (2d Cir. 1973); SEC v. Pearson, 426 F.2d 1339, 1343 (10th Cir. 1970); SEC v. Texas Gulf Sulphur Co., 401 F.2d at 854-55, 866-68 (concurring opinion); but see, e.g., SEC v. Coffey, 493 F.2d 1304, 1314 (6th Cir. 1974), cert. denied, 420 U.S. 908, 95 S. Ct. 826, 42 L. Ed. 2d 837 (1975). However, that position has been significantly eroded by Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S. Ct. 1375, 47 L. Ed. 2d 668 (1976), where the Supreme Court held that scienter, defined as a "mental state embracing intent to deceive, manipulate, or defraud," 425 U.S. at 193-94 n. 12, 96 S. Ct. at 1381, was a necessary element in a private damage action under ง 10(b) and Rule 10b-5. While the Court expressly refused to consider whether scienter was also required in an injunctive action alleging violations of ง 10(b) and Rule 10b-5, its analysis of the language of the statutory provision strongly suggests that proof of scienter is required in all actions under ง 10(b), regardless of the identity of the parties involved. See 425 U.S. at 217-18, 96 S. Ct. 1375 (Blackmun, J., dissenting). Nevertheless, courts have still failed to reach a consensus on the issue. Compare SEC v. Southwest Coal & Energy Co., 439 F. Supp. 820, 825 (W.D.La.1977); SEC v. American Realty Trust, 429 F. Supp. 1148, 1171 (E.D.Va.1977); and SEC v. Bausch & Lomb, Inc., 420 F. Supp. 1226, 1240-41 (S.D. N.Y.1976) (scienter required), aff'd on other grounds, 565 F.2d 8 (2d Cir. 1977) with SEC v. World Radio Mission, Inc., 544 F.2d 535, 540-41 (1st Cir. 1976); SEC v. Hart, No. 78-65 (D.D.C. May 26, 1978) (alternate holding); and SEC v. Goetek, 426 F. Supp. 715, 726 (N.D.Cal.1976) (scienter not required).[66]
Similar confusion prevails with respect to the role of scienter in an injunctive action involving alleged violations of ง 17(a). Several courts have focused on the Supreme Court's suggestion in Hochfelder that the language of ง 17(a) may be broader in scope than that of ง 10(b), see 425 U.S. at 212-13 & n. 32, 96 S. Ct. 1375, and have concluded that ง 17(a) encompasses both intentional and negligent misconduct, at least in actions brought by the SEC for injunctive relief. SEC v. Coven, 581 F.2d 1020, at 1027-1028 (2d Cir. 1978); SEC v. Southwest Coal & Energy Co., 439 F.Supp. at 826; see Comment, Scienter and SEC Injunction Suits, 90 Harv.L.Rev. 1018, 1021 n. 24 (1977). Other courts, however, have come to a contrary conclusion and have required scienter under ง 17(a) as well as under ง 10(b). SEC v. American Realty Trust, supra; see SEC v. Cenco, Inc., 436 F. Supp. 193 (N.D.Ill.1977).
Though these are important issues, the resolution of which would be welcome to the securities bar, the Court concludes that they need not be decided at this time, because the conduct of Brown and Meyer in this case meets the prevailing standard for scienter.
After receiving the unsigned comfort letter at the closing, the Interstate representatives immediately expressed concern over the new information; they caucused privately and sought and received various oral assurances from the NSMC representatives. Moreover, the new information included adjustments which were far from insubstantial; they reduced the reported profit of NSMC by several hundreds of thousands of dollars and converted what had been a sizable profit into a net loss. Despite the obvious materiality of this information, especially as demonstrated by their conduct, *711 they made a conscious decision not to disclose it. Such conduct has been found sufficient to meet the scienter requirement. McLean v. Alexander, 420 F. Supp. 1057, 1080-82 (D.Del.1976); see Nassar & Co., Inc. v. SEC, 185 U.S.App.D.C. 125, 130 n. 3, 566 F.2d 790, 795 n. 3 (1977) (Leventhal, J., concurring); Lanza v. Drexel & Co., 479 F.2d 1277, 1305 (2d Cir. 1973).
This knowing failure to disclose does not alone support a finding of scienter here. Also relevant are certain extrinsic factors, such as the presence of trading in the security during the period in question, actions taken by the defendant to remedy his prior actions, the pattern of the defendant's conduct, and any other similar conduct by the defendant. See SEC v. Bausch & Lomb, Inc., 420 F.Supp. at 1242. The Commission concedes that none of the defendants has been involved in other misconduct, either before or since the incidents alleged here. Further, the present actions took place within a short period of time, with some pressure on the participants to choose a course of action and proceed.
Nevertheless, it cannot be ignored that Brown and Meyer expected to profit handsomely from the merger and the subsequent stock sales.[67] They were in no haste to disseminate the comfort letter information, and in fact they never revealed the adjustments, even after NSMC's year-end audit had been released and their fears of the adjustments being taken out of context should have been assuaged. Finally, although it is difficult to assess their concern with regard to the market value of NSMC stock it is apparent that a major reason for not disclosing the information was the protection of the investments made by Interstate shareholders, including themselves, by avoiding any action which could have a detrimental effect on the price of the stock. These circumstances provide strong additional support for an inference that the defendants acted with scienter.
In any event, to the extent an inference of actual intent to deceive, manipulate, or defraud may be inappropriate, the defendants' actions here clearly constitute "the kind of recklessness that is equivalent to wilful fraud," SEC v. Texas Gulf Sulphur Co., 401 F.2d at 868 (concurring opinion), and which also satisfies the scienter requirement. Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d 38, 44-47 (2d Cir. 1978); Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1040, 1044 (7th Cir.), cert. denied, 434 U.S. 875, 98 S. Ct. 225, 54 L. Ed. 2d 155 (1978); SEC v. Hart, supra; see SEC v. American Realty Trust, 429 F.Supp. at 1171 n. 8; SEC v. Bausch & Lomb, Inc., 420 F.Supp. at 1243 n. 4; McLean v. Alexander, 420 F.Supp. at 1080-81. The failure to disclose the material information in this case was neither inadvertent, compare SEC v. Bausch & Lomb, Inc., 420 F.Supp. at 1242, nor the product of simple forgetfulness, see Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d at 1045 n. 20,[68] but *712 instead the result of a conscious decision made by the defendants. In view of the obviousness of the danger that investors would be misled by their failure to disclose the material information, such conduct must be considered reckless. Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d at 1047-48 (obvious danger of misleading investor, coupled with conscious decision not to disclose information, establishes recklessness as a matter of law).
Accordingly, the Court finds that Brown and Meyer violated ง 10(b), Rule 10b-5, and ง 17(a) through their participation in the closing of the Interstate/NSMC merger and through their sales of NSMC stock immediately following the merger, in each instance without first disclosing the material information contained in the unsigned comfort letter.
IV. AIDING AND ABETTING
The Court must now turn to the Commission's charges that the defendants aided and abetted these two violations of the antifraud provisions. The violations themselves establish the first element of aiding and abetting liability, namely that another person has committed a securities law violation. Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d at 47; Woodward v. Metro Bank of Dallas, 522 F.2d 84, 95 (5th Cir. 1975); SEC v. Coffey, 493 F.2d at 1316. The remaining elements, though not set forth with any uniformity, are essentially that the alleged aider and abettor had a "general awareness that his role was part of an overall activity that is improper, and [that he] knowingly and substantially assisted the violation." SEC v. Coffey, supra. Accord, Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d at 47-48; Woodward v. Metro Bank of Dallas, 522 F.2d at 94-97. See generally, Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and Abetting, Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120 U.Pa. L.Rev. 597 (1972); 3 A. Bromberg, supra at ง 8.5(530).
The Commission's allegations of aiding and abetting by the defendants, specified at page 700 supra, seem to fall into four basic categories: (1) the failure of the attorney defendants to take any action to interfere in the consummation of the merger;[69] (2) the issuance by the attorneys of an opinion with respect to the merger; (3) the attorneys' subsequent failure to withdraw that opinion and inform the Interstate shareholders or the SEC of the inaccuracy of the nine-month financials; and (4) the issuance by the attorneys and Brown of an opinion and letter, respectively, concerning the validity of the stock sales under Rule 133. The SEC's position is that the defendants acted or failed to act with an awareness of the fraudulent conduct by the principals, and thereby substantially assisted the two violations. The Court concurs with regard to the attorneys' failure to interfere with the closing, but must conclude that the remaining actions or inaction alleged to constitute aiding and abetting did not substantially facilitate either the merger or the stock sales.
As noted, the first element of aiding and abetting liability has been established by the finding that Brown and Meyer committed primary violations of the securities laws. Support for the second element, that the defendants were generally aware of the fraudulent activity, is provided by the previous discussion concerning scienter. With the exception of LBB, which is charged with vicarious liability, each of the defendants was actually present at the closing of the merger when the comfort letter was delivered and the adjustments to the nine-month financials were revealed. Each was *713 present at the Interstate caucus and the subsequent questioning of the NSMC representatives; each knew of the importance attributed to the adjustments by those present. They knew that the Interstate shareholders and the investing public were unaware of the adjustments and the inaccuracy of the financials. Despite the obvious materiality of the information, see section III-B supra, each knew that it had not been disclosed prior to the merger and stock sale transactions. Thus, this is not a situation where the aider and abettor merely failed to discover the fraud, see Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d at 52 (Mansfield, J., dissenting), or reasonably believed that the victims were already aware of the withheld information, Hirsch v. du Pont, 553 F.2d 750, 759 (2d Cir. 1977). The record amply demonstrates the "knowledge of the fraud, and not merely the undisclosed material facts," Hirsch v. du Pont, supra, that is required to meet this element of secondary liability. See Ruder, supra at 630-31.
The final requirement for aiding and abetting liability is that the conduct provide knowing, substantial assistance to the violation. In addressing this issue, the Court will consider each of the SEC's allegations separately. The major problem arising with regard to the Commission's contention that the attorneys failed to interfere in the closing of the merger is whether inaction or silence constitutes substantial assistance. While there is no definitive answer to this question, courts have been willing to consider inaction as a form of substantial assistance when the accused aider and abettor had a duty to disclose. Woodward v. Metro Bank of Dallas, 522 F.2d at 97; see Kerbs v. Fall River Industries, Inc., 502 F.2d at 740; Brennan v. Midwestern United Life Ins. Co., 417 F.2d 147, 154 (7th Cir. 1969), cert. denied, 397 U.S. 989, 90 S. Ct. 1122, 25 L. Ed. 2d 397 (1970). Although the duty to disclose in those cases is somewhat distinguishable, in that they contemplate disclosure to an opposing party and not to one's client, they are sufficiently analogous to provide support for a duty here.
Upon receipt of the unsigned comfort letter, it became clear that the merger had been approved by the Interstate shareholders on the basis of materially misleading information. In view of the obvious materiality of the information, especially to attorneys learned in securities law, the attorneys' responsibilities to their corporate client required them to take steps to ensure that the information would be disclosed to the shareholders. However, it is unnecessary to determine the precise extent of their obligations here, since it is undisputed that they took no steps whatsoever to delay the closing pending disclosure to and resolicitation of the Interstate shareholders. But, at the very least, they were required to speak out at the closing concerning the obvious materiality of the information and the concomitant requirement that the merger not be closed until the adjustments were disclosed and approval of the merger was again obtained from the Interstate shareholders. Their silence was not only a breach of this duty to speak, but in addition lent the appearance of legitimacy to the closing, see Kerbs v. Fall River Industries, Inc., supra. The combination of these factors clearly provided substantial assistance to the closing of the merger.
Contrary to the attorney defendants' contention, imposition of such a duty will not require lawyers to go beyond their accepted role in securities transactions, nor will it compel them to "err on the side of conservatism, . . . thereby inhibiting clients' business judgments and candid attorney-client communications."[70] Courts will not lightly overrule an attorney's determination of materiality and the need for disclosure. However, where, as here, the significance of the information clearly removes any doubt concerning the materiality of the information, attorneys cannot rest on asserted "business judgments" as justification for their failure to make a legal decision *714 pursuant to their fiduciary responsibilities to client shareholders.
The Commission also asserts that the attorneys substantially assisted the merger violation through the issuance of an opinion that was false and misleading due to its omission of the receipt of the comfort letter and of the completion of the merger on the basis of the false and misleading nine-month financials.[71] The defendants contend that a technical reading of the opinion demonstrates that it is not false and misleading, and that it provides accurate opinions as to Interstate's compliance with certain corporate formalities. Of concern to the Court, however, is not the truth or falsity of the opinion, but whether it substantially assisted the violation. Upon consideration of all the circumstances, see Woodward v. Metro Bank of Dallas, 522 F.2d at 97, the Court concludes that it did not.
Contrary to the implication made by the SEC, the opinion issued by the attorneys at the closing did not play a large part in the consummation of the merger. Instead, it was simply one of many conditions to the obligation of NSMC to complete the merger. It addressed a number of corporate formalities required of Interstate by the Merger Agreement, only a few of which could possibly involve compliance with the antifraud provisions of the securities laws.[72] Moreover, the opinion was explicitly for the benefit of NSMC, which was already well aware of the adjustments contained in the comfort letter. Thus, this is is not a case where an opinion of counsel addresses a specific issue and is undeniably relied on in completing the transaction. Compare SEC v. Coven, 581 F.2d 1020, at 1028; SEC v. Spectrum, Ltd., 489 F.2d 535 (2d Cir. 1973). Under these circumstances, it is unreasonable to suggest that the opinion provided substantial assistance to the merger.
The SEC's contention with regard to counsel's alleged acquiescence in the merger transaction raises significant questions concerning the responsibility of counsel. The basis for the charge appears to be counsel's failure, after the merger, to withdraw their opinion, to demand resolicitation of the shareholders, to advise their clients concerning rights of rescission of the merger, and ultimately, to inform the Interstate shareholders or the SEC of the completion of the merger based on materially false and misleading financial statements. The defendants counter with the argument that their actions following the merger are not subject to the coverage of the securities laws.
The filing of the complaint in this proceeding generated significant interest and an almost overwhelming amount of comment within the legal profession on the scope of a securities lawyer's obligations to his client and to the investing public.[73] The very initiation of this action, therefore, has provided a necessary and worthwhile impetus for the profession's recognition and assessment of its responsibilities in this area. The Court's examination, however, must be more limited. Although the complaint alleges varying instances of misconduct on the part of several attorneys and firms, the Court must narrow its focus to the present defendants and the charges against them.
Meyer, Schauer and Lord, Bissell & Brook are, in essence, here charged with failing to take any action to "undo" the merger. The Court has already concluded that counsel had a duty to the Interstate shareholders to delay the closing of the merger pending disclosure and resolicitation with corrected financials, and that the breach of that duty constituted a violation of the antifraud provisions through aiding and abetting the merger transaction. The Commission's charge, however, concerns the period following that transaction. Even if the attorneys' fiduciary responsibilities to the Interstate shareholders continued beyond *715 the merger, the breach of such a duty would not have the requisite relationship to a securities transaction, since the merger had already been completed.[74] It is equally obvious that such subsequent action or inaction by the attorneys could not substantially assist the merger.
The final contention of the SEC concerns the issuance by the attorneys and Brown of the Rule 133 opinion and letter, respectively. Little discussion is necessary with respect to this charge, for the Commission has clearly failed to show that these documents substantially assisted the stock sales. Neither of the documents were required by the Merger Agreement, but were requested by NSMC at the closing of the merger. The documents were not intended for the investing public, but for the sole use of NSMC and its counsel in preparing a formal, independent opinion concerning the validity of the sales under Rule 133. Further, the documents were limited to primarily factual issues relevant to the requirements of the Rule, and in no way indicated that they could be relied upon with regard to compliance with the antifraud provisions. Under the circumstances, the Court concludes that the Rule 133 documents issued by the attorneys and Brown did not substantially assist the stock sales by Interstate principals, specifically Brown and Meyer.
Thus, the Court finds that the attorney defendants aided and abetted the violation of ง 10(b), Rule 10b-5, and ง 17(a) through their participation in the closing of the merger.
V. APPROPRIATENESS OF INJUNCTIVE RELIEF
Although the Commission has proved past violations by the defendants, that does not end the Court's inquiry. Proof of a past violation is not a prerequisite to the grant of injunctive relief, see United States v. W. T. Grant Co., 345 U.S. 629, 633, 73 S. Ct. 894, 97 L. Ed. 1303 (1953), nor by itself necessarily sufficient to justify such relief, see SEC v. Bausch & Lomb, Inc., 565 F.2d 8 (2d Cir. 1977); SEC v. Management Dynamics, Inc., 515 F.2d 801, 807 (2d Cir. 1975), but it may, in combination with other factors, warrant an inference of future misconduct by the charged party, SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1100 (2d Cir. 1972). The crucial question, though, remains not whether a violation has occurred, but whether there exists a reasonable likelihood of future illegal conduct by the defendant, "something more than the mere possibility which serves to keep the case alive." United States v. W. T. Grant Co., supra. Thus, the SEC must "go beyond the mere facts of past violations and demonstrate a realistic likelihood of recurrence." SEC v. Commonwealth Chemical Securities, Inc., 574 F.2d 90, 100 (2d Cir. 1978).
The factors which are relevant to such a showing have been previously stated by this Court:
The character of the past violations, the effectiveness of the discontinuance and the bona fides of the expressed intent to comply are considered. The number and duration of past wrongs, the time which has elapsed since the last violation, the opportunity to commit further illegal acts, the novelty of the violation, and the harmful impact of the injunction on the defendant are objective factors which the courts have examined. Subjective inquiries *716 into the wilfulness or bad faith in a defendant's prior conduct and the sincerity of his representations not to violate the law are also pertinent.
SEC v. National Student Marketing Corp., 360 F. Supp. 284, 297 (D.D.C.1973). Accord, SEC v. Universal Major Industries Corp., 546 F.2d 1044, 1048 (2d Cir. 1976); SEC v. Management Dynamics, Inc., supra; SEC v. Penn Central Co., 425 F. Supp. 593, 597 (E.D.Pa.1976). The Court must assess these factors and determine, under the "totality of circumstances", "[w]hether the inference that the defendant is likely to repeat the wrong is properly drawn . . .." SEC v. Management Dynamics, Inc., supra. Exercising the broad discretion accorded it in making this determination, SEC v. Universal Major Industries Corp., 546 F.2d at 1048; SEC v. National Student Marketing Corp., supra, the Court concludes that in this instance injunctive relief is not warranted.
The Commission has not demonstrated that the defendants engaged in the type of repeated and persistent misconduct which usually justifies the issuance of injunctive relief. See, e. g., SEC v. Savoy Industries, Inc., 190 U.S.App.D.C. ___, at ___ n. 37, ___, 587 F.2d 1149, at 1162; SEC v. Commonwealth Chemical Securities, Inc., 574 F.2d at 100; SEC v. Shapiro, 494 F.2d 1301, 1308 (2d Cir. 1974). Instead, it has shown violations which principally occurred within a period of a few hours at the closing of the merger in 1969. The Commission has not charged, or even suggested, that the defendants were involved in similar misconduct either before or after the events involved in this proceeding. Thus, the violations proved by the SEC appear to be part of an isolated incident, unlikely to recur and insufficient to warrant an injunction. See SEC v. Bausch & Lomb, Inc., 565 F.2d at 19; SEC v. Parklane Hosiery Co., 422 F. Supp. 477, 487 (S.D.N.Y.1976), aff'd, 558 F.2d 1083 (2d Cir. 1977). The Commission appears to agree, for in the six years since the filing of this action, it has made no attempt to obtain interlocutory injunctive relief against these defendants. Such inaction argues strongly against the need for injunctive relief. See SEC v. Parklane Hosiery Co., supra.
Further, it is difficult to characterize the violations presented here as either "willful, blatant, and often completely outrageous," SEC v. Manor Nursing Centers, Inc., 458 F.2d at 1101, or as the "garden variety fraud" urged by the Commission, SEC Post-Trial Brief at 129. There is no evidence to suggest that these defendants knew about the comfort letter adjustments prior to the receipt of the unsigned comfort letter at the closing; and after receiving the letter, the defendants were under some pressure to determine a course of action, either to proceed with the transactions as scheduled or to abort both the merger and stock sales. Although it has now been found that they unlawfully and with scienter decided to proceed, their actions in this regard hardly resemble the deliberate and well-planned fraudulent scheme frequently found in securities fraud cases.
Finally, the Commission asserts that an injunction is necessary because the professional occupations of the defendants provide significant opportunities for further involvement in securities transactions. It notes that Brown holds positions as a director and as a consultant with NSMC, and that Meyer, Schauer and LBB continue to be involved in various corporate activities, including securities transactions, as part of their legal practice. While these opportunities distinguish the present defendants from those who, because they completely lack such opportunities, should not be subject to the threat of an injunction, see SEC v. National Student Marketing Corp., 360 F.Supp. at 300, they do not alone justify relief. In fact, various circumstances indicate that this factor is not as one-sided as the Commission suggests. Although Brown retains his positions with NSMC, he is in effect virtually retired; the likelihood of his being involved in a securities transaction, other than as an investor, seems quite small. See SEC v. Parklane Hosiery Co., supra. While the attorney defendants are more likely to be so involved, that fact is countered somewhat by their professional responsibilities as attorneys and officers of the court to conform their conduct to the *717 dictates of the law. The Court is confident that they will take appropriate steps to ensure that their professional conduct in the future comports with the law.[75]
After considering the "totality of circumstances" presented here, the Court concludes that the Securities and Exchange Commission has not fulfilled its statutory obligation to make a "proper showing" that injunctive relief is necessary to prevent further violations by these defendants. Accordingly, judgment will be entered for the defendants and the complaint will be dismissed.[*]
NOTES
[1] Other opinions filed by this Court in connection with this proceeding are reported at 430 F. Supp. 639 (1977); 73 F.R.D. 444 (1977); 402 F. Supp. 641 (1975); 68 F.R.D. 157 (1975), aff'd, 179 U.S.App.D.C. 56, 538 F.2d 404 (1976), cert. denied, 429 U.S. 1073, 97 S. Ct. 809, 50 L. Ed. 2d 790 (1977); 59 F.R.D. 305 (1973); 360 F. Supp. 284 (1973).
[2] NSMC consented to the entry against it of a Judgment of Permanent Injunction on July 27, 1972. Similar entries of judgment were made against the following defendants on the dates indicated: Bernard J. Kurek, May 7, 1974; Peat, Marwick, Mitchell & Co., July 2, 1975; Joseph Scansaroli, December 6, 1976; James F. Joy, December 30, 1976; Cortes W. Randell, January 25, 1977; Anthony M. Natelli, January 25, 1977; Robert A. Katz, April 26, 1977; Marion Jay Epley, III, May 16, 1977; Roger O. Walther, May 16, 1977; Donald A. Fergusson, May 16, 1977; and John G. Davies, August 22, 1977. A settlement Order was agreed to between the SEC and White & Case and filed on May 16, 1977. Motions for summary judgment filed by Paul E. Allison, William J. Bach and Robert P. Tate were granted March 7, 1973.
[3] The $144 per share figure is based on an adjustment for a 2-for-1 stock split in December 1968; the actual price in mid-December 1969 was $72 per share.
[4] Cameron Brown had the largest single holding of Interstate shares; he owned approximately 16,000 shares of common stock and about 11,500 of preferred, with each of the preferred shares convertible to 20 shares of common.
[5] Meyer held 1,240 shares of Interstate common stock in his own name and served, at Brown's request, as trustee of several trusts created by Brown for his children, the corpora of which were Interstate stock.
[6] Because of an accounting method in use in 1969, a company was permitted to "pool" the earnings of an acquired company with the earnings of the parent as though the companies had always operated together. However, in order for NSMC to take advantage of this retroactive pooling, no more than 25 percent of the shares received in the merger exchange could be sold during the first year.
[7] On June 10, 1969, NSMC's stock was selling for a bid price of $44.50 per share, while Interstate's stock was selling for a bid price of $14.25. The agreed exchange ratio of three Interstate shares for two NSMC shares had the effect of valuing the Interstate stock at approximately $30 per share, twice its then market value.
[8] SEC Exhibit 31 at 127 ถ 5(u), 131 ถ 6(u) [Merger Agreement at 7 ถ 5(u), 11 ถ 6(u)].
[9] Id. at 124 ถ 5(d), 128 ถ 6(d) [Merger Agreement at 4 ถ 5(d), 8 ถ 6(d)].
[10] Id. at 128 ถ 6(d) [Merger Agreement at 8 ถ 6(d)].
[11] Id. at 131-32 ถ 8(a), 133-34 ถ 9(a) [Merger Agreement at 11-12 ถ 8(a), 13-14 ถ 9(a)].
[12] Id. at 133 ถ 8(e), 134-35 ถ 9(e) [Merger Agreement at 13 ถ 8(e), 14-15 ถ 9(e)].
[13] Id. at 136 ถ 18 [Merger Agreement at 16 ถ 18].
[14] Id. at 133 ถ 8(k), 135 ถ 9(j) [Merger Agreement at 13 ถ 8(k), 15 ถ 9(j)].
[15] SEC Exhibit 32 at 2; see also id. at 5.
[16] At a stockholders meeting held October 8, 1969, NSMC shareholders approved an increase in the company's authorized shares and then approved the merger of Interstate and five other companies with NSMC. The Special Meeting of Interstate's shareholders was held on October 17, 1969. At that meeting, the merger with NSMC was approved by a vote of 556,931 shares of Interstate common in favor of the merger, 1450 common shares against, and all 27,000 shares of Interstate preferred in favor of the merger.
[17] Joy of NSMC did call Brown on October 29, 1969, to inform him that Peat Marwick had almost completed its audit of NSMC for fiscal 1969, that NSMC's predicted earnings were on target, and that in an effort to make the company's books as clean as possible, Peat Marwick was proposing some changes in NSMC's financial statements which might relate back to May 1969. Joy did not inform Brown, however, of the nature of the adjustments or that they would be reflected in the comfort letter to be delivered to Interstate pursuant to the terms of the Merger Agreement.
[18] The entire letter reads as follows:
Gentlemen:
Under the date of November 14, 1968 we reported on certain financial statements and related schedules of National Student Marketing Corporation.
We have not made an examination of the consolidated financial statements nor audited the records or transactions of National Student Marketing Corporation and its consolidated subsidiaries for the nine months ended May 31, 1969. Accordingly, we express no opinion on such consolidated financial statements.
At your request, we have made a review to October 28, 1969 which does not constitute an examination in accordance with generally accepted auditing standards of National Student Marketing Corporation's consolidated financial statement as of and for the nine months ended May 31, 1969. Accordingly, we have:
(a) Read the aforementioned unaudited consolidated financial statement for the nine months period ended May 31, 1969 and the unaudited consolidated financial statements for the year ended August 31, 1969, which are the latest available interim and annual unaudited financial statements;
(b) Read the minutes of the meetings of the stockholders, Board of Directors, and Executive Committee held during the period from August 31, 1968 to October 28, 1969 included in the minute books at October 28, 1969, officials of the Company having advised us that the minutes of all meetings through that date were set forth therein; and
(c) Had discussions with officials of the Company responsible for financial and accounting matters as to transactions and events subsequent to August 31, 1968, and as to whether adjustments had been made to effect a reasonable closing at May 31, 1969.
Our work did not extend to the period from October 28, 1969 to the date of this letter. It should be understood that this limited review would not necessarily reveal adverse changes in the financial position or results of operations of the Companies or inconsistencies in the application of generally accepted accounting principles. Subject to this explanation and based upon the aforementioned limited review, nothing has come to our attention which caused us to believe that:
1. The National Student Marketing Corporation's unaudited consolidated financial statements as of and for the nine months ended May 31, 1969:
a. Were not prepared in accordance with accounting principles and practices consistent in all material respects with those followed in the preparation of the audited consolidated financial statements which are covered by our report dated November 14, 1968;
b. Would require any material adjustments for a fair and reasonable presentation of the information shown except with respect to consolidated financial statements of National Student Marketing Corporation and consolidated subsidiaries as they existed at May 31, 1969 and for the nine months then ended, our examination in connection with the year ended August 31, 1969 which is still in process, disclosed the following significant adjustments which in our opinion should be reflected retroactive to May 31, 1969:
1. In adjusting the amortization of deferred costs at May 31, 1969, to eliminate therefrom all costs for programs substantially completed or which commenced 12 months or more prior, an adjustment of $500,000 was required. Upon analysis of the retroactive effect of this adjustment, it appears that the entire amount could be determined applicable to the period prior to May 31, 1969. 2. In August 1969 management wrote off receivables in amounts of $300,000. It appears that the uncollectibility of these receivables could have been determined at May 31, 1969 and such charge off should have been reflected as of that date.
3. Acquisition costs in the amount of $84,000 for proposed acquisitions which the Company decided not to pursue were transferred from additional paid-in capital to general and administrative expenses. In our opinion, these should have been so transferred as of May 31, 1969.
2. During the period from May 31, 1969 to October 28, 1969 there has been no material adverse change in the consolidated financial position of National Student Marketing Corporation and its consolidated subsidiaries, or any material adverse change in results of operations of National Student Marketing Corporation and its consolidated subsidiaries as compared with the nine month period ended May 31, 1969 after giving retroactive effect at May 31, 1969 of the adjustments disclosed above.
The terms "financial position" and "results of operations" are used herein in their conventional accounting sense; accordingly, they relate to the consolidated financial statements of the business as a whole and have the same meaning when used in this letter as they have when used in our report.
It is understood that this letter is for the information of Interstate National Corporation and is not to be quoted, or referred to in whole or in part, in any literature used in connection with the expense of securities except for any reference to it in an agreement and plan of merger or in a list of closing documents.
Very truly yours,
SEC Exhibit 54.
[18A] The oral representations of Randell and Joy were not entirely accurate. Peat Marwick was not "tightening up" NSMC's accounting practices, but instead was simply employing the accounting principles and practices previously used by the company. See SEC Exhibit 54. Further, although the NSMC representatives suggested that the adjustments were a matter of timing and would be reflected in NSMC's final quarter rather than in the third quarter ended May 31, in fact a large portion of the deferred costs adjustments and the entire adjustment to paid-in capital were not included in the company's year-end financials. Transcript (Tr.) 181-83, 375-76.
[19] Although there is some dispute whether all the Interstate representatives present at the closing participated in the caucus, resolution of that dispute is not necessary to the disposition of this case.
[20] The pressure to close on October 31 derived from a public announcement to that effect; it was therefore likely that any delay would have had an adverse impact on the stock of both companies. The 4 p.m. deadline was the closing time of the District of Columbia office where the merger documents were to be filed.
[21] Because October 31, 1969, was a state holiday in Nevada, the state where Interstate was incorporated, documents reflecting the acquisition of the company by NSMC were filed in that state on Monday, November 3, 1969, to take effect as of October 31, 1969.
[22] The LBB opinion letter, delivered to NSMC at the closing, reads in pertinent part:
Gentlemen:
We have acted as counsel to Interstate in connection with the merger of Interstate into NSMC pursuant to the Plan. In such capacity, we have examined the Plan together with Exhibits A, B and C thereto; the charters, by-laws in minutes of Interstate and its Subsidiaries (as defined in the Plan), corporate records, certificates of public officials and of officers and representatives of Interstate and such other documents deemed necessary to enable us to give the opinion hereinafter expressed.
Based on the foregoing and having due regard to legal considerations we deem relevant, we are of the opinion that:
* * * * * *
7. The Plan has been duly executed and delivered by Interstate and is a valid and binding obligation in accordance with its terms and any corporate action by Interstate required in order to authorize the transactions therein contemplated has been taken.
8. To our knowledge, neither Interstate nor any Subsidiary is engaged in or threatened with any legal action or other proceeding, or has incurred or been charged with any presently pending violation of any Federal, state or local law or administrative regulation, which would materially adversely affect or impair the financial condition, business, operations, prospects, properties or assets of Interstate.
* * * * * *
10. All other action and proceedings required by law or the Plan to be taken by Interstate at or prior to the Effective Date in connection with the Plan and the transactions provided for therein have been duly and validly taken.
* * * * * *
SEC Exhibit 52.
[23] This belief stemmed from representations made by Epley in his telephone conversations with Peat Marwick. From those conversations Peat Marwick received the justifiable impression that counsel for both Interstate and NSMC were aware of the problems engendered by the adjustments and had concluded that the merger could take place nonetheless. See SEC Exhibit 71 at 2.
[24] SEC Exhibit 57 at 3.
[25] A significant cause of their concern was a statement contained in a copy of a letter from Peat Marwick to Epley which accompanied the signed comfort letter; that letter suggested that Epley was aware of the additional paragraphs on the day of the closing. SEC Exhibit 57, Letter dated October 31, 1969, from Peat Marwick to Mr. Eplee (sic). Jeffers, however, was concerned with the adjustments in general, stating that it was very unusual for them to be included in a comfort letter, that he was surprised the Interstate representatives had closed without a signed comfort letter, and that the deferred cost adjustment of $500,000 was "a hell of a big adjustment," Tr. 2142.
[26] Although Breslin indicated to the Interstate directors that he was unfamiliar with the comfort letter information, he in fact had discussed the contents of the letter with the Washington Peat Marwick office which had called him after the closing on October 31. The Washington office informed Breslin that adjustments were required in NSMC's financials, that the closing was nonetheless completed, and that the numbers and problems involved were going to be included in the comfort letter.
[27] SEC Rule 133(d), promulgated under the Securities Act of 1933 and in effect during the period covered by this action, exempts certain stock transactions from the registration requirements of the Act if sold in brokers' transactions and if the seller โ
(1) Does not directly or indirectly solicit or arrange for the solicitation of orders to buy in anticipation of or in connection with such brokers' transactions;
(2) Makes no payment in connection with the execution of such brokers' transactions to any person other than the broker; and
(3) Limits such brokers' transactions to a sale or series of sales which together with all other sales of securities of the same class by such person or on his behalf within the preceding 6 months will not exceed the following:
(i) If the security is traded only otherwise than on a securities exchange, approximately one percent of the shares or units of such security outstanding at the time of receipt by the broker of the order to execute such transactions, or
(ii) If the security is admitted to trading on a securities exchange, the lesser of approximately (a) one percent of the shares or units of such security outstanding at the time of receipt by the broker of the order to execute such transactions or (b) the largest aggregate reported volume of trading on securities exchanges during any one week within the four calendar weeks preceding the receipt of such order.
17 C.F.R. ง 230.133 (1969). Rule 133 was rescinded effective January 1, 1973, 37 Fed.Reg. 23636 (1972).
The sale of the NSMC stock under Rule 133 did not affect the accounting requirement limiting the amount sold to 25 percent in order to allow "pooling" of Interstate and NSMC financials. See note 6 supra.
[28] The low and high bid prices of NSMC stock during the week of the closing and the first day thereafter were as follows:
Date Bid
October 27, 1969 $51 - $53
October 28, 1969 51 - 52ฝ
October 29, 1969 51ฝ - 52ฝ
October 30, 1969 49 - 50ฝ
October 31, 1969 50 - 54
November 3, 1969 51 - 54ฝ
Defendants' Exhibit L 202 at 8.
[29] The restriction on the sale derived from an earlier merger transaction involving Interstate. In that transaction Interstate exchanged shares of preferred stock for the stock of a company it acquired. Those receiving the preferred stock, including Brown, were supposed to have an "investment intent" which restricted the subsequent sale of their Interstate shares. Although Schauer argued that the merger of Interstate and NSMC constituted a change of circumstances sufficient to permit the shares to be sold, counsel for White Weld did not agree and would not give an opinion on the validity of the Rule 133 transaction as to those preferred shares of Interstate stock.
[30] The memorandum prepared by White & Case stated in part:
We believe that procedures should be established to be followed in connection with dispositions of NSMC stock issued to persons who may be "affiliates" within the meaning of Rule 133. Prior to permitting any such disposition, you should receive the following:
1. Opinion of this firm that the transaction constitutes a "Rule 133 transaction".
2. Letter from the selling "affiliate" to the effect that:
(a) He has not and will not, directly or indirectly, solicited or arranged for the solicitation of orders to buy in anticipation of or in connection with his sales.
(b) He has made and will make no payment in connection with the execution of the sale to any person other than his broker.
(c) A statement as to the number of shares of NSMC stock sold within the preceding six months by the selling "affiliate" and all such sales by members of his immediate family and anyone else who might be deemed an "associate" of the "affiliate".
. . . . .
4. Two troublesome legal areas which may arise are the question of who constitutes an "affiliate" and how many persons may be combined into a single "person" for determining the applicability of the sale formula. In both of these situations, you should obtain an opinion of counsel for the possible "affiliate" after which we would confer with you as to the acceptability of the opinion. It is preferable for the initial determination of these questions to be made by counsel for the possible "affiliate" since it is essentially a factual matter, and they presumably are more familiar with the facts than you or we would be.
SEC Exhibit 121.
[31] The letter sent over Brown's signature reads as follows:
Dear Sirs:
As you know, I have been acting on behalf of myself and certain other persons who may be deemed to have been "affiliates" of Interstate National Corporation in connection with the proposed disposition of a portion of the Common Stock of National Student Marketing Corporation to be distributed to us in connection with the merger of Interstate National Corporation into National Student Marketing Corporation. Orders have been placed with White, Weld & Co. for the sale of such Common Stock by the persons and in the amounts set forth on the schedule annexed hereto.
Such other persons have advised me that they have taken no action in connection with their proposed dispositions and I hereby confirm to you as follows:
(a) I have not and will not, directly or indirectly, solicited or arranged for the solicitation of orders to buy in anticipation of or in connection with our proposed sales.
(b) We have made and will make no payment in connection with the execution of our sales to any person other than our broker.
(c) Neither I nor any of such other persons have effected any sales of Common Stock of National Student Marketing Corporation within the past six months.
Very truly yours,
Cameron Brown
SEC Exhibit 123-A.
The LBB Rule 133 opinion provides:
Dear Sirs:
We are familiar with the proposed sales of Common Stock of National Student Marketing Corporation referred to in the letter of Cameron Brown to you of even date herewith. A list of the proposed sellers and the number of shares which each proposes to sell are set forth in the schedule attached hereto. We hereby advise you that we are familiar with the identify (sic) of such sellers and that, in our opinion, each of such sellers is entitled to effect sales of the number of shares set opposite his name in such schedule within the limitation set forth in subsection (d) of Rule 133 under the Securities Act of 1933.
Very truly yours,
/s/ Lord, Bissell & Brook
SEC Exhibit 123.
[32] 15 U.S.C. ง 77v(a).
[33] 15 U.S.C. ง 78aa.
[34] 15 U.S.C. ง 78u(e).
[35] 15 U.S.C. ง 77t(b).
[36] The Commission has apparently restricted itself to these two violations in its charges against the defendants. See Pre-Trial Brief of the Securities and Exchange Commission at 167-70, 182-85; Tr. 16-17, 2738-41; Order of November 9, 1976.
[37] Section 10(b), 15 U.S.C. ง 78j(b), reads as follows:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange โ
. . . . .
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
[38] Rule 10b-5, 17 C.F.R. ง 240.10b-5, provides:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud.
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
[39] Section 17(a), 15 U.S.C. ง 77q(a), provides:
It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly โ
(1) to employ any device, scheme, or artifice to defraud, or
(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
[40] The Commission's Amended Complaint in this action also included various charges against defendants who have since resolved their differences with the SEC, see note 2 supra. None of those charges, which in essence detail a securities fraud scheme engineered by principal officers, directors and independent accountants of NSMC and fraudulent sales of two NSMC subsidiaries, involved any of the present defendants. In fact, there does not seem to be any dispute that these remaining defendants knew nothing of the alleged misconduct by the NSMC principals.
[41] Pre-Trial Brief of the Securities and Exchange Commission at 184.
[42] The SEC has not articulated a distinct theory upon which LBB may be held to have violated the securities laws. Instead, it simply charges the firm "with responsibility for all of Meyer's and Schauer's activities," SEC Pre-Trial Brief at 185, without citation to any statutory provisions, such as 15 U.S.C. งง 78t(a) and 78t(b), or common law principles, such as respondeat superior, upon which such vicarious liability could be founded. Despite this failing, the Court need not address the significant and difficult questions concerning LBB's responsibility for the actions of Meyer and Schauer, see SEC v. Savoy Industries, Inc., 190 U.S.App. D.C. ___, at ___-___ & nn. 48 & 49, 587 F.2d 1149, at 1170-1171 (1978); Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d 38, 48 & nn. 17 & 18 (2d Cir. 1978), since LBB has not challenged the SEC on this issue. To the contrary, the firm has fully associated itself with the conduct of both of its partners and apparently concedes its responsibility for their conduct. Further consideration of the issue is therefore unnecessary.
[43] Although the SEC does not contest the defendants' assertion that the "clear and convincing" standard of proof governs the assessment of the evidence of fraud in this case, the application of that stringent standard to the present case nonetheless must be rejected. While routinely used in cases involving allegations of fraud, imposition of the clear and convincing standard is justified only where the consequences of the finding of fraud constitute a severe deprivation to the defendant, such as deportation of an alien, Woodby v. Immigration and Naturalization Service, 385 U.S. 276, 87 S. Ct. 483, 17 L. Ed. 2d 362 (1966), or revocation of registration as a broker/dealer, Collins Securities Corp. v. SEC, 183 U.S.App.D.C. 301, 562 F.2d 820 (1977). SEC v. Savoy Industries, Inc., 190 U.S.App.D.C. at ___-___, 587 F.2d at 1168. The present proceeding, like that in Savoy Industries, threatens no such deprivation, only the imposition of an injunction against future violations. Although the impact of an injunction upon a lawyer may be more harsh than upon persons of different occupations, see Mathews, Liability of Lawyers Under the Federal Securities Laws, 30 Bus.Law. 105, 106 (1975); see also SEC v. National Student Marketing Corp., 402 F. Supp. 641, 652 (D.D.C. 1975), the incremental effect does not seem sufficient to justify the extraordinary step of requiring a higher standard of proof against lawyers than that which would be applicable to others. Moreover, certain of the allegations of harm asserted by the attorney defendants will occur, if at all, in subsequent independent proceedings that will be subject to their own particular standard of proof. Absent significant deprivations arising from the present proceeding, the preponderance of the evidence standard of proof is sufficient here, and will be applied. SEC v. Savoy Industries, Inc., supra.
[44] The use of the mails and the facilities of interstate commerce is not disputed, thereby fulfilling that jurisdictional predicate. See 15 U.S.C. งง 77q(a), 78j.
[45] Although only Brown and Meyer are charged as principals, each of the defendants presents arguments against primary violations.
[46] Although the defendants place this issue within the confines of the nexus requirement, it is sometimes considered in the context of materiality, see Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 890 (2d Cir. 1972), for if the misrepresentation or omission is to assume actual importance in the deliberations of a reasonable investor, TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct. 2126, 48 L. Ed. 2d 757 (1976), it must be capable of affecting the investment decision, thus necessitating its occurrence prior to the alleged sale. However, due to the defendants' emphasis in this instance on the lack of any possible causative relationship between their conduct and the "sales" alleged by the Commission, it appears that the defendants' placement of the issue in the nexus context is appropriate.
[47] The Commission's challenge to the validity of the alleged commitment with White Weld, the defendants' agent, is not insubstantial. Typically such commitments are not made with one's agent, but with the actual purchaser of the securities. In the latter instance, as noted at pp. 702-703 infra, Rule 10b-5 imposes "no obligation to pull back from a commitment previously made by the buyer and accepted by the seller because of after acquired knowledge." Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d at 891 (emphasis added). Though it is unclear whether a similar immunity applies with respect to a commitment made with one's agent, it is not implausible to suggest that in an impersonal securities transaction involving an actively traded stock a commitment with a broker is equivalent to a commitment with an unknown buyer. Cf. SEC v. Texas Gulf Sulphur Co., 401 F.2d at 853 n. 17. In any event, it is unnecessary to reach this additional challenge by the Commission because the defendants' contention with regard to the time of commitment must be rejected. Moreover, even if the Court were to address the issue, it would be extremely difficult on the present record to determine the actual point of sale, and further, it is unlikely that the determination, if made, would add anything to the Court's analysis, see note 48 infra.
[48] Receipt of the unsigned comfort letter is crucial because it is the version which first contained the material information which the SEC contends the defendants should have disclosed. See pages 705-709 infra. The signed version of the letter provided little additional information.
[49] See note 28 supra.
[50] On the morning of November 3, Meers allegedly called Brown and informed him that Tate had indicated that he and others were going to cut back on the number of shares they were to sell because the price had risen. Meers requested that Brown call Tate and reaffirm that a binding commitment had been made and that Tate was obligated to turn over his shares. Brown called Tate and made an unsuccessful attempt to persuade him to comply with the commitment. He then contacted his father, who agreed to substitute his NSMC shares for those withheld by Tate.
[51] Brown's position that the SEC is prevented from challenging his commitment by its failure to present that contention in its Pre-Trial Brief must be rejected. See Post-Trial Brief for Cameron Brown, vol. I, at 99-101. The Commission has charged Brown and others with selling NSMC stock after receiving, but not disclosing, the comfort letter. Since, as the defendants point out, the commitment is the "sale" for purposes of the antifraud provisions, the Commission's previous allegations encompass the present challenge to the defendants' position.
[52] Tr. 968, 1597-98.
[53] Id.
[54] See note 36 supra.
[55] Although Northway defined materiality in the context of an alleged proxy statement violation of Rule 14a-9, 17 C.F.R. ง 240.14a-9, promulgated under ง 14(a) of the 1934 Act, 15 U.S.C. ง 78n(a), its logic applies equally to determinations of materiality under the antifraud provisions of the federal securities laws. See S. D. Cohn & Co. v. Woolf, 426 U.S. 944, 96 S. Ct. 3161, 49 L. Ed. 2d 1181 (1976); TSC Industries, Inc. v. Northway, Inc., 426 U.S. at 445-46 n. 8, 96 S. Ct. 2126; SEC v. Savoy Industries, Inc., 190 U.S.App.D.C. ___, at ___, 587 F.2d 1149, at 1171; Goldberg v. Meridor, 567 F.2d 209, 218-19 (2d Cir. 1977); Alton Box Board Co. v. Goldman, Sachs & Co., 560 F.2d 916, 919-20 (8th Cir. 1977); Wright v. Heizer Corp., 560 F.2d 236, 248 (7th Cir. 1977), cert. denied, 434 U.S. 1066, 98 S. Ct. 1243, 55 L. Ed. 2d 767 (1978); Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1040 (7th Cir.), cert. denied, 434 U.S. 875, 98 S. Ct. 225, 54 L. Ed. 2d 155 (1977).
In addition, there is no unfairness in applying the Northway standard to the defendants' conduct in 1969. The Supreme Court's decision in Northway merely resolved the conflict whether the test for materiality was that the information in question "might" or "would" be important to the reasonable investor. Application of the stricter "would" standard, often articulated during the period surrounding the alleged misconduct in this case, see TSC Industries, Inc. v. Northway, Inc., supra, puts no burden on the defendants.
[56] The failure to disclose the information contained in the comfort letter, and thereby to correct the previously issued nine-month financials, can be considered as either an implied misrepresentation or a simple nondisclosure. See 2 A. Bromberg, Securities Law: Fraud ง 6.11(510) (Supp.1977).
[57] Although an accountant's view of materiality is not the same as the legal test, it may be relevant to that determination. William C. Colona, the Peat Marwick accountant assigned to prepare the comfort letter, testified that the adjustments were "very significant" and that they were made because they were material to the nine-month financials. He defined his concept of materiality by referring to a rule of thumb used by accountants, whereby an adjustment is material if it would reduce or increase net earnings, as previously reported, by ten percent of the previously reported figure. Tr. 203-08. As noted in the text infra, the adjustments contained in the unsigned comfort letter reduced the net earnings for the nine-month period by approximately 125 percent.
[58] Although the defendants suggest that Peat Marwick's action in making the adjustments retroactive to May 31 simply reflects a conservative accounting practice, the comfort letter itself indicates that Peat Marwick followed the accounting principles and practices that it had used in preparing NSMC's previous financial statements. In any case, the suggestion does not address the question of whether, regardless of the reason, making the adjustments as of May 31 would have altered the total mix of information available and have assumed actual significance in the deliberations of the reasonable investor.
[59] The reduction of the write-off of unbilled receivables to $200,000 in the signed comfort letter has little effect on the overall magnitude of the adjustments.
[60] Relying on General Time Corp. v. Talley Industries, Inc., 403 F.2d 159 (2d Cir. 1968), cert. denied, 393 U.S. 1026, 89 S. Ct. 631, 21 L. Ed. 2d 570 (1969), the defendants contend that a greater showing of materiality is necessary in a situation where there is no opportunity for the shareholders to vote on the basis of corrected financial information. Assuming there was no such opportunity here, the Court finds General Time to be distinguishable. That case involved an attempt to revoke proxies on the day of the shareholder meeting, not a transfer of securities on the basis of financial statements which were emphasized as important to the shareholders' decision in favor of the merger. As the court in General Time noted, the standard of materiality "is somewhat more elusive in relation to statements issued in a contested election than in regard to a . . . representation designed to induce the purchase or sale of securities, or a proxy statement seeking approval of a proposed corporate transaction . . .." 403 F.2d at 162. The unquestionable importance of the financials involved here meets the standard of materiality applicable to the antifraud provisions. See note 55 supra.
[61] Determining materiality by what insiders knew at the time the merger was closed would effectively resurrect the position rejected by the Supreme Court in Mills. However, instead of substituting a "judicial appraisal of the merger's merits," 396 U.S. at 381, 90 S.Ct. at 620, the shareholders' decision would be supplanted by that of a few insiders.
[62] SEC Exhibit 32 at 2.
[63] Brown has suggested that calling off the merger in order to resolicit shareholders would have overruled the initial vote of those shareholders. Post-Trial Brief for Cameron Brown, vol. I, at 120. But in this case, with several conditions precedent, including receipt of a conforming comfort letter, built into the Merger Agreement approved by the Interstate shareholders, it is just as likely that, under the circumstances, aborting the merger more closely comported with the expressed will of the shareholders.
The defendants also contend that the waiver provision contained in the Merger Agreement permitted the directors of the two corporations to waive any of the conditions precedent, including receipt of the comfort letter. Although the directors could possibly have waived receipt of the comfort letter itself pursuant to the provision, once it was received the shareholder authorization could not extend to nondisclosure of the receipt therein of material information affecting the shareholders' approval of the merger. The waiver provision could not authorize the parties to dispense with the antifraud provisions of the securities laws and transfer securities on the basis of materially false and misleading information. See Kaiser-Frazer Corp. v. Otis & Co., 195 F.2d 838, 843-44 (2d Cir.), cert. denied, 344 U.S. 856, 73 S. Ct. 89, 97 L. Ed. 664 (1952); 15 U.S.C. งง 77n, 78cc(a). Insofar as Smallwood v. Pearl Brewing Co., 489 F.2d 579 (5th Cir.), cert. denied, 419 U.S. 873, 95 S. Ct. 134, 42 L. Ed. 2d 113 (1974), possibly suggests a different result, the Court respectfully disagrees.
[64] The defendants also attempt to equate the actions of insiders of other companies acquired by NSMC with those of the reasonable shareholder, since those insiders also received the Peat Marwick comfort letter and still proceeded with their respective mergers with NSMC. While their actions are relevant to the determination of materiality, the value is minimal since they, like the defendants here, had more information than did the reasonable Interstate shareholder.
[65] The defendants argue that their business decision to complete the merger and thereby to invest substantially in the fortunes of NSMC supports a finding that the adjustments contained in the comfort letter were not material, for if the adjustments were as adverse as the SEC suggests, the Interstate principals, especially Brown, would not have risked their interests by agreeing to the merger. The defendants are correct insofar as they argue that the actions of insiders are relevant to the determination of materiality. See SEC v. Texas Gulf Sulphur Co., 401 F.2d at 851. However, as noted, their actions, as well as those of the insiders of other companies, note 64 supra, and those of Jeffers, Interstate's chief financial officer, note 25 supra, clearly indicate that the comfort letter information, although not decisive, was important to their decision to proceed with the merger.
[66] See generally, Lowenfels, Scienter or Negligence Required for SEC Injunctions Under Section 10(b) and Rule 10b-5: A Fascinating Paradox, 33 Bus.Law. 789 (1978); Comment, Scienter and SEC Injunction Suits, 90 Harv.L.Rev. 1018 (1977); Note, Scienter's Scope and Application in Rule 10b-5 Actions: An Analysis in Light of Hochfelder, 52 Notre Dame Law. 925 (1977); Note, SEC Enforcement Actions to Enjoin Violations of Section 10(b) and Rule 10b-5: The Scienter Question, 5 Hofstra L.Rev. 831 (1977); Note, Scienter and Injunctive Relief Under Rule 10b-5, 11 Ga.L.Rev. 879 (1977); Bucklo, The Supreme Court Attempts to Define Scienter Under Rule 10b-5: Ernst & Ernst v. Hochfelder, 29 Stan.L.Rev. 213 (1977); Berner & Franklin, Scienter and Securities and Exchange Commission Rule 10b-5 Injunctive Actions: A Reappraisal in Light of Hochfelder, 51 N.Y.U.L.Rev. 769 (1976).
[67] The exchange ratio provided the Interstate shareholders with a one hundred percent premium on the value of their stock, see note 7 supra, and the value of both stocks was rising steadily, see note 28 supra.
[68] The Sundstrand court formulated a two-part test for recklessness: first, the danger of misleading investors must be objectively obvious, and second, the defendant's conduct must, subjectively, have been the product of more than "inexcusable neglect." The latter requirement was imposed because of Hochfelder, see 425 U.S. at 190 n. 5, 96 S. Ct. 1375, and requires that the omission result from "something more egregious than even `white heart/empty head' good faith." 553 F.2d at 1045. As an example, the court stated that if "a defendant genuinely forgot to disclose information or [if] it never came to his mind, . . . even though the proverbial `reasonable man' would never have forgotten," 553 F.2d at 1045 n. 20, the subjective portion of the recklessness test would not be met.
Brown alleges that he relied upon the advice of counsel, and that absent any indication from them that proceeding with the merger and stock sales was unlawful, he in good faith went ahead with the transactions. To the extent such reliance could be considered as a possible defense to the present action, see Floor, The Scienter Requirement Under Rule 10b-5 and Reliance on Advice of Counsel, 12 New England L.Rev. 191, 213-22 (1976), presumably as an equivalent to the "forgetfulness" example in Sundstrand, the Court finds it inapposite here. Brown did not rely upon actual advice of counsel, but, if at all, on counsel's silence, and this despite the fact that he never asked for a specific opinion on the legality of closing in light of the massive adjustments revealed by the Peat Marwick comfort letter. This blind inaction hardly constitutes good faith reliance on counsel.
[69] Although only Schauer and LBB are charged with failing to interfere in the merger, apparently because Meyer was more closely involved, it is clear that the SEC's charges in this instance are against Interstate's counsel in general and therefore the term "attorney defendants" is used.
[70] Post-Trial Memorandum and Proposed Conclusions of Law of Defendants Lord, Bissell & Brook, Max E. Meyer, and Louis F. Schauer at 98.
[71] SEC Exhibit 52.
[72] See note 22 supra.
[73] For an extensive listing of articles dealing with the issue, see Hoffman, On Learning of a Corporate Client's Crime or Fraud โ the Lawyer's Dilemma, 33 Bus.Law. 1389, 1404-05 n. 38 (1978).
[74] As noted, the Commission apparently has restricted its charges against these defendants to the two violations involved in the merger and the stock sales by Interstate principals. See note 36 supra. Because the charge of acquiescence in the merger suggests the possibility of a continuing violation with respect to other sales, the Court has carefully examined the record to determine whether the SEC has alleged as a basis for liability under this charge any transactions other than the merger. After reviewing the complaint, the SEC's pre- and post-trial briefs, and the transcripts, the Court finds that the Commission has not fairly asserted a claim of continuing violation in this instance. Thus, the alleged inaction of the attorneys after the merger had no link with the securities transaction in the merger, see page 705 supra, and could not have provided substantial assistance to the already completed merger.
[75] The Commission contends that the defendants' failure to recognize the seriousness of their misconduct, by continuing to maintain that their actions were lawful and proper, demonstrates the need for an injunction. The Court, however, considers the defendants' conduct in this regard as simply putting the SEC to its burden of making a proper showing that injunctive relief is warranted. In the absence of more egregious conduct, such as dilatoriness or bad faith, the defendants will not be penalized for fully defending this action.
[*] In an Order dated May 19, 1977, the Court specified that it would reserve rulings on certain objections to the admissibility of deposition testimony and documentary exhibits until the conclusion of trial. Rulings were reserved on SEC Exhibits 523 and 1053, and on Defendant's Exhibits L106 and S141a. Exhibits 523, L106 and S141a are deemed admitted, and the objections to the admissibility of Exhibit 1053 are sustained and that document is not admitted. Both parties have also objected to certain designations of deposition testimony. Each of the objections to such designations is overruled. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1450420/ | 631 P.2d 187 (1981)
102 Idaho 405
STATE of Idaho, Plaintiff-Respondent,
v.
David Allen OSBORN, Defendant-Appellant.
No. 13400.
Supreme Court of Idaho.
July 9, 1981.
*189 Gaylen L. Box of McDermott & McDermott, Pocatello, for defendant-appellant.
David H. Leroy, Atty. Gen., Lynn E. Thomas, Deputy Atty. Gen., Boise, for plaintiff-respondent.
McFADDEN, Justice.
I Procedural background
The appellant, David Allen Osborn, was arrested and charged with the October 31, 1978, murder of Charlotte Christine Carl. Appellant was arraigned before the magistrate division of the Sixth Judicial District on November 29, 1978 on the charge of first degree murder and a public defender was appointed. On December 7, a preliminary hearing was held and appellant was bound over for trial. Before Sixth District Judge Arthur Oliver on December 11, appellant pled not guilty and filed a notice of intent to rely upon mental disease or defect as an affirmative defense. An examining psychiatrist was appointed by the court at this time. I.C. § 18-211.
Following discovery and argument on various motions not in issue here, appellant, on May 21, 1979, withdrew his plea of not guilty and entered a plea of guilty to the charge of first degree murder. The court, after assuring the knowing and voluntary nature of the plea, ordered a presentence investigation and scheduled an aggravation-mitigation hearing. I.C. § 19-2515. This hearing was held on June 21, 1979, and the matter of sentencing was taken under advisement. On June 29, a memorandum decision, findings of fact, and conclusions of law were issued by the court, and appellant was sentenced to death.
Appellant filed motions for correction or reduction of sentence, which were denied by the district court. Appellant also filed a petition for review of the sentence and a notice of appeal to this court. The matter is before us on a dual basis: under the mandatory review procedure set forth in I.C. § 19-2827 and under the appeal brought by appellant.
II Factual background
No trial having taken place, the following facts are established by and taken from the record of the preliminary hearing.
Appellant and the murder victim were both employed at a Pocatello cafe, worked together, and appeared to get along well. They were seen together in a room at the Pocatello Holiday Inn on October 30, 1978 by an employee of the hotel who delivered a room service order. This employee testified that appellant instructed the victim to sign his name to the tab and spelled out "Osborn" for her.
The next evening, October 31, appellant was stopped by a Pocatello police officer for driving in an inattentive manner. The officer felt that appellant was not sufficiently intoxicated to be arrested, but he did ask the female passenger in the vehicle, whom appellant called Chris, to drive. Later that night, Christine Carl's partially clothed body was found along a road on the outskirts of Pocatello. She had been shot three times in the head, once in the shoulder, and once in the abdomen. Her face showed extensive bruising on the left side, and her nose was fractured. The pathologist who performed the autopsy believed the bullet wound behind the victim's ear was a close contact wound while the other head wounds were probably distance wounds although he stated it was possible that they could have been incurred within eighteen inches of the firearm. The pathologist stated that the large amount of blood loss would indicate that the victim's nose had been broken prior to her being shot. *190 He also stated his opinion that the beating could have occurred prior to the shooting, but noted that this was conjectural as the same bruising could have occurred had the beating occurred simultaneously with the shooting.
About 10:30 that same evening, appellant, driving Christine Carl's car, arrived at the home of an acquaintance. Witnesses at that home testified that Osborn had a pistol in his possession and blood on his vest, chest and boots; that appellant appeared to be acting "weird," though the people in the house could not tell if he was drunk or under the influence of drugs; that appellant stated that he had shot "Chris," and within an hour's time stated that he had buried her in the mountains and that he had placed her body on some railroad tracks; that appellant also stated that the victim had threatened to call the police and turn him in for robbery and that was why he shot her. Two occupants of the house were requested by appellant to hide the car, and in doing so they observed a large amount of blood on the front seat and passenger door of the car.
Police officers later searched the premises and found a dismantled .22 caliber nine-shot revolver. This revolver was at the F.B.I. laboratory in Washington at the time of the preliminary hearing, so only a photograph of it was introduced into evidence. An F.B.I. report stated that due to similarity of rifling marks, the gun in its possession could have been the murder weapon. The report also stated that absent some of the missing parts, the cylinder of the gun had to be manually rotated before the following round could be fired. A Mr. Sullinger testified that in October, 1978, he sold appellant a revolver of the type discovered. He noted that it was then missing a part and that the cylinder had to be revolved by hand between shots before a live round would be positioned.
The psychiatrist who was appointed following appellant's earlier notice of intent to rely upon a defense of mental disease or defect under I.C. § 18-211 reported to the court that appellant had a history of anti-social behavior and alcohol/polydrug abuse. He also noted that appellant claimed to have been on drugs and alcohol at the time of the crime. As to appellant's claim that he remembered nothing of the events of that evening, the psychiatrist stated that in his opinion the claim of amnesia was not genuine, although he noted that it was impossible to be sure. It was also mentioned that appellant had several episodes of amnesia associated with intoxication and violent behavior.
III District court proceedings
After submission of a presentence report, an aggravation-mitigation hearing was held. I.C. § 19-2515. At that hearing, neither prosecution nor defense called any witnesses. The state advised the court that "because I think we do have a a good record of what transpired in the preliminary hearing instead of calling witnesses today, [I choose] to rely on the testimony presented at the preliminary hearing... ." Similarly, appellant's counsel relied upon the facts brought forth in the preliminary hearing and in the reports to the court, and called no additional witnesses, although the appellant did address the court in his own behalf.
The trial court therefore had for sentencing purposes the arguments of counsel and the oral statement of appellant, the presentence investigation report, the transcript and exhibits from the preliminary hearing, and the § 18-211 examining psychiatrist's report.
The court found the following two aggravating circumstances existed beyond a reasonable doubt: (1) "that the murder was especially heinous, atrocious or cruel, manifesting exceptional depravity," I.C. § 19-2515(f)(5), and (2) "that by the murder and the circumstances surrounding its commission, the defendant exhibited utter disregard for human life," I.C. § 19-2515(f)(6). The court also found, but only by a preponderance of the evidence, the aggravating circumstance that appellant, "by prior conduct and his conduct in the commission of the murder, has exhibited a propensity to commit murder and will probably constitute *191 a continuing threat to society." I.C. § 19-2515(f)(8).
In regard to mitigating factors, the court stated:
"This Court, because of the extreme burden imposed upon the sentencing judge by the statute and the offense itself, has consciously searched all the information before it hoping sincerely to find circumstances in mitigation which would overcome the circumstances of aggravation however, such mitigating circumstances do not exist."
and:
"The Court further finds that there are no mitigating circumstances which outweigh the gravity of aggravating circumstances and which would make imposition of the death penalty unjust."
The court then concluded that, under I.C. § 19-2515, "the statutory aggravating circumstances outweigh mitigating circumstances" and sentenced appellant to death.
IV Legal background
Prior to 1977,[1] I.C. § 18-4004 made the death penalty mandatory for those defendants convicted of first degree murder. However, in light of the opinion of the United States Supreme Court in Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976), which held unconstitutional a mandatory death penalty statute virtually identical to Idaho's, the legislature in 1977 amended I.C. §§ 18-4004 and 19-2515 and added § 19-2827 in an attempt to meet the Supreme Court's objections to such statutes. 1977 Sess.Laws Ch. 154, p. 390. The basic premise of Woodson and its companion cases, Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976); Proffitt v. Florida, 428 U.S. 242, 96 S. Ct. 2960, 49 L. Ed. 2d 913 (1976); Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929 (1976); and Roberts v. Louisiana, 428 U.S. 325, 96 S. Ct. 3001, 49 L. Ed. 2d 974 (1976), is that the sentencing authority must be given specific and detailed guidance to assist them in deciding whether to impose a death penalty in order to assure that the death penalty will not be imposed in an arbitrary or capricious manner. To meet this mandate the Idaho legislature enacted an amended version of I.C. § 19-2515 providing for a sentencing hearing at which all relevant information could be presented to the sentencing court; listing the aggravating circumstances which must be found in order to impose the sentence of death; providing that at least one such aggravating circumstance be found to exist beyond a reasonable doubt; and providing that the defendant shall be sentenced to death upon such a finding unless the mitigating circumstances outweigh the found aggravating circumstances. Further, the legislature provided in I.C. § 19-2827[2] for *192 mandatory supreme court review of all death sentences imposed. Appellant raises numerous challenges to the sentence upon direct appeal, which contentions we consider first.
V Issues presented on appellant's appeal
A. The appellant's first contention is that the district court erred in relying upon the preliminary hearing transcript at the sentencing hearing as opposed to requiring the state to present the testimony of witnesses in open court. The record below discloses that the court at the aggravation-mitigation hearing initially offered the appellant an opportunity to change his plea of guilty, which was declined. The court then stated:
"The Court has set this time as a mitigation/aggravation hearing. I'm going to ask you, Mr. Blake [counsel for appellant], to go forward particularly with any statements, first, as to the presentence investigation, and then I'll hear any witnesses or statements you have in mitigation."
The court in effect gave appellant the first opportunity to present any material facts or information he wished at that time in whatever form he wished. After argument by Mr. Blake, wherein no witnesses were called, the court proceeded to hear the state's presentation. Mr. Pincock stated for the prosecution:
"I have chosen, Your Honor, because I think we do have a a good record of what transpired in the preliminary hearing, instead of calling witnesses today, to rely on the testimony presented at the preliminary hearing, Your Honor. I think that there are a number of matters which the Court might address itself to in considering the sentencing, as far as aggravating circumstances are concerned."
Mr. Pincock proceeded to quote at length from various parts of the preliminary hearing record and made arguments thereon.
Mr. Blake then undertook on behalf of appellant to discuss the facts as presented by the preliminary hearing record and the presentence investigation report. The court allowed appellant to give a statement, and when the court inquired if there was anything further to be added, Mr. Blake gave a final statement. At no time did either the state or the defendant object to proceeding in this manner or present any witnesses for examination.
Since appellant did not object to the use of the preliminary hearing record at the time, and in fact acquiesced in its use, we must initially determine whether the general rule that precludes our review of matters not objected to below[3] prohibits our consideration of this issue. We conclude that it does not.
This general rule applicable to appellate review of error is not necessarily controlling where we are statutorily required to undertake appellate review irrespective of the defendant's contentions, if any. Death is clearly a different kind of punishment from any other that may may be imposed, and I.C. § 19-2827 mandates that we examine not only the sentence but the procedure followed in imposing that sentence regardless *193 of whether an appeal is even taken. This indicates to us that we may not ignore unchallenged errors. Moreover, the gravity of a sentence of death and the infrequency with which it is imposed outweighs any rationale that might be proposed to justify refusal to consider errors not objected to below.
Other jurisdictions similarly do not allow technical appellate rules to preclude a comprehensive review of those cases where a sentence of death has been imposed. See e.g., State v. Brown, 607 P.2d 261, 265 (Utah 1980); Commonwealth v. McKenna, 476 Pa. 428, 383 A.2d 174, 179-80 (1978); State v. Ceja, 115 Ariz. 413, 565 P.2d 1274, 1276 (1977); cert. den., 434 U.S. 975, 98 S. Ct. 533, 54 L. Ed. 2d 467 (1977); State v. Martin, 243 Iowa 1323, 55 N.W.2d 258, 260-261 (1952); Tuggle v. State, 73 Okla. Crim. 208, 119 P.2d 857, 859 (1941). We have previously recognized as much in this state by holding that fundamental error, even absent objection at trial will be reviewed on appeal. State v. White, 97 Idaho 708, 714, 551 P.2d 1344, 1350 (1976), cert. den. 429 U.S. 842, 97 S. Ct. 118, 50 L. Ed. 2d 111 (1976); State v. Haggard, 94 Idaho 249, 251, 486 P.2d 260, 262 (1971).
However, while it is the conclusion of this court that we may consider the issue, we hold that the use of the preliminary hearing transcript at the sentencing/aggravation mitigation hearing in this case was not in error.
Facially, I.C. § 19-2516 provides:
"Inquiry into circumstances Examination of Witnesses. The circumstances must be presented by the testimony of witnesses examined in open court, except that when a witness is so sick or infirm as to be unable to attend, his deposition may be taken by a magistrate of the county, out of court, upon such notice to the adverse party as the court may direct. No affidavit or testimony, or representation of any kind, verbal or written, can be offered to or received by the court, or a judge thereof, in aggravation or mitigation of the punishment, except as provided in this and the preceding section." (Emphasis added)
While this provision would seem to imply an absolute requirement of live testimony, pursuant to the last sentence therein, it must be read in light of the preceding section, I.C. § 19-2515. Subsection (c) thereof states:
"(c) In all cases in which the death penalty may be imposed, the court shall, after conviction, order a presentence investigation to be conducted according to such procedures as are prescribed by law and shall thereafter convene a sentencing hearing for the purpose of hearing all relevant evidence and arguments of counsel in aggravation and mitigation of the offense. At such hearing, the state and the defendant shall be entitled to present all relevant evidence in aggravation and mitigation. Should any party present aggravating or mitigating evidence which has not previously been disclosed to the opposing party or parties, the court shall, upon request, adjourn the hearing until the party desiring to do so has had a reasonable opportunity to respond to such evidence. Evidence admitted at trial shall be considered and need not be repeated at the sentencing hearing. Evidence offered at trial but not admitted may be repeated or amplified if necessary to complete the record." (Emphasis added)
The section speaks of the entitlement of the parties to present whatever evidence they desire at the aggravation-mitigation hearing. The ultimate decision regarding the use to be made of that opportunity clearly rests with each party. But the precise question raised by appellant is whether the live testimony mandate of I.C. § 19-2516 displaces or excludes the discretion granted to the state on how to proceed at the hearing, i.e., whether the statute absolutely requires live testimony in open court at the aggravation-mitigation hearing. We decide that it does not.
The last sentence of I.C. § 19-2516 makes it clear that we are to treat both sections as together setting forth the procedure to be followed in such hearings. The statute provides *194 that evidence previously presented at trial need not be repeated and indeed may be amplified if desired. The parties are "entitled to present all [other] relevant evidence" they desire. The manifest intent is to place as much possible relevant information as can be provided before the sentencing court. This also serves to provide this court with as much information and as complete a record as possible for appellate review. While, admittedly, the section speaks of evidence from the prior trial, in light of the purpose of the statute, we see no need to read into the statute a requirement that other previously considered, relevant information from the preliminary hearing is to be excluded unless presented once again by live testimony. This is certainly true where the appellant also relied upon the information contained in the record of the preliminary hearing, as occurred here.[4]
This court was presented in State v. Coutts, 101 Idaho 110, 609 P.2d 642 (1980), with a similar argument that the provisions of I.C. § 19-2516 were absolute. In that case, the defendant claimed that certain remarks of the prosecutor during the sentencing hearing were the equivalent of unsworn evidence in violation of the provisions of the statute. After noting a split in authority among jurisdictions as to the formality required at such hearings, this court stated:
"In order to maintain a viable system of sentencing hearings, under ordinary circumstances, such hearings normally need not be encumbered with all the procedural requirements which attend a resolution of the issue of guilt or innocence. The court therefore holds that in the absence of an explicit request for the formal hearing contemplated by I.C. § 19-2516, the court may reach its sentencing decision by receiving the unsworn formal statements presented by both sides, together with the presentence report and arguments of the respective counsel.
In this proceeding appellant did not present any request to the trial court for a formal hearing as required by I.C. § 19-2516 but participated without objection in the more informal type of hearing conducted by the sentencing judge. After the complained of statements were made by the prosecutor, appellant's counsel responded responded to these statements advising the court that the appellant would deny them, and continued by arguing that the court should consider appellant's age." (Emphasis in original) 609 P.2d at 645.
While the question there, the unsworn statements or argument of counsel, and that here, the use of preliminary hearing testimony, are not identical, we find the analogy persuasive. Where the defendant expressly or impliedly agrees to dispense with the formality possible under the statute, i.e., the presentation of all statements orally and under oath, and instead allows presentation of facts through prior evidence, presentence reports, argument of counsel, and the like, we find no prima facie error due to such use.
We recognize that cases where the death penalty may be imposed are not "under ordinary circumstances." Indeed, our strong belief is that the procedural requirements provided for by the legislature should be followed with care, especially since doing so assures this court of an opportunity to make a meaningful appellate review. Yet *195 we here are faced with a situation where unreasoning adherence to the formal requirements would not materially add to the achievement of statutory objectives. We find no error in the court's consideration of the preliminary hearing record along with the other information before it.
B. Next, we consider appellant's argument that he was denied due process since the state did not formally notify him that it was seeking the death penalty or forewarn him as to which aggravating circumstances it would seek to prove beyond a reasonable doubt at the sentencing hearing. While "it is now clear that the sentencing process, as well as the trial itself, must satisfy the requirements of the Due Process Clause," Gardner v. Florida, 430 U.S. 349, 358, 97 S. Ct. 1197, 1204, 51 L. Ed. 2d 393, 402 (1977), the due process/notice requirements at sentencing are not necessarily the same as those at trial. Williams v. New York, 337 U.S. 241, 248-252, 69 S. Ct. 1079, 1084-1085, 93 L. Ed. 1337, 1343-1344 (1949), reh. den. 337 U.S. 961, 69 S. Ct. 1529, 93 L. Ed. 1760 (1949).
In the present case, under I.C. §§ 18-4004, 19-2513 and 19-2513A, upon pleading guilty to a charge of first degree murder appellant was informed that he could be sentenced to death, or to a determinate or indeterminate sentence of life imprisonment. Not only does the statute so notify, but the record reflects that the court below made the sentencing possibilities abundantly clear to appellant more than once during the proceedings. Indeed, the possibility of capital punishment was noted at each point in the proceedings where the plea of appellant was discussed. Whether the state would urge the maximum penalty or not was immaterial to the question of adequate notice to appellant that it was possible. We find no error in this regard.
In Andrews v. Morris, 607 P.2d 816 (Utah 1980) cert. den. 449 U.S. 891, 101 S. Ct. 254, 66 L. Ed. 2d 120 (1980), the court dismissed the defendant's contention that the sentencing procedure was unconstitutional in that no notice was given as to the aggravating circumstances upon which the death penalty was sought. The Utah court held:
"It is to be noted that U.C.A., 1953, 76-5-202 specifically sets forth eight aggravating circumstances, one or more of which must be alleged, proved, and found by the fact finder. Hence, one charged with a capital felony is put on notice and is made aware of what the State must prove and thus able to prepare his defense." 607 P.2d at 822.
However, in State v. Sonnier, 379 So. 2d 1336 (La. 1979), the court stated:
"[A] defendant is entitled in a capital sentencing proceeding, no less than in the guilt or innocence trial, to be informed of the nature and cause of the accusation against him, LSA-Const. art. 1, § 13 (1974), and to his Fifth Amendment right to `[n]otice... given sufficiently in advance of scheduled court proceedings so that reasonable opportunity to prepare will be afforded, and "[setting] forth the alleged misconduct with particularly."' In Re Gault, 387 U.S. 1, 33, 87 S. Ct. 1428, 1446, 18 L. Ed. 2d 527, 459 [sic] (1967). Thus, the defendant is entitled to know the aggravating circumstances which the prosecution will seek to prove sufficiently in advance of court proceedings so that reasonable opportunity to prepare will be afforded." 379 So.2d at 1356.
However, the court in Sonnier then held that the defendant lacked standing to contest the issue because he had not alleged either that he was not so informed or that he had made any attempt to obtain the information.
We agree with the position taken by the Utah Supreme Court in Andrews v. Morris, supra. The statute clearly sets forth that one of the listed aggravating circumstances must be proven beyond a reasonable doubt, and must outweigh any mitigating circumstances shown, prior to imposition of death. Generally, it is apparent that there will be no surprise under the facts of any given case as to what potential aggravating circumstances are involved. Both defense counsel and prosecution who have participated in the earlier preliminary hearing and trial will ordinarily be well appraised and *196 conversant with the facts and issues involved in the aggravation-mitigation hearing. We additionally note that the statute, in I.C. § 19-2515(c), provides that should any party present evidence not previously disclosed, the court upon request shall adjourn the hearing until the opponent has had a reasonable opportunity to respond. Here, the district court expressly informed counsel to disclose the evidence and arguments to be relied upon at the hearing, and the state did so inform the appellant. Such protections are sufficient and we will not attach thereto a superfluous judicial requirement that the state formally notify a defendant of the particular aggravating circumstance upon which it will rely.
C. The next question before us is whether the trial court erred in failing to set forth the mitigating factors it considered. I.C. § 19-2515(d) states:
"(d) Upon the conclusion of the evidence and arguments in mitigation and aggravation the court shall make written findings setting forth any statutory aggravating circumstance found. Further, the court shall set forth in writing any mitigating factors considered and, if the court finds that mitigating circumstances outweigh the gravity of any aggravating circumstance found so as to make unjust the imposition of the death penalty, the court shall detail in writing its reasons for so finding." (Emphasis added)
As noted previously, the district court stated in its memorandum opinion that it had "searched all the information before it hoping sincerely to find circumstances in mitigation which would overcome the circumstances of aggravation however, such mitigating circumstances do not exist." (Emphasis added.) The court also made the finding of fact:
"The Court further finds that there are no mitigating circumstances which outweigh the gravity of aggravating circumstances and which would make imposition of the death penalty unjust." (Emphasis added)
The record on appeal reflects that appellant's counsel raised below a number of arguable mitigating circumstances such as the nature of appellant's prior criminal record, his history of alcohol and polydrug abuse,[5] his personal and familial background, and the varying interpretations possible from the facts surrounding the offense. Not only were these issues raised and argued, they were also present in the presentence investigation and psychiatric reports and thus clearly before the district court.
I.C. § 19-2515(d) is mandatory in its terms: "the court shall set forth in writing any mitigating factors considered." The reasoning behind a similar statutory requirement for specific written findings was explained by the Florida Supreme Court:
"The fourth step required by Fla. Stat. § 921.141, F.S.A., is that the trial judge justifies his sentence of death in writing, to provide the opportunity for meaningful review by this Court. Discrimination or capriciousness cannot stand where reason is required, and this is an important element added for the protection of the convicted defendant. Not only is the sentence then open to judicial review and correction, but the trial judge is required to view the issue of life or death within the framework of rules provided by the statute." State v. Dixon, 283 So. 2d 1, 8 (Fla. 1973) cert. den. 416 U.S. 943, 94 S. Ct. 1951, 40 L. Ed. 2d 295 (1974).
We feel the requirement of written and detailed findings serves a dual purpose. Initially it focuses the attention of *197 the sentencing court upon all the information before it and requires a thorough and reasoned analysis of all relevant factors. This helps assure that the imposition of the sentence of death is reasoned and objective as constitutionally required. It also serves the purpose, as noted by the Florida Supreme Court, of making the process for imposing death rationally reviewable. On review, if the mandates of I.C. § 19-2515(d) are met, we can determine whether the lower court overlooked or ignored any raised mitigating factors, whether the evidence supports the aggravating factors found, and finally whether the court has properly weighed all factors. If the findings of the lower court are not set forth with reasonable exactitude, this court would be forced to make its review on an inadequate record, and could not fulfill the function of "meaningful appellate review" demanded by the decisions of the United States Supreme Court. We hold that the legislative requirement that all mitigating factors considered be set forth must be met.[6]
In requiring the court to consider and specify mitigating factors, we pause to give some guidance on the matter. While the Idaho legislature has not provided any suggestions as to what constitute mitigating factors, statutes from other states do delineate possibilities.[7] The Model Penal Code sets forth the following factors among others:
"(a) The defendant has no significant history of prior criminal activity. (b) The murder was committed while the defendant was under the influence of extreme mental or emotional disturbance... . (g) At the time of the murder, the capacity of the defendant to appreciate the criminality [wrongfulness] of his conduct or to conform his conduct to the requirements of the law was impaired as a result of mental disease or defect or intoxication... ." § 210.6(4) (Tent.Draft 1962).
See Fla. Stat. Ann. § 921.141(6); Neb. Rev. Stat. § 29-2523(2); Utah Code § 76-3-207. The Supreme Court noted in Gregg v. Georgia, supra, 428 U.S. at 197, 96 S.Ct. at 2936, 49 L.Ed.2d at 888 that the sentencing authority in that state is asked to determine whether there are any special facts about the defendant such as age, extent of cooperation with police, or emotional state at the time of the offense, which would mitigate against imposition of capital punishment. We generally note that the concept of mitigation is broad. Mitigating circumstances have been defined as:
"Such as do not constitute a justification or excuse of the offense in question, but which, in fairness and mercy, may be considered as extenuating or reducing the degree of moral culpability." Black's Law Dictionary (5th ed. 1979) at 903.
In previously discussing the court mitigating circumstances concept under our sentencing provisions, this court stated:
"It may be open to debate as to whether the `circumstances' mentioned in § 19-2515, I.C., refer particularly to circumstances surrounding the commission of the crime and tending to aggravate or mitigate the character of the conduct involved, or whether such circumstances include also the convict, himself, as an individual, which would include his background, his age, upbringing and environment or any other matter appropriate to a determination of the degree of culpability. We think that the statute should be given the broader interpretation, particularly in a capital case." State v. Owen, 73 Idaho 394, 403, 253 P.2d 203, 207-208 (1953), overruled on other grounds, State v. Shepherd, 94 Idaho 227, 486 P.2d 82 (1971).
Such is still our feeling.
Thus, we conclude that there was error in the court's failure to specify in writing the *198 mitigating factors it considered. Consequently, we remand for resentencing.
D. Appellant next argues that the statute is unconstitutional because it fails to specify mitigating factors. This argument was disposed of in Lockett v. Ohio, 438 U.S. 586, 98 S. Ct. 2954, 2981, 57 L. Ed. 2d 973 (1978), wherein the Supreme Court held it was unconstitutional for the legislature to limit the sentencing body's consideration of mitigating factors to those enumerated in a statute. See also State v. Mata, 125 Ariz. 233, 609 P.2d 48, 56-7 (1980) cert. den. ___ U.S. ___, 101 S. Ct. 338, 66 L. Ed. 2d 161 (1980).
E. Appellant next assigns as error the court's finding "by a preponderance of the evidence" that he has exhibited a propensity to commit murder which would probably constitute a continuing threat to society.
The district court observed in response to this argument upon appellant's motion for correction or reduction of sentence:
"Sec. 19-2515 requires that aggravating circumstances must be found beyond a reasonable doubt and since the Court made such finding by preponderance rather than beyond a reasonable doubt, it is obvious that the Court did not consider such finding as an aggravating circumstance upon which it relied in making its ultimate sentencing. Perhaps such finding, since it was by a preponderance of the evidence rather than beyond a reasonable doubt, should not have been inserted as a finding. However, as above stated, the Court was cautious to note that the finding was made by a preponderance and was not considered by the Court as a statutory aggravating circumstance because it was not found beyond a reasonable doubt."
I.C. § 19-2515(f) states that at least one of the statutory aggravating circumstances must be found to exist beyond a reasonable doubt before the sentence of death may be imposed. A finding of an aggravating circumstance by preponderance of the evidence, we feel, should not enter into the statutorily required evaluative process in the absence of express legislative authorization. Yet the inclusion of such a finding here must be viewed in light of the court's statements that this finding was not relied upon as a statutory aggravating circumstance. While generally the inclusion of such a finding would be ill-advised due to its possible impact on the process of balancing the aggravating circumstances found beyond a reasonable doubt and the mitigating circumstances raised, here, due to the express exclusion of the finding by the sentencing court, we find no error.
F. Appellant next argues that due process is denied under the statutory scheme since the death penalty may be arrived at unless the court finds the mitigating circumstances outweigh the aggravating circumstance found. Appellant contends that this constitutes an impermissible shifting of the burden of proof to the defendant and cites the cases of Mullaney v. Wilbur, 421 U.S. 684, 95 S. Ct. 1881, 44 L. Ed. 2d 508 (1975), and Woodson v. North Carolina, supra, in support of this proposition. In Mullaney, the Supreme Court was faced with a state statutory scheme which placed the burden upon a defendant to prove by a preponderance of the evidence that he acted in the heat of passion in order to reduce a murder charge to manslaughter. The Supreme Court held this to be unconstitutional since the due process clause required the state to prove beyond a reasonable doubt the absence of heat of passion or sudden provocation when that issue was properly presented. 421 U.S. at 701-4, 95 S.Ct. at 1891-92, 44 L.Ed.2d at 520-22. What the court essentially decided was that the state had the burden of proving all elements of the offense, including establishing sufficient criminal intent when a legitimate issue on the question of intent was raised. The Court noted that in some situations the defendant bears the burden of production, i.e., of introducing some evidence to raise an issue, but the prosecution retains the burden of persuasion beyond a reasonable doubt. Id.
*199 We find Mullaney unpersuasive authority for appellant's contention.[8] Here we are not concerned with proof of an element of the offense but rather are engaged in an inquiry into all relevant facts and circumstances which might weigh upon the propriety of capital punishment. The weighing process, in our opinion does not involve shifting the burden of persuasion but is concerned instead with the presentation of relevant information to the sentencer in order that a reasoned and considered decision can be reached. The defendant's burden is merely to raise, in the aggravation-mitigation hearing, any factors which might possibly tend to mitigate his culpability for the offense. He has full opportunity to present and argue those factors. The court below then evaluates those factors under the guidelines set forth in the statute. His decision, including his reasoning, is then set forth in detail and this court reviews the entire process. While it is possible to speak of a "burden" of persuasion on the defendant to establish why he should receive leniency, we feel that, under our sentencing process, the facts speak for themselves once presented. The completeness of the evaluative process below and the mandatory review by this court, we feel, withstands constitutional scrutiny. Tichnell v. State, 287 Md. 695, 415 A.2d 830, 848-50 (1980); State v. Watson, 120 Ariz. 441, 586 P.2d 1253, 1258-9 (1978), cert. den. 440 U.S. 924, 99 S. Ct. 1254, 59 L. Ed. 2d 478 (1979).
G. Appellant argues next that the language of the statutory circumstances found beyond a reasonable doubt by the district court[9] is unconstitutionally vague. We conclude that this statutory language withstands constitutional scrutiny.
The need for clear standards to guide the discretion of the sentencing body in death penalty cases was initially set forth in Gregg v. Georgia, supra, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976), wherein Justice Stewart noted that a death penalty scheme "could have standards so vague that they would fail adequately to channel the sentencing decision patterns of juries with a result that a pattern of arbitrary and capricious sentencing like that found unconstitutional in Furman could occur." 428 U.S. 195, n. 46, 96 S.Ct. at 2935, 49 L.Ed.2d at 887. In Gregg, the petitioner argued that the language of the Georgia death penalty statute authorizing the imposition of death if the offense was "outrageously or wantonly vile, horrible, or inhuman in that it involved torture, depravity of mind, or an aggravated battery to the victim" was impermissibly vague and overbroad. The Supreme Court, however, held that this language was not unconstitutional on its face: "It is, of course, arguable that any murder involves depravity of mind or an aggravated battery. But this language need not be construed this way, and there is no reason to assume that the Supreme Court of Georgia will adopt such an open-ended construction." 428 U.S. at 201, 96 S.Ct. at 2938, 49 L.Ed.2d at 890. Subsequently, in Godfrey v. Georgia, 446 U.S. 420, 100 S. Ct. 1759, 64 L. Ed. 2d 398 (1980), the Supreme Court held that where statutory provisions concerning aggravating circumstances such as these could be applied to any murder, a limiting construction is indispensable if the state is to meet its constitutional obligation "to tailor and apply its law in a manner that avoids the arbitrary and capricious infliction of the death penalty." 446 U.S. at 428, 100 S.Ct. at 1764, 64 L.Ed.2d at 406.
Under Gregg, it is apparent that the language contained in I.C. §§ 19-2515(f)(5) and (6) is facially constitutional. However, inasmuch *200 as a reasonable person could fairly characterize any murder as "especially heinous, atrocious or cruel, manifesting exceptional depravity" and as exhibiting an "utter disregard for human life," it is equally apparent under Godfrey that this court must place a limiting construction upon these statutory aggravating circumstances so as to avoid the possibility of their application in an unconstitutional manner.
Other jurisdictions have had an opportunity to construe statutory language similar to that contained in I.C. § 19-2515(f)(5). In State v. Dixon, 283 So. 2d 1 (Fla. 1973), cert. den., 416 U.S. 943, 94 S. Ct. 1951, 40 L. Ed. 2d 295 (1974), the defendant attacked the constitutionality of the statutory aggravating circumstance that "[t]he capital felony was especially heinous, atrocious or cruel." The Florida Supreme Court interpreted this language as follows:
"[W]e feel that the meaning of such terms is a matter of common knowledge, so that an ordinary man would not have to guess at what was intended. It is our interpretation that heinous means extremely wicked or shockingly evil; that atrocious means outrageously wicked and vile; and, that cruel means designed to inflict a high degree of pain with utter indifference to, or even enjoyment of, the suffering of others. What is intended to be included are those capital crimes where the actual commission of the capital felony was accompanied by such additional acts as to set the crime apart from the norm of capital felonies the conscienceless or pitiless crime which is unnecessarily torturous to the victim." Id. at 9. (Emphasis added)
Subsequently, in Profitt v. Florida, 428 U.S. 242, 255-56, 96 S. Ct. 2960, 2968, 49 L. Ed. 2d 913, 925 (1976), the United States Supreme Court approved of this construction, observing that "[w]e cannot say that the provision, as so construed, provides inadequate guidance to those charged with the duty of recommending or imposing sentences in capital cases." In State v. Simants, 197 Neb. 549, 250 N.W.2d 881, 891 (1977) cert. den., 434 U.S. 878, 98 S. Ct. 231, 54 L. Ed. 2d 158, reh. den., 434 U.S. 961, 98 S. Ct. 496, 54 L. Ed. 2d 322 (1977), the Nebraska Supreme Court considered the statutory aggravating circumstance that the murder "manifested exceptional depravity by ordinary standards of morality and intelligence," and stated:
"In interpreting this portion of the statute, the key word is `exceptional.' It might be argued that every murder involves depravity. The use of the word `exceptional,' however, confines it only to those situations where depravity is apparent to such an extent as to obviously offend all standards of morality and intelligence."
We agree with the definition of "heinous, atrocious and cruel" set forth by the Florida Supreme Court in Dixon, and with the definition of "exceptional depravity" set forth by the Nebraska Supreme Court in Simants. With these constructions, i.e., that the murder must be accompanied by acts setting it apart from the norm of murders and that its commission manifests such depravity as to offend all standards of morality and intelligence, the aggravating circumstance contained in I.C. § 19-2515(f)(5) is sufficiently definite and limited to guide the sentencing court's discretion in imposing the death penalty.
A similar limiting construction must be placed upon the aggravating circumstances in I.C. § 19-2515(f)(6), that "[b]y the murder, or the circumstances surrounding its commission, the defendant exhibited utter disregard for human life." To properly define this circumstance, it is important to note the other aggravating circumstances with which this provision overlaps. The second aggravating circumstance, I.C. § 19-2515(f)(2), that the defendant committed another murder at the time this murder was committed, obviously could show an utter disregard for human life, as could the third aggravating circumstance, I.C. § 19-2515(f)(3), that the defendant knowingly created a great risk of death to many persons. The same can be said for the fourth aggravating circumstance, I.C. § 19-2515(f)(4), that the murder was committed for remuneration. Since we will not *201 presume that the legislative intent was to duplicate any already enumerated circumstance, thus making I.C. § 19-2515(f)(6) mere surplusage (See, e.g., Norton v. Dept. of Employment, 94 Idaho 924, 500 P.2d 825 (1972)), we hold that the phrase "utter disregard" must be viewed in reference to acts other than those set forth in I.C. §§ 19-2515(f)(2), (3), and (4). We conclude instead that the phrase is meant to be reflective of acts or circumstances surrounding the crime which exhibit the highest, the utmost, callous disregard for human life, i.e., the cold-blooded, pitiless slayer. With such an interpretation, it is our conclusion that this aggravating circumstance meets the constitutional requirements set forth by the United States Supreme Court. Upon remand, the district court should, in accordance with his opinion and the provisions of I.C.R. 33.1 and 33.2 (enacted subsequent to original sentencing in this case), specifically set forth the facts and reasoning underlying the finding, if any, that a statutory aggravating circumstance exists.
H. Finally, the appellant argues that the legislature improperly delegated the power to inflict the death penalty to the Board of Corrections. I.C. § 19-2716 provides:
"The punishment of death must be inflicted by the intravenous injection of a substance or substances in a lethal quantity sufficient to cause death until the defendant is dead. The director of the department of corrections shall determine the substance or substances to be used and the procedures to be used in any execution."
This argument was disposed of in Ex parte Granviel, 561 S.W.2d 503 (Tex.Cr.App. 1978):
"[T]he existence of an area for exercise of discretion by an administrative officer under delegation of authority does not render delegation unlawful where standards formulated for guidance and limited discretion, though general, are capable of reasonable application... .
... .
It appears that the Legislature has declared a policy and fixed a primary standard and delegated to the said Director power to determine details so as to carry out the legislative purpose which the Legislature cannot practically or efficiently perform itself. The statute is sufficiently complete to accomplish the regulation of the particular matters falling within the Legislature's jurisdiction." 561 S.W.2d at 514-5.
We agree with this analysis; we will not assume that the director of the department of corrections will act in other than a reasonable manner.
VI Conclusion
In light of the preceding discussion, the sentence of death is reversed. Additionally, being required under I.C. § 19-2827 to undertake an appellate review independent of any alleged errors raised on appeal, we note our awareness of that review, although it is clear the actual statutory review in regard to the present case awaits resentencing and the possibility that the penalty of death is again imposed.
Sentence reversed and case remanded for resentencing in accordance with this opinion.
BAKES, C.J., and DONALDSON, J., concur.
SHEPARD, J., dissents without opinion.
BISTLINE, Justice, separately concurring in reversal for resentencing.
Osborn pled guilty to a charge of first degree murder. He now appeals from the sentence of death which was imposed upon him. No trial having taken place, the following facts are taken from the transcript of the preliminary hearing.
I.
Osborn and the murder victim, Charlotte Christine Carl, were both employed at a cafe in Pocatello. They were seen together in a room at the Holiday Inn on October 30, 1978. The next evening, the 31st, Osborn was stopped by a police officer for driving in an inattentive manner. Osborn was not *202 sufficiently intoxicated to be arrested, but the officer did ask Osborn's passenger, whom Osborn called Chris, to drive.
Later that night, Christine Carl's body, partially clothed, was found by the road. She had been shot three times in the head, once in the shoulder and once in the abdomen. Her face showed tremendous contusions on the right side, some bruising on the left side, and a fractured nose. The pathologist who performed the autopsy felt that the bullet wound behind the ear was a close contact wound, while those wounds in the temple were probably fired at a distance, although he conceded that such could have been incurred at a distance of less than eighteen inches. The pathologist stated that the amount of blood indicated her nose had been broken prior to her being shot. He also stated that in this opinion the beating occurred prior to the shooting, but he then stated that this was merely conjecture as the same bruising would have occurred had the beating occurred immediately as she was shot to death.
About 10:30 that night Osborn arrived at Lucy Baker's home, driving Christine Carl's car. He had a pistol in his possession and blood on his vest, chest and boots. Osborn, who appeared to be acting "weird," but who did not appear to be drunk, stated that he had shot Christine Carl. He first stated he had buried her body in the mountains; then he said he had put it on some railroad tracks. He also stated that she had called the cops on him and that was why he had had to shoot her.
Two occupants of Baker's house, at Osborn's request, hid the car. They observed blood on the front seat and passenger door.
The police later searched the Baker premises and found a .22 cal. nine-shot revolver. This revolver was at the FBI lab in Washington at the time of the preliminary hearing, so only pictures of it were introduced in evidence. The FBI report stated that the gun could have been the murder weapon, and that the cylinder of the gun had to be manually rotated before each round could be fired.
Martin Sullinger testified that in October 1978 he had sold Osborn a revolver of the type discovered. He agreed with the FBI report as to the weapon's mechanical attributes.
After being bound over to district court, and after the filing of an information charging him with murder in the first degree, Osborn notified the court of an intent to rely on a defense of mental disease or defect under the provisions of I.C. § 18-209. The psychiatrist found that he was not within the protection of I.C. § 18-211, and indicated that Osborn claimed a history of polydrug abuse, and that Osborn claimed to have been on drugs at the time of the crime. As to Osborn's claim that he remembered nothing of the crime, the psychiatrist stated his opinion that such claim of amnesia was not genuine.
Osborn subsequently pled guilty. The district court, following a hearing, the sufficiency of which is not challenged, accepted the plea. After submission of a presentence report, an aggravation/mitigation hearing was held. At that hearing, neither side called witnesses. The prosecutor advised the court that "because I think we do have a a good record of what transpired in the preliminary hearing, instead of calling witnesses today, [I choose] to rely on the testimony presented at the preliminary hearing... ." The trial court therefore had for sentencing purposes the oral arguments of counsel, an oral statement by Osborn, the presentence report, the transcript and exhibits from the preliminary hearing, the FBI report and the § 18-211 psychiatric evaluation.
The court found the following two aggravating circumstances beyond a reasonable doubt: (1) that "the murder was especially heinous, atrocious or cruel, manifesting exceptional depravity"; and (2) "that by the murder and the circumstances surrounding its commission, the defendant exhibited utter disregard for human life." The court also found, but only by a preponderance of the evidence, the aggravating circumstance that Osborn, by prior conduct and by his conduct in the murder, "has exhibited a *203 propensity to commit murder and will probably constitute a continuing threat to society."
As to mitigating circumstances, the court succinctly found only that there were none which outweighed the gravity of the aggravating circumstances. Pursuant to I.C. § 19-2515, the court imposed the death penalty. We[*] now have the case before us both as an ordinary appeal, and also on mandatory review of the death sentence as required under I.C. § 19-2827.[1]
II.
Prior to 1977, I.C. § 18-4004 made the death penalty mandatory for those defendants convicted of first degree murder. However, in light of the opinion of the United States Supreme Court in Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976), which held a mandatory death penalty statute virtually identical to Idaho's unconstitutional, the legislature amended I.C. §§ 18-4004 and 19-2515, obviously done in an apparent attempt to meet the objections of the Supreme Court. The basic premise of Woodson and its companion cases, Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976), Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929 (1976), and Proffitt v. Florida, 428 U.S. 242, 96 S. Ct. 2960, 49 L. Ed. 2d 913 (1976), is that the sentencing body must be given "specific and detailed guidance to assist them in deciding whether to impose a death penalty" in order "to assure that the death penalty will not be imposed in an arbitrary or capricious manner." 428 U.S. at 252-53, 96 S.Ct. at 2967. To meet this mandate the legislature, in enacting § 19-2515, provided for a sentencing hearing at which all relevant information could be presented to the trial court, listed the aggravating circumstances that must be found in order to impose a sentence of death, provided that at least one aggravating circumstance must be found beyond a reasonable doubt, and provided that the defendant shall be sentenced to death unless *204 the mitigating circumstances outweigh the gravity of the aggravating circumstances. Further, in I.C. § 19-2827 the legislature provided for mandatory Supreme Court review of all death sentences. Osborn on his appeal raises numerous challenges both to the sentencing procedure followed below and to the constitutionality of § 19-2515.
III.
A. The first issue raised by Osborn is his contention that the trial court erred in relying on the preliminary hearing transcript at the sentencing hearing, as opposed to requiring the state to present the testimony of witnesses in open court. Since Osborn did not object to the use of the preliminary hearing transcript, and in fact acquiesced in its use, we must initially determine whether the general rule which precludes our review of matters not objected to, State v. Garcia, 100 Idaho 108, 594 P.2d 146 (1979), State v. Watson, 99 Idaho 694, 701, 587 P.2d 835, 842 (1978), precludes our consideration of this issue. The general rule applicable to appeals is not necessarily controlling where we are mandated to conduct a review, irrespective of the defendant's contentions, if any, the simple reason being that the legislature in providing for mandatory review was surely aware of that which Justice Powell wrote:
"[F]ive members of the Court have now expressly recognized that death is a different kind of punishment from any other which may be imposed in this country... . From the point of view of the defendant, it is different in both its severity and its finality. From the point of view of society, the action of the sovereign in taking the life of one of its citizens also differs dramatically from any other legitimate state action. It is of vital importance to the defendant and to the community that any decision to impose the death sentence be, and appear to be, based on reason rather than caprice or emotion." Gardner v. Florida, 430 U.S. 349, 357-58, 97 S. Ct. 1197, 1204, 51 L. Ed. 2d 393 (1976).
I.C. § 19-2827 mandates not only that we examine the sentence imposed, but the procedure followed in imposing that sentence, regardless of whether an appeal is even taken. The gravity of a sentence of death, and the infrequency with which it is imposed, outweigh any administrative convenience that might be achieved by refusing to consider unchallenged errors.
Other jurisdictions similarly do not allow technical appellate rules to preclude a comprehensive review of those cases where a sentence of death has been imposed. In Commonwealth v. McKenna, 476 Pa. 428, 383 A.2d 174 (1978), for instance, the defendant, who had been sentenced to death, on appeal alleged various errors at his trial but did not challenge his sentence or the constitutionality of the statute under which he was sentenced. Nonetheless, the court, after noting the rule that failure to object to a sentence at sentencing forecloses appellate review of that sentence, refused to apply that rule:
"We recognize, of course, that the doctrine of waiver is, in our adversary system of litigation, indispensable to the orderly functioning of the judicial process. There are, however, occasional rare situations where an appellate court must consider the interests of society as a whole in seeing to it that justice is done, regardless of what might otherwise be the normal procedure. One such situation is surely the imposition of capital punishment. That this is a unique penalty requiring special jurisprudential treatment is a concept now embodied in a statutory law of this Commonwealth. Thus section 1311(g) of the Crimes Code expressly provides that `[a] sentence of death shall be subject to automatic review by the Supreme Court of Pennsylvania... .' See also Rule 1941 of the Pennsylvania Rules of Appellate Procedure. This is illustrative of a general proposition that while a defendant may normally make an informed and voluntary waiver of rights personal to himself, his freedom to do so must give way where a substantial public policy is involved; in such a case an appeals court may feel fully warranted in *205 seeking to reach an issue. We have no doubt that this is such a case. Because imposition of the death penalty is irrevocable in its finality, it is imperative that the standards by which that sentence is fixed be constitutionally beyond reproach." Id. 383 A.2d at 180-81 (footnotes omitted).
Similarly, in State v. Brown, 607 P.2d 261 (Utah 1980), there was no objection to the trial court's failure to include in its voir dire of the jury panel a question on their beliefs on the death penalty, nor was there a request for such inquiry. The court stated that "[n]evertheless, as this is a capital case, we considered the defendant's contention on appeal." Id. at 265. And in State v. Ceja, 115 Ariz. 413, 565 P.2d 1274 (1977), cert. den. 434 U.S. 975, 98 S. Ct. 533, 54 L. Ed. 2d 467 (1977), the court independently reviewed the record to insure that defendant was accorded a fair trial, in spite of the fact that the defendant did not allege any error in the trial. See also State v. Martin, 243 Iowa 1323, 55 N.W.2d 258 (1952) ("[n]o human life should be taken by judicial order until every requirement of statutory law and justice has been complied with"); Tuggle v. State, 73 Okla. Crim. 208, 119 P.2d 857, 859 (1941) (in a capital case "it is the practice of this court to thoroughly examine the record, and consider any errors that may be presented, which are fatal to the accused's rights, even though such errors were not challenged and preserved by objections, exceptions or assignments of error"); State v. Taylor, 213 S.C. 330, 49 S.E.2d 289, 289 (1948) overruled on other grounds in State v. Jones, 268 S.C. 227, 233 S.E.2d 287, 289 (1977) ("it is well settled that where the death penalty is involved, it is the duty of this Court to examine the record for any errors affecting the substantial rights of the accused, even though not made a ground of appeal."); State v. St. Clair, 3 Utah 2d 230, 282 P.2d 323, 327 (1955) ("[w]hile we will not ordinarily raise questions of error on our own motion ... in capital cases when the interests of justice so require the entire proceeding should be reviewed to determine whether errors occurred as a consequence of which the accused did not have a fair trial, even though not assigned and argued."); State v. Russell, 106 Utah 116, 145 P.2d 1003, 1007 (1944) ("[t]his being a capital case, it is the duty of this court to consider manifest and prejudicial error even though not assigned nor argued."); State v. Stenback, 78 Utah 350, 2 P.2d 1050, 1056 (1931) ("[t]his ruling of the trial court is not assigned as error and is not argued, yet this court, in a capital case such as this, may and should sua sponte consider manifest and prejudicial errors which are neither assigned nor argued"). See generally State v. White, 97 Idaho 708, 551 P.2d 1344 (1976) cert. den. 429 U.S. 842, 97 S. Ct. 118, 50 L. Ed. 2d 111 (1976) (court will review fundamental error even if no objection is made at trial); State v. Haggard, 94 Idaho 249, 486 P.2d 260 (1971) (court may consider error even though not objected to).
We hold that the trial court erred in allowing the use of the preliminary hearing transcript. True, I.C. § 19-2515(c)[2] does provide that "[e]vidence admitted at trial shall be considered and need not be repeated at the sentencing hearing," but no such provision applies to evidence received at a preliminary hearing. Not only do we perceive a vast difference where the sentencing *206 court reads a cold record instead of hearing and seeing live witnesses, but we also must have due regard for I.C. § 19-2516:
"The circumstances must be presented by the testimony of witnesses examined in open court, except that when a witness is so sick or infirm as to be unable to attend, his deposition may be taken by a magistrate of the county, out of court, upon such notice to the adverse party as the court may direct. No affidavit or testimony, or representation of any kind, verbal or written, can be offered to or received by the court, or a judge thereof, in aggravation or mitigation of the punishment, except as provided in this and the preceding section." (Emphasis added.)
In State v. Coutts, 101 Idaho 110, 609 P.2d 642 (1980), this Court held that the district court did not have to follow the formal requirements of § 19-2516 in the absence of an explicit request therefor. This decision was said to be based on the belief that any other requirement would impose a useless formality on the trial courts by requiring the swearing of witnesses for even the most perfunctory of facts and on the belief that the provisions for presentence reports had relaxed the requirements of § 19-2516. The Court proceeded to hold that "[i]n order to maintain a viable system of sentencing hearings, under ordinary circumstances, such hearings normally need not be encumbered with all the procedural requirements which attend a resolution of the issue of guilt or innocence." 101 Idaho at 113, 609 P.2d at 645 (emphasis added). We hold today that those cases in which the death penalty may be imposed do not represent "ordinary circumstances." The gravity and infrequency of a sentence of death are such that it is necessary that all procedural formalities be followed with the utmost care. Such a proposition need not be belabored.
Our conclusion is buttressed by our decisions with regard to the use of preliminary hearing testimony at trial. In that regard, we have noted that the only function of a preliminary hearing is to determine whether a crime has been committed and whether there is probable cause to believe that the crime was committed by the accused. State v. Ruddell, 97 Idaho 436, 546 P.2d 391 (1976); State v. Haggard, 94 Idaho 249, 486 P.2d 260 (1971). At a preliminary hearing neither the prosecutor nor the defense counsel has any incentive to go to great lengths in presenting his case, or in cross-examining the other side's witnesses. The preliminary hearing is usually held at an early stage in the proceedings so that the defense counsel has had little time to prepare, or having prepared, sees no reason to display, his hand or, in some situations may well realize that the examining magistrate is not inclined to hear any testimony which merely raises questions of fact. A magistrate does not pass upon guilt, and there seems to be some view in the state that issues of fact ought not be passed upon either. In fact, in Freeman v. State, 87 Idaho 170, 392 P.2d 542 (1964), the Court put the matter wholly at rest:
"`A preliminary examination before a committing magistrate is in no sense a trial. The purpose is to obtain the judgment of a magistrate to the effect that a crime has or has not been committed, and if committed that there is reasonable ground to believe that the person accused is guilty of committing the crime. It is not to be expected, nor is it required, that the same formality and precision must obtain in a preliminary examination as is required upon the trial.' State v. Bilboa, 33 Idaho 128, 190 P. 248." 87 Idaho at 177, 392 P.2d at 546 (emphasis added).
Later in the opinion the Court quoted the Supreme Court of Minnesota for an almost identical statement as to a preliminary hearing being in no sense a trial, also describing it as being merely a process whereunder the state may determine if it wants to proceed further against the accused. 87 Idaho at 179, 392 P.2d at 547.
The same reasoning applies to the case at bar. Before a sentence of death can be imposed, I.C. § 19-2515(f) requires that at least one aggravating circumstance must be proven beyond a reasonable doubt. A preliminary *207 hearing is simply not designed nor intended to produce evidence establishing facts beyond a reasonable doubt; a defendant who pleads guilty, and hence has no trial, is entitled to a procedure as searching and reliable as a trial before it is determined that he should be put to death.
B. Next we will consider Osborn's argument that he was denied due process in that the state did not formally notify him that it was seeking the death penalty or forewarn which specific aggravating circumstances it would at the sentencing hearing seek to prove beyond a reasonable doubt. While "it is now clear that the sentencing process, as well as the trial itself, must satisfy the requirements of the Due Process Clause," Gardner v. Florida, 430 U.S. 349, 358, 97 S. Ct. 1197, 1204, 51 L. Ed. 2d 393 (1977), the due process requirements at trial are not necessarily the same as those at sentencing. Williams v. People, 337 U.S. 241, 69 S. Ct. 1079, 93 L. Ed. 1337 (1949).
In Andrews v. Morris, 607 P.2d 816 (Utah 1980) cert. den. ___ U.S. ___, 101 S. Ct. 254, 66 L. Ed. 2d 120 (1980), the court dismissed the defendant's contention that the sentencing procedure was unconstitutional in that no notice was given as to the aggravating circumstances upon which the death penalty was sought as follows:
"It is to be noted that U.C.A., 1953, 76-5-202 specifically sets forth eight aggravating circumstances, one or more of which must be alleged, proved, and found by the fact finder. Hence, one charged with a capital felony is put on notice and is made aware of what the State must prove and thus able to prepare his defense." Id. at 822.
However, in State v. Sonnier, 379 So. 2d 1336, 1356 (La. 1979), the court stated the following:
"Unquestionably, the need for reliability in the determination of whether to impose the death penalty by adversary proceedings demands that an accused be afforded full rights of due process. Accordingly, a defendant is entitled in a capital sentencing proceeding, no less than in the guilt or innocence trial, to be informed of the nature and cause of the accusation against him, LSA-Const. Art. 1, § 13 (1974), and to his Fifth Amendment right to `[n]otice... given sufficiently in advance of scheduled court proceedings so that reasonable opportunity to prepare will be afforded, and "[setting] forth the alleged misconduct with particularity."' In re Gault, 387 U.S. 1, 33, 87 S. Ct. 1428, 1446, 18 L. Ed. 2d 527, 459 [sic] (1967). Thus, the defendant is entitled to know the aggravating circumstances which the prosecution will seek to prove sufficiently in advance of court proceedings so that reasonable opportunity to prepare will be afforded."
However, the court then held the defendant lacked standing to contest the issue because he had not alleged either that he was not so informed or that he had made any attempt to obtain that information.
In the present case, under § 18-4004, upon pleading guilty to a charge of first degree murder Osborn was informed that he could be sentenced to death, or to a determinate or indeterminate life term.
As to whether the state must give notice of which aggravating circumstances it will seek to prove beyond a reasonable doubt, we agree with the reasoning set forth in State v. Sonnier, supra, insofar as it states that the defendant must be notified of which aggravating circumstances the state will seek to establish beyond a reasonable doubt. The execution of a sentence imposing death is a final, non-correctable event. A defendant should not be put to the burden of preparing to disprove all ten aggravating circumstances, and the burden placed on the state by requiring notification is minimal at most.
However, in the present case, at the aggravation/mitigation hearing Osborn's attorney stated that he had discussed with the prosecutor the subjects that he would "raise in aggravation with respect to the imposition of sentence... ." The better procedure would be to set them out in writing so that they are available for review, see, e.g., Md.Code, Ann. Art. 27 § 412, and since this will pose no hardship on the state, we hold *208 that the state must provide the defendant in a capital case with a list of the aggravating circumstances which it will seek to prove. Since we must remand this case for resentencing, the state can supply Osborn with such notice prior to any future sentencing hearing.
C. The next question before us is whether the trial court erred in failing to set forth the mitigating factors it considered. I.C. § 19-2515(d) is as follows:
"Upon the conclusion of the evidence and arguments in mitigation and aggravation the court shall make written findings setting forth any statutory aggravating circumstance found. Further, the court shall set forth in writing any mitigating factors considered and, if the court finds that mitigating circumstances outweigh the gravity of any aggravating circumstance found so as to make unjust the imposition of the death penalty, the court shall detail in writing its reasons for so finding." (Emphasis added.)
In its memorandum opinion, the trial court stated the following:
"This court, because of the extreme burden imposed upon the sentencing judge by the statute and the offense itself, has consciously searched all the information before it hoping sincerely to find circumstances in mitigation which would overcome the circumstance of aggravation however, such mitigating circumstances do not exist." (Emphasis added.)
The court then made the following finding of fact:
"The Court further finds that there are no mitigating circumstances which outweigh the gravity of aggravating circumstances and which would make imposition of the death penalty unjust." (Emphasis added.)
The State now maintains the only way to interpret this finding is that the trial court concluded there were no mitigating circumstances. We cannot agree. These statements by the trial court indicate that the court examined the written transcript for mitigating circumstances which might outweigh the gravity of aggravating circumstances, but found none. Moreover, the finding of fact quoted can be read as implying that there were some mitigating circumstances, but that they simply did not outweigh the aggravating circumstances. See State v. Mata, 125 Ariz. 233, 609 P.2d 48, 57 (1980) cert. den. ___ U.S. ___, 101 S. Ct. 338, 66 L. Ed. 2d 161 (1980) (where the trial court apparently made the specific finding that mitigating circumstances were absent).
I.C. § 19-2515(d) is mandatory in its terms; the trial court must set forth in writing any mitigating factors considered. The reasoning behind a Florida statutory provision that the trial judge must justify his sentence of death in writing was explained in State v. Dixon, 283 So. 2d 1, 8 (Fla. 1973) cert. den. 416 U.S. 943, 94 S. Ct. 1951, 40 L. Ed. 2d 295 (1974), as follows:
"The fourth step required by Fla. Stat. § 921.141, F.S.A., is that the trial judge justifies his sentence of death in writing, to provide the opportunity for meaningful review by this Court. Discrimination or capriciousness cannot stand where reason is required, and this is an important element added for the protection of the convicted defendant. Not only is the sentence then open to judicial review and correction, but the trial judge is required to view the issue of life or death within the framework of rules provided by the statute."
As added by the court in Dixon:
"It must be emphasized that the procedure to be followed by the trial judges ... is not a mere counting process of X number of aggravating circumstances and Y number of mitigating circumstances, but rather a reasoned judgment as to what factual situations require the imposition of death and which can be satisfied by life imprisonment in light of the totality of the circumstances present. Review by this Court guarantees that the reasons present in one case will reach a similar result to that reached under similar circumstances *209 in another case." 382 So.2d at 10.[3]
The requirement that the mitigating factors considered be set forth is not merely a procedural formality imposed by the legislature as a burden on trial courts. Rather, we see compliance therewith as being necessary to insure that this Court can make the proper and thorough review of any sentence of death which the legislature in turn requires of us. The statutory procedure provides that in the first instance the trial court must set down all the mitigating factors it considers and the aggravating circumstances, it finds. If the mitigating factors outweigh the aggravating circumstances, the court is to detail its reasons for so finding. By requiring these findings, the legislature has provided a procedure where on review we can fulfill our obligation to determine first whether the trial court ignored or overlooked any mitigating factors, secondly, whether the evidence supports the aggravating factors found, and finally whether the court has properly weighed these factors. Where the trial court does not set forth the mitigating factors it has considered, it is impossible for us to pass on the propriety of the basic weighing process undertaken by the court. The trial court, having heard the witnesses, is in a far better position to pass a first judgment on mitigating and aggravating circumstances than is this Court. But if the reasoning of the trial court is not set forth with reasonable exactitude, this Court would be forced to make its review on an inadequate record. We hold that the legislative mandate found in I.C. § 19-2515(d), that all mitigating factors considered must be set forth, must be met.
So viewed, we need not speculate whether the trial court finding in question might have been intended to be understood as a conclusion that there were no mitigating factors. In this regard we note that although the Idaho legislature has not delineated that which constitutes a mitigating factor, statutes from other states do suggest certain factors. For instance, Model Penal Code § 210.6(4) (Proposed Official Draft 1962), which appears to have been influential in other states, suggests the following factors, among others:
"(a) The defendant has no significant history of prior criminal activity. (b) The murder was committed while the defendant was under the influence of extreme mental or emotional disturbance... . (g) At the time of the murder, the capacity of the defendant to appreciate the criminality [wrongfulness] of his conduct or to conform his conduct to the requirements of law was impaired as a result of mental disease or defect or intoxication."
See Fla. Stat. Ann. § 921.141(5); Neb. Rev. Stat. § 29-2523; Utah Code § 76-3-207. Moreover, the United States Supreme Court, in discussing the need to focus the sentencing authority's attention on the specific circumstances of the crime, noted, while upholding the Georgia death penalty statute, that the jury (the sentencing authority in Georgia) is asked whether "there are any special facts about this defendant that mitigate against imposing capital punishment (e.g., his youth, the extent of his cooperation with the police, his emotional state at the time of the crime.)" Gregg v. Georgia, 428 U.S. 153, 197, 96 S. Ct. 2909, 2936, 49 L. Ed. 2d 859 (1976).
D. Defendant also argues that the statute is unconstitutional because it fails to specify mitigating factors. This argument was disposed of in Lockett v. Ohio, 438 U.S. 586, 98 S. Ct. 2954, 57 L. Ed. 2d 973 (1978), wherein the United States Supreme Court held it was unconstitutional for the legislature to limit the sentencing body's consideration of mitigating factors to those enumerated in a statute. See State v. Mata, 125 Ariz. 233, 609 P.2d 48, 56-57 (1980) (holding that a policy of unlimited mitigation is expressly mandated by the United States Supreme Court).
*210 E. We next consider whether the trial court erred in making the finding, by a preponderance of the evidence, that Osborn "by prior conduct or conduct in the commission of the murder at hand, has exhibited a propensity to commit murder which will probably constitute a continuing threat to society." The state argues that this finding is irrelevant because there were two other aggravating circumstances found beyond a reasonable doubt. While it is true there is no indication that the trial court relied on this finding in imposing the sentence of death, the requirement that aggravating and mitigating factors be balanced against each other is so important that any error that might affect that balance cannot be tolerated. Since we reverse on other grounds, we need not decide whether the evidence supports that finding, or that it should have been made at all. But for future guidance, we pause to consider the proposition.
In State v. Simants, 197 Neb. 549, 250 N.W.2d 881, 888 (1977) cert. den. 434 U.S. 878, 98 S. Ct. 231, 54 L. Ed. 2d 158 (1977), the court stated:
"Section 29-2522, R.R.S. 1943, now requires a determination after hearing that sufficient aggravating circumstances exist to justify the imposition of a death penalty. As the United States Supreme Court noted in Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976): `death, in its finality, differs more from life imprisonment than a 100-year prison term differs from one of only a year or two. Because of that qualitative difference, there is a corresponding difference in the need for reliability in the determination that death is the appropriate punishment in a specific case.'
"We believe the obvious intent of the statute is that the enumerated aggravating circumstances should require strong proof. Aggravating circumstances are now a mandatory element to be considered in capital cases. The sentence depends upon the proof of some aggravating circumstance. We believe it is the intent of the act to require the facts upon which the aggravating circumstances ... are based be proved beyond a reasonable doubt, and so construe it."
Similarly, in State v. Dixon, supra, the court held that "[t]he aggravating circumstances ... actually defined those crimes ... to which the death penalty is applicable in the absence of mitigating circumstances. As such, they must be proved beyond a reasonable doubt before being considered by judge or jury." 283 So.2d at 9.
I.C. § 19-2515(f) states that "[a]t least one [aggravating circumstance] ... must be found to exist beyond a reasonable doubt before a sentence of death can be imposed." This language is capable of being understood to imply that other aggravating circumstances can be found to exist by a standard less than "beyond a reasonable doubt," that only one aggravating circumstance need be found "beyond a reasonable doubt." This would mean that other aggravating circumstances could be found by a preponderance of the evidence, and that they could be used in the balancing test against any mitigating factors considered.
We do not believe that this is what the legislature intended. Section 19-2515(b) states that the court shall sentence the defendant to death where it finds a statutory aggravating circumstance, unless mitigating circumstances outweigh the gravity of any aggravating circumstance found. Similarly, § 19-2515(d) states that "if the court finds that mitigating circumstances outweigh the gravity of any aggravating circumstance found so as to make unjust imposition of the death penalty, the court shall detail in writing its reasons for so finding." In neither of these sections does the legislature mention the standard of proof for finding an aggravating circumstance. Due to the gravity of the death penalty, we believe the legislature intended to apply the same standard of proof for aggravating circumstances as for the elements of a crime, i.e., beyond a reasonable doubt. The language that at least one such circumstance must be found to exist beyond a reasonable doubt before a sentence of death can be imposed means only that if not even a single such circumstance is found, a *211 sentence of death cannot be imposed. It does not mean that where one such circumstance is found beyond a reasonable doubt, it follows that other circumstances may permissibly be found by a preponderance. Any other interpretation could conceivably allow aggravating circumstances to outweigh mitigating circumstances in cases where only one aggravating circumstance was found beyond a reasonable doubt, but many were found by a preponderance. A factual finding arrived at by a preponderance of the evidence is insufficient to be entered into the balancing process in the absence of an explicit legislative directive to that effect.
F. Next, Osborn argues that due process is denied in the statutory scheme where the death penalty may be arrived at on the finding of a statutory aggravating circumstance unless the court finds that mitigating circumstances outweigh aggravating circumstances, in that the burden of proof is improperly placed on the defendant. To support his argument Osborn cites Mullaney v. Wilbur, 421 U.S. 684, 95 S. Ct. 1881, 44 L. Ed. 2d 508 (1975), and Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976). However, Mullaney dealt only with proving the elements of a crime, while Woodson held only that it was unconstitutional to impose a mandatory death penalty.
The court in State v. Watson, 120 Ariz. 441, 586 P.2d 1253, 1259 (1978) cert. den. 440 U.S. 924, 99 S. Ct. 1254, 59 L. Ed. 2d 478 (1979), stated the following:
"When the issue of guilt is settled and only the question of punishment remains, due process is not offended by requiring the already guilty defendant to carry the burden of showing why he should receive leniency. This is not contrary to the due process requirement that the State has the burden of proof as to guilt of the defendant. In discussing affirmative defenses when sanity was a question, the United States Supreme Court stated:
`Among other things, it is "normally within the power of the `State to regulate procedures under which its laws are carried out, including the burden of producing evidence and the burden of persuasion,' and its decision in this regard is not subject to proscription under the Due Process Clause unless `it offends some principle of justice so deeply rooted in the traditions and conscience of our people as to be ranked as fundamental.' (citations omitted)" Patterson v. New York, 432 U.S. 197, 201-02, 97 S. Ct. 2319, 2322, 53 L. Ed. 2d 281, 286-87 (1977).'"
In that case, the court then held that the state did not have to negate every mitigating circumstance.
Under the Maryland capital punishment statute, where the sentencing authority finds beyond a reasonable doubt the existence of one or more aggravating factors, then it must determine whether, by a preponderance of the evidence, any one of the mitigating factors exist. If, by a preponderance of the evidence, the sentencing body finds that the mitigating circumstances outweigh the aggravating circumstances, then a sentence of life imprisonment is imposed. If the mitigating circumstances do not outweigh the aggravating circumstances by a preponderance of the evidence, however, then a sentence of death must be imposed. Md. Code Ann.Art. 27 § 413(h). The court upheld the constitutionality of these provisions in Tichnell v. State, 287 Md. 695, 415 A.2d 830, 848 (1980), as follows:
"That it is not a mandatory death penalty statute is clear. Because it allows for a broad consideration of mitigating circumstances, it plainly withstands scrutiny under Woodson v. North Carolina, supra [428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944, 19 Cr.L. 3287 (1976)], and Roberts v. Louisiana, supra [431 U.S. 633, 97 S. Ct. 1993, 52 L. Ed. 2d 627, 21 Cr.L. 3076 (1976)]. Furthermore, it is clear that the statute complies with the three general methods of guiding the discretion vested in the sentencing authority under Gregg, Proffitt, and Jurek. The statute provides a bifurcated trial procedure, and the imposition of the death penalty is limited to *212 cases in which the sentencing authority finds at least one aggravating circumstance. The sentencing authority is required to consider the existence of mitigating circumstances. A sentence of death may be imposed only if the mitigating circumstances do not outweigh the the aggravating circumstances. Although the sentencing authority still has discretion under the statute, it is guided by clear and objective standards."
Under the Idaho statutory scheme, the trial court's discretion is properly guided. There is nothing which is made mandatory without resort to the statutory provisions; the defendant has a full opportunity to present mitigating factors. As such, it withstands constitutional scrutiny.
G. Next, Osborn argues that the aggravating circumstances found beyond a reasonable doubt by the trial court, I.C. §§ 19-2515(f)(5) & (6), are unconstitutionally vague. The need for clear standards for the sentencing body to follow was set forth in Godfrey v. Georgia, 446 U.S. 420, 100 S. Ct. 1759, 1764-65, 64 L. Ed. 2d 398 (1980), as follows:
"[I]f a State wishes to authorize capital punishment it has a constitutional responsibility to tailor and apply its law in a manner that avoids the arbitrary and capricious infliction of the death penalty. Part of a State's responsibility in this regard is to define the crimes for which death may be the sentence in a way that obviates `standardless [sentencing] discretion.' Gregg v. Georgia, supra, 428 U.S., at 196, n. 47, 96 S.Ct., at 2936, n. 47. See also Proffitt v. Florida, 428 U.S. 242, 96 S. Ct. 2960, 49 L. Ed. 2d 913; Jurek v. Texas, 428 U.S. 262, 96 S. Ct. 2950, 49 L. Ed. 2d 929. It must channel the sentencer's discretion by `clear and objective standards' that provide `specific and detailed guidance,' and that `make rationally reviewable the process for imposing a sentence of death.' As was made clear in Gregg, a death penalty `system could have standards so vague that they would fail adequately to channel the sentencing decision patterns of juries with the result that a pattern of arbitrary and capricious sentencing like that found unconstitutional in Furman could occur.' 428 U.S., at 195, n. 46 [96 S.Ct., at 2935 n. 46]." (Footnotes omitted.)
In the case before us the district court, using only the statutory language, wrote that "the murder was especially heinous, atrocious or cruel, manifesting exceptional depravity," and that "by the murder and the circumstances surrounding its commission, the defendant exhibited utter disregard for human life." The district court apparently did not feel compelled to explain the reasoning behind these findings beyond his narration of the facts. Nothing in the statute seemed to require more. We hold, however, that these phrases, without a limiting definition, are unconstitutional. Because we remand for resentencing, we do not need to ponder upon the effect of the trial court's failure to place any limiting definition on these phrases.
We will deal first with the constitutionality of I.C. § 19-2515(f)(5), which sets forth the aggravating circumstance that "the murder was especially heinous, atrocious or cruel, manifesting exceptional depravity." In Godfrey v. Georgia, supra, the United States Supreme Court reversed a sentence of death based solely upon the finding that the offense was "outrageously or wantonly vile, horrible and inhuman." Georgia Code Ann. § 27-2534.1(b)(7) provides that a person convicted of murder may be sentenced to death if it is found beyond a reasonable doubt that the offense "was outrageously or wantonly vile, horrible or inhuman in that it involved torture, depravity of mind, or an aggravated battery to the victim." This aggravating circumstance had been upheld as not unconstitutional on its face in Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976), wherein the Court noted that although it is arguable that any murder involves depravity of mind or an aggravated battery, "there is no reason to assume that the Supreme Court of Georgia will adopt such an open-ended construction." 428 U.S. at 201, 96 S.Ct. at 2938. Subsequently, the Georgia Supreme Court adopted *213 a limiting construction that the offense had to demonstrate "torture, depravity of mind, or an aggravated battery to the victim." 100 S.Ct. at 1766.
The evidence in Godfrey, however, showed that the defendant did not torture or commit an aggravated battery upon his victims. The Supreme Court therefore held that the validity of the death sentence turned on whether the Georgia Supreme Court had supplied a constitutional construction to the phrase "outrageously or wantonly vile, horrible or inhuman in that [they] involved ... depravity of mind... ." Id. at 1767. The court found that defendant's "crimes cannot be said to have reflected a consciousness materially more `depraved' than that of any person guilty of murder." Id. Since there was "no principled way to distinguish this case, in which the death penalty was imposed, from the many cases in which it was not," id., the court reversed the judgment upholding the sentence of death.
Under the decision in Godfrey, the simple phrase "the murder was especially heinous, atrocious or cruel" must be limited so as to be constitutional, and the addition of the phrase "manifesting exceptional depravity" in I.C. § 19-2515(f)(5) does not alter that result, for "exceptional depravity" can apply to any murder in the same manner as "especially heinous, atrocious or cruel."
In State v. Dixon, 283 So. 2d 1 (Fla. 1973) cert. den. 416 U.S. 943, 94 S. Ct. 1951, 40 L. Ed. 2d 295 (1974), the defendant attacked the constitutionality of the aggravating circumstance "[t]he capital felony was especially heinous, atrocious or cruel." The Florida court interpreted these terms as follows:
"[W]e feel that the meaning of such terms is a matter of common knowledge, so that an ordinary man would not have to guess at what was intended. It is our interpretation that heinous means extremely wicked or shockingly evil; that atrocious means outrageously wicked and vile; and, that cruel means designed to inflict a high degree of pain with utter indifference to, or even enjoyment of, the suffering of others. What is intended to be included are those capital crimes where the actual commission of the capital felony was accompanied by such additional acts as to set the crime apart from the norm of capital felonies the consciousless or pitiless crime which is unnecessarily tortuous to the victim." 283 So.2d at 9.
The United States Supreme Court upheld this provision, holding that "[w]e cannot say that the provision, as so construed, provides inadequate guidance to those charged with the duty of recommending or imposing sentences in capital cases." Proffitt v. Florida, 428 U.S. 242, 255-56, 96 S. Ct. 2960, 2968, 49 L. Ed. 2d 913 (1976). See also State v. Watson, supra, 586 P.2d at 1259; State v. Knapp, 114 Ariz. 531, 562 P.2d 704 (1977) cert. den. 435 U.S. 908, 98 S. Ct. 1458, 55 L. Ed. 2d 500 (1978); State v. Sonnier, 379 So. 2d 1336 (La. 1979).
In State v. Simants, 197 Neb. 549, 250 N.W.2d 881, 891 (Neb. 1977) cert. den. 434 U.S. 878, 98 S. Ct. 231, 54 L. Ed. 2d 158 (1977), the court noted that the Nebraska statutory language also includes "... or manifested exceptional depravity by ordinary standards of morality and intelligence." The Nebraska court then interpreted that language as follows:
"In interpreting this portion of the statute, the key word is `exceptional.' It might be argued that every murder involves depravity. The use of the word `exceptional', however, confines it only to those situations where depravity is apparent to such an extent as to obviously offend all standards of morality and intelligence."
In Blake v. State, 239 Ga. 292, 236 S.E.2d 637 (1977) cert. den. 434 U.S. 960, 98 S. Ct. 492, 54 L. Ed. 2d 320 (1977), the court stated that "the depravity of the mind contemplated by the statute is that which results in torture or aggravated battery to the victim." 236 S.E.2d at 643.
The legislature in enacting § 19-2515 intended to comply with the requirements set forth by the Supreme Court, and therefore intended to limit the death penalty to the *214 most aggravated of cases. While the "especially heinous, atrocious or cruel language" refers to the amount of pain suffered by the victim, the exceptional depravity language refers to the state of mind of the defendant. See Harris v. State, 237 Ga. 718, 230 S.E.2d 1 (1976) cert. den. 431 U.S. 933, 97 S. Ct. 2642, 53 L. Ed. 2d 251 (1977). We agree with the definition of heinous, atrocious and cruel set forth by the Florida court in Dixon, and with the definition of exceptional depravity set forth by the Nebraska court in Simants. With this construction, that the crime must be accompanied by acts setting it apart from the norm of murders, this aggravating circumstance is sufficiently definite to guide the sentencing body's discretion.
A similar limiting instruction must be placed upon subsection (f)(6), that "[b]y the murder, or the circumstances surrounding its commission, the defendant exhibited utter disregard for human life." To properly define this circumstance, it is important to note the other aggravating circumstances with which this provision overlaps. The second aggravating circumstance, subsection (f)(2), that the defendant committed another murder at the time this murder was committed, obviously could show an utter disregard for human life, as could the third aggravating circumstance, subsection (f)(3), that "[t]he defendant knowingly created a great risk of death to many persons." The same can be said for the fourth aggravating circumstance, subsection (f)(4), that "[t]he murder was committed for remuneration." With this in mind, since we will not presume that the legislature intended to duplicate any already enumerated circumstances, thus making subsection (f)(6) mere surplusage, see, e.g., Norton v. Department of Employment, 94 Idaho 924, 500 P.2d 825 (1972), we hold that the term "utter disregard" refers to acts other than those set forth in subsections (f)(2), (3) & (4); it refers to those acts which exhibit the highest, the utmost, callous disregard for human life, namely the cold-blooded, pitiless killer, such as the killer who acts randomly without motive or conscience, the killer who does not possess the normal restraints against committing murder, but nonetheless does not do so sadistically or with torture. With such an interpretation, this aggravating circumstance meets the constitutional requirements set forth by the United States Supreme Court.
H. Finally, Osborn argues that the legislature improperly delegated the power to inflict the penalty of death to the Board of Corrections. I.C. § 19-2716 provides as follows:
"The punishment of death must be inflicted by intravenous injection of a substance or substances in a lethal quality sufficient to cause death until the defendant is dead. The director of the department of corrections shall determine the substance or substances to be used and the procedures to be used in any execution."
This argument was disposed of in Ex parte Granviel, 561 S.W.2d 503, 514-15 (Tex.Cr. App. 1978), as follows:
"[T]he existence of an area for exercise of discretion by an administrative officer under delegation of authority does not render delegation unlawful where standards formulated for guidance and limited discretion, though general, are capable of reasonable application... .
... .
"It appears that the Legislature has declared a policy and fixed a primary standard and delegated to the said Director power to determine details so as to carry out the legislative purpose which the Legislature cannot practically or efficiently perform itself. The statute is sufficiently complete to accomplish the regulation of the particular matters falling within the Legislature's jurisdiction."
We agree with this analysis; we will not assume that the director of the Department of Corrections will act in an arbitrary and capricious manner.
IV.
Due to the errors discussed, pursuant to I.C. § 19-2827 we remand this case for *215 resentencing. While § 19-2827(e)(2)[4] provides that resentencing by the trial judge shall be "based upon the record and argument of counsel," where an inadequate and improper record is one of the grounds of error upon which we reverse, the defendant's hearing shall be entirely de novo.
Reversed and remanded for resentencing.
ADDENDUM
Since the foregoing was written and circulated to the other members of the Court in October of last year as a proposed majority opinion,[1] research done in regard to other cases has brought my attention to the applicability of two recent United States Supreme Court decisions to III A.
I.
Before discussing those cases, however, with regard to III E, further review has convinced me that there is merit in the Court's view that the trial court's finding by a preponderance of the evidence that Osborn "has exhibited a propensity to commit murder which will probably constitute a continuing threat to society" was not error in this case because of the court's later explicit statement that it was not considered as a statutory aggravating circumstance. Such does not alter the rest of my analysis under III E, however.
II.
Two recent Supreme Court opinions United States v. Raddatz, 447 U.S. 667, 100 S. Ct. 2406, 65 L. Ed. 2d 424 (1980), and Estelle v. Smith, ___ U.S. ___, 101 S. Ct. 1866, 68 L. Ed. 2d 359 (1981) must be added to the discussion in III A.
A.
In Raddatz, a case wherein there was far less at stake than in the case now before us, the Supreme Court stated:
"The guarantees of due process call for a `hearing appropriate to the nature of the case.' Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313, 70 S. Ct. 652, 657, 94 L. Ed. 865 (1950). The issue before us, therefore, is whether the nature of the issues presented and the interests implicated in a motion to suppress evidence require that the district *216 court judge must actually hear the challenged testimony. The core of respondent's challenge to the statute is that `[t]he one who decides must hear.' Morgan v. United States, 298 U.S. 468, 481, 56 S. Ct. 906, 912, 80 L. Ed. 1288 (1936). Here, he contends, only the magistrate `hears,' but the district court is permitted to `decide' by reviewing the record compiled before the magistrate and making a final determination.
"In Mathews v. Eldridge, 424 U.S. 319, 335, 96 S. Ct. 893, 903, 47 L. Ed. 2d 18 (1976), we emphasized that three factors should be considered in determining whether the flexible concepts of due process have been satisfied: (a) the private interests implicated; (b) the risk of an erroneous determination by reason of the process accorded and the probable value of added procedural safeguards; and (c) the public interest and administrative burdens, including costs that the additional procedures would involve." 100 S.Ct. at 2413.
Considering those three factors in order, first it is at once obvious and unneedful of further discussion that the private interest here implicated is unquestionably of the highest degree, i.e., whether the defendant shall live or shall die. This consideration alone weighs so heavily that the other two considerations require but little comment in passing.
The second factor, that of the risk of an erroneous determination and the probable value of added safeguards, also weighs heavily in favor of requiring a sentencing court to hear rather than to read the testimony upon which it will base its determination. Although it could be said that the preliminary transcript in this particular case might well have been sufficient for this particular capable and experienced trial judge, the function of this Court is to follow clear and unambiguous directives of the legislature. Most judges, so I believe, would prefer not to act solely on a cold record produced at a preliminary hearing which was, as are all, conducted for an entirely different, special, and limited purpose.
The third factor, that of the public interest and administrative burden in requiring an additional hearing, is rather inconsequential, perhaps, but for certain pales in significance when measured against the other two factors. The cost of producing witnesses, probably some but not all of the same witnesses who testified at the preliminary hearing, would surely be no greater than what it would have cost to bring them to trial had Osborn not pleaded guilty the doing of which by Osborn effected a saving to the State of Idaho, which kindness on his part should weigh in his favor in considering whether witnesses should have testified live before the sentencing judge as against the saving of a few dollars.
The short of it is that the legislature did not anticipate that a defendant might enter a plea of guilty to first degree murder;[2]*217 the long of it is that the legislature may now decide for itself if the Court today correctly interprets the legislative omission to allow defendants pleading guilty to that charge to have their lives terminated by government action in the person of a judge who has not viewed the countenances, mannerisms, and voice inflections of those who recount the particulars of the crime. One might also ponder upon the extreme likelihood that at a sentencing trial, unlike the usual preliminary hearing, impeaching evidence might also be submitted.
Finally, I add only that a procedure chosen by the prosecuting attorney, even though it might not be held error because of the public defender's acquiescence therein, and the trial court's acceptance thereof, does not ipso facto meet the statutory requirement, the exact fulfillment of which is necessarily placed before this five-member tribunal for review as to compliance. Although it is plainly to be seen that I.C. § 19-2515(c) does provide that the sentencing court is to receive "all relevant evidence ... in aggravation and mitigation" (which I submit would be the case even absent that phrase), nothing therein approaches the dignity of impliedly negating the clear mandate of I.C. § 19-2516 that the sentencing court hear of the circumstances of the crime only from "witnesses examined in open court" other than, as under I.C. § 19-2515(c), where the sentencing judge has already heard the testimony at trial.
B.
In Estelle v. Smith, supra, the United States Supreme Court held that use of psychiatric testimony, obtained without warning defendant that he had the right to remain silent and that what he told the psychiatrist could be used against him, in the sentencing phase of a capital case violated both the Fifth and Sixth Amendments. In that case Dr. Grigson examined defendant to determine whether he was competent to stand trial. Subsequently, after defendant was convicted of murder, the state used Dr. Grigson as a witness to establish that there was a probability that defendant "would commit criminal acts of violence that would constitute a continuing threat to society." The Supreme Court held as follows:
"We can discern no basis to distinguish between the guilt and penalty phases of respondent's capital murder trial so far as the protection of the Fifth Amendment privilege is concerned. Given the gravity of the decision to be made at the penalty phase, the State is not relieved of the obligation to observe fundamental constitutional guarantees... . Any effort by the State to compel respondent to testify against his will at the sentencing hearing clearly would contravene the Fifth Amendment. Yet the State's attempt to establish respondent's future dangerousness by relying on the unwarned statements he made to Dr. Grigson similarly infringes Fifth Amendment values.
... .
"Dr. Grigson's prognosis as to future dangerousness rested on statements respondent made, and remarks he omitted, in reciting the details of the crime. The Fifth Amendment privilege, therefore, is directly involved here because the State used as evidence against respondent the substance of his disclosures during the pretrial psychiatric examination.
*218 ... .
"[T]he interview with Dr. Grigson cannot be characterized as a routine competency examination restricted to ensuring that respondent understood the charges against him and was capable of assisting in his defense. Indeed, if the application of Dr. Grigson's findings had been confined to serving that function, no Fifth Amendment issue would have arisen.
... .
"Respondent ... introduced no psychiatric evidence, nor had he indicated that he might do so. Instead, the State offered information obtained from the court-ordered competency examination as affirmative evidence to persuade the jury to return a sentence of death... . To meet its burden, the State used respondent's own statements, unwittingly made without an awareness that he was assisting the State's efforts to obtain the death penalty. In these distinct circumstances, the Court of Appeals correctly concluded that the Fifth Amendment privilege was implicated.
... .
"The consideration calling for the accused to be warned prior to custodial interrogation [under Miranda] apply with no less force to the pretrial psychiatric examination at issue here... . When Dr. Grigson went beyond simply reporting to the court on the issue of competence and testified for the prosecution at the penalty phase on the crucial issue of respondent's future dangerousness, his role changed and became essentially like that of an agent of the State recounting unwarned statements made in a post-arrest custodial setting... . Yet [Estelle] was given no indication that the compulsory examination would be used to gather evidence necessary to decide whether, if convicted, he should be sentenced to death. He was not informed that, accordingly, he had a constitutional right not to answer the questions put to him.
... .
"A criminal defendant, who neither initiates a psychiatric evaluation nor attempts to introduce any psychiatric evidence, may not be compelled to respond to a psychiatrist if his statements can be used against him at a capital sentencing proceeding... . If, upon being adequately warned, respondent had indicated that he would not answer Dr. Grigson's questions, the validly ordered competency examination nevertheless could have proceeded upon the condition that the results would be applied solely for that purpose... .
"[W]e must conclude that, when faced while in custody with a court-ordered psychiatric inquiry, respondent's statements to Dr. Grigson were not `given freely and voluntarily without any compelling influences' and, as such, could be used as the State did at the penalty phase only if respondent had been apprised of his rights and had knowingly decided to waive them... . These safeguards of the Fifth Amendment privilege were not afforded respondent and, thus, his death sentence cannot stand.
"When respondent was examined by Dr. Grigson, he already had been indicted and an attorney had been appointed to represent him... . [H]e had a Sixth Amendment right to the assistance of counsel before submitting to the pretrial psychiatric interview....
... .
"Therefore, in addition to Fifth Amendment considerations, the death penalty was improperly imposed on respondent because the psychiatric examination on which Dr. Grigson testified at the penalty phase proceeded in violation of respondent's Sixth Amendment right to the assistance of counsel." ___ U.S. at ___-___, 101 S.Ct. at 1873-1877.
In the present case, the trial court in its memorandum decision stated "[p]rior evaluations and the evaluation by Dr. Reichman indicate that the defendant has an anti-social personality." Thus the trial court did utilize this psychiatric evaluation in the sentencing phase of Osborn's trial. Although Osborn voluntarily underwent this examination, he did so only for the purposes of determining the competency to stand trial and competency at the time of the act *219 charged. At no time was Osborn warned that the state might at his sentencing hearing make use of statements made at the psychiatric examination, nor did Osborn consent to such use of his own statements.
Furthermore, Osborn withdrew his claim of mental defect precluding responsibility when he withdrew his plea of not guilty. It would seem to follow that the psychiatric report could not from that point on be classified as voluntarily given and available for all purposes, especially the purpose of sentencing.
The question then is whether evidence gained as a result of this examination was improperly used to establish an aggravating circumstance, as viewed in light of the statements excerpted from Estelle. Since we are remanding for resentencing, it is perhaps unnecessary that the Court now decide this question, and I raise the point only so that the district court may give consideration to the possibility of excluding evidence, the admission of which may necessitate a second remand for resentencing. In this regard it should also be noted that the Supreme Court's considerations in Estelle could also apply to the use of presentence reports where the presentence investigator may incorporate a defendant's own written statement of the criminal conduct, or a report of a defendant's oral statements thereof, without proper observance of Fifth and Sixth Amendment rights.
NOTES
[1] Prior to 1973, I.C. § 18-4004 provided for sentences of death or life imprisonment for first degree murder. By amendment in 1973, the legislature struck the alternative of life imprisonment, 1973 Sess. Laws, Ch. 276, § 2, p. 589, thus resulting in the mandatory capital punishment status pre-Woodson.
[2] I.C. § 19-2827, as added by 1977, ch. 154, § 5, p. 390:
"Review of death sentences Preservation of records. (a) Whenever the death penalty is imposed, and upon the judgment becoming final in the trial court, the sentence shall be reviewed on the record by the Supreme Court of Idaho. The clerk of the trial court, within ten (10) days after receiving the transcript, shall transmit the entire record and transcript to the Supreme Court of Idaho and to the attorney general together with a notice prepared by the clerk and a report prepared by the trial judge setting forth the findings required by section 19-2515(d), Idaho Code, and such other matters concerning the sentence imposed as may be required by the Supreme Court. The notice shall set forth the title and docket number of the case, the name of the defendant and the name and address of his attorney, a narrative statement of the judgment, the offense, and punishment prescribed. The report may be in the form of a standard questionnaire prepared and supplied by the Supreme Court of Idaho.
(b) The Supreme Court of Idaho shall consider the punishment as well as any errors enumerated by way of appeal.
(c) With regard to the sentence the court shall determine:
(1) Whether the sentence of death was imposed under the influence of passion, prejudice, or any other arbitrary factor, and
(2) Whether the evidence supports the judge's finding of a statutory aggravating circumstance from among those enumerated in section 19-2515, Idaho Code, and
(3) Whether the sentence of death is excessive or disproportionate to the penalty imposed in similar cases, considering both the crime and the defendant.
(d) Both the defendant and the state shall have the right to submit briefs within the time provided by the court, and to present oral argument to the court.
(e) The court shall include in its decision a reference to those similar cases which it took into consideration. In addition to its authority regarding correction of errors, the court, with regard to review of death sentences, shall be authorized to:
(1) Affirm the sentence of death; or
(2) Set the sentence aside and remand the case for resentencing by the trial judge based on the record and argument of counsel.
(f) The sentence review shall be in addition to direct appeal, if taken, and the review and appeal shall be consolidated for consideration.
(g) The Supreme Court shall collect and preserve the records of all cases in which the penalty of death was imposed from and including the year 1975."
[3] State v. Garcia, 100 Idaho 108, 110, 594 P.2d 146, 148 (1979); State v. Watson, 99 Idaho 694, 701, 587 P.2d 835, 842 (1978).
[4] While appellant's counsel did not object to the use of the preliminary hearing transcript, it is noted that he did indeed object to the sufficiency of the evidence disclosed therein. Thus, he relied upon the preliminary hearing record to show arguably mitigating circumstances and to facially show the absence of statutory aggravating factors beyond a reasonable doubt. Were we forced to evaluate the facts disclosed by the preliminary hearing record, we might agree with appellant that certain facts were not adequately proved to support the findings by the district court of aggravating factors "beyond a reasonable doubt." However, such an evaluation is unnecessary given the need for a new hearing on aggravating and mitigating circumstances and we express no opinion as to what the record shows or fails to show. See discussion infra. It can also be noted that any arguable problem with the sufficiency of the evidence adduced at the preliminary hearing does not extend to the use of that record at the sentencing stage, a use we here hold proper.
[5] While the ingestion of drugs or alcohol by appellant on the evening of the offense is not sufficient in itself to raise a defense to the crime, it is our conclusion that any arguable impact of such substance abuse is a proper consideration in mitigation of punishment upon sentencing. Such appears to be the effect of I.C. § 18-116. See also State v. Gomez, 94 Idaho 323, 325, 487 P.2d 686 (1971); State v. Snowden, 79 Idaho 266, 271, 313 P.2d 706 (1957). See generally, Liebman and Shepard, "Guiding Capital Sentencing Discretion Beyond the `Boilerplate': Mental Disorder as a Mitigating Factor," 66 Georgetown Law Journal 757 (1978).
[6] Though unavailable to the district court below at the time of original sentencing, I.C.R. 33.1 and 33.2 provide significant guidance in regard to such matters.
[7] Of course, any such "suggestions," statutory or judicial, are not exclusive as the United States Supreme Court made clear in Lockett v. Ohio, infra, where a policy of unlimited mitigation was mandated.
[8] The other case relied upon by appellant, Woodson v. North Carolina, supra, provides no support for the proposition advanced.
[9] I.C. § 19-2515.
"....
(f) The following are statutory aggravating circumstances, at least one (1) of which must be found to exist beyond a reasonable doubt before a sentence of death can be imposed:
.....
(5) The murder was especially heinous, atrocious or cruel, manifesting exceptional depravity.
(6) By the murder, or circumstances surrounding its commission, the defendant exhibited utter disregard for human life."
[*] As is evident, the usage of the word "we" throughout this opinion is a matter of literary license. The reason for so doing will be explained by the addendum to this opinion.
[1] I.C. § 19-2827 provides as follows:
"(a) Whenever the death penalty is imposed, and upon the judgment becoming final in the trial court, the sentence shall be reviewed on the record by the Supreme Court of Idaho. The clerk of the trial court, within ten (10) days after receiving the transcript, shall transmit the entire record and transcript to the Supreme Court of Idaho and to the attorney general together with a notice prepared by the clerk and a report prepared by the trial judge setting forth the findings required by section 19-2515(d), Idaho Code, and such other matters concerning the sentence imposed as may be required by the Supreme Court. The notice shall set forth the title and docket number of the case, the name of the defendant and the name and address of his attorney, a narrative statement of the judgment, the offense, and punishment prescribed. The report may be in the form of a standard questionnaire prepared and supplied by the Supreme Court of Idaho.
"(b) The Supreme Court of Idaho shall consider the punishment as well as any errors enumerated by way of appeal.
"(c) With regard to the sentence the court shall determine:
"(1) Whether the sentence of death was imposed under the influence of passion, prejudice, or any other arbitrary factor, and
"(2) Whether the evidence supports the judge's finding of a statutory aggravating circumstance from among those enumerated in section 19-2515, Idaho Code, and
"(3) Whether the sentence of death is excessive or disproportionate to the penalty imposed in similar cases, considering both the crime and the defendant.
"(d) Both the defendant and the state shall have the right to submit briefs within the time provided by the court, and to present oral argument to the court.
"(e) The court shall include in its decision a reference to those similar cases which it took into consideration. In addition to its authority regarding correction of errors, the court, with regard to review of death sentences, shall be authorized to:
"(1) Affirm the sentence of death; or
"(2) Set the sentence aside and remand the case for resentencing by the trial judge based on the record and argument of counsel.
"(f) The sentence review shall be in addition to direct appeal, if taken, and the review and appeal shall be consolidated for consideration.
"(g) The Supreme Court shall collect and preserve the records of all cases in which the penalty of death was imposed from and including the year 1975."
[2] I.C. § 19-2515(c) provides as follows:
"(c) In all cases in which the death penalty may be imposed, the court shall, after conviction, order a presentence investigation to be conducted according to such procedures as are prescribed by law and shall thereafter convene a sentencing hearing for the purpose of hearing all relevant evidence and arguments of counsel in aggravation and mitigation of the offense. At such hearing, the state and the defendant shall be entitled to present all relevant evidence in aggravation and mitigation. Should any party present aggravating or mitigating evidence which has not previously been disclosed to the opposing party or parties, the court shall, upon request, adjourn the hearing until the party desiring to do so has had a reasonable opportunity to respond to such evidence. Evidence admitted at trial shall be considered and need not be repeated at the sentencing hearing. Evidence offered at trial but not admitted may be repeated or amplified if necessary to complete the record."
[3] This is consistent with I.C. § 19-2827, which mandates a review by this Court of all cases where the death penalty is imposed.
[4] I.C. § 19-2827(e)(2) provides that this Court may:
"Set the sentence aside and remand the case for resentencing by the trial judge based on the record and argument of counsel."
[1] That opinion was purposefully laid out in parts, and in subparts thereof, in order to make it convenient and expeditious for the other Justices to declare wherein they agreed and wherein they disagreed. Correctly surmising that sufficient grounds existed to necessitate a second sentencing hearing, I was not so naive as to anticipate that all members of the Court would concur across the board on those grounds which I felt required a reversal, and a second sentencing hearing. The type of format used by the author of State v. Wagenius, 99 Idaho 273, 282, 581 P.2d 319 (1978), and often used in major decisions by the United States Supreme Court seemed appropriate. The Chief Justice, however, apparently disagreed and in January assigned the writing of the Court's opinion to another Justice, who was already burdened with sufficient opinions to write in other significant cases. My concern here is not merely pride of authorship, but is only that there are certain types of cases which come before this Court where there are obvious compelling reasons for according those cases a priority in our deliberative and decision-making processes. One example coming readily to mind is any adoption case and, likewise, any child termination case.
Generally such cases have received preferential treatment, and I do not think that anyone would complain that such takes place. Death penalty cases, like juvenile waiver proceedings, see Dillard v. State, 101 Idaho 917, 623 P.2d 1294 (1981), are of a unique type where lengthy delays in the judicial process cannot be tolerated, and can lead to claims of prejudice or of cruel and inhuman punishment, especially where death row defendants are kept dangling indefinitely in appellate court processes not knowing whether they eventually will or will not be executed. The district judge performed the function required of him with alacrity, notwithstanding that absolutely no case law guidelines were available as to the interpretation and meaning of the legislative enactment it became his duty to apply. This Court, however, is open to criticism where an unduly long time will have elapsed between sentencing. And, as Justice McFadden points out, the same mandatory review remains to be done once again after resentencing has taken place, and after the briefing is done, if the death penalty is reimposed.
[2] In State v. Martin, 94 Wash.2d 1, 614 P.2d 164 (1980), the court noted that "[c]learly the legislature did not anticipate the possibility that an accused might plead guilty to a charge of first degree murder. Thus, it simply failed to provide for that eventuality." Id. 614 P.2d at 167. Since the Washington statutory scheme provided that the same jury which determined guilt shall be reconvened to determine whether the death penalty shall be imposed, and since the same trial jury cannot be "reconvened" on a plea of guilty to first degree murder, the court held that upon a plea of guilty to first degree murder a defendant could not be sentenced to death. The Washington court reaffirmed Martin in State v. Frampton, 95 Wash.2d 469, 627 P.2d 922 (1981), going on to hold that the statute was unconstitutional since it allowed the death penalty to be imposed following a plea of not guilty and a trial but not following a plea of guilty. The Washington legislative scheme did contemplate that the sentencing authority, there the jury which decided guilt, having heard the evidence which established guilt, would determine the sentence. With a defendant pleading guilty, there was no jury which had heard and pondered upon the evidence.
It is rather obvious that the Idaho legislature in enacting I.C. § 19-2515(c) similarly simply did not anticipate the possibility that a defendant would plead guilty to first degree murder. I.C. § 19-2515(c) provides in part that "[i]n all cases in which the death penalty may be imposed, the court shall, after conviction, order a presentence investigation... . Evidence admitted at trial shall be considered and need not be repeated at the sentencing hearing." These provisions contemplate that the same body which heard the evidence at trial shall decide whether the death penalty shall be imposed; evidence presented at trial need not be repeated because the court, as the sentencing body, has already heard that evidence. Although, unlike in Washington, it is unnecessary to invalidate the Idaho statutory scheme because of this failing, it does further substantiate my view that it was error for the trial court to rely on the preliminary hearing transcript; the Idaho statutory scheme mandates that the sentencing authority hear the testimony that would have been produced at trial had there been a trial, and clearly the Court goes awry in failing to require absolute compliance in what is generally accepted as a matter of some seriousness.
It should be noted in connection with this unique problem that some states refuse a plea of guilty in a capital case. See, e.g., La.Code Crim.Pro.Ann. art. 557; N.J. Stat. Ann. § 2A:113-3 (repealed 1979 along with the death penalty); N.Y.Crim.Proc. § 220.10(5)(e). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2435453/ | 897 S.W.2d 898 (1995)
Robert BROOKS, Appellant
v.
NATIONAL CONVENIENCE STORES, INC., & Stop N Go Markets of Texas, Inc., Appellees.
No. 04-94-00065-CV.
Court of Appeals of Texas, San Antonio.
April 5, 1995.
Rehearing Overruled April 20, 1995.
*900 Robert P. Wilson, O'Neill, Balega & Wilson, P.C., San Antonio, for appellant.
Ryan G. Anderson, Ball & Weed, P.C., San Antonio, for appellees.
Before LOPEZ, HARDBERGER and DUNCAN, JJ.
OPINION
LOPEZ, Justice.
Appellant, a convenience store employee, brought suit to recover for his injuries suffered during an armed robbery of the convenience store. A preliminary statement of the facts of this case follows. Appellant was employed by National Convenience Stores, Inc. [NCS] to work in a Stop N Go convenience store. Stop N Go Markets of Texas, Inc. [Stop N Go], a subsidiary corporation of NCS, was the lessee of the store premises, and NCS was the guarantor of Stop N Go's obligations under the lease. Appellant was shot and injured on the job during a robbery of the convenience store. He applied for worker's compensation benefits, and received them. He then brought claims of intentional torts against NCS and negligence against Stop N Go.
NCS and Stop N Go jointly moved for summary judgment: NCS on the grounds that the worker's compensation statute granted it immunity, and Stop N Go on the grounds that it owed appellant no duty of care because it was not appellant's employer. The trial court, without stating the grounds for its ruling, granted the motion for summary judgment in full. Appellant argues, in four points of error, that the trial court erred by granting the summary judgment because Stop N Go, as the named tenant in the lease of the premises, owed a duty to protect appellant from harm, and because a material issue of fact existed as to its performance of that duty. The summary judgment granted as to NCS is not challenged. We sever and reverse the portion of the judgment which disposes of appellant's causes of action against Stop N Go.
I. Summary Judgment
a. Standard of Review
The party moving for summary judgment must show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex.1985); Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972). In deciding whether a disputed material fact issue precludes summary judgment, the reviewing court will take as true all evidence favoring the non-movant. Nixon, 690 S.W.2d at 548-49; Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex.1984). Every reasonable inference from the evidence will be indulged in favor of the non-movant, and any doubts will be resolved in his favor. Nixon, 690 S.W.2d at 549; Montgomery, 669 S.W.2d at 311.
A summary judgment may not be affirmed on any grounds not presented in the motion for summary judgment. Villanueva v. Astroworld, Inc., 866 S.W.2d 690, 693 (Tex. App.Houston [1st Dist.] 1993, writ denied). When, as in the instant case, the trial court's order does not specify the grounds relied on for the ruling, the summary judgment will be affirmed if any of the grounds advanced are meritorious. Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 79 (Tex.1989); Villanueva, 866 S.W.2d at 693.
b. Proper Summary Judgment Evidence
In his argument on appeal, appellant claims that appellees presented no summary *901 judgment evidence other than the affidavit attached to the motion for summary judgment. He contends the affidavit is one of an interested party, and was insufficient to support summary judgment. Appellant's contention that the affidavit was the only evidence set forth by appellees is not borne out by the record. Appellees also filed a reply to appellant's response to its motion for summary judgment over two months in advance of the hearing date, and attached several depositions and exhibits. After the hearing, the trial court granted summary judgment for appellees based on "the pleadings and the evidence submitted in support of and in opposition to said motion and hearing arguments of counsel." Appellant does not state why the evidence proffered by appellees in connection with their reply to appellant's response should not be considered. The evidence, and appellees' reply, raised no additional grounds for summary judgment, but rather reiterated and supported the assertions made in the motion for summary judgment and corresponding affidavit. See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex.1993) (summary judgment must stand or fall on grounds expressly presented in motion). Such evidence was properly considered by the trial court in the absence of a timely objection by appellant. Tex.R.Civ.P. 52; Knapp v. Eppright, 783 S.W.2d 293, 296 (Tex.App.Houston [14th Dist.] 1989, no writ). We reject appellant's contention that the affidavit constituted the whole of appellees' summary judgment evidence, and hold that the evidence attached to appellees' reply was properly included in the record before the trial court.
II. Analysis
a. Cause of Action
Appellant asserted in his first amended petition that Stop N Go committed eight specific acts of negligence. Each alleged act constituted either a failure to provide appellant a safe place to work or a failure to warn appellant prior to his employment with NCS of the risks associated with working in a convenience store.[1] In his petition, appellant further stated that Stop N Go's duty to protect him, an NCS employee, arose out of Stop N Go's assumption of obligations under "its leases," participation in the operation of the store, and receipt of profits from the store. By listing specific acts of negligence, appellant limited his cause of action against Stop N Go to one in negligence in maintaining a safe workplace. See Mobil Chem. Co. v. Bell, 517 S.W.2d 245, 254 (Tex.1974).
The essential elements of a negligence cause of action are: (a) the existence of a duty owed by one party to the other; (b) a breach of that duty; and (c) damages proximately caused by that breach. El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex. 1987). To defeat a claim of negligence by summary judgment, a defendant must disprove at least one of these essential elements as a matter of law. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex.1991).
*902 b. Motion for Summary Judgment
Appellees moved for summary judgment and asserted in their motion for summary judgment without further explanation or argument:
Plaintiff has never been an employee of Stop N Go. Stop N Go did not own the property nor operate the business where plaintiff was employed and where he sustained his subject injury.
In support of their motion, appellees attached the affidavit of A.J. Gallerano, vice president and secretary of both NCS and Stop N Go. Gallerano stated in his affidavit that appellant was not employed by Stop N Go, and that NCS owned and operated the store where appellant worked. Stop N Go's motion for summary judgment, stated another way, was based on an assertion that it owed appellant no duty of care. The absence of a duty defeats a cause of action for negligence. Graff v. Beard, 858 S.W.2d 918, 919 (Tex.1993).
Appellant responded to the motion for summary judgment by setting forth evidence which he asserted presented a material issue of fact as to whether Stop N Go participated in the operation of the store. Appellant argued that Stop N Go was the tenant under the lease to the premises, was involved in certain decisions relating to the operation of the store, and that Stop N Go's negligence with respect to these decisions exposed appellant to the danger which caused his injury. The trial court granted the summary judgment.
c. Duty
After the trial court granted appellees' motion for summary judgment, but before appellant filed his brief in this court, the Texas Supreme Court issued its opinion in Exxon Corp. v. Tidwell, 867 S.W.2d 19 (Tex.1993). Appellees argue that Exxon delineates Stop N Go's duty under the facts of this case. In Exxon, a service station employee was shot during a robbery in the course of his employment. The employee sued the oil company which owned the premises leased to his employer, who was an individual dealer. Exxon, 867 S.W.2d at 20. Like in the instant case, the plaintiff's cause of action was based on the oil company's negligent failure to maintain a safe workplace. Id. The supreme court noted that relationships between oil companies and individual service station dealers typically are something more than landlord-tenant but do not reach the level of employer-employee, and that the relationships determine the extent of the oil companies' duty towards service station employees. For example, a landlord is not liable to a tenant for injuries caused by an unsafe condition unless the landlord was aware of the latent dangerous condition at the time the premises were let. But when the landlord retains some possession or control over a portion of the premises, it is charged with the duty of ordinary care to the tenant and its employees in maintaining the portion retained. Exxon, 867 S.W.2d at 21. Employers, on the other hand, have a nondelegable duty of ordinary care to provide a safe workplace for their employees. Exxon, 867 S.W.2d at 21. However, the supreme court concluded that, no matter what the relationship was between the oil company and the employee, the true test to determine whether the oil company had a duty to maintain a safe workplace is whether the oil company reserved a right of control or exercised actual control specifically over the safety and security of the workplace:
We think that in a case alleging negligence in maintaining a safe workplace, the court's inquiry must focus on who had specific control over the safety and security of the premises, rather than the more general right of control over operations.... The focus should be on whether Exxon had the right to control the alleged security defects that led to Tidwell's injury. If Exxon did not have any right to control the security of the station, it cannot have had any duty to provide the same.
Exxon, 867 S.W.2d at 23. With this holding, the supreme court designated a new standard of review in cases involving negligence in maintaining a safe workplace. Plaintiffs *903 must now show that the party they assert had a duty to provide a safe workplace had actual control or a right of control over the specific aspect of the safety and security of the premises which led to the injury. Duty in such cases can no longer be inferred from evidence showing actual control or a right of control over the general operation of the workplace. Exxon, 867 S.W.2d at 23.
Appellant asserts that Exxon is distinguishable from the instant case in that Exxon involved the liability of a landlord, not a tenant. Appellant asserts, without citing any case law, that "[a]s tenant, [Stop N Go] was the corporation actually leasing the property and, as such, it had the direct duty to protect invitees." Appellant ignores the language of its own pleading which clearly alleged negligence in maintaining a safe workplace. See, supra n. 1. Under Exxon, only corporations which have the right to control or actually control safety and security policies of the workplace have a duty to the workers to maintain a safe workplace. Exxon, 867 S.W.2d at 23. Further, the similarities between Exxon and this case are more significant than the differences. In both cases, an employee attempted to hold someone not his employer, but with contractual ties to both the land and the employer, liable for negligence in failing to prevent harm inflicted by a third party which would not have occurred but for the operation of the workplace or business. It is important to note that the harm suffered in each case was not related to some condition on the premises which owners or occupiers were actually, contractually or impliedly required to maintain, but rather occurred because a business was operated therein. We hold that Exxon is applicable to the instant case. Therefore, under Exxon, if there was no material issue of fact with respect to Stop N Go's actual control or right of control over the security defects in the Stop N Go store which led to appellant's injury, then summary judgment was proper.
d. The Evidence
We now outline the summary judgment evidence in order to determine whether there is a material issue of fact which precludes summary judgment, using the standard in Exxon. Exxon, 867 S.W.2d at 23.
1. Gallerano Deposition
The deposition of A.J. Gallerano, vice president and secretary of both NCS and Stop N Go was part of the summary judgment evidence. Gallerano testified that the relationship between NCS and Stop N Go was that of a parent corporation and its subsidiary. He asserted that NCS was doing business as Stop N Go in Texas, and that all decisions with respect to the stores were made by NCS alone. However, he testified that there were no documents available which would describe the legal relationship between NCS and Stop N Go. Instead, he produced a disclosure statement filed by NCS and its subsidiaries, including Stop N Go, in bankruptcy court. Stop N Go was described in the statement as "the operator of convenience stores in the State of Texas. As such, Stop N Go Texas holds title to certain real property leases in Texas and owns certain equipment and merchandise." (emphasis added). Gallerano testified that this portion of the disclosure statement was qualified by other portions, which stated that NCS owned 100% of Stop N Go's stock and that "[a]s of December 9, 1991, NCS operated 985 specialty convenience stores in seven markets in the Sunbelt states under the name Stop N Go.... Operating under the Stop N Go name, NCS' stores are well recognized among customers in its market."
Gallerano admitted that Stop N Go was the actual lessee of the convenience store premises, but stated that it was in name only and that NCS was the actual party who exercised the rights granted to the lessee under the lease. He further testified that the lease was in Stop N Go's name, and not NCS's name, "for tax reasons." According to the lease, which was an exhibit to the deposition, Stop N Go, as tenant, was obligated to "use the Leased Premises for the purpose of operating a drive-in type convenience store...." (emphasis added). The lease further states that the tenant has the absolute right to sublet and assign its rights under the lease, and further has the absolute right to *904 discontinue the operation of any business on the premises so long as it continues to pay the rent. In all respects, the operation of the convenience store was to be controlled by the tenant, Stop N Go, and not the landlord, who is not a party to this lawsuit. NCS is mentioned in the lease as the guarantor of Stop N Go's obligations as a tenant.
Also attached as an exhibit to Gallerano's deposition was an income statement compiled by NCS entitled "National Convenience Stores Incorporated and Subsidiaries Income Statement." The statement includes columns for NCS, Stop N Go, and two other subsidiaries, as well as a column entitled "Consolidated Total." The Stop N Go column seems to reflect that in 1987 Stop N Go had a gross income of over 500 million dollars, paid salaries and wages of over 49 million dollars, and incurred other expenses, including bad debts, rents, taxes, advertising and "other deductions," all totalling millions of dollars. The NCS column reflects that NCS incurred the same types of expenses but in different, smaller amounts. Gallerano refused to speculate as to where Stop N Go gets its income. Also, Gallerano testified repeatedly that Stop N Go had no employees, yet the income statement seems to reflect that Stop N Go paid salaries and wages.
Gallerano also produced several documents which related to NCS safety and security policies in convenience stores. Some exhibits appear to be NCS in-house documents relating to safety policies and instructions on training employees with regard to safety. They do not mention Stop N Go. Another exhibit was a pamphlet entitled "The Good Neighbor TeamNCS Employee Handbook." The Stop N Go logo is on the back cover of the pamphlet. A second exhibit was a series of documents entitled "A Safe Place to WorkWhat You Can Do to Help Prevent Robbery." The Stop N Go logo is on the first page, and the NCS logo is on the back page. Gallerano was not willing to speculate as to which entity or department produced or authored these safety documents.
2. Bravenec Deposition
Included in the summary judgment evidence was the deposition of Ray Bravenec, who was employed by NCS as a regional loss prevention manager. When questioned as to the relationship between NCS and Stop N Go, Bravenec testified that his understanding of the relationship between NCS and Stop N Go was that NCS did business in Texas as Stop N Go. Bravenec further testified as follows:
Q: "Who decided to limit the amount of money contained in the cash register and accessible to employees in the event of a robbery?" Wasis that a company policy?
A: Yes, sir.
Q: What is the company policy?
A: That the cash register should not contain more than $50.00 in bills.
Q: Okay. Is that a policy that was established by a National Convenience Stores and Stop-N-Go Markets of Texas, Inc.?
A: Yes, sir.
* * * * * *
Q: "Who decided to have a time lock safe with limited access to employees?"
A: That would have been a group of the executives, management people make that decision.
Q: And these management people are executivesexecutives or employees?
A: Of National Convenience Stores, yes, sir.
Q: Of National Convenience Stores or Stop-N-Go Markets of Texas, Inc.?
A: Right.
* * * * * *
A: It's a booklet that says, "A safe place to work."
Q: And who puts that booklet out?
A: The corporate loss prevention department in conjunction with corporate training and development.
Q: Okay. What company puts that out?
*905 A: National
Q: Is that a
A: National Convenience Stores, Stop-N-Go Markets."
The booklet entitled "A Safe Place to Work" was attached to the deposition as an exhibit. The booklet has the NCS logo on it and reflects on the back page that it was developed by the Corporate Loss Prevention Department. A pamphlet attached to the deposition was also entitled "A Safe Place to Work." The Stop N Go logo is on the front cover as well as the last page. The NCS logo is on the back page, with the notation "Corporate Training and Development." Bravenec testified that the booklet and pamphlet were given to new NCS employees during their training period.
e. Conclusion
1. Summary Judgment was Improper
Again, we stress that when reviewing a summary judgment, every reasonable inference from the evidence will be indulged in favor of the non-movant, and any doubts will be resolved in his favor. Nixon, 690 S.W.2d at 549; Montgomery, 669 S.W.2d at 311. On review of the evidence, we hold that there is a material issue of fact, even under the more stringent Exxon standard, on Stop N Go's duty towards appellant to maintain a safe workplace. We first note that Exxon was not a summary judgment case. Appellant is not required to prove his case on summary judgment; he is only required to show that there is a material issue of fact precluding summary judgment.
Appellees stated in their motion for summary judgment that Stop N Go did not owe appellant a duty to maintain a safe workplace because Stop N Go did not employ appellant, did not operate the store, and did not own the store. The facts that Stop N Go did not employ appellant and did not own the premises are undisputed, but are not dispositive. However, the question as to Stop N Go's rights or duties with regard to the operation of the business is an unsettled one. Appellees maintain that NCS was "doing business as" Stop N Go, and therefore Stop N Go owed appellant no duty. However, even if this contention was true (and appellees presented no law in support of it) appellees' own testimony and documents are internally inconsistent on this issue. Under the lease, Stop N Go was responsible for the operation of the store, and there is no evidence that Stop N Go somehow assigned this right to NCS. Also, according to the disclosure statement filed in bankruptcy court, Stop N Go was a corporation which operated convenience stores.
Furthermore, appellees' testimony and documents are internally inconsistent as to what Stop N Go's responsibilities, if any, were with respect to security. Ray Bravenec, the NCS regional loss prevention manager referred to both Stop N Go and NCS when answering questions on responsibility for security procedures in Stop N Go stores. Pamphlets on safety and security with regard to robberies exhibit the Stop N Go logo boldly on front. Taking all the reasonable inferences in favor of appellant, we hold that appellees have failed to establish as a matter of law that Stop N Go exercised no control or had no right of control over the safety and security of the workplace with respect to robberies. Even if the evidence did not conclusively show that Stop N Go had a duty, the appellees have failed to negate that duty. Finding that, there is a material issue of fact as to whether Stop N Go owed a duty to appellant to maintain a safe workplace.
2. Worker's Compensation Immunity as to Stop N Go
As previously stated, the summary judgment as to NCS was based on the exclusive remedy (immunity) provision of the Worker's Compensation Act. The dissent suggests that an argument can be made that Stop N Go also had a possible defense to appellant's claim under that provision, which states:
The employees of a subscriber ... shall have no right of action against their employer or against any agent, servant or *906 employee of said employer for damages for personal injuries....
TEX.REV.CIV.STAT.ANN. art. 8306 § 3(a) (Vernon Supp.1995) (repealed 1991) (similar provision currently at TEX.LABOR CODE § 408.001(a) (Vernon 1995)). However, we do not address this issue for one fundamental reason: it was never raised below. NCS and Stop N Go filed joint answers to appellant's petition, joint motions for summary judgment, and a joint reply brief on appeal. However, within these documents the two entities are addressed separately. It is clear that Stop N Go did not plead the worker's compensation exclusive remedy provision as an affirmative defense.[2]Cf. Bradt v. West, 892 S.W.2d 56, 66 n. 7, 80 (Tex.App.Houston [1st Dist.] December 22, 1994, writ requested) (immunity is an affirmative defense). It is further clear that Stop N Go did not raise that issue as a ground for summary judgment.[3]Cf. Travis v. City of Mesquite, 830 S.W.2d 94, 100 (Tex.1992) and W.C.W. v. Bird, 840 S.W.2d 50, 53 (Tex.App.Houston [1st Dist.] 1992), reversed on other grounds, 868 S.W.2d 767 (Tex.1994) (holding that when immunity is not raised as a ground for summary judgment, affirmance on that ground is not permissible). The dissent ignores the rudimentary rule that a trial court has no discretion to grant summary judgment on a ground not expressly stated in the motion. Tex.R.Civ.P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex.1993); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 677 (Tex.1979). It is simply incontrovertible that we do not have authority on appeal to sua sponte determine that "justice and fairness" mandate affirmance of a summary judgment on a theory not presented by the movant.[4] The dissent opines that the parties simply "fail[ed] to recognize the true legal significance" of Stop N Go's status for the purposes of the worker's compensation statute. We have too much respect for the corporate litigants in this case to conclude that the "failure" to raise this apparently valid affirmative defense was anything but a conscious decision. We therefore do not decide on appeal whether Stop N Go is an "agent, servant or employee" of NCS under the worker's compensation statute, or whether appellant's claim against Stop N Go is barred by the statute. Cf. McKelvy v. Barber, 381 S.W.2d 59, 62 (Tex.1964); Long v. Turner, 871 S.W.2d 220, 223 (Tex.App.El Paso 1993, writ denied).
Because the portion of the summary judgment relating to appellant's cause of action against NCS is not challenged on appeal, and because we find no error, we affirm that portion. We agree that the judgment is *907 improper with respect to appellant's cause of action against Stop N Go. We therefore order that the portions of the judgment which relate to Stop N Go are reversed and ordered severed and remanded for proceedings in accordance with this court's opinion.
DUNCAN, Justice, dissenting.
As phrased by Stop N Go and the majority, the issue in this case is whether Stop N Go owes Brooks a duty to provide a safe workplace under the "right to control safety and security of the workplace" test set forth in Exxon Corp. v. Tidwell, 867 S.W.2d 19 (Tex.1993). Applying this test to the summary judgment proof, the majority holds that there is a "material issue of fact as to whether Stop N Go owed a duty to appellant to maintain a safe workplace."
In my view, a fact issue on right to control is immaterial in the context of this case; accordingly, I neither agree nor disagree with the majority as to whether the summary judgment proof raises a fact issue as to Stop N Go's right to control. My disagreement with the majority arises instead out of its reliance on the Exxon right to control test and its interpretation of Rule 166a(c), Tex. R.Civ.P., as precluding an affirmance. I would hold that, as a matter of law, a wholly-owned subsidiary is an "agent" of its parent for purposes of the Workers' Compensation Act and, if either provided workers' compensation coverage, neither is subject to suit by an employee. I would further hold that Rule 166a(c) does not preclude, and Rule 81(b)(1), Tex.R.App.P., mandates, affirmance.
In my view, a single undisputed fact so distinguishes this case from Exxon as to render the Exxon test inapplicable: Stop N Go is a wholly-owned subsidiary of NCS, Brooks' employer. The importance of this fact is evidenced by examining the effect that a judgment against Stop N Go would have in this case. When an employee recovers on a third-party claim, the workers' compensation carrier is subrogated to the employee's recovery to the extent of the benefits paid; the third-party tortfeasor is thus ultimately made to bear the loss occasioned by its wrongful conduct. See Pan American Ins. Co. v. Hi-Plains Haulers, 163 Tex. 1, 350 S.W.2d 644 (1961); Tex.Lab.Code § 417.001(b) (Vernon Pamph.1995) (similar provision formerly located at Tex.Rev.Civ. Stat.Ann. art. 8307, § 6a).
NCS's compensation carrier will thus have a right of subrogation against Stop N Go to the extent of the benefits paid. But, because Stop N Go is a wholly-owned subsidiary of NCS, this right of subrogation will exist only in the most theoretical sense. If Brooks recovers a judgment against Stop N Go, Brooks or NCS's compensation carrier or both willdirectly or indirectlycollect from NCS, Stop N Go's sole shareholder. Therefore, regardless of whether a right of subrogation is actually asserted, a judgment against Stop N Go will deprive NCS of the benefit of affording Brooks workers' compensation coveragethe exclusive remedy bar of the Workers' Compensation Act.[1]
For this reason alone, I would not apply the Exxon test. I would instead hold, as a matter of law, that the undisputed fact that Stop N Go is a wholly-owned subsidiary of NCS conclusively establishes that Stop N Go is an "agent" of NCS; therefore, if either NCS or Stop N Go provided workers' compensation coverage, neither is subject to suit by an employee for breach of a duty to provide a safe workplace. Cf. McKelvy v. Barber, 381 S.W.2d 59, 62 (Tex.1964) (agents, servants, and employees protected by exclusive remedy bar, and whether defendant is agent of employer depends upon whether employer had right to control physical details of defendant's performance); Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex.1975) (corporate fiction disregarded in tort case "where management and operations [of a parent and its wholly-owned subsidiary] are assimilated to the extent that the *908 subsidiary is simply a name or conduit through which the parent conducts its business");[2]Lawler v. Dallas Statler-Hilton JV, 793 S.W.2d 27, 34 (Tex.App.Dallas 1990, writ denied) (holding that both joint venturer and joint venture are employers of employee of joint venture for purposes of workers' compensation); Watson v. Nortex Wholesale Nursery, 830 S.W.2d 747 (Tex.App.Tyler 1992, writ denied) (whether employee even has cause of action against corporation that is intimately related to employer "conjectural").
My final point of disagreement with the majority is on the proper interpretation of Rule 166a(c) in the unusual context of this case. I recognize that our summary judgment rule provides that a motion for summary judgment "shall state the specific grounds therefor." Tex.R.Civ.P. 166a(c). The rule also provides, however, that "[i]ssues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal." TEX.R.CIV.P. 166a(c) (emphasis added). Nowhere does Rule 166a prohibit an affirmance on an unpresented ground. And nowhere does Rule 166a purport to alter Rule 81(b)(1), Tex.R.App.P., which provides that "[n]o judgment shall be reversed on appeal ... unless ... the error complained of amounted to such a denial of the rights of the appellant as was reasonably calculated to cause and probably did cause rendition of an improper judgment in the case, or was such as probably prevented the appellant from making a proper presentation of the case to the appellate court...." TEX. R.APP.P. 81(b)(1). This aspect of Rule 166a(c) and Rule 81(b)(1) appear to flow directly from the mandate of Rule 1 to liberally construe the rules "to obtain a just, fair, equitable and impartial adjudication of the rights of litigants under established principles of substantive law" ... "with as great expedition and dispatch and at the least expense both to the litigants and to the state as may be practicable...." TEX.R.CIV.P. 1.[3]
In my view, Rule 166a(c), when construed in the light of Rules 1 and 81(b)(1), should not require a remand when a dispositive issue has been addressed and conclusively established by the summary judgment proof, and there is no possibility that the non-movant can prevail on remand. As Justice Hecht has noted: "All ... rules can be applied under the rubric of literal construction to defeat their own purposes unless those purposes govern and define the rules. The underlying principles must control." McConnell v. Southside I.S.D., 858 S.W.2d 337, 347 (Tex.1993) (Hecht, J., dissenting). I believe this case clearly demonstrates that a rigid construction of Rule 166a(c) may defeat rather than serve the purpose of the rule.
The parties' summary judgment proof addresses and conclusively establishes that Stop N Go is a wholly-owed subsidiary of NCS. In another context, this might amount to a merely uncontroverted fact that defeats the cause of action on an unpresented ground; in that situation, I believe Rule 166a(c) would require a remand to enable the non-movant to present additional summary judgment proof to raise a fact issue on the unpresented ground. Indeed, that is the purpose of the rule. But, in the context of this case, the fact is not simply uncontroverted; *909 it is uncontroverted, incontrovertible, and dispositive. In my opinion, Brooks cannot recover against Stop N Go, regardless of the legal theory employed and regardless of the presence or absence of any other fact. This is simply not a case in which a remand will achieve the fundamental goal of fairness underlying Rule 166a(c). Rather, this is a case in which the defect cannot be cured on remand. Accordingly, remanding this case can and will achieve nothing more than imposing additional costs and delay on the litigants and our taxpayer-supported judicial system, contrary to the letter and the spirit of Rule 1. I may be wrong, but I cannot and will not attribute that intent to our supreme court either in its promulgation of Rule 166a(c) or in its decisions in Clear Creek[4] and McConnell, neither of which involved the unusual circumstances before this court in this casethe parties' failure to recognize the true legal significance of the undisputed, material fact of Stop N Go's status as a wholly-owned subsidiary of Brook's employer. See McConnell, 858 S.W.2d at 344, (Gonzalez, J., concurring in judgment only), 347, 349 (Hecht, J., joined by Cornyn, J., dissenting) (dissenting in part because of the plurality's failure to apply harmless error standard and noting that, insofar as the plurality's opinion purports to preclude summary judgment on a ground established by the summary judgment evidence, it is dicta), id. at 349-50 (Enoch, J., joined by Phillips, C.J., dissenting) (dissenting because of the plurality's failure to apply harmless error standard).
For these reasons, I respectfully dissent.
NOTES
[1] The eight specific acts of negligence were:
1. Failure to insure that employees of the Defendant, NCS, were provided a "safe place to work" as was represented to the Plaintiff before he agreed to come to work for the Defendant, NCS;
2. Engaging in, cooperating in, and instituting certain procedures designed to severely limit the amount of money that the Plaintiff had access to should he be faced with an armed robbery, thereby placing him in great danger;
3. Failure to institute security procedures necessary to protect the employees of NCS from violence associated with armed robberies;
4. Failure to warn the employees of the Defendant, NCS, of known dangers of said employment;
5. Failure to instruct the employees of NCS to known dangers of said employment;
6. In negligently misrepresenting to Plaintiff that prior to his employment with the Defendant, NCS, that the store in question was a "safe place to work;"
7. Failure to adequately warn potential criminals that there was a limited amount of cash available for theft, thereby angering them once they learned that said fact after they had committed a crime; and
8. Failure to disclose to the Plaintiff before his employment with the Defendant, NCS, the results of studies, surveys, and/or analysis relating to his risks of serious personal injury as a result of being employed in a "convenience" store.
[2] Defendants' First Amended Original Answer raised three defenses: (1) a general denial by both defendants; (2) that Stop N Go did not owe plaintiff any legal duty because it did not employ plaintiff; and (3) that plaintiff's common law claims against NCS were barred by the Worker's Compensation Act.
[3] Defendants' Second Amended Motion for Summary Judgment has four numbered paragraphs and a prayer. Paragraph I reflects that an affidavit is attached to the motion. Paragraph II states that Stop N Go never employed plaintiff, or owned or operated the business. Paragraph III states that NCS employed plaintiff, and was a subscriber to the Worker's Compensation Act, having procured an insurance policy. Paragraph IV states that plaintiff received benefits from "aforesaid policy of insurance" for his injury, and is barred from seeking damages for the injury by the exclusive remedy provision of the Worker's Compensation Act. The motion concludes with a prayer for summary judgment. We conclude that this motion for summary judgment never raises the ground that Stop N Go is protected by the exclusive remedy provisions of the Worker's Compensation Act. No connection is made in the motion between NCS, the employer, and Stop N Go. Instead, the motion tracks the defendants' answer, which states that because Stop N Go did not employ plaintiff, it owed him no legal duty. See Shutters v. Domino's Pizza, Inc., 795 S.W.2d 800, 803 (Tex.App.Tyler 1990, no writ) (summary judgment in personal injury action could not be sustained, despite apparent validity of argument concerning exclusive remedy provisions of Worker's Compensation Act, when motion alleged only that plaintiff was not injured in the course and scope of employment).
[4] Even a "liberal construction" of the Texas rules of appellate procedure do not allow us to contradict clear mandates from the Texas Supreme Court. See Travis v. City of Mesquite, 830 S.W.2d 94, 100 (Tex.1992) ("A summary judgment cannot be affirmed on a ground not specifically presented in the motion for summary judgment.").
[1] Tex.Lab.Code § 408.001 (Vernon Pamph.1995) (similar provision formerly located at Tex.Rev.Civ. Stat.Ann. art. 8306, § 3(a)).
[2] In my view, there is no evidence in the summary judgment record before us to suggest that NCS operated Stop N Go as anything other than a business conduit. The undisputed summary judgment proof establishes that NCS alone hires employees and maintains bank accounts; NCS pays for all merchandise placed in Stop N Go stores; NCS pays all rent, salaries, and other expenses, but for tax purposes "attributes" these expenses to the appropriate Stop N Go subsidiary; both Gallerno and Bravenec testified, and the disclosure statement filed by NCS in the bankruptcy court unequivocally states, that NCS operates the stores "under the name of Stop N Go." Indeed, in describing the relationship between NCS and Stop N Go, Bravenec referred to "National Convenience Stores d/b/a Stop-N-Go."
[3] At the time Rule 1 was written, of course, the Texas Rules of Civil Procedure included the rules governing appellate procedure. The fact that the 1986 enactment of the Texas Rules of Appellate Procedure separated the trial and appellate rules is, in my view, of no importance. Wherever located, the rules must be interpreted in the spirit mandated by Rule 1.
[4] City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 677 (Tex.1979). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1391062/ | 234 Ga. 594 (1975)
216 S.E.2d 845
FURGERSON
v.
THE STATE.
29783.
Supreme Court of Georgia.
Submitted March 28, 1975.
Decided June 17, 1975.
Larry W. Dowdy, for appellant.
Albert D. Mullis, District Attorney, Arthur K. Bolton, Attorney General, G. Stephen Parker, Assistant Attorney General, for appellee.
HILL, Justice.
This is an out of time appeal, granted by the Superior Court of Telfair County where the defendant was convicted.
After his arrest on June 21, 1970, defendant was indicted at the June Term for the crime of rape which was alleged to have occurred on June 20. Counsel was appointed September 1 with the understanding that the defendant was seeking to employ counsel of his own choosing.
The defendant was arraigned October 28, 1970, the trial commenced October 29 with appointed counsel representing the defendant, and the jury returned its verdict of guilty on October 31, on which verdict a life sentence was imposed.
Knowing of no reversible error, counsel was allowed to withdraw from the case without the agreement of the *595 defendant. Defendant later filed his pro se motion for out of time appeal, counsel was appointed, the motion was granted, a motion for new trial and an amendment thereto were filed and overruled, and this appeal followed.
Errors are enumerated on the general grounds and on the alleged ineffective assistance of appointed trial counsel.
1. Briefly stated, the evidence showed that on the night of June 20, 1970, the 14-year-old victim and her boy friend were parked; that two men appeared, opened the door, and hit the boy friend on the head with a pipe-like object; that a third person appeared; that they approached the boy friend with a rope; and that he ran. The victim testified that she was raped by the three men. Thereafter she went to the police, then to the hospital, and later to a doctor. Investigating officers found a rope and piece of pipe at the scene. In his unsworn statement, the defendant admitted being at the scene, opening the car door, and hitting the boy friend. He denied that rape had occurred. This statement coincided generally with a statement he previously had given to the investigating officers. A co-defendant in his statement given to these officers had admitted that he had intercourse with the victim after the defendant had done so.
The trial court did not err in overruling the motion for new trial on the general grounds as the verdict was not contrary to the law or the evidence.
2. Defendant strenuously contends that appointed trial counsel rendered ineffective assistance. This contention is based primarily on the facts that at the commencement of the trial, counsel moved for a continuance for purpose of discovery on the ground that he had not been afforded an opportunity to subpoena witnesses and take their pre-trial testimony, pointing out that the defendant had been indicted so soon after arrest that no commitment hearing was held, and urging that it was only the day before trial that he learned for certain that the defendant would not have retained counsel to represent him; that he moved to be discharged from representing the defendant because the defendant ignored his advice and counsel; and that after trial he did not pursue an appeal.
*596 Defendant, represented on this appeal by newly appointed counsel, does not cite any incident which occurred at the trial which would show ineffectiveness or lack of preparation.
The trial transcript shows that trial counsel was vigorous in defense of the defendant. His cross examination of the state's witnesses shows familiarity with the case. He called one doctor who examined the victim whose testimony was that he saw no evidence of rape. The defendant's unsworn statement was made against counsel's advice.
At the hearing on the amended motion for new trial, defendant's former attorney testified that he conferred with the defendant prior to trial several times; that one such session, including a conference with defendant's parents, lasted all one afternoon; that he interviewed witnesses for the state including the victim; that he realized there was little chance of acquittal; that his recommendation that the defendant enter a plea and avoid the highest penalty was refused by the defendant; that the case was as ready for trial as it could be; and that he moved for continuance in the hope that during the delay he might find something that would be of help.
The matter of trial counsel's not having pursued an appeal has been rendered moot by this appeal. (That decision by counsel was made prior to Thornton v. Ault, 233 Ga. 172 (210 SE2d 683)).
We previously have held that a defendant does not have the right to choose his court-appointed counsel. McClure v. Hopper, 234 Ga. 45 (3) (214 SE2d 503). The fact that a defendant does not approve of the appointment of counsel does not demonstrate ineffective assistance of counsel. For the same reason, the fact that an attorney does not approve the person he is appointed to represent does not demonstrate ineffective assistance. As shown by Pitts v. Glass, 231 Ga. 638 (203 SE2d 515), the effective assistance of trial counsel is measured not by his effectiveness in achieving a favorable result (verdict) but by his reasonable effectiveness during the trial in defending the accused.
The fact that trial counsel made a motion for continuance for the purpose of discovery does not *597 demonstrate ineffective assistance. Nor does it necessarily demonstrate lack of preparation for trial by counsel. On the contrary, the making of the motion itself may be considered as evidence of diligence by counsel. The motion was made; it was overruled by the court; that ruling has not been urged as error here, possibly because there is at present no right in criminal cases in Georgia to obtain the pre-trial testimony of witnesses by depositions. Instead, the making of the motion for continuance has been offered as evidence of ineffectiveness of counsel. As such evidence it was not binding upon the question of effectiveness of counsel or his alleged lack of preparation for trial.
The trial court did not err in overruling defendant's amended motion for new trial on the ground of alleged ineffective assistance of trial counsel. Pitts v. Glass, 231 Ga. 638, supra.
Judgment affirmed. All the Justices concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1772875/ | 475 So. 2d 756 (1985)
William L. QUEALY
v.
PAINE, WEBBER, JACKSON & CURTIS, INC., Donald S. Castrone, New England Gas and Electric Association and Vance, Sanders Investors Fund, Inc.
No. 85-C-0495.
Supreme Court of Louisiana.
September 10, 1985.
Rehearing Denied October 10, 1985.
*758 Phillip Wittmann, Douglas Dodd, Jo Strickler, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, for defendant-applicant.
John Baus, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Perry Staub, Monroe & Lemann, Matthew Greenbaum, New Orleans for respondents.
MARCUS, Justice.
This action was filed by William L. Quealy against Paine, Webber, Jackson & Curtis, Inc. (Paine Webber) and New England Gas and Electric Association (NEGEA) for the unauthorized sale of 1,500 shares of NEGEA stock owned by Quealy. Also named defendant was Donald S. Castrone, who bought the shares from an imposter and presented them for re-sale to Paine Webber.[1] Paine Webber filed a third-party demand against William F. Ryan, a notary who prepared and notarized a bill of sale which purportedly transferred ownership of the shares from the imposter to Castrone. NEGEA filed a third-party demand against Paine Webber seeking indemnification for any damages for which it might be cast.
The trial judge rendered judgment in favor of Quealy and against Paine Webber and NEGEA, in solido, in the amount of $32,437.50 for the loss of the shares based on their value on the day before trial,[2] together with $15,840 for lost dividends, and $15,000 in general damages, or a total of $63,227.50. The judge further awarded legal interest from the date of judicial demand until paid on the award for the lost shares and general damages and from the date due on the award for lost dividends. Judgment was further rendered in favor of NEGEA on its third-party demand against Paine Webber in an amount equal to that rendered in favor of Quealy. Paine Webber's third-party demand against Ryan was dismissed.
*759 The court of appeal, finding that Paine Webber and NEGEA were guilty of conversion, affirmed the judgment of the trial court in all respects except to exclude interest on the value of the lost stock and to award attorney fees and court costs to NEGEA on its third-party demand against Paine Webber. It further remanded the case to the trial court to fix the amount of attorney fees and costs.[3] On Paine Webber's application, we granted certiorari to determine the correctness of that decision.[4]
Quealy inherited 1,500 shares of NEGEA common stock from his mother, as well as a small amount of shares in three other corporations. He kept the stock certificates in an unlocked leather suitcase in the room he lived in at a French Quarter hotel. Besides the dividends he received from those securities, his only income was a small Army disability pension. In 1977, a fire at the hotel forced him to move to another nearby hotel. He assumed the stock certificates remained in the suitcase after he moved. In February of 1978, Quealy noticed that he had not received his quarterly dividend and immediately contacted NEGEA. He was informed that the shares had been surrendered. Apparently, the NEGEA stock certificate had been stolen from Quealy's suitcase.[5]
Donald Castrone, sales manager of a West Bank new car dealership, testified that in December of 1977 a man claiming to be William Quealy came to the dealership and spoke to him about purchasing a car. (Several months later, Castrone was introduced to the plaintiff and stated that he was not the same man who came to the dealership). During their negotiations, the imposter stated that he wanted to buy the car with cash and offered to sell Castrone various stocks, including 1,500 shares of NEGEA, at a price below market value. The imposter claimed that he did not want to sell the stock through a broker because he wanted to avoid the usual delays in receiving cash for the stock. Castrone contacted his friend and attorney, William Ryan, and requested advice on the purchase of the stock.
Ryan called Morris Cali, a broker at Paine Webber's New Orleans office, to determine what steps were necessary for Castrone to purchase the stock by private sale and then to sell it for cash without waiting the usual period. Charles Bailey, operations manager of the office, checked with NEGEA and determined that the stock had not been reported as lost, stolen or missing. Cali then advised Ryan that in order to transfer the stock, Paine Webber would require a notarized bill of sale.
Castrone and the imposter arrived at Ryan's home (located in uptown New Orleans) the following evening after Castrone closed the car dealership. Castrone testified that he had gone to Ryan's home on several previous occasions, both for social purposes and to conduct legal business. At Ryan's inquiry, the imposter stated that he had obtained the stock through an inheritance. Ryan asked the imposter for identification, but at trial in December of 1983 (some six years later) could not recall what type of identification was produced. He testified that he did not personally know the man who represented himself as William Quealy. The imposter signed the back of the stock certificate, and he and Castrone signed the bill of sale which Ryan then notarized. Witnesses who subsequently signed the bill of sale did not actually see Castrone and the imposter sign the document. Castrone paid the imposter in cash, outside of Ryan's presence.
The following day (December 9, 1977), Ryan accompanied Castrone to the Paine Webber office with the stock certificate and notarized bill of sale. In order to accomplish the sale and transfer of the NEGEA stock, Castrone opened an account for the first time with Paine Webber. Bailey and John P. Godchaux, manager of the *760 office, each reviewed the documents and satisfied themselves that the bill of sale was properly notarized and that the signature on the back of the certificate matched the seller's signature on the bill of sale. Godchaux approved the sale, and Bailey placed on the certificate a guarantee that the signature was that of the person whose name appeared on the face of the certificate (William L. Quealy). Godchaux and Bailey both testified that Paine Webber guaranteed the seller's signature in reliance on the notarized bill of sale. Godchaux indicated that NEGEA would not have accepted the shares without the signature guarantee. Castrone then sold the stock for cash and received payment. Paine Webber earned a $390 commission on the transaction. Castrone bought the stock from the imposter for $24,000 and sold it for $24,885, making a profit of $885.
Quealy testified that the signatures on the stock certificate and bill of sale were not his, and that he never sold the NEGEA stock nor received any money from its sale. Since he ceased to receive dividends in 1977, practically all of Quealy's income has been derived from his disability pension which is insufficient to meet his expenses. At the time of trial, Quealy was living in a rooming house in New Orleans. He had great difficulty walking and had twice been confined to a wheelchair. He was unable to travel to the courthouse to testify. Quealy was physically unable to work and testified that his living conditions had seriously deteriorated since the loss of the NEGEA dividends.
The issues presented for our determination are:
(1) Whether Paine Webber was guilty of converting Quealy's stock.
(2) Whether the notary was liable to Paine Webber on its third-party demand for notarizing a forged signature.
(3) Whether the trial judge properly awarded the value of the lost stock as of the day before trial rather than the date of conversion.
(4) Whether the trial judge erred in awarding general damages for mental anguish and inconvenience suffered by Quealy for the loss of use of the stock.
(5) Whether Paine Webber was liable to NEGEA on its third-party demand for attorney fees and court costs.
LIABILITY OF PAINE WEBBER
A conversion consists of an act in derogation of the plaintiff's possessory rights, and any wrongful exercise or assumption of authority over another's goods, depriving him of the possession, permanently or for an indefinite time, is a conversion. It is of no importance what subsequent application was made of the converted property, or that defendant derived no benefit from his act. Importsales, Inc. v. Lindeman, 231 La. 663, 92 So. 2d 574 (1957).
Without Paine Webber's signature guarantee, NEGEA would not have accepted the stock and Quealy would have remained the record owner. Paine Webber's signature guarantee was therefore a necessary step in the transfer of ownership and was a contributing cause of Quealy's loss. Internal regulations (Internal Control Memo # 50) circulated to Paine Webber employees required that signature guarantees be made only where the employee either knows the individual or takes steps to verify his identity, such as by making a comparison of the signature to a signature card or other similar records. As a member of the New York Stock Exchange, Paine Webber was bound by that association's Rule 405 (also known as the "Know Your Customer" rule) which obliged the brokerage firm to use due diligence in knowing with whom it does business. Godchaux and Bailey testified, however, that they merely relied on the notarized bill of sale as proof that the signature of Quealy was genuine. Bailey guaranteed that the signature was that of the person named on the face of the certificate, although Paine Webber personnel did not know Quealy nor have a record of his signature and the certificate was not signed in their presence. Moreover, although *761 Ryan knew Morris Cali and had an account with Paine Webber, none of the personnel had previously known Castrone.
Under these circumstances, it was not reasonable for Paine Webber to rely on the notarized bill of sale and take no further steps to verify the authenticity of Quealy's signature. In guaranteeing the signature of a person they did not know, who did not sign in their presence, and whose signature they did not compare to other existing records, Paine Webber employees acted in a manner inconsistent with Quealy's property rights. Paine Webber wrongfully assumed control over Quealy's stock and contributed to depriving him of its possession and was liable for conversion. La.Civ.Code art. 2315.
LIABILITY OF NOTARY
In Howcott v. Talen, 133 La. 845, 63 So. 376 (1913), in enunciating the standard of care for a notary who acknowledges a signature, we stated:
[S]o long as he exercises the precaution of an ordinarily prudent businessman in certifying to the identity of the persons who appear before him, it may be doubted whether he has any other function to discharge.... [I]t can hardly be expected that he will ordinarily require more than the reasonable identification of persons who come before him merely to acknowledge their signatures to instruments of any kind.
In Howcott, a notary (Dearing) was approached by Boulmay, a man he had known several years. Boulmay introduced Dearing to an individual who claimed to be heir to a succession. (In fact, the succession never existed and the heir was an imposter scheming to sell property he did not actually own). Boulmay requested that Dearing notarize an act of sale which purported to transfer ownership of property from the imposter to another. Dearing notarized the instrument, and the scheme was later uncovered. This court found that Dearing, as notary, had exercised the care of an ordinarily prudent businessman and was not liable for notarizing the imposter's signature.
In the instant case, Ryan took further precautionary steps than did the notary in Howcott. Like Dearing, Ryan was well-acquainted with the individual (Castrone) who introduced him to the imposter. When Castrone contacted him about the proposed private sale of stock, Ryan called Paine Webber to ascertain the requirements of such a transaction. Bailey testified at trial that a private sale of stock was not unusual. The fact that Ryan notarized the bill of sale in his home at night does not suggest any impropriety, as he had previously done legal work for Castrone in his home after Castrone (who lived in Slidell) finished work. Ryan asked the imposter how he had obtained the stock and requested identification. While Ryan could not recall at trial exactly what type of identification the imposter produced, it should be noted that the trial took place six years after the bill of sale was notarized. Under the circumstances, we are unable to say that the trial judge was clearly wrong in finding that Ryan did not act unreasonably in this transaction. Arceneaux v. Domingue, 365 So. 2d 1330 (La.1978). Clearly, Ryan met the standard of care for a notary as set forth in Howcott. Therefore, the court of appeal did not err in affirming the finding of the trial judge that Ryan was not liable to Paine Webber on its third-party demand for notarizing the signature of an imposter.
MEASURE OF DAMAGES FOR LOST STOCK
The traditional damages for conversion consist of the return of the property itself, or if the property cannot be returned, the value of the property at the time of the conversion. Boisdore v. International City Bank & Trust Co., 361 So. 2d 925 (La.App.4th Cir.), writ denied, 363 So. 2d 1384 (La.1978). There are some transactions in stocks in which to hold a defendant liable only for the value of the stocks at the date of their actual conversion would afford a very inadequate remedy; *762 as, for instance, where one buys stocks with the intention of holding them for a rise in the market and the broker sells them without authority so that the principal loses the opportunity of availing himself of the rise. Leurey v. Bank of Baton Rouge, 131 La. 30, 58 So. 1022 (1912). Where a commodity which fluctuates in value is converted, its owners should be given the benefit of better prices that prevailed within a few months afterwards. Succession of Gragard, 106 La. 298, 30 So. 885 (1901). Every act whatever of man that causes damage to another obliges him by whose fault it happened to repair it. La.Civ.Code art. 2315. Damages are measured by the loss sustained by the obligee and the profit of which he has been deprived. La.Civ.Code art. 1995.
The value of Quealy's NEGEA shares on the date they were wrongfully transferred by Paine Webber to NEGEA (December 9, 1977) was $24,885. Rather than following the general rule in conversion cases and measuring the shares' value as of the date of conversion, the trial judge awarded Quealy $32,437 for the lost stock, which represented its market value on the day before trial (December 13, 1983). The general rule accomplishes the goal of fully compensating the conversion victim in cases where the converted property depreciates over time. In such instances, the victim is made whole by returning to him exactly what was lost. In the case of stock, which fluctuates in value, applying the general rule of damages will not always accomplish the goal of making the victim whole. Such is the case here. In order for Paine Webber to fully repair the damage caused, it must reimburse Quealy in an amount sufficient to enable him to repurchase exactly what was lost: 1,500 shares of NEGEA stock. La.Civ.Code arts. 2315 and 1995. The trial judge thus properly awarded Quealy an amount commensurate with the value of 1,500 shares of NEGEA stock as of the day before trial.[6]
GENERAL DAMAGES
Damages for mental anguish and inconvenience arising from the loss of use of property have been allowed in tortious conversion cases. Alexander v. Qwik Change Car Center, Inc., 352 So. 2d 188 (La.1977). Similarly, where property has been wrongfully seized through judicial process, damages for mental anguish and inconvenience due to the loss of use of the property are recoverable. Nassau Realty Co., Inc. v. Brown, 332 So. 2d 206 (La.1976); Hernandez v. Harson, 237 La. 389, 111 So. 2d 320 (1958). In Hernandez, we stated:
Plaintiff is entitled to recover for humiliation, mortification and mental anxiety, and for physical discomfort and inconvenience as a result of the deprivation of use and enjoyment of his car.... Such an item is not confined to proof of actual pecuniary loss. It is true that there is no proof of malice nor was the seizure characterized by harshness and total disregard to the interests of plaintiff. Yet it was illegally and wrongfully executed, coupled with the continued deprivation of its use for an extended period of time, sufficient to have caused mortification, annoyance and physical discomfort.
The award of general damages in a conversion case, if proven, is clearly supported by the jurisprudence. Quealy testified that except for a small disability pension, the dividends from the converted stock constituted his main source of income and his living conditions were drastically impaired by the loss of those dividends.[7]*763 He was physically unable to work, and on December 14, 1983 (date of trial), he had been without the dividend income for six years. There was ample evidence in the record to support a finding that Quealy suffered mental anguish, humiliation and inconvenience from the loss of use of his property. Therefore, the trial judge did not err in awarding general damages.
LIABILITY OF PAINE WEBBER TO NEGEA FOR ATTORNEY FEES AND COURT COSTS
Attorney fees are not allowed in Louisiana except where authorized by statute or contract. Hernandez v. Harson, supra (on rehearing). Unless the judgment provides otherwise, costs shall be paid by the party cast. La.Code Civ.P.art. 1920.
The trial judge granted NEGEA's third-party demand for indemnification based on Paine Webber's signature guarantee of an imposter. He found that Paine Webber was liable for all costs of the proceedings. The court of appeal stated that Paine Webber was liable to NEGEA for any loss that resulted from the signature guarantee and included within Paine Webber's liability an award of attorney fees and court costs. The court of appeal relied on La.R.S. 10:8-312.[8]
Paine Webber guaranteed the imposter's signature on December 9, 1977. Quealy's suit was filed December 6, 1978. La.R.S. 10:8-312 was enacted by Acts 1978, No. 165, § 1 with an effective date of January 1, 1979. It was not in effect at the time the signature was guaranteed nor when suit was filed. Being substantive in nature, the statute should not be retroactively applied. Therefore, it does not govern this case.[9]
The statutory provisions which applied when Paine Webber guaranteed the imposter's signature are contained in the Uniform Stock Transfer Act. La.R.S. 12:621, et seq. (repealed by Acts 1978, No. 165, § 6, eff. Jan. 1, 1979). Our review of these statutes yields no provision whereby a signature guarantor assumes the defense of the issuer when a claim is made against the latter for wrongful transfer, nor do we find any statutory authority for an award of attorney fees against a signature guarantor in such a case. Furthermore, there was no contractual agreement between Paine Webber and NEGEA that could provide for attorney fees. Thus, the court of appeal erred in finding Paine Webber liable for attorney fees on NEGEA's third-party demand.
Paine Webber was found liable for indemnification on NEGEA's third-party demand and, as the party cast, it was obliged to pay court costs. La.Code Civ.P. art. 1920.
In sum, we find that the court of appeal erred in awarding NEGEA attorney fees on its third-party demand against Paine Webber, and we reverse that portion of the judgment. In all other respects, the judgment of the court of appeal is affirmed.
*764 DECREE
The judgment of the court of appeal is affirmed in all respects except it is reversed insofar as it grants attorney fees to New England Gas and Electric Association on its third-party demand against Paine, Webber, Jackson & Curtis, Inc.
LEMMON, J., dissents from the award of general damages, the measure of damages, and the liability of Paine Webber to plaintiff, but concurs as to Paine Webber's liability on NEGEA's third party demand.
NOTES
[1] Castrone filed for relief under Chapter 7 of the Bankruptcy Code (11 U.S.C. Sec. 701, et seq.) prior to trial and did not take part in these proceedings. Also named defendant was Vance, Sanders Investors Fund, Inc. who settled with Quealy before trial.
[2] To prove the current market value of the stock, Quealy introduced in evidence the NYSE-Composite Transactions of December 13, 1983 appearing in The Wall Street Journal the next day (December 14, 1983) which was the date of trial. Therefore, the value of the stock fixed by the trial judge was based on the closing price for December 13, 1983.
[3] 464 So. 2d 930 (La.App. 4th Cir.1985).
[4] 467 So. 2d 528 (La.1985).
[5] Three other stock certificates were also stolen from Quealy. The record is unclear as to the disposition of these three certificates; in any event, they are not the subject of this litigation.
[6] The question of what value should be awarded for stock which has declined in value since its conversion is not before us. We note, however, that in such a case, the general rule which measures damages as of the date of conversion would make the owner whole by replacing exactly what he lost. See Atkins v. Garrett, 270 F. 939 (5th Cir.1921).
[7] Due to physical infirmities, Quealy did not testify at trial. His testimony was introduced through a videotaped deposition. Paine Webber objected on relevancy grounds to questions regarding Quealy's living conditions since the conversion, and the trial judge sustained the objections. The trial judge erred in his rulings as this evidence was relevant to the proof of general damages which are recoverable in conversion cases. Moreover, the trial judge awarded general damages based on the record which contained the evidence that he had previously ruled inadmissible.
[8] La.R.S. 10:8-312 provides:
(1) Any person guaranteeing a signature of an indorser of a security warrants that at the time of signing
(a) The signature was genuine; and
(b) The signer was an appropriate person to indorse; and
(c) The signer had legal capacity to sign.
(2) Any person may guarantee an indorsement of a security and by so doing warrants not only the signature (Subsection 1) but also the rightfulness of the particular transfer in all respects. But no issuer may require a guarantee of indorsement as a condition to registration of transfer.
(3) The foregoing warranties are made to any person taking or dealing with the security in reliance on the guarantee and the guarantor is liable to such person for any loss resulting from breach of the warranties.
[9] Because La.R.S. 10:8-312 was not in effect when Paine Webber guaranteed the signature, we do not reach the question of whether the term "any loss" includes attorney fees. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2379593/ | 485 S.W.2d 943 (1972)
HARTZELL PROPELLER COMPANY, INC., Appellant,
v.
Barbara Nan Dick ALEXANDER et al., Appellees.
No. 5161.
Court of Civil Appeals of Texas, Waco.
October 5, 1972.
Rehearing Denied October 26, 1972.
*944 Anderson, Henley, Shields, Bradford & Pritchard, C. A. Searcy Miller, Dallas, for appellant.
Jackson, Walker, Winstead, Cantwell & Miller, H. Dudley Chambers, Turner, Rodgers, Winn, Scurlock & Sailers, John H. McElhaney, Dallas, for appellees.
OPINION
McDONALD, Chief Justice.
This is an appeal by defendant Hartzell from $45,500 judgment for plaintiffs in a products liability case.
Plaintiffs Alexander and Ballanger (daughters of Fred Dick, deceased), Southwestern Public Service Company, and Hartford Accident and Indemnity Company, sued defendants Hartzell Propeller Company and Dallas Aero Service, alleging that on February 10, 1967 a Beechcraft airplane owned by Southwestern and piloted by Fred Dick crashed and burned at Dallas Love Field killing all occupants of the aircraft, including Dick and A. R. Wilson, President of Southwestern, and destroying the aircraft.
Plaintiffs alleged the cause of the crash was the inflight failure, on take off, of a propeller blade manufactured by defendant Hartzell; that the propeller blade which failed was defective and unreasonably dangerous to the user or consumer in that "The failed blade did not have a large enough shank size"; and that such was a producing cause of the failure.
Plaintiffs alternatively plead that defendant Aero Service negligently failed to inspect or rework the engine upon which the failed propeller blade was mounted, which negligence was a proximate cause of the crash.
Plaintiffs Alexander and Ballanger sought $75,000 damages for the wrongful death of Fred Dick, for losses suffered by their mother, surviving widow (since deceased) of Fred Dick, and for themselves as daughters of Fred Dick, alleging they have been deprived of reasonably expected *945 pecuniary contributions, care, counsel, guidance, protection and services of their father.
Southwestern sought $65,000, as the value of its aircraft.
Hartford sought death benefits under workman's compensation policies and funeral benefits paid on Watson; (and subrogation of amounts paid on Dick).
Defendant by answer plead contributory negligence, misuse, and voluntary exposure to risk by pilot Dick; that negligence of Aero proximately caused the accident; and that plaintiffs Alexander and Ballanger, daughters of Fred Dick were not entitled to recover damages as a matter of law as they were grown and married.
Trial was to a jury which found:
1) At the time it left the hands of Hartzell Propeller Inc., the shank size of the propeller blade in question rendered it unreasonably dangerous.
2) Said condition was a producing cause of the failure of the propeller blade.
8) Barbara Dick (widow of Fred Dick) was damaged $7,000.
9) Barbara Dick Alexander was damaged $3,000.
10) Suzan Dick Ballanger was damaged $10,000.
11A) $1000. was reasonable expense for burial of A. R. Watson.
15) On the occasion in question the right engine was running rough or vibrating immediately prior to takeoff.
16) Fred Dick was negligent in taking off on the occasion.
17) Said negligence was a proximate cause of the accident.
18) Dallas Aero Service did not fail to properly service the right engine of the aircraft at the time of overhaul.
21) The failure of Pratt & Whitney to amend its service bulletins prior to February 1967 relative to engines (as on the Southwestern Aircraft) was not the sole proximate cause of the accident.
22) The failure of the FAA to make certain requirements was not the sole proximate cause of the accident.
The trial court rendered judgment for plaintiff Southwestern for $25,000. (on stipulation of the value of its aircraft); for plaintiffs Alexander, Ballanger and Hartford for $20,000 (in such proportions as are satisfactory to them); and for plaintiff Hartford for $500. for payment made on funeral of A. R. Watson.
The record reflects that on February 10, 1967, during daylight and in good weather, a twin engined Beechcraft airplane, owned by Southwestern, and piloted by the professional full time company pilot Fred Dick, crashed and burned at Love Field just moments after takeoff, killing Dick, Southwestern's President W. R. Watson, and Watson's wife.
Just after takeoff when the aircraft reached 100 to 200 feet in altitude one of the propeller blades on the right engine separated from the aircraft, causing extreme vibration. The right engine broke loose and the aircraft, observed by witnesses in the control tower, crashed and burned. The entire event transpired in 10 to 15 seconds.
The propeller which failed was manufactured by defendant Hartzell. The model was designed in 1956 and installed on the Southwestern aircraft in May 1964. The propeller which the manufacturer represents should have an "indefinite life", had 852 hours total flight time at the time of failure.
The failure was caused by a fatigue fracture in the butt end of the propeller blade, which was hidden from detection from all inspections other than a complete major overhaul conducted only at 800 to 1000 hour intervals.
*946 There is evidence the failure was caused by the fact the diameter of the propeller blade was not large enough to withstand the vibratory stresses of the Pratt & Whitney engine upon which it was mounted. The engine was designed in the 1930's and defendant in 1956 designed this propeller for the existing engine. Defendant admitted that prior to the accident made basis of this case it came to the knowledge and realization that its propeller needed to be strengthened, and that simple redesign by increasing the propeller shank size would double the margin of safety, and in reasonable probability such precaution would have prevented a crash under the circumstances here involved. Despite this knowledge and realization defendant withheld such information from the public because it did not have its new "beefed up" model ready to sell.
Defendant appeals on 71 points[1], an overview of which discloses four basic contentions.
Defendant's 1st contention asserts Issues 1 and 2 will not support a judgment; that the element of foreseeability is missing; and that the trial court's definitions of unreasonably dangerous and producing cause are erroneous.
Issue 1 found "that at the time it left the hands of Hartzell Propeller, Inc., the shank size of the propeller blade rendered it unreasonably dangerous." And Issue 2 found "said condition was a producing cause of the failure of the propeller blade."
The trial court instructed the term "`unreasonably dangerous' as used herein means that an ordinary man, knowing the risks and dangers actually involved in its use however latent or scientifically undiscoverable the hazard might have been, and whether due to a miscarriage in the manufacturing process or the way the product was designedwould not have placed in the channels of commerce"; and "`Producing Cause' means an efficient, exciting, or contributing cause, which in a natural and continuous sequence, in connection with any other cause or causes produced the event complained of. There may be more than one producing cause of an event".
Texas has adopted the rule of strict liability in tort (Sec. 402A Strict Liability, Restatement of Torts 2d), to users and consumers, with respect to sellers and manufacturers of defective products, which cause physical harm to persons. Franklin Serum Co. v. C. A. Hoover & Son, Tex., 418 S.W.2d 482.
And the doctrine of strict liability is applicable to defective design cases. Pizza Inn, Inc., v. Tiffany, CCA, NWH, Tex.Civ.App., 454 S.W.2d 420; Garcia v. Sky Climber, Inc., CCA, NRE, Tex.Civ. App., 470 S.W.2d 261; Ford Motor Co. v. Russell & Smith Ford Co., CCA, NWH, Tex.Civ.App., 474 S.W.2d 549.
C. A. Hoover v. O. M. Franklin Serum Co., Tex., 444 S.W.2d 596, establishes that foreseeability has no place in the concept of strict liability in situations as here.
The cases cited establish that issues 1 and 2 will support plaintiff's judgment. The trial court's definitions of "unreasonably dangerous" and "producing cause" are not erroneous.
Defendant's 2nd contention asserts there is no evidence or insufficient evidence to support the jury's answer to Issues 1, 2, 18, 21, and 22.
*947 Issue 1 found the shank size of the propeller blade rendered it unreasonably dangerous, and Issue 2 found such a producing cause of the failure of such blade. The witness Bierman, president of defendant, admitted that before the crash defendant came to the actual realization that its propeller needed to be strengthened. Defendant's witness Chritchloe testified that to "increase the strength of the propeller" would solve the problem. And Mr. Bierman further testified that increasing the size of the propeller shank would double the safety margin; that defendant did so after the crash; and that use of the new blade would in reasonable probability have prevented this crash.
In issues 18, 21, and 22 the jury found Dallas Aero Service did not fail to properly overhaul the engine; that the engine's manufacturer and FAA's failure to require more stringent servicing were not the sole proximate cause of the accident.
Dallas Aero's service records are in evidence and reflect that proper servicing requirements were met. The engine manufacturer designed the engine in the 1930's. It has been out of production since World War II. It originally came with a different type propeller. Defendant designed and manufactured its propeller to go on the engine. Defendant's witness Chritchloe testified the problem could be solved by increasing the strength of the propeller. Witness Bierman testified the engine problems here involved "was very difficult to control from the FAA's standpoint." The contention is overruled.
Defendant's 3rd contention asserts judgment should have been rendered for it upon Issues 15, 16, and 17. These issues found that on the occasion the right engine was running rough; that Dick was negligent in taking off; and said negligence was a proximate cause of the accident.
When the strict liability rule attaches or is applicable, conventional contributory negligence of plaintiff is not a defense; nor is contributory negligence consisting of failure to discover the defect in the product, or to guard against the possibility of its existence. Shamrock Fuel & Oil Sales Co. v. Tunks, Tex., 416 S.W.2d 779; McKisson v. Sales Affiliates, Inc., Tex., 416 S.W.2d 787. The findings were properly disregarded by the trial court.
Defendant's 4th contention asserts there is no evidence or insufficient evidence to support the jury's answers to Issues 9 and 10, and that plaintiffs Alexander and Ballanger are entitled to no award as a matter of law.
Plaintiffs Alexander and Ballanger were the daughters of pilot Dick. The jury in Issues 9 and 10 awarded them $3000. and $10,000. respectively for the death of their father. Barbara Alexander, age 29, was having difficulties with her husband (from whom she was divorced four months after the crash). Her husband did not support her. She looked to her father for personal guidance, advice, and financial support. Her father maintained a joint bank checking account for her benefit. Suzan Ballanger, age 19, married because of a pregnancy at 18; never lived with her husband and was divorced from him after the baby came. She lived with her parents and depended on her father for personal guidance, advice, and support. At the date of her father's death she was regularly receiving $170. per month from her father for support. Article 4671, our wrongful death statute, makes no distinction between adults and infants, or married or single survivors. Article 4675 provides for recovery by the surviving spouse and "children".
Adult children may recover damages for the wrongful death of parents, and in arriving at such damages the loss of prospective contribution from the deceased parent may be taken into consideration. San Antonio & A. P. Ry. Co. v. Long, 87 Tex. 148, 27 S.W. 113; Texas & P. Ry. Co. v. Martin, CCA, NWH, 25 Tex. Civ. App. 204, 60 S.W. 803; IGN Ry. *948 Co. v. Acker, CCA, Er. Dism'd. judgment correct, Tex.Civ.App., 128 S.W.2d 506; Houston Gas & Fuel Co. v. Perry, 127 Tex. 102, 91 S.W.2d 1052; Texas Consolidated Transportation Co. v. Eubanks, CCA, NRE, Tex.Civ.App., 340 S.W.2d 830. This contention is overruled.
All defendant's points have been considered and are overruled.
Affirmed.
NOTES
[1] Many of these points are based on assignments which violate Rules 374 or 418 Texas Rules of Civil Procedure, or are multifarious, for which reasons the matters complained of are not properly preserved. Weingarten v. Moore, Tex., 449 S.W.2d 452; MKT Ry. v. McFerrin, S.Ct. 156 Tex. 69, 291 S.W.2d 931; Int. Sec. Life Ins. Co. v. Howard, CCA, NRE, Tex.Civ.App., 456 S.W.2d 765; SMI v. Jamieson, CCA, NWH, Tex.Civ. App., 473 S.W.2d 275. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1377985/ | 30 Cal.3d 606 (1982)
639 P.2d 248
180 Cal. Rptr. 177
BOBBY JOE MAXWELL, Petitioner,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; THE PEOPLE, Real Party in Interest.
Docket No. L.A. 31162.
Supreme Court of California.
January 28, 1982.
*609 COUNSEL
Laidley & Lawson, Pierpont M. Laidley, Fred Alschuler and Walter Alschuler for Petitioner.
John H. Larson, County Counsel, and John P. Farrell, Deputy County Counsel, for Respondent.
No appearance for Real Party in Interest.
OPINION
NEWMAN, J.
One due process requirement is that an individual charged with serious crime be represented by competent and independent counsel. Another is that courts generally must not interfere with defendant's informed conclusions as to how his defense ought to be conducted. In this lawsuit, which involves an indigent defendant accused of capital murder, those two requirements appear to conflict; and we must decide which one commands more deference.
*610 (1a) The precise issue is whether the trial court erred when, notwithstanding petitioner's protest, it recused his retained counsel and appointed substitute counsel on the ground that the fee contract, giving retained counsel the right to exploit petitioner's life story, created an intolerable conflict of interest. We conclude that petitioner knowingly and intelligently waived the potential prejudice and, therefore, that the trial court did err.
Petitioner is charged with four counts of robbery (Pen. Code, § 211) and ten of murder (§ 187), some of which involve special circumstances raising the possibility that he will be sentenced to death (§ 190.2). He retained attorneys who seem to be experienced criminal defense lawyers.
The contract provides that irrevocably he assigns to counsel, as their fee, "any and all right, title, and interest, of any kind, nature and description throughout the world in and to the story of [his] entire life ..." including all entertainment and commercial exploitation rights. He is to receive 15 percent of the "net amount" realized by the exploitation. He promises to cooperate in the exploitation efforts and not to disclose his story to others except with counsel's consent or as required by law or his defense.
In the contract he waives all defamation and invasion-of-privacy claims against counsel that may arise from the exploitation. Counsel are not obligated to undertake an appeal, and appellate representation and fees therefor are declared to be subjects of later negotiation.[1]
*611 The contract reflects extensive disclosure of possible conflicts and prejudice. It declares that counsel may wish to (1) create damaging publicity to enhance exploitation value, (2) avoid mental defenses because, if successful, they might suggest petitioner's incapacity to make the contract, and (3) see him convicted and even sentenced to death for publicity value. But a catch-all paragraph after reciting that other, unforseen conflicts may also arise reads: "The Lawyers will raise every defense which they, in their best judgment based upon their experience feel is warranted by the evidence and information at their disposal and which, taking into consideration the flow of trial and trial tactics, is in Maxwell's best interests. The Lawyers will conduct all aspects of the defense of Maxwell as would a reasonably competent attorney acting as a diligent conscientious advocate." (Italics added.)
In another paragraph petitioner is told of his right to appointed counsel (because he is indigent), and he is urged to seek independent legal advice about the matter. It is recited that retained counsel have supplied him with (1) a list of lawyers known by them, (2) the address and telephone number of the county bar referral service, and (3) a photocopy of "Attorneys" listings in the yellow pages for the Los Angeles area.
On April 9, 1979, petitioner was arraigned in municipal court. He pleaded not guilty and reserved the right to plead not guilty by reason of insanity. On April 26 counsel notified the court of his indigency and of the retainer contract. Judge Gutierrez questioned him and received his proffered waiver of all conflicts. After preliminary hearing (closed at counsel's request) petitioner was bound over for trial. He reiterated his municipal court pleas, and a defense psychiatrist and an investigator were appointed.
At the September 14 hearing Judge Malone on his own motion inquired into the contract and examined petitioner. Via questions and answers he established that petitioner was literate, had an eighth-grade education, had read and signed the entire contract, had separately initialed many critical paragraphs, knew he could consult an independent attorney, and on his own chose not to do so. The judge called his attention specifically to the paragraphs disclosing potential conflicts and *612 confirmed that petitioner had read carefully and understood each entry. He replied affirmatively when asked if he remained satisfied with counsel's conduct.
After considering the psychiatric reports submitted in confidence by counsel, the judge ruled that (1) petitioner knowingly and willingly had chosen not to seek outside advice and was satisfied with his representation and the contract, and (2) counsel's competency was not at issue, but (3) counsel nonetheless must be disqualified because of the inherent conflict created. Four days later, after confirming that petitioner still wished to proceed with his retained lawyers, Judge Malone recused them and appointed substitute counsel. Petitioner seeks mandate to overturn the rulings.
WHEN MAY DEFENDANT DEMAND "DEFICIENT" COUNSEL?
Respondent (the Los Angeles Superior Court, represented by county counsel[2]) contends that the fee contract effected a conflict contrary to constitutional guarantees of effective counsel, violated ethical standards, and jeopardized the integrity of the judicial process.
(2) The right to counsel guaranteed by section 15 of article I of the California Constitution does contemplate effective counsel, and effectiveness means more than mere competence. Lawyering may be deficient when conflict of interest deprives the client of undivided loyalty and effort. (See People v. Corona (1978) 80 Cal. App.3d 684, 720 [145 Cal. Rptr. 894]; cf. Glasser v. United States (1942) 315 U.S. 60, 75-76 [86 L.Ed. 680, 701-702, 62 S.Ct. 457].)
Protection of a defendant's right to loyal counsel is essential. This court has said that trial judges assume the burden of ensuring that their appointments of counsel for indigent defendants do not "result in a denial of effective counsel because of some possible conflict...." (People v. Cook (1975) 13 Cal.3d 663, 671 [119 Cal. Rptr. 500, 532 P.2d 148]; but cf. Cuyler v. Sullivan (1980) 446 U.S. 335, 346-347 [64 L.Ed.2d 333, 345-346, 100 S.Ct. 1708].) (3) When a conviction is attacked validly on the ground that an appointed lawyer was influenced by conflict of interest the appellate court may not "`indulge in nice calculations as to the amount of [resulting] prejudice...,'" and the conviction *613 must be reversed if the record supports "informed speculation" that the conflict was prejudicial. (People v. Chacon (1968) 69 Cal.2d 765, 776-777, and fn. 3 [73 Cal. Rptr. 10, 447 P.2d 106]; see too Glasser, supra, 315 U.S. 60, 76 [86 L.Ed. 680, 702].[3])
Yet effective assistance is linked closely to representation by counsel of choice. When clients and lawyers lack rapport and mutual confidence the quality of representation may be so undermined as to render it an empty formality. Hence many precedents recognize that the constitutional right to counsel includes a reasonable opportunity for those defendants who have the necessary resources to control the designation of their legal representatives. (E.g., Crooker v. California (1958) 357 U.S. 433, 439 [2 L.Ed.2d 1448, 1453-1454, 78 S.Ct. 1287], overruled on other grounds, Miranda v. Arizona (1966) 384 U.S. 436 [16 L.Ed.2d 694, 86 S.Ct. 1602, 10 A.L.R.3d 974], rehg. den., 385 U.S. 890 [17 L.Ed.2d 121, 87 S.Ct. 11]; Chandler v. Fretag (1954) 348 U.S. 3, 9 [99 L.Ed. 4, 9-10, 75 S.Ct. 1]; Willis v. United States (9th Cir.1979) 614 F.2d 1200, 1202; United States v. Bragan (4th Cir.1974) 499 F.2d 1376, 1379.)
California decisions are in accord. While acknowledging that the right to chosen counsel is not absolute they limit severely the judge's discretion to intrude on defendant's choice of counsel in order to eliminate potential conflicts, ensure adequate representation, or serve judicial convenience.
People v. Crovedi (1966) 65 Cal.2d 199 [53 Cal. Rptr. 284, 417 P.2d 868] held that a court abused its discretion by denying a continuance during retained counsel's temporary incapacity. "[T]hough it is clear," said Crovedi, "that a defendant has no absolute right to be represented by a particular attorney [fn. omitted], still the courts should make all reasonable efforts to ensure that a defendant financially able to retain an attorney of his own choosing can be represented by that attorney.... [¶] ... [T]he state should keep to a necessary minimum its interference with the individual's desire to defend himself in whatever manner he deems best, using any legitimate means within his resources *614 and ... that desire can constitutionally be forced to yield only when it will result in significant prejudice to the defendant himself or in a disruption of the orderly processes of justice unreasonable under the circumstances of the particular case." (Pp. 207-208, first italics original.)
Despite that concern with "significant prejudice" this court has stressed that the judge's finding of potential incompetence or conflict usually does not justify court-ordered removal. Smith v. Superior Court (1968) 68 Cal.2d 547 [68 Cal. Rptr. 1, 440 P.2d 65] concluded that a trial court could not, over defendant's objection, recuse his lawyer even where the judge from preliminary observation had become convinced of the lawyer's incompetence. Speaking for a unanimous court Justice Mosk said that to protect the right to counsel "the judge must be on his guard neither to infringe upon the defendant's right to counsel of his choice, nor to compromise the independence of the bar...." (P. 559.)
A few months later Justice Mosk spoke again for the unanimous court: "We recently held [in Smith] that a court has no power to remove a defense attorney, over the objections of both the defendant and that attorney, upon a finding that the latter is `incompetent' because of purported ignorance of the law to try the particular case.... A fortiori, a court cannot remove an attorney on the far less relevant ground of the nature of the financial arrangement between him and his client. To do so would, as in Smith, infringe upon the defendant's right to counsel of his choice and compromise the independence of the bar. When a defendant appears with retained counsel, it is clear the court has no power to inquire into the defendant's personal financial condition, to determine that he is unable to pay his chosen attorney an `adequate' fee, and to order that he be represented instead by court-appointed counsel or the public defender [fn. omitted]; when a defendant appears with a public defender who is satisfied from his own inquiry that his client is eligible for his services, such judicial interference with their relationship would be no less tolerable. As we explained in Smith, `the relationship is independent of the source of compensation, for an attorney's responsibility is to the person he has undertaken to represent rather than to the individual or agency which pays for the service.... It follows that once counsel is appointed [or undertakes] to represent an indigent defendant, whether it be the public defender or a volunteer private attorney, the parties enter into an attorney-client relationship which is no less inviolable than if counsel had been retained. To hold otherwise would be to subject that relationship to an unwarranted and invidious discrimination *615 arising merely from the poverty of the accused.'" (Ingram v. Justice Court (1968) 69 Cal.2d 832, 840 [73 Cal. Rptr. 410, 447 P.2d 650, 36 A.L.R.3d 1391].)
(4) Still later this court observed without dissent that "the involuntary removal of any attorney is a severe limitation on a defendant's right to counsel and may be justified, if at all, only in the most flagrant circumstances of attorney misconduct or incompetence when all other judicial controls have failed...." (Cannon v. Commission on Judicial Qualifications (1975) 14 Cal.3d 678, 697 [122 Cal. Rptr. 778, 537 P.2d 898].)
People v. Cook, supra, 13 Cal.3d 663 rejected defendants' contention of prejudice relating to retained counsel's joint representation of several codefendants. This court explained that the judge's obligation to avoid appointments of conflicted counsel does not apply where counsel has been retained. "Indeed," said the court, "it is extremely doubtful that defendants' right to retain counsel of their own choice could or should be challenged by the trial court." (Pp. 671-672.)
Protection of defendant's right to reject unwanted counsel has progressed also on other fronts. We now know that a mentally competent defendant who duly waives counsel, may dismiss his lawyer and represent himself no matter how much the judge doubts his legal ability. (Faretta v. California (1975) 422 U.S. 806, 819-821 [45 L.Ed.2d 562, 572-574, 95 S.Ct. 2525].) And if he timely requests substitution of appointed counsel the court at a minimum must inquire into the reasons for his displeasure with his attorney. (People v. Marsden (1970) 2 Cal.3d 118, 122-124 [84 Cal. Rptr. 156, 465 P.2d 44].)
Developments such as those point to the conclusion that chosen representation is the preferred representation. Defendant's confidence in his lawyer is vital to his defense. His right to decide for himself who best can conduct the case must be respected wherever feasible.[4]
*616 CONTRASTING VIEWS
It is argued that life-story fee contracts are inherently prejudicial, unethical, and against public policy and that the judge has power and the duty to protect the integrity of the trial and, thus, confidence in the judicial process. Do those concerns perhaps outweigh a single defendant's interest in chosen counsel?
Contracts of this kind are widely criticized. It is said they tempt lawyers, consciously or subconsciously and adversely to the client's interests, to tilt the defense for commercial reasons. (See, e.g., Wojtowicz v. United States (2d Cir.1977) 550 F.2d 786, 793, cert. den. 431 U.S. 972 [53 L.Ed.2d 1071, 97 S.Ct. 2938]; Ray v. Rose (6th Cir.1976) 535 F.2d 966, 974, cert. den., 429 U.S. 1026 [50 L.Ed.2d 629, 97 S.Ct. 648]; United States v. Hearst (N.D.Cal. 1978) 466 F. Supp. 1068, 1083 [53 A.L.R.Fed. 110] revd. on other grounds (9th Cir.1980) 638 F.2d 1190, 1193, cert. den. (1981) 451 U.S. 938 [68 L.Ed.2d 325, 101 S.Ct. 2018]; People v. Corona, supra, 80 Cal. App.3d 684, 720; ABA Code of Prof. Responsibility, EC (Ethical Consideration) 5-4; ABA Proposed Model Rules of Prof. Conduct, rule 1.9(d) and com. thereto.)[5] They do present a threat that counsel might provide deficient representation. They also raise questions under the California Rules of *617 Professional Conduct.[6] (Cf. Comment, The Lawyer's Moral Paradox 1979 Duke L.J. 1335.[7])
Some precedents recognize a court's power to recuse an attorney so as to help ensure a fair trial and preserve judicial integrity. Comden v. Superior Court (1978) 20 Cal.3d 906 [145 Cal. Rptr. 9, 576 P.2d 971, 5 A.L.R.4th 562] approved a judge's order that attorneys withdraw from a civil case because a member of their firm would likely be a witness. The majority noted that generally both California and American Bar Association standards required withdrawal of an attorney in those circumstances. "[U]ltimately the issue involves a conflict between a client's right to counsel of his choice and the need to maintain ethical standards of professional responsibility. `The preservation of public trust both in the scrupulous administration of justice and in the integrity of the bar is paramount.... [The client's recognizably important right to counsel of his choice] must yield, however, to considerations of ethics which run to the very integrity of our judicial process.' ..." (P. 915.)
People v. Superior Court (Greer) (1977) 19 Cal.3d 255 [137 Cal. Rptr. 476, 561 P.2d 1164] upheld dismissal of a district attorney on grounds of personal bias against defendant. The opinion stressed the trial court's strong interest in assuring the prosecutor's impartiality and noted inter alia the American Bar Association's stricture against prosecutorial conflicts of interest. (Pp. 263-264, 269.)
Occasionally this court has isolated instances in which appointed counsel faced potential conflicts so inherent and serious as to invalidate *618 any subsequent conviction, regardless of proof of adverse effect on counsel's performance in the case. People v. Rhodes (1974) 12 Cal.3d 180 [115 Cal. Rptr. 235, 524 P.2d 363] held that a city attorney with prosecutorial responsibilities may not be appointed to defend indigent criminal defendants. And in People v. Barboza (1981) 29 Cal.3d 375 [173 Cal. Rptr. 458, 627 P.2d 188] we found "inherent and irreconcilable conflicts" in a budgetary scheme that discouraged the public defender from urging his own disqualification in multiple-representation cases. (P. 381.)
None of those cases compels or authorizes a dismissal here. In Greer defendants filed the recusal motion; there was no question of any dismissal over their objection or of intrusion on their right to chosen counsel. Moreover, disqualification of a biased prosecutor was justified on the ground that his duties extended far beyond those of the typical advocate. Because he represented a sovereignty with paramount responsibility for penal fairness his impartiality was fundamental to the truth-finding goal of the criminal justice system. (19 Cal.3d at pp. 266-267.)
Rhodes and Barboza addressed defendants' posttrial challenges to their appointed counsel. Again no interference with chosen legal representatives was involved. We stressed in Barboza that the hidden conflict inherent in the budget provisions there at issue "would be more readily apparent" to defendants who had retained their attorneys. (P. 379.)[8]
*619 Comden, supra, 20 Cal.3d 906, suggested that in civil matters the right to chosen counsel may be weighed strictly against competing considerations of conflict of interest, professional ethics, and judicial integrity.[9] (5) We now conclude, however, that, with exceptions set forth in this opinion, the mere possibility of a conflict does not warrant pretrial removal of competent counsel in a criminal case over defendant's informed objection.[10] When the possibility of significant conflict has been brought to the court's attention and the danger of proceeding with chosen counsel has been disclosed generally to defendant, he may insist on retaining his attorneys if he waives the conflict knowingly and intelligently for purposes of the criminal trial.[11] To the extent People v. Municipal Court (Wolfe) (1977) 69 Cal. App.3d 714, 719-720 [138 Cal. Rptr. 235] suggests a contrary conclusion it is disapproved.
*620 (6) As in other cases involving forfeiture of the right to counsel, waiver of potential conflicts may not be inferred from a silent record. (Carnley v. Cochran (1962) 369 U.S. 506, 516-517 [8 L.Ed.2d 70, 77-78, 82 S.Ct. 884]; Chacon, supra, 69 Cal.2d 765, 774.) When substantial risks of conflict are brought to the court's attention before trial but an adequate waiver of defendant's effective-assistance rights cannot be obtained on the record, the court must presume that he has not knowingly and intelligently chosen to proceed with retained counsel. (See People v. Carter (1967) 66 Cal.2d 666, 670 [58 Cal. Rptr. 614, 427 P.2d 214].) The court may then protect the record and defendant's right to effective assistance by requiring counsel's withdrawal. (See United States v. Dolan (3d Cir.1978) 570 F.2d 1177, 1182; Geer, Representation of Multiple Criminal Defendants: Conflicts of Interest and the Professional Responsibilities of the Defense Attorney (1978) 62 Minn.L.Rev. 119, 148-151.)[12]
*621 (1b) In this case, extensive pretrial disclosures about conflicts arising from the fee contract were made on the record to both petitioner and court. Yet petitioner insisted on proceeding with his counsel. Did that insistence constitute an adequate waiver, precluding counsel's removal? We believe that it did.
In determining whether a waiver of potential conflicts is knowing, intelligent, and unconditional, the trial court must "navigate adroitly between the Scylla of denying a defendant the right to determine his own fate and the Charybdis of violating his right to counsel...." (See Carter, supra, 66 Cal.2d at p. 667.) Some federal cases have implied that the court's inquiry must separately explore each foreseeable conflict and consequence and that defendant's waiver may extend only to matters discussed in detail on the record. (E.g., United States v. Eaglin (9th Cir.1977) 571 F.2d 1069, 1086 [49 A.L.R.Fed 786]; United States v. Dolan, supra, 570 F.2d 1177, 1181-1182; United States v. Garcia (5th Cir.1975) 517 F.2d 272, 278.) It also has been suggested that defendant must express in his own words his understanding of what he has been told. (Dolan, supra, at p. 1182; Garcia, supra, 517 F.2d 272, 278; cf., Fed. Rules Crim. Proc., rule 11.)
Rules that are that strict seem neither necessary nor workable. Not all imaginable consequences of a conflict that inheres in a life-story contract can be predicted before trial. Indeed, much of the information needed to assess the impact of the conflict on defendant's case may be privileged. (See Cook, supra, 13 Cal.3d at p. 672, fn. 7; Dolan, supra, at pp. 1181-1182; Geer, supra, 62 Minn.L.Rev. at pp. 148-151.) In the parallel area of self-representation, waivers have been deemed sufficient where defendant was warned of the general danger of proceeding on his own. (See, e.g., People v. Teron (1979) 23 Cal.3d 103, 108-109 [151 Cal. Rptr. 633, 588 P.2d 773]; People v. Lopez (1977) 71 Cal. App.3d 568, 573 [138 Cal. Rptr. 36].)
The trial court's procedure here, we think, sufficiently established that petitioner was competent to waive his rights. The judge examined a psychiatric evaluation, and the record suggests neither mental nor emotional incapacity. (See Teron and Lopez, both supra.) The judge also acted properly by referring to the disclosure provisions of the agreement *622 and carefully determining that petitioner had read and understood each one. Those provisions explained the basic problem that counsel's economic motivations might run counter to petitioner's trial concerns. They warned that counsel might be tempted in specified ways to sabotage petitioner's defense. They also cautioned that not all problems could be foreseen. Waiver of the consequences of potential conflict was not inadequate simply because neither the court nor the agreement undertook the impossible burden of explaining separately every conceivable ramification. We therefore conclude that the trial court's order recusing the chosen counsel must be overturned.
CONCLUSION
We stress that our opinion connotes no moral or ethical approval of life-story fee contracts. We have addressed only this narrow question: May a criminal defendant (here charged with capital crimes) be denied his right to representation by retained counsel simply because of potential conflicts or ethical concerns even when he has asserted, after extensive disclosure of the risks, that he wishes to proceed with his chosen lawyers and no others? Our answer is No.[13]
Let a writ of mandate issue directing respondent court to vacate its order discharging Messrs. Pierpont M. Laidley, Walter Alschuler, and Fred Alschuler as attorneys of record for the defendant in Los Angeles Superior Court action No. A350010 and to enter any and all orders necessary to reinstate them as defense attorneys in that action.
Mosk, J., Broussard, J., and Tobriner, J.,[*] concurred.
KAUS, J.
I concur in the result reached in Justice Newman's lead opinion, although I had hoped that our opinion would find harsher language respecting the "life story" contract's propriety as well as its *623 enforceability. If we indicated not only that the contract is ethically flawed, but also that we doubt its efficacy as a vehicle for compensating counsel, the issue before us now would probably never recur.
My reason for joining in the result reached by Justice Newman's opinion is that I do not perceive it to be the duty of trial courts to act as an arm of the State Bar Court and specifically enforce professional ethics by recusing counsel. (See dis. opn. of Justice Manuel in Comden v. Superior Court (1978) 20 Cal.3d 906, 919 [145 Cal. Rptr. 9, 576 P.2d 971, 5 A.L.R.4th 562].)
Although it appears to me that Maxwell has adequately waived any conflict inherent in the contract, I am under no illusion that, if convicted, he will not raise the conflict as a ground for reversal. It will have to be dealt with at that time. The notion that trial courts can prophylactically prevent attorney-client issues from being raised on appeal or in collateral proceedings is, unfortunately, Utopian.
BIRD, C.J., Concurring and Dissenting.
The right to counsel of one's own choice is one of this nation's most fundamental freedoms. (See People v. Holland (1978) 23 Cal.3d 77, 86 [151 Cal. Rptr. 625, 588 P.2d 765].) This court has been diligent in its efforts to ensure that all our citizens, regardless of their status in life, have the opportunity to be defended by counsel of their choice. (See Harris v. Superior Court (1977) 19 Cal.3d 786 [140 Cal. Rptr. 318, 567 P.2d 750]; People v. Byoune (1966) 65 Cal.2d 345 [54 Cal. Rptr. 749, 420 P.2d 221]; People v. Crovedi (1966) 65 Cal.2d 199 [53 Cal. Rptr. 284, 417 P.2d 868].)
In our criminal justice system, the poor have basically two choices. They can accept court-appointed counsel or make some arrangement with private counsel that ensures that counsel will receive some remuneration for the services rendered. One of the problems this case underscores is the fact that our courts do not properly or completely compensate appointed counsel for the work they perform. As a result, if an attorney in the private practice of the law accepts a court appointment, it usually means that the attorney will be less than fully compensated for his or her work.
In a complex and serious case such as the one before the court, it may not be economically feasible for counsel to accept a court appointment. Therefore, the only way in which an indigent may be able to secure counsel of his choice may be through a "life story" arrangement. *624 For this court to hold any "life story" agreement, regardless of its contents, impermissible would be to foreclose to the indigent perhaps the only opportunity he may have to secure counsel of his choice. At the same time, counsel should not exploit the circumstances in which the accused finds himself. If the only "money" the accused has is the potential profit from publishing his story, counsel should be scrupulous in any retainer agreement of this type. Exploitation of the poor and powerless is not unique to this society. However, members of the legal profession are sworn to uphold and defend the rights enumerated in our Constitution. They should never be a party to their violation.
I agree with those portions of the majority opinion which hold that (1) a "life story" agreement is not an impermissible means by which a person accused of crime may retain an attorney but (2) the accused must "knowingly and intelligently" waive on the record the potential conflicts flowing from this arrangement. (Maj. opn., ante, at p. 619.)
I have grave misgivings about permitting an accused to waive a right if he has not been given specific, understandable, and detailed information sufficient to enable a person untrained in the law to make a truly knowing and intelligent decision. A mere statement of "the basic problem" and a recitation that "not all problems could be foreseen" might suffice if the decision were to be made by a legal scholar. However, they are woefully inadequate when the decision-maker is a criminal defendant unschooled in the law.
The Faretta line of cases is inappropriate here. (Cf., Faretta v. California (1975) 422 U.S. 806 [45 L.Ed.2d 562, 95 S.Ct. 2525].) Petitioner Maxwell is a layman. He does not seek to represent himself for he does not believe even superficially that he is competent to understand or deal with the legal system without the assistance of counsel. He needs and wants skilled legal assistance. Where questions arise as to a potential inadequacy in that very assistance, Maxwell cannot be expected to be aware of the magnitude and ramifications of the problem without the assistance of someone skilled in the law. Further, he cannot be deemed to have waived his right to obtain that knowledge.
The deficiencies in the record of the present case highlight the problem. At no point has petitioner been told that by accepting these particular attorneys with their potentially conflicting interests, he could be losing his right to assert certain issues on appeal. For example, he could be precluded from obtaining a reversal on the basis of inadequacy of *625 counsel if that claim were based upon the conflicts waived by him at the trial court level. This could be a substantial limitation of petitioner's appellate rights, yet he has not been informed of it. An intelligent and knowing waiver of those rights was never elicited.
Moreover, the "life story" agreement signed by petitioner may well adversely affect other protections he might otherwise enjoy. In section 37 of the agreement, petitioner has agreed to "waive upon demand by Lawyers the so called attorney-client privilege and any and all other privileges and rights which would prevent the full and complete exercise and exploitation of the rights granted to Lawyers herein." (Italics added.) No specific mention has been made to petitioner of the impact of this provision on his privilege against self-incrimination, nor indeed has the attorney-client privilege been explained elsewhere.
To a person trained in the law, a host of legal problems come easily to mind. Suppose, for example, that petitioner is convicted, but the conviction is reversed on appeal and remanded for retrial. Under the terms of the agreement, these counsel are not obligated to represent him at any stage beyond the present superior court proceedings. If they decide not to represent him in the retrial proceedings, they may demand that he waive his privilege prior to the retrial.
Indeed, if counsel speak with petitioner at any time after their representation terminates the agreement seems to allow counsel to demand such cooperation no privilege will protect petitioner's statements to them. The prosecution may obtain those statements simply by serving a subpoena on the attorneys.
None of these issues was ever explored with petitioner, either in the written agreement or at the court hearing on the issue of recusal. In sum, I do not believe that this record establishes a knowing and intelligent waiver by petitioner of his right to a counsel whose interests are not in potential conflict with his own.
A peremptory writ should issue directing the trial court to conduct further hearings at which petitioner would be given an adequate advisement of all the conflicts and potential consequences. Then, petitioner may decide whether or not he wishes to be represented by these particular attorneys. (See United States v. Dolan (3d Cir.1978) 570 F.2d 1177, 1180-1182; United States v. Gaines (7th Cir.1976) 529 F.2d *626 1038, 1043-1044; United States v. Garcia (5th Cir.1975) 517 F.2d 272, 276-278.)
RICHARDSON, J.
I respectfully dissent. The 19-page attorney retainer agreement drafted by defendant's attorneys created, from the moment of its inception, irreconcilable conflicts of interest which fully justified the trial court's action in recusing the attorneys. In my view, as between defendant's right to counsel of choice and the court's duty to assure defense representation free of conflicting interests, the latter is more important.
The retainer agreement in question contains several troubling features: (1) Attorneys are given the full ownership, "irrevocably, absolutely and forever," of defendant's life story, unlimited as to type of story, nature of media use, geographic territory for exploitation, and duration, and covering "all events," past, present and future in Maxwell's life (¶ 28); (2) the attorneys are to receive 85 percent of the net proceeds realized from defendant's life story, and 15 percent is to go to defendant (¶ 39); (3) the attorneys' services do not include an appeal (¶ 24); (4) defendant's obligation for compensation arises immediately and vests in the attorneys irrevocably (¶ 22); (5) defendant waives the "attorney-client privilege and any and all other privileges and rights which would prevent the full, immediate and complete exercise and exploitation of the rights granted to lawyers" (¶ 37); and (6) defendant waives all claims for defamation for intrusion on his privacy or "anything else by reason of anything contained in [his life] story" (¶ 38).
There are several reasons why such an agreement should not be sanctioned. It contains both the reality and the appearance of fatally conflicting interests. The terms of the contract, if performed, would deny defendant significant present and future procedural protections. Contracts of this kind have been widely condemned on general ethical grounds. If implemented, such agreements would seriously erode the integrity of the judicial system. The contract should be invalidated as a judicially declared rule of criminal procedure.
THE RIGHT TO CHOSEN COUNSEL
While defendant's right to counsel of his own choice is an important right it is neither constitutionally ordained nor absolute. It must yield to weightier considerations when necessary to preserve judicial integrity and assure public respect for the administration of justice. Due process *627 principles require that assistance of counsel must be "effective." (Reece v. Georgia (1955) 350 U.S. 85, 90 [100 L.Ed. 77, 83, 76 S.Ct. 167], italics added; see Glasser v. United States (1942) 315 U.S. 60, 70 [86 L.Ed. 680, 699, 62 S.Ct. 457].) Moreover, "We have repeatedly held that constitutional and statutory guarantees are not violated by the appointment of an attorney other than the one requested by defendant." (Drumgo v. Superior Court (1973) 8 Cal.3d 930, 934 [106 Cal. Rptr. 506 P.2d 1007], cert. den., 414 U.S. 979 [38 L.Ed.2d 223, 94 S.Ct. 272]; People v. Hughes (1961) 57 Cal.2d 89, 98-99 [17 Cal. Rptr. 617, 367 P.2d 33].) In reaching this conclusion courts have stressed two major "values" integral to the judicial system. An appellate court aptly observed recently: "[T]he right of an accused to retain defense counsel of his choice is not absolute, there being other values of substantial importance which may also demand recognition.... One such value is the preservation of public confidence in the integrity and impartiality of our criminal justice system, and here it should prevail." (People v. Municipal Court (Wolfe) (1977) 69 Cal. App.3d 714, 719-720 [138 Cal. Rptr. 235].) Emphasizing a second vital consideration, a federal opinion has noted: "The right to effective representation by counsel whose loyalty is undivided is so paramount in the proper administration of criminal justice that it must in some cases take precedence over all other considerations, including the expressed preference of the defendants concerned and their attorney." (United States v. Carrigan (2d Cir.1976) 543 F.2d 1053, 1058, conc. opn. Lumbard, J.)
Defendant faces the most serious of criminal charges with the gravest of possible consequences. He requires counsel, not only of unquestioned professional competence (People v. Pope (1979) 23 Cal.3d 412, 423-425 [152 Cal. Rptr. 732, 590 P.2d 859, 2 A.L.R.4th 1]), but also counsel whose allegiance to him is total and unalloyed, free of the subtle, opposing magnetic pull of self-interest or adverse pecuniary advantage. This, the majority refuses to assure.
THE CONFLICTING INTERESTS
What are the conflicting interests which are created by this retainer agreement? The agreement itself frankly acknowledges that it "may create a conflict of interest between Maxwell and the lawyers, and that the provisions of this agreement may give the lawyers a monetary interest adverse to the interests of Maxwell." Interestingly, counsel in *628 paragraph 14 in novel and clinical fashion describe three specific areas of conflict:
"a. The lawyers may have an interest to create publicity which would increase the money which they might get as a result of this agreement, even if this publicity hurt Maxwell's defense.
"b. The lawyers may have an interest not to raise certain defenses which would question the sanity or mental capacity of Maxwell because to raise these defenses might make this agreement between the lawyers and Maxwell void or voidable by Maxwell.
"c. The lawyers may have an interest in having Maxwell be convicted and even sentenced to death so that there would be increased publicity which might mean that the lawyers would get more money as a result of this agreement." Counsel then promise (¶ 14(d)), however, that they will not take advantage of defendant or pursue any adverse interests, but rather will diligently serve him. I have no doubt that they will try to do so. Moreover, I do not question their good faith in testing the permissible ethical limits of the instrument which they have drawn, although I deplore the very lengthy procedural delay thereby caused to the trial of the merits of this case.
Nonetheless, the agreement crosses the line of propriety. The solemn assurances expressed in paragraph 14(d) to resist the commercial opportunities do not purge the instrument of its taint. Such promises are simply commitments to do what the law already requires, adding nothing to counsel's continuing, preexisting fiduciary duties. The opportunity for, and the appearance of, mischief are the twin evils here. The pressure of self-interest is generated by an agreement which provides that counsel's only compensation will come from the commercial exploitation of defendant's life story. This self-interest thus created at the inception of the contract is ever present to sway, if unconsciously, the numerous decisions of counsel both pretrial and during trial.
Very recently a similar tension arising from divided loyalties prompted us in People v. Barboza (1981) 29 Cal.3d 375, 381 [173 Cal. Rptr. 458, 627 P.2d 188], to disapprove a contractual relationship which by its own terms created personal financial interests opposing professional obligation. We stressed that it is necessary that counsel avoid "`any relation which would prevent him from devoting his entire energies to his *629 client's interests,'..." (Id., at p. 379, quoting Anderson v. Eaton (1931) 211 Cal. 113, 116 [293 P. 788].) In invalidating an agreement with a public defender we emphasized that "the contract places him in a situation with grave consequences and implications for the administration of justice. Not only is there an `appearance of impropriety,' there is also a real and insoluble tension, created by the contract between the defender's conflicting interests." (Id., at p. 381.) Similar reasoning applies where, as here, the personal financial interests of counsel are at stake.
In like fashion, examining posttrial a similar literary agreement between counsel and client, the court in People v. Corona (1978) 80 Cal. App.3d 684, 720 [145 Cal. Rptr. 894], reversed a conviction stating: "[I]t is indisputable that by entering into the literary rights contract trial counsel created a situation which prevented him from devoting the requisite undivided loyalty and service to his client. From that moment on, trial counsel was devoted to two masters with conflicting interests he was forced to choose between his own pocketbook and the best interests of his client, the accused."
The scope of the conflicts "built in" to the agreement exceeds those acknowledged by the attorneys themselves in paragraph 14. The real vice of the arrangement appears most clearly in considering certain tactical decisions which may confront trial counsel. Suppose that before trial, through a plea bargain, defendant's life may be saved by an informed entry of a guilty plea to certain of the multiple counts, including murder, with which he is charged. Should counsel recommend such a bargain? Perhaps they should, but would they, knowing that the sales value of a book or television manuscript would decline if there was no dramatic trial testimony elicited? How really objective will counsel be in exploring the opportunities for avoiding trial without any attendant publicity if the commercial value of defendant's life story is thereby reduced or destroyed? If defendant is tried, should he be called as a witness to tell his "story," or exercise his constitutional right to remain silent, thereby putting "the prosecution to its proof"? Surely, the sales value of defendant's story would be affected by the decision. If defendant takes the stand during trial would the areas of his direct examination be affected, however subtly, perhaps unknowingly, by counsel's financial interest in the drama and salability of his testimony? As anticipated in paragraph 14(b), would the existence of the contract affect a decision to assert an insanity defense with its inherent threat to the validity of the agreement?
*630 In summary, decisions and strategy may be affected by motives which are antithetical to defendant's basic right to effective counsel. Moreover, there is no clear evidence that defendant fully understands the legal implications of his purported waiver.
The case is before us pretrial. Accepting counsel's good faith assurances that they will not exploit any opportunities afforded them by their agreement, how will we know if they so restrain themselves? The United States Supreme Court, focusing on the attorney's role in the plea bargaining function alone, noted in Holloway v. Arkansas (1978) 435 U.S. 475, 490-491 [55 L.Ed.2d 426, 438, 98 S.Ct. 1173], "[I]t would be difficult to judge intelligently the impact of a conflict on the attorney's representation of a client. And to assess the impact of a conflict of interests on the attorney's options, tactics, and decisions in plea negotiations would be virtually impossible." In similar fashion, how is a trial court, honestly and fairly, to identify and trace the motives, selfish or altruistic, hidden or express, behind the myriad decisions pretrial and at trial made by counsel in a multiple murder case? The inescapable fact is that defendant will have no way of knowing, and neither the trial nor appellate court is in a better position to judge.
Rule 5-101, Rules of Professional Conduct of the State Bar of California, binding on all California lawyers, provides in relevant part: "Avoiding Adverse Interest. A member of the State Bar shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless (1) the transaction and terms in which the member of the State Bar acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in manner and terms which should have reasonably been understood by the client, (2) the client is given a reasonable opportunity to seek the advice of independent counsel of the client's choice on the transaction, and (3) the client consents in writing thereto." (Italics added.)
The majority of the Court of Appeal rejected the present agreement and applied the "fair and reasonable" strictures of the foregoing rule 5-101 to the contract's paragraph 37 which recites: "Maxwell does hereby agree to waive upon demand by Lawyers the so called attorney-client privilege and any and all other privileges and rights which would prevent the full and complete exercise and exploitation of the rights granted to Lawyers herein." The appellate court appropriately noted that paragraph 37 provides for "an advance waiver [which] *631 might well inhibit Maxwell from fully disclosing to his retained lawyers all information that could be helpful in his defense. The confidential relationship between attorney and client is at the heart of a proper functioning of our judicial system. A compelled waiver of this privilege for the purpose of advancing the fee interest of the attorney cannot be tolerated."
Although the majority (ante, p. 610, fn. 1) recites that "counsel conceded that [¶ 37] ... overreaches," neither the extent nor the effect of the concession is clear. Moreover, paragraph 33 of the contract remains. In it defendant "promises, covenants and agrees to assist the lawyers at any and all times and in any and all ways permissible by law in the protection, exercise, and exploitation of their rights to the Story." Defendant additionally agrees fully to disclose any relevant material to the lawyers or their designated agents to further the lawyers' rights to his story. Thus, there remains the substance of a waiver of the attorney-client privilege.
Further, I am unable to reconcile the language and spirit of paragraph 33 with the following mandate of Business and Professions Code section 6068: "It is the duty of an attorney: ... [¶] (e) To maintain inviolate the confidence, and at every peril to himself to preserve the secrets, of his client."
Finally, another inescapable fact remains attorneys have agreed to represent Maxwell only during trial. What is to prevent them from publicly utilizing every bit of information that they have gleaned during trial preparation and trial at the same time that defendant is appealing from a judgment of conviction? The appellate briefs of the second attorney may be filed simultaneously with a book of the first attorneys aimed at the best seller list. Aside from the profound implications such a situation would have for the judicial system in general, what is there to protect defendant's rights during the appellate process and any subsequent retrial? At that point he will no longer be the "owner" of his life story, which will instead be in the hands of his former attorneys whose only remaining interest may be the promotion of sales.
EROSION OF JUDICIAL AND PROFESSIONAL INTEGRITY
As a consequence of the intrinsic ethical difficulties raised by the contract, it seems to me self-evident that its judicial approval will inevitably *632 damage the integrity of both bench and bar. Not only does the contract permit, indeed invite, legal and tactical decisions which may be self-serving and contrary to the client's best interests, but the appearance of impropriety further taints the arrangement. As noted, an ethical shadow is cast over the lawyer-client relationship.
Both the reality and the image of the financial arrangement between attorneys and client are suspect, human nature and temptation being what they are. Contracts of the type herein presented will appear to the eye and ear of the average layman as indistinguishable from run-of-the-mill commercial or public relations agency agreements. In my view, the engrafting of this device on the judicial process will inevitably dilute public acceptance and understanding of legal advocacy founded on a fiduciary relationship of complete trust and confidentiality between attorney and client which is directed solely toward the advancement and vindication of the client's legal rights, not counsel's fiscal advantage. Counsel cannot simultaneously wear the hat of a literary or theatrical agent whose goal is commercial promotion and the hat of a counselor at law who is guided by strict ethical constraints.
My colleagues approve a contractual arrangement which has been specifically condemned by the American Bar Association (ABA) Code of Professional Responsibility. The ABA code, Ethical Consideration (EC) could not be more explicit: "EC 5-4 If, in the course of his representation of a client, a lawyer is permitted to receive from his client a beneficial ownership in publication rights relating to the subject matter of the employment, he may be tempted to subordinate the interests of his client to his own anticipated pecuniary gain. For example, a lawyer in a criminal case who obtains from his client television, radio, motion picture, newspaper, magazine, book, or other publication rights with respect to the case may be influenced, consciously or unconsciously, to a course of conduct that will enhance the value of his publication rights to the prejudice of his client. To prevent these potentially differing interests, such arrangements should be scrupulously avoided prior to the termination of all aspects of the matter giving rise to the employment, even though his employment has previously ended." (Italics added.)
Similarly, the latest Discussion Draft of ABA Model Rules of Professional Conduct, insists upon substantially higher professional standards. The proposed rules prohibit outright this form of contractual arrangement, *633 declaring: "An agreement by which a lawyer acquires literary rights concerning the subject matter of the representation involves incompatible standards for the lawyer's performance, one being effectiveness in representing the client and the other being performance that has literary value." (Comment, Proposed Rule 1.9(d), 48 U.S.L. Week, No. 32, p. 8, Feb. 19, 1980, italics added.) One federal court recently described life-story arrangements between attorney and client as "a practice which deserves judicial condemnation." (United States v. Hearst (N.D.Cal. 1978) 466 F. Supp. 1068, 1083 [53 A.L.R. Fed. 110], affd. in part and vacated in part (9th Cir.1980) 638 F.2d 1190, cert. den., sub nom., Hearst v. United States (1981) 451 U.S. 938 [68 L.Ed.2d 325, 101 S.Ct. 2018], italics added.)
The rejection of such contracts is not new. Ten years ago the ABA Standards for Criminal Justice, the Prosecution Function and the Defense Function, Approved Draft 1971, supplement section 3.4 provided: "It is unprofessional conduct for a lawyer, prior to conclusion of all aspects of the matter giving rise to his employment, to enter into any agreement or understanding with a client or a prospective client by which he acquires an interest in publication rights with respect to the subject matter of his employment or proposed employment." (Italics added.)
To me, these collective ethical judgments are strongly persuasive. We should not affix our seal of judicial approval on that which "should be scrupulously avoided," or on that which "involves incompatible standards." We cannot sanction as "fair and reasonable to the client" under California Rules of Professional Conduct, rule 5-101, that "practice which deserves judicial condemnation" and which involves "unprofessional conduct for a lawyer." California citizens are entitled to ethical standards for their lawyers which are no lower than those of practitioners nationwide.
The maintenance of judicial integrity has been a fixed principle in our jurisprudence. (Elkins v. United States (1960) 364 U.S. 206, 215 [4 L.Ed.2d 1669, 1676, 80 S.Ct. 1437].) In California we have recently emphasized that "`It is essential that the public have absolute confidence in the integrity and impartiality of our system of criminal justice.'" (People v. Superior Court (Greer) (1977) 19 Cal.3d 255, 268 [137 Cal. Rptr. 476, 561 P.2d 1164], quoting from People v. Rhodes (1974) 12 Cal.3d 180, 185 [115 Cal. Rptr. 235, 524 P.2d 363].)
*634 The majority's conclusion is also contrary to recent decisions by both this court and the federal courts. In People v. Chadd (1981) 28 Cal.3d 739 [170 Cal. Rptr. 798, 621 P.2d 837] (cert. den., sub nom., California v. Chadd (1981) 452 U.S. 931 [69 L.Ed.2d 431, 101 S.Ct. 3066]) we were faced with the question whether a defendant in a capital case could plead guilty without the concurrence of counsel. The Chadd majority placed heavy emphasis on the public interest involved, adding that "before Faretta [v. California (1975) 422 U.S. 806 (45 L.Ed.2d 562, 95 S.Ct. 2525)] this court squarely held that a capital defendant has no right to waive his automatic appeal: `It is manifest that the state in its solicitude for a defendant under sentence of death has not only invoked on his behalf a right to review the conviction by means of an automatic appeal but has also imposed a duty upon this court to make such a review. We cannot avoid or abdicate this duty merely because defendant desires to waive the right provided for him. In other contexts it has been held that a defendant's waiver or attempted waiver of a right is ineffective where it would involve also the renunciation of a correlative duty imposed upon the court.' (People v. Stanworth (1969) 71 Cal.2d 820, 833 [80 Cal. Rptr. 49, 457 P.2d 889]; accord, People v. Teron (1979) ... 23 Cal.3d 103, 115, fn. 7 [151 Cal. Rptr. 633, 588 P.2d 773].)" (P. 752, italics added.)
California courts have repeatedly emphasized that "Although a defendant may waive rights which exist for his own benefit, he may not waive rights which belong also to the public generally." (People v. Werwee (1952) 112 Cal. App.2d 494, 500 [246 P.2d 704]; People v. Stanworth, supra, 71 Cal.2d 820, 833-834 and cases cited therein.) We have previously adhered to the basic principle enunciated in Massie v. Sumner (9th Cir.1980) 624 F.2d 72, 74 (cert. den. (1981) 449 U.S. 1103 [66 L.Ed.2d 828, 101 S.Ct. 899]) and cited approvingly in Chadd (28 Cal.3d, at p. 753) that: "`The state of California has a strong interest in the accuracy and fairness of all its criminal proceedings.'" The majority now approves, however, a defendant's choice, over trial court rejection, of counsel whose legal representation of him is steeped in conflict both potential and actual by virtue of the retainer agreement. The result of the majority's new standard is to elevate a defendant's choice of counsel above the court's "correlative duty," emphasized by us in Stanworth, to assure that he has effective counsel free of conflict.
The pivotal role of the judiciary in preserving unimpaired the fidelity of the justice system has been recently stressed by the United States *635 Supreme Court which put it this way: "In an adversary system of criminal justice, there is no right more essential than the right to the assistance of counsel. But that right has never been understood to confer upon defense counsel the power to veto the wholly permissible actions of the trial judge. It is the judge, not counsel, who has the ultimate responsibility for the conduct of a fair and lawful trial. `"[T]he judge is not a mere moderator, but is the governor of the trial for the purpose of assuring its proper conduct...."'" (Lakeside v. Oregon (1978) 435 U.S. 333, 341-342 [55 L.Ed.2d 319, 326-327, 98 S.Ct. 1091].)
Defendant insists he wants particular counsel, and counsel want to represent him. Why do not defendant and counsel ask the trial court to appoint counsel with compensation for their services on the basis of standard fees? If the reason for refusing to follow this procedure is because of the loss of pecuniary gain to counsel from the contract, it is at this point, in my view, that the trial court, sensitive to the conflicting interests created by the agreement, watchful both for defendant's interests and the functioning reality and appearance of the criminal justice system was fully justified in declining to accept the agreement.
Not only is it the court which must make the ultimate decision, but as we have previously summarized: "[U]ltimately the issue involves a conflict between a client's right to counsel of his choice and the need to maintain ethical standards of professional responsibility. `The preservation of public trust both in the scrupulous administration of justice and in the integrity of the bar is paramount.... [The client's recognizably important right to counsel of his choice] must yield, however, to considerations of ethics which run to the very integrity of our judicial process.'" (Comden v. Superior Court (1978) 20 Cal.3d 906, 915 [145 Cal. Rptr. 9, 576 P.2d 971, 5 A.L.R. 4th 562], cert. den., 439 U.S. 981 [58 L.Ed.2d 652, 99 S.Ct. 568].) The foregoing principle, expressed in a civil case, has even greater force when applied, as here, to a defendant who is faced with the most serious of criminal charges.
FARETTA
I find unpersuasive the majority's argument, by analogy to Faretta v. California, supra, 422 U.S. 806, that because an independent right of self-representation exists, a defendant may therefore compel the trial court to accept his waiver of conflict-free counsel. Here defendant does *636 not waive counsel, but desires it. Unlike Faretta, the issue is a trial court's power to insist that defendant's representation be conflict-free.
CONCLUSION
Long ago we established for California a very clear ethical position, which has guided the bench and bar ever since. This standard should be firm, fixed and immovable, mandating that "One of the principal obligations which bind an attorney is that of fidelity, the maintaining inviolate the confidence reposed in him by those who employ him, and at every peril to himself to preserve the secrets of his client. [Citations omitted.] This obligation is a very high and stringent one.... By virtue of this rule an attorney is precluded from assuming any relation which would prevent him from devoting his entire energies to his client's interests. Nor does it matter that the intention and motives of the attorney are honest. The rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to an attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent." (Anderson v. Eaton, supra, 211 Cal., at p. 116, italics added.) These principles are as sound today as they were 50 years ago and we seriously err when we depart from them.
It is not enough for the majority to insist that it "does not approve `life story' contracts." (Ante, p. 621.) With due respect, it seems to me inescapable that the majority does approve and sanction the agreement. Surely, the contract and defendant's "waivers" will be binding on defendant after trial if we condone them here. If the majority does not "approve" and declares invalid the present agreement, it should in candor so declare in order that the interested parties, both defendant and counsel, should be under no misapprehension.
Believing that both the public and those charged with criminal offenses in California are entitled to greater protection, I would invalidate and disapprove any and all similar attorney retainer agreements as a judicially declared rule of criminal procedure. (People v. Barboza, supra, 29 Cal.3d, at p. 381; People v. Rhodes, supra, 12 Cal.3d, at pp. 186-187; People v. Vickers (1972) 8 Cal.3d 451, 461 [105 Cal. Rptr. 305, *637 503 P.2d 1313]; People v. Cahan (1955) 44 Cal.2d 434, 442 [310 P.2d 661].)
Accordingly, I would sustain the action of the trial court in relieving counsel for defendant's protection.
NOTES
[1] The contract includes provisions designed to ensure counsel's right to receive and exploit confidential material about petitioner's life. In paragraph 37 he agrees to waive, on counsel's demand, his attorney-client privilege and "any and all other privileges and rights which would prevent the full and complete exercise" of counsel's interests. In paragraph 33 he promises to (1) give counsel all materials he has "pertaining to [his] life and experiences," (2) use his best efforts to obtain and turn over such materials in the hands of others, and (3) "confer with [counsel] ... as often as [they] shall reasonably require so as to enable [them] to elicit from [him] all details" of his life.
A client may surrender his privilege of confidentiality (see Evid. Code, §§ 912, subd. (a), 954), and a fact he gives his lawyer permission to reveal is not a "secret" the lawyer must preserve (see Bus. & Prof. Code, § 6068). However, counsel conceded at oral argument that paragraph 37 overreaches and disclaimed intent to rely on it. Moreover, whether or not paragraph 33 was similarly waived, we think it cannot be invoked until after these criminal proceedings have become final. Though counsel contracted to represent petitioner only through trial, the State Bar's Rules of Professional Conduct and the agreement itself impose duties of fairness, undivided loyalty, and diligent defense. (See rules 2-111(A)(2) [lawyer withdrawing from employment must act reasonably to avoid prejudice to client], 5-101 [lawyer may not acquire interest adverse to client except as fair and reasonable]; cf. Agreement, pars. 14(d), 17.) Those duties would be violated if counsel disclosed prejudicial, confidential material at any time during the criminal proceedings.
[2] The People, real party in interest, have taken a position on the recusal order in neither trial nor appellate courts.
[3] The Supreme Court has ruled that the federal Constitution requires automatic reversal when defendant shows (1) that the trial court improperly refused a change of counsel sought by defendant after timely disclosure of potential conflict, or (2) that an actual, unwaived conflict "adversely affected" counsel's performance. (Cuyler, supra, 446 U.S. 335, 348 [64 L.Ed.2d 333, 346]; Holloway v. Arkansas (1978) 435 U.S. 475, 488-489 [55 L.Ed.2d 426, 436-438, 98 S.Ct. 1173].)
[4] Ingram recognized that the right to chosen counsel extends, insofar as feasible, to the poor. (69 Cal.2d at pp. 840-841.) But for them, of course, the right too often is illusory. Realistically an indigent defendant may have trouble finding a private lawyer acceptable to him who is willing to take his case and pursue it with zeal. One commentator recently observed: "If lawyers for nonpaying clients cannot be induced through a system of incentives to represent their clients zealously, the right to counsel may become a useless cosmetic that insults more than it serves the interests of the clientele. The reputation of the bar is a matter of interest to the community as a whole, for it is unlikely that the public's regard for the law itself can long survive disdain for the craftsmanship of those who administer it." (Carrington, The Right to Zealous Counsel, 1979 Duke L.J. 1291, 1307-1308; cf., Wheeler & Wheeler, Reflections on Legal Representation of the Economically Disadvantaged: Beyond Assembly Line Justice (1980) 26 Crime & Delinquency 319.)
We should not callously foreclose an indigent's right to use the means at his disposal to provide the necessary incentives. (See Crovedi, supra, 65 Cal.2d at pp. 207-208.)
[5] EC (Ethical Consideration) 5-4 provides: "If, in the course of his representation of a client, a lawyer is permitted to receive from his client a beneficial ownership in publication rights relating to the subject matter of the employment, he may be tempted to subordinate the interests of his client to his own anticipated pecuniary gain. For example, a lawyer in a criminal case who obtains from his client television, radio, motion picture, newspaper, magazine, book, or other publication rights with respect to the case may be influenced, consciously or unconsciously, to a course of conduct that will enhance the value of his publication rights to the prejudice of his client. To prevent these potentially differing interests, such arrangements should be scrupulously avoided prior to the termination of all aspects of the matter giving rise to the employment, even though his employment has previously ended."
DR (Disciplinary Rule) 5-103(A) provides: "A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client [with exceptions irrelevant here]...."
The comment to proposed rule 1.9(d) currently provides: "An agreement by which a lawyer acquires literary rights concerning the subject matter of the representation involves incompatible standards for the lawyer's performance, one being effectiveness in representing the client and the other being performance that has literary value...."
[6] California Rules of Professional Conduct, rule 5-101 provides: "A member of the State Bar shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless (1) the transaction and terms in which the member of the State Bar acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in manner and terms which should have reasonably been understood by the client, (2) the client is given a reasonable opportunity to seek the advice of independent counsel of the client's choice on the transaction, and (3) the client consents in writing thereto."
The disclosure and the attorney-advice provisions of the contract in this case are a patent attempt to comply with the California rule.
[7] Several states have laws providing that any proceeds from commercial exploitation of one's crimes shall be paid into state-supervised escrow funds for disbursement to victims and for legal defense. (E.g., Ariz.Rev.Stats. (1978) §§ 13-4201, 13-4202; Ga. Code Ann. (1981 Supp.) § 27-3401; Ill.Ann.Stats. (1981-1982 Supp.) 70 ¶ 403 et seq.; N.Y.Exec.Law (1980-81 Supp.) § 632-a.) A similar proposal failed in the California Legislature. (Assem. Bill No. 2635 (1977-1978 Reg. Sess.).)
[8] The budget system attacked in Barboza was a "direct ... financial disincentive for the public defender either to investigate or declare the existence of actual or potential conflicts of interest requiring employment of other counsel." (29 Cal.3d at p. 379.) The conflict was not "tenuous" because the defender's budget and income were "directly affected by his determination of whether a conflict of interest exists ..." (id., at p. 380), creating a "real and insoluble tension" between counsel's professional and financial motives (p. 381).
A life-story agreement creates no such inherent or inevitable conflict. The contract here discloses that the value of petitioner's story might benefit from a long, sensational trial leading to conviction and death. It seems not unlikely, though, that counsel's self-interests might best be served by a careful, diligent defense that avoids conviction or minimizes the penalty. A quiet strategy that succeeds may well make a better story than a flamboyant failure. Counsel's reputation, a precious professional and commercial asset, is enhanced; and the risks of professional discipline and demeaning criticism are reduced. Also, it may be commercially prudent to keep lurid facts confidential until the legal battle has ended.
Justice Files' dissenting remarks in the Court of Appeal are particularly apt: "Although the literary rights contract is not a common experience for attorneys, the kind of `conflict' discussed here is not at all unusual.... [A]lmost any fee arrangement between attorney and client may give rise to a `conflict.' An attorney who received a flat fee in advance would have a `conflicting interest' to dispose of the case as quickly as possible, to the client's disadvantage; and an attorney employed at a daily or hourly rate would have a `conflicting interest' to drag the case on beyond the point of maximum benefit to the client.
"The contingent fee contract so common in civil litigation creates a `conflict' when either the attorney or the client needs a quick settlement while the other's interest would be better served by pressing on in the hope of a greater recovery. The variants of this kind of `conflict' are infinite. Fortunately most attorneys serve their clients honorably despite the opportunity to profit by neglecting or betraying the client's interest."
[9] Comden's application even to civil cases is weakened by developments in response to this court's opinion. Effective November 1, 1979, the State Bar has liberalized the rule on attorney-witnesses. Counsel need no longer withdraw from either a civil or criminal case if the client consents in writing to continued representation after (1) full disclosure of the implications of counsel's dual role as advocate and witness, and (2) an opportunity to seek independent legal advice protections analagous to those accorded petitioner here. (Rules Prof. Conduct, rule 2-111(A)(4), as amended.) Thus the State Bar has concluded that a fully informed client's right to chosen counsel outweighs potential conflict or threat to trial integrity posed by counsel's appearance as witness. And it has determined also that counsel's dual participation under the circumstances is not unethical.
[10] We do not deprive the trial court of power to act when an actual conflict materializes during the proceedings, producing an obviously deficient performance. Then the court's power and duty to ensure fairness and preserve the credibility of its judgments extends to recusal even when an informed defendant, for whatever reason, is cooperating in counsel's tactics. (See Cannon v. Commission on Judicial Qualifications, supra, 14 Cal.3d 678, 697; Smith v. Superior Court, supra, 68 Cal.2d 547, 559.) No such facts appear here.
[11] Prior California decisions seem to assume that the right to counsel unhindered by conflicts may be waived. (See, e.g., In re Hochberg (1970) 2 Cal.3d 870, 878 [87 Cal. Rptr. 681, 471 P.2d 1]; People v. Chacon, supra, 69 Cal.2d 765, 774.) The federal decisions are clearer. They affirm that conflicts may be waived and, if waived, provide no federal constitutional ground for attack on a conviction. (Holloway v. Arkansas, supra, 435 U.S. 475, 483, fn. 5 [55 L.Ed.2d 426, 433]; see also Wood v. Georgia (1981) 450 U.S. 261 [67 L.Ed.2d 220, 101 S.Ct. 1097]; Cuyler v. Sullivan, supra, 446 U.S. 335, 346-347 [64 L.Ed.2d 333, 345-346]; Glasser v. United States, supra, 315 U.S. 60, 70 [86 L.Ed. 680, 699].)
Nothing in People v. Chadd (1981) 28 Cal.3d 739 [170 Cal. Rptr. 798, 621 P.2d 837] (cert. den. sub nom. California v. Chadd (1981) 452 U.S. 931 [69 L.Ed.2d 431, 101 S.Ct. 3066] or People v. Stanworth (1969) 71 Cal.2d 820 [80 Cal. Rptr. 49, 457 P.2d 889] indicates that defendant lacks power to waive counsel's potential conflicts of interest. Chadd held only that a capital defendant cannot circumvent his statutory disability to plead guilty without consent of counsel. (Pp. 746-755; see Pen. Code, § 1018.) Stanworth ruled that no one may divest this court of its statutory and constitutional duty to review a death judgment against him. (Pp. 832-834; see Cal.Const., art. VI, § 11; Pen. Code, § 1239, subd. (b).) In both cases the state has asserted an overriding public interest in full examination of capital charges and sentences, even where the person accused or condemned wishes not to resist. The state has demonstrated no parallel desire to overrule a defendant who, with full information, chooses to make a vigorous defense through counsel in whom he has special confidence.
When a conflict is validly waived, defendant may still argue on appeal that he received ineffective assistance for reasons unrelated to the conflict. Because of the difficulty of isolating errors motivated by conflicts and because defendant has created the problem by his knowing insistence on conflicted counsel, the burden should be on him to show that deficiencies he later asserts did not arise from the conflict.
[12] Our holding that disclosed but unwaived conflicts justify recusal does not contravene Smith, Chacon, or Cook, supra. Smith dealt with an unreasonable sua sponte conclusion by the trial court that counsel was incompetent; there we saw no need for removal. Though we stressed defendant's repeated objections to recusal, the issue of waiver of effective assistance never arose. Cook's suggestion that judges may never interfere with a choice of conflicted counsel was dictum since the case concerned trial prejudice. Again the issue of waiver was not confronted. In Chacon we held that prejudice arising from conflicted representation could be asserted on appeal. But there a silent record forced the conclusion that the conflict had not been waived, and the trial court had not attempted to remove conflicted counsel.
With recent guidance from the United States Supreme Court we now reaffirm that judges need not inquire about conflicts affecting retained counsel unless, as here, the issue is raised by counsel or a party. Counsel has the responsiblity to advise both client and court of potential conflicts as soon as they arise. Where this duty is breached and trial proceeds without disclosure and formal waiver, defendant may of course argue that a conflict of interest did adversely affect counsel's efforts in his behalf. (Cuyler v. Sullivan, supra, 446 U.S. 335, 348 [64 L.Ed.2d 333, 346]; Holloway v. Arkansas, supra, 435 U.S. 475, 485-486 [55 L.Ed.2d 426, 435-436]; Cook, supra, 13 Cal.3d at p. 670; Chacon, supra, 69 Cal.2d at pp. 775-776.)
[13] As Justice Files observed below: "I do not disagree with EC 5-4 of the American Bar Association's Code of Professional Responsibility, which declares that the kind of contract which is here involved `should be scrupulously avoided.' But we are here dealing with a fact and not a theory. The defendant and his attorneys have made the contract. The question now is whether this defendant, charged with four capital offenses, shall be deprived of his chosen attorneys and forced to accept the trial court's choice who, in the words of the Faretta court: `"represents" the defendant only through a tenuous and unacceptable legal fiction.'"
[*] Retired Associate Justice of the Supreme Court sitting under assignment by the Chairperson of the Judicial Council. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2319627/ | 232 Md. 409 (1963)
194 A.2d 88
IN THE MATTER OF CROMWELL AND WHITE
[No. 145, September Term, 1963.]
Court of Appeals of Maryland.
Decided October 8, 1963.
The cause was argued before the full Court.
Tucker R. Dearing and Juanita Jackson Mitchell, with whom were Jack Greenberg and Derrick A. Bell, Jr., on the brief, for the appellants.
Robert C. Murphy, Deputy Attorney General, with whom were Russell R. Reno, Jr., Assistant Attorney General, and C. Burnam Mace, State's Attorney for Dorchester County, on the brief, for the State of Maryland.
HENDERSON, J., delivered the opinion of the Court.
These cases came before us at an earlier stage, on petitions to release the appellants from the custody of the training schools to which they had been committed as juvenile delinquents, pending the hearing of these appeals. We declined to do so, holding that the temporary commitments violated no constitutional principle, and that the trial court was not clearly wrong in declining to release these children to the custody of their mothers under the circumstances of the case. We took judicial notice of the fact that the Governor had sent the State Militia to Cambridge to prevent threatened outbreaks of violence. We pointed out that the trial court may well have felt that it was in the best interests of the children that they be removed from the scene of danger, where they would be safe from the physical injuries they might suffer if they remained at home and persisted in their past course of participating in protests against racial segregation that were not always peaceful or law-abiding. Ex parte Cromwell, 232 Md. 305, 309.
*412 We advanced these appeals for hearing, and the case was heard on a stipulated statement of facts in lieu of a transcript of proceedings. We take judicial notice of the facts that the militia is still in Cambridge and that a Charter Amendment designed to clear the air, by forbidding discrimination in restaurants and certain other places of public accommodation, was defeated by popular vote on October 1, 1963.
The appellants, Dwight Cromwell and Dinez White, contend that they were denied their constitutional rights under the Fourteenth Amendment to the Federal Constitution, in that the court found them to be juvenile delinquents simply because of their participation in civil rights demonstrations. They argue that in picketing the Board of Education and in walking down the streets of Cambridge, they were merely exercising a right of free speech and assembly. The other three demonstrations in which they participated were "sit-ins" of privately operated places of public accommodation. They argue that these actions did not constitute unlawful trespass or disturbances of the peace, to justify a conviction either under the State Trespass Law (Code (1957), Art. 27, sec. 577), or the State Disorderly Conduct Law (Code (1957), Art. 27, sec. 123) or the local law of Dorchester County, P.L.L. (1961 Ed.) Art. 10, sec. 91 (Disorderly Conduct).
The Juvenile Court Act (Code (1957), Art. 26, sec. 52 (e)) provides:
"`Delinquent child' means a child (1) Who violates any law or ordinance, or who commits any act which, if committed by an adult, would be a crime not punishable by death or life imprisonment; (2) who is incorrigible or ungovernable or habitually disobedient or who is beyond the control of his parents, guardian, custodian or other lawful authority; (3) who is habitually a truant; (4) who without just cause and without the consent of his parents, guardian or other custodian, repeatedly deserts his home or place of abode; (5) who is engaged in any occupation which is in violation of law, or who associates with immoral or vicious persons; or (6) who so deports himself as to injure or endanger the morals of himself or others."
The appellants were each 15 years of age when arrested on charged of disorderly conduct in connection with the "sit-in" *413 demonstrations. Being of an age where the Juvenile Court has exclusive jurisdiction under Code (1957), Art. 26, sec. 53, in the absence of waiver under sec. 54, they were charged with delinquency in the juvenile court, on petitions assigning as the only reasons therefor, disorderly conduct on three occasions identified by dates in one case, and on four occasions in the other. At the hearing they were represented by counsel.
In the previous appeal we expressed no opinion as to the validity of the finding of delinquency, stating that the only matter then before us was the propriety of the ruling that the infant petitioners be lodged in the training schools pending the determination of these appeals. The question reserved is now before us. We have no difficulty in holding that there was evidence before the trial court to support a finding that each child had committed acts, which if committed by an adult, would have constituted the crimes of trespass and disorderly conduct. We refer particularly to an incident mentioned in our prior opinion, where they entered the Dorset Theatre without tickets while a show was in progress, lay on the floor, used profane language and refused to leave until arrested. If we assume, without deciding, that children have the same rights of protest enjoyed by adults, such conduct, we think would justify a conviction in the case of adults. See Bell v. State, 227 Md. 302, 305, and cases there cited. (The Supreme Court granted certiorari in this case, and in the earlier case of Griffin v. State, 225 Md. 422, and these cases will be argued, or reargued in the current term.) Under the existing law, unless and until it be declared unconstitutional by the Supreme Court of the United States, we find no violation of the Fourteenth Amendment in the assertion of a private proprietor's right to choose his customers, or to eject those who are disorderly or enter without paying a charge imposed upon all patrons.
But the difficulty in the case at bar is that a mere finding of a basis for delinquency is not enough. Code (1957), Art. 26, sec. 54, provides that when the jurisdiction of the Juvenile Court is invoked the "judge shall then determine whether or not such child comes within any of the aforesaid terms and is, by reason thereof, in need of care or treatment within the provisions and intent of this subtitle." Sec. 61 provides that the case shall be *414 dismissed if the "judge determines that the child is not within the jurisdiction of the court or that the child is not in need of care or treatment * * *." (Italics supplied.) Such need in the case at bar arises out of the threatened physical harm to the appellants, if they should persist in participating in public demonstrations which might lead to violence. If public demonstrations were discontinued for any reason, or if some guaranty were offered that the appellants would be effectively prevented by their parents or guardians from participating, we think it is clear that there would be no need for other or further care or treatment on that score.
While we hold that the disorderly conduct shown was sufficient to support the finding of delinquency, the conduct of these appellants, standing alone, was not so fundamentally wrong as to require permanent treatment, as distinguished from temporary custodial care. In the main, the demonstrations in which they participated were conducted by adults who, although disorderly in some instances, were not engaged in acts involving moral turpitude. It appears that the adult demonstrators were either dismissed, when charged with disorderly conduct, or that minimum fines were imposed. Incarceration of these children beyond the immediate need for their protection could hardly be supported.
The State perhaps recognizing the weakness of the case for further detention on this score, seeks to bolster it by arguing that the appellants were shown by the evidence to be incorrigible or beyond the control of their parents or others in lawful authority, under sec. 52 (e) (2), or truant, under (3). It should be noted that the evidence on these points was admitted prior to any adjudication of delinquency. It should further be noted that no petitions had been filed on these grounds prior to the demonstrations. The appellants argue that all of this evidence was improperly admitted, over objection.
In the first place, as we have noted above, there was no assignment of (2) or (3) as a reason for the charge of delinquency. If the State wished to rely on anything other than the disorderly conduct on stated occasions, it would have been easy to do so, and perhaps would have enabled counsel for the respondents to summon witnesses or otherwise prepare his case. *415 Maryland Rules 903 and 915 indicate that reasons relied on should be fully assigned, if only to prevent surprise.
Moreover, the State put in evidence, over objection, summaries of reports by school principals and teachers, that had been gathered by the school superintendent, although the persons making the reports were not present for cross-examination. The original reports were not produced. Not only were some of the statements in these reports highly derogatory, but the statements as a whole were equivocal. At one point the statements as to Dinez speak of an unacceptable behavior pattern, at another of cooperation in the current year. In the case of Dwight, the statements speak at one point of emotional disturbance, at another of marked improvement. In his case there was also a report from the Health Department, that he had been referred "after being suspected" of a serious sexual offense. Yet there was no finding on the point, and nothing but a notation that he kept appointments irregularly. Apart from being hearsay, the report was irrelevant and misleading.
It is quite true, as the State argues, that proceedings in a juvenile court are not criminal in nature. See Moquin v. State, 216 Md. 524, and Ex parte Cromwell, supra. But the rules of practice and procedure, including the rules of evidence, apply in civil as well as in criminal cases. We find nothing in the statute to the contrary, except the language of sec. 60, that "[h]earings shall be conducted in an informal manner * * *." The case of McDonough v. Director, 229 Md. 626, 634, relied on by the State, is distinguishable because the statute dealing with defective delinquency expressly made the report to the Court by the Patuxent staff admissible, despite the fact that it contained hearsay. See Schultz v. Director, 227 Md. 666, 667. If, as some authorities suggest and our own Rules reflect, juvenile proceedings should be conducted without strict regard for the usual court rules, we think there is at least a minimum standard of fairness that must be observed. See 1 Wigmore, Evidence (3d ed.), sec. 4d 4, p. 101 et seq; 4 Wharton, Criminal Law and Procedure (Anderson), sec. 1477; Paulsen, Fairness to the Juvenile Offender, 41 Minn. L. Rev. 547; Allen, Criminal Justice, Legal Values and the Rehabilitative Ideal, 50 J. Crim. L., C. and P.S. 226, 231; Annotation 43 A.L.R.2d *416 1128. We think the introduction of this evidence, without advance notice and in a form that prevented cross-examination and clarification, was prejudicial and unfair. Accordingly, we shall reverse and remand the case for further proceedings, not inconsistent with the views here expressed, in order that the whole matter may be reviewed in the light of the situation now found to exist.
Decree reversed and case remanded, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1477953/ | 108 F.2d 748 (1940)
KAHN
v.
COMMISSIONER OF INTERNAL REVENUE (two cases).
No. 137.
Circuit Court of Appeals, Second Circuit.
January 8, 1940.
Llewellyn A. Luce, of Washington, D. C., for petitioners.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Howard D. Pack, Sp. Assts. to Atty. Gen., for respondent.
Before SWAN, AUGUSTUS N. HAND, and PATTERSON, Circuit Judges.
PER CURIAM.
The petitioners are partners in a New York firm engaged in the business of converting cotton gray goods into yard goods for sale to manufacturers of articles of clothing. In the year 1933 the partnership, purporting to act pursuant to section 23(j) of the Revenue Act of 1932, 47 Stat. 180, 26 U.S.C.A. § 23(k), charged off as worthless certain overdue accounts. These deductions, reflected in the income tax returns of the petitioners, the commissioner disallowed, resulting in the deficiencies complained of. The Board has affirmed the action of the commissioner.
The debts charged off as worthless represented sales to customers in South American countries which in November 1933 had laid embargoes against sending money abroad. The firm received reports from its agents in the countries in which the debtors were located that due to the embargoes it was impossible to get any money out of those countries and that it was uncertain when, if ever, the accounts would be paid. The members of the firm, with its manager and auditor, determined that the accounts were worthless and charged them off on its books on December 31, 1933. There were nine such accounts aggregating some $8,500. The embargoes were lifted in March 1934 and almost all these accounts were paid during that year. For years prior to 1933 it was the established policy and custom of the firm to charge off at the end of each year all foreign accounts several months overdue, which had been shipped on a cash basis and which the firm had attempted to collect. If and when such accounts were collected later, they were included in the firm's income. In all years from 1930 to the date of the hearing before the Board (May 27, 1938), except the year 1933, the amount of recovery had exceeded the amount of the *749 accounts so charged off and the commissioner had accepted that method of accounting. In 1933, however, he disallowed the charge off of $8,521.52 but allowed recoveries amounting to $4,374 to remain in the firm's income.
It is not to be doubted that the petitioners acted in good faith; but to justify charging off a debt as worthless the taxpayer must also act reasonably, investigating the facts relating to the debt in question and drawing reasonable inferences with respect to its worthlessness from the information obtained. Sherman & Bryan v. Blair, 2 Cir., 35 F.2d 713, 715. Neither the existence of the embargoes nor the reports received from the firm's South American agents were enough to justify an inference that the debts charged off would never be paid. The embargo prevented the debtors from remitting foreign exchange in 1933, but this was likely to be only a temporary condition, though of indefinite duration, nor would it prevent collection of payment in the currency of the countries where the debtors were respectively located. The situation presented was far different from that of a governmental seizure of property of an alien enemy, such as was considered in United States v. S. S. White Dental Mfg. Co., 274 U.S. 398, 47 S. Ct. 598, 71 L. Ed. 1120. We think the Board was right in following its own prior ruling as to the effect of a moratorium. See Richards & Hirschfield, Inc., v. Commissioner, 24 B.T.A. 1289. The reports from the firm's agents to the effect that owing to the embargoes money could not be sent out and "it was uncertain when, if ever, the accounts would be paid," were accompanied by no information as to the financial condition of the debtors; they add nothing to the embargo as a basis for charging off the accounts.
Some of the accounts were several months overdue but obviously the mere failure of a debtor to pay promptly does not justify a determination that the debt is worthless in the absence of any investigation as to the debtor's solvency. See Clark v. Commissioner, 3 Cir., 85 F.2d 622, 624; 3 Paul & Mertens' Law of Federal Income Taxation (1934), 440. Indeed, it is clear from the auditor's testimony (fol. 179) that the accounts were charged off because of the embargo and because of the firm's policy and practice to write off all foreign accounts several months overdue which had been shipped on a cash basis. Although it is argued that such practice, in which the commissioner acquiesced both before and subsequent to the year 1933, is enough to support the deductions, this contention cannot prevail. The statutory requirements as to deductions cannot be overridden by the fact that the commissioner has failed to correct errors of the taxpayer in other years. Askin & Marine Co. v. Commissioner, 2 Cir., 66 F.2d 776, 777.
Finally, it is urged that if the claimed deductions be disallowed, then the recoveries of $4,374.06 on debts charged off in prior years pursuant to the firm's practice should not be included in its income for 1933. Assuming that this contention, which apparently was not presented to the Board, may be considered by us, it cannot withstand scrutiny. Having received the benefit of deduction for worthless debts in prior years, any subsequent recoveries thereon must properly be treated as income of the year when realized. Commissioner v. Liberty Bank & Trust Co., 6 Cir., 59 F.2d 320; Putnam Nat. Bank v. Commissioner, 5 Cir., 50 F.2d 158. The disallowance of the deduction for accounts written off in 1933 prevents the sums collected on such accounts in 1934 from being properly treated as income for that year, but it can have no effect on the recoveries realized in 1933.
Orders affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1661301/ | 514 S.W.2d 329 (1974)
Joyce COOK et al., Appellants,
v.
EMPLOYEES RETIREMENT SYSTEM OF TEXAS et al., Appellees.
No. 8241.
Court of Civil Appeals of Texas, Texarkana.
May 17, 1974.
Bill M. Glaspy, Smith, Glaspy & Moss, Mesquite, Zach E. Mason, Richardson, for appellant.
John L. Hill, Atty. Gen., Bill Campbell, Asst. Atty. Gen., Austin, for appellee.
RAY, Justice.
This is a suit to construe Article 6228f Vernon's Ann.Civ.St. concerning survivors benefits under the Employees Retirement System of Texas. Appellants (plaintiffs), Marlin D. Cook, Jr. for himself individually, and Joyce Cook (surviving widow of Lieutenant Marlin D. Cook, Sr.) as next friend for her minor children, Stephen C. *330 Cook and Stanley G. Cook, brought suit against the Employees Retirement System of Texas and its board of trustees, appellees (defendants) seeking to have appellees pay her children monthly benefits until each child reaches the age of twenty-one years. The facts were stipulated by the parties to be that Lieutenant Marlin D, Cook, a fireman employed by the City of Richardson, Texas, died on August 30, 1972, while in the course and performance of his duties and that he was survived by his widow, Joyce Jeanette Cook and three children, Marlin Donald Cook, Jr., a son born on October 18, 1953, Stephen Craig Cook, a son born October 23, 1957, and Stanley Gregg Cook, a son born October 23, 1957; that the board of trustees and the Employees Retirement System of Texas approved monthly annuities to the three surviving children and ordered payments to be made until such time as any child entitled to said benefits under the act (Article 6228-f) ceased to be a minor child as that term is defined in the act. Senate Bill No. 123, Ch. 626, 63rd Tex. Legislature, Regular Session, 1973, effective August 27, 1973, extended all the rights, privileges and obligations of majority to all persons who are at least eighteen years of age. The appellees informed Mrs. Cook that the Attorney General of Texas had ruled that all persons over the age of eighteen would be considered adults on the effective date of Senate Bill 123 and that all children of law officers and firemen who were over the age of eighteen would no longer be eligible for survivors benefits, as well as those children who subsequently reached age eighteen.
Marlin Donald Cook, Jr., had reached the age of eighteen years on October 18, 1971, and payments for his benefit were discontinued on the effective date of Senate Bill 123 (August 27, 1973).
This suit was brought to establish the right of the children of Lieutenant Cook to receive benefits until they reach the age of twenty-one. The trial court ordered that appellants take nothing, from which judgment this appeal has been timely perfected. Two points of error are submitted for our consideration.
Appellant insists that the interests of her children vested at the date of death of Lieutenant Marlin Donald Cook, Sr. and therefore her children are entitled to monthly annuities under Article 6228f, supra, until each child reaches the age of twenty-one years. Appellant's position is that Article 1, Sec. 16 of the Texas Constitution, Vernon's Ann.St., and Article 1, Sec. 10 of the United States Constitution forbids any retroactive laws from being passed which would impair the obligation under any contract. Appellant states that the rights of the children were vested before the "eighteen year old law" (Senate Bill No. 123, supra) became effective on August 27, 1973. Pursuant to Article 3, Sec. 51-d of the Texas Constitution, the Legislature passed Article 6228f which provides in Section 2(7) that a "Minor child" means a child who, on the date of the violent death of any person covered by this act, has not reached the age of twenty-one years. This section was amended by Acts 1973, 63rd Legislature, p. 1256, ch. 458, effective June 11, 1973. The "eighteen year old bill" (Senate Bill 123) became effective on August 27, 1973, and effectively changed the meaning of "Minor child" from one who has not reached the age of twenty-one years to one who has not reached the age of eighteen years.
Section 51-d of Article 3 of the Texas Constitution provides that the Legislature has the power to provide for the payment of benefits to "the surviving spouse and minor children" of officers of police and fire departments. It is clear that the "eighteen year old law", Article 5923b, V.A.C.S., meant to emancipate all persons eighteen years of age or older from the legal bonds of infancy and states in Section 2 the following:
"Notwithstanding any statutory or decisional law, or any rule, regulation, or ordinance of this state or of any political *331 subdivision or incorporated city or town of this state, a person who is at least 18 years of age has all the rights, privileges, and obligations of a person who is 21 years of age. A law, rule, or regulation, or ordinance which extends a right, privilege, or obligation to a person on the basis of a minimum age of 21, 20, or 19 years shall be interpreted as prescribing a minimum age of eighteen years."
We think the clear language of Article 5923b V.A.C.S. changes the age or those defined as infants or minors and overrides the provisions of Article 6228f V.A.C.S. Article 5923b was signed into law after the amendments to Article 6228f. Upon the effective date of Article 5923b, August 27, 1973, all those who had reached their eighteenth birthday and who subsequently became eighteen years of age were disqualified to receive any further benefits under Article 6228f unless appellant is correct in her position that the benefits payable under Article 6228f became vested at the date of death of a police or fire department officer antedating August 27, 1973.
The Texas Supreme Court, in City of Dallas v. Trammell, 129 Tex. 150, 101 S.W.2d 1009 (Tex.1937) adopted the rule that the right of a pensioner to receive monthy payments from the pension fund after retirement from service, or after his right to participate in the fund has accrued, is predicated upon the anticipated continuance of existing laws, and is subordinate to the right of the Legislature to abolish the pension system, or diminish the accrued benefits of pensioners thereunder. That position was reaffirmed in Board of Managers of the Harris County Hospital District v. Pension Board, 449 S.W.2d 33 (Tex.1969). We therefore hold that the minor children of Lieutenant Marlin D. Cook, Sr. acquired no rights in the financial assistance funds held and administered by the State Board of Trustees of the Employees Retirement System of Texas under Article 6228f V.A.C.S. which were greater than the right of the Legislature to change the eligibility of those receiving and to receive such funds. We reaffirm the established rule that all pension funds, financial assistance funds, annuities and such other benefits created by the Texas Legislature for the benefit of employees and other personnel of this State and the political subdivisions thereof as designated by statute or otherwise by law shall be subordinate to the right of the Legislature to abolish the system, diminish the accrued benefits, increase the benefits, change the eligibility for benefits or to otherwise alter or modify the method of payment of the benefits of any or all such funds. In the present case, the minor children of Lieutenant Cook acquired no vested right in the financial assistance funds provided under Article 6228f V.A.C.S., but only acquired the right to participate in the fund subject to the continuing control of the Legislature. In the instant case, the Texas Legislature affectively changed the age at which the benefits would terminate for those receiving financial assistance from the fund created pursuant to Article 6228f by the passage of Senate Bill 123 (Article 5923b V. A.C.S.)
Appellant's points of error are overruled and the judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2459254/ | 439 S.W.2d 281 (1969)
PAUL HARDEMAN, INC., et al., Appellants,
v.
J. I. HASS COMPANY, Inc., et al., Appellees.
No. 5-4852.
Supreme Court of Arkansas.
April 7, 1969.
Rehearing Denied May 5, 1969.
*282 Wright, Lindsey & Jennings, Little Rock, for appellants.
Rose, Meek, House, Barron, Nash & Williamson, Little Rock, for appellees.
BROWN, Justice.
Plaintiffs below were Paul Hardeman, Inc., Fischbach and Moore, Inc., and Morrison-Knudsen, Inc., prime contractors under a joint venture in the construction of missile launch facilities in White County. The defendant J. I. Hass Company, Inc., was a painting subcontractor for the joint venture or prime contractor. William Turpin, an employee of Hass, was injured when he fell while painting near the top of a vent pipe. The prime contractor admitted negligence in not properly securing the vent pipe at its base and paid Turpin $50,000. Plaintiffs sued Hass under a contract of indemnity for the amount paid Turpin. (The Uniform Joint Tortfeasors Act is not involved.) Employers Mutual Liability Insurance Company of Wisconsin paid Turpin workmen's compensation and it intervened, seeking recoupment from the prime contractor; Turpin's release to the prime contractor reserved intervenor's right to maintain such an action. The trial court held (1) that Hass was free of any negligence contributing to cause Turpin's injuries, (2) that the contract of indemnity did not obligate Hass under the circumstances to indemnify the prime contractor, and (3) that the stipulated amount due Employers Mutual would bear interest from the date of entry of judgment and not from an earlier date when the debt was stipulated to be owed. Plaintiffs appeal on the first two holdings and Employers Mutual appeals with respect to the date interest should have started.
The prime contract held by the joint venture called for its installation of a three-inch vent pipe to be set vertically in a concrete pad or base. When the concrete was poured the three-inch pipe was not available; so, with the approval of the United States Corps of Engineers, a four-inch sleeve or collar was placed in the concrete base. It was agreed that the three-inch pipe would be inserted in the sleeve to a depth of eighteen inches and welded. When the three-inch pipe arrived it was inserted but only to a depth of a few inches. Instead of welding the two pipes a type of caulking material was inserted in the space between the pipes. The pipe was 27' 10" in height above the pad. The prime contractor awarded J. I. Hass Company a painting contract which included this particular pipe. Hass furnished its painter, William Turpin, the equipment with which to do the painting. In the painting trade that equipment is called stirrup and saddle. Two buckles are tied on the ends of a rope and are used for foot stirrups. That rope is placed around the center of the pipe. Another rope is tied to a two-by-twelve board and it is used for a saddle. That rope is likewise attached to the pole and is thrown and tied off at a point some four feet from the top of the pole. The top four feet is painted by the use of a long brush so the painter never climbs higher than the tie-off. Turpin had painted approximately four feet when the pipe came loose at the base and he fell to the ground.
That the prime contractor was negligent in the erection of the pipe is not here questioned. This suit was instituted on the theory that as a matter of law the contract of indemnity executed by Hass obligated it to reimburse the prime contractor in full *283 for the latter's payment to Turpin. In the alternative it was asserted that Hass would unquestionably be liable in proportion to its negligence in allegedly failing to provide Turpin with safe equipment for the performance of his task. Both sides presented their evidence on the alleged negligence of Hass. The trial court concluded that Hass was entitled to an instructed verdict. Secondly, it was held that Hass was not obligated to reimburse the prime contractor for sums it was forced to pay as a result of an accident caused solely by the prime contractor's negligence. We proceed to examine the propriety of the court's holdings on those two points.
In testing the granting of a directed verdict the rule has been many times stated and ofttimes with a slight variation. A typical statement of the rule is found in Barrentine v. Henry Wrape Co., 120 Ark. 206, 179 S.W. 328 (1915):
In determining on appeal the correctness of the trial court's action in directing a verdict for either party, the rule is to take that view of the evidence that is most favorable to the party against whom the verdict is directed, and where there is any evidence tending to establish an issue in favor of the party against whom the verdict is directed, it is error to take the case from the jury.
We have no intention of deviating from the rule just stated; however, it has been some time since we have pointed up the meaning of the term "any evidence." The term has long been recognized to mean "evidence is legally sufficient to warrant a verdict." Catlett v. St. Louis, I. M. & S. Railway Company, 57 Ark. 461, 21 S.W. 1062 (1893). To be legally sufficient it must be substantial; and substantiality is a question of law. St. Louis S. W. Ry. Co. v. Braswell, 198 Ark. 143, 127 S.W.2d 637 (1939).
The only witness offered by the prime contractor was Ben Hopkins. His qualifications in the field of structural engineering were admitted. We summarize the significant portions of his direct testimony in the following paragraph:
A procedural method of painting a pipe of three inches or less, over 24 feet high is to place a painter's extension ladder on each side of the pole. A lock is placed at the top section of the extension ladders, locking them together. There is no contact between the pole and the ladders. The bottom of the ladders is placed four feet from the bottom of the pole. Another method is to drop a painter by a swing that is hung from a crane lift. That is not as economical as the ladder method. With the stirrup and saddle method, the weight and movement of the painter creates a stress at the point of anchorage. If a painter and his rig weighs 200 pounds and he is at the top of a pole 27' 10" in height, is suspended outside the pipe and some twelve inches away from it, with his legs not wrapped around the pipe, he would create a "live and dead load of 19,082 pounds per square inch" on a three-inch pipe. Pipe of the type at hand is not used by engineers for building purposes past a criterion of 18,000 pounds of stress per square inch. Actually the yield point of that type pipe is set by manufacturers between forty-five and sixty thousand pounds. Design engineers use the eighteen thousand pound criterion as a cushion for safety. He asserted that any unusual movements made by Turpin while in the painting process would be a critical factor.
On cross-examination it was brought out that Mr. Hopkins was not aware that the three-inch pipe was inserted from two to three inches into the four-inch pipe, that the pipes were not welded, and that caulking material was placed in the space between the pipes. When advised of that situation he conceded that Turpin was bound to fall because of the faulty installation. And, although he did not deviate from his opinion that the saddle and stirrup method is poor procedure, he concluded that he had no criticism of Hass for permitting Turpin to climb the pole with that method. *284 In reaching that conclusion he considered the fact that other poles properly constructed had been climbed by the same method and without incident.
Hopkins' opinion that the stirrup and saddle method was unsafe in this situation is fatally weakened by some of his assumptions which are not supported by the record. He conceded that the strength of the pipe was on a "hairline" between being safe and hazardous. For that reason his assumptions become all the more important. Hopkins calculated the stress at the anchor point from the very top of the pole; the uncontradicted proof showed that the painter tied off his climbing rope from three to four feet below the top. In computing the stress at the anchor point, Hopkins assumed that Turpin and his rig created a weight of 200 pounds; there is no evidence in the record to support that assumption. He assumed that the painter was suspended some twelve inches from the pole with his legs dropped downward; the evidence showed that the saddle was against the pole and the painter's legs were wrapped around the pole. Added to the unsupported assumptions is the fact that there was no proof of any unusual movements by Turpin, which it is admitted would have been significant. Another factor which the trial court probably considered of some importance is that Hopkins revealed that the yield point set by manufacturers is from forty-five to sixty thousand pounds, as opposed to his estimated stress load placed on the pipe by Turpin of 19,082 pounds.
Of course any negligence on the part of Hass in furnishing Turpin with what Hopkins considered to be an improper set of equipment would not be enough to make Hass liable. The second and vital step in the chain of proof would be a showing preponderantly that the equipment used was a proximate cause of the fall. In that respect we consider the proof to be entirely lacking. In fact Hopkins stated that the pipe fell because of defective installation.
Secondly, the prime contractor claims a right to judgment against J. I. Hass Company as a matter of law. That is on the theory that under the terms of the subcontract, Hass agreed unconditionally to indemnify the prime contractor for any and all liabilities owed by the prime contractor arising out of any accident occurring as a result of the subcontractor's activities; and that the obligation was undertaken by the agreement irrespective of fault. The indemnity provision of the subcontract is as follows:
9. Subcontractor agrees to save and indemnify and keep harmless Contractor, Owner and Architect-Engineer against all liability, claims, demands or judgments for damages arising from accidents to persons or property occasioned by Subcontractor, his agents or employees, and against all claims or demands for damages arising from accidents to Subcontractor, his agents or employees, whether occasioned by Subcontractor or his agents or his employees; and Subcontractor will defend any and all suits brought against Contractor, Owner, or Architect-Engineer, and all of them, on account of any such accidents, and will pay any judgments rendered in such suits, and will reimburse and indemnify Contractor, Owner or Architect-Engineer and any of them, for all expenditures, or expenses, including attorney fees and court costs, had or incurred by reason of such accidents. Contractor shall, at its option, have full control of any defense of any such suits, and contractor shall at all times have the option of choosing the attorney or attorneys to perform the professional services involved.
On the question of indemnity we are cited one case from our jurisdiction, C & L Rural Elec. Coop. Corp. v. Kincaid, 221 Ark. 450, 256 S.W.2d 337 (1953). There the indemnity provision is so different from the one at bar that Kincaid is of no aid. Many decisions are cited by appellants and appellees from other jurisdictions *285 supporting their respective theories. The decided weight of authority favors appellees. The precise question is whether this indemnity provision obligates the subcontractor to indemnify the prime contractor for damages arising out of the negligence of prime contractor which was the proximate cause of Turpin's injuries. The intention of Hass to so obligate itself must be expressed in clear and unequivocal terms and to the extent that no other meaning can be ascribed. 41 Am.Jur.2d, Indemnity § 15. Where an injury is caused by the sole negligence of the indemnitee many courts, in interpreting the indemnity contract, predicate their interpretation on the theory that such a liability would be unusual and harsh; consequently, the courts endeavor to relieve the indemnitor of liability to the negligent indemnitee. 175 A.L.R., p. 32, § 18.
We examine the provisions of the indemnity paragraph. There are three areas in which liability is imposed on the subcontractor:
1. He is liable for damages arising from accidents to persons or property occasioned by him, his agents or employees;
2. He must indemnify for damages chargeable to the prime contractor as a result of injury or damage to the subcontractor, his agents or employees, whether occasioned by the subcontractor, or his agents or employees; and
3. The subcontractor must at his expense defend any suits brought against the prime contractor as the result of any accident occasioned by the subcontractor, his agents or employees.
The meaning of the words "occasioned by" holds the key to a proper interpretation of the contract.
As used in this contract the verb "occasioned" could have had one of two meanings. In a number of instances it is said that the cause of an injury is that which actually produces it, whereas the occasion is that which provides an opportunity for the causal agency to act. Merlo v. Public Service Co., 381 Ill. 300, 45 N.E.2d 665 (1942); Barney v. Adcock, 162 Neb. 179, 75 N.W.2d 683 (1956). On the other hand most dictionaries list "caused" as a synonym for "occasioned" and there are those cases in which the two words are said to be synonymous. For example, Union Gold Mining Co. v. Crawford, 29 Colo. 511, 69 P. 600 (1902); People v. Halbert, 78 Cal. App. 598, 248 P. 969 (1926); and Smart v. Raymond, 142 S.W.2d 100 (Mo.App.1940).
In view of the uncertainty of the manner in which "occasioned by" was used in this contract, we cannot say the subcontractor expressed an intent, in words clear and unequivocal, to bind itself for the negligence of the prime contractor. That is especially true in face of the fact that it would require no extraordinary skill in draftsmanship to so bind the subcontractor in words and phrases of absolute certainty.
There remains for consideration the cross-appeal of Employers Mutual. At the trial on October 26, 1965, the prime contractor stipulated its liability to Employers Mutual for workmen's compensation benefits paid Turpin. Through no fault of the parties or the court the formal judgment was not entered until August 3, 1967. That judgment allowed interest to Employers Mutual from the latter date. The carrier is entitled to interest from the date of the stipulation. Kincade v. C. & L. Rural Elec. Coop., 227 Ark. 321, 299 S.W.2d 67 (1957).
Affirmed on direct appeal; reversed and remanded on cross-appeal.
FOGLEMAN, J., disqualified and not participating. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1847062/ | 731 So. 2d 1076 (1999)
Donna Lynn HUGHES, Plaintiff-Appellant,
v.
OLIVE GARDEN ITALIAN RESTAURANT and Liberty Mutual Insurance Co., Defendants-Appellees.
No. 31,939-CA.
Court of Appeal of Louisiana, Second Circuit.
May 5, 1999.
*1077 Bobby L. Culpepper & Associates by Bobby L. Culpepper, Counsel for Appellant.
Theus, Grisham, Davis & Leigh by James M. Edwards, Monroe, Counsel for Appellees.
Before STEWART, GASKINS and DREW, JJ.
DREW, J.
In her suit for damages arising out a fall at her employer's premises, Donna Lynn Hughes appealed a summary judgment in favor of her employer and its insurer. The issue is whether plaintiff's exclusive remedy is in worker's compensation. After "clocking out" following her day's work, she was injured in an area inaccessible to the general public. For the following reasons, the judgment of the trial court is affirmed.
FACTS AND PROCEDURAL HISTORY
Employed as a cashier/bar tender at The Olive Garden Restaurant in Monroe on May 19, 1996, Hughes was scheduled to work from 4:00 p.m. until closing around 10:00 p.m. At the instructions of the manager, she clocked out early about 9:15 p.m., since business was slow. She left the restaurant briefly to move her car from the rear to the front parking lot. Hughes then reentered the restaurant and talked with co-employees while awaiting the arrival of her daughters who were to ride home with her. Hughes and the others sat in the bar area and discussed whether plaintiff had sampled a new dessert the restaurant was serving. It was customary for employees to sample products to become familiar with foods to better assist customers. When one of the managers did not return to the bar, she went through the bar and into the alley, the area where employees make the last preparations before serving the food. She spoke with the manager about sampling a piece of the dessert. He looked and found none in the small cooler in the alley. When Hughes asked, the manager stated that some of the cake was in the freezer and suggested that she get a piece for herself and for the manager who also had not tried the dessert. Inside the freezer, she slipped on an icy floor and injured herself.
On February 20, 1997, plaintiff brought this personal injury action in tort in Ouachita District Court against GMRI, Inc. d/b/a The Olive Garden Restaurant and *1078 its insurer, Liberty Mutual Insurance Company. Responding with a motion for summary judgment, defendants maintained that plaintiff was in the course and scope of her employment at the time she was injured and that her exclusive remedy was via worker's compensation. Defendants supported the motion for summary judgment with the pleadings, Hughes' deposition and their written discovery requests along with Hughes' responses.
In reasons for judgment, the trial court noted that Hughes fell in a freezer isolated from public areas and inaccessible to the general public. Regardless of whether she was expected to sample the dessert as a duty of her employment, she would not have been allowed in the freezer except for her employment at the Olive Garden. Noting that Olive Garden would have a difficult time arguing against worker's compensation coverage, the trial court granted the summary judgment in favor of defendants and dismissed Hughes' tort action.
DISCUSSION
The summary judgment procedure is designed to secure the just, speedy and inexpensive determination of every action allowed by law. Appellate courts review summary judgments de novo under the same criteria that govern the district court's consideration of whether summary judgment is appropriate. Thus, an appellate court questions whether a genuine issue of material fact exists and whether the mover is entitled to judgment as a matter of law. Ledent v. Guaranty National Ins. Co., 31,346 (La.App.2d Cir.12/28/98), 723 So. 2d 531.
Summary judgments are governed by La. C.C.P. art. 966, which was amended in both the 1996 and 1997 legislative sessions. See Acts 1996, 1st Ex.Sess., No. 9 and Acts 1997, No. 483. The effect of these amendments is to establish that summary judgment is now favored. A motion for summary judgment should be granted if the pleadings, depositions, interrogatories, admissions on file and affidavits show that there is no genuine issue of material fact and the mover is entitled to judgment as a matter of law.
La. C.C.P. art. 966 now states that if the moving party points out that there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense, and the nonmoving party fails to produce factual support sufficient to establish that she will be able to satisfy her evidentiary burden of proof at trial, there is no genuine issue of material fact and summary judgment should be granted.
La. C.C.P. art. 967 provides that when a motion for summary judgment is made and supported as above, an adverse party may not rest on her pleadings, but her responses, by affidavits or otherwise provided above, must set forth specific facts showing that there is no genuine issue for trial. If she does not so respond, summary judgment is appropriate and shall be rendered against her. Cassey v. Stewart, 31,437 (La.App.2d Cir.1/20/99), 727 So. 2d 655.
Hughes argued that the trial court erroneously granted summary judgment because Olive Garden and its insurer did not sustain their burden of proving that they were entitled to tort immunity under La. R.S. 23:1032. Specifically, Hughes complained that defendants did not establish that Hughes' injury occurred in the course and scope of Hughes' employment at the restaurant.
In its reasons for judgment, the trial court distinguished two cases upon which Hughes relied. In Mundy v. Dept. of Health and Human Resources, 593 So. 2d 346 (La.1992), Mundy was injured while in the public area, an elevator, of her employer's premises. An unknown assailant stabbed her as she was going to begin her shift as an LPN at Charity Hospital in New Orleans. Mundy was not in the course of employment because she was in *1079 a public area and was not under the supervision and control of her employer. The injury did not arise out of her employment because the risk of being stabbed was not greater to plaintiff than for any other member of the public. Therefore, Mundy was not restricted to worker's compensation recovery and could pursue her action in tort.
The employer is responsible for compensation benefits to an employee who is injured by an accident which occurs in the course of the employment and arises out of the employment. La. R.S. 23:1031. Compensation benefits are the employee's exclusive remedy against his employer for such an injury. La. R.S. 23:1032. When the employer seeks to avail itself of tort immunity under Section 1032, the employer has the burden of proving entitlement to immunity.
An accident occurs in the course of employment when the employee sustains an injury while actively engaged in the performance of his duties during working hours, either on the employer's premises or at other places where employment activities take the employee. While coverage has been extended in some cases to include accidents during times for rest or lunch periods or before and after work on the employer's premises, or to include accidents at places where employment duties are performed off the employer's premises, the principal criteria for determining course of employment are time, place and employment activity.
The determination of whether an accident arises out of employment focuses on the character or source of the risk which gives rise to the injury and on the relationship of the risk to the nature of the employment. An accident arises out of employment if the risk from which the injury resulted was greater for the employee than for a person not engaged in the employment. 593 So.2d at p. 349. (Citations omitted.)
Not separate and unrelated, the concepts of "course of employment" and "arising out of employment" are mutually interdependent. In a particular case, a weak showing of one may be counterbalanced by a strong showing of the other. Mundy, supra.
In Anderson v. Mamgano, 94-723 (La. App. 5th Cir. 2/15/95), 652 So. 2d 34, a nursing assistant, Anderson, had finished her shift and had gone outside with a coworker to wait for a ride home. Frightened by a dog, the pair reentered the premises. A locust got into the building at the same time. Plaintiff slipped and fell while attempting to catch the bug. There was disputed testimony as to whether plaintiff slipped and fell and as to whether Anderson was told by the night supervisor to catch the bug. Credibility determinations were resolved in favor of defendant's version of events. The court held that Anderson could not recover worker's compensation. She was in a public area of the employer's premises. Chasing a bug was not part of her duties which had ended. The risk of falling while chasing a bug was not greater for Anderson than any member of the public. The incident did not occur in the course of and did not arise out of her employment.
In Mitchell v. Brookshire Grocery Company, 26,755 (La.App.2d Cir.4/5/95), 653 So. 2d 202, writ denied, 95-1115 (La. 6/16/95), 655 So. 2d 339, Mitchell had completed her shift and clocked out. She made a personal purchase in the store and was walking to her car when she fell in a pot hole and suffered serious injuries. This court distinguished Mundy, supra, and noted that, as an employee, Mitchell was presumed to encounter the risk of the defective parking lot at a greater frequency than the general public and had a greater probability of injury. Mitchell remained on the premises after work for a personal errand. This court concluded Mitchell was in the course and scope of her employment and entitled to worker's compensation.
*1080 Unlike Mundy, Anderson, and Mitchell, supra, in which the injuries occurred in public areas of the employers' premises, Hughes was injured in an area which was not accessible to the public. Contrary to Mundy and Anderson, supra, the risk was greater for the employees than the public. Like this plaintiff, the employee in Mitchell supra, was at greater risk than the general public by virtue of her employment and was entitled to proceed in worker's compensation.
The trial court found that Hughes would not have been allowed in the freezer if she had not been an employee. The trial court did not err in finding that Hughes was in the course of her employment when her injury occurred. Although the accident happened from 30 to 40 minutes after she had "clocked out," her activity, sampling the new dessert, and the place, in the freezer inaccessible to the public, placed her activity within the course of her employment. This accident also arose out of her employment because the risk of injury in the freezer was much greater for Hughes and other Olive Garden employees than it was for the public at large who had no access to the freezer located in a restricted area of the restaurant.
Because defendants introduced no evidence or affidavit from an Olive Garden employee to show who was allowed in the freezer, Hughes argued that a genuine issue of material fact exists. That argument is without merit. The defendants relied upon the pleadings and filed Hughes' deposition testimony and discovery responses to support the motion for summary judgment. Hughes' deposition testimony established that customers were not allowed behind the bar, in the alley (area where servers made last preparations before serving food) or in the freezer (located in the rear of the premises off the hallway adjacent to the cooking area) according to the diagram plaintiff drew. As a bartender, Hughes had to go into the freezer from time to time to obtain foods such as ice cream, cakes and daiquiri mixes needed in the bar.
Although the trial court's reasons for judgment refer to plaintiff's opposition to defendants' motion for summary judgment, the opposition and any attachments were not filed into the record in the trial court and are not contained in the record on appeal. Her affidavit, to which she referred in her appellate brief, stated that employees were not required to sample desserts, that she anticipated paying for her dessert, and this was her first trip into the freezer to get a dessert sample. The affidavit is attached to her appellate brief, but is not found in the appellate record. Neither appellate briefs nor attachments to briefs are part of the appellate record. These documents may not be considered by this court unless they have been properly introduced into evidence. Rhodes v. Executive Risk Consultants, Inc., 26,021 (La.App.2d Cir.8/17/94), 642 So. 2d 269.
A de novo review of this entire record dictates that the judgment of the trial court be affirmed. The pleadings, depositions and discovery responses establish that there is no genuine issue of material fact and that defendants are entitled to judgment as a matter of law. Defendants relied upon the pleadings and plaintiff's responses to discovery and deposition which establish that plaintiff was in the course of her employment out of which her injury arose. Hughes failed to place into the record her opposition to the summary judgment of which the trial court had benefit. However, even if this court had considered plaintiff's affidavit opposing the motion for summary judgment, nothing therein establishes that the motion for summary judgment should have been denied.
*1081 DECREE
At the time of plaintiff's injury, she was in the course of her employment and engaged in an activity arising out of her employment. Plaintiff's exclusive remedy is in worker's compensation. The summary judgment in favor of defendants which dismissed Hughes' action for damages is affirmed at plaintiff's costs.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2204115/ | 36 N.J. 63 (1961)
174 A.2d 881
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
FRANK ABBOTT, DEFENDANT-APPELLANT.
The Supreme Court of New Jersey.
Argued September 13, 1961.
Decided November 6, 1961.
*66 Mr. Charles Handler argued the cause for defendant-appellant (Mr. Joel F. Handler, on the brief).
Mr. Martin L. Greenberg, Assistant Prosecutor, argued the cause for plaintiff-respondent (Mr. Brendan T. Byrne, Essex County Prosecutor, attorney).
The opinion of the court was delivered by WEINTRAUB, C.J.
Frank Abbott was convicted of atrocious assault and battery. The Appellate Division affirmed, 64 N.J. Super. 191 (1960), and we granted certification, 34 N.J. 176 (1961).
Abbott shared a common driveway with his neighbors, Michael and Mary Scarano. The Scaranos engaged a contractor to pave their portion. Abbott obtained some asphalt from the contractor and made a doorstop to keep his garage door from swinging onto the Scaranos' property. Nicholas Scarano, who was visiting with the Scaranos, his parents, objected to Abbott's innovation. After some words between them a fist fight ensued.
Although Abbott managed to land the first punch, with which he sent Nicholas to the ground, a jury could find Nicholas was the aggressor. At this point Michael Scarano came at Abbott with a hatchet. Michael said the tool had just been returned to him by the contractor, and denied he *67 meant to use it as a weapon. According to Abbott, Mary Scarano followed, armed with a carving knife and large fork. The actors gave varying versions of what happened, but the end result was that all of the Scaranos were hit by the hatchet. Nicholas received severe head injuries. Abbott claimed he too suffered a laceration.
Abbott admitted he finally wrested the hatchet from Michael but denied he wielded it at all. Rather he insisted that the Scaranos were injured during a common struggle for the instrument. A jury could, however, find Abbott intentionally inflicted the blows.
Abbott was separately indicted for atrocious assault and battery upon each of the Scaranos. There was a common trial of these indictments. The jury acquitted Abbott of the charges relating to Michael and Mary, but found him guilty as to Nicholas.
I.
The principal question is whether the trial court properly instructed the jury upon the issue of self-defense. The trial court charged upon the subject of excessive force, as to which Abbott does not complain. It charged also upon the subject of retreat, and it is here that error is alleged. Although the jury could have found Abbott used excessive force, we cannot know whether the jury found for him on that subject and convicted because he had failed to retreat in accordance with the trial court's instruction.
As to retreat, the trial court charged upon two hypotheses. One was that the critical events occurred upon Abbott's property. Upon that basis, the court said Abbott could stand his ground, and, of course, of this Abbott does not complain. The second hypothesis was that the alleged offense occurred upon the common driveway. Presumably on the authority of State v. Pontery, 19 N.J. 457, 475 (1955), the trial court held that since all the principals were equally entitled to be on the driveway, Abbott could not claim immunity *68 from the ordinary retreat rule. Abbott does not question that thesis, but disputes the court's statement of the conditions under which an obligation to retreat would arise.
A.
We have the preliminary question whether defendant must demonstrate "plain error" to question the instruction. As the Appellate Division noted, defendant did not record a protest to the charge as given. But he had requested a charge and did note his objection to the trial court's refusal to grant it. His request was erroneous, but nonetheless it is plain he did not acquiesce in the trial court's version. The important fact is that the trial court was alerted to the basic problem and charged in a manner different from the request made. In such circumstances, especially when the controlling principles are complex or unsettled, it would be unreasonable to deny a review merely because a defendant failed to project a formula which squares with our concept of the true doctrine. We would never deny relief merely because a litigant's position on appeal went beyond the point we found to be correct. We should not demand a greater capacity for prediction during the trial itself. We accordingly reach the meritorious issue.
B.
The subject of retreat usually arises in homicide matters. We will first discuss it in that context, and then consider whether the principles apply to a charge of atrocious assault and battery, and if they do, whether the trial court correctly guided the jury in this difficult area.
We should make it clear that we are discussing the doctrine of retreat and not the subject of the use of excessive force. If the force used was unnecessary in its intensity, the claim of self-defense may fall for that reason. In the discussion which follows we assume a defendant used no more force *69 than he believed necessary to protect himself in the circumstances as they reasonably appeared to him, and consider only whether the claim of self-defense should be denied because he could have avoided the use of that force by retreating.
The question whether one who is neither the aggressor nor a party to a mutual combat must retreat has divided the authorities. Self-defense is measured against necessity. Brown v. State, 62 N.J.L. 666, 708 (E. & A.), affirmed, 175 U.S. 172, 20 S.Ct. 77, 44 L.Ed. 119 (1899); State v. Hipplewith, 33 N.J. 300, 316-318 (1960). From that premise one could readily say there was no necessity to kill in self-defense if the use of deadly force could have been avoided by retreat. The critics of the retreat rule do not quarrel with the theoretical validity of this conclusion, but rather condemn it as unrealistic. The law of course should not denounce conduct as criminal when it accords with the behavior of reasonable men. Upon this level, the advocates of no-retreat say the manly thing is to hold one's ground, and hence society should not demand what smacks of cowardice. Adherents of the retreat rule reply it is better that the assailed shall retreat than that the life of another be needlessly spent. They add that not only do right-thinking men agree, but further a rule so requiring may well induce others to adhere to that worthy standard of behavior. There is much dispute as to which view commands the support of ancient precedents, a question we think it would be profitless to explore.
Other jurisdictions are closely divided upon the retreat doctrine. It is said that the preponderant view rejects it. Perkins, Criminal Law 899 (1957); 1 Warren, Homicide § 157, at pp. 767-68 (perm. ed. 1938); Model Penal Code § 3.04, comment 3, at p. 24 (Tent. Draft No. 8, 1958). For additional discussions of the contending views see 1 Wharton, Criminal Law and Procedure § 235 (Anderson 1957); Annotation, 2 L.R.A. (N.S.) 49 (1906); Annotation, 18 A.L.R. 1279 (1922). Our Court of Errors and *70 Appeals deliberately adopted the retreat rule with an awareness of the contending views, State v. Di Maria, 88 N.J.L. 416 (Sup. Ct. 1916), affirmed o.b., 90 N.J.L. 341 (E. & A. 1917), and the doctrine has since been invoked. State v. Centalonza, 18 N.J. Super. 154 (App. Div. 1952); cf. State v. Goldberg, 12 N.J. Super. 293 (App. Div. 1951). The Model Penal Code embraces the retreat rule while acknowledging that on numerical balance a majority of the precedents oppose it. Model Penal Code § 3.04, comment 3, at p. 24 (Tent. Draft No. 8, 1958).
We are not persuaded to depart from the principle of retreat. We think it salutary if reasonably limited. Much of the criticism goes not to its inherent validity but rather to unwarranted applications of the rule. For example, it is correctly observed that one can hardly retreat from a rifle shot at close range. But if the weapon were a knife, a lead of a city block might well be enough. Again, the rule cannot be stated baldly, with indifference to the excitement of the occasion. As Mr. Justice Holmes cryptically put it, "Detached reflection cannot be demanded in the presence of an uplifted knife." Brown v. United States, 256 U.S. 335, 343, 41 S.Ct. 501, 65 L.Ed. 961, 963 (1921). Such considerations, however, do not demand that a man should have the absolute right to stand his ground and kill in any and all situations. Rather they call for a fair and guarded statement of appropriate principles.
In Brown, supra, the United States Supreme Court said (256 U.S., at p. 343, 41 S.Ct., at p. 502, 65 L.Ed., at p. 963):
"* * * Rationally the failure to retreat is a circumstance to be considered with all the others in order to determine whether the defendant went farther than he was justified in doing; not a categorical proof of guilt."
The comment to § 3.04 of the Model Penal Code (at p. 24) says the passage just quoted "seems to be a median position" and "would apparently remit the issue to the jury, without *71 a legal mandate on the point." We are not sure we correctly understand these observations. We think it clear that Brown accepted the retreat doctrine, but we do not read the opinion of Mr. Justice Holmes to mean that the subject should be submitted without guidance, thus permitting each jury to decide whether the subject of retreat should be considered, and if so, what the ingredients of the doctrine should be. We know of no jurisdiction which leaves to a jury the task of devising the legal principles. Rather we read Brown to hold only that the particular "formula laid down by the [trial] court" was not "adequate to the protection of the defendant's rights" (256 U.S., at pp. 342-343, 41 S.Ct., at p. 502, 65 L.Ed., at pp. 962-63) in the factual pattern which the defendant there asserted.
We believe the following principles are sound:
1. The issue of retreat arises only if the defendant resorted to a deadly force. It is deadly force which is not justifiable when an opportunity to retreat is at hand. Model Penal Code § 3.04(2)(b)(iii). As defined in § 3.12(2) a deadly force means "force which the actor uses with the purpose of causing or which he knows to create a substantial risk of causing death or serious bodily harm."
Hence it is not the nature of the force defended against which raises the issue of retreat, but rather the nature of the force which the accused employed in his defense. If he does not resort to a deadly force, one who is assailed may hold his ground whether the attack upon him be of a deadly or some lesser character. Although it might be argued that a safe retreat should be taken if thereby the use of any force could be avoided, yet, as the comment in the Model Penal Code observes (at p. 23), "The logic of this position never has been accepted when moderate force is used in self-defense; here all agree that the actor may stand his ground and estimate necessity upon that basis." Cf. Prosser, Torts § 19, at p. 90 (2d ed. 1955); Restatement, Torts § 63 (1934). Hence, in a case like the present one, the jury should be instructed that Abbott could hold his ground when Nicholas *72 came at him with his fists, and also when Michael and Mary came at him with the several instruments mentioned, and that the question of retreat could arise only if Abbott intended to use a deadly force.
2. What constitutes an opportunity to retreat which will defeat the right of self-defense? As § 3.04(2)(b)(iii) of the Model Penal Code states, deadly force is not justifiable "if the actor knows that he can avoid the necessity of using such force with complete safety by retreating * * *." We emphasize "knows" and "with complete safety." One who is wrongfully attacked need not risk injury by retreating, even though he could escape with something less than serious bodily injury. It would be unreal to require nice calculations as to the amount of hurt, or to ask him to endure any at all. And the issue is not whether in retrospect it can be found the defendant could have retreated unharmed. Rather the question is whether he knew the opportunity was there, and of course in that inquiry the total circumstances including the attendant excitement must be considered. We add that upon a retrial the facts as developed in the light of this principle may be such that Abbott would be entitled to an instruction that if his version of the approach by Michael and Mary is accepted, the issue of retreat must be resolved in Abbott's favor.
3. There has been some uncertainty in the language of our cases upon the burden of proof with respect to self-defense. The decisions are treated in State v. Chiarello, 69 N.J. Super. 479 (1961), where the Appellate Division correctly said that although the burden is upon a defendant to adduce evidence to support the defense, yet if such evidence appears either in the State's case or upon the defendant's case, the issue must be left to the jury with this instruction: that the burden is upon the State to prove beyond a reasonable doubt that the defense is untrue, and hence there must be an acquittal if there is a reasonable doubt as to whether defendant did act in self-defense within the definition of that defense. Accordingly, if the issue of *73 retreat is raised in connection with the defense of self-defense, the jury should be instructed that the burden is also the State's to prove beyond a reasonable doubt that defendant knew he could have retreated with complete safety, and that if a reasonable doubt upon that question should exist, the issue of retreat must be resolved in defendant's favor.
C.
As we have said, the subject of retreat arises most often in homicide cases. It is equally pertinent if the charge is assault with intent to kill (N.J.S. 2A:90-2). State v. Centalonza, supra (18 N.J. Super. 154). Here the charge is atrocious assault and battery (N.J.S. 2A:90-1), a crime which involves vicious or brutal conduct. State v. Riley, 28 N.J. 188, 197-198 (1958), appeal dismissed and cert. denied, 359 U.S. 313, 79 S.Ct. 891, 3 L.Ed.2d 832 (1959). An intent to kill is not an ingredient of that offense, but an intent to do serious bodily harm would seem to be implicit. The doctrine of retreat reflects a policy with respect to the use of deadly force, and the same policy considerations equally obtain if the end result is something less than murder. The Appellate Division held the doctrine applicable to atrocious assault and battery. The comment to Article 3 of the Model Penal Code (at p. 3) expresses the same view, saying, "If the particular force, for example, would be unjustifiable in a prosecution for homicide it should be equally unjustifiable if the victim survives and what is charged is an assault." This seems sound, and hence an instruction upon the subject is appropriate in a trial for atrocious assault and battery, but the instruction should be expressly centered about the use of deadly force.
D.
We turn to the instruction of the trial court. It reads:
"* * * If you find the charges involved or either of them happened on the joint or common driveway and that the defendant *74 had an available opportunity to retreat and you also find that he was or appeared to be threatened by assault and battery with imminent danger of life or serious bodily harm, again there is no duty to retreat. On the other hand, under the latter circumstances, if you find that he did not appear to be threatened by assault and battery with imminent danger of life or great bodily harm, he had a duty to retreat and if he failed to retreat the defense of self-defense would not avail him and would not constitute a defense to these charges or any of these charges if you find that he had a duty to retreat."
It is at once apparent that the charge consists of abstract propositions, unanchored to the factual setting. It will be recalled the encounter had two phases, although one quickly followed the other. The first phase was an unarmed attack by Nicholas which Abbott met in kind; the second involved, as the jury could find, an attack or apparent attack by hatchet in the hands of Michael and by kitchen utensils allegedly wielded by Mary, both aided by Nicholas who had arisen from the initial punch. We have no way of knowing whether the jury understood Abbott was required to retreat when first assailed by Nicholas alone. The jury may well have so gathered since the instruction excluded self-defense "if you find that he [Abbott] did not appear to be threatened by assault and battery with imminent danger of life or great bodily harm," and of course Nicholas's attack with his fists readily fitted within those terms.
The State asks us to assume the jury understood an unarticulated premise, i.e., that the court was referring solely to the hatchet affair. If we could so assume, still under the instruction the obligation to retreat would depend upon the nature of the attack upon Abbott rather than the amount of force Abbott intended to employ. In short, there was no reference to the use of a deadly force by Abbott. And if we should read the charge in still another way, to wit, that the court was merely defining its prior reference to "an available opportunity" to retreat and hence meant that the opportunity was not "available" if retreat would have subjected Abbott to imminent danger to his life or of great bodily harm but was "available" if he could get away with *75 a hurt of lesser character, still the charge would be incorrect. This is so because there is no obligation to retreat unless retreat can be effected "with complete safety," and indeed with knowledge that retreat can be so effected. Further, upon that interpretation, the instruction would be devoid of any statement of the facts prerequisite for consideration of the subject, i.e., an intent by the defendant to use a deadly force.
We have said enough to indicate the insufficiency of the charge. Even upon study and restudy we are not sure we can extract the thesis the trial court held. A jury which listens to a single reading of an instruction cannot be expected to debate its meaning and reach a correct view of it. A charge should be a clear, unambiguous guide related to the evidence in the case. The conviction must be reversed.
II.
The record of Abbott's direct examination reads in part:
"Q. How much do you weigh, Mr. Abbott? A. At the present time?
Q. At the present time. A. Just close to 200 pounds, right now.
Q. Now, on July 15, 1957 [the date of the alleged crime] do you know how much you weighed? About July 15, not necessarily on that day, say within a few pounds either way. A. About 135, 140 pounds, I guess.
Q. Why was your weight so low at that time?
Mr. Loftus: I object on the ground it is irrelevant. I don't see any relevancy to this situation.
The Court: I will sustain the objection."
Defendant complains he was thereby barred from showing serious medical conditions, pertinent to his ability to defend with lesser force or to retreat with safety. The Appellate Division held defendant failed to comply with R.R. 1:5-1(a) in that he did not object to the ruling, and further held there was no manifest wrong or injury.
The cited rule reads in part:
"* * * Error in the admission or rejection of testimony, or in the charge of the court, or in the refusal to charge as requested by *76 the defendant, or in the denial by the court of any matter resting in discretion, or in any other ruling or order made during the course of the trial, shall be cause for reversal if specific objection thereto was made and it appears from the entire record of the proceedings had upon the trial that the defendant thereby suffered manifest wrong or injury." (Emphasis added)
Read literally, this rule would seem to require a specific objection to be stated after an offer of proof has been rejected, and some casual statements might be read to support that theme. State v. Gibson, 15 N.J. 384, 391 (1954); State v. Huff, 14 N.J. 240, 248 (1954); State v. Hogan, 20 N.J. Super. 1, 9 (App. Div. 1952). Thus understood, the rule could be thought to continue the discredited practice of former days under which error could not be asserted on appeal unless at the trial counsel had intoned "exception."
Our rules do not perpetuate mere ritual. Rather the purpose is to require a litigant to make known his position to the end that the trial court may consciously rule upon it. When that has happened, it would be pure ceremony to require some further protest. This view is embodied in R.R. 3:7-8, which reads as follows and in the light of which R.R. 1:5-1(a), quoted above, must be understood:
"Exceptions to rulings or orders of the court or instructions to the jury are not required in order to reserve the questions involved for review on appeal; and for all purposes for which an exception has heretofore been necessary it suffices that the defendant, at the time the ruling or order of the court is made or sought, makes known to the court the action which he desires the court to take or his objection to the action of the court and the grounds therefor; but if a party has no opportunity to object to a ruling or order, the absence of an objection shall not thereafter prejudice him."
Actually in the Tentative Draft (1948) of our rules, the provisions of this rule appeared in Rule 1:2-14(a), the forerunner of R.R. 1:5-1(a).
Applied to the admission and exclusion of evidence, these rules have this effect: If a litigant complains of the admission of evidence, he must show he objected to its receipt and stated the reasons for his opposition. If he did, no more is required to preserve his right to appellate *77 review. If the litigant complains of an exclusion of evidence, it is enough that his adversary's objection was upheld unless he refused an opportunity to tell the court why he thought the evidence should be admitted. Here Abbott complains of the exclusion of proof. The State objected to the offer as "irrelevant." If the trial court wished Abbott to explain his thesis, an opportunity to do so should have been given. The trial court did not, but rather, apparently satisfied it fully appreciated what was involved, upheld the State. We see no reason to require Abbott to utter "I object" or to attempt to argue against a ruling already announced. He made known the ruling he wished, i.e., admission of the evidence he offered. He did not decline an opportunity to enlighten the court. We are satisfied the alleged error is presented without recourse to the doctrine of "plain error."
There is a different question with which the one just discussed should not be confused. That question is whether a litigant must spread on the record the essence of what he would have proved but for the adverse ruling. R.R. 4:44-3 provides "the examining attorney may make a specific offer of what he expects to prove by the answer of the witness." The rule in terms applies to civil matters but is merely declaratory of prior good practice and should be observed as well in criminal proceedings. Without such disclosure, an appellate court cannot readily evaluate whether the exclusion, although erroneous, resulted in manifest wrong or injury. State v. Micci, 46 N.J. Super. 454, 458 (App. Div. 1957); see State v. Gambutti, 36 N.J. Super. 219, 233 (App. Div. 1955); New Jersey Highway Authority v. Rudd, 36 N.J. Super. 1, 5 (App. Div. 1955).
Of course the details of the proffered proof ultimately depend upon the integrity of counsel, and that being so, a representation first made on appeal might be argued to be no less meaningful. But the proffer should be made at trial, for at least the reason that the statement may well induce the trial judge to reconsider and perhaps to reverse his ruling.
*78 Our experience indicates widespread failure to place such offers upon the trial record. Indeed, frequently we receive our first glimpse in response to questions at oral argument. In the present case the disclosure first appeared in the brief on appeal, wherein we are told defendant wanted to prove serious injuries and illness from which he was in the process of recovery at the time of the alleged offense. The admissibility of such proof on the issues of excessive force and of retreat is too evident to require discussion. The question disallowed was on its face suggestive of proof of that kind. Since the judgment must be reversed for other reasons already given, we need not speak further of the sufficiency of the record. But we take this opportunity to remind the bar that a failure to spread the offer on the trial record may lead the appellate court to conclude that it cannot find the error was harmful.
III.
Abbott further urges the State could not move the indictment against him because prior thereto it had brought Michael Scarano to trial for assault with intent to kill him, which trial resulted in an acquittal. We think the Appellate Division correctly rejected this contention.
IV.
Since the case must be remanded, we refer to a ruling of which Abbott does not here complain, lest it be repeated at a retrial. During direct examination Abbott was asked, "At any time did you intentionally strike anybody with this ax?" The State objected "on the ground it is leading," and was sustained. Curiously, a question essentially the same had already been asked and answered. After that question was answered, the State objected without specifying any ground. The trial court replied, "I think it is admissible and is answered anyway. I will permit it to stand."
The objection that the question was "leading" was unsound. In a sense every question is "leading." If *79 interrogation did not lead, a trial would get nowhere. Indeed one vice of a question such as, "What is your position in this case?," is that it does not lead enough, and thus would deny the opposing party an opportunity to guard against the rankest kind of improper proof. A question must invite the witness's attention to something. No formula can be stated with confidence that it will embrace all situations. But it may be said that ordinarily a question is not improperly leading unless it suggests what the answer should be or contains facts which in the circumstances can and should originate with the witness. See generally McCormick, Evidence § 6 (1954); 3 Wigmore, Evidence §§ 769-72 (3d ed. 1940). The question whether Abbott intentionally struck any of the Scaranos with the ax was perfectly proper; we do not see how else it could be phrased. Cf. State v. Len, 108 N.J.L. 439, 440 (Sup. Ct. 1932).
Since the objection to the earlier question was not particularized, it is appropriate to add that questions addressed to the mental operations of a defendant are thoroughly proper when such operations are an ingredient of the State's case or of a defense. See State v. Myers, 7 N.J. 465, 483 (1951); State v. Len, supra (108 N.J.L. 439). Relevancy and materiality are obvious. And a defendant's competency to testify thereto is equally plain. Indeed no one knows better than he. Of course, he may not be believed, but his self-interest is not a bar, and has not been since the demise of the common-law rule which denied the stand to a party to a controversy. See 2 Wigmore, Evidence § 579, at p. 701 (3d ed. 1940).
The judgment is reversed and the matter remanded for further proceedings not inconsistent herewith.
For reversal and remandment Chief Justice WEINTRAUB, and Justices JACOBS, FRANCIS, PROCTOR, HALL, SCHETTINO and HANEMAN 7.
For affirmance None. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1566626/ | 34 So. 3d 779 (2010)
Helen D. NEVILLE, Appellant,
v.
Thomas A. NEVILLE, Appellee.
No. 5D09-1736.
District Court of Appeal of Florida, Fifth District.
May 14, 2010.
Sean P. Sheppard, of Sheppard & Sheppard, P.A., St. Augustine, for Appellant.
No Appearance for Appellee.
MONACO, C.J.
This is an appeal from an order terminating child support in which the appellant, Helen D. Neville, argues that the trial court erred in adopting the hearing officer's recommendation to terminate child support paid by the appellee, Thomas A. Neville, with respect to the youngest child of the parties. Because the youngest child, C.W., although 18 years of age, had not graduated from high school, and because the order concerning child support based on the agreement of the parties required the child support for this child to be continued, we reverse.
At the time that the marriage between the parties was dissolved they entered into an agreement that provided, among other things, that "[c]hild support shall continue as to each minor child until said child graduates from high school but not to exceed *780 age 19, dies, marries, becomes self-supporting, enters the armed forces, or is otherwise emancipated." The final judgment of dissolution included similar language in ordering Mr. Neville to pay child support "until a child attains the age of eighteen (18) years and thereafter until said child graduates from high school but not to exceed age 19, marries, enters the armed forces, becomes self-supporting, dies or is otherwise emancipated, whichever event comes first."
In 2009, Mr. Neville filed a supplemental petition for modification apparently aimed to terminate child support for his children other than C.W. He recognized that the final judgment required him to support his offspring "until each graduated from high school, but not to exceed the age of nineteen." He asked only that child support be modified as to the other children to comport with the requirements of the final judgment.
The matter was considered initially by a hearing officer. Ms. Neville conceded at the hearing that all three children were over eighteen, but both parties acknowledged that the youngest was still in high school. The hearing officer found that the two eldest children were over eighteen and had already graduated from high school, and that while the youngest child was over eighteen, he would not graduate from high school before reaching nineteen. Surprisingly the hearing officer recommended that child support be terminated immediately for all three children. After the hearing officer announced his ruling, the former wife asked, "I don't get any claims for [C.W.]? He's still in high school." The hearing officer responded "No, ma'am, because he's not going to graduate prior to reaching 19." The trial court thereafter approved the report and recommendation of the hearing officer and entered an order implementing it.[1]
So far as we can tell, the hearing officer derived his ruling that flew directly in the face of the agreement of the parties and the order requiring the payment of child support from section 743.07(2), Florida Statutes (2009). That statute, which deals with the removal of the disabilities of nonage when persons turn 18, provides that:
[t]his section shall not prohibit any court of competent jurisdiction from requiring support for a dependent person beyond the age of 18 years when such dependency is because of a mental or physical incapacity which began prior to such person reaching majority or if the person is dependent in fact, is between the ages of 18 and 19, and is still in high school, performing in good faith with a reasonable expectation of graduation before the age of 19.
As this court has noted previously, a parent is not legally bound to support his or her children beyond the age of 18, unless the parent agrees to do so in a binding contract, or unless one of the exceptions to section 743.07 applies. See Dep't of Rev. ex rel. Hall v. Hall, 699 So. 2d 1036, 1037 (Fla. 5th DCA 1997). In the matter before us section 743.07(2) should have played no role in the disposition. This case involved only the implementation of an agreement of the parties and the final judgment of dissolution. It was not about a court ordering child support beyond the age of 18 based on incapacity of the child. Here, by an unambiguous written agreement Mr. Neville was to pay child support for C.W. until the child graduated *781 from high school, but not beyond the child's nineteenth birthday. C.W. was still in high school and had not yet reached 19 when the court terminated child support for him. Because the trial court failed to order Mr. Neville to pay child support for C.W. in accordance with the agreement and as required by the final judgment, it erred. Cf. State, Dep't of Health & Rehabilitative Servs. ex rel. Dodge v. Dodge, 647 So. 2d 170 (Fla. 2d DCA 1994).
Accordingly, we reverse and remand this cause to the trial court to calculate the child support Mr. Neville owes for C.W. from the time support was terminated to the time C.W. turned 19 and to order payment of that amount in compliance with the joint stipulation and the final judgment of dissolution.
REVERSED and REMANDED with instructions.
ORFINGER and JACOBUS, JJ., concur.
NOTES
[1] For reasons that are unclear from the record it appears that before the trial court approved the hearing officer's order, a notice was sent to the City of St. Augustine directing it to stop deducting child support from the former husband's pay check. This was obviously inappropriate. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1573378/ | 396 S.W.2d 103 (1965)
Leslie C. DuPUY, Jr., Petitioner,
v.
The CITY OF WACO, Respondent.
No. A-10644.
Supreme Court of Texas.
October 13, 1965.
Rehearing Denied December 15, 1965.
*104 Naman, Howell, Smith & Chase, Waco, for petitioner.
Thomas R. Hunter, City Atty., Jones, Boyd, Westbrook & Lovelace, Waco, for respondent.
STEAKLEY, Justice.
The City of Waco constructed a viaduct on South 17th Street in 1962 to improve the movement of vehicular traffic in the city. No property of Petitioner, Leslie C. DuPuy, was physically appropriated by the City but access to his property was impaired by the viaduct. The question we are called upon to decide in this suit by DuPuy against the City is whether damages for the diminishment in value of Petitioner's property resulting from the impairment of access is recoverable under Article I, Sec. 17, of the Constitution of Texas, Vernon's Ann.St., which provides: "No person's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made * * *."
The trial court rendered judgment for the Petitioner upon the basis of favorable jury findings. The Court of Civil Appeals, as did the jury upon trial, found that the reasonable market value of the property has been substantially damaged for a public use. However, the Court of Civil Appeals reversed the judgment of the trial court and rendered judgment for the City upon the holding that the construction of the viaduct was a reasonable exercise of the police power, wherefore Petitioner had no cause of action since there was neither a physical taking nor a complete loss of access. City of Waco v. DuPuy, 386 S.W.2d 192.
The location of the property of Petitioner in relation to the viaduct and the surrounding streets is depicted on the accompanying schematic diagram. Prior to the construction of the viaduct, DuPuy fronted on South 17th Street and sided on an alley connecting with Franklin Avenue. The viaduct elevated 17th Street above the property of DuPuy and left him access to the front by a way under the viaduct between the supporting columns and dead-ending at DuPuy's property.
*105
*106 It is the position of Respondent, City of Waco, by its counter points, and of the attorneys for other cities filing amicus curiae briefs, that the City is not liable for the limitation of access to Petitioner's property by the construction of the viaduct because such was incidental to a reasonable exercise of the police power. The Attorney General of Texas, likewise by amicus curiae brief, asserts that without regard to any distinction between an exercise of the police power and the power of eminent domain, the damage of Petitioner is damnum absque injuria because there has been no invasion of any legal rights of Petitioner. The Attorney General argues that Petitioner has no damage because he still has complete access to the system of public roads and summarizes his position in saying that "The access is less convenient and the loss of traffic flow by the front door is apparent but it is settled that both the real elements of loss to commercial value are damnum absque injuria."
The problem is a recurring one of great difficulty and there is much literature on the subject.[1] The comment of this Court in City of San Antonio v. Pigeonhole Parking of Texas, 158 Tex. 318, 311 S.W.2d 218, 73 A.L.R. 2d 640 (1958), is timely:
"The lack of uniformity among the authorities seems to be no less apparent now than it was in 1906 when it was observed in Sauer v. City of New York, 206 U.S. 536, 27 S. Ct. 686, 690, 51 L. Ed. 1176, that:
`* * * The right of an owner of land abutting on public highways has been a fruitful source of litigation in the courts of all of the states, and the decisions have been conflicting, and often in the same state irreconcilable in principle. The courts have modified or overruled their own decisions, and each state has in the end fixed and limited, by legislation or judicial decision, the rights of abutting owners in accordance with its own view of the law and public policy. * * *'"
The demands of progress are inexorable and public improvements should not be discouraged; but just as compelling is the principle that private property rights are to be protected with all citizens sharing equally in the cost of progress. It was said in Brewster v. City of Forney, 223 S.W. 175 (Tex.Comm.App.1920):
"The Constitution of Texas and the decisions of her courts reveal a zealous regard for the rights of the individual citizen. Not only will they not permit his property to be `taken' for a public use without compensation, but will not permit it to be damaged unless the citizen is compensated to the extent of such damage. To hold otherwise would be to put upon one citizen a burden which should rest upon the aggregate citizenship, as the direct beneficiary of the public work, the construction and operation of which has damaged the property of one citizen."
It was recognized by this Court in Chicago, R. I. & G. Ry. Co. v. Tarrant County Water Control and Improvement District No. 1, 123 Tex. 432, 73 S.W.2d 55 (1934), that our Constitution and statutes have been construed generally to authorize the recovery of compensation not only for property actually taken under the power of eminent domain, but for property damaged as well; that compensation is not required *107 to be paid in all cases of damage to property occasioned by the exercise of the police power; and that our decisions permit recovery by the citizen for damages consequent upon changing street and highway grades.
This Court more recently upheld a recovery of damages under Article I, Sec. 17, of the Constitution in an inverse condemnation proceeding without attempting a distinction between the power of eminent domain and an exercise of the police power. Brazos River Authority v. City of Graham, 163 Tex. 167, 169, 354 S.W.2d 99 (1962). See in this connection San Antonio River Authority v. Lewis, 363 S.W.2d 444 (Tex. 1963). As graphically expressed in Brazos River, our refusal to compartmentalize an exercise of sovereignty as either police power or eminent domain for the resolution of problems arising under Article I, Sec. 17, of the Constitution rests upon the manifest illusoriness of distinctions between them. And here, as in Brazos River, the property in question was not being used to the detriment of the public in any respect and has not been subjected to any type of regulation. One or the other of these elements is generally considered to be an essential characteristic of an exercise of the police power. City of San Antonio v. Pigeonhole Parking of Texas, 158 Tex. 318, 311 S.W.2d 218, 73 A.L.R. 2d 640 (1958); Lombardo v. City of Dallas, 124 Tex. 1, 73 S.W.2d 475 (1934); Spann v. City of Dallas, 111 Tex. 350, 235 S.W. 513, 19 A.L.R. 1387 (1921); Connor v. City of University Park, 142 S.W.2d 706 (Tex. Civ.App.1940, writ ref.).[2] Moreover, the viaduct was constructed for a public use, the necessary consequence of which was the causing of a property loss to Petitioner not common to the general public. These elements are generally considered to be supportive of special damages in law whether or not termed an exercise of the power of eminent domain. State v. Hale, 136 Tex. 29, 146 S.W.2d 731 (1941); Fort Worth Improvement District No. 1 v. City of Fort Worth, 106 Tex. 148, 158 S.W. 164, 48 L.R.A.,N.S., 994 (1913); Gulf, C. & S. F. Ry.Co. v. Fuller, 63 Tex. 467 (1885); Gulf, C. & S. F. R. R. Co. v. Eddins, 60 Tex. 656 (1884); Illinois Cent. R. Co. v. Moriarity, 135 Tenn. 446, 186 S.W. 1053 (1916); cf. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43 S. Ct. 158, 67 L. Ed. 322 (1922) and City of West University Place v. Ellis, 134 Tex. 222, 134 S.W.2d 1038 (1940).[3]
*108 It is settled that a direct physical invasion of property is not required under the present provisions of Article I, Sec. 17, of the Constitution of Texas to entitle an owner to compensation. McCammon & Lang Lumber Co. v. Trinity & B. V. Ry. Co., 104 Tex. 8, 133 S.W. 247, 36 L.R.A., N.S., 662 (1911); Gulf, C. & S. F. Ry. Co. v. Fuller, 63 Tex. 467 (1885); Gulf, C. & S. F. R. R. Co. v. Eddins, 60 Tex. 656 (1884) It was the injustice of requiring an actual taking which explains the inclusion for the first time in the Constitution of 1876 of the requirement that compensation be paid for the damaging of property for public use. Judge Gaines wrote for this Court in Trinity & S. Ry. Co. v. Meadows, 73 Tex. 32, 11 S.W. 145, 3 L.R.A. 565 (1889): "The insertion of the words `damaged or destroyed' in the section quoted was doubtless intended to obviate this question, and to afford protection to the owner of property, by allowing him compensation, when by the construction of a public work his property was directly damaged or destroyed, although no part of it was actually appropriated." See also State v. Hale, 136 Tex. 29, 146 S.W.2d 731 (1941), and Gainesville, H. & W. R. Co. v. Hall, 78 Tex. 169, 14 S.W. 259, 9 L.R.A. 298 (1890). In the exercise of the power to take or appropriate private property for public use, the state, counties and other subdivisions of this state, railroads and corporations to which the power of eminent domain has been delegated, are in the same position and are governed by the same rule. Hale, supra. The basic concept of Article I, Sec. 17, in its requirement for the payment of compensation was expressed by this Court in Hale in terms of private property being subjected to a perpetual servitude for the benefit of the public entitling the owner to compensation for his damage.
It is the settled rule in this state that an abutting property owner possesses an easement of access which is a property right; that this easement is not limited to a right of access to the system of public roads; and that diminishment in the value of property resulting from a loss of access constitutes damage. Powell v. Houston & T. C. R. Co., 104 Tex. 219, 135 S.W. 1153, 46 L.R.A.,N.S., 615 (1911); Eddins, supra; Fuller, supra; cf. American Const. Co. v. Seelig, 104 Tex. 16, 133 S.W. 429 (1911). This Court said in Powell:
"The ownership of the lot abutting upon the street carried with it as property the right of free and unimpaired access thereto and egress therefrom, and whatever impaired that right and caused a depreciation of the value of the lot constituted damage to the lot within the meaning of the Constitution."
It was reasoned in Fuller that the word "property" as used in the Constitution "means not only the thing owned, but also every right which accompanies ownership and is its incident"; and that "by damages is meant `every loss or diminution of what is a man's own, occasioned by the fault of another,' whether this results directly to the thing owned, or be but an interference with the right which the owner has to the legal and proper use of his own." Eddins says it in these words: "Where, as the result of the occupation of it by the railroad company, the use of the street by the adjoining owner is very greatly impaired, and the injury in this respect is one special in its character, and not one common to the entire community at large, an action to recover such special damage will lie." To the same effect is Fort Worth, Improvement District No. 1 v. City of Fort Worth, 106 Tex. 148, 158 S.W. 164, 48 L.R.A.,N.S., 994 (1913), in which this Court held that if a public work is constructed which inflicts an injury peculiar to certain property not suffered in common with other property in the community or section, such property is damaged within the meaning of the Constitution, and the law will not permit the infliction of such injury without the allowance of just compensation. See also *109 Hidalgo County Water Imp. Dist. v. Holderbaum, 11 S.W.2d 506 (Com.App.1928); Commissioners' Court of Harris County v. Kaiser, 23 S.W.2d 840 (Tex.Civ.App. 1929, writ ref.); Southern Traction Co. v. Fears, 199 S.W. 856 (Tex.Civ.App.1918, writ ref.); City of Houston v. Kleinecke, 26 S.W. 250 (Tex.Civ.App.1894, no writ hist.).
It is obvious that the construction of a large public improvement will have a different effect upon ingress and egress to and from properties which are differently located. The determination in a given situation of whether or not there has occurred a compensable damaging under the Constitution is to be approached from the premise that an access right is an easement judicially recognized as appurtenant to tangible property to protect the benefits of private ownership. This should not be extended to recognize a compensable damaging where a property owner has reasonable access to his property after construction of the public improvement. The benefits of private ownership have been assured so long as there is reasonable access and an action for compensation under the Constitution will not lie where such is the case. This is illustrated by the case of Moorlane Company v. Highway Department, 384 S.W.2d 415 (Tex.Civ.App.1964, writ ref. n. r. e.), upon which we acted contemporaneously with the granting of the application for writ of error in the instant case. Moorlane, et al., sued to recover compensation for an impairment of their property rights of access which resulted from the construction of a highway overpass. They claimed the right to compensation on the basis of the diminishment of access rights because construction of the overpass narrowed the street upon which they abutted. The Court of Civil Appeals rested its decision principally upon the holding that the Highway Department and City were acting under the police power in constructing the overpass, and there was not a complete taking of the right of access. However, the Court pointed out in its opinion that the property owners "still had access to their property and trucks could load and unload * * * although the large trucks could not use this street in its entirety as had been before the overpass was built. * * *" It was our view that the property owners were left with reasonable access and the lesser; impairment was damnum absque injuria; the application for writ of error was therefore refused with the notation "no reversible error." See Rule 483, Texas Rules of Civil Procedure.
Other cases by the Texas courts upon which the City principally relies are likewise distinguishable from the case at bar. Lysaght v. City of Fort Worth, 359 S.W.2d 128 (Tex.Civ.App.1962, writ ref.), and City of Forth Worth v. Southwest Magazine, 358 S.W.2d 139 (Tex.Civ.App.1962, writ ref. n. r. e.), were suits for compensation for the removal of facilities of the property owner constructed in a city street. Holbrook v. State, 355 S.W.2d 235 (Tex.Civ. App.1962, writ ref. n. r. e.); Pennysavers Oil Co. v. State, 334 S.W.2d 546 (Tex.Civ. App.1960, writ ref.); and State Highway Commission v. Humphreys, 58 S.W.2d 144 (Tex.Civ.App.1933, writ ref.), were highway rerouting cases and stand principally for the propositions that an abutting property owner does not have a vested interest in the traffic that passes in front of his property; that he cannot recover for loss of trade resulting from a highway relocation; and that he is not entitled to damages because of the construction of controlled access highways in such manner as to deny direct access to the new major highway. It is also to be noted that the case of City of San Antonio v. Pigeonhole Parking of Texas, 158 Tex. 318, 311 S.W.2d 218, 73 A.L.R. 2d 640 (1958), involved a mandamus action to compel the issuance of a permit for a curb cut, i. e., a regulation in the exercise of the police power.
*110 The facts here go substantially beyond Moorlane. The initial and primary question is whether DuPuy's access rights have been impaired to an extent which constitutes a damage to property for a public use under Article I, Sec. 17, of the Constitution of Texas. In our view this is a question of law[4] and we hold that such has been shown here. Cf. Housing Authority of City of Dallas v. Higginbotham, 135 Tex. 158, 143 S.W.2d 79 (1940), 130 A.L.R. 1053, in which this Court held that the question of what is a public use under Article I, Sec. 17, of the Constitution is a question of law for determination by the courts. Prior to the construction of the viaduct the property of DuPuy fronted on South 17th Street with full access thereto; now, South 17th street is fourteen feet above the property and a concrete support forms a solid barrier to the immediate right of DuPuy's building. As a result, the building is left fronting on a cul-de-sac under the viaduct. It is generally held under analogous circumstances that a property owner left in a cul-de-sac is entitled to damages. Lee v. City of Stratford, 125 Tex. 179, 81 S.W.2d 1003 (1935), cites with approval the case of In re Hull, 163 Minn. 439, 204 N.W. 534, 205 N.W. 613, 49 A.L.R. 320 (1925), which states the rule as follows: "The owner of property abutting on a public highway has a special interest in the highway different from that of the general public. To recover damages for the obstruction or vacation of the highway, it is not essential that access to his property has been entirely cut off, but he cannot recover if his only complaint is that he is compelled to travel farther or over a poorer road in going to and from his property. * * * If, by the discontinuance of a highway running across, along or to the land in question, it is left abutting upon a cul-de-sac, the owner is deemed to have suffered an injury not common to the public." See also 25 Am. Jur., Highways, § 318; 49 A.L.R. 330, 351; 93 A.L.R. 639, 642; 2 Nichols, Eminent Domain, § 6.32(2) (3d ed. 1963); II McQuillin, Municipal Corporations, § 30.193 (3d ed. 1964); II American Law of Property, § 9.55 (1952). It is not enough that DuPuy can get to the system of public roads and the traveling public can get to his building. We are clear in the view that the construction of the viaduct has deprived DuPuy of reasonable access which entitles him to invoke the provision of the Constitution requiring the payment of compensation when property is damaged for a public use. Cf. City of Chicago v. Taylor, 125 U.S. 161, 8 S. Ct. 820, 31 L. Ed. 638 (1888); Breidert v. Southern Pacific Co., 61 Cal. 2d 659, 39 Cal. Rptr. 903, 394 P.2d 719 (1964); People v. Ricciardi, 23 Cal. 2d 390, 144 P.2d 799 (1944); Bacich v. Board of Control, etc., 23 Cal. 2d 343, 144 P.2d 818 (1943); Rose v. State, 19 Cal. 2d 713, 123 P.2d 505 (1942); Minnequa Lumber Co. v. City and County of Denver, Colorado, 67 Colo. 472, 186 P. 539 (1919); City of Chicago v. Burcky, 158 Ill. 103, 42 N.E. 178, 29 L.R.A. 568 (1895); Hendrickson v. State, 267 Minn. 436, 127 N.W.2d 165 (1964); Illinois Central R. R. Co. v. Moriarity, 135 Tenn. 446, 186 S.W. 1053 (1916). See also II McQuillin, Municipal Corporations, § 30.192 (3d rev. ed. 1964); 28 Tex.Jur.2d Highways and Streets, § 196; 39 C.J.S. Highways § 143b.
The trial court submitted two issues to the jury for the purpose of determining the amount of damages to which DuPuy was entitled. These issues required the jury to find the reasonable market value of the property immediately before and immediately after the construction of the viaduct. The respective findings of the jury were $15,500.00 and $7,000.00. The City as Appellant presented a point of error to the Court of Civil Appeals urging the *111 proposition that the trial court erred in its charge because the jury was not limited to "compensable items of damage" in determining the before and after market value of DuPuy's property. The support therefor was an objection to the charge on the ground that it did not limit consideration of the jury to compensable items of damage. It was argued generally by the City before the Court of Civil Appeals that the jury was allowed "to consider circuity of travel, loss of view insofar as it affected highest and best use, loss of light and air and anything that they might pick up from the evidence or the exhibits." The record at bar reflects that the problem of an impairment of light, air and view is not involved. The trial court sustained special exceptions to the allegations in DuPuy's original petition concerning light, air and view and during the trial sustained objections of the City to testimony regarding these elements as being irrelevant and immaterial to any issue in the case and as not supported by the pleadings. However, there was included in the charge to the jury a special instruction which recited that evidence had been admitted relating to the possible effect the construction of the viaduct may have had on the view from DuPuy's property and which limited consideration of such evidence to determination of the highest and best use for the property. The City did not specifically object to this instruction and we are at a loss to understand the reason for its inclusion since the trial court had sustained the objection of the City to the proffered evidence relating to the elements of light, air and view. But in any event we do not consider that harmful error was presented to the Court of Cvil Appeals in these respects. This Court in State v. Carpenter, 126 Tex. 604, 89 S.W.2d 194, 979 (1936), recognized that the rule applicable to the determination of damages when there has been a permanent injury to land by reason of the construction of a public improvement requires an ascertainment of the difference between the market value of the land immediately before and immediately after the construction. The reasoning of the Court in resolving the question there presented is equally applicable to the problem here presented, i. e., it is not proper to instruct the jury as to certain items or elements of damages which may or may not be taken into consideration in ascertaining depreciation in market value; the Court there said: "It appears to us that in most if not in all cases the whole matter of what may be considered by the jury and what may not be considered will be best determined by the trial court in the admission and exclusion of testimony rather than by instructions to the jury."
The judgment of the Court of Civil Appeals is reversed and that of the trial court is affirmed.
GRIFFIN, J., dissenting.
NOTES
[1] See, e.g., Rayburn, Texas Law of Condemnation §§ 235-44 (1960); Cromwell, Loss of Access to Highways: Different Approaches to the Problem of Compensation, 48 Va.L.Rev. 538 (1962); Gibbes, The Control of Highway AccessIts Prospects and Problems, 12 S.C.L.Q. 377 (1960); Comment, Liability of Governmental Units for Damaging Private Property, 15 Baylor L.Rev. 403 (1963); Comment, Eminent Domain v. Police Power as Related to the Abutting Owner's Right of Access, 14 Baylor L.Rev. 70 (1962); Comment, Eminent DomainDamages Recovery for Interference with the Right of Access, 18 So.Cal.L.Rev. 42 (1944); Note, 32 Calif.L.Rev. 95 (1944).
[2] "If we differentiate eminent domain and police power as distinct powers of government, the difference lies neither in the form nor in the purpose of taking, but in the relation which the property affected bears to the danger or evil which is to be provided against." Freund, Police Power, § 511 (1904).
[3] "The distinguishing characteristic between eminent domain and the police power is that the former involves the taking of property because of its need for the public use while the latter involves the regulation of such property to prevent the use thereof in a manner that is detrimental to the public interest. The police power may be loosely described as the power of the sovereign to prevent persons under its jurisdiction from conducting themselves or using their property to the detriment of the general welfare. * * * However, it is universally conceded that when land or other property is actually taken from the owner and put to use by the public authorities, the constitutional obligation to make just compensation arises, however much the use to which the property is put may enhance the public health, morals or safety." 1 Nichols, Eminent Domain §§ 1.42, 1.42(1) (3d 1964).
"Eminent domain then, is the actual physical invasion, acquisition and taking of private property to further some lawfully declared public purpose grounded in public necessity and convenience, in furtherance of public policy for some public purpose authorized by the constitution and statutes of the sovereign entity. * * * The exercise of the police powers of the sovereign or its delegates is the lawful exercise of a restraint or regulation upon private property or private rights or even the impairment or destruction of those rights in the public interest or for the general welfare." Rayburn, Texas Law of Condemnation, Sec. 4(1) (1960).
[4] There is a contrariety of opinion at this point. The Supreme Court of California considers as one of law the question of whether there has been sufficient impairment of access to invoke a similar constitutional provision. People v. Ricciardi, infra. The Supreme Court of Minnesota treats the question as one of fact. Hendrickson v. State, infra. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1104086/ | 657 So.2d 328 (1995)
Robert DELPHEN and Gina M. Delphen
v.
The DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT, State of Louisiana, et al.
No. 94-CA-1261.
Court of Appeal of Louisiana, Fourth Circuit.
May 24, 1995.
Rehearing Denied July 20, 1995.
*331 Christopher J. Bruno, Natasha R. Zimmerman, Bruno & Bruno, New Orleans, for Robert Delphen and Gina Delphen.
Iris A. Tate, Wilkerson, Tate & Williams, New Orleans, for State of Louisiana, through Dept. of Transp. and Development.
Michael T. Pulaski, Keith W. McDaniel, Diana L. Tonagel, Pulaski, Gieger & Laborde, New Orleans, for Bridgestone Cycle Co., Ltd.
Before BYRNES, CIACCIO and PLOTKIN, JJ.
BYRNES, Judge.
The State of Louisiana through the Department of Transportation and Development ("DOTD") and Bridgestone Cycle Company, Ltd. ("Bridgestone") appeal a judgment notwithstanding the verdict increasing the apportionment of Bridgestone and DOTD's fault, as well as lowering plaintiff Robert Delphen's[1] fault in a personal injury/product's liability action resulting from a bicycle accident. Plaintiffs, Robert and Gina Delphen, answered the appeal. We reverse in part and render.
The bicycle accident occurred on June 27, 1990, when Robert Delphen borrowed a ten-speed racing bike owned by Amy Newton and which had been stored at her friend's home, where the plaintiffs were residing. Robert Delphen crossed the Chef Menteur drawbridge, and encountered approximately a two-three inch change in elevation on the bridge at the point where the movable swing span joins the fixed portion of the bridge. He was thrown from the bicycle and struck his face on the roadway. As a result he underwent seven operations.
Robert and Gina Delphen filed suit against the DOTD for negligent maintenance of the roadway. They also filed a products liability action against Cleary Bicycle, Moped and Go-Cart Center, Inc., the dealer/seller of the bicycle; Suntour, U.S.A., the alleged distributor of the quick release mechanism on the bicycle; and Bridgestone, the bicycle manufacturer, alleging that the bicycle was defectively designed because it did not have a secondary retention device, which plaintiffs claim is supposed to keep the wheel from separating if the quick release device fails. Plaintiffs also claimed that the manufacturer did not provide adequate warnings. Robert Delphen averred that the front wheel separated from the bicycle before he lost control of the bicycle and was the proximate cause of his injuries. Plaintiffs settled with the seller/dealer and the alleged distributor of the quick release prior to trial.
After trial, the jury found that Bridgestone was 30 percent negligent, DOTD was 45 percent negligent, and Robert Delphen was 25 percent comparatively negligent. The jury's award included the following damages:
Damages due to plaintiff, Robert Delphen
a) Past & future physical
pain & suffering $100,000.00
b) Past & future mental
pain & anguish 50,000.00
c) Past & future medical
expenses 95,524.52
d) Past & future lost
wages 98,000.00
e) Past & future permanent
injury 50,000.00
f) Loss of enjoyment of
life 20,000.00
___________
Total: $413,524.52
Damages due to plaintiff, Gina Delphen
a) Past & future loss of
consortium $ 50,000.00
*332 On February 18, 1994, the trial court entered a judgment adopting the jury verdict with respect to the amount of the damage award. The trial court did not adopt the advisory jury verdict with respect to DOTD's percentage of fault, but amended the amount from 45 to 50 percent. The trial court reduced the assessment of Robert Delphen's fault from 25 to 20 percent.
On April 19, 1994, the trial court granted the plaintiffs' motion for judgment notwithstanding the verdict, increased Bridgestone's assessment of fault from 30 to 40 percent, and reduced Robert Delphen's fault from 20 to 10 percent. Bridgestone and DOTD appealed, and plaintiffs answered the appeal.
The issues on appeal are whether: (1) the trial court erred in granting a JNOV on the apportionment of fault; (2) the jury instructions were proper; and (3) the damage award was correct.
Bridgestone argues that: (1) the trial court used the wrong JNOV standard to set aside the jury verdict in assessing fault; (2) the trial court failed to provide the correct jury charges; (3) the plaintiffs failed to show that the bicycle was defective or that Bridgestone failed to provide adequate warnings; and (4) the amount of damages was excessive.
DOTD contends that: (1) it did not breach any duty owed to Robert Delphen; (2) that Robert Delphen did not act with reasonable care and his breach of duty was the proximate cause of his injuries; and (3) that the amount of damages is excessive.
Plaintiffs assert that: (1) the trial court applied the proper JNOV standard; (2) the plaintiffs carried their burden of proof established by the Louisiana Products Liability Act; (3) the trial court improperly instructed the jury with respect to Mrs. Delphen's claim for mental anguish; and (4) the damage award should be increased.
A motion for judgment NOV may be granted on the issue of liability or on the issue of damages or on both issues. La. C.C.P. art. 1811(F). When a bifurcated trial results in inconsistent findings by the trial judge and the jury, the appellate court must undertake a de novo review of the record. McCullough v. Regional Transit Authority, 593 So.2d 731 (La.App. 4th Cir.), writ denied, 595 So.2d 655 (La.1992). In addition, without addressing the propriety of the JNOV, misleading jury instructions with respect to the products liability claim require a de novo review of the record with respect to the apportionment of fault. See Nigreville v. Federated Rural Elec. Ins. Co., 93-1202 (La. App. 3d Cir. 7/13/94), 642 So.2d 216, writ denied, 94-2803 (La. 1/27/95), 649 So.2d 384.
A trial court has a duty to instruct the jury only on the law that pertains to the evidence adduced in that particular case. Barnett v. New Orleans Public Service Inc., 489 So.2d 452, 455 (La.App. 4 Cir.1986). To accomplish this duty, the trial court must both require that the jury consider only the correct law and avoid confusing the jury. Guilfore v. D.H. Holmes Co., Ltd., 93-0076 (La.App. 4th Cir. 1/13/94), 631 So.2d 491, writ denied, 94-0376 (La. 4/4/94), 635 So.2d 1125.
BRIDGESTONEPRODUCTS LIABILITY
In the present case the trial court instructed the jury as follows:
The manufacturer of a product shall be liable to a claimant for damage proximately caused by an unreasonably dangerous product when such damage arose from a reasonably anticipated use of the product by the claimant or another person.... "Reasonably anticipated use" of the product means a use or handling of a product that the product's manufacturer should reasonably expect of an ordinary person in the same or similar circumstances. Normal use includes reasonable, foreseeable misuse, and a manufacturer is obligated to take into account such misuse in designing its product. The age of the product is not of consequence.... The manufacturer is in the best position, economically and technologically, to provide such general protection.
The trial court erred when it gave general instructions as to defect and liability and at the same time stated that "normal use, includes reasonable, foreseeable misuse." The jury instructions in the present case did not reflect the correct applicable law because *333 they allowed the jury to infer that the term "reasonable anticipated use" constitutes "normal use," including all "foreseeable misuses."
Plaintiffs must prove that a product is defective if it is unreasonably dangerous in its reasonably anticipated use or that there existed, at the time of the manufacture, a feasible alternative design capable of preventing the injury. La.R.S. 9:2800.54(A). Under La.R.S. 9:2800.53(7), "reasonable anticipated use" means "a use or handling of a product that the product's manufacturer should reasonably expect of an ordinary person in the same or similar circumstances." The term "reasonably anticipated use" is more restrictive than the broader, prior standard of "normal use," which included all reasonably foreseeable uses and misuse, that was utilized prior to the Louisiana products liability statute. Lockart v. Kobe Steel Ltd. Const. Machinery Div., 989 F.2d 864 (5th Cir.1993); Daigle v. Audi of America, Inc., 598 So.2d 1304 (La.App. 3d Cir.), writ denied, 604 So.2d 1306 (La.1992). The inclusion of the phrase "reasonably anticipated use" in the provision of the LPLA conveys the message that the manufacturer is not responsible for accounting for every conceivable foreseeable use of a product. London v. MAC Corp. of America, 44 F.3d 316 (5th Cir.1995). The more restrictive scope of liability was meant to avoid prior confusion because virtually any conceivable use is foreseeable. Lockart, supra.
In Myers v. American Seating Co., 93 1350 (La.App. 1st Cir. 5/20/94), 637 So.2d 771, writs denied, 94-1569 (La. 10/7/94), 644 So.2d 631 & 94-1633 (La. 10/7/94), 644 So.2d 632, the appellate court found that the evidence showed that any danger presented by standing on a folding chair was an obvious danger to a reasonable person and that standing on the rear portion of a folding chair was not a reasonably anticipated use. The plaintiff failed to establish that the chair was unreasonably dangerous in design or that the manufacturer provided an inadequate warning.
In Daigle v. Audi of America, Inc., supra, the automobile manufacturer was not liable for injuries sustained by a prospective purchaser of a used car. The fact that, while trying to locate the car's hood latch, the plaintiff stuck his fingers beyond the flare without knowing where he was reaching and with the engine running, was not a reasonably anticipated use of the product.
In Lockart v. Kobe Steel Ltd. Const. Machinery Div., supra, dismissal of the manufacturer from the suit on summary judgment was proper based on the fact that the workers' injuries caused by their use of the excavator to suspend a heavy pontoon by chaining it to the bucket's teeth was not a reasonably anticipated use.
In London v. MAC Corporation of America, supra, at the close of its case, the manufacturer moved for judgment as a matter of law, which was granted by the trial court. When the plaintiff stood on the gearbox of a shredder to attempt to fix it, he fell and was injured. The appellate court upheld the manufacturer's motion based on the finding that standing on a shredder to fix it was not a reasonably anticipated use as defined under La.R.S. 9:2800.53(7).
In Myers, Daigle, Lockart, and London, although misuse of the products would have been "foreseeable" under the improper jury instruction given in the present case, each foreseeable misuse was not equivalent to a "reasonably anticipated use" applicable under the LPLA.
In the present case the product, a 1981 model Kabuki Diamond Formula A-12 road racing bicycle, was used extensively by its owner, Amy Newton, for competitive racing and personal recreation. Requiring great precision, the bicycle was built with a quick release retention device on the front axle hub, permitting the rider to remove the wheel from the frame without the use of tools. The quick release mechanism was used by a bicycle racer to facilitate the quick removal and replacement of tires during racing situations.
Prior to the accident Robert Delphen had attempted to adjust the bicycle's front wheel because it wobbled during his previous use. He testified that he was unfamiliar with the quick release hub and did not know how to properly mount the front wheel. Danger *334 imposed by the wheel would have been obvious to a reasonable person who would recognize that the bicycle was a specialized product for sophisticated users, and the ordinary person should inquire into the proper manner of fastening the quick release mechanism before using the bicycle again. Considering the obvious danger posed by the sophisticated bicycle, the fact that Robert Delphen rode the bicycle across the Chef Menteur drawbridge without obtaining additional instructions regarding the bicycle's proper use and knowing that the wheel previously had become loose, was not a reasonably anticipated use of the product.
Plaintiffs claim a feasible alternative design capable of preventing the injury was available so that Bridgestone was liable under La.R.S. 9:2800.54(A). Plaintiffs argue that a secondary retention device was available at the time that the bicycle was manufactured and that device would have prevented the wheel from releasing while Mr. Delphen was riding the bicycle. However, plaintiffs' experts agreed that Schwinn's second retention device was a patented device that could only be used by the company holding the patent. Other similar devices were not developed or feasible at that time. The precision and utility of the quick release feature was very desirable in a bicycle specifically designed for the purpose of sophisticated racing. The danger presented by the release mechanism, its quick release of the front wheel, is the very essence of its usefulness. Robert Delphen was aware of this characteristic of the product that allegedly caused the accident.
Further, a product is not unreasonably dangerous or defectively designed where the evidence shows that the product can be safely used if the instructions in the operations manual are followed. Prather v. Caterpillar Tractor Co., Inc., 526 So.2d 1325, 1331-32 (La.App. 3d Cir.), writ denied, 531 So.2d 272 (La.1988). Plaintiffs claim that Bridgestone failed to provide adequate warning concerning the operation of the quick release mechanism. Bridgestone's expert, Mr. Hidenori Yamaki, testified that the bicycle's manual provided specific instructions on operating the quick release, as well as general instructions and safety warnings on bicycle operation, including avoidance of road obstacles. The owner, Amy Newton, acknowledged receipt of the manual and the adequacy of the instructions.
In Lockart, supra, the appellate court found that although the owners' manual probably did not reach the ultimate users, the manufacturer of an hydraulic excavator was not liable for workers' injuries. Similarly, in the present case, in its bicycle manual, Bridgestone provided adequate instructions and warnings so that the product could be safely used if the instructions were followed. Because of the obvious complex and technical nature of the bicycle, the manufacturer did not have a duty to provide all instructions and warnings on the bicycle itself. Bridgestone's duty did not require warnings concerning dangers that are or should be obvious to the ordinary user. Hines v. Remington Arms Company, Inc., 94-0455 (La. 12/8/94), 648 So.2d 331. Plaintiffs failed to show that the bicycle was unreasonably dangerous in its reasonably anticipated use or that Bridgestone was liable under the Louisiana Products Liability Act where Bridgestone provided adequate instructions and warnings in its manual.
LIABILITY OF DOTD
The elements necessary to impose liability on the public entity DOTD based on the defective condition of the roadway are the same whether based on negligence or strict liability; under either theory plaintiffs must prove: (1) that the entity owned or had custody of the thing that caused damage; (2) that the thing was defective in that it created an unreasonable risk of harm to others; (3) that entity had actual or constructive knowledge of the defect or the risk of harm imposed thereby and failed to take corrective measures within a reasonable time; and (4) causation. Faulkner v. State, Dept. of Transp. & Development, 25,857 (La.App. 2d Cir. 10/21/94), 645 So.2d 268, writ denied, 94-2901 (La. 1/27/95), 649 So.2d 390. DOTD has a duty to keep the roadway in a reasonably safe condition, to discover any unreasonable dangerous condition, and either correct the condition or warn of its *335 existence. Clement v. State Through Dept. of Transp. and Development, 528 So.2d 176 (La.App. 1st Cir.), writ denied, 532 So.2d 157 (La.1988). DOTD is not the guarantor of safety for travelers; its duty is only to make sure the road is reasonably safe for traffic. Ryland v. Liberty Lloyds Ins. Co., 93-1712 (La. 1/14/94), 630 So.2d 1289. The court must weigh the magnitude and the probability of injury against the burden of preventing the injury. Entrevia v. Hood, 427 So.2d 1146 (La.1983). Considerations to determine whether the roadway is unreasonably dangerous are: the gravity of the harm presented, the utility of the thing, the cost of correcting or reducing the risks, and the societal rights, obligations, expectations and values. Theriot v. Lasseigne, 624 So.2d 1267 (La. App. 3d Cir.1993), rev'd on other grounds, 93-2661 (La. 7/5/94), 640 So.2d 1305.
In the present case, the trial court found that the Chef Menteur Highway Bridge was under the custody and control of the DOTD, which had notice of the defect. In its reasons for judgment on the motion for JNOV, the trial court held that the DOTD "should have made major modifications to adjust the bridge so that both sides would be equal. Although this adjustment is expensive, the discontinuity constituted a severe enough hazard to take remedial measures. At the very least, DOTD should have posted warning signs or signs prohibiting bicycle traffic on the bridge."
Although we need not agree that the DOTD should have undertaken expensive measures to correct the bridge differential, the DOTD is liable because it did not post signs on the bridge warning of the danger of the differential of the elevations of the bridge and/or restricting bicycle travel. The utility of reducing the risks by posting warning signs was outweighed by the harm presented. In its brief, the DOTD acknowledges that the Chef Menteur Bridge was not designed for bicycle traffic although it was designed and was reasonably safe for vehicular use. In that case, the DOTD had a duty to warn bicyclists of the danger and was liable for failing to post warning signs.
COMPARATIVE NEGLIGENCE
An individual driver owes a duty of being reasonably observant of conditions that might affect the operation or use of his vehicle; this duty includes the duty to use his vehicle reasonably and to maintain a proper lookout for hazards that might pose an unreasonable risk of harm. Faulkner v. State Dept. of Transp. & Development, supra. The court also must consider whether reducing the negligent plaintiff's recovery would serve as an incentive for similarly situated plaintiffs to exercise care, while not reducing the incentive of the owner of the thing to remove the risk of harm. Sistler v. Liberty Mut. Ins. Co., 558 So.2d 1106 (La.1990). Robert Delphen was aware that: he was riding a specialized racing bicycle; the front wheel of the bicycle had previously been wobbly but he had adjusted it without obtaining instructions; and he saw the bridge differential prior to the accident. Under the circumstances, to control his bicycle properly, he could have stopped and walked across the elevation before proceeding on the bridge. Robert Delphen was comparatively negligent in operating, without experience, a sophisticated bicycle without instructions on an unfamiliar roadway. A reduction in Delphen's award by 50 percent will serve as an incentive to other similarly-situated plaintiffs to exercise reasonable care on the highways. At the same time, assessing 50 percent fault on the State should provide an incentive for the State to maintain the bridge in a reasonably safe condition. We conclude that the DOTD was 50 percent at fault, and Robert Delphen was 50 percent comparatively negligent for his injuries.
DAMAGES
The trial court adopted the jury verdict with respect to the amount of the damage award. Consideration of the jury's determination of damages is limited to a review for abuse of discretion on appeal. The discretion vested in the trier of fact is "great," and even vast, in determining the amount of damages. Youn v. Maritime Overseas Corp., 623 So.2d 1257 (La.1993), cert. denied, Maritime Overseas Corp. v. Youn, ___ U.S.___, 114 S.Ct. 1059, 127 *336 L.Ed.2d 379 (1994). When damages are insusceptible of precise measurement, much discretion is left to the court for its reasonable assessment. La.C.C. art. 1999; Coco v. Winston Industries, Inc., 341 So.2d 332 (La. 1976). The reviewing court must evaluate the particular injuries and their effects on the particular injured persons. Reck v. Stevens, 373 So.2d 498 (La.1979). Only after a determination of an abuse of discretion is a resort to prior awards appropriate, and then only for the purpose of determining the highest or lowest point that is reasonably within that discretion. Youn, supra.
PAST & FUTURE MEDICAL DAMAGES
Robert Delphen underwent seven surgeries on his face, incurring over $70,524.52 in past medical bills. His surgeries included a tracheotomy, various surgical repairs to his shattered nose, and repair to his fractured right eyeball. He also had his jaw wired shut and underwent surgeries involving orthodontic care. Dr. Edward D. Moise, an orthodontist, testified that Mr. Delphen probably required additional treatment for temporomandibular joint displacement syndrome (TMJ). Dr. Susan Andrews, an expert in the field of neuropsychology, diagnosed Robert Delphen with major depression attributed to the accident. He underwent nine months of psychotherapy at $100 to $125 an hour, and Dr. Andrews testified that Mr. Delphen needed to be seen by a psychiatrist on a regular basis in the future. The jury's award for past and future medical expenses bears a reasonable relationship to the elements of the medical damage award so that the jury did not abuse its discretion in awarding a total of $95,524 for past and future medical expenses.
GENERAL DAMAGE AWARD
The jury itemized $100,000 for past and future pain and suffering; $50,000 for past and future mental pain and anguish, $50,000 for past and future permanent injury, and $20,000 for loss of enjoyment of life. These awards total $220,000. General damages involve physical and mental pain and suffering, inconvenience, loss of intellectual gratification or physical enjoyment, and others factors which affect the victim's life. Glasper v. Henry, 589 So.2d 1173 (La.App. 4th Cir.1991), writ denied, 594 So.2d 1315 (La.1992). Plaintiffs assert that Mr. Delphen endured years of physical and emotional suffering as a result of the accident. Robert Delphen had problems keeping his employment, was unable to concentrate because of chronic pain, and had marital difficulties as a result of the accident. Considering the trauma of the accident, Robert Delphen's surgeries, facial scars, and mental suffering, we cannot say that the jury abused its discretion in its assessment of these damages.
PAST & FUTURE LOST WAGES
DOTD contests the damage award for past and future loss of wages based on the fact that Robert Delphen earned more after the accident than he earned before. Loss of earning capacity, not just pecuniary loss, is the basis for assessing loss of wages. Folse v. Fakouri, 371 So.2d 1120 (La.1979). In Finnie v. Vallee, 620 So.2d 897, 900-901 (La.App. 4th Cir.), writ denied, 625 So.2d 1040 (La.1993), this court stated:
Loss of earning capacity is not the same as lost wages. Rather, earning capacity refers to a person's potential. Earning capacity is not necessarily determined by actual loss. While the plaintiff's earnings at the time of the accident may be relevant, such figures are not necessarily indicative of her past or future lost earning capacity. The plaintiff need not be working or even in a certain profession to recover this type of award. What is being compensated is the plaintiff's lost ability to earn a certain amount, and he may recover such damages even though he may never have seen fit to take advantage of that capacity. Hobgood v. Aucoin, 574 So.2d 344, 346 (La.1990). The trial court should consider whether and how much the plaintiff's current condition disadvantages him in the work force. The trial court should then ask itself what the plaintiff might be able to have earned but for his injuries and what he may now earn given his resulting condition.
*337 Prior to the accident Mr. Delphen was earning $5 to $6 an hour as a painter. Before that he had worked for F.N. Wolf as a stockbroker in 1989, earning $16,583.84 that year. After the accident, he was employed by Merrell Lynch as a stockbroker but was terminated for lack of production, which plaintiffs claim was a result of his accident because he could barely talk. Within a year Robert Delphen worked for Edward D. Jones, a stock brokerage company, but Mr. Delphen was discharged for lack of production. Robert Delphen testified that he continued to seek employment but was unsuccessful due to the accident.
The parties stipulated to the testimony of plaintiffs' two expert witnesses: Bobby Roberts, a vocational rehabilitation expert, and Melville Wolfson, an expert in the field of forensic economics. Mr. Roberts testified that stockbrokers begin with an annual salary of $28,000 and Mr. Delphen was capable of being a stockbroker. Mr. Wolfson stated that Mr. Delphen's past lost wages were $89,253 and projected his future lost wages as $40,139.
The parties also stipulated to the testimony of defendants' expert witness, Dr. Kenneth Boudreaux, a professor and expert in the field of economics. Dr. Boudreaux calculated that Robert Delphen's past lost wages were $10,810.32, and his future wage loss would be $15,000. The treating physicians did not restrict Mr. Delphen from returning to work. We cannot say that the jury abused its discretion in awarding $98,000 for past and future loss of wages.
MRS. DELPHEN'S CLAIM FOR LOSS OF CONSORTIUM
DOTD complains that the jury award of $50,000 for loss of consortium to Mrs. Delphen is not supported by the record where the plaintiffs' lifestyle was basically the same before the accident as after the accident. A cause of action for loss of consortium arises when the injured party's condition deteriorates to such an extent that his spouse is actually deprived of his consortium, service, and society. Faraldo v. Hanover Ins. Co., 600 So.2d 81 (La.App. 4th Cir.1992). Gina Delphen testified that the plaintiffs were newlyweds at the time of the accident. She stayed with her husband during the six to nine days that he was hospitalized. After that, they lived with her parents for a month, and then the next month, she prepared his food, applied his medicine, bathed him and assisted in taking care of his other needs. The couple's social and sexual life diminished. Mrs. Delphen felt she lost something very valuable to her, which was the foundation of her marriage. These events occurred at a crucial time of the Delphens' first year of marriage which would be vulnerable in times of adversity, and they had to endure Robert's physical suffering as well as his emotional depression. Although it appears to be close to the higher limits for such an award, we cannot find that the jury abused its vast discretion in assessing its award for loss of consortium.
MRS. DELPHEN'S CLAIM FOR MENTAL ANGUISH
The plaintiffs complain that the trial judge erred in failing to provide a jury charge concerning Mrs. Delphen's claim for mental anguish. Damages for mental pain and anguish arising out of an injury to another may be awarded when: (1) the claimant has viewed an accident or injury or arrived upon the scene soon thereafter before the victim's condition has substantially changed; (2) the victim suffered a traumatic injury of such severity that one in the claimant's position would be expected to suffer serious mental anguish; (3) the emotional distress is serious and reasonably foreseeable; and (4) there is a close relationship between the victim and the claimant. Blair v. Tynes, 621 So.2d 591 (La.1993); Lejeune v. Rayne Branch Hosp., 556 So.2d 559 (La.1990). Gina Delphen's testimony related to distress due to the strain on the marriage, financial stress, and loss of her husband's support, which was linked to her claim for loss of consortium, rather than any debilitating injury caused by seeing her husband shortly after he was injured. If there were any error in not providing the jury charge, it was not reversible error because, as distressing as Mrs. Delphen's experience in seeing her husband soon after the accident must have *338 been, the plaintiffs did not provide evidence that her injury was severe and debilitating.
Accordingly, the judgment of the trial court is reversed with respect to Bridgestone and the plaintiffs' demands against Bridgestone are rejected. We reverse the judgment pertaining to the assessment of fault and render judgment allocating 50 percent fault to DOTD and 50 percent fault to Robert Delphen for his comparative negligence. We affirm the amount of the damage award.
REVERSED IN PART AND RENDERED.
NOTES
[1] In the record the plaintiffs' last name is also spelled "Delphin"; however, the plaintiffs' briefs and correspondence show that the plaintiffs' name is spelled "Delphen". | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1768813/ | 892 S.W.2d 20 (1994)
Mark METZGER, L.T. Bradt, and Joe Alfred Izen, Jr., Appellants,
v.
Judy SEBEK, Earle Lilly, Piro & Lilly, P.C., Depelchin Children's Center, Baylor College of Medicine, Ernest Kendrick, Michael D. Cox, Jean Guez, Barbara Taylor, Luisa Maria Acevedo Lohner, Ann M. Hodges, and Joel A. Nass, Appellees.
No. 01-92-00912-CV.
Court of Appeals of Texas, Houston (1st Dist.).
September 29, 1994.
Rehearing Overruled November 10, 1994.
*26 L.T. "Butch" Bradt, Houston, Joe Alfred Izen, Jr., Bellaire, for appellants.
*27 Randall D. Wilkins, Edward J. Hennessy, Donald M. Hudgins, Sheryl L. Mulliken Fike, James H. Barker, M. Karinne McCullough, Alan Magenheim, Donald B. McFall, R. Edward Perkins, Richard A. Sheehy, Lauren L. Beck, Roger Townsend, Sarah B. Duncan, Jennifer Bruch Hogan, William R. Pakalka, Nancy J. Locke, Houston, for appellees.
Before DUGGAN, HUTSON-DUNN and PRICE[1], JJ.
OPINION
PRICE, Justice (Assigned).
The plaintiff in a multi-cause of action lawsuit appeals from a directed verdict against him on all causes of action. He and his trial attorneys also appeal from sanctions entered against them by the trial judge. We affirm parts of the judgment, reverse and remand parts of the judgment, and reverse and render part of the judgment. We dismiss part of the appeal for want of jurisdiction.
I. The Evidence
The trial, before it was terminated by the judge's directed verdict, lasted over a month. The following evidence was adduced, in front of the jury unless otherwise noted.
Mark Metzger (Metzger) and his wife Judy (Sebek[2]) had three children: Marcus, Larry, and Danielle. In 1986, Metzger and Sebek separated. In October of that year, Metzger filed for divorce, alleging adultery. In the divorce proceeding, Metzger was represented by Burta Raborn (Raborn). Earle Lilly (Lilly) and Joel Nass (Nass) represented Sebek. Metzger was awarded sole managing conservatorship of the children, but he later agreed to joint managing conservatorship with Sebek.
The divorce case was ordered to "non-binding" arbitration in November, 1986. Metzger testified in a bill of exception that Lilly, in January, 1987, "entered a pleading in the court record requesting theit was an order for Child Protective Services, which was infusing into the case child abuse allegations." Although the divorce court's file is in our record, no such pleading is contained within it, or anywhere else in the record. We have no pleading in our record that "infus[es] into the case child abuse allegations" in or around January, 1987.
At some point during early 1987, Larry, now three and a half years old, was enrolled in Montessori Morning Glory School (the School). On February 20, personnel at the School reported a handprint bruise on Larry's stomach to Childrens' Protective Services (CPS). According to Sebek, this was the first time that Larry manifested a sign of abuse. The CPS record indicates that the "[p]hysical abuse has been substantiated," but that the "[p]erpetrator [is] unknown." Also in March, 1987, the School's progress reports on Larry indicated that he was unable to complete his work, he attacked other children, and he cried in a "heavy, emotional, depressed" manner.
Late in April, two of Larry's teachers at the School met separately with Metzger and Sebek to convey their concerns and recommend counseling. Sebek asked one of Larry's teachers, Rebecca Kugler (Kugler), who was also the School's director, to recommend a psychologist. Kugler referred her to several psychologists, among them Barbara Taylor (Taylor). The non-binding arbitration ended, unsuccessfully, on April 28.
On April 29, Sebek and Larry met with Taylor. While Sebek and Taylor talked, Larry began playing with the dolls in the meeting room. According to Taylor, Larry's play with the dolls was disturbing:
Larry took the dolls and stripped their clothes off. I mean ... had them all undressed.... It was a frantic activity. That was the first thing that caught my attention.
The next thing that he did, which was most unusual, was he took Scotch tape ... and he taped his own mouth, after which he took the Scotch tape and bound the legs of *28 the dolls together and taped them. He had ... a quality to his play that was eerie. [H]e would laugh and he would have this glimmer on his face that was very bizarre and strange ... and I said: There is something very wrong here.
[T]his activity and this stripping of the dolls and taping of the legs and then eventually at one point having dolls humping one another from behind and hiding under the stairwellI have a baby doll in my office that's a regular-size baby doll that he took behind the chair. He would leer over the chair at me and undress the baby doll and always with Scotch tape over his mouth and always was taping the mouths and the legs of the dolls, and the significance of that to me was that there is something that's very secret, that he is not supposed to tell, and that the tape over his mouth is an indication of the secretiveness of this.
Based on his appearance and his play, Taylor suspected that Larry was being sexually abused.
During this first meeting between Sebek, Larry, and Taylor, Sebek told Taylor that Metzger had twice previously been reported to CPS for child abuse. Shortly after the meeting, Taylor called Marie Senegel (Senegel), the CPS case worker, and informed Senegel of her suspicions. During their conversation, Senegel told Taylor that she was planning on closing the file on Metzger. Taylor asked Senegel to keep the case open, and Senegel agreed.
Taylor also attempted to get Metzger to meet with her. These attempts were unsuccessful.
Taylor next saw Larry on May 4. At that time, Larry
reenacted the sexual theme of stripping the clothes off the dolls, taping his mouth, taping their legs, and having the dolls hump one another ... There were different configurations. Sometimes the father doll is behind the child doll ...
That same day, Taylor called Kugler to obtain some information on the Metzger family. Kugler told Taylor about an incident when Metzger knocked Larry down and kicked him in the stomach because he had tripped over his shoelace. She also related an incident in which Larry "saw a little girl with a loving father and kicked the little girl in the head." He then "cracked up and began to sob and cry." Kugler did not implicate anyone in sexual abuse.
On May 7 and May 9, Metzger, Larry, and Marcus went to see Dr. Jerome Brown (Brown), another psychologist. Dr. Brown documented the following observations and conclusions:
The evaluation results for the children reveal difficulties for both of them, especially for the youngest, Larry. They are both troubled children ... Larry ... seems to be a more disturbed child....
With regard to the specific issue of sexual abuse of [Larry], there is no clear or definite way to use the evaluation results to determine whether or not such actions ever occurred. However, it can be stated that Mr. Metzger does not exhibit the personality characteristics, behaviors, background or attitudes typically associated with individuals who do commit such inappropriate acts. The level of involvement he has with [Larry] is unusual for the typical sex offender....
In summary, the present situation involving allegations of sexual abuse by Mr. Metzger of ... Larry should be viewed with considerable skepticism, in my opinion. Mr. Metzger simply does not exhibit the characteristics, attitudes or behavioral background of individuals who molest their children....
On May 11, Brown wrote Kugler, asking her to fill out a report on Larry's "functioning at school." Dr. Kugler's response included the following remarks:
[Larry] attacks children physically by hitting, kicking, throwing things at them, pushing, pouring water on them from a drinking glass, spitting, and pulling on clothing....
He is exhibiting confusion about discipline and love, appropriate physical contact with others and other alarming behaviors.... Larry undresses dolls and physically abuses them. He has made attempts to undress shy children and sleeping children *29 and on one occasion attempted to insert his finger into the anus of another child.... Larry places tape over his mouth when he sees tape on the art shelf of the classroom.
In late May or early June, Kugler and another teacher met with Metzger and Sebek to discuss Larry's behavior at the School, which had worsened. Kugler told Metzger and Sebek that Larry "was showing signs of sexual acting-out behavior, that the boy had become more aggressive, he was hitting other children...." Kugler requested that Metzger and Sebek remove Larry from the School because of his "aggressive behavior." Kugler also told Metzger and Sebek that, as a result of Larry's sexual acting-out, the School was going to report to CPS about Larry's sexually oriented behavior.
On June 2, Sebek moved the court to conduct a social study. Lilly suggested that the court appoint Dr. Jean Guez (Guez), a psychologist, to conduct the study. Raborn spoke to court personnel about Guez and approved Lilly's suggestion. The court appointed Guez, specifying that she should "perform psychological testing and evaluation of the children and the parties" and to make a written report of her findings to the court.
On June 3, Kugler reported to Senegel at CPS. Another CPS worker in turn reported to the Houston Police Department (HPD). HPD assigned Officer Sherry Turner Anderson (Anderson) to the case.
On June 4, Senegel called one of Larry's other teachers at the School. The teacher confirmed that Larry had been sexually acting-out in class.
On June 10, Senegal visited Metzger and Larry at Metzger's home. Senegel discussed "inappropriate touching" with Larry:
We discussed the parts of the body utilizing the anatomically correct dolls and he was easily able to name all parts including the private part area. We then discussed good and bad touches. I asked if anyone had given him a bad touch and he said no. I asked if he had touched anyone else and he said no.... I then told Larry that he should tell his parents if someone touches his private part area and he agreed....
Senegel also met with Marcus during this visit:
[Marcus] proceeded to tell me that Larry was put out of school for touching someone in the "butt" and he said that he does it all the time....
The next day, June 11, Sebek met separately with Guez and Senegel. Sebek expressed concern that someone was sexually abusing Larry, and she recounted a list of possible suspects, including some of Metzger's neighbors. She did not list Metzger among the people she thought might be responsible. When discussing the same subject with Senegel, she again mentioned Metzger's neighbors, but not Metzger.
Either on June 16 or 17, Guez evaluated Larry. Guez testified that her first evaluation of Larry was on June 17; her notes also indicate that June 17 was the first date. Senegel, however, testifying from a copy of her handwritten notes, stated that she called Guez on June 16, and that Guez told Senegal that she (Guez) had evaluated Larry and suspected that he had been abused. She testified that she had not seen her original handwritten notes, and that "[i]t's possible" that the date had been altered. She stated that "[t]he date could have been changed." Guez testified that she spoke to Senegal and reported her suspicion on June 17. Guez reported to Senegal that Larry was "troubled," and that he was possibly being sexually abused.
Guez stated that he evaluated Larry four times: on June 17 and 18, and on July 7 and 9. During this period, she obtained copies of Kugler's records, Brown's records, and Taylor's records. Guez' observations of Larry included the following:
Larry is acutely distressed.... His demeanor, affect, and behavior as well as the content of his play and projections suggest a strong likelihood of both physical and sexual abuse. The etiology of the abuse appears to be from a male figure and possibly a paternal figure.
Guez also stated that Larry's distress appears to relate to a history of sexual abuse, "most likely by his father."
*30 From the stand, Guez explained some of the reasons for her conclusion that it was "most likely" Metzger who was sexually abusing Larry:
[Larry] went over to a dollhouse and he removed the furniture from the room, and there's a group of family dolls that I have that go along with the dollhouse. He removed all of the furniture from one room, and he said: I'm scared to touch the daddy dolls. He took the daddy dolls and he put them behind his back and hid them and called them the daddy dolls.... He took two daddy dolls and he hid them behind his back.
. . . . .
Then he unclothed the little boy doll, hides it and starts smiling and becomes very secretive in his play with that doll. And then he looks at me ... and he points to the anus of the doll and he says: What's that? And he sort of smiles and appears to have a lot of anal interest at that point. He says: The chimney has smoke in it. This is daddy. He pulls out a daddy doll. He says: I have two daddies.... [T]hen he says he hurt him and the little boy with the two daddies, he's dead, and the mommy and the daddy are mad at each other, and the two daddies are together right now. He's got the two daddy dolls and the little boy doll in the middle, and he has the daddys [sic] back-to-front, and he says they're bad, real bad, and he bangs them against this little baby doll in the middle, and says they're having a spanking. That created some interest in me in sexual problems, fear of daddy, possibility of some type of abuse, be it physical, emotional or sexual with father figures.
Guez' conclusions included the following:
[T]here is a strong likelihood of both physical and sexual abuse suggested by [Larry's] behavior. The etiology of the abuse appears to be from a male figure and possibly a paternal figure.... A male figure and possibly a paternal figure was suggested to me by this boy's play, and specific references to his fear of daddy dolls and his preoccupation with being hurt and scared around daddy, wanting to run away from daddy's house.
Guez' notes and her testimony both reflect that Larry had said that he had two "daddies." Guez did not know to whom Larry was referring when he spoke of the second "daddy."
On June 26, Senegal asked Guez to serve as "case monitor" and to "inform us if abuse is disclosed." On June 30, Senegal noted in the CPS file on the case that "[a]t this time, the investigation is incomplete. Therefore, findings will be delayed until we are able to reinterview Larry for possible sexual abuse."
On or about July 2, HPD "cleared" the case against Metzger "as unfounded," noting that Larry himself had never stated that he had been abused. Anderson stated that there was "some evidence" to go forward with the case, but that there was just not enough evidence, particularly without a statement from Larry.[3] The report mentions that Sebek "suspects the father's friends" of abusing Larry, "as the father is gay."
On July 6, Guez evaluated Metzger. Her reports states that "[t]here is a preoccupation with sexuality which suggests a cloaked or latent polymorphous perverse orientation to the environment. His fantasies may include latent homosexual, bisexual, and exhibitionist feelings ... [T]he data suggest that... his rigid defensive stance belies emotional dysfunction particularly in the arena of interpersonal relations and sexuality."
On the morning of July 7, Sebek noticed that Larry was lying on the floor not wearing any underwear. Sebek testified about the incident as follows:
[H]e was playing with himself. And he was sort of in a traumhe was in a daze. And I said, Larry, and he was kind of straunched [sic] up on the floor. What are you doing. And he said I am playing with my privates. Jerking them up and down. I said has anybody ever done that with you. He said yes. And I said who. And trying to be calm about this whole thing. He said daddy. And I said, well, does he *31 do anything else with you. And he said he ties his feet.
. . . .
And he said other things about his daddy riding his back, calling him horsey and names and so it wasI assured him that he had done nothing wrong, that everything was going to be okay. And we talked a little bit about saying no, being firm and I called Dr. Guez and asked her what I should do with him.... [S]he recommended I take him out of the situation, the home and take him in another environment and that I had done the right thing by staying calm.
That afternoon, Metzger picked up Larry to attend an appointment they had with Guez. Pursuant to the court's temporary orders, Larry was to spend that night (and the night of July 9) with Metzger. While Metzger and Larry were with Guez, Sebek drove to Metzger's home to talk to Larry's baby-sitter. Because Sebek knew she had to leave Larry with Metzger that night, she asked the sitter to spend the night in Larry's room with Larry. Sebek told the sitter that she was concerned because Larry had been having "horrible nightmares"; the sitter promised Sebek that she would watch over Larry.
On July 9, Sebek reported Larry's statements to Senegal. She told Senegal she wanted to "file charges" against Metzger. Senegal scheduled an interview for Sebek and Larry for the next day, July 10.
In the interview, Senegal used anatomically correct dolls to question Larry. The following occurred (in Senegal's words):
Larry had a blue bicycle chain with him.... We again talked of touching, in terms of good touches and bad touches and I asked if anyone had given him a bad touch and he said yes, his father did. I asked how many times it happened and he said many times. I asked in which part of the house and he said the bedroom.... I then asked Larry to indicate with the dolls and he undressed the male doll and touched his private part area by moving it up and down. I then asked Larry about the bicycle chain and he said he and his father play with it. I asked him to show me and he tied the chain around his arms and also put it over his head and around his waist.
After interviewing Larry, Senegal recommended to Sebek that Metzger have no overnight visitation "because of the abuse." Senegal also recommended that Metzger's visits with Larry all be supervised.
Later that day, Senegal, Sebek, and Larry went to Anderson's office. Sebek gave a statement to Anderson about what Larry had said, and Senegal videotaped an interview with Larry for Anderson to view.
We have viewed the videotape. During its making, Larry fidgets constantly, sometimes standing on his head, sometimes sitting in the interviewer's lap, sometimes lying down, and sometimes moving around on his feet. We note the following occurrences, set out in chronological order, on the videotape:
* Larry correctly identifies the name of his "dad" as Mark.
* Larry has difficulty with the concepts of truth and lying:
Interviewer: Larry, do you know what a lie is?
Larry: Yeah.
Interviewer: Yeah. What is a lie?
Larry: I don't know.
Interviewer: Okay. Do you know if it's good or bad to tell a lie?
Larry: No.
Interviewer: No? You don't? Is it good to tell a lie?
Larry: Yeah.
Interviewer: Is it good to tell the truth?
Larry: Yes.
Interviewer: Okay, is it good, is it bad to tell a lie?
Larry: Yes.
Interviewer: Okay. Do you know what happens when you tell a lie?
Larry: Yeah.
Interviewer: What happens?
Larry: I don't know.
* Larry can correctly identify a person's "bottom" and "private parts" on anatomically correct dolls.
*32 * Larry denies several times that "anyone" has touched his private parts. After the last denial, however, he volunteers that "somebody did." The following exchange then takes place:
Interviewer: Somebody did? Who did?
Larry: I don't know.
Interviewer: You don't know?
Larry: (inaudible)
Interviewer: You do know? Who did?
Larry: Daddy.
Interviewer: Okay. What did he touch you with there?
Larry: I don't know.
Interviewer: You don't know. Did he touch you a lot of time or a little bit of times?
Larry: A little bit of times.
Interviewer: Little bit of time?
Larry: Yeah.
Interviewer: Did he touch you in the living room or the bedroom?
Larry: Bedroom.
* Later, Larry again correctly identifies his "daddy's name" as Mark:
Interviewer: What's your daddy's name, Larry?
Larry: Mark.
* The interviewer later asks Larry where "Mark" touched him, and Larry indicates the doll's crotch several times. After the last indication, Larry very visibly wets his pants.
* At the end of the interview, the interviewer questions Larry about the truthfulness of what he has said in the interview:
Interviewer: Now, everything you told me today, is it the truth or is it a lie? Are you telling me the truth?
Larry: A lie.
Interviewer: Huh?
Larry: A lie.
Interviewer: No? It's a lie?
Larry: Yeah.
Based on what she had heard and seen, Anderson decided to "reopen" the case against Metzger. The report notes that the case is "to continue pending presentation to the DA's office."
In a report dated July 13, Guez reported to the court concerning Larry's situation. Guez wrote:
[T]here is ample reason for alarm in regard to the psychological well being of these children and in particular ... Larry. Different from the acute distress which the children are experiencing relative to the current litigation and hostility between these two parents, there is a chronic history of trauma, possible abuse both physical and sexual.... Larry exhibits severe signs of depression, self-abuse, uncontrolled acting-out and aggression and a general paucity of either ego controls or nurturing. The deficits in this little boy are so great as to certainly warrant intense psychological intervention, even on an in-patient status. Larry's distress appears to relate to a history of both sexually and physically abuse [sic] most likely by his father. The abuse ... [appears to be] more in line with fondling and exhibitionism.
Guez also wrote that neither Sebek or Metzger was capable of adequately caring for Larry:[4]
These children have been raised in an environment where the father has taken an authoritarian, rigid, punitive role and where the mother has taken a passive-submissive and helpless role. Both extremes are to a fault and neither on its own can supply the psychological needs of these children.... In the first setting, they are more prone to be behaviorally controlled, but emotionally damaged and in the latter setting they are more likely to be behaviorally out of control, but more emotionally supported. The lack of a core identity in Mrs. Metzger keeps her from being able to provide direction either for herself or for her children and she will need a massive dose of parenting skills and *33 support in order to provide an appropriate environment in which these children can thrive. Mr. Metzger's interpersonal and sexual problem and reliance upon authoritarian models of the family make him a poor candidate to be Managing Conservator of these children. That is not to say he should not be allowed father-son or father-daughter relationships with his children. But it is to say that overnight visitation is not recommended, at least for the younger two at this time....
It is recommended that if Mrs. Metzger can get herself psychological support and education on parenting that she be given sole Managing Conservatorship and that Mr. Metzger be allowed a status of PC under limited circumstances....
At trial, Guez elaborated on Metzger's "sexual problem" (the term she used in her report). She testified that Metzger had "difficulties in gender identity, in sexual expression, and in fantasy associated with sexual issues."
On July 14, Sebek's attorneys, Lilly and Nass, moved for a temporary restraining order, seeking to stop Metzger from exercising his visitation rights with his children. The motion was based on Guez' report (a copy of which Nass had previously obtained) and information obtained from Sebek, Taylor, and the School, and was supported by affidavit. The certificate of service on the motion indicates that a copy of the motion was hand-delivered to Raborn.
At the hearing on July 14, the court granted an ex parte temporary restraining order prohibiting Metzger's access to his children. The court set a hearing for July 17.
Later on July 14, Guez called Senegal and told her that she had filed a report with the court in which she stated her suspicion that Metzger was sexually abusing Larry. Guez also told Senegal that she believed Larry should be hospitalized.
The next day, July 15, Senegal called Metzger to schedule an office visit for them to discuss the allegations of sexual abuse. Metzger said he needed to discuss the matter with his attorney and would call Senegal the next day. When Metzger called the next day, he informed Senegal that his attorney advised that he should have no contact with her until after the hearing on July 17.
On July 17, the judge met with Lilly, Nass, Raborn, Senegal, and Guez. Lilly, Raborn, and Guez all testified regarding what occurred in the conference. Their testimony is substantially the same and reflects the following: Guez paraphrased the contents of her report, and stated that, in her opinion, Larry had been sexually abused, by a male, while in the care and custody of his father. She stated that neither Metzger or Sebek was currently able to adequately care for Larry, and that she wanted to place Larry in Depelchin Children's Center (Depelchin) because she feared for Larry's safety, physical and psychological. Although nothing was specifically voiced by Guez or Senegal, both Raborn and Lilly understood that, if they would not accept Guez' recommendation that Larry be hospitalized, CPS, with the support of Guez, would attempt to intervene in the lawsuit and seek Larry's hospitalization.
Raborn found Guez "articulate," "persuasive," "professional," and "credible." She believed that the judge would accept Guez' recommendations and put Larry in Depelchin "based upon his view of the best interest of Larry Metzger." She therefore advised Metzger, after the conference, to settle the case "and try to work something out with regard to [Depelchin] so that he could maximize the amount of time that he would have with the children." Raborn advised Metzger that, if he agreed to having Larry put in Depelchin, "he might have a little control over" the conditions of Larry's hospitalization, i.e., his visitation rights there. She advised him that if he did not agree to hospitalization, the court would probably do it anyway, and he would then probably have much less say in visitation.
When Guez left the conference, she encountered Metzger outside the conference room. She told him that his children, and particularly Larry, were not safe, and that they needed to be in "some type of protective setting," either "a hospital [or] foster care."
On July 20, the judge, Metzger, Raborn, Sebek, and Lilly signed an agreed divorce *34 decree. The decree included the following terms:
* Sebek is appointed managing conservator of the children.
* Metzger is appointed possessory conservator.
* Larry is to be placed in Depelchin for 30 days, the cost to be borne primarily by Sebek.
* Sebek shall enter therapy with Guez "as pertains to the parent-child" relationship.
* "As a condition of possession of and access to the minor children," Metzger shall enter therapy with Dr. Blair Justice, or, if Dr. Justice is unable to serve as Metzger's therapist, with "a substitute psychologist or psychiatrist as recommended by Dr. Jean Guez."
Guez was to be "the liaison [ ] between the treating professionals and the legal professionals to determine the best interest" of Larry after the divorce.
Sebek enrolled Larry at Depelchin on July 21. She signed a consent form which stated that Larry "will receive ... accepted psychiatric treatment and normal medical treatment by the staff" while he is a patient. She also was presented with (among other forms) a form entitled "Movie Permission," which stated as follows:
Sometimes during a patient's stay with [Depelchin], movies with ratings of PG 13 and R are shown specifically for therapeutic content. These movies are always pre-viewed and approved by the treatment team. After viewing, the content is utilized for group dynamic processing.
May we have your permission to allow your child to view these movies with the group, if shown?
Yes
No
Sebek checked "Yes" and signed the form.
Larry was admitted to a 10-to-12 bed unit of Depelchin. His treatment team consisted mainly of Dr. Ernest Kendrick, Dr. Luisa Lohner, and Dr. Ann Hodges (all of whom we will refer to by their respective last names). Dr. Kendrick, from Baylor College of Medicine (Baylor), was the head of the team.
Larry was evaluated shortly after being admitted. Kendrick opined that Larry "had a variety of behaviors that were unusual, abnormal, and for a child his age ... dysfunctional for him." Under "Findings," Larry's psychiatric evaluation form lists seven disorders with the notation "R/O," for "rule out," before the disorders.[5] Guez informed Metzger of the "rule outs." Metzger understood that the "rule outs" were disorders that the evaluating physician had already concluded were not present in Larry; in other words, that these seven disorders had been "ruled out" as possible problems. Metzger reasoned that, because these seven disorders had been, in his mind, eliminated, the staff at Depelchin had concluded that Larry had not been sexually abused.
Actually, however, according to Kendrick, "rule out" means just the opposite:
[R]ule out does not mean that any particular event is eliminated as a possibility.... It actually means just the contrary, that that's part of the differential diagnosis and we are interested to see if those particular things might be what's going on with the patient.... The significance of it is to communicate to other people who are who may be involved in reviewing the patient's treatment what it is you are thinking about as possibilities that may be the ideology or at least maybe thewhat's going on with the patient diagnostically, because that often will indicate treatment.
The other health care professionals who testified regarding the meaning and significance of "rule out" gave it the same meaning and significance as Kendrick.
Upon receiving news of the "rule outs," Metzger called Senegal. He requested a meeting with Senegal and her supervisor. Metzger told Senegal that his "rights had been violated"; that Larry's psychiatric evaluation had "ruled out" sexual abuse; that he and Senegal had been "manipulated and used *35 by the system"; and that he had not abused Larry.
Senegal and Metzger arranged to meet the next day. Metzger, however, called the next day and cancelled the meeting, because "something had come up."
Dr. Justice was not available to counsel Metzger; therefore, pursuant to the divorce decree, another doctor had to be secured for that purpose. Metzger asked Kendrick for a recommendation, and Kendrick endorsed Dr. Michael Cox (Cox). Guez approved this choice, and Metzger contacted Cox immediately to begin therapy.
The first month or so of Larry's stay at Depelchin was marked by problems, including the following:
* Larry was often physically aggressive and confrontational with other children. Some of these episodes ended with the other child striking back against Larry and subduing him.
* Larry often struck staff members.
* Larry went to the bathroom in his pants several times, on one occasion smearing excrement on the walls and floor.
* Larry used bad language (words such as "f___" and "a___e") on numerous occasions, cursing the staff and other children;
* Larry stated that two older female children come into his room at night and touch his penis. He then recanted, twice stating that the girls did not do anything.
* Larry often played with his privates, and was noted to "act out sexually." On one occasion, he was noted lying on his stomach with his pants and underwear down. He had "stuck a little toy car up between his buttocks." When asked about the incident, Larry said he had put the car in his "butt" because, "If I didn't do that, something would get me." When asked who told him that, Larry replied, "my daddy."
On August 11, Metzger visited Larry during a "play therapy session." He did not see Larry again until September.
On August 21, upon Larry's having completed one month's stay in Depelchin, Kendrick, Taylor, Guez, Lohner, and Senegal met to discuss Larry's case. Larry's diagnosis was "post-traumatic symptoms due to sexual abuse, possibly by Mr. Metzger, as well as possible physical abuse." Another note stated that "[a]t present there are still questions about both parents' capacity to parent; however, Ms. Metzger is the least detrimental." The following plan was also reported:
Larry will remain hospitalized for an additional 30 days and Mr. Metzger's visitations will remain the same. Larry can be released to Ms. Metzger once her ability to protect increases and this will be based on three criteria:
a. Her plans for day-care.
b. Her increased parenting skills and therapy for she and Larry.
c. Ms. Metzger's commitment to long-term treatment for Larry.
The report from the August 21 meeting concludes with this note: "The card Mr. Metzger had given to Larry was also disclosed and it displayed two gorillas, one on top of the other one, which was determined inappropriate."
Anderson presented HPD's file on the case to Marie Munier (Munier), Chief of the Child Abuse Unit of the District Attorney's Office, who decided to go forward. Child Abuse Unit personnel contacted those appellees who had records on Larry and subpoenaed their records. None of the appellees initiated contact with the District Attorney's Office or volunteered information.
By September 17, Larry had achieved some progress. Kendrick reported that Larry no longer used the bathroom in his pants or wet his bed.
On September 25, Munier spoke by telephone to Cox. Cox agreed that someone had been abusing Larry, but pointed out that Larry had called other adult males besides Metzger "daddy." Munier thus decided that, in order to ascertain whether Larry actually meant Metzger when he had implicated, on previous occasions, "daddy" in his sexual abuse, Larry should view a photospread and be asked to identify who had abused him. Munier asked Anderson to arrange a photospread that included pictures of Metzger, Sebek's boyfriend (whom Metzger had identified as a possible perpetrator), and others. *36 Anderson went to Depelchin and showed Larry the photospread. Larry picked out Metzger's picture.
On October 2, Senegal called Kendrick about Larry's progress. Kendrick related that Larry had regressed within the last 10 days and had started soiling his pants again. Kendrick also noted that Larry's play "is also regressing to sexual connotations again." He also reported that Metzger had visited Larry twice a week lately, and opined that Larry's regression "has a direct association to Mr. Metzger's re-entry into Larry's life." Kendrick projected that Larry would need to remain in Depelchin for another 30 days. He expressed reservation regarding whether either of Larry's parents could adequately care for him.
On October 27, Munier presented the case regarding Metzger to a grand jury. She presented both the evidence that tended to incriminate Metzger in the sexual abuse of his son, and the evidence that tended to exculpate him.
Cox was the only witness to testify. Excerpts of his testimony include the following:
* "I have no evidence from the standpoint of psychological test that would leave [sic] me to believe he is a sex offender."
* "I don't believe [Metzger] ever touched this child for his own sexual gratification."
* "If I was blind and said, `Give me this stuff and the test results on this. Is this guy likely to offend?' I would say `no.'"
Later in Cox' testimony, Munier confronted him with the fact that Larry had picked Metzger out of a photospread. She asked Cox, "Does that change your opinion now?" He replied:
[I]f the interview and picture session were a valid one ... I assume it was a valid interview and I assume that Larry validly indicated Mark and to me, yeah, that is the most significant data point.
The grand jury indicted Metzger for sexual indecency with a child. The charges were dismissed, however, on the district attorney's motion, made after the trial court ruled that Larry was incompetent to testify.
On November 11, Depelchin discharged Larry. In the "closing summary," Kendrick wrote:
Although Larry made significant progress while in therapy, he needs to continue with outpatient care to decrease his depression and self-abusive behaviors, increase his trust in adults, increase his ability to protect himself by enlisting the aid of significant others, and reduce his aggressive behaviors. His parents need to continue in therapy to increase their parent management skills and improve their abilities in protecting and communicating with Larry.
On July 25, 1988, Guez issued her final report to Raborn and Lilly. She observed that "Larry is doing remarkably well"; that "Mark and Judy Metzger have made measurable progress in regard to their own therapy and parenting skills," but also that "[b]oth... continue to have a higher priority attached to their own needs than to the children's...."; and that "[i]n regard to visitation issues, it is imperative that the status quo be maintained.[6] Night terrors and bedwetting continue to occur after visitations with Mr. Metzger and increased time or unsupervised time is not considered to be in the best interest of the children."
On July 13, 1989, Metzger filed suit in federal court against the appellees and others, since dismissed. On August 16, 1990, the federal court dismissed Metzger's case on the ground that "the Court abstains from exercising jurisdiction even if, arguably, that jurisdiction exists." Metzger then brought suit in state court.
At the time of trial, Metzger's petition asserted the following causes of action:
1. civil conspiracy "for the unlawful purpose of maliciously, and without probable cause, bringing a criminal prosecution against Plaintiff for allegedly having sexually abused" Larry;
2. civil conspiracy "to [extort from and] defraud Plaintiff of valuable property and liberty interests, protectable under both the Texas and United States Constitutions";
3. malicious prosecution;
*37 4. "deprivation of civil rights based upon malicious prosecution";
5. intentional infliction of emotional distress;
6. medical negligence for "negligently misdiagnos[ing] Larry as having been physically and sexually abused by Plaintiff" (asserted only against Depelchin, Baylor, Kendrick, Lohner, Cox, and Taylor);
7. negligent infliction of emotional distress (asserted only against Depelchin, Baylor, Kendrick, Lohner, Cox, and Taylor); and
8. civil RICO (Racketeer Influenced and Corrupt Organizations Act)[7].
After hearing Metzger's evidence, the trial court granted a directed verdict for all appellees on all applicable causes of action; the court did not state the specific ground or grounds on which it granted the motion. The court then sanctioned Metzger and his trial attorneys, L.T. "Butch" Bradt (Bradt) and Joe Alfred Izen, Jr. (Izen).
II. A Fair Trial Before An Unbiased Judge
The appellants contend that the trial court denied them "a fair and impartial trial," and did not act as an unbiased court. They complain that the court "disparag[ed]" counsel "both in and out of the presence of the jury," and that the court "accus[ed] counsel... of lying to the court and jury." This includes Metzger's sixth point of error, Bradt's tenth, eleventh, and twelfth points of error, and Izen's eleventh, twelfth, and thirteenth points of error.
We note initially that, because the judge removed this case from the juryand thus the jury did not decide anythingMetzger could not have been harmed by the jury perceiving from his attorneys' conflicts with the judge that the judge was against him, if indeed the jury did so perceive. We also note that the judge never accused counsel of lying. On three occasions, he admonished Metzger's counsel not to mislead, each time with some reason:
1. Outside the presence of the jury, the judge told Izen that he had misled the court, asked him why he did it, and instructed him not to do it again. Izen had stated that Guez suspected other people besides Metzger of abusing Larry, when Guez had actually said that Sebek had told her that she, Sebek, suspected other people of the abuse.
2. While questioning his witness, Izen referred to a medical report as being written by Taylor, when in fact the witness he was examining at the time had just testified that she herself had written the report. Defense counsel objected to the question, pointing out that the report had not been written by Taylor. The judge sustained the objection, and then told Izen, "don't mislead me anymore."
3. When Izen was cross-examining Lilly, Lilly testified four times that he had not seen a videotape before trial. Izen then asked him whether he remembered what was on the videotape. After an objection by defense counsel, the judge told Izen to "think again" if he thought he was going to mislead the lawyers, the judge, and the jurors, and told him that he had tried to "misrepresent evidence."
The propriety of the judge's comments will be discussed below. With these preliminary observations, we turn to our analysis of the appellants' complaint.
1. The substance of the parties' right
The parties have a right to a fair trial under both the United States Constitution and the Texas Constitution. See In re Murchison, 349 U.S. 133, 136, 75 S.Ct. 623, 625, 99 L.Ed. 942 (1955) (holding that "[a] fair trial in a fair tribunal is a basic requirement of due process"); Babcock v. Northwest Memorial Hosp., 767 S.W.2d 705, 708 (Tex.1989) (holding that, "[i]n Texas, the right to a fair and impartial trial is guaranteed by the Constitution"). In Texas, part of the right to a fair and impartial trial is also secured by statute. See Tex.Gov't Code Ann. § 62.105 (Vernon 1988).
One of the most fundamental components of a fair trial is "a neutral and detached judge." Ward v. Village of Monroeville, *38 409 U.S. 57, 62, 93 S.Ct. 80, 84, 34 L.Ed.2d 267 (1972). A judge should be fair and impartial and not act as an advocate for any party. Delaporte v. Preston Square, Inc., 680 S.W.2d 561, 563 (Tex.App.Dallas 1984, writ ref'd n.r.e.). A judge should not be any party's adversary. Ex parte Finn, 615 S.W.2d 293, 296 (Tex.Civ.App.Dallas 1981, no writ); see Delaporte, 680 S.W.2d at 563. The impartiality of the judge is not only a matter of constitutional law, but of public policy, as well:
Public policy demands that a judge who tries a case act with absolute impartiality. It further demands that a judge appear to be impartial so that no doubts or suspicions exist as to the fairness or the integrity of the court. Judicial decisions rendered under circumstances that suggest bias, prejudice or favoritism undermine the integrity of the courts, breed skepticism and mistrust, and thwart the principles on which the judicial system is based.
CNA Ins. Co. v. Scheffey, 828 S.W.2d 785, 792 (Tex.App.Texarkana 1992, writ denied) (citations omitted).
Every trial court has the "inherent power" to control the disposition of the cases on its docket "with economy of time and effort for itself, for counsel, and for litigants." Landis v. North Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 166, 81 L.Ed. 153 (1936). "How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance." Id. at 299 U.S. at 254-55, 57 S.Ct. at 166.
In Texas, a trial court's exercise of its "inherent power" is partially promoted by, and partially guided by, the Texas Rules of Civil Procedure, which "provide a trial judge with the tools to facilitate the litigation of lawsuits and, to a certain extent, to prevent abuse of the legal process." Waguespack v. Halipoto, 633 S.W.2d 628, 629 (Tex.App. Houston [1st Dist.] 1982, writ dism'd w.o.j.). Together, the court's "inherent power" and the applicable rules of procedure and evidence accord judges broad, but not unfettered, discretion in handling trials. See Texas Employers Ins. Ass'n v. Loesch, 538 S.W.2d 435, 440 (Tex.Civ.App.Waco 1976, writ ref'd n.r.e.) (holding that court may place some limits on voir dire examination); Tex.R.Civ.P. 270 (allowing the court the discretion to permit "additional evidence" to be offered); Tex.R.Civ.P. 286 (stating that "[a]dditional argument may be allowed in the discretion of the court" in the event that the jury receives further instructions after having retired); Tex.R.Civ.Evid. 611(a) (giving the court "reasonable control" over the interrogation of witnesses and presentation of evidence).
2. The obligations of the judge and attorneys
The judge is responsible for the general conduct and management of the trial. Pitt v. Bradford Farms, 843 S.W.2d 705, 706 (Tex.App.Corpus Christi 1992, no writ); Food Source, Inc. v. Zurich Ins. Co., 751 S.W.2d 596, 600 (Tex.App.Dallas 1988, writ denied); French v. Brodsky, 521 S.W.2d 670, 679 (Tex.Civ.App.Houston [1st Dist.] 1975, writ ref'd n.r.e.). In fulfilling this responsibility, the court has discretion in expressing itself while managing the trial. Pitt, 843 S.W.2d at 706; Food Source, 751 S.W.2d at 600; Texas Employers Ins. Ass'n v. Draper, 658 S.W.2d 202, 209 (Tex.App.Houston [1st Dist.] 1983, no writ); Best Inv. Co. v. Hernandez, 479 S.W.2d 759, 761 (Tex.Civ.App. Dallas 1972, writ ref'd n.r.e.). The judge may properly intervene in the proceedings to maintain control and promote expedition. Food Source, 751 S.W.2d at 600; French, 521 S.W.2d at 679. The judge should, however, refrain from verbally confronting or displaying displeasure toward counsel, particularly in the presence of the jury. Pitt, 843 S.W.2d at 706; Food Source, 751 S.W.2d at 600; French, 521 S.W.2d at 679. During trial, the judge should not make unnecessary comments or remarks that may result in prejudice to a litigant. Brown v. Russell, 703 S.W.2d 843, 847 (Tex.App.Fort Worth 1986, no writ); Crawford Chevrolet, Inc. v. McLarty, 519 S.W.2d 656, 664 (Tex.Civ. App.Amarillo 1975, no writ).
"Lawyers [] have the responsibility to conduct themselves with respect for the tribunal and the legal system." Shaw v. Greater Houston Transp. Co., 791 S.W.2d 204, 211 (Tex.App.Corpus Christi 1990, no *39 writ). The lawyers (and parties) should not engage in behavior likely to invoke proper admonishment from the court. See Pitt, 843 S.W.2d at 707; Draper, 658 S.W.2d at 209.
3. The standard of review
To reverse a judgment on the ground of improper conduct or comments of the judge, we must find (1) that judicial impropriety was in fact committed, and (2) probable prejudice to the complaining party. Pitt, 843 S.W.2d at 706; Brown, 703 S.W.2d at 847; see Food Source, 751 S.W.2d at 600; Tex.R.App.P. 81(b). We examine the entire record to determine whether these factors are present. Pitt, 843 S.W.2d at 706-707; Brown, 703 S.W.2d at 847.
4. Analysis and resolution
The statement of facts in this case is over 4400 pages long. We have read it in its entirety, including all of the many episodes where the judge and one or both of Metzger's trial attorneys had any sort of interaction. The appellants complain of over 150 of these episodes.
The great majority of the interactions between the judge and Metzger's attorneys was innocuous; many were just exchanges during which the judge disagreed with Metzger's attorneys on some point, such as when the judge would sustain an objection made by defense counsel. In some of these instances of disagreement, the disagreements became unpleasant, marked by perceptible sharpness on both sides. In other of these instances, the judge was abrupt, terse, or gruff with Metzger's attorneys. There is no doubt from this record that the judge sometimes lost his patience with them over the course of the proceedings, which lasted more than a month.
Nor is there any doubt that the judge's patience was sorely tested by the behavior indeed, sometimes the anticsof Metzger's attorneys. The record reflects that, to a large degree, Metzger's attorneys invited the court's agitation and impatience by their behavior. For example, Metzger's attorneys repeatedly violated the order in limine; violated other orders of the court; interrupted the judge; grumbled audibly about rulings; laughed at the judge; misread documents; and attempted to mislead the judge and some witnesses. Metzger's attorneys often earned the impatience and intolerance sometimes shown them by the judge.
In several encounters, the remarks of the judge may indeed have created an impression in the minds of the jurors that the judge was impatient, agitated, and angry at the behavior of Metzger's counsel. This is regrettable. However, as noted, counsel contributed to a very large degree to the state of mind that produced the judge's sometimes sharp rebukes. We find no evidence, however, that the judge's impatience was anything more than that, and no evidence of bias against Metzger or his attorneys. The judge's agitation did not lead to partiality. Nor did the judge become an advocate. The record indicates that the judge's comments were mainly directed to the often disorderly process of the triala process over which the law makes him responsible.
For us to set out and analyze in this opinion each episode of conflict cited by the appellants would benefit no one. See Best Investment, 479 S.W.2d at 761 (where appellant complained of judge's statements that allegedly embarrassed counsel and that allegedly showed the judge had become an advocate for the other side, court of appeals, in overruling point, declined to set out the various remarks complained of, stating that "[i]t would serve no useful purpose" and that the court "ha[s] carefully read and considered same and are of the opinion that none of them or all of them taken together constitute error"); see also Glasser v. United States, 315 U.S. 60, 83, 62 S.Ct. 457, 471, 86 L.Ed. 680 (1942) (Court declined to separately consider "numerous instances of alleged prejudicial misconduct" because to do so "would unduly extend this opinion," and held "after due consideration" that there was no reversible error). It would needlessly lengthen an already long opinion, be of no aid to the parties and their attorneys, and provide no significant guidance to the bench and bar.
We hold that Metzger has not shown the prejudice required for us to reverse and remand on this ground. See Pitt, 843 S.W.2d *40 at 706; Brown, 703 S.W.2d at 847. As noted, the jury did not decide this case, so any prejudice against Metzger that the encounters between the judge and Metzger's attorneys may have produced in the minds of the jurors is irrelevant.
Indeed, there is authority that the jury's not deciding this case makes the appellants' complaint about the judge moot. See Best Investment, 479 S.W.2d at 761 (holding that "the point of error" based on the judge's allegedly improper remarks "seems to be moot since the case was withdrawn from the jury's consideration and judgment rendered by the court"). However, in at least one case, a court of appeals has reversed a judgment on this ground "[e]ven though many of the[] incidents occurred outside the presence of the jury," holding that "the cumulative effect of all of [the judge's] acts deprived appellants of a fair trial." Shaw, 791 S.W.2d at 211 (emphasis added).[8] Here, even considering the "cumulative effect" of all of the judge's comments, we cannot say that Metzger's right to a fair trial was compromised by the court's behavior. Those instances where the court showed less patience or decorum than it should have do not amount to reversible error.
Based on the above, we overrule Metzger's sixth point of error. We also overrule Bradt's tenth, eleventh, and twelfth points of error, and Izen's eleventh, twelfth, and thirteenth points of error, but for a different reason. The right to a fair trial before an impartial judge is the litigant's right, not the attorney's. Bradt and Izen do not have standing to complain of this alleged error. See Gibson v. Richter, 97 S.W.2d 351, 352 (Tex.Civ.App.San Antonio 1936, no writ).
III. The Directed Verdict
Metzger argues that the trial court erred in granting all of the defendants a directed verdict on all of his causes of action. This includes Metzger's third and seventh points of error.
Bradt and Izen also allude to the granting of the directed verdict as error. However, even if their discussions of the issue could be construed as valid argument under Tex.R.App.P. 74(f)an issue we do not decidethey still lack standing to complain of the alleged error. See Gibson, 97 S.W.2d at 352.
1. The standard of review
Where a trial court grants a motion for directed verdict without stating the specific ground or grounds on which it is relying, the verdict must be upheld if any of the grounds stated in the motion are meritorious. McCarley v. Hopkins, 687 S.W.2d 510, 512 (Tex.App.Houston [1st Dist.] 1985, no writ). A directed verdict is proper if (1) a defect in the non-movant's pleadings makes them insufficient to support a judgment; (2) the evidence conclusively proves a fact that establishes the movant's right to judgment as a matter of law, or negates the right of the non-movant to judgment; or (3) the evidence is insufficient to raise a fact issue on the cause of action at issue. Edlund v. Bounds, 842 S.W.2d 719, 723-24 (Tex.App.Dallas 1992, writ denied); McCarley, 687 S.W.2d at 512. The trial court should not weigh the credibility of the witnesses in determining whether a directed verdict is warranted. Do v. Huber, Formagus, Holstead & Guidry Ins., Inc., 728 S.W.2d 852, 853 (Tex.App. Beaumont 1987, no writ).
In reviewing a directed verdict, we consider all of the evidence in the light most favorable to the party against whom the verdict was directed, disregarding all contrary evidence and inferences. Qantel Business Sys., Inc. v. Custom Controls Co., 761 S.W.2d 302, 303 (Tex.1988); Edlund, 842 S.W.2d at *41 723. We determine whether there is any evidence of probative force to raise a fact issue on the material question presented. Edlund, 842 S.W.2d at 723. If such evidence exists, it was error for the trial court to direct a verdict; the question should have been presented to the jury. Id. at 724.
2. Metzger's causes of action
A. Negligent infliction of emotional distress
In Texas, there is no cause of action for negligent infliction of emotional distress. Boyles v. Kerr, 855 S.W.2d 593, 594 (Tex.1993). At the time of trial, however, this cause of action did exist. See St. Elizabeth Hosp. v. Garrard, 730 S.W.2d 649, 653-54 (Tex.1987). Nevertheless, because Metzger did not proceed solely on this theory at trialhaving proceeded on seven other causes of action, as wellwe apply the holding in Boyles and affirm the judgment for the defendants on negligent infliction of emotional distress. See Boyles, 855 S.W.2d at 594, 603 (where plaintiff failed to assert alternative causes of action perhaps because, under Garrard, this tort still existed, and thus proceeded only on this cause of action, court held that, although case had to be reversed because tort was abrogated, case was remanded for new trial for plaintiff to assert other possible theories of recovery). The abolishment of this tort in Boyles did not leave Metzger without a viable theory of recovery, as his pleading of seven other applicable causes of action shows. Therefore, unlike in Ms. Kerr's case, there is no need to remand so that Metzger can plead new theories in the place of this one, because he did not rely solely on this theory at trial.
We affirm the directed verdict regarding negligent infliction of emotional distress.
B. Medical malpractice
Metzger pled medical malpractice against Depelchin, Baylor, Kendrick, Lohner, Cox, and Taylor, for "negligently misdiagnos[ing] Larry as having been physically and sexually abused by Plaintiff." However, "a mental health care professional owes no professional duty of care to a third party to not negligently misdiagnose a condition of a patient." Bird v. W.C.W., 868 S.W.2d 767, 772 (Tex.1994). In Bird, the supreme court held that a summary judgment granted to a psychologist accused of negligently misdiagnosing a child as having been sexually abused by his father was proper, because the psychologist "owed no professional duty to the father to not negligently misdiagnose the condition of the child." Id. at 770.
Bird applies here. We affirm the directed verdict regarding medical malpractice.[9]
C. Malicious prosecution
"Public policy requires that there be wide latitude in reporting facts to a prosecuting authority in order that the exposure of crime not be discouraged." Compton v. Calabria, 811 S.W.2d 945, 949 (Tex.App.Dallas 1991, no writ). "Protection is [] afforded to one who makes a full and fair disclosure to the prosecuting attorney." Ellis County State Bank v. Keever, 888 S.W.2d 790, 794 (1994). The gravamen of a malicious prosecution action is that the defendant improperly made the plaintiff the subject of legal process to the plaintiff's detriment. Browning-Ferris Indus., Inc. v. Zavaleta, 827 S.W.2d 336, 338 (Tex.App.Corpus Christi 1991, writ denied); Daniels v. Conrad, 331 S.W.2d 411, 415 (Tex.Civ.App.Dallas 1959, writ ref'd n.r.e.) (quoting Daughtry v. Blanket State Bank, 60 S.W.2d 272, 273 (Tex.Civ. App.Austin 1933, no writ)).
At the time this case was tried, a plaintiff against whom criminal proceedings were instituted was required to establish seven facts to prove malicious prosecution: (1) the commencement of a criminal prosecution against the plaintiff; (2) that the prosecution was caused by the defendant or through its *42 aid or cooperation; (3) that the prosecution terminated in favor of the plaintiff; (4) that the plaintiff was innocent; (5) that there was no probable cause for the proceeding; (6) that the defendant acted with malice; and (7) damages. Zavaleta, 827 S.W.2d at 338; Compton, 811 S.W.2d at 949; Thomas v. Cisneros, 596 S.W.2d 313, 316 (Tex.Civ. App.Austin 1980, writ ref'd n.r.e.); Pete v. Metcalfe, 8 F.3d 214, 219 (5th Cir.1993).[10] "One accused of malicious prosecution is rightly aided by `an initial presumption that a defendant acted reasonably and in good faith and therefore had probable cause.'" Keever, 888 S.W.2d at 794 (quoting Akin v. Dahl, 661 S.W.2d 917, 920 (Tex.1983), cert. denied, 466 U.S. 938, 104 S.Ct. 1911, 80 L.Ed.2d 460 (1984)).
The issue of whether probable cause existed does not turn on the guilt or innocence of the malicious prosecution plaintiff. Fisher v. Beach, 671 S.W.2d 63, 66 (Tex.App.Dallas 1984, no writ); Parker v. Dallas Hunting & Fishing Club, 463 S.W.2d 496, 500 (Tex.Civ.App.Dallas 1971, no writ); Ledesma v. Dillard Dep't Stores, Inc., 818 F.Supp. 983, 986 (N.D.Tex.1993). Even an acquittal is not evidence of a lack of probable cause. Fisher, 671 S.W.2d at 66; Parker, 463 S.W.2d at 500; Parkerson v. Carrouth, 782 F.2d 1449, 1452 (8th Cir.1986); Ledesma, 818 F.Supp. at 986. Similarly, the dismissal of the criminal case before trial is not evidence of a lack of probable cause. Ada Oil Co. v. Dillaberry, 440 S.W.2d 902, 910 (Tex.Civ.App.Houston [14th Dist.] 1969, writ dism'd); see Ledesma, 818 F.Supp. at 986.
In their motion for directed verdict, the appellees advanced one ground for a directed verdict on the cause of action of malicious prosecution: the existence of probable cause. The record reveals that, during the proceedings, the trial court temporarily excused the jury and itself received the evidence on probable cause. The trial court, in other words, was the finder of fact regarding probable cause.
While this procedure is unusual, the record reflects that it had the approval of all of the attorneys and the judge. Metzger attacks the procedure on appeal, arguing in his fourth point of error that the court erred "in ruling on ... probable cause for malicious prosecution," and that the court had thereby infringed on Metzger's "right to trial by jury."
Metzger is estopped from bringing the point. The record shows more than once that his counsel expressly agreed to try the issue of probable cause to the court, on one occasion even pointing out some of the benefits of proceeding in that fashion. A party cannot encourage the court to take a particular action and then complain on appeal that the court erred by taking it. Austin Transp. Study Policy Advisory Comm. v. Sierra Club, 843 S.W.2d 683, 689 (Tex.App.Austin 1992, writ denied); Dolenz v. American Gen. Fire & Casualty Co., 798 S.W.2d 862, 863 (Tex.App.Dallas 1990, writ denied). We overrule Metzger's fourth point of error.
In the context of malicious prosecution, probable cause is "the existence of such facts and circumstances as would excite belief in the mind of a reasonable person, acting on facts within his knowledge, that the person charged was guilty of the crime for which he was prosecuted." Compton, 811 S.W.2d at 949-50; see Zavaleta, 827 S.W.2d at 345 n. 3. Thus, the question is not what the facts actually were, but rather what the defendant honestly and reasonably believed the facts to be. Compton, 811 S.W.2d at 950; Green v. Meadows, 517 S.W.2d 799, 810 (Tex. Civ.App.Houston [1st Dist.] 1974) (quoting 54 C.J.S. Malicious Prosecution § 20 (1948)), rev'd on other grounds, 524 S.W.2d 509 (Tex. 1975).
*43 The court, sitting as the trier of fact on this particular issue, found that there was probable cause in this case. This finding is supported by abundant evidence. As set out in the fact recitation above, Metzger was strongly implicated in the sexual abuse of Larry by (1) Guez, after observing and evaluating Larry; (2) Sebek, after speaking with Larry; and (3) Larry himself, who implicated him on several occasions. Each of these implications of Metzgerat least one of which was known to every appelleeindependently constitutes "such facts and circumstances as would excite belief in the mind of a reasonable person, acting on facts within his knowledge, that the person charged was guilty of the crime for which he was prosecuted."
Because probable cause existed, the appellees were entitled to a directed verdict on Metzger's claim for malicious prosecution. See Kroger Co. v. Hughes, 616 S.W.2d 287, 288 (Tex.Civ.App.Houston [1st Dist.] 1981, orig. proceeding) (holding that finding of probable cause was fatal to plaintiff's malicious prosecution action); Lancaster & Love, Inc. v. Mueller Co., 310 S.W.2d 659, 662-63 (Tex.Civ.App.Dallas 1958, writ ref'd) (holding that existence of probable cause defeated plaintiff's malicious prosecution action); Adcox v. Safeway Stores, Inc., 512 F.Supp. 452, 453-54 (N.D.Tex.1980) (holding that "existence of probable cause is an absolute bar" to malicious prosecution action and awarding summary judgment to defendant). We affirm the directed verdict regarding malicious prosecution.
D. "Deprivation of civil rights based upon malicious prosecution"
"There is a constitutional right to be free of `bad faith prosecution.'" Hand v. Gary, 838 F.2d 1420, 1424 (5th Cir.1988). This right may be vindicated by bringing a civil rights claim. Id. at 1425, 1426; Singleton v. City of New York, 632 F.2d 185, 194-95 (2d Cir.1980), cert. denied, 450 U.S. 920, 101 S.Ct. 1368, 67 L.Ed.2d 347 (1981); Bussard v. Neil, 616 F.Supp. 854, 856 (M.D.Penn.1985).[11] Metzger thus brought his claim under 42 U.S.C. § 1983 (1986).
That there was no probable cause for the prosecution is an element of this cause of action. Lee v. Mihalich, 847 F.2d 66, 69-70 (3d Cir.1988); Elbrader v. Blevins, 757 F.Supp. 1174, 1179 (D.Kansas 1991); Bussard, 616 F.Supp. at 857. The inability to show a lack of probable cause is a "fatal defect" in a plaintiff's deprivation of civil rights case based upon malicious prosecution. Bussard, 616 F.Supp. at 857; see Elbrader, 757 F.Supp. at 1179. Facts that show the existence of probable cause and thus defeat a malicious prosecution claim also defeat a civil rights claim based on malicious prosecution. Bussard, 616 F.Supp. at 857.
In their motion for directed verdict, the appellees argued the existence of probable cause as the basis for a directed verdict on this cause of action. As noted, the court found probable cause, a finding supported by ample evidence. Because probable cause existed, the appellees were entitled to a directed verdict on this claim, as well. See Bussard, 616 F.Supp. at 857. We affirm the directed verdict regarding deprivation of civil rights by malicious prosecution.
E. Conspiracy to maliciously prosecute
Metzger alleged the existence of a conspiracy "for the unlawful purpose of maliciously... bringing a criminal prosecution against Plaintiff for allegedly having sexually abused" Larry.
A civil conspiracy is "a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means." Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). Thus, a plaintiff may allege that the object of the conspiracy is the commission of a tortfor example, to defraud him. See Bernstein v. Portland Savings & Loan Ass'n, 850 S.W.2d 694, 706 (Tex.App.Corpus Christi 1993, writ denied). The tort is the "unlawful predicate act" of the conspiracy. Id. at 709. Disproving the "unlawful predicate act," however, does not automatically *44 disprove a conspiracy to commit that act. See id. at 709 n. 12.
The plaintiff in a civil conspiracy action must show the following elements: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result. Massey, 652 S.W.2d at 934; Bernstein, 850 S.W.2d at 705. The "unlawful, overt acts" must be acts in furtherance of the conspiracy. Massey, 652 S.W.2d at 934.
In their motion for directed verdict, the defendants argued that they had committed no unlawful acts that led to Metzger's indictment, and that lawfully furnishing information to law enforcement officers is not an act for which they may be held liable. We agree with both assertions. The record does not reflect "one or more unlawful, overt acts" committed in furtherance of a scheme to have Metzger prosecuted. The absence of this element is fatal to Metzger's claim. See Massey, 652 S.W.2d at 934.
Metzger points out four occurrences that he argues are examples of the "conspiracy" in motion. First, Metzger notes that Depelchin "ruled out any abuse of Larry." (Emphasis in Metzger's brief.) As noted above, Larry was evaluated shortly after being admitted to Depelchin. Under "Findings," Larry's psychiatric evaluation form lists seven disorders with the notation "R/O," for "rule out," before the disorders. Guez informed Metzger of the "rule outs," and Metzger concludedwronglythat the "rule outs" were disorders that the evaluating physician had already decided were not present in Larry (i.e., that these seven disorders had been "ruled out" as possible problems). Metzger reasoned that, because these seven disorders had been, in his mind, disqualified, the staff at Depelchin had concluded that Larry had not been sexually abused.
As Kendrick testified, however, the term "rule out" has a meaning quite different than that attributed to it by Metzger. "Rule outs" are actually those problems that may in fact be what is wrong with the patient, and that therefore should be focused on, not considered ineligible. All of the health care professionals who testified about the meaning and significance of "rule out" agreed. This episode is not evidence of a conspiracy; it is evidence of a misunderstanding, and nothing more.
Metzger also states that Guez' conclusion "that Metzger engaged in fondling and exhibitionism with Larry was based on her interpretation of Metzger's response to card three of the Rorschach test!" This seems to imply that, when Guez evaluated Metzger, she based her conclusion that the abuse was "more in line with fondling and exhibitionism" solely on Metzger's response to a single card of the Rorschach test.
Metzger argues that it was improper to reach such a conclusion from a single response. We do not address this issue, because the record indicates that Guez' conclusion was not based solely on Metzger's response to card three or any other single response. This episode, in any event, is not evidence of a conspiracy.
Third, Metzger contends that Taylor and Guez "violat[ed][] the requirements of § 34.01 and 34.02, Family Code," by not making a "written report of abuse to CPS." It is undisputed that both reported their suspicions of abuse to CPS, albeit orally; Taylor testified she did not make her report in writing "because there was already a case opened and I had the name of the person there to talk with, so I just called her and talked to her."
We need not determine whether Taylor and Guez violated the Family Code; even presuming for the sake of (Metzger's) argument that they did, these are not unlawful acts in furtherance of the conspiracy. According to Metzger, the object of the conspiracy was to maliciously prosecute him; he makes no argument regarding how Taylor and Guez not reporting Larry's abuse in writing helped the alleged conspiracy toward that goal. Nor can we independently conceive how these specific acts furthered the alleged conspiracy, particularly when it is undisputed that both did, in fact, report to CPS, although orally. Ironically, part of Metzger's complaint is that people reported abuse in the first place; here, however, he *45 argues that the very reports he complains about should have been made in writing, which would have made them even more substantial than they were.
Furthermore, the wrongful act in a civil conspiracy claim must be done to the plaintiff. American Computer Trust Leasing v. Jack Farrell Implement Co., 763 F.Supp. 1473, 1489 (D.Minn.1991), aff'd and remanded, American Computer Trust Leasing v. Boerboom Int'l, Inc., 967 F.2d 1208 (8th Cir.1992), cert. denied, ___ U.S. ___, 113 S.Ct. 414, 121 L.Ed.2d 338. Here, if the lack of written reporting harmed anybody (and there is no evidence that it did), it would have been Larry that was harmed, not Metzger.
This circumstance does not constitute evidence of the alleged conspiracy.
Fourth, Metzger asserts that "the purported handwritten notes of Ann Hodges which bore out purported outcry evidence of sexual abuse by Metzger were, in actuality, forged by Jean Guez." Hodges testified that all the notes purportedly written by her, were, in fact, written by her. Metzger, however, outside the presence of the jury, produced a handwriting expert who stated that the notes were really written by Guez. The judge refused to allow the witness to testify before the jury, however, in part because her testimony violated a memorialized agreement between Metzger's counsel and the defendants' counsel that limited the scope of her testimony, and in part because her testimony was based on a document that had been altered.
Metzger does not offer any legal argument or authority regarding why the judge's exclusion of this evidence was erroneous; rather, he just concludes that "[t]he thought that a jury might conclude that forging of such documents became necessary so as to keep the lid on the conspiracy appeared to have evaded the judge." Metzger's failure to cite any authority to support this contention itself waives the contention. New York Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., 856 S.W.2d 194 (Tex.App. Dallas 1993, no writ); Clone Component Distribs. of Am., Inc. v. State, 819 S.W.2d 593, 597 (Tex.App.Dallas 1991, no writ); Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768, 810 (Tex.App.Houston [1st Dist.] 1987, writ ref'd n.r.e.), cert. dism'd, 485 U.S. 994, 108 S.Ct. 1305, 99 L.Ed.2d 686 (1988); Tex. R.App.P. 74(f) ("The argument [in a brief] shall include: ... (2) such discussion of the... authorities relied upon as may be requisite to maintain the point at issue."). The fact that he supports his contention with but a single, conclusory sentence is a separate, independent ground of waiver. Anheuser-Busch Cos. v. Summit Coffee Co., 858 S.W.2d 928, 942 (Tex.App.Dallas 1993, writ denied); Tex.R.App.P. 74(f)(2) ("The argument [in a brief] shall include: ... (2) such discussion of the facts ... as may be requisite to maintain the point at issue.").[12]
Metzger does not explain how the alleged forgery was needed to "keep the lid on the conspiracy," a good question considering there was an abundance of "outcry evidence of sexual abuse" aside from the Hodges notes. In any event, it appears that the judge was correct in excluding the evidence under the circumstances.
Furthermore, Metzger offers no argument regarding how the alleged forgery was in furtherance of the alleged conspiracy. From our review of this record, we cannot conceive how it was. Nor does Metzger allow how the alleged forgery harmed him, and again, from this record, we cannot say how it did.
This matter does not constitute evidence of the alleged conspiracy.
We are cognizant that, "[b]ecause of the secretive nature of conspiracies, courts allow plaintiffs to show conspiracy by circumstantial rather than direct evidence." Bernstein, 850 S.W.2d at 705. What Metzger offered on this claim, however, does not rise even to that level. We affirm the directed *46 verdict regarding conspiracy to maliciously prosecute.
F. Conspiracy to defraud
Metzger pled the existence of a civil conspiracy "to [extort from and] defraud Plaintiff of valuable property and liberty interests, protectable under both the Texas and United States Constitutions." Under "Violation of Civil Rights," he complains that (1) the defendants denied him access to the courts by improperly "threat[ening]," at the July 17 conference, to place Larry in Depelchin; (2) the defendants "extort[ed] a `settlement'" and forced the divorce decree upon him, thus "unconstitutionally interfer[ing] with Metzger's family relationship with his children"; and (3) "in forcing Metzger to undergo psychological testing and treatment under a psychologist who had to be approved by Guez, the defendants unconstitutionally interfered with another of Metzger's liberty and privacy interests: the decision to obtain or reject medical treatment."
We have grave reservations about the viability of these claims. See Hamill v. Wright, 870 F.2d 1032, 1037-38 (5th Cir.1989). The defendants argued in their motion for directed verdict, however, that, among other things not concerning the claims' viability to begin with, there was no evidence to support them. We agree.
There is no evidence that the defendants improperly "threatened" to put Larry in Depelchin at the July 17 conference; rather, a straightforward, accurate reading of the testimony about the conference shows it was understood that, if the attorneys would not accept the recommendation to hospitalize Larry, CPS, with the support of Guez, would attempt to intervene in the lawsuit and itself try to get Larry hospitalized. Under this record, this is not actionable behavior, much less a denial of "access to the courts." The record reveals no more than CPS attempting to effect the hospitalization of a child whom the record shows was sorely in need of it.[13]
Nor is there evidence of the "extortion" of a settlement or that the defendants forced Metzger to sign the decree. The record demonstrates that Metzger, on the advice of his skilled and experienced counsel, decided to settle the case on less favorable terms than he would have liked due to considerable leverage on Sebek's side. This was not an "unconstitutional [] interfer[ence] with Metzger's family relationship with his children."
Nor did any defendant "forc[e] Metzger to undergo psychological testing and treatment under a psychologist who had to be approved by Guez." The record shows that Metzger, on the advice of his formidable counsel, accepted the terms of the decree, again in view of considerable leverage on the other side. This does not constitute interference with any of Metzger's rights.
Metzger points to the "disappearing motion" of January, 1987, as evidence to support his claim. As noted above, we find no such pleading in our record, or any pleading "infusing into the case child abuse allegations" in or around January, 1987.[14]
He also points to the discrepancy about when Guez first evaluated Larry. We see no difference whether the initial evaluation was on June 16 or June 17; it is undisputed that she did, in fact, evaluate him, and see him on several occasions. We acknowledge that either Guez' records, which state that Guez' first evaluation was on June 17, or Senegal's records, which state that she called Guez on June 16, and that Guez told her that she *47 (Guez) had evaluated Larry, are inaccurate regarding a date. The facts recorded in those records, however, are undisputed. Their irreconcilability regarding a date does not constitute evidence of conspiracy.[15]
What Metzger offered on this claim does not attain the status of even circumstantial evidence. We affirm the directed verdict regarding conspiracy to defraud.
G. RICO
Under his RICO claim, Metzger pled that the defendants ran a "Child Abuse Enterprise." He alleged the following:
The Child Abuse Enterprise consists of attorneys, social workers, health care professionals and the institutions that participate in child abuse and treating victims of such abuse.... It has as its purpose and function the acquisition of illegal income which it obtains from victims of false child abuse allegations, such as Mark Metzger, from insurance companies, from the State of Texas and from agencies of the federal government.
A RICO plaintiff must have standing to sue pursuant to 18 U.S.C. § 1964(c) (1991). Ocean Energy II, Inc. v. Alexander & Alexander, Inc., 868 F.2d 740, 742 (5th Cir.1989). Section 1964(c) gives standing only to a person "injured in his business or property by reason of [the alleged RICO violation]." 18 U.S.C. § 1964(c) (1991); see Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir.1988). The quoted language requires the plaintiff not only to show that he has suffered injury to his business or property, but also to show that the injury was caused by the predicate acts of racketeering activity that make up the RICO violation. Brandenburg, 859 F.2d at 1187. In addition to meeting the requirement of standing, a plaintiff who desires to show a RICO violation must prove "(1) a person who engages in (2) a pattern of racketeering activity (3) connected to the acquisition, establishment, conduct, or control of an enterprise." Ocean Energy II, 868 F.2d at 742; Delta Truck & Tractor, Inc. v. J.I. Case Co., 855 F.2d 241, 242 (5th Cir.1988), cert. denied, 489 U.S. 1079, 109 S.Ct. 1531, 103 L.Ed.2d 836 (1989).
In their motion for directed verdict, the defendants argued that there is no evidence to support Metzger's civil RICO claim. For at least two reasons, we agree.
First, Metzger has not shown in this record that he was injured in his business or property by any predicate act of racketeering activity. In the section of his brief in which he discusses his RICO claim, he makes no mention of any evidence of this type of damages. Nor are we able to find any in the record. Without such evidence, Metzger cannot succeed on his RICO claim. See Brandenburg, 859 F.2d at 1187.
Second, "the RICO person must be one that either poses or has posed a continuous threat of engaging in acts of racketeering." Delta Truck & Tractor, 855 F.2d at 242. There is no evidence that these defendants pose or have posed a continuous threat to engage in racketeering acts. For example, the defendants who are mental health care professionals dealt with the evaluation and treatment of Larry. Even if they committed some fraudulent acts in this processwhich we will assume for the sake of argument, but do not find in the recordthat does not mean that they "posed a continuous threat [to] engag[e] in acts of racketeering." That does not qualify the course of Larry's treatment and evaluation as actionable under RICO. See id. at 243; Procter & Gamble Co. v. Big Apple Indus. Bldgs., Inc., 655 F.Supp. 1179, 1184 (S.D.N.Y.1987) ("[T]he RICO defendants in this case were engaged in a single lawful project of finite scope and duration.... Allegations of numerous instances of fraud in carrying out this project does not *48 bring it within the scope of the RICO statute.").
Metzger argues that an attorney general's report concerning Depelchin billings that he admits are totally unrelated to Larry's stay there support his RICO claim. We disagree. The report concerns Depelchin's billing for treatment accorded 31 other patients. It was presented to a grand jury looking into Depelchin's billing practices, and the grand jury declined to indict Depelchin. This is not evidence of a RICO violation on the part of Depelchin.[16]
Metzger also argues Depelchin's billing was fraudulent because it included "the showing of R-rated movies to a three-year-old...."[17] The record indicates that Larry and others were shown the movie for a therapeutic purpose, but does not go into specifics. In any event, billing for the showing of the movie to Larry is not itself evidence of fraud.[18]
We affirm the directed verdict regarding Metzger's RICO claim.
H. Intentional infliction of emotional distress
Under this cause of action, Metzger complains "of the conduct of the Defendants in falsely branding him a child abuser." It is not our place to say whether Metzger abused Larry; that issue is not presented in this case, and we have not decided it. However, the record indicates support for those defendants who believed Metzger was abusing Larry. The tort of intentional infliction requires "outrageous conduct"conduct that is outside all possible bounds of decency, reprehensible, and completely intolerable in a civilized community. Twyman v. Twyman, 855 S.W.2d 619, 621 (Tex.1993).[19] Considering the record, determining that Metzger was abusing Larryregardless of the truth or falsity of that determinationwas not "outrageous conduct."
As the defendants argued in their motion for directed verdict, there is no proof in this record of any "outrageous conduct" on the part of any defendant. We affirm the directed verdict regarding intentional infliction of emotional distress.
3. Conclusion
After considering all of the evidence in the light most favorable to Metzger, and disregarding all contrary evidence and inferences, we hold that trial court did not err in directing a verdict for the defendants as to all causes of action. We overrule Metzger's third and seventh points of error and affirm that part of the judgment.[20]
IV. Recusal
1. The motions for sanctions
On April 29, 1992, Lilly, Nass, and Piro & Lilly filed a motion for sanctions against Metzger, Bradt, and Izen. On May 7, Baylor, Kendrick, Cox, Lohner, and Hodges filed *49 their motion for sanctions. Depelchin also filed a motion for sanctions on that date. On May 12, Taylor filed her motion for sanctions, and on May 14, Sebek filed hers.[21]
No motion was set for a hearing, however, until May 12, when Taylor gave notice that her motion would be heard on May 15. Other defendants then followed suit, giving notice that the hearing on their respective motions would be also on May 15. These notices, however, were all filed after May 12.
Thus, at the earliest, Metzger, Bradt, and Izen had notice of the May 15 hearing on May 12, just three days before the hearing. On May 12, Bradt moved to recuse the judge; Metzger and Izen did not. The judge refused to hear Bradt's motion, ruling that the motion to recuse was untimely, and thus in violation of Texas Rule of Civil Procedure 18a(a).
In his eighth and ninth points of error, Bradt complains that the judge erred by proceeding with the sanctions hearing against him in the face of his motion to recuse.[22] We agree.
Rule 18a(a) states that a motion to recuse must be filed "[a]t least ten days before the date set for trial or other hearing...." Tex.R.Civ.P. 18a(a). As the appellees point out, we have held that the mandatory "recuse or refer" provisions of rule 18a do not come into play unless the motion to recuse is timely filed. Houston N. Properties v. White, 731 S.W.2d 719, 722 (Tex. App.Houston [1st Dist.] 1987, writ dism'd); Petitt v. Laware, 715 S.W.2d 688, 692 (Tex. App.Houston [1st Dist.] 1986, writ ref'd n.r.e.).
This case, however, is different. We agree that Bradt's motion was technically untimely under rule 18a(a), because it was not filed at least 10 days before the hearing on the defendants' motions for sanctions. However, Bradt did not even get 10 days notice of the hearing; his earliest notice was on May 12, only three days before the hearing.[23] Where the movant in a motion to recuse does not receive 10 days notice of the hearing on the matter from which he seeks to recuse the judge, the 10-day requirement of rule 18a(a) cannot apply. A contrary holding would be unreasonable; we cannot require a litigant to comply with a rule in a situation in which compliance, through no fault of his own, is impossible. Until the defendants filed their notices of a hearing on the motions for sanctions, Bradt was entitled to treat those motions as potential nullities. "A court is not required to consider a motion that is not called to its attention." Greenstein, Logan & Co. v. Burgess Mktg., Inc., 744 S.W.2d 170, 179 (Tex.App.Waco 1987, writ denied). Bradt had no need to move the judge to recuse himself from a sanctions hearing until the motions for sanctions were set for a hearing. The amount of time between the date the motions were set for a hearing and the date of the hearing left him no chance to file a timely rule 18a motion to recuse, as was his right. Thus, we do not apply the 10-day requirement of rule 18a(a) to these facts.
When Bradt filed his motion to recuse, the judge should have either recused himself or asked the presiding judge of the administrative judicial district to assign a judge to hear the motion. Carson v. Gomez, 841 S.W.2d 491, 492-93 (Tex.App.Houston [1st Dist.] 1992, no writ) (quoting Greenberg, Fisk & Fielder v. Howell, 676 S.W.2d 431, 433 (Tex.App.Dallas 1984, no writ)); TEX. R.CIV.P. 18a(c). He did neither, and there were no other options. Greenberg, Benson, Fisk & Fielder v. Howell, 685 S.W.2d 694, 695 (Tex.App.Dallas 1984, orig. proceeding); see Carson, 841 S.W.2d at 492-93 *50 (quoting Greenberg, Fisk & Fielder, 676 S.W.2d at 433); General Motors Corp. v. Evins, 830 S.W.2d 355, 357 (Tex.App.Corpus Christi 1992, orig. proceeding); TEX. R.CIV.P. 18a(c). We therefore sustain Bradt's eighth and ninth points of error, reverse the judgment to the extent that it sanctions Bradt (because the sanctions hearing should not have proceeded against Bradt in the face of Bradt's motion to recuse), and order the judge, on remand, to comply with the requirements of rule 18a(c). See Greenberg, Fisk & Fielder, 676 S.W.2d at 433 (requiring judge to either enter an order recusing himself or enter an order referring the motion to recuse to the presiding judge of his administrative district).[24]
2. Voluntary recusal
In Bradt's thirteenth and fourteenth points of error, and in Izen's fourteenth and fifteenth, Bradt and Izen argue that the judge erred in not voluntarily recusing himself[25] or "disclosing his connections with the appellees in order that appellants might timely move to recuse him." We disagree.
Although their references to facts under these points of error are at best vaguethey refer to "connections," "ties," and "illegal ex parte contacts" between the judge and unspecified appelleeswe presume that Bradt and Izen refer to the following: (1) the judge clerked for one of the defense attorneys years earlier, and his son clerked for the firm that employs another, although the son was not employed by that firm at the time of trial; (2) one of the firms involved in the trial had earlier invited the judge to one of its firm retreats; (3) the judge had dined several times at a restaurant owned by one of the defense attorneys; and (4) some of the defense firms had earlier made campaign contributions to the judge.
We note initially that there are no "illegal ex parte" contacts reflected in the record. No appellant attempted to recuse the judge on this basis.
Rule 18b(2) lists those instances in which a judge should recuse himself. None of the above situations come within the ambit of that rule; not one of the facts, on its face, provides good reason to question the judge's impartiality. See Aguilar v. Anderson, 855 S.W.2d 799, 802 (Tex.App.El Paso 1993, writ denied); Texaco v. Pennzoil, 729 S.W.2d at 842-45.
We overrule Bradt's thirteenth and fourteenth points of error and Izen's fourteenth and fifteenth points of error.
V. Sanctions
After trial, the judge held a hearing on the defendants' motions for sanctions. The judge imposed sanctions against Metzger, Bradt, and Izen, jointly and severally, in the total amount of $994,000 plus interest. The appellants complain of this action in Metzger's first and second points of error, Bradt's first through seventh points of error, and Izen's first through tenth points of error.
1. The trial court's power
Texas trial courts have the power to punish abuses of the legal process. The court's authority to punish certain abuses has been codified in various rules and statutes. See, e.g., Tex.R.Civ.P. 13 (improper pleadings, motions, and "other papers"); Tex.R.Civ.P. 21b (failure to serve or deliver copies of pleadings and motions); Tex.R.Civ.P. 215 (abuse of discovery); Tex.Fam.Code Ann. § 34.032 (Vernon Supp.1994) (frivolous claims brought against persons reporting child abuse).
The court's power to sanction for abuse of the legal process is not, however, limited to that specifically conveyed in rules *51 and statutes. Such a power may be implicit in a particular rule or statute. See Koslow's v. Mackie, 796 S.W.2d 700, 703 (Tex.1990) (although Tex.R.Civ.P. 166 does not provide for sanctions, court held that judge had "power implicit under rule 166 to provide in his pretrial order that the refusal to participate in the status conference or the failure to file a timely joint status report would result... [in] `dismissal, default, or other sanctions....'"). Trial courts also have inherent powers on which they may call to administer justice and preserve their dignity and integrity. Public Util. Comm'n v. Cofer, 754 S.W.2d 121, 124 (Tex.1988); Eichelberger v. Eichelberger, 582 S.W.2d 395, 398 (Tex.1979). This power includes the ability to sanction bad faith conduct that occurs during the course of litigation. Lawrence v. Kohl, 853 S.W.2d 697, 700 (Tex.App.Houston [1st Dist.] 1993, no writ); Kutch v. Del Mar College, 831 S.W.2d 506, 509 (Tex.App.Corpus Christi 1992, no writ). In Kutch, the court specifically held that Texas trial courts have the inherent power to sanction for abuses of the judicial process which may not be covered by rule or statute. 831 S.W.2d at 510. As we did in Lawrence, 853 S.W.2d at 700, we voice our approval of Kutch, and we now adopt this particular holding as our own.[26]
2. The standard of review
When an order of sanctions refers to one specific rule, either by citing the rule, tracking its language, or both, we are confined to determining whether the sanctions are appropriate under that particular rule. See Lawrence, 853 S.W.2d at 701; Owens-Corning Fiberglas Corp. v. Caldwell, 807 S.W.2d 413, 415 (Tex.App.Houston [1st Dist.] 1991, orig. proceeding). The judgment states that "came on to be heard the motions of each of the defendants ... for sanctions pursuant to Texas Rules of Civil Procedure 13." The judgment also tracks some of the language of rule 13. Conversely, no other rule or other basis for sanctions, including the trial court's inherent power to sanction, is cited or otherwise referred to in the judgment. We will thus confine our review to whether the sanctioning of Metzger, Bradt, and Izen for violating rule 13 was appropriate. We review sanctions assessed under rule 13 with an abuse of discretion standard. Kutch, 831 S.W.2d at 512.
The appellees argue that we may consider the trial court's inherent power to sanction in determining whether the sanctions are proper in this case. Pursuant to Lawrence and Owens-Corning, we disagree. Where the court, in imposing sanctions, does not rely on its inherent power to sanction, we may not consider that power as a basis for the sanctions on our review of the sanctions. Owens-Corning, 807 S.W.2d at 415-16; see Lawrence, 853 S.W.2d at 701. Therefore, we are confined to determining whether the sanctions are proper under rule 13the only authority for sanctions relied on in the judgmentand thus we do not consider all of the behavior referred to by the appellees that is not implicated under rule 13, which only addresses the signing of pleadings, motions, and "other papers."[27]
3. Analysis and resolution
As noted above, the judge should have recused himself from determining whether Bradt should be sanctioned. As such, the sanctions against Bradt cannot stand, and we have above reversed that part of the judgment and remanded with instructions. We pause here to limit the consideration of whatever trial court determines whether Bradt should be sanctioned to whether Bradt should be sanctioned for violating rule 13. The only basis for the judge's attempted sanctioning of Bradt was that he had violated rule 13. The parties and the *52 court are bound, on our remand, to a determination only of whether Bradt violated that particular rule (and, if so, what amount in sanctions should be assessed). We proceed to determine whether the sanctioning of Metzger and Izen for violating rule 13 was appropriate.
Rule 13 states in pertinent part:
The signatures of attorneys or parties constitute a certificate by them that they have read the pleading, motion, or other paper; that to the best of their knowledge, information, and belief formed after reasonable inquiry the instrument is not groundless and brought in bad faith or groundless and brought for the purpose of harassment.... If a pleading, motion or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, after notice and hearing, shall impose an appropriate sanction available under Rule 215-2b, upon the person who signed it, a represented party, or both.
No sanctions under this rule may be imposed except for good cause, the particulars of which must be stated in the sanction order. "Groundless" for purposes of this rule means no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.
Tex.R.Civ.P. 13. "Rule 13 affords a court the option of imposing sanctions for pleadings, motions, or other papers signed in violation of the prohibition against filing documents that are groundless and brought in bad faith or groundless and brought for the purpose of harassment." Johnson v. Smith, 857 S.W.2d 612, 617 (Tex.App.Houston [1st Dist.] 1993, orig. proceeding).
A party seeking sanctions has the burden of establishing its right to relief. GTE Communications Sys. Corp. v. Tanner, 856 S.W.2d 725, 729 (Tex.1993). Because rule 13 "prescribes that courts presume that papers are filed in good faith," the party moving for sanctions for a violation of rule 13 has the burden of overcoming this presumption. Id. at 731.
A. Izen
Regarding Izen, we note that he did not enter this case until December of 1991, over a year from the time it was filed in state court. The only "pleading, motion, or other paper" Izen signed was his appearance of record, and none of the appellees claim that Izen should be sanctioned under rule 13 for filing this particular document. Sanctions for violating rule 13 can only be assessed against an attorney when he or she has actually signed the offending pleading, motion, or other paper. Tanner, 856 S.W.2d at 730. Because Izen cannot be sanctioned under rule 13 on the basis of a "pleading, motion, or other paper" not signed by him, and because the single "pleading, motion, or other paper" signed by Izen could not have been a proper predicate for rule 13 sanctions against him, the sanctions against Izen for violating rule 13 cannot stand.
We sustain Izen's fifth point of error, under which he contends that he should not have been sanctioned under rule 13 because he did not violate that rule. We reverse the part of the judgment that assesses sanctions against Izen, and render judgment that no sanctions be imposed against him.
B. Metzger
Regarding Metzger, we note that, in assessing sanctions for violating rule 13, a party should not be punished for its counsel's conduct "unless the party is implicated apart from having entrusted its legal representation to counsel." Glass v. Glass, 826 S.W.2d 683, 687 (Tex.App.Texarkana 1992, writ denied). Metzger signed an affidavit that supported a response to a motion for summary judgment filed by five of the defendants. The affidavit was, of course, prepared by Metzger's counsel, but Metzger supplied the information, read the affidavit before it was filed, and swore therein that he had "personal knowledge of all facts which are set forth in this affidavit and they are true and correct." However, it later became clear that Metzger did not have personal knowledge of several of the alleged facts stated in his affidavit, including that Guez wrote the Hodges notes and facts concerning Baylor's use of the mails, which pertained to *53 Metzger's RICO claims. Metzger subsequently admitted that he did not have the personal knowledge that he swore in the affidavit that he had.[28]
The appellees contend that Metzger's act is sufficient to uphold the sanctions against him. We agree that his act is sanctionable; lying in an affidavit is a despicable, shameful act. The rules that permit sanctions exist because of acts like this one.[29] In this regard, we agree with the appellees that they met their burden of establishing their right to sanctions against Metzger. We do not agree, however, that the sanction imposedexposure to joint and several liability for $994,000 plus interestis justified by this one act, which is the only act we find Metzger committed that violated rule 13.
Rule 13 requires that the sanctions assessed be "appropriate." Tanner, 856 S.W.2d at 731. Rule 13's "appropriate" standard is equivalent to rule 215's "just" standard. Id. Thus, to determine whether sanctions imposed for violating rule 13 are "appropriate," we employ the same test used to determine whether sanctions imposed for violating rule 215 are "just." See Glass, 826 S.W.2d at 688. In order to decide whether the sanctions imposed are just, we must (1) determine whether a direct relationship exists between the offending conduct and the sanctions imposed, and (2) whether the sanctions are excessive. Transamerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex.1991); Glass, 826 S.W.2d at 688-89.[30]
The first prong of the "justness" test focuses on whether the sanction is directed against the abuse and toward remedying the prejudice caused the innocent parties. Transamerican, 811 S.W.2d at 917. It also focuses on whether the sanction was visited upon the actual offender. Id. The second prong focuses on whether the punishment fits the crime; a sanction should be no more severe than necessary to satisfy its legitimate purposes, and courts must consider the availability of sanctions less stringent than those ultimately imposed. Id.
The sanction imposed against Metzger does not pass the second part of the "justness" test. The sanction is excessive. It is more severe than necessary to adequately punish Metzger for lying in the affidavit; Metzger's punishment did not fit his crime, even considering the disgraceful nature of the crime. The judge abused his discretion. The amount of the sanction to which Metzger faces exposure must be reduced.
We sustain Metzger's first and second points of error to the extent that they argue that the sanction imposed against him was excessive. We hold that the trial court did not err in sanctioning Metzger, but that the part of the judgment setting the sanctions at joint and several liability for $994,000 plus interest cannot stand. We therefore affirm the part of the judgment imposing sanctions against Metzger, but reverse the part of the judgment that sets the sanctions at joint and several liability for $994,000 plus interest. We remand that part of the judgment for the judge to redetermine, in light of the second prong of the "justness" test discussed in this opinion, the amount that Metzger should be sanctioned for violating rule 13.
We overrule Metzger's first and second points of error to the extent that they argue that the part of the judgment assessing sanctions is void.[31] We overrule Izen's *54 first through fourth and his sixth through tenth points of error to the extent that they argue that the part of the judgment assessing sanctions is void.[32] We overrule Bradt's first through seventh points of error to the extent that they argue that the part of the judgment assessing sanctions is void, and to the extent that they argue that Bradt should not be sanctioned at all. The sanctions order is not void.[33] We leave the determination of whether Bradt should be sanctioned for violating rule 13 to whatever trial court addresses the issue on remand.
VI. Contempt
In his fifteenth point of error, Bradt argues that the judge abused his discretion by holding him in contempt. The judge held Bradt in contempt twice, once on April 10, and once on April 29.
After he was held in contempt, Bradt moved for the determination of guilt or innocence of contempt by a judge other than the one who had held him in contempt. See Tex.Gov't Code Ann. § 21.002(d) (Vernon Supp.1994). The presiding judge of the administrative judicial region assigned another judge to determine Bradt's guilt or innocence. See id. The assigned judge dismissed the contempt charges that resulted from Bradt's conduct on April 10.[34]
1. The trial court's power
Texas trial courts have an inherent power to punish for contempt. Ex parte Pryor, 800 S.W.2d 511, 512 (Tex.1990); Owens-Corning, 807 S.W.2d at 415. This inherent power has been codified in the Texas Government Code. See TEX.GOV'T CODE ANN. §§ 21.001, 21.002 (Vernon 1988).
The power to punish for contempt is "an essential element of judicial independence and authority." Pryor, 800 S.W.2d at 512. The power "enables courts to persuade parties to obey an order or decree of the court so that the order will not be rendered ineffectual by recalcitrant litigants." Id. "[T]he underlying concern that gave rise to the contempt power was not ... merely the disruption of court proceedings. Rather, it was disobedience to the orders of the Judiciary, regardless of whether such disobedience interfered with the conduct of trial." Chambers, 501 U.S. at 44, 111 S.Ct. at 2132 (quoting Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 798, 107 S.Ct. 2124, 2132, 95 L.Ed.2d 740 (1987)).
2. Our jurisdiction
Decisions in contempt proceedings are not appealable. Ex parte Williams, 690 S.W.2d 243 n. 1 (Tex.1985); Ex parte Cardwell, 416 S.W.2d 382, 384 (Tex.1967); Mendez v. Attorney Gen. of Texas, 761 S.W.2d 519, 521 (Tex.App.Corpus Christi 1988, no writ); Smith v. Holder, 756 S.W.2d 9, 10-11 (Tex.App.El Paso 1988, no writ); Gensco, Inc. v. Thomas, 609 S.W.2d 650, 651 (Tex. Civ.App.San Antonio 1980, no writ); Anderson v. Burleson, 583 S.W.2d 467 (Tex. Civ.App.Houston [1st Dist.] 1979, no writ). This is so even where the contempt order is being appealed along with a judgment that is appealable. See Mendez, 761 S.W.2d 519; Gensco, 609 S.W.2d at 650; Grace v. *55 McCrary, 390 S.W.2d 397 (Tex.Civ.App. Waco 1965, writ dism'd).
The validity of a contempt order can be attacked only by a writ of habeas corpus. Williams, 690 S.W.2d at 243 n. 1; Saenz v. Saenz, 756 S.W.2d 93, 95 (Tex.App.San Antonio 1988, no writ); Anderson, 583 S.W.2d at 467; but see Deramus v. Thornton, 160 Tex. 494, 497-98, 333 S.W.2d 824, 827 (1960) (stating that there may be circumstances in some contempt proceedings that would make a remedy by habeas corpus inadequate, and that would therefore implicate mandamus relief); Kidd v. Lance, 794 S.W.2d 586, 587 n. 1 (Tex.App.Austin 1990, orig. proceeding) (citing Deramus and holding that mandamus is the "only" available remedy where there is no order of confinement); International Ass'n of Machinists & Aerospace Workers v. Axelson, Inc., 593 S.W.2d 362, 363 (Tex.Civ.App.Texarkana 1979, no writ). Bradt has not applied for habeas or mandamus relief, but has instead attempted to appeal from the contempt proceedings below.
3. Resolution
Considering the above authorities, we hold that we have no jurisdiction to hear Bradt's appeal from the contempt proceedings. The question of what specific disposition to make of Bradt's fifteenth point of error remains.
In both Mendez and Gensco, part of the appeal was from an appealable judgment, and part of the appeal was from an order of contempt, which is not appealable. Mendez, 761 S.W.2d 519; Gensco, 609 S.W.2d 650. In both cases, the court of appeals overruled the points of error complaining of the contempt order and disposed of the entire appeal by affirmance. Mendez, 761 S.W.2d at 521, 522; Gensco, 609 S.W.2d at 651, 652.
In Grace, too, part of the appeal was from an appealable judgment, and part of the appeal was from an order of contempt. 390 S.W.2d 397. The court, rather than overruling the point of error complaining of the contempt order, wrote that "this court is without jurisdiction to review the portion of this appeal as relates to the contempt proceeding," and held that the appellant's "point related thereto is accordingly dismissed." Id. at 398. The court stated at the end of its opinion that the judgment is affirmed, but that the appeal as it pertains to the order of contempt is dismissed. Id.
We choose the route taken by the Grace court. Where a court of appeals has no jurisdiction to hear an appeal from an order, it dismisses the appeal. See, e.g., Pierce Mortuary Colleges, Inc. v. Bjerke, 841 S.W.2d 878 (Tex.App.Dallas 1992, no writ) (order amending class certification); Pelt v. State Bd. of Ins., 802 S.W.2d 822 (Tex.App. Austin 1990, no writ) (order resolving discovery dispute); Conley v. Pompa, 627 S.W.2d 512 (Tex.App.Corpus Christi 1982, no writ) (order granting new trial). It does not overrule the points of error. The same rule should apply in a case in which a court of appeals has no jurisdiction to consider part of the appeal. It should dismiss the part over which it has no jurisdiction, not overrule the points that relate to that part.[35] This action vindicates the rule that we dismiss that over which we have no jurisdiction. See Conley, 627 S.W.2d at 513.
For want of jurisdiction, we dismiss Bradt's appeal to the extent that it complains of the decisions made in the contempt proceedings (his fifteenth point of error).[36]
VII. Conclusion
We affirm the part of the judgment that grants all of the appellees a directed verdict on all of Metzger's causes of action.
*56 We reverse the part of the judgment that imposes sanctions against Bradt and remand to the trial court with instructions that (1) the judge, on remand, comply with the requirements of rule 18a(c), and (2) the consideration of whatever trial court determines whether Bradt should be sanctioned be limited to whether Bradt should be sanctioned for violating rule 13.
We reverse the part of the judgment that assesses sanctions against Izen and render judgment that no sanctions be imposed against him.
We affirm the part of the judgment imposing sanctions against Metzger, but reverse the part of the judgment that sets the sanctions at joint and several liability for $994,000 plus interest. We remand that part of the judgment for the judge to redetermine, in light of the second prong of the "justness" test discussed in this opinion, the amount that Metzger should be sanctioned for violating rule 13.
We dismiss Bradt's appeal to the extent that it complains of the decisions made in the contempt proceedings (his fifteenth point of error).
NOTES
[1] The Honorable Frank C. Price, former justice, Court of Appeals, First District of Texas at Houston, sitting by assignment.
[2] "Sebek" is Judy's last name since a subsequent marriage.
[3] When asked what the term "unfounded" meant as used in the report, Anderson testified: "There was nothere was not enough evidence at that time to substantiate an offense."
[4] Guez repeated her evaluation in live testimony: "I think that's the gist of my report, that neither one of these parents could care for this child."
[5] The disorders are "undifferentiated attention deficit disorder," "conduct disorder," "oppositional defiant disorder," "dysthymia primary type," "post-traumatic stress disorder," "dream anxiety disorder," and "adjustment disorder with mixed disturbance of emotions and conduct."
[6] Metzger's visits with Larry were to be "100% supervised."
[7] 18 U.S.C. §§ 1961-1968 (1991 & Supp.1994).
[8] The appellants attempt to equate this case to Shaw. The two cases are not, however, comparable. In Shaw, the judge asked an attorney who she had just held in contempt to pay money to the judge's favorite charitya friend of the judge who was in the hospital awaiting an operation. 791 S.W.2d at 211. The judge told one attorney to "shut up!" Id. The judge insulted one of the attorneys, openly questioning his competence; told one of the parties that she was sorry he had chosen the attorney who was representing him; left the bench during the trial; and brought her son, who was ill at the time, to court during the trial, which disrupted the proceedings. Id. The judge in this case did not come close to plumbing the depths of Shaw behavior.
[9] The defendants did not cite Bird in moving for a directed verdict on this cause of action; it had not yet issued at the time of trial. They did, however, employ the rationale of Bird in their motion, relying on two cases that reached similar results before Bird was written, Vineyard v. Kraft, 828 S.W.2d 248 (Tex.App.Houston [14th Dist.] 1992, writ denied), and Dominguez v. Kelly, 786 S.W.2d 749 (Tex.App.El Paso 1990, writ denied).
[10] Since the time of trial, the Supreme Court of Texas has decided Browning-Ferris Indus., Inc. v. Lieck, 881 S.W.2d 288 (1994). In Lieck, the court changed the second element listed above from that the prosecution was caused by the defendant or through its aid or cooperation to "whether [the defendant] either `initiated' or `procured' [the criminal proceedings], depending on the nature of the case." 881 S.W.2d at 292. The court wrote that "[t]he Restatement concepts of initiation and procurement are better suited to malicious prosecution cases than the more general idea of causation." Id. The court limited the application of the new second element to "[malicious prosecution] cases in the future." Id.
[11] The tort of malicious prosecution "rises to constitutional dimensions because it results in a denial of due process." Bussard, 616 F.Supp. at 856.
[12] In none of Metzger's complaints regarding the exclusion of evidence does he address the requirements necessary to obtain a reversal based on the evidence's exclusion. The appellant must show that (1) the trial court did in fact err in excluding the evidence, and (2) the error was reasonably calculated to cause and probably did cause rendition of an improper judgment. Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex.1989).
[13] We note that the right of access to the courts is the right to sue, which Metzger didhe brought the divorce actionbut "not the right to win." Alexander v. Macoubrie, 982 F.2d 307, 308 (8th Cir.1992).
[14] We do have in our record a certified copy of a proposed "Order Granting Social Study." The certified copy reflects Lilly's signature, and the District Clerk's office certifies on the back of the paper that it was filed on January 9, 1987. The certified copy of the proposed order, which does not reflect the trial judge's signature, states that it is "ordered, adjudged and decreed that a social study be conducted of all parties by the Harris County Children's Protective Services and that their findings be promptly filed with this court...." This document states nothing about allegations of child abuse. Further, we know of no reason that Sebek should not have asked the court, even in January, 1987, to have CPS perform a social study.
[15] We presume Metzger's theoryhe does not articulate itis that Guez had her mind made up on June 16 that she was going to report that Larry had been abused; that she therefore actually did tell Senegal on June 16 that she had evaluated Larry and concluded he had been sexually abused; and that the next day, she saw Larry and recorded her predetermined conclusion. Even if this is what occurred, it is not evidence of conspiracy, but rather of wrongdoing solely on the part of Guez. Nor does it mean that Larry was not, in fact, abused; the record is replete with evidence from others besides Guez that he was.
[16] The trial court, acting on defense objections that the evidence was irrelevant, excluded the report. Metzger does not present argument or authority regarding why the exclusion was error, and thus he waived any complaint. Wise v. DeToca, 761 S.W.2d 467, 469 (Tex.App.Houston [14th Dist] 1988, no writ); Tex.R.App.P. 74(f). In any case, we agree that the evidence was irrelevant.
[17] Metzger states that the movie "caused [Larry] to have day terrors and nightmares." The record does not support this conclusion.
[18] We are not persuaded by Metzger's theory that the mental health field is itself a fraud. He labels psychology a "pseudo-science" and writes that "the psychologists and psychiatrists continue to prosper amid the wreckage of the lives that they have destroyed with their grossly inadequate and improper treatment." We disagree with this blanket indictment. We also note that the insurance company which paid Depelchin for Larry's treatment specifically stated that it found no fault with Depelchin's billing.
[19] The elements of the tort are (1) the defendant acted intentionally or recklessly; (2) the defendant's conduct was extreme and outrageous; (3) the defendant's actions caused the plaintiff emotional distress; and (4) the emotional distress suffered by the plaintiff was severe. Twyman, 855 S.W.2d at 621.
[20] We also note that, under this record, appellees Sebek, Guez, and Taylor are immune from liability via Tex.Fam.Code Ann. § 34.03 (Vernon Supp. 1994). The appellees pled this immunity, and argued it in their motion for directed verdict. Under the language of section 34.03(a), however, only the appellees listed above would qualify for immunity here.
[21] When Guez moved for sanctions is unclear in the record.
[22] Metzger and Izen, neither of whom moved to recuse the judge, did not object to untimely notice of the hearing, did not request a continuance, and announced at the hearing that they were ready to proceed.
Metzger, however, complains that the judge erred by proceeding with the sanctions hearing against Bradt in the face of Bradt's motion to recuse. Because the part of the judgment that sanctions Bradt does not affect Metzger, Metzger cannot complain about it on appeal. See Gibson, 97 S.W.2d at 352. We therefore overrule Metzger's fifth point of error.
[23] Bradt pointed this out to the judge at the hearing.
[24] We reject the appellees' argument that Bradt's motion to recuse "failed to establish a proper basis for recusal," and therefore the judge could ignore it. This is the same argument we rejected in Carson, 841 S.W.2d at 493. The judge who has been asked to recuse should not be the one who determines whether the motion states valid grounds for recusal. See id.
[25] Under rule 18b(2), judges may voluntarily recuse themselves from proceedings in which their impartiality might reasonably be questioned. Dunn v. County of Dallas, 794 S.W.2d 560, 562 (Tex.App.Dallas 1990, no writ). That a party has filed a motion to recuse is not a prerequisite to a judge recusing him- or herself under this rule. Id.
[26] Naturally, there are limitations to this inherent power to sanction. See Lawrence, 853 S.W.2d at 700; Kutch, 831 S.W.2d at 510-11.
[27] The appellees also argue that the sanctions were actually imposed in part under Texas Rule of Civil Procedure 215, because rule 13 "incorporates" rule 215. This argument is untenable. Rule 13 states that the court, in punishing a violation of rule 13, shall impose an appropriate sanction from those available under rule 215-2b. Tex.R.Civ.P. 13; Lawrence, 853 S.W.2d at 699. This does not amount to a blanket "incorporation" of rule 215 such that a sanction under rule 13 could also automatically be said to be based, even in part, on rule 215.
[28] Testimony at the sanctions hearing showed that the defendants in response to whose motions for summary judgment Metzger had filed a false affidavit passed the hearing on their motions because they were certain that Metzger's affidavit had raised fact issues, and their motions would be denied.
[29] In his dissent in Chambers v. NASCO, Inc., 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991), Justice Kennedy observed that sanctions are allowed because of conduct that "degrades the profession and disserves justice." Id. at 76, 111 S.Ct. at 2149 (Kennedy, J., dissenting). Lying in an affidavit most certainly "disserves justice."
[30] Furthermore, the due process clause requires that there be a reasonable relationship between the sanctionable act committed and the sanctions assessed. See Glass, 826 S.W.2d at 688. The absence of a reasonable relationship between the two constitutes an abuse of discretion. See id.
[31] Metzger, Izen, and Bradt contend that the sanctions are void because good cause for the sanctions, and the particulars of good cause, are not stated in the judgment; because they were sanctioned for events that occurred while the case was still in federal court; because Metzger's pleadings "had survived motions for summary judgment"; because the sanctions constituted "fee shifting"; and because the law was "unsettled" regarding Metzger's RICO claims. The judgment most definitely states good cause and its "particulars." We are unable to find any indication in the judgment, or that part of the record supporting it, that Metzger, Bradt, or Izen was sanctioned for events that occurred in federal court or that the judge awarded the sanctions as some sort of impermissible fee shifting. Further, that a client's pleadings "survive[] motions for summary judgment" does not mean that they cannot be the basis of rule 13 sanctions. That is particularly true here, where only four of the 12 defendants asked the trial court to rule on a motion for summary judgment. Nor do we believe that Metzger's RICO claim was "an innovative use" of RICO, and thus should not be the basis of rule 13 sanctions. As noted above, Metzger did not even have the standing necessary to bring a RICO claim.
[32] See note 30, supra.
[33] See note 30, supra.
[34] The dismissal order concludes with the following language: "[T]he Court is of the opinion that the Respondent, L.T. Bradt, is entitled to a dismissal of the contempt charges made against him, and it is so ordered."
[35] Injunction cases are a good example of this principle. When a portion of an order is injunctive, that part of the order is appealable, even though another portion of the order may be interlocutory and unappealable. Eichelberger v. Hayton, 814 S.W.2d 179, 182 (Tex.App.Houston [1st Dist.] 1991, writ denied). In considering such an order, we rule on the points of error complaining of the appealable injunction, and dismiss for want of jurisdiction the part of the appeal that arises from the unappealable portion of the order. See id.
[36] We also note that, because the contempt charges relating to Bradt's conduct on April 10 were dismissed, the question of whether the judge erred in holding Bradt in contempt on April 10 would be moot. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2037238/ | 32 Ill.2d 212 (1965)
205 N.E.2d 33
THE PEOPLE ex rel. Robert H. Engle, Appellant,
v.
OTTO KERNER, Governor, et al., Appellees.
No. 38848.
Supreme Court of Illinois.
Opinion filed February 4, 1965.
Rehearing denied March 18, 1965.
*213 ROBERT H. ENGLE, of Chicago, pro se.
WILLIAM G. CLARK, Attorney General, of Springfield, (RICHARD A. MICHAEL, Assistant Attorney General, of counsel,) for appellees.
DON H. REUBEN, LAWRENCE GUNNELS, and JACK S. LEVIN, for appellee William J. Scott, State Treasurer.
Affirmed in part and reversed in part.
Mr. JUSTICE UNDERWOOD delivered the opinion of the court:
This is an appeal from a decree of the circuit court of Sangamon County denying relator's prayer for declaratory judgment and finding, inter alia, that the 1954 amendment to article IV of the Illinois constitution was validly proposed and does not violate either the constitutions of Illinois or the United States. Important questions concerning constitutional legislative reapportionment are here presented. The cause is here directly as questions arising under both the United States and State constitutions are involved. Illinois Const. art. VI, sec. 5; Supreme Court Rule 28-1.
Relator, appellant herein, a voter, taxpayer and potential candidate for the Illinois House, instituted suit in the circuit court asking for a declaratory judgment that (1) this amendment to article IV of the Illinois constitution (article IV, secs. 6, 7, 8,) is totally invalid; (2) the 68th (1953) General Assembly proposed amendments to more than three articles of the constitution in violation of the Gateway Amendment (article XIV, section 2,); (3) the 68th General *214 Assembly was without power to propose any amendment denying people equality (on a population basis) of representation in the Illinois senate or in constitutional conventions; (4) the General Assembly consists of 51 senators and 153 representatives (instead of the present 58 and 177, respectively) under the last valid reapportionment of 1901 pursuant to the constitution of 1870; and (5) the 1964 amendments to the Election Code are invalid.
The 1954 amendment to article IV specifically provides:
ARTICLE IV
"§ 6. The General Assembly in 1955 shall redistrict the state for the purpose of electing state senators. There shall be fifty-eight senatorial districts. Cook county shall have twenty-four of the districts. These twenty-four districts shall be located as follows: Eighteen in the territory that is within the present corporate limits of the city of Chicago; and six in the territory that is in Cook county outside such corporate limits. The remaining one hundred and one counties of the state shall have thirty-four of the senatorial districts.
"All senatorial districts shall be formed of contiguous and compact territory. In their formation, area shall be the prime consideration.
"The senatorial districts shall be numbered one, two, three, and so forth, including fifty-eight. Each such district shall elect one senator, whose term of office shall be four years. Senators elected in districts bearing even numbers shall be elected in 1956 and every four years thereafter; and senators elected in districts bearing odd numbers shall be elected in 1958 and every four years thereafter.
"§ 7. The General Assembly in 1955 and in 1963, and every ten years thereafter, shall redistrict the state for the purpose of electing state representatives. There shall be fifty-nine representative districts. In the 1955 redistricting Cook County shall have thirty of the districts. These thirty districts shall be located as follows: Twenty-three in the territory that is within the present corporate limits of the City of Chicago; and seven in the territory that is in Cook County outside such corporate limits. In the 1955 redistricting, the remaining one hundred and one counties of the state shall have twenty-nine of the representative districts. In redistricting subsequent to the 1960 census, and thereafter, the fifty-nine representative districts shall be divided among (1) that part of Cook County that is within the present corporate limits of the City of Chicago, *215 (2) that part of Cook county that is outside such corporate limits, and (3) the remaining one hundred and one counties of the state, as nearly as may be, as the population of each of these three divisions bears to the total population of the state.
"Representative districts shall be formed of contiguous and compact territory, and shall contain, as nearly as practicable, a population equal to the representative ratio; outside of Cook County, such districts shall be bounded by county lines unless the population of any county entitles it to more than one representative district. The representative ratio for the entire state shall be the quotient obtained by dividing the population of the state by fifty-nine. No representative district may contain less population than four-fifths of the representative ratio.
"Three representatives shall be elected in each representative district in 1956 and every two years thereafter. The term of office shall be two years. In all elections of representatives aforesaid, each qualified voter may cast as many votes for one candidate as there are representatives to be elected, or may distribute the same, or equal parts thereof, among the candidates as he shall see fit; and the candidates highest in votes shall be declared elected.
"§ 8. In performing its duties under Sections 6 and 7 of this amendment, the General Assembly shall redistrict and reapportion in a single legislative enactment. If, however, the regular session of the General Assembly in 1955 as to both senatorial and representative districts or in 1963, or any ten years thereafter as to representative districts, fails by the first day of July to redistrict the state into such districts, then the redistricting shall be accomplished by a commission. Within thirty days after such first day of July, the state central committee of each of the two political parties, casting the highest votes for governor at the last preceding gubernatorial election, shall submit to the governor of the state a list of ten persons. Within thirty days thereafter, the governor shall appoint the commission of ten members, five from each list. If either of the state central committees fail to submit the list within the specified time, the governor, within the specified time, shall appoint five members of his own choice from the party of such committee. Each member of the committee shall receive $25.00 a day, but not more than $2,000 for his services.
"This commission shall redistrict the state into senatorial districts and into representative districts in the manner specified above. This commission shall file with the secretary of state a full statement of the numbers of the senatorial and representative districts and their boundaries. No such statement shall be valid unless approved by seven members of such commission.
*216 "After such statement is filed, senators and representatives shall be elected according to the statement and the districts therein determined, until a redistricting and reapportionment are thereafter made by the General Assembly as provided in this amendment. If, however, the statement is not filed within four months after the commission is appointed it shall stand discharged. Thereupon, all senators, scheduled for election at the next election for state senators, and all state representatives shall be nominated and elected at the next election from the state at large. Following such an election at large, the General Assembly at its next regular session shall perform the duties specified in this amendment. But if such a General Assembly fails to perform these duties, then another commission, as specified in this Section 8, shall be appointed in like manner, with like duties, and power, and with like effect; and so forth until a valid senatorial and representative redistricting and reapportionment are secured in this 1950 decade and each decade thereafter. But there can be only one valid senatorial and representative redistricting and reapportionment during a particular decade."
Relator first argues that because the amendment to article IV does not itself provide a legislative redistricting scheme, it violates article XIV, section 2, which requires that a proposed constitutional amendment be "entered in full" on the Journals of both Houses of the legislature and "published in full" at least three months preceding the general election. It is maintained that the proposed amendment must itself describe the precise geographical boundaries of the district, as well as all other details, in order to comply with "entered and published in full" requirements. However, relator cites no provision in the constitution nor any other authority for this proposition: i.e. that the constitution may not establish reapportionment standards and leave to the General Assembly the task of devising a statutory scheme in compliance therewith. This has been the traditional method of reapportionment, and this court has held that the legislature may exercise discretion in reapportioning according to constitutional standards. (See People ex rel. Heffernan v. Carlock, 198 Ill. 150, 160-61; People ex rel. Woodyatt v. Thompson, 155 Ill. 451.) We *217 find nothing constitutionally offensive in the procedures here employed.
Relator next argues that the effect of section 6 of article IV of the 1954 amendment, with regard to the Senate, was to charge the succeeding General Assembly with the responsibility and the power to legislatively determine and freeze the senatorial districts, the only manner by which they might subsequently be changed being constitutional amendment, as "[o]nce the senate districts have been established, they are permanently fixed and may not be altered, revised or reallocated except by constitutional amendment. See Donovan v. Holtzman, 8 Ill.2d 87." (People ex rel. Giannis v. Carpentier, 30 Ill.2d 24, 26.) This, relator maintains, is to enable a legislature to enact merely by legislation that which may be undone only by constitutional amendment and therefore, in effect, violates the provisions of article XIV requiring a 2/3 majority vote in both houses and 2/3 majority vote of the electors concerning constitutional amendments.
However, this argument is of no real consequence, for in view of Germano v. Kerner, 378 U.S. 560, 12 L.ed.2d 1034, wherein the United States Supreme Court reversed the district court's holding that the apportionment of the Illinois senate was constitutional and remanded the cause "for further proceedings consistent with the views stated in our opinions in Reynolds v. Sims (377 U.S. 533) and in other cases related to state legislative apportionment decided along with Reynolds," it can no longer be contended that the area apportionment provisions of article IV, section 6, and its prohibitions against subsequent legislative change are valid.
Nor do we find constitutional infirmities in the contention that the Gateway Amendment (Ill. Const., art. XIV, sec. 2), has been violated by the 68th General Assembly, although relator argues that the provisions thereof were disregarded in that, while on their face the proposed constitutional *218 amendments proffered by the 68th General Assembly purported to amend only three articles, i.e. the canal article, the executive article, and article IV (the legislative article), the amendment to the latter article by implication amended the due process provision of article II, section 2, the free-and-equal election provision of article II, section 18, and the constitutional-convention provision, article XIV, section 1. Hence, it is maintained, amendments to more than the three-article limit were made. Since any implied amendment of the due-process and free-and-equal-election provisions is necessarily rendered nugatory by our holding that parts of article IV, section 6, are invalid, we need discuss only the undisputed implied amendment of the constitutional-convention provision.
In City of Chicago v. Reeves, 220 Ill. 274, we held that the forerunner (which prohibited the proposal by any one General Assembly of amendments to more than one article), of the Gateway Amendment applied only to express amendments and did not apply to "implied amendments or changes which were necessarily worked in other articles of the constitution by the express amendments of a particular article of the constitution." (220 Ill. at 284.) This principle is particularly applicable here, where the increase in the number of legislators in the express amendment to article IV necessarily increases the number of legislators required to call a constitutional convention and the number of delegates at such convention, and such implied changes are not, under Reeves, objectionable.
Relator also contends that the provisions of the Election Code dealing with the 1964 at-large representative election (S.H.A., chap. 46, par. 8A-1 et seq. March 1964 pamphlet) are invalid in that (1) they are based on the allegedly void 1954 constitutional amendment, and (2) that since the provisions are restricted to the year 1964, they constitute "special legislation" proscribed by article IV, section 22, of the Illinois constitution. In view of our subsequent *219 determination herein that the federally unconstitutional portions of the 1954 constitutional amendment do not invalidate the balance of the amendment and that, insofar as the provisions of the Election Code here under attack are restricted to the year 1964, the question is now moot, these contentions are without merit.
It should be noted that in People ex rel. Giannis v. Carpentier, 30 Ill.2d 24, we held that article IV, section 8, did not contemplate Senators running at large where there had been a failure to reapportion the House of Representatives. That decision was based substantially upon the language employed in sections 6, 7 and 8 and the principle that the constitution should wherever possible be construed to avoid irrational, absurd, or unjust consequences. (30 Ill.2d 24, 28-29.) Our statement therein regarding the immutability of the 1955 senatorial districts, while lending justification to the ultimate decision, was not necessary to the determination of the issue presented, i.e., whether the Senators coming up for election in 1964 were obliged to run from the State at large. As a consequence, the invalidity above noted wrought in our constitution by a change in Federal constitutional interpretation does not affect the ultimate construction given article IV, section 8, in Giannis. Hence, the provisions of section 8 dealing with at-large representative elections do not govern senatorial elections.
While it is apparent that the second paragraph of section 6 is constitutionally unsound under the rationale of Reynolds v. Sims, 377 U.S. 533, 84 S.Ct. 1362, 12 L.ed.2d 506, and that the first paragraph thereof is likewise invalid insofar as it purports to allot specified numbers of districts to various geographical areas, it does not necessarily follow that the entire amendment must fall. The principle inherent in all sections of the amendment, i.e.: that the State shall be divided into three principal political regions, is not obnoxious per se but only when the equality-of-population principle is significantly diluted (Reynolds v. Sims). As the *220 United States Supreme Court there said (84 S.Ct. 1390): "A State may legitimately desire to maintain the integrity of various political subdivisions, insofar as possible, and provide for compact districts of contiguous territory in designing a legislative apportionment scheme. Valid considerations may underlie such aims. Indiscriminate districting, without any regard for political subdivision or natural or historical boundary lines, may be little more than an open invitation to partisan gerrymandering." And again at page 1391: "* * * a State may legitimately desire to construct districts along political subdivision lines to deter the possibilities of gerrymandering." It is clear that the number of districts allocable to each region cannot be frozen into the constitution, since population changes may necessitate substantial revision from time to time. We therefore conclude that, while the first paragraph in section 6 is unconstitutional insofar as it allocates specified numbers of districts to designated geographical areas without reference to population, and the second paragraph is unconstitutional per se, the principle of dividing the State into three major regions consisting of (1) the city of Chicago, (2) the portion of Cook County lying outside the city of Chicago, and (3) the balance of the State, as made manifest in the remaining constitutionally valid portions of the amendment, is compulsory insofar as it can be used compatibly with the equality-of-representation theme in any future redistricting of the Senate.
Since it is not argued that other provisions of sections 6, 7 and 8 of article IV clash with Federal constitutional requirements, the inquiry now becomes whether the above noted partial unconstitutionality demands total invalidity of these sections. This is, in turn, determined by whether the admittedly invalid portions are independent and severable from the other provisions and whether "it was the purpose of the law to accomplish two or more objects." Jackson v. Blair, 298 Ill. 605, 609; see also People ex rel. Adamowski *221 v. Wilson, 20 Ill.2d 568, 582; McDougall v. Lueder, 389 Ill. 141, 155; People ex rel. Dougherty v. City of Rock Island, 271 Ill. 412, 422.
We believe that sections 6, 7 and 8 manifestly satisfy the tests of independence, and hence, severability. The provisions (1) give the General Assembly the power to redistrict the House of Representatives, with express provision that the latter is to be determined on the basis of population, (2) provide for periodic reapportionment of the House (3) establish the number of senatorial and representative districts and the number of legislators to be elected from each district, (4) require that senatorial and representative districts be formed of contiguous and compact territory,(5) provide for terms of office of the legislators and when they are to be elected, and (6) give due regard to the three separate, traditional regions of the State. The purposes sought to be achieved are clearly multiple, independent, and severable.
Relator maintains, however, that the unconstitutional portions of the amendment are of a vital nature, and that without them it cannot be said the remaining valid portions would have been enacted; hence, the entire amendment must fall. A late and controlling expression thereon is People ex rel. Adamowski v. Wilson, 20 Ill.2d 568, 582, which quotes with approval the following language in McDougall v. Lueder, 389 Ill. 141, 155: "The fact that a part of an act is unconstitutional does not require that the remainder shall be held void unless all the provisions are so connected as to depend upon each other. The valid and invalid provisions may even be contained in the same sentence and yet be perfectly distinct and separable so that the former may stand though the latter fall." We then held: "If what remains after the invalid portion is stricken is complete in itself and capable of being executed wholly independently of that which is rejected, the invalid portion does not render the entire section unconstitutional unless it *222 can be said that the General Assembly would not have passed the statute with the invalid portion eliminated. [Citing cases]." We believe it cannot fairly be said that, since area alone is a constitutionally impermissible basis for districting and the major geographical divisions are retained insofar as compatible with population requirements, the remaining portions of the amendment would not have been adopted. We therefore hold that, except for the first two paragraphs of section 6, the provisions of sections 6, 7 and 8 of article IV referred to above are valid, subsisting, integral parts of the Illinois constitution. It should be expressly noted here that, while we have held part of the plan evidenced by the first two paragraphs of section 6 to be invalid, the principle implicit therein and elsewhere manifest in the amendment, i.e. that each legislative district shall be wholly included within one of the three traditional regions of the State, still remains.
Since the portion of article IV, section 6, authorizing Senate redistricting was limited by its terms to 1955, it becomes necessary to determine whether, since there is no express constitutional provision granting power to the legislature to reapportion the Senate, the General Assembly has the power to do so. As the drafters of sections 6, 7 and 8 envisioned a permanently apportioned Senate based upon area, no reapportionment provision (other than for 1955) was necessary. See People ex rel. Giannis v. Carpentier, 30 Ill.2d 24.
It is well settled that de facto office-holders, as we now have in the Senate, are vested with complete authority to act as such, particularly in the absence of any de jure officers. (See Lavin v. Commissioners of Cook County, 245 Ill. 496, 505-06; Harvey v. Sullivan, 406 Ill. 472, 479.) This principle, applied here, is in accordance with expressions in United States Supreme Court decisions, which have assumed that existing State legislatures, although elected from unconstitutional districts, have full power to act. *223 (Maryland Committee for Fair Representation v. Tawes, 377 U.S. 656, 676; 12 L.ed.2d 595; Reynolds v. Sims, 377 U.S. 533, 586; Roman v. Sincock, 377 U.S. 695, 699.) It would therefore seem that plenary legislative power is still vested in the General Assembly as presently constituted.
Formerly (prior to the 1954 amendments to article IV) the General Assembly had the power to reapportion its election districts. (See Fergus v. Kinney, 333 Ill. 537; People ex rel. Fergus v. Blackwell, 342 Ill. 223; People ex rel. Woodyatt v. Thompson, 155 Ill. 451; Fergus v. Marks, 321 Ill. 510). As has been stated, the 1954 amendment made it unnecessary, with regard to the Senate, for the further exercise of redistricting power by the legislature. However, this power was not expressly taken away, and, where an unanticipated change in Federal constitutional interpretation upsets the language of the Illinois constitution, we can see no reason forbidding the revitalization of this traditional and inherent reapportionment power.
We have held that our legislature has the inherent power to enact legislation not expressly prohibited by the constitution, and that, moreover, "The Illinois legislature does not look to the State constitution for power to act, but looks to it and the Federal constitution only for restrictions upon its powers to act. (Fenske Bros. Inc. v. Upholsterers International Union, 358 Ill. 239; Nielsen v. City of Chicago, 330 Ill. 301; Taylorville Sanitary District v. Winslow, 317 Ill. 25.) Every subject within the scope of civil government which is not within some constitutional inhibition may be acted upon by the General Assembly. (Sutter v. People's Gas Light and Coke Co. 284 Ill. 634.)" Locust Grove Cemetery Ass'n v. Rose, 16 Ill.2d 132, 138.
Other courts, finding themselves faced with the same dilemma here before us, have sustained the inherent power of unconstitutionally districted legislatures (because of the change in Federal law) to reapportion. (See Maryland Committee for Fair Representation v. Tawes, 228 Md. 412, *224 180 A.2d 656, 670; LeDoux v. Parish Democratic Executive Committee, 244 La. 981, 156 So.2d 48; Harris v. Shanahan, 192 Kans. 183, 387 P.2d 771; Butteworth v. Dempsey (D. Conn.), 229 F. Supp. 754; Buckley v. Hoff (D. Vermont), 234 F. Supp. 191). We hold, therefore, that the General Assembly has the power to redistrict the Senate.
It is to be observed, however, that such reapportionment and redistricting scheme as may be enacted must, in the light of the language used in Reynolds v. Sims, provide for periodic review thereof as related to interim population changes. While not purporting to establish an inflexible standard of frequency of reapportionment, that case is authority for the proposition that decennial reapportionment "would clearly meet the minimal requirements for maintaining a reasonably current scheme of legislative representation," and that reapportionment with less frequency "would assuredly be constitutionally suspect." 84 S.Ct. 1382-3, 12 L.ed. at 540.
A constitutionally valid plan of election must be completed, under Reynolds v. Sims, by 1966, and a Federal court is now being asked to remedy the malapportionment existing in the Illinois Senate (Germano v. Kerner, Civil No. 63C-291, N.D. Ill.) (on remand from the U.S. Supreme Court) in the event the General Assembly does not do so before August 2, 1965. While we trust the General Assembly will succeed in its task, we must, in view of the unfortunate 1964 House apportionment experience, (see People ex rel. Spence v. Carpentier, 30 Ill.2d 43) consider the possibility of failure.
As the final forum available in this State, it is our responsibility to construe and apply provisions of our State and the Federal constitutions as related to the problems of legislative reapportionment. We conceive it to be the responsibility of the State of Illinois to establish its own constitutionally selected legislative body, and that the State *225 agencies, both historically and logically, are the proper forum for resolution of the problems therein, consonant with the Federal constitutional interpretations relating to equality of representation. The highest courts of our sister States have so held in Butcher v. Bloom, 415 Pa. 438, 203 A.2d 556; State ex rel. Reynolds v. Zimmerman, 22 Wis. 544, 126 N.W.2d 551; Davis v. McCarty (Okla.), 388 P.2d 480. Such action has been approved by the United States Supreme Court. (Maryland Committee for Fair Representation v. Tawes, 377 U.S. 656, 674, 84 S.Ct. 1429, 1439, 12 L.ed.2d 595; Scranton v. Drew, 379 U.S. 40, 13 L.ed.2d 107.) It is also evident that the underlying principle that State courts should be given priority in resolving similar questions was a factor motivating Congress in the enactment of subparagraph (5), section 2284, Title 28, U.S.C.A. All parties to this proceeding either request or concede that we may retain jurisdiction.
We have expressed confidence that the General Assembly will successfully perform its duty to enact a constitutionally valid plan during its current session. Nevertheless, we retain jurisdiction of this cause for the purpose of taking such affirmative action as may be necessary to insure that the 1966 election is pursuant to a constitutionally valid plan. We do not here determine whether, in the absence of a constitutional legislatively determined plan, language in Tawes, and in Lucas v. 44th Gen. Assembly of Colorado, 377 U.S. 713, 84 S.Ct. 1472, 12 L.ed.2d 632, and related United States Supreme Court decisions, requires us to adopt, simultaneously, provisional reapportionment and redistricting plans for both houses.
The judgment of the Sangamon County circuit court is affirmed insofar as it does not conflict with this opinion and is otherwise reversed. Jurisdiction of this cause is retained.
Affirmed in part and reversed in part, and jurisdiction retained.
*226 Mr. JUSTICE SCHAEFER dissenting:
I agree with the opinion of the majority of the court insofar as it holds (1) that no more than three constitutional amendments were proposed by the 68th General Assembly; (2) that issues concerning the validity of those provisions of the Election Code that relate to the 1964 at-large election of representatives are now moot, and (3) that the present members of the state Senate, although elected from discriminatory districts that violate the constitution of the United States, nevertheless have de facto authority to act as members of the Senate of Illinois. But other conclusions are reached with which I can not agree.
The primary contention of the relator is not answered by the majority opinion. That contention is that the constitution of Illinois was not complied with in the adoption of the 1954 reapportionment amendment. The argument is that if senatorial districts once fixed by the legislature can be changed only by constitutional amendment, the districts so fixed have been made a part of the constitution without having been published and without having been submitted to and adopted by the people of the state at a referendum election, as the amending clause of the constitution requires. Constitution, art. XIV.
The opinion disposes of this contention on the ground that since the decision of the Supreme Court of the United States in Germano v. Kerner, 378 U.S. 560, "it can no longer be contended that the area apportionment provisions of article IV, section 6, and its prohibitions against subsequent legislative change are valid." But this statement does not meet the relator's contention. That contention, if sound, would completely invalidate the 1954 amendment upon the ground that the entire amendment was not submitted to and adopted by the people, as required by the constitution of Illinois. The fact that the Supreme Court of the United States has held a portion of the amendment invalid because it violates the federal constitution has nothing to do with *227 the relator's claim that requirements of the Illinois constitution were not complied with.
This contention of the relator is based upon the statement in People ex rel. Giannis v. Carpentier, 30 Ill.2d 24, 26, concurred in by only three members of this court, that "Once Senate districts have been established, they are permanently fixed and may not be altered, revised or reallocated except by constitutional amendment." As was pointed out in the dissent in the Giannis case, and as is conceded in the majority opinion in this case, no issue concerning the immutability of Senate district boundaries was before the court in the Giannis case. The observation as to the constitutional status of Senate districts was unnecessary to the decision and in my opinion the court should not adhere to it.
The language of the 1954 amendment contemplates senatorial, as well as representative, redistricting every ten years: "But if such a General Assembly fails to perform these duties, then another commission, as specified in this Section 8, shall be appointed in like manner, with like duties, and power, and with like effect; and so forth until a valid senatorial and representative redistricting and reapportionment are secured in this 1950 decade and each decade thereafter. But there can be only one valid senatorial and representative redistricting and reapportionment during a particular decade." (Italics supplied.)
If this court were to hold, in accordance with this language, that senatorial districts once established are not immutable, the relator's contention in this case would fall. But the court does not so hold. It leaves the contention unanswered, except as it refers to the legislation which prescribes district boundaries which can be changed only by constitutional amendment as "the traditional method of reapportionment." The majority opinion cites no authority whatsoever to support its assumption that legislation which can be altered only by constitutional amendment is a traditional *228 method of reapportionment. None has been cited by the parties, and I am aware of none.
The relator's contention that the 1954 amendment violates the Illinois constitution could easily be answered by adhering to the actual language of the 1954 amendment and repudiating the Giannis dictum as to the immutability of Senate districts. But the court now appears to have rejected that course. I see no escape from the conclusion that, if the 1954 amendment meant that Senate districts established without having been published or submitted to a constitutional referendum, could be changed only by constitutional amendment, the relator's contention is sound and the 1954 amendment was not validly adopted under the constitution of Illinois.
Section 8 of the 1954 amendment provides that if the legislature fails to reapportion, a special commission is to be convened to do so and that if it fails one half of the Senate and all of the House must run at large. This provision was one of the most important aspects of the 1954 amendment since it was believed that this would solve the problem of legislative refusal to obey the constitutional mandate to reapportion every ten years. (See Donovan v. Holzman, 8 Ill.2d 87.) The majority opinion omits any reference to this provision when it enumerates the valid portions of the amendment. This omission, coupled with the gratuitous observation, "We do not here determine whether, in the absence of a constitutional legislatively determined plan, language in Tawes, and in Lucas v. 44th General Assembly of Colorado, 377 U.S. 713, 84 S.Ct. 1472, 12 L.ed.2d 632, and related United States Supreme Court decisions, requires us to adopt, simultaneously, provisional reapportionment and redistricting plans for both houses", and the court's retention of jurisdiction, can apparently be explained only on the ground that the majority is getting ready to read section 8 out of the constitution.
Section 8 provides explicitly what is to happen in the *229 event that the General Assembly fails to reapportion. The constitution of Illinois does not contemplate reapportionment by any court, state or federal. There is therefore no practical reason for the retention of jurisdiction of this case. Nor is there any legal basis for the retention of jurisdiction of this case. This is an action for a declaratory judgment, of which this court does not have original jurisdiction. The case is here on appeal from the circuit court of Sangamon County. The jurisdiction of this court ends when it has affirmed or reversed the judgment of the circuit court, or remanded the case to that court for further proceedings. The issues presented in the circuit court concerned only the November 1964 election. They did not at all involve the contingency that the General Assembly might, in 1965, fail to perform its duty. The circuit court decided only the issues that were presented to it, and those are the only issues that are actually before this court.
If the majority were to hold that the provisions of section 8 are still applicable, I would agree on the severability issue. But if, as appears to be the case, they are reading that provision out of the amendment, I can not agree that what remains is separable and valid. The majority correctly states the applicable legal principle as set forth in People ex rel. Adamowski v. Wilson, 20 Ill.2d 568, but it fails to apply that principle. The test of separability there stated is: "If what remains after the invalid portion is stricken is complete in itself and capable of being executed wholly independently of that which is rejected, the invalid portion does not render the entire section unconstitutional unless it can be said that the General Assembly would not have passed the statute with the invalid portion eliminated." (20 Ill.2d at 582.) The majority opinion completely ignores the second portion of the test.
As I read that opinion the only new provisions embodied in the 1954 amendment that certainly remain valid are those which increase the number of senatorial and representative *230 districts and those which provide that in establishing legislative districts some districts are to be allocated to the city of Chicago, some to the county of Cook outside the city of Chicago, and some to the remaining counties of the state. Certainly the General Assembly in 1953 would not have proposed, nor would the people in 1954 have ratified, a constitutional amendment that made only those relatively insignificant changes in the existing constitution. The suggestion that such an amendment would have been adopted disregards the serious problem that had confronted the state since 1911.
That problem was described in the official explanation of the proposed amendment:
"The Constitution now requires legislative districts to be based solely on population. This has proved unworkable ever since the 1910 census because a valid redistricting would have given the single county of Cook a majority in both houses of the General Assembly. * * *
"Illinois badly needs a legislative redistricting. The present districts stand as they were created half a century ago. As a result, serious inequalities of population have developed, not only as between Cook County and downstate, but even within these major areas of the State. The apportionment amendment tends to assure the people of a constitutional districting because if the General Assembly fails to act, a commission is provided; and if the commission fails to act, legislators will be elected at large." Quoted in Donovan v. Holzman, 8 Ill.2d 87, 92.
The majority opinion enumerates six purposes sought to be achieved by the 1954 amendment, and describes them as "clearly multiple, independent, and severable." Five of these purposes were not new, but were contained in the constitution as it existed before the 1954 amendment. Power to redistrict the House of Representatives on the basis of population, a provision for periodic apportionment, a provision establishing the number of senatorial and representative *231 districts and the number of legislators to be elected from each district, a requirement that legislative districts be formed of contiguous and compact territory, and provisions for the terms of office and the times of election of legislators all these were contained in article IV of the constitution of 1870 prior to its amendment in 1954.
It simply can not be said that repetition of existing provisions was the purpose of the 1954 amendment. In no way would the solution of the problem that confronted the state have been advanced by an amendment that included only these provisions. The sixth of the purposes of the amendment as described by the majority was new to "give due regard to the three separate traditional regions of the State." But no one would have regarded that provision, standing alone without the unconstitutional discrimination it was designed to implement, as of any significance in terms of the problem facing the people.
Although the opinion describes the purposes of the amendment, apart from its unconstitutional discriminatory provisions, as primarily the re-enactment of existing provisions of the 1870 constitution, it omits the provision for automatic redistricting contained in article 8. It has not been suggested by anyone that this provision is invalid. The official explanation quoted above, as well as all the other contemporaneous explanations, emphasize the vital importance of this provision. (See People ex rel. Giannis v. Carpentier, 30 Ill.2d 24, 35.) No reason for its omission is suggested. If any part of the 1954 amendment remains valid, that provision remains.
Mr. JUSTICE HERSHEY joins in this dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1756757/ | 887 S.W.2d 49 (1994)
Johnny Ray FISHER, Appellant,
v.
The STATE of Texas, Appellee.
No. 1159-91.
Court of Criminal Appeals of Texas, En Banc.
October 19, 1994.
*51 Donald S. Gandy, J. Rex Barnett, Fort Worth, for appellant.
Tim Curry, Dist. Atty., and C. Chris Marshall, David L. Richards, Charles Brandenberg and Roxanne McDonald, Asst. Dist. Atty., Fort Worth, Robert Huttash, State's Atty., Austin, for State.
Before the court en banc.
OPINION ON STATE'S MOTION FOR REHEARING AFTER PETITION FOR DISCRETIONARY REVIEW REFUSED
MALONEY, Judge.
Appellant was convicted of the aggravated offense of delivery of a controlled substance, amphetamine, with an aggregate weight, including adulterants and dilutants, of twenty-eight grams or more. Appellant was sentenced to twenty-five years imprisonment. In an unpublished opinion the Court of Appeals reversed the judgment of the trial court and ordered a judgment of acquittal. Fisher v. State, No. 2-89-269-CR slip op. (Tex.App.Ft. Worth 1991). We refused the State's petition for discretionary review, but subsequently granted its Motion for Rehearing after Petition for Discretionary Review Refused.
The indictment alleged delivery of
a controlled substance, namely: amphetamine of more than twenty-eight grams but less than four hundred grams[.]
At trial a chemist for the Department of Public Safety testified that her analysis of the substance at issue showed that of its total weight of 59.32 grams, only thirty-one percent or 18.38 grams was pure amphetamine. She further testified that the remainder of *52 the substance consisted of adulterants and dilutants.
The jury was instructed that
[t]he offense is aggravated if the person delivers a controlled substance, namely, amphetamine, and the amount of the controlled substance is, by aggregate weight, including any adulterants and dilutants, twenty-eight grams or more.
Appellant objected to the above instruction on the ground that it included the phrase "adulterants and dilutants" which was not pled in the indictment. The trial court overruled the objection and the instruction was submitted.
Before the Court of Appeals appellant argued that by including the phrase "adulterants and dilutants," the trial court's instruction allowed the jury to convict appellant on a theory not pled in the indictment. Based upon this Court's decisions in Reeves v. State, 806 S.W.2d 540 (Tex.Crim.App.1990), cert. denied, 499 U.S. 984, 111 S. Ct. 1641, 113 L. Ed. 2d 736 (1991) and Farris v. State, 811 S.W.2d 577 (Tex.Crim.App.1990), the Court of Appeals concluded that when an indictment alleges a specified weight of a controlled substance and does not also specify that the weight includes "adulterants and dilutants" then the State must prove the existence of the controlled substance in its pure form in the amount of the weight alleged. Fisher, slip op. at 5. The Court of Appeals therefore agreed with appellant that the jury instruction authorized the jury to convict appellant on a theory not supported by the indictment. The Court of Appeals further held that "the evidence is insufficient to convict the appellant on the aggravated offense as alleged in the indictment," reversed the judgment of the trial court and ordered an acquittal. Id. at 6.
The State claims that the Court of Appeals erred in measuring sufficiency of the evidence against the indictment rather than the jury instruction, citing Benson v. State, 661 S.W.2d 708 (Tex.Crim.App.1982) (opinion on State's second motion for reh'g), cert. denied, 467 U.S. 1219, 104 S. Ct. 2667, 81 L. Ed. 2d 372 (1984) and Boozer v. State, 717 S.W.2d 608 (Tex.Crim.App.1984). The State concedes that the jury charge should not have included the instruction on adulterants and dilutants, but argues that such instruction amounted to charge error entitling appellant to a new trial, not an acquittal. Appellant maintains that the Court of Appeals correctly measured sufficiency against the indictment.
The State also urges this Court to re-examine and clarify the standard by which sufficiency of the evidence is measured, pointing to inconsistencies in the Benson Boozer line of cases. We granted review to reconsider the standard by which sufficiency of the evidence is measured in cases where the jury instruction allows a conviction on a theory different from that specifically alleged in the indictment and to determine whether the Court of Appeals erred in its sufficiency analysis in this case.[1]
I.
Our notion of reviewing sufficiency of the evidence is inextricably bound with due process principles of notice and opportunity to defend. In In re Winship, 397 U.S. 358, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970), the Supreme Court recognized that the "Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged." (emphasis added). Citing Winship, the Supreme Court stated in Jackson v. Virginia, 443 U.S. 307, 314, 99 S. Ct. 2781, 2786, 61 L. Ed. 2d 560 (1979), that a conviction on a charge not made or not tried is a denial of due process consistent with the broader principle *53 "that a person cannot incur the loss of liberty for an offense without notice and a meaningful opportunity to defend." Concluding that these principles applied on appeal as well as at trial, the Supreme Court held that "[a]fter Winship the critical inquiry on review of the sufficiency of the evidence to support a criminal conviction must be not simply to determine whether the jury was properly instructed, but to determine whether the record evidence could reasonably support a finding of guilt beyond a reasonable doubt." Id. at 318.[2] It logically follows that the reviewing court's sufficiency analysis must take into account the crime with which the defendant was charged in the indictment.
We accordingly recognized in Benson v. State, supra, that there must be a connection between the crime with which a defendant is charged in the indictment and a reviewing court's role in reviewing the sufficiency of the evidence to support a conviction. There, we were asked whether a reviewing court should look to the indictment or the jury charge in determining sufficiency of the evidence to support a conviction. 661 S.W.2d at 713. Discussing the respective roles of the indictment and jury charge, we began with the premise that "the indictment must allege all of the essential elements of the offense." Id. The charge must also contain all of the essential elements of the offense and "should correspond with and incorporate the allegations in the indictment." Id. We stressed the relationship between the indictment, the proof, and the jury charge, explaining that:
The standard by which sufficiency is measured was established in Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979) ... This standard must be applied to the evidence and to a correct charge that corresponds to the indictment allegations. The verdict comes from the jury's determination of the evidence in light of the instructions and law given in the charge. The indictment is directed to the defendant for notice and jurisdiction requirements. It is the charge that "convicts."
Id. at 715 (emphasis added). We held that "when a charge is correct for the theory of the case presented we review the sufficiency of the evidence in a light most favorable to the verdict by comparing the evidence to the indictment as incorporated into the charge." Id. (emphasis in original).
In Boozer v. State, supra, the charge contained an erroneous instruction on the law applicable to accomplice witness testimony. We held that "sufficiency of the evidence is measured by the charge that was given." 717 S.W.2d at 610 (emphasis in original). While the emphasis in Boozer was on the charge alone rather than the "indictment as incorporated into the charge" as we emphasized in Benson, the issue before the Court in Boozer concerned an instruction on accomplice witness testimony, a matter that was not and need not have been pled in the indictment. Accordingly, we do not construe Boozer as limiting or modifying Benson's holding.
While the basis upon which Benson and Boozer were decided is not here questioned,[3]*54 this Court's construction of subsequent constitutional amendments and legislative action ultimately affects the reasoning underlying those decisions. Therefore, we need to re-examine Benson and Boozer in light of those constitutional and statutory changes before addressing the State's specific questions about our application of those cases.
For over one hundred years Texas courts have held that defects of substance contained in an indictment rendered it "fundamentally defective" and could be raised at any time.[4]See, e.g., Studer v. State, 799 S.W.2d 263, 266-67 (Tex.Crim.App.1990); American Plant Food Corporation v. State, 508 S.W.2d 598, 603 (Tex.Crim.App.1974); Williams v. State, 12 Tex.Ct.App. 398, 401 (1882); White v. The State, 1 Tex.Crim.App. 211, 213 (1876); see generally George E. Dix, Texas Charging Instrument Law: The 1985 Revisions and the Continuing Need for Reform, 38 Baylor L.Rev. 1, 13-24 (1986). The failure of an indictment to allege all of the elements of an offense was considered a fundamental defect, rendering an indictment and thus a conviction based thereon, void. See, e.g., Gengnagel v. State, 748 S.W.2d 227, 229 (Tex.Crim.App.1988) (indictment that failed to allege acts constituting recklessness was fundamentally defective); White, 1 Tex. Crim.App. at 214-15 (indictment that failed to allege felonious intent was fatally substantively defective); see also Ex parte Cannon, 546 S.W.2d 266, 268 (Tex.Crim.App.1976) (indictment that failed to allege facts to constitute all elements of offense was fundamentally defective, void and subject to attack in application for writ of habeas corpus).
Expressing frustration over the ability of a defendant to raise substantive defects in the indictment for the first time on appeal, the 69th Legislature submitted for approval to the voters an amendment to article V, § 12 of the Texas Constitution which would give the legislature authority to regulate practices and procedures relating to the use of indictments and informations.[5] The proposed amendment was approved by the voters, and the legislature accordingly passed amendments to the Texas Code of Criminal Procedure, all effective December 1, 1985. In Studer v. State, 799 S.W.2d 263 (Tex.Crim. App.1990), we construed the amendments to article V, § 12 of the Texas Constitution and to article 1.14 of the Code of Criminal Procedure[6] as providing that defects of substance or form contained in an indictment must be objected to at trial or are waived.[7] A defect of substance includes the omission of a required element or elements of the offense *55 charged.[8] Therefore, the failure of an indictment to allege all of the elements of an offense is waived in the absence of an objection thereto. Id.
Accordingly, it is now possible under Studer for a defendant to be convicted on the basis of an indictment that does not allege all of the elements of the offense. See, e.g., State v. Oliver, 808 S.W.2d 492, 493-94 (Tex. Crim.App.1991) (indictment which fails to allege culpable mental state is still "indictment" conferring jurisdiction and defect waived); Rodriguez v. State, 799 S.W.2d 301, 302-03 (Tex.Crim.App.1990) (information which fails to allege requisite knowledge nevertheless sufficient to confer jurisdiction and defect waived). This scenario is at odds with our premise in Benson which assumed the existence of an indictment that properly alleged all of the elements of the offense. In light of Studer the initial question to be resolved in measuring sufficiency of the evidence is whether the indictment alleges all of the elements of an offense.
II.
In the case of an indictment that facially alleges a complete offense, the reviewing court can adhere to the Benson principle of measuring sufficiency by looking at "the indictment as incorporated into the charge." Benson, 661 S.W.2d at 715 (emphasis in original). This is the rule regardless of whether the indictment was facially complete originally or whether it was made facially complete pursuant to a subsequent amendment.
However, in the case of an indictment that does not facially allege a complete offense, the reviewing court's sufficiency analysis must now take into consideration not only the facially incomplete indictment, but also the controlling penal provision,[9] and the jury instruction. First, the reviewing court must ascertain from the indictment what penal provision the indictment is based upon. At a minimum the indictment must be sufficient to give notice of what offense the State is alleging so that the controlling penal provision can be identified.[10] Next, the reviewing court must compare that penal provision with the jury instruction. The instruction should allege all of the elements of the offense as set forth in the controlling penal provision (including all of the elements alleged in the indictment, and any omitted element in accordance with the controlling penal provision). Once it is established that the jury instruction properly incorporates all of the *56 essential elements of the offense as set forth in the controlling penal provision, the reviewing court can proceed to measure sufficiency of the evidence against the instruction given.[11]Cf. Benson, supra; Boozer, supra.
We do not mean to suggest that an indictment which fails to specifically charge or set forth all of the essential elements of an offense is constitutionally sound, but only, as we held in Studer, that a defendant must object to substantive defects in order to preserve error.[12] In the case of an indictment that does not facially allege a complete offense and was objected to as substantively defective, the defendant will undoubtedly be entitled to a new trial based upon trial error for potentially any number of issues, including lack of notice for due process purposes.
III.
With these principles in mind, we now address the State's question as to how sufficiency should be measured "[w]hen the jury *57 instructions allow a conviction on an improperly broad theory of liability."[13] By "improperly broad theory of liability", the State is referring to a situation where there is a variance between the indictment and the jury instruction such that the instruction seemingly broadens the basis upon which the State can obtain a conviction. The groundwork laid in the previous section is applicable here. We begin by asking whether the indictment facially alleges a complete offense.
Where the indictment facially alleges a complete offense (either initially or after amendment), the State is bound by the theory alleged in the indictment, as is the reviewing court in its sufficiency analysis. See Benson, supra (recognizing connection between crime charged in indictment and sufficiency analysis based on jury instruction). By holding in Benson that a reviewing court must compare "the evidence to the indictment as incorporated into the charge," we meant an indictment that has been properly incorporated into the instruction. The importance of reviewing the sufficiency of the evidence based upon the indictment as properly incorporated into the instruction is derived from the principles set forth in Winship and later in Jackson. It would violate due process for a reviewing court to analyze sufficiency based upon an instruction broadening the basis upon which the State could obtain a conviction under a facially valid indictment. Therefore, when the indictment facially alleges a complete offense and the instruction broadens the basis upon which the State can obtain a conviction, the reviewing court shall review sufficiency by comparing the evidence to the indictment as properly incorporated into the instruction, disregarding any language contained in the instruction which expands upon the theory set forth in the indictment.[14]See Reeves, supra (measure sufficiency against "correct charge that corresponds to the indictment allegations"). The reviewing court may only disregard matters contained in the instruction that would normally have to be pled in the indictment, but were not. For instance, while an instruction on the law of parties might be said to broaden the basis upon which the State can obtain a conviction, that is a matter that need not be pled in the indictment.
Where the indictment does not facially allege a complete offense (either initially or after amendment), the State may attempt to prove (and the defendant is deemed to be on notice of) any theory of the offense that is consistent with the incomplete indictment and the controlling penal provision examined together. Accordingly, the instruction may broaden the State's theory as set forth in the incomplete indictment so long as the instruction remains consistent with the *58 allegations that are contained in the indictment and with the controlling penal provision. The reviewing court measures sufficiency of the evidence against the instruction, eliminating from its consideration any language expanding the State's theory beyond that which would be consistent with the allegations contained in the incomplete indictment and the controlling penal provision examined together.[15]
We pause at this point to address the applicability of several United States Supreme Court cases cited in the State's brief for the proposition that because a conviction cannot be upheld on the basis of a theory not passed upon by the jury, sufficiency must be measured against the instruction given. See, e.g., McCormick v. United States, 500 U.S. 257, 111 S. Ct. 1807, 114 L. Ed. 2d 307 (1991); Cole v. Arkansas; Dunn v. United States, 442 U.S. 100, 99 S. Ct. 2190, 60 L. Ed. 2d 743 (1979). Above, we have held that while sufficiency is measured against the jury instruction, the instruction must properly incorporate the indictment (and, where appropriate, portions of the controlling penal provision). If the instruction improperly expands upon the allegations in the indictment (and, where appropriate, portions of the controlling penal provision), the reviewing court should disregard the expansive language. We do not find the Supreme Court cases in conflict with our holding in this regard.
In Cole, the petitioners were charged by information with violating § 2 of a particular state provision and the jury was also instructed on § 2 of the provision. However, in reviewing sufficiency of the evidence, the state appellate court upheld the convictions on the basis of § 1 of the provision. The United States Supreme Court granted certiorari to decide whether it violated due process under the Fourteenth Amendment for a reviewing court to affirm a conviction on grounds neither charged in the information nor passed upon by the jury. Noting that "[n]o principle of due process is more clearly established than that notice of the specific charge and a chance to be heard in a trial of the issues raised by that charge," the Supreme Court held that "to conform to due process of law, petitioners were entitled to have the validity of their convictions appraised on consideration of the case as it was tried and as the issues were determined in the trial court." Cole, 333 U.S. at 201-02, 68 S.Ct. at 517 (emphasis added). Due process was violated where the petitioners' convictions were affirmed "as though they had been tried and convicted of a violation of § 1, when in truth they had been tried and convicted only of a single offense under § 2." Id. at 202, 68 S.Ct. at 517.
In Dunn, during grand jury proceedings the petitioner implicated a fellow inmate, resulting in the fellow inmate's indictment. In a subsequent meeting with the fellow inmate's attorney on September 30th, the petitioner recanted the statements made in the grand jury proceeding. Pursuant to a motion to dismiss the fellow inmate's indictment, a hearing was held on October 21st, at which the petitioner adopted the September 30th statements. Thereafter, the petitioner was indicted for violations of a federal Code provision that prohibits false statements "in any proceedings before or ancillary to any court or grand jury." The indictment alleged that the petitioner's grand jury testimony was inconsistent with statements made on September 30th in a proceeding ancillary to the inmate's prosecution. The jury was also instructed to base its decision on the September 30th statements. The Court of Appeals affirmed the conviction on the ground that the October 21 hearing was an ancillary proceeding. That court acknowledged that the indictment specified the September 30th rather than the October 21st hearing as the ancillary proceeding, but held this discrepancy between the proof at trial and the indictment was not prejudicial. The Supreme Court reversed:
To uphold a conviction on a charge that was neither alleged in an indictment nor presented to a jury at trial offends the most basic notions of due process. Few constitutional principles are more firmly *59 established than a defendant's right to be heard on the specific charges of which he is accused. [citations omitted] There is, to be sure, no glaring distinction between the Government's theory at trial and the Tenth Circuit's analysis on appeal. The jury might well have reached the same verdict had the prosecution built its case on petitioner's October 21 testimony adopting his September 30 statement rather than on the September statement itself. But the offense was not so defined, and appellate courts are not free to revise the basis on which a defendant is convicted simply because the same result would likely obtain on retrial.
Id. 442 U.S. at 106-07, 99 S.Ct. at 2195. The Court concluded that since the September 30th meeting did not constitute an "ancillary proceeding," the conviction could not stand. Id.
The petitioner in McCormick, a state legislator, received money from a constituent organization, but did not report receipt of the money as either campaign contributions or income for tax purposes.[16] The petitioner was indicted for violating the Hobbs Act by extorting payments under color of official right and for filing a false income tax return. The petitioner appealed on the ground that the evidence did not support the verdict, claiming that the Act required a showing that the elected official promised action or inaction in exchange for the money. The Court of Appeals held that such a showing was not required where the parties never intended the payments to be legitimate campaign contributions. The Court of Appeals listed seven factors to be considered in determining the parties' intent in this regard, and upon consideration of those factors concluded that the evidence supported a finding that the parties never intended the money to be a campaign contribution. The Supreme Court reversed, noting that the Court of Appeals' analysis did not account for the fact that the jury was never instructed on the issue of the parties' intent:
It goes without saying that matters of intent are for the jury to consider. [citation omitted] It is also plain that each of the seven factors that the Court of Appeals thought should be considered in determining the parties' intent present an issue of historical fact. Thus even assuming the Court of Appeals was correct on the law, the conviction should not have been affirmed on that basis but should have been set aside and a new trial ordered. [citations omitted]
McCormick, 500 U.S. at 270, 111 S.Ct. at 1815.
The holdings in Cole and Dunn are similar. Both cases were reversed where the court of appeals measured sufficiency on a theory different from that alleged in the indictment or information, set forth at trial and instructed upon. In both cases the indictment or information was perfectly reflected in the instruction. Based upon due process principles of notice and opportunity to defend, the Supreme Court held that a defendant had a due process right to a review of the offense as he was charged, tried and convicted. Our holding that the reviewing court should disregard language expanding upon the basis for which the State could obtain a conviction beyond that alleged in the indictment (and, where appropriate, the controlling penal provision), is consistent with Cole and Dunn's holdings that a defendant is entitled to appellate review of the offense that he was charged with and defended against.
McCormick is slightly different. The Court of Appeals in that case announced a new rule of law that was not included in the jury instruction. The new rule pertained to the intent of the parties, an issue of fact to be decided by the jury. Since the issue of intent was one for the jury to determine, reversal *60 and remand for a new trial was appropriate so that the defendant would have the opportunity to have a jury pass upon that issue. We do not in the instant case authorize the affirmance of a conviction on the basis of issues that were proper, but were not passed upon by the jury. Rather, we are authorizing the reviewing court to disregard issues that were improperly included in the instruction. Moreover, our holding would not preclude a reversal for instructional error even if the evidence was found sufficient.
IV.
We now turn to the facts of the instant case. Following the principles outlined above, we first ask whether the indictment facially alleges a complete offense. The indictment alleged delivery of "a controlled substance, namely: amphetamine of more than twenty-eight grams but less than four hundred grams." There is nothing facially defective about this indictment. Under the Controlled Substances Act applicable to this case, a person commits an offense if he delivers a controlled substance which is defined to include amphetamine. Tex.Rev.Civ. Stat.Ann. art. 4476-15 § 4.031(a) (Vernon 1985). Because this indictment facially alleged a complete offense, the State is limited to proving the theory alleged, as is the reviewing court so limited in its sufficiency analysis.
In analyzing sufficiency in this case, we look at the indictment as properly incorporated into the instruction. The allegations made in the indictment in this case were properly incorporated into the instruction, but those allegations were erroneously enlarged by the addition of the "adulterants and dilutants" language. We therefore disregard such enlargements in our sufficiency analysis. While appellant was indicted for delivery of more than 28 grams but less than 400 grams of amphetamine, the evidence showed that only 18.38 grams of the controlled substance at issue was pure amphetamine. We hold the Court of Appeals did not err in concluding that the evidence was insufficient to support appellant's conviction.
V.
The State concedes that the instruction should not have included the "adulterants and dilutants" language and that, appellant having objected to the instruction on these grounds, is entitled to a new trial due to instructional error, rather than an acquittal for insufficiency of the evidence. The State suggests that the Court of Appeals should not have conducted a sufficiency review at all, but should have reframed appellant's insufficiency claim as an instructional error problem.
The State cites Fain v. State, 725 S.W.2d 200 (Tex.Crim.App.1986), as illustrative of how to properly approach the instructional error vs. insufficiency of the evidence problem. There, the jury instruction did not allege a proper sequence of prior convictions and also required the State to prove an impossibilitythat one of the prior convictions became final before the underlying offense was committed. The defendant appealed on the basis of both insufficient evidence and instructional error. Pointing out that none of the parties maintained that the instructions were correct for the theory of the case presented, we concluded the Court of Appeals did not err in holding that the defendant's insufficient evidence claim was really one of instructional error. Id. at 202. The State argues that this case should be treated like Fain.
We note initially that Fain is an aberration among our opinions on sufficiency of the evidence reviews. In Fain, we essentially disregarded the defendant's sufficiency of the evidence claim, addressing instead his instructional error claim as dispositive of the issue. Beginning with Boozer, we have consistently held that the reviewing court is compelled to conduct a sufficiency of the evidence review when raised, even where there was an error in the instruction. We expressly overrule Fain's holding to the contrary. The State complains of cases where it is the instructional error that renders the evidence insufficient. However, we are not faced here with such a case.[17] Accordingly, *61 we decline at this juncture to revisit our holdings that sufficiency of the evidence should be measured against the instruction given even in cases where the evidence is rendered insufficient due to instructional error.
In summary, the indictment in this case facially alleged a complete offense; the Court of Appeals properly measured sufficiency of the evidence by considering the allegations contained in the indictment as properly incorporated into the instruction, disregarding the language expanding upon those allegations, finding the evidence insufficient. The judgment of the Court of Appeals is affirmed.
CAMPBELL and MEYERS, JJ., not participating.
CONCURRING COMMENT ON STATE'S PETITION FOR DISCRETIONARY REVIEW
CLINTON, Judge, concurring.
Understanding that while an "incomplete" charging instrument may invest a trial court with subject matter jurisdiction over a cause, by failing to object to "incompleteness" an accused does not waive or forfeit the fundamental right to a fair and impartial trial under protections constitutionally guaranteed by due process and due course of law clausesany implication to the contrary in Studer v. State, 799 S.W.2d 263 (Tex.Cr.App.1990), notwithstandingI join the opinion of the Court.
DISSENTING OPINION ON STATE'S PETITION FOR DISCRETIONARY REVIEW
McCORMICK, Presiding Judge, dissenting.
Appellant was charged with delivery of amphetamine weighing between 28 and 400 grams. The indictment did not include any language about adulterants and dilutants. However, the jurors were instructed that they could use the weight of adulterants and dilutants in calculating the weight of the controlled substance for which appellant was responsible. Appellant objected to the charge on that ground. On appeal he challenged both the correctness of the jury charge and the sufficiency of the evidence.
Viewed in the light most favorable to the verdict, the evidence at trial is summarized in the following statements. See Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979). Undercover police officers purchased a quantity of amphetamine from appellant for $2,000. When buyers like the undercover officer purchase amphetamine from either wholesalers or street-level retailers, it has been cut at least once and often twice to dilute its strength and increase the quantity of the substance. The powder delivered by appellant weighed 59.32 grams, of which 31% (or 18.38 grams) was pure amphetamine. The pure powder had been "cut" with nicotinamide, another name for vitamin B-12; nicotinamide is a common cutting agent. The 59.32 grams was the total weight of the powder including any adulterants, dilutants and the amphetamine.
Relying on this Court's decisions in Reeves v. State, 806 S.W.2d 540 (Tex.Cr.App.1990), cert. denied, 499 U.S. 984, 111 S. Ct. 1641, 113 L. Ed. 2d 736 (1991), and Farris v. State, 811 S.W.2d 577 (Tex.Cr.App.1990), the Court of Appeals held in an unpublished opinion that the jury charge should have required the State to prove the pure amount of drugs over 28 grams. Fisher v. State, No. 02-89-269-CR (Tex.App.Fort Worth, delivered August 6, 1991). However, rather than reverse for a new trial in light of this error in the charge, the court said it was compelled by *62 Reeves and Farris to judge sufficiency against the theory that should have been submitted to the jurya theory restricted to a pure amount of amphetamine in excess of 28 grams. The court then awarded an acquittal since the pure amphetamine weighed less than that. The Court of Appeals did not address whether the evidence would have been sufficient had the appellate court, like the jury, considered the weight of adulterants and dilutants.
In light of Reeves, the jury charge should not have included an instruction on adulterants and dilutants. The defendant was clearly entitled to a new trial since he challenged the instructions on this ground.
However, this error should not cause an acquittal. The evidence was sufficient under the instructions the jury was told to use in deciding the case, and that is the theory to which the sufficiency test of Jackson v. Virginia, supra, should be applied. Given the chemist's testimony that the pure drug had been cut with vitamin B-12 and the undercover officer's testimony that amphetamine was usually cut once or twice, often with vitamin B-12, to dilute the strength and increase the quantity of the powder, a rational trier of fact could easily have concluded that there was in excess of 28 grams of pure amphetamine mixed with the adulterants and dilutants.
Since the evidence was in fact sufficient to convict under the charge as submitted, the acquittal is improper. Therefore, I respectfully dissent.
WHITE, J., joins.
NOTES
[1] We granted review of the following grounds:
1. Instead of awarding an acquittal, should the Court of Appeals have remanded for a new trial due to error in the jury instructions?
2. When the jury instructions allow a conviction on an improperly broad theory of liability, should the sufficiency of the evidence under Jackson v. Virginia be measured against the legal theory contained in the instructions actually given, against the legal theory that should have been submitted to the jury, or against some other standard?
3. Did the Court of Appeals err in not addressing whether the evidence was sufficient under the instructions actually given to the jury instructions which allowed the jury to take into account the weight of adulterants and dilutants?
[2] Recognizing in Jackson that the question raised went to "the basic nature of the constitutional right recognized in Winship", the Supreme Court framed the issue presented as follows:
whether the due process standard recognized in Winship constitutionally protects an accused against conviction except upon evidence that is sufficient fairly to support a conclusion that every element of the crime has been established beyond a reasonable doubt.
Jackson, 443 U.S. at 313-14, 99 S.Ct. at 2786.
[3] The State maintains that the basic principle of measuring sufficiency against the jury instruction given is logically sound. While appellant argues that sufficiency should be measured against the indictment, he has not cross-petitioned on those grounds. In addition, the State has called our attention to several United States Supreme Court cases which indicate that it is a violation of due process for a reviewing court to measure sufficiency of the evidence against a standard different than that passed upon by the trier of fact. See, e.g., McCormick v. United States, 500 U.S. 257, 111 S. Ct. 1807, 114 L. Ed. 2d 307 (1991) (court of appeals improperly upheld conviction on legal and factual grounds not considered by jury, citing among other cases, Cole v. Arkansas); Dunn v. United States, 442 U.S. 100, 99 S. Ct. 2190, 60 L. Ed. 2d 743 (1979) (to affirm conviction on basis of theory that differed from theory presented in indictment and jury charge is offensive to due process of law, citing Cole v. Arkansas); Cole v. Arkansas, 333 U.S. 196, 68 S. Ct. 514, 92 L. Ed. 644 (1948) (state court which affirmed conviction under § 1 of statute, when defendant was charged and convicted under § 2 of statute, violated due process of law).
[4] A defect of substance was described as "go[ing] to the very sufficiency of the indictment to support the particular conviction based thereon. It is this quality of the sufficiency of the State's pleading as a matter of law to support the conviction that makes the deficiency one of substance." American Plant Food Corporation v. State, 508 S.W.2d 598, 603 n. 1 (Tex.Crim.App. 1974). Defects of substance were, and still are, listed in article 27.08 of the Code of Criminal Procedure. A substantively correct indictment prior to the constitutional amendments was, in the language of our recent opinion in Marin v. State, 851 S.W.2d 275, 279 (Tex.Crim.App.1993), "an absolute systemic requirement [that could not] be made subject to rules of procedural default because, by definition, they [were] not forfeitable."
[5] Article V, section 12(b) as amended provides that:
An indictment is a written instrument presented to a court by the grand jury charging a person with the commission of an offense. An information is a written instrument presented to a court by an attorney for the State charging a person with the commission of an offense. The practice and procedures relating to the use of indictments and informations, including their contents, amendment, sufficiency, and requisites, are as provided by law. The presentment of an indictment or information to a court invests the court with jurisdiction of the cause.
[6] Article 1.14 as amended provides in part:
(b) If the defendant does not object to a defect, error, or irregularity of form or substance in an indictment or information before the date on which the trial on the merits commences, he waives and forfeits the right to object to the defect, error, or irregularity and he may not raise the objection on appeal or in any other postconviction proceeding.
Tex.Code Crim.Proc.Ann. art. 1.14(b).
[7] The constitutional amendments effectively transformed a substantively correct indictment from what was previously a nonforfeitable systemic requirement into a matter that is implemented only upon request. Marin, 851 S.W.2d at 279-80.
[8] Some other defects of substance, in addition to a missing element, that were recognized prior to the 1985 amendments included failure to allege date of offense, culpable mental state, victim's name, enhancement allegations, amount of a controlled substance, and manner and means of committing the offense where it is the manner and means that renders the act criminal. See, e.g., Ex parte Chance, 601 S.W.2d 356 (Tex.Crim. App.1980) (indictment alleging date of offense that was subsequent to date of indictment fundamentally defective); Smith v. State, 573 S.W.2d 546 (Tex.Crim.App.1978) (indictment that alleged stolen property of over $200 would be fundamentally defective as to conviction for theft of over $10,000 but not as to conviction for theft of over $200 but less than $10,000); Ex parte Spain, 589 S.W.2d 132 (Tex.Crim.App.1979) (indictment failing to allege culpable mental state fundamentally defective); Ex parte Lewis, 544 S.W.2d 430 (Tex.Crim.App.1976) (indictment that did not allege victim's name fundamentally defective); Saunders v. State, 528 S.W.2d 843 (Tex.Crim.App.1975) (indictment that failed to allege date offense committed fundamentally defective); Wilson v. State, 520 S.W.2d 377 (Tex. Crim.App.1975) (indictment that alleged delivery of controlled substance fatally defective for failure to allege amount of substance delivered so as to reflect punishment involved); Reeves v. State, 144 Tex. Crim. 270, 162 S.W.2d 705 (App.1942) (indictment which did not allege manner and means by which defendant contributed to delinquency of minor failed to charge offense).
[9] The phrase "controlling penal provision" as used in this opinion refers to penal provisions that may be contained in various statutes or codes defining the substantive crime alleged in the indictment.
[10] We assume in this opinion that the indictment alleges enough to identify the offense charged. For example, an indictment might allege only four of five elements of a particular offense. By comparing the allegations in the indictment, albeit incomplete, with various penal code provisions, one should be able to determine which entire offense the State is alleging. See George E. Dix, Texas Charging Instrument Law: The 1985 Revisions and the Continuing Need for Reform, 38 Baylor L.Rev. 1, 43 (1986) (in order to charge "an offense" as required under Article V, § 12 of the Texas Constitution, indictment must at least "make reasonably clear what criminal offense the grand jury intended").
[11] Presumably, the law as it currently pertains to variances between the indictment and the charge would apply to cases involving variances between the controlling penal provision and the charge, but we need not address those issues in this case. See, e.g., Langston v. State, 855 S.W.2d 718, 721 (Tex.Crim.App.1993) (having pled additional element in charge, State assumes burden of proving it); Fee v. State, 841 S.W.2d 392, 396 (Tex.Crim.App.1992) (where State's burden elevated in charge beyond minimum required by statute, sufficiency nevertheless measured against charge in absence of State's objection at trial to charge); Warren v. State, 810 S.W.2d 202 (Tex.Crim.App.1991) (although charge could have properly alleged appropriation of items in disjunctive, it alleged appropriation in conjunctive; therefore, State required to appropriation of all items alleged); see also Stephens v. State, 717 S.W.2d 338, 341 (Tex.Crim.App.1986) (indicating that when charge includes erroneous or additional allegation to which State objected at trial, and sufficiency turns upon that erroneous instruction, would be treated as trial error); Polk v. State, 749 S.W.2d 813, 815-16 (Tex.Crim.App. 1988) (Benson and Boozer cannot stand for proposition that jury charge may authorize conviction on less evidence than law requires; "[i]t would be anomalous to measure the sufficiency of the evidence against an authorization that reduces the State's burden of proof from that which is minimally required under the law").
[12] A defendant may object to a substantive defect by filing an Exception to Form, a motion to quash, or some other motion for appropriate relief. Cf. State v. Lora, 213 Kan. 184, 515 P.2d 1086, 1091-92 (1973) (if defendant had question as to nature of ulterior felony in burglary case that was not made clear in information, he should have requested bill of particulars; failure of information to allege intended felony underlying burglary was waived where defendant on notice per testimony in preliminary hearing); United States v. Mallen, 843 F.2d 1096 (8th Cir.) (although indictment failed to allege that defendant's false statement was made for purpose to procuring loan, defendant had notice of that element by virtue of indictment's reference to defendant's financial statement, together with citation of controlling statute), cert. denied, 488 U.S. 849, 109 S. Ct. 130, 102 L. Ed. 2d 103 (1988); United States v. Campos-Asencio, 822 F.2d 506, 508 (5th Cir.1987) (failure of indictment which charged illegal re-entry into United States after deportation to specifically allege lack of consent by attorney general was waived where not raised before trial and indictment alleged defendant was in U.S. "unlawfully" and cited controlling statute containing lack of consent requirement); but cf. United States v. Pupo, 841 F.2d 1235, 1239 (4th Cir.) (mere citation of applicable statute does not give defendant notice of nature of offense), 488 U.S. 842, 109 S. Ct. 113, 102 L. Ed. 2d 87 (1988). Article 27.09 of the Code of Criminal Procedure provides that a defendant may make an exception to the form of an indictment for its failure to include any requisite prescribed by articles 21.02 and 21.03. Article 21.02 provides in part that the indictment must set forth the offense in plain and intelligible language and article 21.03 provides that "[e]verthing should be stated in an indictment which is necessary to be proved."
We note that although federal rules prevent federal courts from holding that untimely objections to the substance of the indictment are altogether waived, Fed.R.Crim.P. 7(c) (indictment or information "shall be a plain, concise and definite statement of the essential facts constituting the offense charged."); Fed.R.Crim.P. 12(b) (objection that indictment does not show jurisdiction of court or that it "fails to ... charge an offense" need not be raised prior to trial), federal courts have demonstrated a willingness to uphold a substantively defective indictment when there is not a timely objection, by giving it a liberal construction. See, e.g., United States v. Vogt, 910 F.2d 1184, 1201 (4th Cir.1990) (upon post-conviction challenge to sufficiency of indictment, "every intendment is then indulged in support of ... sufficiency"), cert. denied, 498 U.S. 1083, 111 S. Ct. 955, 112 L. Ed. 2d 1043 (1991); Mallen, 843 F.2d at 1102 (indictment challenged for first time after verdict will be construed liberally in favor of sufficiency and there will be no reversal absent prejudice unless indictment "cannot, within reason, be construed to charge a crime"); Campos-Asencio, 822 F.2d at 508 (indictment will be construed liberally where defendant had notice of issue, demonstrates no prejudice and waits for appeal to assert challenge to substance of indictment).
[13] The State also complains of our application of Benson and Boozer under other scenarios, but those issues are not implicated by the facts presented in this case and are therefore beyond the scope of this opinion.
[14] The State complains that our opinions in Farris and Reeves are inconsistent. We acknowledge inconsistency in some of the statements made in those opinions. However, we note that the result in both of those cases is consistent with our holding today. In Reeves, 806 S.W.2d at 541, the indictment alleged that the defendant delivered "more than twenty-eight grams but less than four-hundred grams" of amphetamine, but did not allege "adulterants and dilutants". The evidence showed that the entire substance weighed 29.7 grams and that the substance contained amphetamine; however, the percentage of amphetamine within the substance was not determined. The instruction provided that the weight could be determined by including adulterants and dilutants. Reiterating the principles set forth in Benson, we said that sufficiency must be determined by measuring the evidence against "a correct charge that corresponds to the indictment allegations." Id. at 543. We concluded, however, that "under either theory" (as set forth in the indictment or the instruction), the evidence was insufficient.
In Farris, 811 S.W.2d at 578 n. 1, the indictment alleged that the defendant possessed "more than 400 grams" of amphetamine. We recognized that the instruction authorized the jury to consider adulterants and dilutants in determining the weight. Id. at 579. The testimony was that the entire substance weighed 916.83 grams and included amphetamine and adulterants and dilutants. There was no testimony as to what the adulterants and dilutants were. Stating that sufficiency of the evidence should be measured against the jury charge, and based upon our previous holding in McGlothlin v. State, 749 S.W.2d 856 (Tex.Crim.App.1988), that adulterants and dilutants are substances added to increase the bulk or quantity of the final product without increasing its activity, we held that the evidence was insufficient. Id. at 579-80.
[15] Again, the reviewing court may only disregard matters contained in the instruction that would normally have to be pled in the indictment.
[16] As a member of the West Virginia House of Delegates, the petitioner was an advocate of legislation allowing foreign medical doctors to practice under temporary permits while studying for the state licensing exams. Some of the foreign doctors who had repeatedly taken and failed the state exams formed an organization which urged extension of the time period within which to pass the state exams. As a result of discussions with the doctors' organization, petitioner agreed to sponsor during the 1985 session, legislation which would grant foreign doctors immunity from state licensure by virtue of their years of experience. Petitioner received money from the doctors' organization during his 1984 campaign.
[17] While admittedly the State is the loser in such cases, we emphasize that the ability to avoid these problems rests with the State. We have indicated that if the State properly objects to an error in an instruction which error would ultimately render the evidence insufficient, the reviewing court will treat the issue as one of trial error, rather than sufficiency of the evidence. See Stephens v. State, 717 S.W.2d 338, 341 (Tex. Crim.App.1986) (indicating that when instruction includes erroneous or additional allegation to which State objected at trial, and sufficiency turns upon that erroneous instruction, would be treated as trial error). However, in the absence of an objection from the State, the defendant is entitled to rely upon the instruction as properly setting forth the State's theory of the case. See, e.g., Boozer, supra; Fee v. State, 841 S.W.2d 392, 396 (Tex.Crim.App.1992). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1769691/ | 523 S.W.2d 787 (1974)
HABITAT, INC., and M. A. Mills, Trustee, Appellants,
v.
Bill McKANNA, Appellee.
No. 4749.
Court of Civil Appeals of Texas, Eastland.
December 27, 1974.
Rehearing Denied May 23, 1975.
Gerald R. Coplin, Passman, Jones, Andrews, Coplin, Holley & Co., Dallas, for appellants.
Fred R. Brown, Brown, Brown & Bowen, Inc., Garland, for appellee.
*788 McCLOUD, Chief Justice.
This is a suit by Bill McKanna for debt and foreclosure of a mechanics' and materialmen's lien. McKanna entered into an oral contract with Town East Real Estate Agency, Inc., to provide plumbing materials and labor in connection with the construction of 42 townhouses to be built on land owned by Town East Real Estate Agency. Plaintiff alleged he was owed $14,300 for labor and materials furnished. McKanna added as defendants, U. S. Financial-Gulf & Mountain, Inc., M. A. Mills, Trustee, and Habitat, Inc., alleging they claimed an interest in the property in question.
In a nonjury trial the court awarded McKanna a $14,300 judgment against Town East Real Estate Agency and U. S. Financial-Gulf & Mountain, Inc. The court further held that plaintiff's mechanics' and materialmen's lien was valid and ordered its foreclosure. The judgment provides, however, that plaintiff's lien is inferior to a $64,000 vendor's lien and directs that such superior lien shall be extinguished by the proceeds of the sale before plaintiff's mechanics' and materialmen's lien is satisfied.
Defendants, U. S. Financial-Gulf & Mountain, Inc., M. A. Mills, Trustee, and Habitat, Inc., have appealed. Town East Real Estate Agency, Inc., has not appealed. We affirm in part and reverse and render in part.
The trial court found that plaintiff and Town East Real Estate Agency, Inc., entered into an oral contract in September of 1971 whereby plaintiff would do plumbing work on 42 townhouses to be built on the subject property for a total contract price of $27,300; that Town East paid plaintiff $13,000 in the form of "draws" as the work progressed; that plaintiff completed his work on or about March 21, 1972; that plaintiff prepared and filed his affidavit for record in the mechanics' and materialmen's lien records on June 10, 1972; that Town East became the record owner of the subject property by deed dated October 16, 1970, and recorded October 20, 1970; that Town East executed and delivered to Fort Worth Mortgage Company a $450,000 note secured by a deed of trust covering the subject property; that both instruments were dated September 29, 1971, but the deed of trust was not filed for record until November 19, 1971; and, that plaintiff commenced visible work on the job site on October 27 or 28, 1971.
Defendants first contend the trial court erred in holding that plaintiff had a valid lien on all 42 lots. They argue that plaintiff and Town East agreed upon a price of $650 per unit and that plaintiff knew at the inception of work how much of the debt each lot was responsible for and that each lot was a separate and distinct parcel. The record reflects that plaintiff was paid $13,000 which defendants assert was for work performed on 20 units and since plaintiff was not able to testify as to which units or lots he had been paid for he was not entitled to a "blanket lien" on all 42 townhouse units.
Plaintiff filed his lien on the following described land:
"Such property being known as 11902, 11906, 11910, 11914, 11918, 11922, and 11926 Brook Valley in the City of Balch Springs, Dallas County, Texas, and being more fully described as follows:
Being Lots One (1) through Forty-Two (42), in Block "B" of the Green Valley Townhouses Addition, an addition to the Town of Balch Springs, Dallas County, Texas."
Defendants contend that "townhouses" should be treated as separate and distinct parcels of land and since plaintiff recognized that the townhouses were designed for separate sale he entered into a contract to perform labor and supply materials for 42 units at a set price per unit.
*789 The trial court found that the contract was for a total price of $27,300, and plaintiff had been paid a "draw" of $13,000 leaving a balance owed of $14,300. Plaintiff testified he gave Town East a price on the "complete job" which he computed on the basis of $650 per townhouse unit.
In Lyon v. Logan, 68 Tex. 521, 5 S.W. 72 (1887), the court said:
"When materials have been furnished under a single contract for buildings erected on two or more contiguous lots owned by the person to whom the material is furnished, we see no reason why the lien should not attach to all the lots; and it would be exceedingly unreasonable to require the person who furnishes the material in such a case to ascertain how much of the material is placed in each house. This is a matter under the control of the owner of the property improved; and, if he does not see proper to make separate contracts for material to be used on each lot, he cannot be heard to say that a lien does not attach upon all the lots upon which the material is used."
The rule is stated in 38 Tex.Jur.2d § 47, page 604, as follows:
"Ordinarily, a mechanics' or materialmen's lien does not attach to premises separate and distinct from those on which the improvement or repairs were made. That lien may, however, extend to more than one lot or tract, provided the owner has chosen to consider them as a unit in contracting for the improvement; that is, if the improvement is made under an entire contract for the whole and is located on one body of land, it is one improvement, though there are several separate structures. As long as the owner treats the lots as one property, by making one contract for material to be used on all of them, without designating what part of the material is to be used on lot, the materialman may treat the lots as one piece of property in fixing his lien. In order for the lien to extend to two or more lots or tracts it is necessary that they should be contiguous, otherwise they cannot be necessarily connected with the improvement; the statute determines, however, the extent of the statutory lien and not the contract between the parties."
The record contains evidence to support the trial court's finding that plaintiff and Town East entered into a single contract which covered all of the 42 townhouses. We hold that plaintiff had a valid lien on all 42 lots.
We are next confronted with a priority of liens question. The court found that approximately $65,000 of the funds advanced by Fort Worth Mortgage Company were used by Town East to pay off a prior vendor's lien which was created when Town East acquired the property. The record reflects that the Fort Worth Mortgage Company note and deed of trust were assigned to U. S. Financial-Gulf & Mountain in February of 1972. The court found that Town East defaulted on the note; that M. A. Mills was appointed substitute trustee under the deed of trust; that Mills caused to be posted the statutory notices provided in the deed of trust for a trustee's sale to be held on November 7, 1972; that Mills, substitute trustee, executed and recorded a deed to subject property conveying it to U. S. Financial-Gulf & Mountain for an alleged consideration of $1,000 cash bid by U. S. Financial-Gulf & Mountain at a trustee's sale allegedly held on November 7, 1972; that U. S. FinancialGulf & Mountain then executed a deed back to Mills, trustee, for a consideration of $485,000 in January of 1973; and, that Mills then executed a deed conveying subject property to Habitat, Inc., in consideration of its taking the property subject to such $485,000 note.
The trial court's judgment recited that the foreclosure by Mills was void because "no sum of money was paid or received." *790 In its findings of fact the court found that a sale of the property for $1,000 on November 7, 1972, would be for a "grossly inadequate consideration," but found that the sale to M. A. Mills, trustee, for $485,000 was the true consideration received by U. S. Financial-Gulf & Mountain rather than the $1,000.
Mills testified that Charles Hagan, an agent for U. S. Financial-Gulf & Mountain, was present at the trustee's sale and bid $1,000. Mills stated that Hagan did not actually give him $1,000, however, the record reflects a credit on the note for that amount.
In Thomason v. Pacific Mutual Life Ins. Co. of California, 74 S.W.2d 162 (Tex. Civ.App.El Paso, 1934, writ ref.), the mortgagee's cash bid was not actually paid in cash, but was applied as a credit upon the note. The court held that the credit upon the note was equivalent to receiving cash.
We hold the trial court erred in holding the foreclosure sale by M. A. Mills, trustee, was void.
The $450,000 Fort Worth Mortgage Company deed of trust was not recorded until after plaintiff had visibly started working on the project. The trial court held that the deed of trust lien which was assigned to U. S. Financial-Gulf & Mountain was superior to plaintiff's lien to the extent funds were used to pay off the prior $64,000 vendor's lien. Plaintiff has not challenged this holding by the trial court.
The court held that U. S. Financial-Gulf & Mountain received by virtue of the foreclosure sale excess consideration over and above the amount of the $64,000 vendor's lien and plaintiff's $14,300 mechanics' and materialmen's lien and, therefore, U. S. Financial-Gulf & Mountain was indebted to plaintiff in the amount of $14,300.
We agree with the trial court's holding and find some evidence to support it.
The evidence showed that Fort Worth Mortgage Company loaned Town East $450,000 on the property in September of 1971. On November 7, 1972, M. A. Mills, trustee, conducted a trustee's sale whereby he purported to convey the property to the then mortgagee, U. S. Financial-Gulf & Mountain for $1,000. Within a few weeks U. S. Financial-Gulf & Mountain sold the property back to Mills, trustee, in consideration of his $485,000 note and thereafter, Mills, trustee, conveyed the property to Habitat, Inc., who bought subject to Mills' note. We think the court could reasonably find from these facts that the true consideration received by U. S. Financial-Gulf & Mountain was not $1,000 as recited in the trustee's deed, but $485,000 as evidenced by the subsequent transactions.
The $64,000 purchase money vendor's lien was included in the $450,000 deed of trust which was foreclosed. The foreclosure cut off plaintiff's inferior mechanics' and materialmen's lien. Irving Lumber Company v. Alltex Mortgage Company, 468 S.W.2d 341 (Tex.1971). The trial court held, however, that only that portion of the $450,000 deed of trust representing the prior purchase money lien was superior to plaintiff's lien since the deed of trust was recorded subsequent to plaintiff's visible commencement of work. Even though the foreclosure extinguished plaintiff's lien he is, we think, nevertheless, entitled to recover money damages from the mortgagee at the foreclosure if at such time the mortgagee received consideration in excess of the $64,000 purchase money lien. In Irving Lumber Company v. Alltex Mortgage Company, supra, the court noted that the mechanics' and materialmen's lien holder did not seek any of the proceeds in the hands of the party foreclosing the superior mortgage. In the instant case plaintiff sought such excess proceeds and the court found that U. S. Financial-Gulf & Mountain received consideration over and above the $64,000 superior vendor's lien and the $14,300 mechanics' and materialmen's lien.
*791 The trial court's judgment awarding plaintiff a judgment against U. S. Financial-Gulf & Mountain, Inc., for $14,300 is affirmed. That portion of the judgment holding the foreclosure void and decreeing a foreclosure of plaintiff's mechanics' and materialmen's lien is reversed and rendered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1879865/ | 643 So. 2d 242 (1994)
MIDLAND RISK INSURANCE COMPANY and Loren Fredieu, Plaintiffs-Appellees,
v.
STATE FARM MUTUAL AUTO INSURANCE COMPANY, et al., Defendants-Appellants.
No. 93-1611.
Court of Appeal of Louisiana, Third Circuit.
September 21, 1994.
Earl Garland Pitre, Lake Charles, for Midland Risk Ins. Co., Etc.
Michael Roane Cagle, Lake Charles, for Audrey Nash.
Robert Samuel Dampf, James Anthony Blanco, Lake Charles, for State Farm Ins. Co.
Before COOKS, DECUIR and CULPEPPER[*], JJ.
COOKS, Judge.
State Farm Mutual Auto Insurance Company appeals an award of penalties to the plaintiff and his insurer. For the following reasons, we affirm.
FACTS
On November 5, 1991, Boyd Waggoner, was using a jeep to tow a pick-up truck that was stuck in the mud when the jeep suffered the same fate. Loren Fredieu, the plaintiff, attempted to extricate Boyd's vehicle, which was still linked to the pick-up truck, from the mud. However, the rope Boyd was using to tow the pick-up truck snapped and his jeep collided with Fredieu's vehicle. Fredieu's vehicle sustained approximately $2,200 in damages.
Boyd's mother, Audrey Nash, owned the jeep he was driving. State Farm Mutual Auto Insurance Company (State Farm) provided coverage for the jeep until Audrey *243 allowed it to lapse because the jeep needed repairs. On November 5, 1991, the day of Boyd's accident, Audrey went to her State Farm agent's office to reinstate the insurance on the jeep. When she completed the application for insurance and paid a deposit, the date and time (3:30 p.m.) was recorded on the application. Deann Derbonne, the office manager, testified she informed Audrey the insurance was in effect before Audrey left the office. Later that day, sometime between 5:00 p.m. and 5:30 p.m., Audrey discovered her son was involved in an accident before she arrived at the agent's office. Since the agent's office was closed for the day, Audrey notified State Farm of the occurrence on the following day.
State Farm's regional office subsequently sent a copy of the declarations page of Audrey's insurance policy to Derbonne. The declarations page stated the policy's effective time was 5:30 p.m. on November 5, 1991, the day of the accident. Derbonne then changed the time recorded on a copy of the application maintained in her office from 3:30 p.m. to 5:30 p.m.
Fredieu and his insurer, Midland Risk Insurance Company (Midland Risk), filed suit against Boyd, his mother and State Farm seeking recovery of property damages. State Farm asserted, in answer, that the policy it issued to Audrey was not in effect at the time of her son's accident. Later, Fredieu and Midland Risk filed a supplemental and amending petition seeking penalties from State Farm. They alleged State Farm violated its duty of good faith and fair dealing by altering Audrey's insurance policy without notice or her knowledge or consent.
The trial court held Boyd was not liable for Fredieu's damages. However, the court found State Farm altered Audrey's policy by changing the effective time to 5:30 p.m. on the day of the accident. Without this alteration, the effective time of the policy would have been 12:01 a.m. on that date.[1] Fredieu and his insurer were each awarded $5,000 in penalties. State Farm appeals.
DISCUSSION
State Farm argues Audrey's vehicle was not covered because the actual effective time of the policy was after the accident. It relied upon the time Audrey completed the application, which Derbonne recorded as 3:30 p.m. State Farm also notes the trial court found Boyd's accident occurred approximately thirty minutes prior to this time.
LSA-R.S. 22:1220 provides in pertinent part:
A. An insurer ... owes to his insured a duty of good faith and fair dealing. The insurer has an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be liable for any damages sustained as a result of the breach.
B. Any one of the following acts, if knowingly committed or performed by an insurer, constitutes a breach of the insurer's duties imposed in Subsection A:
....
(3) Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of, the insured.
....
C. In addition to any general or special damages to which a claimant is entitled for breach of the imposed duty, the claimant may be awarded penalties assessed against the insurer in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater. Such penalties, if awarded, shall not be used by the insurer in computing either past or prospective loss experience for the purpose of setting rates or making rate filings.
LSA-R.S. 22:1220(A) grants third-party claimants a right of action when an insurer violates its duty of good faith and fair dealing. See Romero v. Gary, 619 So. 2d 1244 (La.App. 3d Cir.1993); D'Abreu v. Diesel *244 Power Int'l, Inc., 625 So. 2d 540 (La.App. 5th Cir.1993). Section 1220(C) further grants third-party claimants the additional right to recover penalties when an insurer breaches its duty of good faith and fair dealing. See Romero, supra. Therefore, Fredieu is entitled to seek penalties from State Farm.
The policy booklet given to Audrey stated that the effective time for the insurance policy was 12:01 a.m. However, in the declarations page State Farm subsequently issued to Audrey, State Farm declared that the effective time of coverage for liability, uninsured motorist and property damages was amended to 5:30 p.m. The effective time of coverage for the emergency road service was not amended. State Farm argues Derbonne did not alter the time on the insurance application from 3:30 to 5:30 p.m. in bad faith because she relied on a typographical error on the declaration page issued by the regional office. Derbonne's motive for altering the time recorded on the application does not end the inquiry. The amendment to the policy made on the declaration page changed the effective time of the policy, which was 12:01 a.m. as expressly provided by the policy's terms. The time Audrey actually completed the application is not material. This alteration was made without giving notice to Audrey. Despite the clear language of the policy, State Farm continued to deny coverage and insisted that the policy's effective time was properly amended. These acts by State Farm violated its duties under LSA-R.S. 22:1220(B)(3).
Next, we turn to address whether the penalty awards to Fredieu and his insurer, Midland Risk, are appropriate considering the trial court's finding that State Farm's insured was not liable. State Farm cites Champagne v. Hartford Casualty Ins. Group, 607 So. 2d 752 (La.App. 1st Cir.1992) in support of its position that damages must be proved before penalties are assessed. However, the court in Champagne reached this conclusion without offering reasons to support it. Fredieu and Midland Risk contend the penalty provision found in Section 1220(C) is not contingent on a damage award. This court in Harris v. Fontenot, 606 So. 2d 72 (La.App. 3d Cir.1992) affirmed an award of penalties although damages had not been proven. However, whether damages are required before penalties are awarded was not reviewed on appeal. We find neither Champagne nor Harris provides us with adequate guidance to resolve this issue.
Section 1220(A) legislatively imposes a duty of good faith and fair dealing on insurers. Section 1220(B) enumerates certain acts, which if knowingly committed or performed by an insurer, constitute a breach of its duty of good faith and fair dealing.
Penalties are imposed to discourage certain types of conduct by an insurer. The language in Section 1220(C) does not expressly require that a claimant suffer damages before recovering penalties. Moreover, if this requirement was so, the statute's purpose more often would be thwarted. Claimants may decide not to file claims against insurers if the disputed amount or the damages are not substantial. As an end result, the misconduct which the legislature obviously intended to curb or deter would thrive. Thus, we find if an insurer commits any one of the acts enumerated in Section 1220(B), penalties may be imposed without a showing of damages.
State Farm also complains that Midland Risk, an insurer, is not entitled to receive an award of penalties. Alternatively, State Farm contends Section 1220(C) limits the total penalty award which may be cast against it to $5,000. When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature. LSA-C.C. art. 9. The language of Section 1220(C) is clear and unambiguous. Third-party claimants are entitled to receive an award of penalties when an insurer breaches its duties. Midland Risk is a third-party claimant. Furthermore, the statute does not limit the total penalty to $5,000 irrespective of the number of claimants. It states "the claimant may be awarded penalties." This language is not "exclusive" in expression. Thus, the statute authorized the penalty awards granted by the trial court against State Farm in favor of Midland Risk and Fredieu.
*245 DECREE
For the reasons expressed above, the trial court's judgment is affirmed. Costs are assessed to State Farm.
AFFIRMED.
CULPEPPER, J. dissents for the reasons stated in Champagne v. Hartford Casualty Ins. Group, 607 So. 2d 752 (La.App. 1st Cir. 1992).
NOTES
[*] Judge William A. Culpepper, Retired Judge, participated in this opinion by appointment of the Louisiana Supreme Court as Judge Pro Tempore.
[1] In the section titled "When and Where Coverage Applies," State Farm's policy provides: "The policy period begins and ends at 12:01 A.M. Standard Time at the address shown on the declarations page." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2410743/ | 278 S.W.2d 339 (1955)
WHITSON COMPANY, Inc., et al., Appellants,
v.
BLUFF CREEK OIL COMPANY et al., Appellees.
No. 15600.
Court of Civil Appeals of Texas, Fort Worth.
March 18, 1955.
Rehearing Denied April 15, 1955.
*340 Stine & Stine, Henrietta, and Hassell & Hassell and J. W. Hassell, Jr., Dallas, for appellants.
Robinson, Shipp, Robertson & Barnes, Okahoma City, Okl., Donald & Donald, and T. B. Coffield, Bowie, for appellees.
MASSEY, Chief Justice.
From a judgment entered in behalf of the owner of an "overriding" royaly interest in one lease, and in behalf of the owner of the leasehold estate in it and another lease, for damages because of the destruction of the value of the leasehold estate and royalty interest, for conversion of property and equipment from said leases, including in part the restoration of property and in part for the value of property converted, and for injunctive and other relief, the defendants appealed.
Judgment affirmed in part and reversed and remanded in part.
Suit in the court below actually involved several causes of action, some of which did not have as parties plaintiff and defendant the same persons as in others. It is believed that the following explanation would be helpful.
R. H. Rucker, Jr., was an individual who occasionally dealt in oil and gas leases. He was an officer in a corporation called the Bluff Creek Oil Company, which corporation *341 also dealt in oil and gas leases, and operated leases.
L. R. Whitson was an officer of O. W. R. Oil Company, a corporation, which owned and operated oil and gas leases, producing and selling oil and gas. L. R. Whitson, though having no official connection with another similar corporation, the Whitson Company, was personally interested in its welfare. The Whitson Company was primarily owned, operated and managed by the sons of L. R. Whitson, whom he was inclined to aid and guide toward successful and profitable business activities.
There were two parcels of real property in Montague County, Texas, which were under oil and gas leases to the Bluff Creek Oil Company. The first will be hereinafter termed the Fenoglio Lease, and the second, the Nabours Lease. These leases were neighboring, though not adjacent. The Nabours Lease was a full 7/8ths lease, but the Fenoglio Lease was a 6/8ths lease, being burdened with a 1/8 "overriding" royalty interest in R. H. Rucker, Jr., who retained such interest as a part of the compensation for the original transfer by him of the 6/8ths leasehold interest to Bluff Creek Oil Company.
Procedure was begun toward drilling an oil well on each of these leases. Whitson Company became interested in both projects and entered into negotiation of contracts whereby it acquired certain rights to the oil produced, saved and sold from any well or wells on them, and also acquired certain rights in the leasehold estates held by Bluff Creek Oil Company.
The Fenoglio Lease.
Bluff Creek Oil Company and Whitson Company entered into a contract on August 31, 1949, the material provisions of which included the following language:
"Now, Therefore, for and in consideration of the sum of one dollar ($1.00) and other good and valuable considerations, the receipt of which is hereby acknowledged, Bluff Creek Oil Co. does hereby bargain, sell, transfer and assign and convey unto Whitson Company, Inc., its successors and assigns, an undivided fifteen-sixteenths (15/16ths) of six-eighths (6/8ths) interest in the proceeds from all oil, gas, casinghead gas and other minerals produced, saved and sold under the terms of the above described oil and gas lease.
"This assignment is made subject to the following terms and conditions:
"1. Assignee * * * shall be entitled to receive fifteen-sixteenths (15/16ths) of six-eighths (6/8ths) of the proceeds of the oil, gas, casinghead gas and other minerals produced, saved and sold from the above described land until such time as it has been reimbursed, for all sums expended by it in drilling and completing the well now located upon the above described premises, including sums advanced by it for the excess cost of seven-inch casing used in said well, and all sums expended by it in the operation of said well, * * *.
"2. At such time as said Whitson Company, Inc. shall have been reimbursed for all sums expended and advanced by it, as set out in paragraph No. 1, it shall be entitled to receive the full six-eighths (6/8ths) of the oil, gas, casinghead gas and other minerals produced, saved and sold from the above described land until it has received a sum equal to the sums received by Bluff Creek Oil Co. from the one-sixteenth (1/16th) of six-eighths (6/8ths) interest retained by it in this assignment.
"3. When the net returns to the parties hereto have been equalized, as above provided, then and thereafter Whitson Company, Inc. shall be entitled to receive one-half of six-eighths (½ of 6/8ths) of the oil, gas and other minerals produced, saved and sold from the above described premises, and the excess interest herein assigned to said Whitson Company, Inc. * * * and Bluff Creek Oil Co. shall thereafter be entitled to receive one-half of six-eighths *342 (½ of 6/8ths) of the oil, gas and other minerals produced, saved and sold from the above described land, and the parties hereto shall thereafter own the leasehold estate in equal onehalf (½) shares, subject to the overriding royalty interest reserved by R. H. Rucker, Jr. * * *.
"4. Assignor, Bluff Creek Oil Co., reserves the right, at any time, to reimburse Assignee for all sums expended or advanced by it, as hereinabove provided, and thereupon to become vested with an undivided one-half (½) interest in the oil and gas leasehold estate, subject to the overriding royalty interest referred to above.
"To Have and To Hold the rights and interests herein assigned unto the said Assignee, its successors and assigns, pursuant to the terms and conditions of the oil and gas lease above described and of the prior assignment hereof."
Pursuant to this contract, drilling was either begun or completed at Whitson Company's expense, and upon the completion of the well, operations incident to the production of oil were conducted,the expense of which Whitson Company paid according to the provisions of the contract.
Our view of this transaction between the Bluff Creek Oil Company and Whitson Company in regard to the Fenoglio Lease is that Whitson acquired thereby a right, analogous to that of an option, to acquire an undivided one-half interest in and to the six-eighths title of Bluff Creek Oil Company to the oil and gas in place under the lease, and an undivided onehalf interest in and to all the interests Bluff Creek Oil Company might otherwise be considered to own, such as its rights to use the surface in the search for and production of oil, etc. An option passes no title but is an executory contract prescribing conditions upon the occurrence of which an optionee may become entitled to demand passage of title. 37 Tex.Dig., Vendor and Purchaser. Of course, in the present instance, by express agreement, title was prescribed to automatically pass upon the performance of the conditions precedent.
Of course, whether from the production of the well in question, or from it along with other wells which might have been drilled through Bluff Creek Oil Company's right to do so, under the terms of its leasehold interest acquired from R. H. Rucker, Jr., the Whitson Company had the right to take into its possession all the oil produced and saved, subject to the right of Rucker and the primary royalty owner, and to sell it on the market. It had the right to retain 15/16ths of the amount (which but for the contract and services of Whitson Company under the contract would have belonged to Bluff Creek Oil Company) yielding up to Bluff Creek Oil Company only 1/16th thereof. However, this 15/16ths was to be credited to expense, whichbut for the contract would have been the expense of Bluff Creek Oil Company. But for the unfortunate circumstances hereinafter related, it would have been expected that continued application of the said 15/16ths of such proceeds received from the sale of the oil produced and saved would have eventually made Whitson Company whole. With such done, supplemented by a short period of time during which the Whitson Company would take the entire proceeds (which but for the contract would have gone to Bluff Creek Oil Company) until it was reimbursed further the amount of the cumulative 1/16th payments made to Bluff Creek Oil Company, Whitson Company would have become, in the manner provided, the owner of one-half of the whole interest theretofore owned and possessed by the Bluff Creek Oil Company.
From the date of the contract, by virtue of the fact that Whitson Company assumed certain obligations of Bluff Creek Oil Company, thereby relieving the latter of these obligations, the Bluff Creek Oil Company's leasehold estate and interest became burdened with those rights provided by the contract to belong to Whitson Company until that day contemplated when Whitson Company and Bluff Creek Oil Company *343 would become joint owners of the leasehold estate of the latter in and to the Fenoglio Lease. In other words, it is our opinion that the value of the leasehold estate of Bluff Creek Oil Company at any particular date in the interim period would not be the value of the same in the ordinary case. Rather would such value be the value of the leasehold estate as burdened with the rights of the Whitson Company. Had Bluff Creek Oil Company sold such interest it had during this period, the interest sold would have been subject to Whitson Company's rights, and it goes without saying that a prospective purchaser would have insisted upon a substantial reduction in price, knowing that 15/16ths of the proceeds from the sale of the oil were being kept by the Whitson Company and applied upon its contract with Bluff Creek Oil Company,and knowing additionally that once there had been a complete performance by Whitson Company, as contemplated by the contract, his title to and interest in what he purchased would be reduced by 50%.
The same thing would not be true as to the "overriding" royalty interest of Rucker, for it was not burdened with the contract. Therefore, the value of his interest would not be affected by the contract.
The Fenoglio Lease is involved in the appeal because the Whitson Company and L. R. Whitson complain of the judgment rendered against them for damages because of the destruction of the market value of Bluff Creek Oil Company's leasehold estate, and because of the destruction of the market value of Rucker's "overriding" royalty interest. There was a part of the judgment which extended against Whitson Company, L. R. Whitson, and O. W. R. Oil Company because of conversion of property and equipment from the Fenoglio Lease, and involving receivership costs in connection with the protection of part or all of such property, etc.
The Nabours Lease.
A similar contract was entered into upon the Nabours Lease by the same parties. Whether or not there was any "overriding" royalty reserved out of the leasehold estate covered by the contract is immaterial upon this appeal. The single oil well which was drilled on the Nabours Lease yielded commercial production, and there is no dispute but what from the sale of this production there was a proper application of profits to the contract of Whitson Company with Bluff Creek Oil Company. Each day's production brings nearer the day upon which Whitson Company might reasonably be expected to become the owner of an equal interest with Bluff Creek Oil Company in the leasehold estate of the Nabours Lease.
The Nabours Lease is involved in the appeal because certain expenses of a receiver appointed to conduct its operations were taxed against the Whitson Company, though the receivershipin so far as it extended to such operationswas dissolved. See Whitson Company, Inc., v. Bluff Creek Oil Company, 1953, Tex.Civ.App., Fort Worth, 256 S.W.2d 1012, writ dismissed, w. o. j. Of this, the Whitson Company complains. The Nabours Lease is further involved in the appeal because damages for the conversion of property and equipment from said lease were assessed against O. W. R. Oil Company. Of this, the O. W. R. Oil Company complains. Also, the Nabours Lease is involved in the appeal because a permanent injunction was issued by the trial court restraining Whitson Company, L. R. Whitson and O. W. R. Oil Company from disposing of, or disconnecting or using otherwise than for the operation of said lease, the equipment thereof, from interfering with the operation of the lease and the production of oil therefrom, etc. Of this, all three of said parties complain.
History of the Controversy.
The well on the Fenoglio Lease was drilled the latter part of 1949 and was brought in as a commercial oil producer. It was initially operated by the Bluff Creek Oil Company. All profits from such operation were delivered to the Whitson Company, and such Company made all the *344 disbursements, kept the books and applied credits under the provisions of the contract, etc. In the spring of 1951, the well began to "make water". That is, though it was still producing oil, it started producing water at the same time. Then, in about June of 1951 the well quit flowing. Swabbing operations brought about a resumption of production. About the same time a test of the well was caused to be made to determine the location in the hole which was the source of the water. By agreement of the parties, but without any reduction thereof to writing, the Whitson Company and Mr. L. R. Whitson took possession of the well premises and from that point assumed full control of the well operations. The well was "shot", that is, an explosive charge or series of charges were set off which perforated the zone from which the oil production was being realized, and this operation was successful. At least the well was put back on profitable production. Whitson Company continued to operate the well. Bluff Creek Oil Company ceased any activity in connection with its operation.
There appears to have been a similar experience with the well in the fall of 1951, and a similar correction, followed by a second like experience and correction in January of 1952. The trouble seemed to have been somewhat exasperating. Finally, further trouble was encountered in April of 1952. Mr. L. R. Whitson went to the scene of the trouble. Upon his direction and authority, what is known as "Torpedo Jets shooting a hole 1 inch" were discharged in the hole at depths between 6,188 to 6,178 feet. The character of discharge was by what is sometimes called "an open-hole gun". The charges made several holes, each one inch in diameter, perforating the metal casing in the well, and perforating the formation around the casing. Approximately twenty such discharges were set off in the ten feet of zone perforated. Despite this action, the well did not come into production. Instead fluids coming from the well were water, about 95% and oil, about 5%. The Whitson Company employees asked Mr. L. R. Whitson, who was still present, what they should do under the circumstances. He replied, "It looks to me like you ought to abandon the well". Then he left the vicinity. Mr. C. O. Glenn, the superintendent for the Whitson Company, testified that L. R. Whitson gave him instructions to "pull the pipe" and move it off the lease.
During the period necessarily incurred in the doing, and immediately following receipt of such instruction or suggestion from L. R. Whitson, the Whitson Company employees proceeded to pull the casing out of the well, plug it, and abandon it. They, and employees of the O. W. R. Oil Company, moved the property and equipment theretofore at the well-site off the Fenoglio Lease and onto premises belonging to the O. W. R. Oil Company. Shortly thereafter, the properties of the O. W. R. Oil Company in the vicinity were all acquired by the Whitson Company.
No effort was made to drill into and test the production potential of a lower zone of the same formation as that formerly yielding production from the well, though such lower zone had been logged and tested sufficiently to indicate a probability that a commercial yield could be expected therefrom. No one contacted any person connected with the Bluff Creek Oil Company or Mr. R. H. Rucker, Jr., and it was some time later when these parties first discovered what had happened. By that time the well on the lease had been pulled, plugged and abandoned, and all the property and equipment used in connection therewith removed.
The Whitson Company and its officials were clearly of the opinion that the property and equipment of the well on the Fenoglio Lease belonged to the Whitson Company and that the Bluff Creek Oil Company had no rights therein. They had a like belief as to the property and equipment on the Nabours Lease at the site of the well there in production. The Whitson Company and its officials were also of the opinion that they were the owners of at least a majority interest in the leasehold *345 estates under both the Fenoglio and Nabours Leases, and that their authority in connection with operations on both leases, including the right to do as they thought best relative to removing property and equipment, pulling casing, abandoning wells, etc., was unaffected by any right of the Bluff Creek Oil Company.
Pursuant to its opinion and position, Whitson Company had caused or permitted O. W. R. Oil Company to remove certain property and equipment from the premises of the Nabours Lease, or at least caused such property and equipment to be delivered to the O. W. R. Oil Company, though, as we have heretofore noted, the Nabours Lease was under production and Whitson Company was competently operating the same. The operations on the Nabours Lease were conducted by Whitson Company pursuant to an oral agreement of consent, similar to that whereby it had initially taken charge of the operations on the Fenoglio Lease.
As result of the affirmation of these rights which Whitson Company believed it had, and further because of what had transpired on the Fenoglio Lease, the Bluff Creek Oil Company and R. H. Rucker, Jr., filed suit against the Whitson Company, L. R. Whitson, and the O. W. R. Oil Company. The District Court of Montague County appointed a receiver to take charge of the property and equipment on the Nabours Lease, and to take charge of such property as had been removed therefrom, and from the Fenoglio Lease, as might be located and taken into possession. The same receiver was appointed and placed in control of the operations in progress on the Nabours Lease. Upon an appeal, the action of the trial court was affirmed as to the property, but reversed as to the operations on the Nabours Lease. See Whitson Company, Inc., v. Bluff Creek Oil Company, supra.
Subsequently, in the spring of 1944, the suit filed by Bluff Creek Oil Company and R. H. Rucker, Jr., was tried on the merits. A temporary injunction, not appealed from, was tried as a part of the case and merged into a permanent injunction. We will consider this suit as by the various causes of action involved in the court below and appealed to this court.
The Award of Damages Because of Lease Destruction.
Bluff Creek Oil Company's suit was against the Whitson Company and L. R. Whitson on account of its loss and damage resulting from the destruction of the value of the Fenoglio Lease. L. R. Whitson was claimed to have been jointly liable along with the Whitson Company under the circumstances above explained. The suit of R. H. Rucker, Jr., was against the same defendants because of the loss of and damage to his "overriding" interest in the lease. There is no complaint on the appeal of the findings underlying the right of Bluff Creek Oil Company and R. H. Rucker, Jr., to damages, at least in so far as Whitson Company is concerned. The circumstances were somewhat similar to those in the case of Comanche Duke Oil Co. v. Texas Pac. Coal & Oil Co., Tex. Com.App.1927, 298 S.W. 554. However, the principal complaint of the appellants upon the appeal is upon the measure of damage adopted.
Upon this phase of the case, the trial court submitted the following special issue to the jury:
"What do you find from a preponderance of the evidence was the reasonable cash market value, if any, of the 6/8ths leasehold estate in the oil and gas lease in question, exclusive of all equipment, just prior to the commencement of the last remedial work on said well by Whitson Company? Answer: $50,000.00."
L. R. Whitson and the Whitson Company objected to the submission of this issue, and preserved their complaint thereof at all stages of the proceedings. Their contention in the trial court and upon this appeal is that the issue as submitted and the answer thereto considered occasioned the wrong measure of damages and that the judgment was erroneous because *346 it was a judgment based thereon. They pointed out that the value inquired about in the issue was not qualified by proper consideration of the burden existing pursuant to the contract between Whitson Company and Bluff Creek Oil Company, affecting its value. We believe that the point thereupon is well taken. Indeed, there seems to be insufficient evidence, if any at all, upon the value of such leasehold estate as so burdened, and the affected parties made objection and preserved points on the appeal because thereof. However, the question is in our opinion settled because there was an erroneous issue and the answer thereto would be an erroneous finding on the matter of damages underlying the judgment which was entered based upon such finding. The judgment, therefore, cannot stand in the particular respect in question.
As the appellees upon the appeal contend, we agree that the ordinary and proper measure of damages for the destruction of any land, or interest in land, in a leasehold estate, or interest thereunder, is the difference in its value immediately prior to the occurrence of the loss and damage, and immediately subsequent to the occurrence. Pickens v. Harrison, 1952, 151 Tex. 562, 252 S.W.2d 575; and other cases under 14 Tex.Dig., Damages. Seemingly this rule was applied in the case of Comanche Duke Oil Co. v. Texas Pac. Coal & Oil Co., supra. The lease and the "overriding" royalty interest are interests in realty. 31-A Tex.Jur., p. 190, "Oil and Gas", sec. 117, et seq., "Estates or Interests under Lease"; Veal v. Thomason, 1942, 138 Tex. 341, 159 S.W.2d 472. There is no distinction in the applicable measure of damage in cases of damages to differing estates in land. Texon Drilling Co. v. Elliff, Tex.Civ.App., San Antonio 1947, 210 S.W.2d 553, 557 (and authorities there cited), reversed on other grounds. But this rule would be qualified in a case such as the one before us, where the value immediately prior to the occurrence involves more than the market value of the property free and unaffected by any other interest therein. The special issue submitted disregards the fact that the contract between Bluff Creek Oil Company and the Whitson Company, in full force and effect at the time, operated to reduce the market value of Bluff Creek Oil Company's interest in the lease. As so reduced must the inquiry upon damages be made of the jury as the finder of fact in the case. Bluff Creek Oil Company is not entitled to collect damages because of any loss it did not sustain. Should effect be given to the jury's finding in answer to the issue submitted would be to give it a greater amount than that to which it is entitled. Therefore, reversible error is apparent.
As previously noted, the same qualification does not apply in the case of R. H. Rucker, Jr., the owner of the "overriding" royalty interest in and to the same property. This is true because the contract does not operate to diminish the value of his interest. Therefore, the almost identical inquiry made in the special issue upon the matter of the value of his interest before the occurrence of the loss and damage was correct, and the judgment entered in his behalf was wholly proper as based upon a jury finding properly establishing his damages.
On the Matter of L. R. Whitson's Liability for Loss and Damage of the Fenoglio Lease.
The judgment entered in the suit held L. R. Whitson personally liable, along with the Whitson Company, for the loss and damage R. H. Rucker, Jr., sustained as result of the destruction of the value of his interest in the production from the Fenoglio Lease. Complaint is made and the contention advanced that no case was made out against L. R. Whitson.
The special issue bearing upon the personal liability reads as follows:
"Do you find from a preponderance of the evidence that L. R. Whitson and Whitson Company were acting jointly in conducting the operations of the Fenoglio lease during the time in question? Answer: Yes."
*347 As previously noticed, L. R. Whitson was present at the scene or in that vicinity and gave the orders, or in any event made suggestions direct to the employees of the Whitson Company which were treated and acted upon as orders, and resulted in the destruction of the value of the well and the Fenoglio Lease. Under the evidence it was further shown that L. R. Whitson had full authority to do all the things which he did do in so far as the Whitson Company was concerned, and on account of the doing of which the Whitson Company's liability was established by the jury verdict. We believe that L. R. Whitson was found by the verdict to be jointly and severally liable along with the Whitson Company upon sufficient competent evidence. His liability was that of an agent, if not as a joint adventurer, since an agent is always primarily liable for his own torts despite the fact that his principal is likewise responsible by and through him under the doctrine of respondeat superior, where those additional facts are existent which demonstrate his agency in their commission. 2 Tex.Jur., p. 589, "Agency", sec. 177, "Agency or Employment as Affecting Liability of Tort-feasor". Of course, the issue submitted was posed upon a situation analogous to that in the case of joint adventurers, where one commits wrongful acts in conducting the joint enterprise of controlling and operating premises or the use of contrivances where all adventurers are liable for the tort of the one. 48 C.J.S., Joint Adventures, § 14, sub. e, p. 870; 30-B Tex.Jur., p. 202, sec. 31 (formerly 30 Tex.Jur., p. 776). We believe the finding in the instant case to be sufficient as it would undoubtedly be in those cases considered in C.J.S., particularly since there was no objection to the issue, and since there was no request for specially requested issues posed along the usual lines in instances of disputed agency.
On the Matter of Judgment Against O. W. R. Oil Company for the Value of Bluff Creek Oil Company's Interest in Property Converted from the Nabours Lease.
In connection with the receivership there was certain property removed from the premises of the Nabours Lease which was not taken into possession by the receiver, it having been alleged to be property which was converted by O. W. R. Oil Company jointly and in concert with Whitson Company and L. R. Whitson. Under the judgment, the value of the interest of Bluff Creek Oil Company in such property was $883.12. No complaint on the same point upon the appeal is made by L. R. Whitson or the Whitson Company.
A point complaining of this action by the trial court is brought forward upon the appeal by the O. W. R. Oil Company, but the error so assigned is not briefed and is therefore considered by us as having been waived. See Texas Rules of Civil Procedure, rule 418 and cases annotated thereunder.
On the Matter of Receivership Expenses Incurred in Operating the Nabours Lease.
As previously noticed, this court by its reversal of the trial court in connection with the appointment of a receiver to operate the well on the Nabours Lease, vacated the appointment in that respect and it would seem that Whitson Company's authority to conduct the operations thereupon was restored. Upon the judgment entered in the trial of the merits of the cause, the expenses of the operation during the time the well was under the receiver's control was found at the figure of $712.50, and adjudged against the Whitson Company along with an order that such amount should be charged against the contract between said Company and Bluff Creek Oil Company as an operating expense. Under this contract Whitson Company was reimbursing itself its costs and expenses at the rate of 15/16ths of the gross profits received from the oil produced, saved and sold as result of the operations of the well on the Nabours Lease. Assuming an ultimate complete "pay out" of the expenses charged by the contract of the parties against the well in question, to result in equal ownership of the leasehold estate between Whitson Company and Bluff Creek Oil Company, the expenses would eventually be equally borne by such parties if not entirely borne by Bluff Creek *348 Oil Company. However, there would of course be a possibility of a failure of the well in which event all of such expense would fall upon the Whitson Company.
There is no contention that the amount of $712.50 is unreasonable for the receiver's supervisory services. It appears from the evidence that said amount was based upon the value of such services. Supervision of the operations would have been necessary even had no receiver been appointed, and the cost thereof would have been chargeable to the operation expenses, paid by Whitson Company, and by it in turn charged to the account between the parties upon the lease and well "pay out". Under these circumstances the order of the trial court in the respect complained of was an adjustment which, as between the parties, was equitable and proper in the circumstances and was within the discretion of the trial court. 36 Tex.Jur., p. 262, "Receivers", sec. 134, "Liability for Costs and Expenses". This is true even though the appointment of the receiver was improper in the initial instance.
On the Matter of Injunction.
A permanent injunction was issued, pursuant to trial of the suit on the merits, which restrained L. R. Whitson, Whitson Company, and the O. W. R. Oil Company from disposing of any property and equipment on the Nabours Lease, and from interfering with the operation of such lease. The record indicates that the Whitson Company is operating the lease. The only evidence which might be considered as having a bearing upon the matter came from C. O. Glenn, superintendent for the Whitson Company, during the introduction of the plaintiffs' opening case,and from L. R. Whitson on cross-examination. Such evidence as there was upon the matter of the property and equipment indicates that such as was taken prior to the occasion of the suit was taken in the belief that it was property which belonged to Whitson Company only, but that upon the suit being filed it was recognized that a mistake might have been made. Orders were given to Mr. Glenn that such property should not be freely handled as property belonging to Whitson Company, as theretofore had been the case, and that there was a question about whether it belonged to Whitson Company. Upon the question of interfering with the operation of the Nabours Lease, the state of the record indicates that the Whitson Company was left in charge of these operations, though this might not actually be the case. In any event, in respect to property or to operations, the evidence falls short of the requisite that it show an intention on the part of the persons enjoined to do something which would injure the complainants, or that the enjoined actions were sufficiently threatening and certain as to have reasonably aroused the fear of the applicant for the writ. 24 Tex.Jur., pp. 145 and 146, secs. 103 and 104. For this reason, judgment in respect to the injunction cannot stand.
There is a claimed procedural error relative to the matter of damages to the Fenoglio Lease. A witness upon the market value of the Fenoglio Lease upon the occasion of a prior trial, in which a mistrial occurred, was shown to have been beyond the jurisdiction of the court upon the occasion of the later trial, and his earlier testimony on direct examination was read to the jury. There was no impropriety shown in the introduction of the evidence given the jury. There was no evidence contradicting the proof introduced to the effect that the witness was beyond the jurisdiction of the trial court at the time of the later trial. Hence, occasion for introduction of the testimony was demonstrated as an exception to the hearsay rule, 17 Tex.Jur., p. 658, sec. 276.
The judgment entered in the court below in favor of R. J. Rucker, Jr., and against Whitson Company, Inc., and L. R. Whitson upon the matter of damages is affirmed.
The judgment entered in the court below in favor of Bluff Creek Oil Company, a corporation, against O. W. R. Oil Company as well as against Whitson Company, Inc., and L. R. Whitson for the sum of *349 $883.12, the value of the interest of Bluff Creek Oil Company in property converted from the premises of the Nabours Lease and not practical of restoration, is affirmed.
The judgment entered in the court below taxing costs of the receivership upon the Nabours Lease operations against Whitson Company, Inc., with provision that said costs should be charged by it against the contract existent between Bluff Creek Oil Company and Whitson Company on the Nabours Lease operations, is affirmed.
The judgment entered in the court below in favor of Bluff Creek Oil Company, a corporation, against Whitson Company, Inc., and L. R. Whitson upon the matter of damages for destruction of the value of the former's leasehold estate interest in and to the Fenoglio Lease, is reversed and remanded for another trial.
The judgment entered in the court below in favor of Bluff Creek Oil Company, a corporation, against Whitson Company, Inc., L. R. Whitson and O. W. R. Oil Company, granting a permanent injunction against disposing of, disconnecting or using otherwise than for the operation of the Nabours Lease the equipment on said lease, and from interfering in any way with the operation of said lease and the production of oil therefrom, etc., is reversed and remanded for another trial.
On Motion for Rehearing.
Upon the motions for rehearing filed by parties on both sides of this controversy, we find error assigned to the same matter by all.
The appellants make assignment as follows:
"The Court erred in not making any finding or rendering any judgment disposing of the issue as to the personal property recovered from the Fenoglio lease, the judgment of the trial court having vested title thereto to the plaintiff, Bluff Creek Oil Company, and no disposition having been made of appellants' claim therefor."
Appellee Bluff Creek Oil Company makes assignment as follows:
"The error of the Court of Civil Appeals in failing to affirm the judgment of the trial court in favor of Bluff Creek Oil Company against all Appellants for title and possession to property removed from the Fenoglio lease, and for the value of equipment converted in the sum of $3,957.77 as set out in the judgment."
In our original opinion, we find appended to the paragraph giving the reason the Fenoglio lease is involved in the appeal our statement to the effect that there was a part of the judgment which was entered by the trial court which extended against all three appellants because of conversion of property and equipment from that lease. The language was inserted as it was and at the place where it was inserted because from our understanding of the appellants' points of error, there was no error assigned to the judgment rendered by the lower court in this particular. That being true, we had no occasion to pass upon any point or to belabor the question in our opinion. Furthermore, if the appellants' points on appeal could be so construed as having embraced complaint as now made upon motion for rehearing, such would have properly been considered by us as waived in any event, since it was not briefed.
All motions for rehearing are refused. | 01-03-2023 | 10-30-2013 |
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