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https://www.courtlistener.com/api/rest/v3/opinions/1763941/ | 764 S.W.2d 26 (1989)
Ralph B. SMITH, Appellant,
v.
Joseph D. VALDEZ & Laura Villalobos, Appellees.
No. 04-87-00409-CV.
Court of Appeals of Texas, San Antonio.
January 11, 1989.
Rehearing Denied February 7, 1989.
*27 Ralph B. Smith, San Antonio, pro se.
Joseph Valdez, San Antonio, pro se.
Before CADENA, C.J., and REEVES and CHAPA, JJ.
OPINION
PER CURIAM.
Appellant Ralph Smith appeals from a judgment granting appellees a permanent injunction.
Appellant's brief fails to comply with even the most rudimentary briefing rules. See TEX.R.APP.P. 74. The brief's statement of the facts is not fair and condensed; it is not pertinent to any points of error; nor does it make reference to any pages in the record where support might be found. TEX.R.APP.P. 74(f).
The appellant does not present in his brief a discussion of facts or authorities relied upon to maintain his so-called points of error. Id.
Further, his supposed points of error are too general and indefinite to merit any consideration. For example, one "point of error" complains that "The appellee, Joseph D. Valdez, had described his fraudulent method of transferring said property in a transcribed tape recording." This statement is not an assignment of error. "A point of error is an indispensable part of a brief and a mere abstraction or conclusion stated in lieu of a point of error in briefing is not acceptable when no error of the trial court is alleged therein." Blackburn v. Manning, 307 S.W.2d 347, 351 (Tex.Civ.App.Amarillo 1957, writ dism'd w.o.j.). The appellant presents nothing for consideration.
The Texas Supreme Court insists that when an intermediate appellate court is faced with a morass such as the one before this court, it must allow the appellant "`a reasonable time to correct or amend such defects or irregularities....'" Inpetco, Inc. v. Texas American Bank/Houston, 729 S.W.2d 300 (Tex.1987) (per curiam) (citing TEX.R.APP.P. 83). This court has done so.
On December 15, 1987, appellant was granted the opportunity to modify and supplement his brief. He chose not to do so. On May 9, 1988, William J. Smith, appellant's father, who is not a party or counsel in this action, filed motion for leave to file supplemental brief. The court held the motion in abeyance and ordered Mr. Smith to show his authority to file the supplemental brief on behalf of appellant. He did not show authority as ordered, so on December 30, 1988, the court refused to allow supplementation.
Because appellant has chosen not to take advantage of the two opportunities to correct or amend his brief we still have nothing before us for consideration.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1769692/ | 340 So. 2d 429 (1976)
SOUTHEASTERN FIDELITY INSURANCE COMPANY et al., Defendants-Appellants,
v.
Melvin GANN, Plaintiff-Appellee.
No. 48870.
Supreme Court of Mississippi.
November 30, 1976.
Rehearing Denied December 14, 1976.
*430 Aultman, Pope, Aultman, Van Slyke & Tyner, Thomas W. Tyner, Hattiesburg, for defendants-appellants.
Armis E. Hawkins, Houston, Darden & Sumners, Lester F. Sumners, New Albany, for plaintiff-appellee.
Before PATTERSON, SUGG and WALKER, JJ.
PATTERSON, Presiding Justice, for the Court:
Melvin Gann brought suits in the Circuit Court of Chickasaw County to obtain the proceeds of certain insurance policies issued by Southeastern Fidelity Insurance Company, Industrial Fire & Casualty Company, and Balboa Insurance Company, totaling $20,000. The suits were consolidated and tried to the court without a jury. The court found for the plaintiff in the sum of the policies and the defendants, aggrieved, present this joint appeal.
Gann owned and lived upon a farm near Houston, Mississippi. Influenced by the organizational structure of the Houston Country Club, a nonprofit corporation, he determined to create a working-man's counterpart. His efforts resulted in the creation of the Ponderosa Country Club, Inc., the building being constructed on land adjacent to Gann's residence. The building was financed through funds borrowed by Gann, James Kyle and Shorty Black. It was a single story structure, 30 x 120 feet, with concrete block walls and a shingle roof.
The club was used for informal parties in which dancing was one of the entertainments. In 1972 the sheriff objected to dancing at the club resulting in sharp curtailment of this activity. Because dancing was no longer permitted, the club directors voted to partition 30 x 90 feet of the building into three rental apartments to defray club expenses. The front 30 x 30 feet was maintained as a club for the use of its members.
Gann, president of the Ponderosa Country Club, procured the insurance on the club building. It was obtained through Robert Scott, an employee of the Tabb Insurance Agency of Houston, Mississippi. Gann contacted Scott to secure insurance upon his home, his airplane and the club building as he thought it convenient to have his insurance with one agency. Gann informed Scott that fire and hazard insurance were desired on "the 3-family dwelling in the back part of the club ... the ninety feet." Scott was notified of the intention to retain the remaining space in the front of the building as a club.
Scott agreed to obtain insurance upon the building consistent with these uses, but was unable to do so from companies licensed by the state. He thereupon obtained coverage from the appellants, all nonadmitted insurers within the state, effective May 6, 1972.
The affidavit of Scott, the agent, certified to be correct by Gann, the insured, "setting forth facts in complete detail," required by Mississippi Code Annotated section 83-21-23 (1972) related to purchasing insurance from a nonadmitted company, was not executed until November 9, 1972. Although the policies were issued to Melvin Gann individually, he denied this was his request, testifying that he asked Scott to insure the Ponderosa Country Club. However, he did not deny his signature upon the affidavit indicating he owned the "3-Family Tenant Dwelling."
Gann dealt only with Scott in obtaining the insurance. He did not sign an application for coverage nor was he requested to do so. It was stipulated that the representations concerning insurance on the club building were those of Gann. However, he had no knowledge of how the insurance was obtained, stating,"I just left it up to him." The three policies were mailed to Gann who never read them. Several weeks thereafter Scott and an unidentified individual came to Gann's property, inspected his home and *431 had the opportunity to observe the club building although neither asked to examine it. Gann was billed by Scott and paid the premiums on the insurance to him.
On December 9, 1972, the club building was destroyed by fire and Gann was thereafter interrogated under oath in accord with the policies' provisions. He answered all questions except those concerning title to the club property and in this refusal referred the insurers to the county land records for the status of title.
Although Scott was subpoenaed by the plaintiff, he was not called to testify by either party. The only witness was Gann and his testimony is undisputed. It establishes that the club was his brainchild and was constructed with funds borrowed by Gann, James Kyle and Shorty Black on lands conveyed to the club by Gann or through his efforts. The grantors were Mrs. Louise Gann Posey, Mrs. Bobby Gann Hurt and Mrs. Bonnie Gann Wilkes. Gann was asked, "So you had deeded the land to Ponderosa Country Club, Inc. Is that right?" He responded, "Yes, sir."
Additionally, Gann was the club's president from its beginning until he purchased, after the fire, all outstanding stock, thereby becoming, according to his reasoning, the sole owner of the corporation and as such conveyed, or attempted to convey, the corporate property to himself. The previous insurance on the building was in the corporate name.
These suits were brought in Gann's name although the Ponderosa Country Club, Inc. was the record owner. In this circumstance Gann asserts that it is immaterial whether the proceeds are paid to the Ponderosa Country Club, Inc. or to the Ponderosa Country Club, Inc. and himself.
The trial judge found that Scott was the agent of the insurers and that Gann was the owner of the corporation with an insurable interest in the property. Therefore a judgment for $20,000, the sum of the policies, was awarded the plaintiff.
The appellants urge for reversal that the trial court erred (1) in not finding for the appellants because the appellee failed to answer questions in an examination under oath material to the risk, (2) in finding Robert Scott to be the agent of the appellants, (3) in failing to find for the appellants on the issue of misrepresentation of the insured property, and (4) in failing to find the plaintiff had no insurable interest in the insured property.
We are of the opinion the first assignment is without merit. It is beyond argument that an insurer has a right to interrogate the insured upon questions material to the contract when such provision is parcel of the policy. This generalization, however, does not mean that each uncertain answer, or that referring the insurer to a source of information would cancel the policy. In Taylor v. Fireman's Fund Insurance Co., 306 So. 2d 638 (Miss. 1974), we cited with approval from Claflin v. Commonwealth Insurance Co., 110 U.S. 81, 3 S. Ct. 507, 28 L. Ed. 76 (1883), the following:
The object of the provisions in the policies of insurance, requiring the assured to submit himself to an examination under oath, to be reduced to writing, was to enable the Company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to its rights, to enable it to decide upon its obligations, and to protect it against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. ... (306 So.2d at 645)
See also Standard Ins. Co. v. Anderson, 227 Miss. 397, 86 So. 2d 298 (1956). The response to the questions of appellants' counsel, contended to forfeit the policies, was not a refusal to answer, but was a reference to information which would have revealed the status of title. The questions to Gann and his answers were:
Q. Who owned the land on which this building was located?
A. The Club.
Q. The Ponderosa Club, Inc.?
*432 A. Yes, sir.
Q. So you had deeded the land to Ponderosa Country Club, Inc. Is that right?
A. Yes, sir.
Q. Ponderosa Country Club, Inc. actually owned the building and the land on which it was situated?
MR. HAWKINS: [Gann's counsel]
The records over here would speak for themselves. I don't know, myself. You would have to check the records. I would not want to answer something without checking the records, themselves.
MR. AULTMAN:
Do you object to him answering?
MR. HAWKINS:
Yes, sir, without checking the records.
MR. AULTMAN:
Q. On advice of counsel do you refuse to answer?
MR. HAWKINS:
I am telling him that the records, themselves, Mr. Aultman, will speak for themselves. You can check the records.
MR. AULTMAN:
If he knows who owns it, I would like for him to tell me.
MR. HAWKINS:
I don't know if he knows who owns it or not. He would have to see the deed records. It is a title question; it is a legal question in my opinion.
MR. AULTMAN:
Q. Do you refuse to answer that, Mr. Gann?
A. Yes, sir.
All questions of which Gann had knowledge were answered and his refusal, if it be such, to respond to queries concerning title does not, in our opinion, appear to be an attempt to willfully conceal information material to the risk or to otherwise deceive the insurer. In Taylor, supra, relied upon by the appellants, the claimant swore he was the sole owner of a house that burned. The records revealed he owned at best a one-half interest against which there was an indebtedness for the purchase price secured only by Taylor's check drawn upon an insolvent account. By contrast Gann acknowledged the Ponderosa Country Club owned the property, but when prompted by counsel, concluded the records would best reflect the title. His reference seems to be nothing more than a recognition that records are more accurate than memory. The numerous refusals and evasive answers in Taylor, supra, present a far different factual situation from the present, thereby distinguishing it. We conclude that Taylor, supra, does not require a forfeiture of the present policies.
As noted, Gann dealt only with Scott in purchasing the insurance and left all details to him. Scott's endeavors led to the policies being issued by the nonadmitted companies. He billed Gann for the premiums and they were paid by Gann. From these facts the trial judge found that Scott was the agent of the appellants. We agree. Mississippi Code Annotated section 83-17-1 (1972) provides in part:
Every person ... who takes or transmits, ... an application for insurance or a policy of insurance, .. or who shall receive or deliver a policy of insurance of any such company, or who shall examine or inspect any risk, or receive, collect, or transmit any premium of insurance ... or do or perform any other act or thing in the making or consummation of any contract of insurance for or with any such insurance company, ... or who shall ... aid in adjusting any loss for or on behalf of any such insurance company ... shall be held to be the agent of the company for which the act is done or the risk is taken as to all the duties and liabilities imposed by law, whatever conditions or stipulations may be contained in the policy or contract.
The appellants argue, however, that this section has no application to nonadmitted insurance companies because Mississippi Code Annotated section 83-21-31 (1972) has specific application to an unauthorized insurer, thereby eliminating consideration of Section 83-17-1, a general section. Section 83-21-31 provides:
*433 As to any policy or contract issued pursuant to sections 83-21-17 to 83-21-31, and as to any claim for loss or damage arising under any such policy or contract, the cited sections shall apply. As to any such policy or contract issued by an unauthorized insurer in a manner not provided in said preceding sections, sections 83-21-31 to 83-21-51 shall apply.
We think this contention has no merit. The sections preceding Section 83-21-31 relate to the procedural necessities for obtaining insurance, the licensing of agents for nonadmitted companies, their bond and the agent's report. The succeeding sections relate to service of process, acts constituting the insurance commissioner as an agent and related matters. None refer to acts sufficient to constitute an agent. Since this is so, we are of the opinion that Section 83-17-1 does apply. Moreover, Scott became the agent of the appellants under the general law of agency by the present facts. He acted in their behalf in placing the insurance and they accepted his services by issuing the coverage. Both were to profit from the transaction. The trier of facts did not err in this regard. Turner v. Williams, 257 So. 2d 525 (Miss. 1972); Engle Acoustic & Tile, Inc. v. Grenfell, 223 So. 2d 613 (Miss. 1969); and Overing v. Skrmetta, 218 Miss. 648, 67 So. 2d 606 (1953).
It is contended the policies should be cancelled because of material misrepresentations of the insured. In considering this issue we observe that Gann's only communication with the appellants was through his affidavit certifying the correctness of Scott's affidavit of November 9, 1972, for procurement of insurance from a nonadmitted company. It names Melvin Gann as the person for whom insurance was sought and describes the property as a "3-Family Tenant Dwelling."
The policies were effective May 6, 1972, several months prior to the affidavit. Therefore, the representation did not induce the appellants to issue the policies. Moreover, the recitations in the affidavit and certificate were facts known by Scott with nothing to indicate that Gann initiated the affidavit. Scott was aware that a portion of the building was to be continued as a club and, indeed, he had knowledge that it had been previously so used since he set up the bookkeeping for the enterprise. We conclude the contended misrepresentations did not have a material effect upon the issuance of the policies.
Finally, it is urged the policies are unenforceable because Gann had no insurable interest in the Ponderosa County Club. We are cognizant of the general rule that an insurable interest in property must exist in an insured when the contract is entered for it to be effective. The present question is whether Gann had an economic interest in the property although the naked title was in the Ponderosa Country Club, Inc. when the policies were issued.
The property was conveyed to the Ponderosa Country Club by the efforts of Gann. His interest in the club was sufficient for him to borrow, with others, $12,000 toward the construction of the building. He was the president and, as best we can determine from the record, the manager of the enterprise. His actions subsequent to the fire were consistent with his interest preceding it. He paid $8000 to retire an indebtedness against the building and redeemed all outstanding shares of stock. He testified, "I took the full loss." Moreover, the building had an undisputed worth of $40,000 and was insured for one-half of that amount. Additionally, there is no evidence of any interest in the property or the proceeds of the insurance other than that of the appellee.
From these circumstances we are of the opinion the trial court correctly found Gann had an insurable interest in the property even though the legal title was elsewhere. He was subject to economic loss at the time the policies were issued if the building were destroyed. Liverpool & London & Globe Ins. Co. v. Delaney, 190 Miss. 404, 200 So. 440 (1941). And see Aetna Ins. Co. v. King, 265 So. 2d 716 (Fla.App. 1972); Skaff v. United States Fidelity & Guaranty *434 Co., 215 So. 2d 35 (Fla.App. 1968); and Smith v. Eagle Star Ins. Co., 370 S.W.2d 448 (Tex. 1963), wherein that Court quoted with approval 29 Am.Jur. 781, Insurance, section 438, as follows: "The principle may be stated generally that anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction... ." (370 S.W.2d at page 450) The reason for the rule requiring an interest in property upon which insurance is sought is to prevent the coverage from becoming a wagering contract contrary to public policy. 4 Appleman, Insurance Law and Practice, § 2121 (1969). There is no evidence before us indicating these policies were obtained contrary to public policy because of the lack of an insurable interest. We therefore conclude the trial court's finding was correct and surely we cannot state it was manifestly contrary to the evidence. McDaniel Bros. Constr. Co. v. Jordy, 195 So. 2d 922 (Miss. 1967).
AFFIRMED.
GILLESPIE, C.J., INZER, P.J., and SMITH, ROBERTSON, SUGG, WALKER, BROOM and LEE, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1781312/ | 940 S.W.2d 340 (1997)
Johnny THOMAS, Trustee For The Bankruptcy Estate Of Donald L. Muennink and Wife, Phylis Muennink, Appellant,
v.
Thomas D. BRACEY, Appellee.
No. 04-96-00402-CV.
Court of Appeals of Texas, San Antonio.
February 12, 1997.
*341 Robert J. Rothe, Hondo, for appellant.
Thomas D. Bracey, Thomas D. Bracey & Associates, San Antonio, for appellee.
Before RICKHOFF, LÓPEZ and ANGELINI, JJ.
ANGELINI, Justice.
This is an appeal from the granting of summary judgment in a defamation action arising out of an incident that occurred on a piece of property in which appellant claims to have an interest. In four points of error, appellant contends that the trial court erred in granting summary judgment. We affirm the judgment of the trial court.
Factual and Procedural Background
Appellee, Thomas Bracey, represented Vernor Muennink in his capacity as independent executor of the estate of Leslie Muennink. Leslie Muennink's estate includes a one-half interest in certain property located in Medina County, Texas. Appellant, Donald Muennink[1], owns an undivided one-fourth interest in the same property.
Vernor Muennink, as executor of Leslie Muennink's estate, continued a sharecropping agreement entered into by Leslie Muennink whereby Franklin Muennink farmed the property in question and paid a portion of his earnings to the estate. On November 1, 1994, following several attempts to stop the sharecropping operations, appellant threatened Franklin Muennink's foreman with a gun and demanded that he leave the property. As a result of appellant's conduct, Franklin Muennink has since refused to continue the sharecropping operation.
On November 2, 1994, appellee sent appellant the following letter on behalf of Vernor Muennink:
RE: Trespass on Property of the Estate of Leslie D. Muennink,
Cause No. 5846, County Court at Law of Medina County,
Texas; Our File 307.08.
Dear Mr. Muennink:
As you are aware, I represent Vernor Muennink, in his capacity as the executor of the estate of Leslie D. Muennink. In that connection, Vernor Muennink and his brother Leslie before him for several years *342 agreed with Mr. Franklin Muennink to allow sharecropping on land known as the Carter place, and the Home place, which land remains in the name of the decedent and under the control of the decedent's executor.
For several months you have trespassed on the property and inhibited and attempted to prevent farming operations. You have placed a lock on the gate, which will be removed, and, on Monday, October 31, 1994, attempted to run off Mr. Salmon Flores from the property while he was plowing the land. Mr. Salmon Flores, as you know, is employed by Franklin Muennink, the authorized sharecropper.
On Tuesday, November 1, 1994, you again trespassed upon the property and again ran Mr. Flores off the property with use of a pistol.
This letter is to formally demand that you cease and desist trespassing on the property, and stop in any manner inhibiting farming operations on any of the property.
Very truly yours,
/s/ Thomas Bracey
Thomas D. Bracey
A copy of this letter was sent to Deputy August Fisher of the Medina County Sheriff's Department.
As a result of the November 1, 1994, incident, appellant was convicted of aggravated assault with a deadly weapon. This court affirmed the conviction on appeal. On January 4, 1995, appellee sought a declaratory judgment against appellant on behalf of the estate of Leslie Muennink, alleging civil trespass and tortious interference with the sharecropping agreement. This action remains pending. Finally, on February 10, 1995, appellant filed the present suit, seeking to hold appellee liable for the allegedly libelous statements made in the November 2, 1994, letter published to Deputy Fisher. Appellee moved for summary judgment on the ground that the statements at issue were absolutely privileged by the fact that they were made in connection with judicial proceedings. The trial court did not consider appellant's untimely response to appellee's motion and granted summary judgment in appellee's favor.
Arguments on Appeal
A. Summary Judgment
In order to prevail on a motion for summary judgment, a defendant must either prove that no genuine issue of material fact exists, affirmatively disprove at least one element of the plaintiff's cause of action, or prove an affirmative defense as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex.1985); Ross v. Arkwright Mut. Ins. Co., 892 S.W.2d 119, 127 (Tex.App.Houston [14th Dist.] 1994, no writ). In any case, the movant bears the burden of proving that he is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c). On review, the appellate court must take as true all evidence favoring the non-movant and indulge every reasonable inference in his favor. Park Place Hosp. v. Milo, 909 S.W.2d 508, 510 (Tex.1995); Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex.1984).
Considering the public policy concerns regarding free expression, the Texas Supreme Court has noted that summary judgment may be particularly appropriate in defamation actions. See Casso v. Brand, 776 S.W.2d 551, 558 (Tex.1989). However, the general principles of summary judgment procedure still apply, and a defendant in a defamation action must negate an essential element of the plaintiff's cause of action or conclusively establish all elements of an affirmative defense in order to obtain summary judgment. TIMOTHY PATTON, SUMMARY JUDGMENTS IN TEXAS 153 (1996). Summary judgment may be obtained in a defamation case upon a proven plea of privilege. Id.
B. Absolute Privilege
Appellee asserts that he is entitled to the defense of absolute privilege because the communication at issue was sent to appellant and a deputy sheriff in connection with and in contemplation of judicial proceedings. It is well-settled that communications made in the course of a judicial proceeding may not serve as the basis of a civil action for libel or slander, regardless of the negligence *343 or malice with which they are made. James v. Brown, 637 S.W.2d 914, 916 (Tex.1982)(citing Reagan v. Guardian Life Ins. Co., 140 Tex. 105, 166 S.W.2d 909 (1942)). This absolute privilege has been extended to communications made in contemplation of and preliminary to judicial proceedings. Darrah v. Hinds, 720 S.W.2d 689, 691 (Tex.App.Fort Worth 1986, writ ref'd n.r.e.); Russell v. Clark, 620 S.W.2d 865, 868 (Tex.Civ.App.Dallas 1981, writ ref'd n.r.e.). Statements made by judges, jurors, counsel, parties, or witnesses are protected. Id. (citing W. PROSSER, HANDBOOK ON THE LAW OF TORTS § 114 (4th ed.1971)).
The public policy behind absolute privilege as it relates to attorneys representing clients in a pending or contemplated proceeding was noted by the court in Russell:
Public policy demands that attorneys be granted the utmost freedom in their efforts to represent their clients. To grant immunity short of absolute privilege to communications relating to pending or proposed litigation, and thus subject an attorney to liability for defamation, might tend to lessen an attorney's efforts on behalf of his client.
Russell, 620 S.W.2d at 868. However, in order for absolute privilege to apply, the communication must bear some relationship to a pending or proposed judicial proceeding in which an attorney is employed, and must be in furtherance of that representation. Id. An absolute privilege does not extend to communications made by an attorney outside of judicial proceedings.
Appellant urges that appellee is not entitled to claim absolute privilege, but instead must rely on a qualified privilege defense. When a communication of an alleged wrongful act is made to an official authorized to protect the public from such act, that communication is entitled to only a qualified privilege. Zarate v. Cortinas, 553 S.W.2d 652, 655 (Tex.Civ.App.Corpus Christi 1977, no writ). For example, such a qualified privilege arises in cases in which crimes are reported to police authorities. See, e.g., Vista Chevrolet, Inc. v. Barron, 698 S.W.2d 435, 437-40 (Tex.App.Corpus Christi 1985, no writ)(holding report to police that plaintiff had stolen a car only qualifiedly privileged); Zarate, 553 S.W.2d at 654-56 (finding complaint filed with sheriff accusing plaintiff of an unauthorized loan of county equipment subject to qualified privilege).
In the present case, appellant recognizes the existence of the absolute privilege enjoyed by those who communicate in the course of judicial proceedings, but asserts that appellee is not entitled to the protection of such privilege because he published his November 2, 1994, letter to Deputy Fisher. Therefore, according to appellant, the communication was made outside of judicial proceedings. Pursuant to Zarate, appellant contends that because appellee's letter falsely accused appellant of criminal trespass and was sent to Deputy Fisher, an official authorized to protect the public from such acts, the communication is entitled to only a qualified privilege. Appellee responds by asserting that Zarate is not controlling because the communication in question was made in connection with his representation of a client in both pending and prospective judicial proceedings.
Whether an alleged defamatory matter is related to a proposed or existing judicial proceeding is a question of law to be determined by the court. Russell, 620 S.W.2d at 870. All doubt should be resolved in favor of the communication's relation to the proceeding. Id. In this case, the trial court determined that the publication of appellee's letter to Deputy Fisher related to a judicial proceeding and was, therefore, absolutely privileged. We agree.
The first sentence of the letter notified the reader that appellee was communicating in his capacity as the attorney representing Vernor Muennink as the independent executor of Leslie Muennink's estate. The letter also indicated that it was in regard to cause number 5846 in the Medina County Court at Law, the estate administration proceeding. The letter was clearly written in an effort to secure the rights of appellee's client, the executor of the estate, in property and income belonging to the estate. Additionally, appellee's letter contemplated a separate judicial proceeding to enforce the rights of the *344 estate. Appellee, on behalf of his client, did in fact file suit against appellant for civil trespass and tortious interference with contract following the incident referenced in the letter. As such, the letter was written both in connection with and preliminary to a judicial proceeding.
We note that whether appellant had a right to access the land in question by virtue of his undivided one-fourth interest in the property has no bearing on appellee's absolute privilege defense. Appellee's interest in writing the letter was in protecting the rights of his client in ensuring that the best interests of Leslie Muennink's estate were maintained. This included ensuring that the sharecropping operations continued to generate income for the estate until the administration was complete. See TEX.PROB.CODE § 238 (Vernon Supp.1997)(stating that the executor is entitled to "carry on the operations of such farm ... or cause the same to be done ... as shall appear to be for the best of interest of the estate."). In representing his client, appellee had the right to demand that appellant cease his violent interference with the sharecropping operations. The issue of whether appellant had the right to access the property and curtail the sharecropping operation is a legal issue independent of appellee's efforts to serve his client in the administration of the estate. In any event, the absolute privilege afforded an attorney in communications regarding judicial proceedings protects an attorney from liability in an action for defamation irrespective of his purpose in publishing the defamatory matter, his belief in its truth, or even his knowledge of its falsity. RESTATEMENT (SECOND) OF TORTS § 586 cmt. a (1977).
Finally, the fact that appellee's letter was published to a law enforcement official has no bearing upon the privilege under the facts of this case. Appellee sent the letter in connection with and in contemplation of judicial proceedings. Even statements aimed at parties not involved in the proceeding are absolutely privileged if they bear some relation to a judicial proceeding. Odeneal v. Wofford, 668 S.W.2d 819, 820 (Tex.App.Dallas 1984, writ ref'd n.r.e.). As such, the communication was absolutely privileged. See, e.g., James, 637 S.W.2d at 916-17; Darrah, 720 S.W.2d at 692-93; Odeneal, 668 S.W.2d at 820; Russell, 620 S.W.2d at 868-70.
Because appellee conclusively established his right to the affirmative defense of absolute privilege, we conclude that the trial court did not err in granting summary judgment in appellee's favor. The judgment of the trial court is affirmed.
NOTES
[1] Donald Muennink and his wife declared bankruptcy during the course of these proceedings. As such, Johnny Thomas, trustee for the estate in bankruptcy, has legal and equitable title to this cause of action. However, for the sake of clarity, Donald Muennink will be referred to as appellant in this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1821617/ | 468 So. 2d 492 (1985)
ALTAMONTE HITCH & TRAILER SERVICE, INC., Etc., et al., Appellants,
v.
U-HAUL CO. OF EASTERN FLORIDA, Etc., et al., Appellees.
No. 84-225.
District Court of Appeal of Florida, Fifth District.
May 9, 1985.
William L. Eagan of Arnold, Matheny & Eagan, P.A., Orlando, for appellants.
J. Thomas Cardwell and W. James Gooding III, of Akerman, Senterfitt & Eidson, Orlando, for appellees.
ORFINGER, Judge.
This is an appeal by the plaintiffs below from a final judgment entered on defendants' counterclaim. Their principal contention is that they were improperly denied a jury trial. We disagree, and affirm.
Appellants (as plaintiffs) filed the action in January, 1978. They sought damages and equitable relief based on alleged violations by defendants of a dealer's agreement and lease between the parties. On December 27, 1978, defendants filed a counterclaim seeking damages from plaintiffs for unpaid rents and other fees claimed due under the contracts between the parties. Plaintiffs filed an amended complaint on April 12, 1979 to which an answer was filed on January 8, 1980. Neither party requested a jury trial.
On January 20, 1983, plaintiffs filed a notice for trial, maintaining that the action was at issue and that "[i]t is estimated that two (2) days for a non-jury trial will be adequate." On March 17, 1983, the court entered an order setting the case for non-jury trial for the trial period beginning July 12, 1983. On March 24, 1983, plaintiffs filed a motion for leave to amend their complaint so as to request a jury trial. No grounds were stated. This motion was denied.
On June 13, 1983, plaintiffs again moved for permission to amend their complaint so as to request trial by jury, this time stating that their prayer for injunctive relief was now moot and that no injustice to defendants nor inconvenience to the court would be occasioned by the request. This motion was denied on June 15, 1983. On July 18, 1983, plaintiffs filed an answer to the counterclaim which had been filed approximately *493 four and a half years earlier, demanding a jury trial "of all issues so triable." Non-jury trial began two days later, July 20, 1983 after the court denied plaintiffs' oral motion that trial should be by jury. Final judgment was subsequently entered against the plaintiffs on their claim and in favor of defendants on the counterclaim and from this judgment the plaintiffs appeal.
Florida Rule of Civil Procedure 1.430 provides:
(a) Right preserved. The right of trial by jury as declared by the Constitution or by statute shall be preserved to the parties inviolate.
(b) Demand. Any party may demand a trial by jury of any issue triable of right by a jury by serving upon the other party a demand thereof in writing at any time after commencement of the action and not later than ten days after the service of the last pleading directed to such issue. The demand may be endorsed upon a pleading of the party.
* * * * * *
(d) Waiver. A party who fails to serve a demand as required by this rule waives trial by jury. If waived, a jury trial may not be granted without the consent of the parties but the court may allow an amendment in the proceedings to demand a trial by jury or order a trial by jury on its own motion. A demand for trial by jury may not be withdrawn without the consent of the parties.
The committee notes to Rule 1.430 provide that subdivision (d) is intended to conform with the decisions in Wood v. Warriner, 62 So. 2d 728 (Fla. 1953) and Shores v. Murphy, 88 So. 2d 294 (Fla. 1956), but that subdivision (d) is not intended to overrule Wertman v. Tipping, 166 So. 2d 666 (Fla. 1st DCA 1964). In Wood and Shores the court held that a trial judge may order a jury trial if the demand for trial is made on the day of trial (Wood) or even in the absence of any appropriate demand for jury trial (Shores). In Wertman, the appellate court reviewed the scenario where the trial court denied a belated motion to try the case by jury. The Wertman court stated:
When a motion for jury trial is made after lapse of the ten day period, the trial court is called upon to exercise a sound judicial discretion in determining if the ends of justice require the granting of the motion. If it is plain that justice would be denied if the motion is not granted, the trial judge would have abused his discretion and committed reversible error in denying such motion. However, the burden is on the moving party to establish that justice requires that the motion be granted.
The case here had already been set for trial when the motion was made and to have granted it a postponement of the trial date would have been required. This could have been an inconvenience and handicap to the plaintiffs and also to the court. There are other factors which the trial judge might properly have considered, such as the state of the trial calendar and his own prior commitments of his time, which are not apparent from the record but would be within his peculiar knowledge. The presumption is in favor of the correctness of the order. For this court to overthrow it, the appellant must show that it is clearly erroneous. We do not deem such a showing to have been made.
When the plaintiffs failed to request a jury trial and noticed the case for non-jury trial, the court and the defendants were justified in deeming a jury trial waived and proceeding accordingly. When appellants had a change of heart at such a late date it was incumbent on them to demonstrate not only their desire for trial by jury but also that such procedure would not impose an injustice upon their adversary nor unreasonable inconvenience on the court in the performance of its duties. This they did not do. The request made in March, 1984 made no showing at all. The June request was too late because it was too close to the trial date, as was the demand filed in the belated answer to the *494 counterclaim, filed four and a half years late and two days before trial.
As in Wertman, the plaintiffs effectively waived any right to a jury trial here, and they have failed to demonstrate that the trial court abused its discretion in rejecting their belated request. We find no merit in the other issues raised.
AFFIRMED.
DAUKSCH and FRANK D. UPCHURCH, Jr., JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1989374/ | 188 B.R. 544 (1995)
In re Thomas Cullen DAVIS and Karen Joyce Davis, Debtors.
Thomas Cullen DAVIS, Plaintiff-Appellee,
v.
Sandra DAVIS, Defendant-Appellant.
Civ. A. No. 3:94-CV-2024-D. Bankruptcy No. 487-41796-MT-11. Adv. No. 394-3070.
United States District Court, N.D. Texas, Dallas Division.
November 8, 1995.
*545 *546 St. Clair Newbern, III, Ft. Worth, Tex., for defendant-appellant.
R. Steven Jones, Ronald R. Payne (argued), and Ted S. Byers of Hesse & Jones, Dallas, Tex., for plaintiff-appellee.
FITZWATER, District Judge:
This appeal presents the question whether 11 U.S.C. § 522(c)(1), which provides that exempt property is liable for § 523(a)(5) debts (family support obligations), preempts Texas homestead law. The bankruptcy court held that it does not. In re Davis, 170 B.R. 892 (Bankr.N.D.Tex.1994). Because Texas homestead law is not preempted, the bankruptcy court's order is affirmed.
I
Defendant-appellant Sandra Davis ("Sandra") and her former husband, debtor-plaintiff-appellee Thomas Cullen Davis ("Cullen"), were divorced in 1968.[1] Pursuant to a property settlement, support and child custody agreement (the "Agreement"), and the divorce judgment ("Divorce Judgment"), Cullen agreed to make monthly payments to Sandra through January 1, 1991, and thereafter to pay her other sums subject to certain contingencies. In 1979 Cullen married his current wife, debtor Karen Joyce Davis ("Karen"). In 1984 they purchased certain real property that they occupy and claim as their homestead (the "Homestead").
In 1987 Cullen and Karen filed a voluntary chapter 7 petition, which was subsequently *547 converted to a chapter 11 case. They elected the exemptions under nonbankruptcy law and claimed certain property, including the Homestead, to be exempt under Texas law.
Cullen commenced an adversary proceeding against Sandra, seeking a determination that his indebtedness pursuant to the Agreement and Divorce Judgment was dischargeable. Sandra counterclaimed for a ruling that the indebtedness was nondischargeable pursuant to § 523(a)(5). In 1991 the parties settled the adversary proceeding, entering into an agreed final judgment of nondischargeability (the "Judgment") that awarded Sandra the total sum of $300,000 ($250,000 plus $50,000 in attorney's fees). The Judgment declared this sum to be nondischargeable pursuant to § 523(a)(5).
In 1993 Sandra filed the instant application for turnover order and other relief in aid of judgment. Sandra based her motion on Fed. R.Bankr.P. 7069, which in turn incorporates Fed.R.Civ.P. 69. She contended that she had been unable to collect the Judgment from Cullen, and requested that the bankruptcy court order him to turn over a warranty deed that conveyed the Homestead to her, and to turn over $29,915.00 in personal property in the event the Homestead was of inadequate value to satisfy the Judgment. Sandra argued that § 522(c)(1) rendered Cullen's otherwise exempt property liable for the Judgment because the debt was nondischargeable pursuant to § 523(a)(5).
Following a hearing, the bankruptcy court held that although Sandra held a nondischargeable judgment pursuant to § 523(a)(5), she could not execute on it against Cullen's Homestead. Davis, 170 B.R. at 898. Sandra argued that Rule 69(a), read in conjunction with § 522(c)(1), allowed her to execute on the Judgment. Rule 69 provides that execution shall be in accordance with Texas law, "except that any statute of the United States governs to the extent it is applicable." Section 522(c)(1) provides that exempt property remains "liable" for § 523(a)(5) family support debts. Sandra argued that § 522(c)(1) is a "statute of the United States" applicable to the Texas turnover statute, Tex.Civ.Prac. & Rem.Code Ann. § 31.002 (West 1986) (the "Turnover Statute"),[2] and thus preempts the statute's prohibition against execution on exempt property. See Davis, 170 B.R. at 896.
The bankruptcy court held that the Turnover Statute was unavailable to Sandra on two grounds. First, it noted that turnover is only obtainable for property that is not ordinarily subject to levy. The court reasoned that § 31.002(a)(1) and (a)(2) must be read independently. The fact that Sandra was unable to levy upon Cullen's exempt Homestead did not detract from the character of the Homestead, i.e., real property, as a type ordinarily subject to levy. Id. at 895-96. "The potential for Mr. Davis to resist that relief does not alter the status of the property nor subject it to this supplemental means for relief." Id. at 896. The bankruptcy court therefore concluded that Sandra had failed to meet the requirement for turnover in § 31.002(a)(1).
Second, the bankruptcy court noted that the Texas Turnover Statute is unavailable for exempt property and that Cullen's Homestead is exempt. Id. The court rejected Sandra's argument that § 522(c)(1) made the Homestead liable for § 523(a)(5) debts and that she therefore met the requirements of § 31.002(a)(2). The court reasoned that Rule 69(a), which concerns the application of statutes on execution, could not be invoked to apply § 522(c)(1) to the Turnover Statute. Id. Because § 522(c)(1) is not an execution statute, the court reasoned, it did not govern.
The bankruptcy court held that § 522(c)(1) did not preempt the protection of exempt property found in the Turnover Statute. Relying on First Gibraltar Bank, FSB v. Morales, 19 F.3d 1032 (5th Cir.), cert. denied, ___ *548 U.S. ___, 115 S. Ct. 204, 130 L. Ed. 2d 134 (1994), vacated on other grounds, 42 F.3d 895 (1995), the court determined that § 522(c)(1) would preempt the Turnover Statute only if Congress specifically intended to displace the police power of the State of Texas. Davis, 170 B.R. at 896-97. Moreover, on the basis that real property law was of "special concern to the states," the court held that there was a presumption against preemption. Id. at 897 (citing First Gibraltar, 19 F.3d at 1039). The court then looked to the language of the Bankruptcy Code and determined that although § 522(c)(1) did not bar execution on the Judgment, it also did not provide a mechanism for doing so. Id. at 897-98. Thus § 522(c)(1) did "not prevent non-bankruptcy law from imposing such an injunction" against execution. Id. at 898. Because Texas had enjoined execution, and § 522(c)(1) did not preempt Texas law, Sandra could not compel the turnover of Cullen's Homestead. Id. Sandra appeals.
II
Sandra contends the order denying her turnover application must be reversed because § 522(c)(1) inferentially preempts Texas law either by the pervasive scheme of bankruptcy legislation or by an actual conflict between state and federal law in this area.
A
Acting within the authority granted it by the Supremacy Clause of the Constitution, U.S. Const. art. VI, cl. 2, Congress may enact legislation that preempts state law. California v. ARC Am. Corp., 490 U.S. 93, 100, 109 S. Ct. 1661, 1664, 104 L. Ed. 2d 86 (1989). Preemption is most easily recognized when Congress displaces state law "by so stating in express terms," Pacific Gas & Elec. Co. v. State Energy Resources Conserv. & Dev. Comm'n, 461 U.S. 190, 203, 103 S. Ct. 1713, 1722, 75 L. Ed. 2d 752 (1983), but may also be "implicitly contained in its structure and purpose," Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S. Ct. 1305, 1309, 51 L. Ed. 2d 604 (1977). The key inquiry in both instances is whether Congress intended that federal law supersede state law. See Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 369, 106 S. Ct. 1890, 1899, 90 L. Ed. 2d 369 (1986). Courts inquiring whether a federal statute preempts state law must begin their analysis from the presumption that the police powers of the states are not to be disturbed unless this is the "clear and manifest purpose of Congress." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447 (1947); see First Gibraltar, 19 F.3d at 1039.
Preemption may be implied where federal and state law conflict. Such a conflict exists when compliance with both federal and state law is a physical impossibility, or where state law obstructs "accomplishment and execution of the full purposes and objectives of Congress." Pacific Gas, 461 U.S. at 204, 103 S. Ct. at 1722. In addition, preemption may be implied where "a scheme of federal legislation is `so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.'" First Gibraltar, 19 F.3d at 1039 (quoting Pacific Gas, 461 U.S. at 204, 103 S. Ct. at 1722).
To determine whether Texas homestead law is preempted in the present case, the court must consider the intent of Congress manifested in the language of the Bankruptcy Code, as well as the police power of the State of Texas with respect to homestead protections.
Section 522(c)(1) of the Bankruptcy Code provides:
Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencement of the case except a debt of a kind specified in section 523(a)(1) or 523(a)(5) of this title[.]
The exempt property that may be held liable pursuant to § 522(c)(1) includes Cullen's Homestead. The question presented is whether Texas homestead law interferes with the pervasive scheme in bankruptcy established by Congress, or conflicts with the terms of § 522(c)(1).
*549 Texas laws protecting the homestead are expansive and deeply rooted. Cf. Zwernemann v. Von Rosenburg, 76 Tex. 522, 13 S.W. 485, 487 (1890). Homestead rights have long been zealously guarded, and they trace back to Texas' days as a republic, prior to admission into the Union. See Act of Jan. 26, 1839, 1839 Laws of Rep. of Tex. 1236. They "are not only based upon a tender regard for the welfare of the citizen, but have for their object the stability and welfare of the state." Andrews v. Security Nat'l Bank, 121 Tex. 409, 50 S.W.2d 253, 256 (1932). "The homestead exemption was founded on principles of soundest policy. . . . Its design was not only to protect citizens and their families from destitution, but also cherish and support in bosoms of individuals, those feelings of sublime independence which are so essential to maintenance of free institutions." Franklin v. Coffee, 18 Tex. 413, 417 (1857). Article XVI, § 50 of the Texas Constitution provides that no homestead can be the subject of a forced sale for payment of any debts other than purchase money debts, taxes, and mechanics liens. Tex. Const.Ann. art. XVI, § 50 (West 1993). The universal rule of construction is that the Texas homestead law is to be liberally construed to accomplish its objectives. See In re Henderson, 168 B.R. 151, 157 (W.D.Tex. 1993), aff'd, 18 F.3d 1305 (5th Cir.) (per curiam), cert. denied, ___ U.S. ___, 115 S. Ct. 573, 130 L. Ed. 2d 490 (1994). Homestead protections will not be lightly disturbed. See In re Moody, 77 B.R. 566, 578 (S.D.Tex.1987), aff'd, 862 F.2d 1194 (5th Cir. 1989), cert. denied, 503 U.S. 960, 112 S. Ct. 1562, 118 L. Ed. 2d 209 (1992).
B
The court first considers whether § 522(c)(1) preempts the Texas homestead law pursuant to a pervasive scheme.
It is clear that under Texas law, Sandra would not be able to force the sale of Cullen's Homestead to collect sums owed pursuant to the Agreement and Divorce Judgment. Eggemeyer v. Eggemeyer, 623 S.W.2d 462, 466 (Tex.App.1981, writ dism'd w.o.j.) (holding homestead not subject to forced sale to secure payment of accrued child support because child support judgment does not fall within three categories of debt collectible from homestead specified in Texas Constitution). Sandra asks this court to hold that, in exchange for the protections of bankruptcy, a Texas debtor exposes to liquidation a homestead that, under any other set of circumstances, would be immune from execution.
The Bankruptcy Code does not support this result. Congress presumably understood, when it provided debtors with the option to elect state exemptions, that the broad protections of state law would apply. By allowing state exemptions under § 522(b), Congress contemplated that the exemptions available to debtors in the several states would not be uniform. There is therefore no "pervasive scheme" in the Bankruptcy Code with respect to exempt property. Sandra contends that "in the absence of a clear statement of intent to the contrary, Congress should be presumed to have intended the bankruptcy laws to apply uniformly across the states." Given the express relinquishment of uniformity in § 522(b), and the presumption against preemption when there is no clear and manifest congressional purpose, the court cannot agree.
Sandra is correct that § 522(c) covers all types of exempt property, whether claimed under the federal or state exemptions. As the court points out infra at § II(C), however, § 522(c) does not conflict with Texas law. The Turnover Statute's protection of exempt property does not therefore impose upon the exemption scheme set out in § 522. To the contrary, § 522 expressly provides that state-law exemptions apply under the Code.
In addition, the history of § 522 supports the proposition that preemption may not be inferred. When Congress revised the Code to permit states to opt out of the federal exemptions, it delegated to the states precisely the authority Sandra contends is preempted the power to designate which assets will be excluded from the bankruptcy estate. Originally, Congress contemplated providing a uniform and exclusive exemption provision to be applied to all bankruptcy cases, but rejected this proposal in favor of the regimen now in place. See Report of the Comm'n on the Bankruptcy *550 Laws of the United States, H.R.Doc. No. 93-137, 93rd Cong., 1st Sess., pts. I & II, at 4-503 (1973). In doing so, Congress allowed the states to prescribe the nature and extent of exemptions that might be used in bankruptcy a significant delegation of authority.[3]See Owen v. Owen, 500 U.S. 305, 308, 111 S. Ct. 1833, 1835, 114 L. Ed. 2d 350 (1991) ("Nothing in subsection (b) (or elsewhere in the Code) limits a State's power to restrict the scope of its exemptions; indeed, it could theoretically accord no exemptions at all."). Because Congress has delegated this authority, this court must give deference to state law, and find that preemption applies only when there is a clear and specific conflict between Code provisions and state exemption laws. See In re Stone, 119 B.R. 222, 233 (Bankr.E.D.Wash.1990) (holding that even in exemption area, states cannot enact legislation in conflict with specific provisions of Bankruptcy Code).
C
The court next addresses whether Texas homestead law and § 522(c)(1) are in actual conflict.
Section 522(c)(1) provides that exempt property cannot be liable for most prepetition debts. It also specifies certain debts for which exempt property can be liable. It is silent, however, regarding how a creditor might execute a judgment on exempt property that can be held liable. The holder of a judgment for family support obligations can collect from exempt property if the creditor has a means of execution. For execution on the Judgment, Sandra must rely on state law in this case the Texas Turnover Statute which applies through Rule 69.
The court rejects the assertion that Texas homestead law conflicts with this reading of § 522(c)(1) because Sandra still cannot collect from Cullen's Homestead. Sandra can impose liability on the Homestead, regardless of its exempt status. Under Texas law, a creditor may record and index an abstract of judgment in the county where property is located in order to perfect a judgment lien against the property. See Tex.Prop.Code Ann. § 52.001 (West 1995). This lien will attach even on homestead property. Henderson, 18 F.3d at 1309. In Henderson the court held, contrary to several Texas cases, that "a judicial lien in Texas does fasten a liability on the homestead" for purposes of determining whether a debtor can rely on § 522(f) of the Code to avoid it. Id. at 1309. "The debtor's homestead is not exempt from the perfected lien; rather, the homestead is exempt from any seizure attempting to enforce the perfected lien." Exocet Inc. v. Cordes, 815 S.W.2d 350, 352 (Tex.App.1991, no writ). Therefore under Texas property law, a homestead remains liable for debts of the type specified in §§ 523(a)(1) and 523(a)(5) of the Code because liens may be perfected against the property.
This is all that § 522(c)(1) requires. The function of § 522(c)(1) is to ensure that certain liens on exempt property remain in force. It therefore serves to modify § 522(f)(1) of the Code, which provides:
Notwithstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is a judicial lien[.]
In the absence of § 522(c)(1), a debtor could invoke the protections of § 522(f) to avoid the fixing of a lien on his exempt property for family support obligations. This is so because a debtor electing state exemptions is entitled to invoke the lien avoidance protections of § 522(f) even where state law defines exempt property in a manner that it is not encumbered by preexisting liens. See Owen, 500 U.S. at 313, 111 S. Ct. at 1838. Courts applying Owen have concluded that state law governs what property will be exempt, but that the effect of liens on that state-defined exempt property is a matter of federal law. *551 Cf. In re Conyers, 129 B.R. 470, 472 (Bankr. E.D.Ky.1991).
Sandra relies on several cases that actually support this court's reading of § 522(c)(1). In In re Citrone, 159 B.R. 144 (Bankr.S.D.N.Y.1993), the court held that a debtor's ability to avoid judicial liens that impair state exemptions does not extend to debts specified in § 522(c). The debtor could not therefore use § 522(f) to avoid two judgment liens for child and spousal support. Id. at 146 (holding debts of type specified in § 522(c)(1) "are not dischargeable under 11 U.S.C. § 523(a)(5) and thus may not be avoided under 11 U.S.C. § 522(f)"). By stating that exempt property remains liable for § 523(a)(1) and § 523(a)(5) debts, § 522(c)(1) serves to limit the scope of § 522(f) not the scope of state exemptions.
Similarly, Conyers held that, even though the Kentucky homestead exemption did not apply to debts or liabilities existing prior to purchase of the property, § 522(f) would allow the debtor to avoid such liens because, absent the liens, the homestead would be exempt under state law. In reaching this conclusion, the court looked to § 522(c)(1) and determined that "the types of debts that remain collectible after bankruptcy from exempt property is controlled by federal rather than state law." Conyers, 129 B.R. at 472. The court's holding stands only for the proposition that state exemption law should not affect otherwise valid liens; the perfection of liens is governed by federal law as embodied in § 522.
Sandra asserts that "Section 522(c)(1) not only prevents general creditors from reaching the debtor's exempt property to satisfy their claims (whether the debtor asserts federal or state exemptions), but also allows two special types of claims to be satisfied out of property that would otherwise be exempt." This argument extends the reach of this section too far. The holdings in Citrone and Conyers do not make § 522(c)(1) an execution statute. When the Conyers court stated that §§ 522(c)(1), 523, and 524 would conflict with a reading of § 522(b) that empowers states to "permit or deny collection of certain claims from exempt property after bankruptcy whether or not such claims are dischargeable in bankruptcy," Conyers, 129 B.R. at 472 (emphasis added), it was concerned about state exemption law altering the federal characterization of debts as collectible from either estate assets or assets outside of the bankruptcy estate (both exempt property and post-bankruptcy earnings). State exemption law must conform to the federal determinations of which debts survive bankruptcy. The mechanism by which those debts are collected, however, remains a matter of state law.
That § 522(c)(1) is not an exemption statute becomes clear when § 522(c) is read as a whole. See United Savs. Ass'n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 371, 108 S. Ct. 626, 630, 98 L. Ed. 2d 740 (1988) (noting that statutory construction is holistic endeavor). Section 522(c)(2) allows exempt property to be held liable for certain debts already secured by a lien. If § 522(c) were an execution statute, it would have no cause to rely on existing liens to have effect. That liability as to § 523(a)(1) and § 523(a)(5) debts is not defined by pre-existing liens does not change the defining as opposed to executory nature of § 522(c). Rather, it suggests that for these debts a lien or other means of executing on the judgment need not precede the claiming of exemptions. The creditor, after the debtor has declared bankruptcy and claimed exemptions pursuant to § 522(b), may still pursue these debts by whatever means are available, i.e., state-law remedies for execution on a judgment.
The remaining cases that Sandra cites involve attempts by debtors to avoid liens on their exempt property. In each case, nonbankruptcy law provided the creditor with a means to execute on the judgment. None of the cases suggests that § 522(c)(1) provides the mechanism for doing so. Rather, § 522(c)(1) prevents debtors from avoiding already-obtained liens for alimony, child support, and tax claims. See, e.g., In re Meadows, 75 B.R. 695, 698-99 (Bankr. N.D.Tex.1987) (denying debtor's claim of exemption for workers' compensation settlement where divorce agreement provided that half of settlement proceeds would go to minor daughter, and Tex.Fam.Code Ann. *552 § 14.05 (West 1986) permitted Texas courts to provide for child's support from any resources available).
Texas homestead law does not bar the perfecting of a lien on homestead property. Accordingly, it does not conflict with the mandate of § 522(c)(1), which imposes a limitation on the lien-avoidance provisions of § 522(f).
* * *
Section 522(c)(1) does not preempt Texas homestead law. Accordingly, Sandra's ability to collect the Judgment is determined according to the terms of the Texas Turnover Statute. Because this statute prohibits recovery from exempt property, and Cullen's Homestead is exempt under Texas law, Sandra may not invoke the Turnover Statute to force conveyance of the Homestead. The bankruptcy court's order denying Sandra's motion for a turnover is therefore
AFFIRMED.
NOTES
[1] Sandra was the movant in the instant application for turnover and Cullen was the respondent. For clarity, the court refers to the parties by their capacities in the original adversary proceeding and on appeal.
[2] The Texas Turnover Statute provides, in pertinent part:
(a) A judgment creditor is entitled to aid from a court of appropriate jurisdiction through injunction or other means in order to reach property to obtain satisfaction on the judgment if the judgment debtor owns property, including present or future rights to property, that:
(1) cannot readily be attached or levied on by ordinary legal process; and
(2) is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.
Tex.Civ.Prac. & Rem.Code Ann. § 31.002 (West 1986).
[3] The debtor may opt to exempt property either under the exemptions provided in § 522(d), or under the exemptions provided by state and nonbankruptcy law. The debtor selects either of these options in its entirety, and cannot pick and choose items from both of the lists. In re Stone, 119 B.R. 222, 230 (Bankr.E.D.Wash.1990). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1434532/ | 507 F.3d 581 (2007)
UNITED STATES of America, Plaintiff-Appellee,
v.
David H. ENGLAND, Defendant-Appellant.
No. 06-2381.
United States Court of Appeals, Seventh Circuit.
Argued September 24, 2007.
Decided November 7, 2007.
*582 *583 Monica Mallory (argued), Office of the United States Attorney, Rockford, IL, for Plaintiff-Appellee.
Thomas L. Shriner, Jr., Foley & Lardner, Milwaukee, WI, Ellen M. Wheeler, Joanne Lee (argued), Foley & Lardner, Chicago, IL, for Defendant-Appellant.
Before POSNER, FLAUM and WOOD, Circuit Judges.
FLAUM, Circuit Judge.
On September 15, 2004, defendant-appellant David England, a convicted felon, smashed his neighbor's car window with the butt of a gun and then discharged the gun into the air. England was soon arrested and, while in prison, he campaigned over the prison phone to get his sister, brother-in-law and father to hide evidence and create an alibi for him. When he learned that his brother-in-law was instead cooperating in the investigation, he made threats to kill him.
*584 For his efforts, a grand jury returned a four-count indictment. The indictment charged one count of unlawful possession of a firearm by a felon under 18 U.S.C. § 922(g), two counts of witness tampering in violation of 18 U.S.C. § 1512(b), and one count of threatening physical force with the intent to prevent the testimony of a witness in violation of 18 U.S.C. § 1512(a)(2)(A). At trial, England proceeded without counsel and, on January 6, 2006, a jury convicted him of all counts. The district court then sentenced England to 262 months imprisonment.
England now appeals, challenging the sufficiency of the evidence underlying his conviction for the threats, the voluntariness of his decision to represent himself, and the reasonableness of his sentence. For the reasons set out below, we affirm his conviction and the district court's finding of a voluntary waiver of his right to counsel. However, because the district court did not consider the potential disparity that may arise from England's sentence, we vacate his sentence and remand for resentencing.
I. Background
On September 15, 2004, defendant-appellant David England was investigating a recently broken window in his mother's home. He had confronted four neighbors about the incident and tried to get one to admit to breaking the window. When his efforts to elicit a confession failed, he evened the score by shattering two car windows in a nearby car and firing a gun into the air. One of the onlookers notified the police and, a week later, the police apprehended England at a gas station where he had stopped to refuel. The police opted not to impound the car he was drivinghis mother's Pontiac Grand Amand it remained parked at the gas station. Based on the onlookers' statements, a grand jury indicted England for being a felon in possession of a firearm.
While in custody, England called his sister, Dawn Bull, regarding the Grand Am. He asked his sister to move the car to his grandmother's house and "put a tarp over it." Later that day and again on September 25, he called his brother-in-law, Robert Bull, inquiring as to the whereabouts of the car and telling Bull not to let anyone use it. On September 26, after moving the car, England's sister and mother found a blue duffle bag in the engine compartment. Concerned about the contents of the bag, they flagged down a police officer who removed it and found a bloodied gun inside. The police conducted DNA analysis on the recovered blood and matched the sample to England.
News of the gun's recovery did not sit well with England; he immediately grew concerned that his sister and mother were cooperating with the police. On September 27, he called his brother-in-law and told him to make sure that his sister and his mother "don't get out o' hand" and told him to "control them women." Later, on November 1, he also asked his sister to corroborate his alibi, saying that he did not "understand why a . . . couple of my family members can't . . . recognize they were up there at Barnes and Noble that particular day, and they seen me up there." Dawn refused.
On December 15, England learned that his brother-in-law had been cooperating with the police and he boiled over. He could not call his brother-in-law directly as Bull had blocked all calls coming from the prison. So England called his father instead. He told his father that he would "put some bullets in somebody's head" and asked his father to "talk with [Bull] man to man." On December 27, he went further, asking his father to "go relay a message to Robert" that if he "shows up to court, *585 when I walk outta prison in fifteen years, I'm 'onna fuckin' murder his motherfuckin' ass." At trial, England's father would testify that he never relayed these threats to Bull. In fact, Bull would not learn of England's statements until the government alerted him later in the investigation. Nonetheless, based on these threats and England's efforts to procure an alibi, on March 1, 2005, a grand jury issued a superseding indictment, tacking on two counts of witness tampering and one count of threatening a witness.
During his initial appearance for the felon-in-possession charge, the court appointed England an attorney, Paul Flynn. During England's continued detention hearing on February 8, Flynn advised the magistrate judge that England wanted to represent himself, despite Flynn's advice to the contrary. Near the end of the hearing, the magistrate questioned England extensively on his decision to represent himself. During the colloquy, England stated that he had studied the law off and on for several years and had helped with his prior criminal trials. He said that he was familiar with the Federal Rules of Evidence and Criminal Procedure and knew that the judge would not assist him during the trial. Finally, England said that he understood the evidence that the government would offer and, despite the magistrate's opinion that he would be better served by a lawyer, he wanted to represent himself. When Flynn expressed his concern that England only wanted to represent himself to move to a separate prison, the magistrate inquired further and clarified that self-representation would not impact his location. Satisfied by England's responses and convinced that the waiver was voluntary, the magistrate permitted England to proceed pro se with Flynn as standby counsel.
The next week, on February 14, the district court held another pre-trial proceeding to determine whether England had knowingly and voluntarily waived his right to counsel. The court expanded upon the magistrate's questioning, including an inquiry into England's personal history; his education and family background; various aspects of the trial such as the marshaling of evidence and the function of opening statements; and England's familiarity with the charges and potential sentencing issues that could arise. The district court also concluded that England would be better off with an attorney and so informed England. Following the questioning, England remained convinced that he wanted to represent himself. The extensive questioning satisfied the court that England's waiver was voluntary, and the court allowed him to proceed pro se. After England claimed that he was having problems with Flynn, the court appointed new full-time counsel, Dennis Ryan. On December 29, 2005, England again requested to represent himself and, after determining that this was done knowingly and voluntarily, the court complied, appointing Ryan as standby counsel. The case went to trial on January 3, 2006. On January 6, the jury convicted England on all counts.
At sentencing, the court requested briefing on the appropriate Guidelines section to apply to Count IVthreatening physical force with the intent to prevent the testimony of a witness. The government and the presentence investigation report initially stated that U.S.S.G. § 2A2.1(a)(1) was appropriate. This section covers "Assault with Intent to Commit Murder; Attempted Murder" and has a base offense level of 33. The court, however, directed both parties to brief whether U.S.S.G. § 2J1.2 might be more appropriate. This section covers "Obstruction of Justice" and *586 would result in an offense level of 22.[1] The court ultimately ruled that § 2A2.1 was appropriate. In so doing, the court first looked to the statutory index in Appendix A and located 18 U.S.C. § 1512(a). The Appendix indicated that § 1512(a) applied to four separate Guidelines sections. The court reasoned that "Assault with Intent to Commit Murder; Attempted Murder" was the most germane and stated that it had to "apply the offense guidelines referenced in the statutory index to the statute of conviction unless the case falls within the limited stipulation exception," which was inapplicable. Although the court found it "somewhat difficult in this case," it applied § 2A2.1 and set the base offense level at 33. The court declined to lower the sentence under 18 U.S.C. § 3553(a) and sentenced England to 262 months. This appeal followed.
II. Discussion
A. Waiver of Right to Counsel
England argues that he did not knowingly and voluntarily waive his right to counsel. The right to represent oneself is "necessarily implied by the structure" of the Sixth Amendment. Faretta v. California, 422 U.S. 806, 819, 95 S. Ct. 2525, 45 L. Ed. 2d 562 (1975). Although one can certainly question the wisdom of self-representation, the right has a worthy pedigree; a defendant's freedom to raise his own voice in his defense comes from the notion that some measure of individual autonomy prevents a court from forcing an attorney upon the defendant. Id. However lofty this ideal may be, courts cannot rubber-stamp a defendant's invocation of his right to self-representation. The district court must make the defendant "aware of the dangers and disadvantages of self-representation, so that the record will establish that `he knows what he is doing and his choice is made with eyes open.'" Id. at 835, 95 S. Ct. 2525 (quoting Adams v. United States ex rel. McCann, 317 U.S. 269, 279, 63 S. Ct. 236, 87 L. Ed. 268 (1942)).
To that end, this Court has established a four-part test that examines: (1) whether and to what extent the district court conducted a formal hearing into the defendant's decision to represent himself; (2) other evidence in the record that establishes whether the defendant understood the dangers and disadvantages of self-representation; (3) the background and experience of the defendant; and (4) the context of the defendant's decision to waive his right to counsel. United States v. Todd, 424 F.3d 525, 530 (7th Cir.2005). This Court reviews the district court's finding of voluntary waiver for an abuse of discretion, Todd, 424 F.3d at 530 n. 1, and we will not overturn the district court's decision "unless it would result in fundamental unfairness impinging on due process rights," United States v. Irorere, 228 F.3d 816, 827 (7th Cir.2000) (quoting Maclin v. Freake, 650 F.2d 885, 886 (7th Cir.1981)). Based on our review of the questions posed by the magistrate and district court, we agree that England's waiver was knowing and voluntary.
As to the first factor, both the magistrate and the district court adequately informed England of exactly what he was waiving. A court does not have to give the defendant a crash course in criminal law or trial procedure before a defendant's waiver of his right to counsel will be voluntary. See Todd, 424 F.3d at 531. However, the "failure to inform [a defendant] of the dangers and disadvantages of *587 self-representation weighs against a finding of a knowing or intelligent waiver." United States v. Bell, 901 F.2d 574, 578 (7th Cir.1990). On two occasions during the pretrial proceedingsbefore the magistrate and again before the district courtEngland received warnings about the pitfalls of self-representation. The magistrate's questioning tracked most, if not all, of the questions contained in the Federal Judicial Center's Bench-book for U.S. District Court Judges. The magistrate specifically probed England's familiarity with the Federal Rules of Evidence and Criminal Procedure, the nature of the charges against him, and the law more generally. In addition, the magistrate informed him that he would be better served by professional counsel and retained Flynn as standby counsel. Although strict adherence to the Benchbook is not required and rote adherence not desired, United States v. Egwaoje, 335 F.3d 579, 585 (7th Cir.2003), the magistrate's questioning meaningfully touched upon all the pitfalls of self-representation set out in the Benchbook. Six days later, the district court questioned England again and went even further, discussing matters ranging from the purpose of the opening statement to his reasons for forgoing representation, possible strategies for cross-examination, and the government's burden of proof. The district court's initial investigation spanning thirty-three pages of transcript provides an impressive illustration of a formal inquiry into a defendant's waiver of his right to counsel. These two wide-ranging discussions of the effects of waiver nearly a year before trial were clearly sufficient to inform England of the consequences of his decision.
Turning to the second factor, other evidence indicates that England understood the consequences of his waiver. In analyzing this factor, this Court has credited statements by the defendant regarding his own legal disability and explanations by standby counsel of the pitfalls of self-representation. United States v. Sandles, 23 F.3d 1121, 1128 (7th Cir.1994). At the initial hearing before the magistrate, England's then-attorney said that he had tried to talk England out of his decision, but England would not listen. See United States v. Moya-Gomez, 860 F.2d 706, 735-36 (7th Cir.1988) (crediting statements by standby counsel in finding voluntary waiver). Before the district court, England recognized his own legal inability and said that he would do "about the same [as an attorney], or I guess I'll have to take my chances." See Moya-Gomez, 860 F.2d at 735 (crediting awareness of legal disability in finding waiver). In addition, after his own advocacy failed to gain an acquittal, England handed the reins over to his standby counsel during sentencing, saying that he did not know what he was doing. That England recognized the risk of self-representation, after being informed that he had made an unwise decision by his acting attorney, provides other evidence that England was aware of the consequences of waiver.
As to the third factor, England's background and experience would also tend to support a finding of knowing and voluntary waiver. This Court examines the background and experience of the defendant merely to gauge whether he appreciated the gravity of his waiver, not in the hopes of finding adequate legal training. See Faretta, 422 U.S. at 835, 95 S. Ct. 2525 (stating that "a defendant need not himself have the skill and experience of a lawyer in order competently and intelligently to choose self-representation"); Egwaoje, 335 F.3d at 585-86. England's background indicated that he proceeded with his eyes open. He had the equivalent of a high school education and had thirty-six *588 credits at a community college. A doctor determined that he was competent to stand trial and did not have any mental health issues that would interfere with his ability to understand waiver. England also had been in court several times before for his state criminal charges. Granted this was England's first time in federal court and he had not represented himself in his earlier proceedings. However, his prior involvement with the criminal justice system apprised him of the "seriousness of the charges brought against him." Egwaoje, 335 F.3d at 586.
Finally, the context of England's decision indicates that it was knowing and voluntary. A waiver is likely knowing and voluntary if the defendant gave it for strategic reasons or after repeatedly rejecting the assistance of counsel. Egwaoje, 335 F.3d at 586. England's behavior at trial caused unnecessary delay and duplicated the proceedings. On February 8 and 14, 2005, England said that he wanted to represent himself and the court appointed Flynn as stand-by counsel. In June, he complained of medical problems but refused to cooperate with the doctors. On July 1, 2005, the government moved to replace Flynn as stand-by counsel after England accused Flynn of working for the prosecution. When the court subsequently appointed Ryan as stand-by counsel, little improved. England refused to cooperate or even meet with Ryan. At one point, England even spat in Ryan's face. England's behavior at trial seemed calculated to delay and complicate the proceedings whenever possible. Self-representation gave him the opportunity to do this. In light of his behavior at trial, his decision to forgo counsel was rooted in strategy and, accordingly, this factor favors a finding of voluntary waiver.
For the foregoing reasons, England's waiver of his right to counsel was knowing and voluntary. Each factor supports a finding of voluntariness; the evidence of voluntariness is overwhelming. Accordingly, we affirm the district court's finding of waiver.
B. Sufficiency of the Evidence
England also argues that the evidence was insufficient to support his conviction for witness tampering under 18 U.S.C. § 1512(a)(2)(A). A challenge based on the insufficiency of the evidence is a tall order, United States v. Johnson, 903 F.2d 1084, 1086 (7th Cir.1990), and the standard governing such challenges is familiar: This Court must affirm a conviction if "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Id. (citing United States v. Troop, 890 F.2d 1393, 1397 (7th Cir.1989)) (emphasis omitted). In other words, an appeal does not deputize this Court as the ultimate trier of fact. Section 1512(a)(2)(A) punishes whoever "uses physical force or the threat of physical force against any person . . . with intent to . . . influence, delay, or prevent the testimony of any person in an official proceeding." 18 U.S.C. § 1512(a)(2)(A). To sustain a conviction under § 1512(a)(2)(A), the government must show that (1) England used the threat of physical force; (2) with the intent of curtailing his brother-in-law's involvement in his prosecution. On appeal, the issue before this Court is a narrow one. England rightly does not deny expressing a desire to kill his brother-in-law for cooperating; the recorded conversations with his father over the prison phone prove as much. Instead, England argues that his statements to his father cannot support the weight of his conviction because his father never relayed the threats to his brother-in-law. A threatening statement that the intended recipient does not receive, England argues, is not *589 the "use of . . . [a] threat" for purposes of § 1512(a)(2)(A). We disagree.
The statute itself does not define what it means to "use[ ] . . . the threat of physical force." However, the plain meaning of the phrase does not require that the would-be victim learn of the threat. The verb "use" in § 1512(a)(2) is roughly akin to "employ" and means to "to put into action or service." WEBSTER'S THIRD INTERNATIONAL DICTIONARY 2523 (1981); see also BLACK'S LAW DICTIONARY 1541 (6th ed.1990) (defining "use" as "to convert to one's services"). And a "threat" is "an expression of intention to inflict evil, injury, or damage on another." WEBSTER'S THIRD, supra, at 2382; BLACK'S, supra, at 1480 (defining "threat" as a "communicated intent to inflict physical or other harm on any person or on property"). When read together, the statute prohibits expressing an intent to inflict injury on another through physical force.[2] An "expression" only requires that someonenot necessarily the intended victimperceive it. Adding a requirement that the would-be victim himself actually perceive the threat would graft on an additional "receipt" element that the statute's text does not require. See United States v. Geisler, 143 F.3d 1070, 1071-72 (7th Cir.1998) (rejecting a "receipt" requirement under 18 U.S.C. § 876, which prohibits depositing threatening communications in the mail); see also Johnson, 903 F.2d at 1088 n. 5 (stating that under § 1512 "the focus is on the endeavor to bring about the proscribed result, rather than on the success of the endeavor"). We have not read an analogous requirement into other statutes prohibiting threats. See United States v. Fuller, 387 F.3d 643, 646-47 (7th Cir.2004) (18 U.S.C. § 871); Geisler, 143 F.3d at 1071-71 (18 U.S.C. § 876). Accordingly, we decline to do so under § 1512(a)(2)(A).
To avoid this result, England argues that, because the threat never actually made it to his brother-in-law, his statements did not have a "reasonable tendency to intimidate," citing the standard articulated by this Court in United States v. De Stefano, 476 F.2d 324 (7th Cir.1973). However, this argument misreads De Stefano. The relevant issue in that case was whether a none too subtle "question" that the defendant posed to a witness in an elevator"Have you done any fishing lately?"constituted a threat under 18 U.S.C. § 1503. Id. at 327, 330. The Court articulated an objective standard for evaluating whether a statement constitutes a threat, concluding that the relevant inquiry is whether the statement has a "reasonable tendency to intimidate." Id. at 330. This standard governs the contents of the threat; that is, whether the defendant's statement is actually "an expression of intention to inflict evil, injury, or damage." This objective reasonableness standard ensures that only "true threats" go punished. See Watts v. United States, 394 U.S. 705, 707, 89 S. Ct. 1399, 22 L. Ed. 2d 664 (1969); United States v. Stewart, 411 F.3d 825, 828 (7th Cir.2005) (stating that a "true threat" consists of a statement made "in a context or under such circumstances wherein a reasonable person would foresee that the statement would be interpreted by those to whom the maker communicates a statement as" a threat (quoting United States v. Khorrami, 895 F.2d 1186, 1191 (7th Cir.1990))). It does not provide a yardstick for measuring the likelihood that the *590 statement would either reach or subjectively affect the intended recipient.
Nonetheless, the fact that the intended target never received the threat is still relevant under § 1512(a)(2)(A). The proximity of the person who hears the threat to the ultimate target of the threat is evidence of the speaker's "intent to . . . influence, delay, or prevent the testimony of any person in an official proceeding." Cf. United States v. Spring, 305 F.3d 276, 281 (4th Cir.2002) (stating that "whether a threat was communicated to the victim may affect whether the threat could reasonably be perceived as an expression of genuine intent to inflict injury"). As the link between an expression of an intent to inflict injury and the participant in an official proceeding grows more attenuated, so too does the inference that the speaker intended to "influence, delay, or prevent" testimony in an official proceeding. In this case, no such attenuation exists. England could not reach his brother-in-law because he had blocked calls from the prison phone. His next best option was to convey the threats to his father with instructions to pass them along. Although it was not inevitable that his father would relay the threat, it was not irrational to think that England intended to influence his brother-in-law. Because rationality is the relevant inquiry, sufficient evidence supported England's conviction under § 1512(a)(2)(A).
C. Reasonableness of England's Sentence
Finally, England challenges the reasonableness of his sentence. In calculating England's sentence, the district court first looked to the statutory index of the Guidelines and found the Guidelines sections corresponding to 18 U.S.C. § 1512(a). Pursuant to this Court's holding in United States v. Lanas, 324 F.3d 894 (7th Cir.2003), the district court concluded that the most germane Guidelines section was U.S.S.G. § 2A2.1, which punishes "Assault with Intent to Commit Murder; Attempted Murder." In so doing, the court rejected England's argument that it should apply U.S.S.G. § 2J1.2, which governs "Obstruction of Justice," but which the Guidelines do not link to § 1512(a). After grouping the four counts, the district court calculated England's sentencing range using the base offense level for attempted murder, carrying an offense level of 33. Finally, the court declined to vary the sentence based on the factors listed in 18 U.S.C. § 3553(a).
The issue on appeal is straightforward: England threatened to kill his brother-in-law yet the Sentencing Guidelines point to a sentence for attempted murder. The difference between the two is not negligible; attempted murder carries a base offense level of 33 whereas threats of physical injury to obstruct justice carry a base offense level of 22. See U.S. SENTENCING GUIDELINES MANUAL §§ 2A2.1, 2J1.2 (2005). England's ultimate sentence was 262 months in prison, which, on appeal, England claims is an unreasonable one. However, we do not find it necessary to reach the reasonableness of England's sentence. The record on appeal lacks any indication that the district court considered "the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct." 18 U.S.C. § 3553(a)(6). Because the record is inadequate to evaluate the district court's use of its discretion, we vacate England's sentence and remand for resentencing.
As a preliminary matter, the district court properly declined to apply U.S.S.G. § 2J1.2. Prior to the 2000 Amendments to the Sentencing Guidelines, the district court would have been free to *591 choose a section not listed in the statutory index in arriving at the appropriate base offense level, "provided the charged conduct fit more closely within the other guideline." Lanas, 324 F.3d at 904. However, the 2000 Amendments deleted this "heartland" provision. Rather than tinker with the Guidelines sections listed in the statutory index, the district court must typically begin with "the offense guideline referenced in the Statutory Index for the statute of conviction." See United States v. Gracia, 272 F.3d 866, 876 (7th Cir.2001) (quoting U.S. SENTENCING GUIDELINES MANUAL app. C. supp., amend. 591, at 32 (2000)); see also United States v. Kosmel, 272 F.3d 501, 507 (7th Cir.2001) (discussing effect of Amendment 591 on "heartland" analysis). As long as the ultimate sentence is reasonable, the district court can vary from the sentence identified in the Guidelines based on its discretion under § 3553(a). See United States v. Vitrano, 495 F.3d 387, 391-92 (7th Cir.2007).
In denying the defendant's request for a variance, the district court did not actively consider 18 U.S.C. § 3553(a)(6) and the sentence disparity that may arise from England's sentence. In a post-Booker world, the district court enjoys considerable discretion when imposing a sentence. The present sentencing regime consists of a nearly exhaustive set of rules set out in the Guidelines that is moderated by judicial discretion and the reasonableness standard. Illustrative of this discretion are the considerations set out in 18 U.S.C. § 3553(a); the result dictated by the rigid calculus in the Guidelines must first pass through the discretion conferred by these factors before a sentence becomes final. See United States v. Cunningham, 429 F.3d 673, 676 (2005).
In the case at hand, the court gave no indication that it considered the disparity that may arise from England's sentence when it discussed a variance under § 3553(a) even though the defendant pointed to the factual dissimilarity between his threat and the applicable Guidelines section. Elsewhere, the court expressed its concern over the potential injustice that might occur. The district court stated that it found the use of the Guidelines section for attempted murder "somewhat difficult in this case." In addition, the court requested briefing on whether to apply § 2A2.1 or § 2J1.2 to England's conduct. Despite these concerns and the fact that the typical threat called for a markedly different sentence, the district court did not discuss the potential disparity as part of its § 3553(a) analysis.
This discretion is all the more important where, as here, it appears that the Sentencing Guidelines might have a fairly pernicious scrivener's error. The error results from a recent amendment that Congress made to the witness tampering statute. In 2002, Congress amended 18 U.S.C. § 1512 and created the current § 1512(a)(2). Before the 2002 changes, § 1512(a) only punished "[w]hoever kill[ed] or attempt[ed] to kill another person, with intent to" affect his cooperation in an official proceeding. 18 U.S.C. § 1512(a) (2000). At the time, the Sentencing Guidelines statutory index mapped these offenses to four sections of the Guidelines: first- and second-degree murder, voluntary manslaughter, and § 2A1.1, which governs "Assault with Intent to Commit Murder; Attempted Murder." U.S. SENTENCING GUIDELINES MANUAL app. A, at 459 (2001). Given what § 1512(a) punished at the time, this made sense. A person either "kill[ed]" the person involved in an official proceeding (through first- or second-degree murder or voluntary manslaughter) or "attempt[ed] to kill" him. The statutory index punished accordingly.
*592 Similarly, before the 2002 changes, § 1512(b) punished "[w]hoever knowingly use[d] intimidation or physical force, threaten[ed], or corruptly persuade[d] another person, . . . or engage[d] in misleading conduct toward another person" involved in an official proceeding. 18 U.S.C. § 1512(b) (2000). The statutory index mapped these offenses to three Guidelines sections: attempted murder, aggravated assault, and § 2J1.2, which governs "Obstruction of Justice." U.S. SENTENCING GUIDELINES MANUAL app. A, at 459 (2001). This also made sense. A defendant either used physical force meaning to kill the witness but fell short (committing attempted murder); used physical force meaning only to harm the witness and succeeded (committing aggravated assault); or threatened, intimidated or otherwise "corruptly persuaded" the witness (and obstructing justice).
In 2002, Congress rearranged the witness tampering statute and added a new § 1512(a)(2). Pub.L. No. 107-273, at 1803-04 (2002). The bill was entitled "Increasing the Penalty for Using Physical Force to Tamper with Witnesses, Victims, or Informants" and it produced the current § 1512. Id. Section 1512(a)(2) now punishes "[w]hoever uses physical force or the threat of physical force against any person, or attempts to do so." 18 U.S.C. § 1512(a)(2) (2006). The 2002 amendment also added a ten-year statutory maximum for threats under the modified § 1512(a)(2) and struck "physical force" from § 1512(b). Pub.L. No. 107-273, at 1804. Section 1512(b) now only punishes intimidation, threats, corrupt persuasion and misleading conduct. 18 U.S.C. § 1512(b) (2006).
However, the relevant portions of the statutory index to the Sentencing Guidelines remained exactly the same. See U.S. SENTENCING GUIDELINES MANUAL app. A, at 525 (2005). As a result, the Guidelines sections that correspond to § 1512(a) do not include "Obstruction of Justice," even though a threat of physical force against a witness would appear to fall within this category. Similarly, although no crime involving physical violence exists in § 1512(b), the statutory index continues to reference second-degree murder and aggravated assault. Most notably, the statutory maximum for threats under § 1512(a) is ten years, but the minimum Guidelines sentence for murder threats under § 1512(a) is over eleven years. Compare U.S. SENTENCING GUIDELINES MANUAL ch. 5, part A (2005) (setting minimum sentence for defendant with no prior criminal history and base offense level of 33 at 135-168 months in prison) with 18 U.S.C. § 1512(a)(3)(C) (2006) (providing as punishment "in the case of the threat of use of physical force against any person, imprisonment for not more than 10 years").
All of this points to a potential scrivener's error in the statutory index. If a mistake exists, remedying it falls within the purview of the Sentencing Commission, not this Court. However, given the discretion that the district court has in imposing a sentence, the potential disparity that may arise from sentencing a threat as though it was an attempted murder would be a basis for a variance. Because the district court did not explain its view on the potential disparity, we vacate England's sentence and remand for resentencing. However, we express no opinion as to the appropriate sentence.
III. Conclusion
For the reason's stated herein, we AFFIRM England's conviction and VACATE his sentence and REMAND for resentencing.
NOTES
[1] The base offense level set out in 2J1.2(a) is 14, with 8 levels added by 2J1.2(b)(1)(A) "[i]f the offense involved causing or threatening to cause physical injury to a person, or property damage, in order to obstruct the administration of justice."
[2] "Putting an expression into action or service" means simply "expressing." See WEBSTER'S THIRD, supra, at 802 (defining "express" as "to represent in words" and "expression" as "an act, process, or instance of representing, manifesting or conveying in words or some other medium"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1434539/ | 451 P.2d 556 (1969)
80 N.M. 63
STATE of New Mexico, Plaintiff-Appellee,
v.
Charles T. WILLIAMS, Defendant-Appellant.
No. 8697.
Supreme Court of New Mexico.
March 10, 1969.
Calvin R. Neumann, Clovis, for defendant-appellant.
Boston E. Witt, Atty. Gen., Donald W. Miller, Asst. Atty. Gen., Santa Fe, for plaintiff-appellee.
OPINION
CARMODY, Justice.
Appellant was denied post-conviction relief without a hearing, and here seeks reversal because, he contends, he should have been allowed to appear and testify concerning a claimed denial of due process arising from prejudicial publicity, the denial of the trial court to change the venue, and the refusal of the trial court to instruct on the self-defense theory.
This is the third time appellant has been before this court. In State v. Williams, 76 N.M. 578, 417 P.2d 62 (1966), his conviction on the charge of first-degree murder was affirmed. In State v. Williams, 78 N.M. 431, 432 P.2d 396 (1967), we affirmed a denial of a sought for post-conviction relief. In the criminal case (76 N.M. 578, 417 P.2d 62), one of the questions raised and disposed of was a challenge to the jury panel based on discrimination. In this proceeding, appellant makes a related but somewhat different claim, in that here it is urged that he should have been granted a change of venue because prejudice existed against him in the county of trial. Prior to the original trial, the court conducted an extensive hearing on a motion for change of venue. Various witnesses were called, including a representative of the N.A.A.C.P., who testified that he had been unable to find any prejudice against the defendant because of his race or because of the charge against him. Following this hearing, the trial court denied the motion for change of venue on several grounds, two of which were:
"3. That there is no prejudice to the Defendant in the newspapers [sic] reports offered into evidence by him."
and
"4. There is no showing of public excitement against Defendant * * *."
The trial court in the present case referred specifically to this order and his recollection of the hearing, and reaffirmed his prior ruling.
Appellant's other contention in this proceeding is to the effect that the trial court failed to instruct the jury on the right of self-defense, and that, as a result, the burden of proof as to self-defense was placed upon the defendant.
*557 Neither of the above matters was raised specifically in the original appeal nor in the first post-conviction attempt. We do, however, take note of the fact that, in what we term the "criminal appeal," the questions were raised as to the composition of the jury and certain attacks were made upon other instructions.
Ordinarily, post-conviction proceedings cannot be used as a substitute for an appeal. State v. Williams, 78 N.M. 431, 432 P.2d 396 (1967), supra; Nieto v. State, 79 N.M. 330, 443 P.2d 500 (Ct.App. 1968); and State v. Sedillo, 79 N.M. 254, 442 P.2d 212 (Ct.App. 1968). It is only under circumstances where it appears that the defendant was fundamentally deprived of a fair trial that post-conviction relief is available. Fay v. Noia, 372 U.S. 391, 83 S. Ct. 822, 9 L. Ed. 2d 837 (1963); cf., State v. Sisneros, 79 N.M. 600, 446 P.2d 875 (1968).
Here, petitioner generally alleged prejudicial publicity. He did not allege a factual basis for the relief sought as required under State v. Williams, 78 N.M. 431, 432 P.2d 396 (1967), supra. There are no allegations in the petition, even if the trial court and we were to disregard the express findings made prior to the original trial, which in any way approached the circumstances which were considered in Sheppard v. Maxwell, 384 U.S. 333, 86 S. Ct. 1507, 16 L. Ed. 2d 600 (1966). Here, the motion, the files and records conclusively show that appellant is entitled to no relief, State v. Lobb, 78 N.M. 735, 437 P.2d 1004 (1968); State v. Moser, 78 N.M. 212, 430 P.2d 106 (1967); and State v. Gorton, (Ct.App.), 449 P.2d 791, decided January 13, 1969. Here, the trial court had not only tried the original case but had reviewed the transcript and reaffirmed his original determination on the motion for change of venue based upon findings which had substantial support. The claimed error as to the failure to properly instruct, even if the same had merit (which we doubt), cannot be raised at this late date on a motion for post-conviction relief. State v. Williams, 78 N.M. 431, 432 P.2d 396 (1967), supra; State v. Sedillo, supra; and compare State v. Sanders, 54 N.M. 369, 225 P.2d 150 (1950).
The appeal is without merit.
The order denying relief is affirmed. It is so ordered.
NOBLE, C.J., and MOISE, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1434538/ | 104 Ariz. 247 (1969)
451 P.2d 27
STATE of Arizona, Appellee,
v.
Frank CHAMBERS, Appellant.
No. 1860.
Supreme Court of Arizona. In Banc.
March 7, 1969.
Darrell F. Smith, Former Atty. Gen., Gary K. Nelson, Atty. Gen., by Carl Waag, Asst. Atty. Gen., for appellee.
Hunter, Bartlett & Penn, by Gerald D. McCafferty, Phoenix, for appellant.
HAYS, Justice.
Frank Chambers, hereinafter referred to as defendant, was charged and found guilty of armed robbery in violation of A.R.S. § 13-641 and § 13-643, and for assault with *248 a deadly weapon in violation of A.R.S. § 13-249. From his conviction he appeals.
On November 5, 1965, the Liquor Den of Tempe, Arizona was the object of an armed robbery. During the course of the robbery the owner was shot and wounded. After defendant's arrest, the store's owner identified him in a line-up. Before trial the defendant apparently felt he could exonerate himself by submitting to a polygraph test. The Public Defender's office, representing the defendant, entered into a detailed written stipulation with the County Attorney's office that the test would be given and the results used as evidence in the trial. The results indicated that the defendant was not telling the truth.
The defendant's first assignment of error is that the trial court erroneously admitted into evidence the results of the polygraph test. Defendant concedes that he signed the stipulation agreeing to take the test, and more importantly, that he agreed that the results could be used as evidence at his subsequent trial. Defendant, however, claims that he did not know the nature and the purpose of the stipulation, and did not realize he was waiving his privilege against self-incrimination. This Court has approved the admissibility of results from lie detector tests in criminal cases, but only when the parties have expressly stipulated to their admission, State v. Valdez, 91 Ariz. 274, 371 P.2d 894 (1962); State v. Sneed, 98 Ariz. 264, 403 P.2d 816 (1965).
The record indicates that the Superior Court, out of the presence of the jury, heard the following testimony concerning the stipulation: (1) the defendant was represented by competent counsel at the time he signed the stipulation; (2) the effect of the stipulation was explained in reasonable detail to the defendant, and (3) it was the defendant, not his defense counsel or the state, who expressed the desire to have the polygraph test.
The trial court has discretion to determine the admissibility of evidence, State v. Valdez, supra. The trial court is given "reasonable discretion" in determining the relevancy and admissibility of evidence, State v. Turner, 92 Ariz. 214, 375 P.2d 567 (1962).
The defendant next contends that he was denied his right to a fair trial under the 5th, 6th, and 14th amendments to the United States Constitution. He bases his argument upon the denial by the trial court of his motion requesting that the state pay for the services of an additional polygraph expert who might testify on his behalf. To support his position, Defendant refers us to People v. Watson, 36 Ill. 2d 228, 221 N.E.2d 645 (1966); Bush v. McCollum, 231 F. Supp. 560 (D.C. 1964), Affm. at 344 F.2d 672 (5th Cir.1965); Jacobs v. United States, 350 F.2d 571 (4th Cir.1965).
This Court specifically ruled on this question in the recent case of State v. Bowen, 104 Ariz. 138, 449 P.2d 603, filed January 23, 1969. In that case, we stated:
"It is ably argued that indigent defendants should be afforded expert testimony at state expense. People v. Watson, 36 Ill. 2d 228, 221 N.E.2d 645 (1966) (handwriting expert in a forgery case); Ambassador Goldberg, Equality and Governmental Action, James Madison Lecture copyrighted by New York University School of Law, p. 18 (February 11, 1964); Report of Attorney General's Committee on Poverty and the Administration of Criminal Justice, p. 12 (1963).
This Court has never held that an indigent is entitled to experts at State expense, and no Arizona authority is cited to this effect. In State v. Crose, 88 Ariz. 389, 357 P.2d 136 (1960), it was held that an indigent defendant who had entered a plea of not guilty by reason of insanity was not entitled to have medical experts appointed at State expense to assist him in his defense. * * * Until the power of the courts to order payment of defense experts is authorized by appropriate legislation, we cannot judicially legislate to enlarge the scope of the term "counsel" to encompass expert testimony." (Emphasis added.)
*249 Defendant next assigns as error the failure of the Court to give defendant's requested instruction. This instruction was a small part of a larger instruction, and was approved by the Court. However, for some unknown reason it was not given. We, however, conclude the omission is not reversible error for two fundamental reasons. First, even with knowledge of the approval the defendant failed to object to the omission. In State v. Rodgers, 7 Ariz. App. 29, 435 P.2d 864 (1967), the defendant failed to object to an instruction which informed the jury of the legal effect of the defendant's flight after the crime. The court held such failure waived any right to challenge the instruction on appeal. We said in State v. Evans, 88 Ariz. 364, 369, 356 P.2d 1106, 1109 (1960):
"It is an accepted rule of law that appellate courts will only consider such questions as were raised at the trial with respect to errors or omissions in the giving of instructions. 5 Wharton, Criminal Law Procedure § 2097, p. 265 (1957). The rule stated by Wharton is the accepted rule in this jurisdiction, Rule 272, Rules of Criminal Procedure, 17 A.R.S. Rule 272 provides: `The law of evidence and the law relating to instructions to the jury in civil actions shall apply to criminal actions except as otherwise provided.' Rule 51 of the Rules of Civil Procedure, 16 A.R.S., provides in part: `No party may assign as error the giving or the failure to give an instruction unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection.'"
Secondly, the part of the instruction requested by defendant stated:
"Evidence of identification of the defendant in the absence of prior familiarity with him is merely the expression of an opinion by a witness, and is to be regarded by the jury in the same light as any other opinion that may be expressed by a witness."
Identification is almost always a matter of opinion. State v. Sutton, 272 Minn. 399, 138 N.W.2d 46 (1965); State v. Linzia, 412 S.W.2d 116 (Missouri 1967). We can certainly assume that the jury viewed the store owner's identification of defendant as his "opinion".
Defendant's next assignment of error also relates to the trial court's instructions. The defendant and the state agreed in the stipulation that if the polygraph tests were used as evidence, the court would give a certain instruction regarding their veracity. The defendant alleges that the court ignored the instruction and that this was prejudicial error. The parties agreed as follows:
"The Court shall also instruct the jury that they shall not accept the test result and the examiner's opinion as conclusive of the issues before them, but that they are privileged to consider the results of the examiner's opinion along with all the other evidence in the case and give the polygraph evidence whatever weight and effect they think it reasonably deserves."
Defendant cannot maintain that such a stipulation limits the instructions a trial court may give. However, we concede that since the stipulation was admitted into evidence, any significant departure might result in unfairness to the defendant. We conclude the record indicates the stipulated instruction was sufficiently adhered to. Although the Court didn't use the exact language in the stipulation, it still effectively reflected the import and meaning of the stipulated instruction. The Court is not bound to instruct in the exact terms of an approved instruction, as long as the jury is otherwise correctly instructed on the applicable law.
In his final argument, defense counsel attempted to impress upon the jury that eye-witness identification is often unreliable. To support this thesis, he began reading an excerpt from a book entitled *250 "Reasonable Doubt". The Court sustained the prosecution's objection upon the ground that the defendant was improperly attempting to introduce in his argument matters not in evidence. Defendant unsuccessfully argued that the book was only being used to reinforce defendant's theory that eyewitnesses are not necessarily reliable. He now contends that the refusal of the Court to permit him to read from the book was reversible error.
Rule 271, Rules of Criminal Procedure, 17 A.R.S., reads as follows:
"It shall be the duty of the court to control all proceedings during the trial, and to limit the introduction of evidence and the argument of counsel to relevant and material matters, for the purpose of expeditious and effective ascertainment of the entire truth regarding the matters involved."
In State v. Neil, 102 Ariz. 299, 300, 428 P.2d 676, 677 (1967), we said:
"This Court has often noted that attorneys must be given wide latitude in their arguments to the jury. State v. Dowthard, 92 Ariz. 44, 373 P.2d 357; State v. Thomas, 78 Ariz. 52, 275 P.2d 408, affirmed 356 U.S. 390, 78 S. Ct. 885, 2 L. Ed. 2d 863. But, we have also made it quite clear that the arguments must be based on facts which the jury is entitled to find from the evidence and not on extraneous matters that were not or could not be received in evidence. State v. Jordan, 80 Ariz. 193, 294 P.2d 677."
The defendant cites no cases which hold that it is reversible error for the trial court to refuse to permit counsel to read in closing argument, books or other writings not in evidence. We hold that this is a matter within the discretion of the trial court.
The judgment is affirmed.
UDALL, C.J., LOCKWOOD, V.C.J., and STRUCKMEYER and McFARLAND, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1752389/ | 479 S.W.2d 733 (1972)
R. G. McCLUNG COTTON COMPANY, Inc., Appellant,
v.
COTTON CONCENTRATION COMPANY et al., Appellees.
No. 17748.
Court of Civil Appeals of Texas, Dallas.
February 24, 1972.
Rehearing Denied April 6, 1972.
Second Motion for Rehearing Denied May 4, 1972.
*737 David M. Kendall, Jr., Woodruff, Kendall & Smith, W. Newton, Barnes, Dallas, for appellant.
Frank C. Brooks, O. D. Montgomery, Brooks, Montgomery & Matthews, Dallas, for appellees.
GUITTARD, Justice.
This suit was brought by plaintiff R. G. McClung Cotton Company, Inc. against defendant Cotton Concentration Company to recover as damages the amount of decline in market value of 8,485 bales of cotton during the period of delay by defendant in weighing and sampling the cotton, which was stored in defendant's warehouse, together with interest and storage charges for the period of the delay. The jury found that defendant failed to weigh and sample the cotton within a reasonable time after plaintiff requested it to do so, that the difference in market value for the period of the delay was $106,062, and that because of such delay plaintiff was required to pay out $7,356 as storage charges and $6,365 as interest charges. Defendant moved for judgment non obstante veredicto and the trial court sustained this motion in part, denying recovery for difference in market value but rendering judgment on the verdict for the storage and interest charges. Both parties have appealed.
1. Plaintiff's Appeal
a. Proof of Damages
Plaintiff's eighth point asserts that the trial court erred in disregarding the finding of difference in market value because there was sufficient evidence of probative force to support this finding. We sustain this point.
The principal question is whether the owner of goods intended for sale, which are unreasonably delayed in processing, may recover damages measured by decline in market value of the goods during the period of delay without proof of the amount actually received from sale of the goods. We hold that proof of the actual sale price is not required.
Since we have found no cases directly on this point, we have reviewed the authorities concerning measure of damages for breach of contract and particularly those in analogous cases of delay by carriers in transportation of goods. The general principle of damages is compensation to plaintiff for his actual loss resulting from defendant's wrong. Chicago, M. & St. P. Ry. v. McCaull-Dinsmore Co., 253 U.S. 97, 40 S. Ct. 504, 64 L. Ed. 801 (1920); Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484 (1952). In applying this principle to claims for delay by carriers in shipment of goods intended for sale, the courts have established the measure of damages to be the difference between the market value at the time and place of delivery required by the contract and the market value at the place and time of actual delivery. Chicago, M. & St. P. Ry. v. McCaull-Dinsmore Co., supra; San Antonio & A. P. Ry. v. Pratt, 89 Tex. 310, 34 S.W. 445 (1896); Texas P. Ry. v. Nicholson, 61 Tex. 491 (1884); Texas & N. O. R. R. v. H. Rouw Co., 271 S.W.2d 666 (Tex.Civ.App., San Antonio 1954, writ dism'd); Chicago, R. I. & Pac. Ry. v. C. C. Mill Elevator & Light Co., 87 S.W. 753 (Tex.Civ.App., San Antonio 1905, no writ). However, this rule is not applied where evidence shows that the actual loss was less than the difference in market value. Missouri Pac. R. R. v. H. Rouw Co., 258 F.2d 445 (5th Cir. 1958); Missouri, K. & T. Ry. v. Witherspoon, 18 Tex. Civ. App. 615, 45 S.W. 424 (Fort Worth 1898, no writ).
In the present case defendant insists that it is not governed by the rules concerning common carriers because a warehouseman is not held to as high a responsibility as a common carrier, and also, since defendant was guilty of no delay in delivering the cotton, but only in filling orders to take certain cotton from storage, reweigh and resample it, and return it to storage, defendant *738 is not responsible for any decline in market value for the period of the delay.[1]
We cannot distinguish the common-carrier cases on this ground. None of the authorities above cited, or any others we have examined, take the carrier's strict liability as the basis of the market value rule of damages. That rule is rather an application of the general principle of contract damages, which is to give the plaintiff the benefit of his bargain by awarding him an amount that would put him in as good a position as if defendant had performed. Chicago, M. & St. P. Ry. v. McCaull-Dinsmore Co., supra. In Texas P. Ry. v. Nicholson, 61 Tex. 491, 497 (1884), the Supreme Court said that this measure of damages in suits against common carriers for delay, "does not proceed from the extraordinary care required of them by the common law, or any other stringent rules applied to them, but is equally binding upon any party who undertakes to do for another a specific thing within a specified time." The same measure of damages applies to a claim by a buyer against a seller for delay in delivery of goods sold. Richard v. American Union Bank, 253 N.Y. 166, 170 N.E. 532, 69 A.L. R. 667 (1930).
Defendant contends that the market value rule only fixes a limit to damages in cases of delay and does not relieve plaintiff of showing actual loss on ultimate disposition of the goods. It points to evidence that plaintiff did not dispose of the cotton in question immediately on receipt of the weights and samples, but sold and shipped it out of the warehouse over a period of several months at prices not shown by the evidence. Defendant argues that the difference in market value was only a "paper loss".
We conclude that there is evidence of actual loss. Testimony shows that the cotton market is seasonal in that most of the trading takes place in the months following the harvest in late summer and fall, and that after textile mills and other users of cotton arrange for their year's supply, cotton remaining on hand is difficult to sell. In the early months of this particular season of 1967-68, users of cotton anticipated a scarcity and bought up the cotton they needed at high prices, but the crop turned out to be larger than forecast, so that there was a decided drop in the price after the first of January. Because of the abundance of new-crop cotton on the market, it was difficult to dispose of the older cotton at any price in late February and early March, when the reweighing and resampling was done, and also in the months following. Moreover, plaintiff's customers were textile mills, to whom plaintiff supplied cotton of certain specifications in accordance with their particular requirements. Plaintiff could not fill their orders with any of the 8,485 bales in question because accurate information concerning weights and grades was not available without reweighing and resampling. Consequently, plaintiff had to use other cotton to supply these customers, some of which had to be purchased on the market at current prices, and when the weights and samples from the bales in question were finally available in late February and March, other purchasers had to be found. In our opinion this evidence is sufficient to raise a jury issue of actual loss to plaintiff resulting from defendant's unreasonable delay in reweighing and resampling the cotton, *739 though the exact prices at which this cotton was sold were not established.
Moreover, evidence of decline in market value during the delay was sufficient to establish actual loss, at least prima facie. A dealer in commodities of fluctuating value is damaged by delay if he loses a favorable market. When the goods are finally available to him, he may sell and take his loss, or he may hold them at his own expense and risk and wait for an upturn in the price. If he decides to wait, any loss from further market decline will fall on him rather than on the wrongdoer who caused the delay, and any gain during such subsequent period should be his also. Jamal v. Dawood [1916], 1 AC 175 (Privy Council); 3 Williston, Sales § 582 at 242 (Rev.Ed.1948). Cf. Gonzalez v. Texas Feed & Grain Co., 328 S.W.2d 923 (Tex. Civ.App., Fort Worth 1959, writ ref'd n. r. e.). The law does not throw on the innocent owner the risk of subsequent loss resulting from market fluctuation and allow the wrongdoer the benefit of a subsequent gain. It awards damages measured by difference in market value during the period of the delay in order to put the owner in as good a position as he would have been if the contract had been performed on time.
Defendant cites Great Atl. & Pac. Tea Co. v. Atchison, T. & S. F. Ry., 333 F.2d 705 (7th Cir. 1964, cert. den. 379 U.S. 967, 85 S. Ct. 661, 13 L. Ed. 2d 560), in support of its contention that proof of decline in market value does not establish actual damages. That case was a suit for damages for two days' delay in a shipment of plums from California to New York for sale in A. & P.'s retail stores. The trial was upon a stipulation from which the trial court found that the plums were sold at identical retail prices on Wednesday instead of Monday, and that there was no loss of profits because the court could not assume that A. & P. had no plums to satisfy customer demand on Monday and Tuesday. In affirming judgment for defendant on these findings, the court of appeals acknowledged that the market value rule was the usual measure of damages in such cases and that the burden of proving that it should not apply was on the carrier, but observed that this rule was merely a method to ascertain the actual damages and should not be applied when actual damages could be ascertained by other means. The precise holding is stated in the following language:
"Proof of decline in wholesale price does not establish actual damage since the parties stipulated that A & P's daily price list issued to its retail stores "did not move up or down in relation to changes in the wholesale market prices during that period.'"
The A. & P. case would be in point if the evidence here affirmatively showed that plaintiff promptly disposed of the 8,485 bales in question at prices as high as they would have brought if the weighing and sampling had been done without delay. Since there is no such evidence, we hold that proof of decline in market value for the period of the delay established prima facie the fact as well as the amount of actual damages, and that the burden then shifted to defendant to offer evidence that the actual loss was less than the amount of such decline.
This holding is supported by New York, L. E. & W. R. R. v. Estill, 147 U.S. 591, 13 S. Ct. 444, 37 L. Ed. 292 (1892), in which the Supreme Court applied the market value measure of damages to a claim for injuries to a shipment of cattle, and expressly held that plaintiff was not required to trace each animal and show the amount for which it was sold, though such evidence might have been brought out by defendant to contradict plaintiff's evidence of market value. Likewise, in Reider v. Thompson, 197 F.2d 158 (5th Cir. 1952), damages measured by difference in market value were allowed against a carrier for deterioration in a shipment of sheepskins, though the actual amount realized on ultimate *740 disposition was not shown, and the court said such amount could have been shown by the carrier as a defensive matter. Also, Gold Star Meat Co. v. Union Pac. R. R., 438 F.2d 1270 (10th Cir. 1971) holds that the burden is on the carrier to show that the market value rule will not result in a just measure of actual damages.[2] all these cases involved physical damage to the property shipped, but the same market value measure of damages applies. Texas P. Ry. v. Nicholson, 61 Tex. 491 (1884). We do not agree with the suggestion in the A. & P. opinion that these authorities can be distinguished, since we see no reason why plaintiff must prove the amount the property sold for in one case and not in the other.
b. Evidence of Market Value
We turn now to defendant's "cross-points" complaining of the trial court's submission of difference in market value. Among the elements of damages submitted was subdivision (a) of issue 7, as follows:
"The difference, if any, between the cash market value of the 8,485 bales of cotton in question on the date such cotton should have been reweighed and resampled, if such service had been performed within a reasonable time and the cash market value of those bales of cotton when the samples and reweighs were delivered between February 23 and March 11, 1968."
Defendant's "Cross-Point Eight" complains that the trial court erred in overruling its objection that there was insufficient evidence to support the submission of this issue, and any affirmative finding of the jury thereto. We must construe this point as raising only the contention of legal insufficiency of the evidence to support submission of the issue rather than factual insufficiency to support the jury's answer, since the issue was properly submitted if there was any evidence to support an affirmative finding. Owens v. Rogers, 446 S.W.2d 865 (Tex.Sup.1969). Though the point is couched in the language of a cross-point complaining of the submission of the issue rather than a counterpoint in support of the judgment non obstante veredicto, we shall consider it as a counter-point in the light of the brief as a whole, which contains no prayer or other suggestion that the case be remanded for a new trial.
Any way we consider this point, it must be overruled, since we find some evidence of a difference in market value. The material dates were established. Plaintiff's request for reweights and resamples was made on December 5, 1967. The jury found that a reasonable time for weighing and sampling the cotton was 28 days. This finding fixed January 2, 1968 as a reasonable time for performance by defendant. It was undisputed that the weights and samples were delivered between February 23 and March 12, 1968. On market value, the record contains the opinion testimony of Rufus McClung and Heinz Molsen, both cotton merchants of long experience. McClung testified that the market value of the cotton in question in Galveston in late December and early January was 18 cents a pound, and that its market value was 15 cents a pound in late February and early March. He figured the bales to weigh an average of 500 pounds and that a decline of 3 cents a pound would be $15 a bale, making a total reduction of $127,235 for the 8,485 bales. Molsen testified that the value of all grades of cotton receded in price about 2 cents a pound from early January to late February or early March, and continued falling after March, and *741 that the better grades declined by a greater amount.
Defendant attacks the sufficiency of this evidence on the ground that it was too general and did not relate to the exact quantity, quality and specifications of the 8,485 bales in question, or to the exact date of valuation, though the price was subject to daily fluctuation. Defendant insists that to determine the market value of a bale of cotton on a certain date it is necessary to know the exact weight and grade of the bale, the length, thickness and tensile strength of the fibres, and the price at which cotton of that particular specification was sold in the market on the particular day of valuation. Defendant says further that the evidence shows that adjustments should be made for brokerage fees, commissions, freight charges and "tare weights," which are deducted when the cotton is sold for export. Defendant would have us impose on plaintiff the burden to prove all these factors in order to establish the market value of each of the 8,485 bales in question on January 2, 1968 and again on the particular date between February 23 and March 12 when the weight and grade of that particular bale was furnished to plaintiff.
In our opinion, plaintiff did not have such a burden in view of the testimony that the market value of all cotton declined at least 2 cents a pound between early January and late February, and that higher grades declined even more. The "tag list" showing the weights of the bales as determined by defendant was in evidence and available for examination by the. jury. The jury also had figures for freight charges, brokerage fees, commissions and "tare weights." Although the opinion testimony concerning market value was in the nature of an estimate or approximation, this is the usual nature of valuation testimony. No rebutting evidence of market value was offered by defendant. We hold that the opinion evidence of market value, together with the testimony concerning general market conditions during the period in question, was sufficient to support submission of the issue of the difference between the market value on the date the cotton should have been weighed and sampled and the market value when the weights and samples were actually delivered to plaintiff.
Defendant's "Cross-Point Nine" is that the trial court erred in overruling its objection to the issue on difference in market value on the ground "that the submission of said Special Issue was against the great weight and preponderance of the evidence." We overrule this cross-point because even if a finding adverse to defendant would have been contrary to the overwhelming weight and preponderance of the evidence, that would not establish error in submission of the issue, since the trial court must submit the issue if there is any evidence to support an affirmative finding. Defendant could not raise this question by objecting to submission of the issue, but only after verdict. Strauss v. LaMark, 366 S.W.2d 555 (Tex. Sup.1963). In view of the judgment for defendant non obstante veredicto, defendant was no required to file a motion for new trial to attack the verdict on this ground, but could do so by cross-points in its brief under Texas Rules of Civil Procedure, rule 324. However, we cannot construe defendant's "Cross-Point Nine" as raising this contention, since there is no prayer that the case be remanded for a new trial on this ground if the judgment non obstante veredicto is reversed. Moreover, defendant would have difficulty in showing that the jury's finding on this issue is against the overwhelming preponderance of the evidence, since the finding is based on the opinion testimony of plaintiff's witnesses, and defendant offered no evidence to rebut such testimony.
c. Authority of Defendant's Agent
Plaintiff's second and third points assert that the trial court erred in disregarding the findings of the jury what William *742 Brown had actual and apparent authority to act for defendant in making a contract with plaintiff that the cotton in question would be reweighed and resampled within three weeks after a request to do so. These points are overruled. In view of our sustaining plaintiff's eighth point and our holding that plaintiff is entitled to recover on its alternative plea that defendant failed to reweigh and resample the cotton within a reasonable time after such a request, the findings concerning the express contract affect only the amount of damages to the extent of storage charges and interest for the seven days' difference between the contract period of three weeks and the 28 days found by the jury to be a reasonable time. We hold without further discussion that the jury's findings on these issues were properly disregarded because the evidence does not raise an issue of either actual or implied authority of Brown to make such a contract for defendant.
d. Liability of Surety
Plaintiff's ninth point asserts that the trial court erred in instructing a verdict in favor of American Indemnity Company, the surety on defendant's warehouseman's bond. This point is sustained. The bond is conditioned that defendant as principal "shall well and truly perform and fulfill all of its duties as a public warehouseman, and all of its obligations under any warehouse agreement * * * with respect to cotton held by Commodity Credit Corporation or * * * persons who have purchased such cotton and cotton linters from Commodity Credit Corporation, * * *."
Plaintiff argues that since weighing and sampling the cotton was a service offered to customers at fixed charges set out in defendant's tariff, the delay in question was a breach of its duties under its contract of storage with Commodity Credit Corporation and with plaintiff as a purchaser of the cotton in question from Commodity Credit Corporation, and the language of the bond is sufficient to cover plaintiff's damages for delay in performing that obligation. The surety contends that the bond does not impose liability on it for damages from mere delay in the performance of obligations to persons who buy Commodity Credit Corporation cotton, but only for failure and refusal to perform such obligations at all. We hold that the duty to perform the service includes the duty to perform within a reasonable time, and that the time of performance as well as the act of performance is a duty secured by the bond. Consequently the trial court judgment in this respect must be reversed, and, since the surety was a party to this suit, and presented no separate defense to its liability on the bond, it is bound by the judgment against the principal defendant, even though it was dismissed from the case on its motion for instructed verdict before submission to the jury.
2. Defendant's Appeal
a. Storage Charges
We turn now to defendant's appeal. Defendant's first points asserts that the trial court erred in overruling its motion for judgment notwithstanding the jury's finding that plaintiff had incurred storage charges of $7,356 because of the delay. Defendant pleaded that plaintiff paid these charges voluntarily after the cotton had been removed from the warehouse with full knowledge that they covered storage for the period when the cotton had not been reweighed and resampled.
The evidence shows that about February 3, 1968, Rufus McClung asked defendant's president John Gallagher whether he was going to continue the storage charges on the unsampled cotton, and Gallagher replied that the was. McClung then said "You've got a lawsuit on your hands." On February 28 plaintiff's counsel sent a letter to defendant advising that plaintiff was claiming damages and expenses for the delay, including storage charges. Later, when the cotton was sold, defendant did *743 not require plaintiff to pay the storage charges before delivering the cotton but shipped it out on plaintiff's orders and billed plaintiff for the charges. Plaintiff's secretary-treasurer paid these bills by checks in the usual manner of paying bills. Other cotton belonging to plaintiff was in defendant's warehouse at the time, but plaintiff does not show that defendant had a lien on the other bales for the charges in question or that defendant made any threat to hold the other bales for these charges.
We hold that payment of the charges under the circumstances does not prevent recovery of such charges as an element of damages for delay. Consequently, we overrule the first point on defendant's appeal.
We recognize the general rule that money voluntarily paid with full knowledge of all the facts,[3] and without fraud or coercion, cannot be recovered back, though it was paid on a void demand, or on a claim having no foundation in fact, and was paid without consideration. Runcie v. Runcie, 407 S.W.2d 861 (Tex.Civ. App., Amarillo 1966, writ ref'd n. r. e.); Gibson v. General American Life Ins. Co., 89 S.W.2d 1070 (Tex.Civ.App., El Paso 1936, writ dism'd). The rationale of this rule is that a party who pays a claim is deemed to have made his own decision that it is justly due. If he thinks otherwise, he should resist. He should not pay out his money, leading the other party to act as though the matter were closed, and then be in a position to change his mind and invoke the aid of the courts to get it back. Neither should he be allowed to avoid the inconvenience of immediate litigation by paying a claim and reserve to himself the privilege of suing for the money at a time and under circumstances of his own choosing, when his adversary may be at a disadvantage because of unavailability of records and witnesses. Thompson v. Shoemaker, 7 N.C.App. 687, 173 S.E.2d 627 (1970); American Motorists Ins. Co. v. Shrock, 447 S.W.2d 809 (Mo.App.1969); Brisbane v. Dacres, 5 Taunt. 143, 128 Eng.Rep. 641 (Ex.1813).
However, the rule against recovery of voluntary payments is not applied rigidly in cases where the reasons for the rule do not exist. In some cases the payor is allowed to recover the money if he clearly never intended to surrender his position. Thus, in West Texas State Bank v. Tri-Service Drilling Co., 339 S.W.2d 249 (Tex.Civ.App., Eastland 1960, writ ref'd n. r. e.), a borrower from a bank paid a renewal note with knowledge that the bank had diverted a substantial portion of the proceeds of the original loan to an unauthorized purpose. The court held that notwithstanding such payment, the borrower was entitled to recover the money diverted by the bank because the evidence showed that he continued to insist on restoration of the funds and never intended to waive his claim. Likewise, in Prigmore v. Hardware Mutual Ins. Co., 225 S.W.2d 897 (Tex.Civ.App., Amarillo 1949, no writ), monthly checks inadvertently sent out from an insurance company to its former agent after his employment had been discontinued were held to be sufficient consideration to support a note signed by him, and the payments were held not voluntary, though the checks were sent out because of the negligence of some employee. Texas courts also hold that a bank which inadvertently or negligently pays a check which it has been notified not to pay may recover from the payee. First-Wichita National Bank v. Steed, 374 S.W.2d 932 (Tex.Civ. App., Fort Worth 1964, no writ); Capital Nat. Bank in Austin v. Wootton, 369 S.W.2d 475 (Tex.Civ.App., Austin 1963, no writ).
*744 Here, as in the cases cited, it is clear that plaintiff had no intention to give up any part of his claim for damages when its secretary-treasurer paid defendant's bills for storage charges. Plaintiff made its claim for damages for delay, expressly including the storage charges, before these charges were paid, and has continued to assert that claim. It filed suit on May 1, 1968, less than two months after defendant delivered the last weights and samples to plaintiff. Since the evidence shows that several months elapsed before all of the 8,485 bales were shipped out, it appears that some if not most of the charges were paid after the suit was filed. These charges were a relatively small part of the entire claim for damages. Defendant was not put at a disadvantage. Defendant's position is no worse than it would be if plaintiff had withheld payment of that part of the charges attributable to the delay and had cast on defendant the burden to establish such charges by way of counterclaim.
This is not a case like Ladd v. Southern Cotton Press & Mfg Co., 53 Tex. 172 (1880), which was a suit to recover storage charges voluntarily paid on the ground that the charges were excessive, and therefore not rightfully due. Rather it is a case in which plaintiff seeks to recover damages for delay, and claims as a part of such damages its expenses for storage during the period of the delay. The charges themselves are not disputed. Presumably they were correctly calculated on the basis of defendant's established rates for the time the 8,485 bales of cotton were admittedly in defendant's warehouse. The question of whether plaintiff should recover the amount of such charges as damages for delay does not turn on whether the charges themselves were properly assessed and demanded, but rather on whether they were expenses incurred by plaintiff because of defendant's breach of contract and should be included in plaintiff's damages in order to put plaintiff in as nearly as possible the same position as plaintiff would have been in if no delay had occurred. Essentially, the situation is no different than it would be if the cotton had been stored with a third person.
We must consider here not only the rule against recovery of voluntary payments but also the rule that damages for breach of contract should be assessed in an amount sufficient to compensate for the full amount of the loss. For the reasons stated we hold that the latter rule rather than the former is controlling.
b. Interest
The second point on defendant's appeal complains of the trial court's overruling its motion for judgment non obstante veredicto as to interest charges of $6,365 on the ground that such interest charges were special damages arising from circumstances not in contemplation of the parties when the contract was made. We overrule this point because we hold that plaintiff was entitled to interest on the value of the cotton for the period of the delay at the legal rate of six per cent per annum as general damages, and defendant has not shown that the amount of interest charges found by the jury was more than the interest would be if figured at the legal rate.
Although defendant may have had no notice of any particular financing arrangements plaintiff had made in order to buy the cotton in question, plaintiff's evidence shows that defendant knew plaintiff had intended to sell the cotton when it was reweighed and resampled. Failure to furnish the weights and samples within a reasonable time deprived plaintiff of the money it would have realized from sale of the cotton for the period of the delay. Plaintiff is entitled to be put in as near as may be the same position it would have occupied if defendant had furnished the weights and samples within a reasonable time, and in order to put plaintiff in this position plaintiff must be awarded interest on the value of the cotton at the legal rate of six per cent for the period of delay in addition to *745 the difference in market value. Whether plaintiff actually borrowed money to buy the cotton or used its own capital for that purpose is immaterial.
This holding is supported by Houston & T. C. Ry. v. Jackson, 62 Tex. 209 (1884), which was a suit for delay in transporting cotton. The trial court awarded damages including the difference in market value and also interest for the period of delay at twelve per cent, which was the rate the owner had to pay. The Supreme Court held that the owner was entitled to interest as damages for the delay in addition to the difference in market value because he had been deprived of the proceeds of the sale for that period, and the carrier was presumed to have known that the owner intended to convert the cotton into money. However, the court refused to permit recovery of the actual interest paid, and reduced the amount of interest allowed in the judgment by one-third to the amount produced by the statutory legal rate, which was then eight per cent. This amount was allowed even though the petition had no general prayer for interest. Another decision supporting recovery of interest at the legal rate on the value of the property for the period of the delay, though plaintiff claimed a greater amount, is Dorrance & Co. v. International & G. N. R. R., 103 Tex. 200, 125 S.W. 561 (1910).
Under these authorities, defendant cannot be charged with any particular contract rate of interest paid by plaintiff in excess of the legal rate in the absence of notice to defendant at the time the contract was made of the particular rate of interest plaintiff was required to pay. However, in order to show harm from the amount of interest allowed, defendant has the burden to show that the judgment for interest charges of $6,365 is more than interest at the legal rate would have amounted to for the period of the delay. Plaintiff alleged that the interest it had to pay because of the delay was $9,407, and plaintiff's testimony was that this amount was figured at 6¾ per cent on the money borrowed from December 26 until the weights and samples were delivered. We find no evidence in the record that the amount of $6,365 found by the jury and allowed by the court amounted to more than six per cent.
c. Reasonable Time
The third, fourth and fifth points in defendant's appeal assert that the trial court erred in overruling its motion to disregard the jury's answers to issues 6, 8 and 17. These findings were (6) that a reasonable time for reweighing and resampling the 8,485 bales was 28 days after plaintiff's request of December 5, 1967, (8) that defendant did not reweigh and resample the cotton within a reasonable time after such request, and (17) that the circumstances and conditions at defendant's warehouse from December 5, 1967 to March 12, 1968, were not causes beyond defendant's control which resulted in delays in the reweighing and resampling of plaintiff's cotton. Defendant relies on a provision in its tariff that it is "not liable for any delays or other consequences, which may result from work stoppage, riots, fires, floods or other causes beyond our control." Defendant's evidence shows that it had difficulty in getting labor during the period in question and that the workmen in hired were inexperienced and inefficient. There was also evidence of an unusually high level of movement of cotton into and out of the warehouse, but defendant's manager admitted that the delay would not have occurred if efficient workmen had been available.
We overrule these points. The tariff provision in question cannot be construed to throw upon defendant's customers the risk of loss from the inexperience and inefficiency of defendant's own employees. Moreover, there was evidence that during the period when defendant was having difficulty giving plaintiff's reweigh and resample orders the prompt attention which plaintiff was demanding, defendant actively solicited shipments of new-crop cotton *746 into the warehouse, which it gave priority in weighing and sampling. We conclude that the evidence amply supports the findings in question.
Judgment
Insofar as the trial court rendered judgment for plaintiff on the verdict of the jury, that judgment is affirmed. Insofar as the court rendered judgment for defendant Cotton Concentration Company notwithstanding the jury's answer to subdivision (a) of issue 7, that judgment is reversed and judgment is here rendered for plaintiff against such defendant for the damages as found in answer to that issue. Insofar as the trial court rendered judgment in favor of American Indemnity Company, that judgment is reversed and judgment is rendered in plaintiff's favor in the same amount as against the principal defendant.
Affirmed in part, and reversed and rendered in part.
ON MOTION FOR REHEARING
Defendant's motion for rehearing complains of our ruling that proof of decline in market value for the period of the delay establishes plaintiff's damages prima facie, and that the burden shifted to defendant to show that the amount of plaintiff's loss was less than such decline. Defendant insists that it has been deprived of due process because it had no information as to whether plaintiff actually lost profits when it sold the cotton and the trial court refused to permit cross-examination of plaintiff's chief witness, Rufus McClung, in this respect.
The claim of denial of due process fails for several reasons.
First. This contention is another form of defendant's principal argument that plaintiff's loss must be determined by loss of profits rather than by decline in market value. We adhere to the views expressed in our original opinion. Since the action is in contract, plaintiff is entitled to have its loss determined by the contract measure of damages, that is, it is entitled to be put in as good a position as if defendant had performed promptly. Whether plaintiff made a profit or loss on sale of a particular bale of cotton is immaterial to a damage question. If plaintiff bought a bale in December for $850 and would have sold it in January at its market value of $900 if defendant had weighed and sampled it promptly, but had to sell it in March when it first became available for sale, for $750 because of decline in market price, the amount of plaintiff's damage is not $100 but $150. This damage is not theoretical, but the actual amount necessary to put plaintiff in the position he would have been in if defendant had performed promptly. Furthermore, if plaintiff decides not to sell in March for the price then prevailing, but to wait for a better market, and sells in June, the correct amount of damages is still $150, whether the actual sale price is $800 or $700. Since the owner takes the risk of subsequent loss from market fluctuation, he, rather than the wrongdoer, should get the benefit of subsequent gain. In this connection plaintiff's transactions with respect to cotton other than the cotton in question are immaterial.
We have held that decline in market value is prima facie evidence of damages for delay in performance rather than the controlling measure because the owner may not choose to take the risk of further price fluctuation. If the decides not to wait for a better market, but sells promptly for the best price obtainable, his loss is the difference between the market value when performance was due and the actual sale price, even if that price is above current market quotations.[1] Defendant would have *747 been entitled to present this kind of evidence to show that plaintiff's loss was less than the market value, but it made no attempt to do so.
Second. The record fails to show that defendant was deprived of the right to present any relevant evidence. The cross-examination to which objection was sustained did not inquire into the amount for which the cotton was sold, but concerned plaintiff's profit for the entire 1967-68 season. Plaintiff's overall profit for the year would have no bearing on the question of whether plaintiff sustained a loss because of defendant's delay in weighing and sampling the particular cotton. Defendant has not called our attention to anything in the record showing that it has been denied the right to prove the price at which the cotton was sold, even if the sale price were relevant. Whether such evidence would be relevant would depend on various factors, such as whether the sale was too remote in time.
Third. Defendant had the opportunity to raise here by cross-point any ground that would require a new trial rather than rendition of judgment on the verdict, but has failed to do so. Upon the record as it comes to us, we cannot remand for a new trial for improper restriction of defendant's right to cross-examine or for exclusion of any relevant rebutting evidence. If the trial court erred in that respect, but then rendered judgment non obstante veredicto in defendant's favor, defendant was not required to file a motion for new trial, but it was required under Tex.R.Civ.P. 324 to raise this ground by cross-point in its brief in this court. By the express provisions of that rule, failure to bring forward by cross-points such grounds as would vitiate the verdict is deemed a waiver of such grounds. Consequently no denial of due process is shown.
Defendant contends further that even under the market value measure of damages plaintiff has failed to prove its damages because its evidence does not allow for commissions, brokerage fees, freight charges, tare weights, etc. Figures for these factors were before the jury, and defendant quotes some of them in its motion. If we understand defendant's argument correctly, it is not that these factors were not proved, but rather that the jury did not deduct them in figuring the damages. In this connection defendant points out that the damages found by the jury amount to exactly 2½ cents per pound for 8,485 bales at 500 pounds a bale. Defendant does not point to any evidence that brokerage and commission charges in March would have varied from those in January. The weights of each bale and the tare weights were before the jury for its consideration in determining whether the net weight of the bales averaged as much as 500 pounds. The jury's failure to make deductions for these factors would raise at most a question of excessiveness of the damages, rather than one of no evidence of damages, and no cross-point complaining of excessiveness has been presented to us.
Defendant repeats its argument that under the market value measure, the value of each individual bale must be established according to its particular specifications, and that evidence of actual sales rather than opinion evidence is required to establish the market value. No authority is cited in support of this argument. Defendant's objections in these respects go to the weight of plaintiff's evidence rather than competency to prove damages. We hold only that the evidence before the jury was some evidence to support the verdict.
Finally, defendant contends that in allowing plaintiff recovery of interest as general damages on the value of the cotton *748 for the period of delay as well as decline in market value we have allowed a double recovery because interest, if recovered as general damages, is the sole measure of the loss. This contention also is overruled. These are two separate items of damage. If plaintiff's sale of the cotton was delayed from January to March because defendant failed to furnish weights and samples promptly, plaintiff was entitled to interest for the period of delay even if no market decline had occurred, since it was deprived of the proceeds of sale of the cotton for that period. As we held in the original opinion, plaintiff is limited to the legal rate of interest unless it actually paid interest at a higher rate and defendant had notice that such higher interest would be paid. Regardless of whether the recovery of interest was as the legal or some higher rate, plaintiff has not only been deprived of the proceeds of the sale for the period of delay, for which interest is proper compensation, but has an additional loss in that the amount for which it could sell the cotton has been reduced. Both items of damage are recoverable.
Motion for rehearing overruled.
NOTES
[1] We do not decide the question of whether in this kind of case decline in market value is not recoverable in the absence of notice at the time the contract was made that the cotton could not be sold until the reweighing and resampling was done, since both parties have treated the issue as one of general rather than special damages. Plaintiff's president, Rufus McClung, testified that before plaintiff bought the cotton in question, which was already in defendant's warehouse, he told defendant's agent, "We have to know, we have got to get the samples because we have got sales for the cotton and I don't want to buy something I can't use."
[2] Cf. Fort Worth & D. Ry. v. United States, 242 F.2d 702 (5th Cir. 1957), holding that the measure of damages for loss of cottonseed products shipped by the government and lost by the carrier was the full market value of the products at the place of delivery, though the government intended to sell such products for livestock feed at about half the market value under an emergency drought relief program.
[3] Since plaintiff does not claim that the payments were made under a mistake of fact, the question before us is not like the questions in Benson v. Travelers Ins. Co., 464 S.W.2d 709 (Tex.Civ.App., Dallas 1971, no writ) and Hodges Food Stores v. Gulf Ins. Co., 441 S.W.2d 309 (Tex.Civ.App., Dallas 1969, no writ).
[1] The case is analogous to one in which a buyer of goods wrongfully refuses to accept them. The seller has a choice of remedies. Under the decisions, he is not limited to a recovery based on the actual amount he realizes from a sale to another buyer, but may treat the goods as his own and recover damages based on the market price at the time and place fixed for delivery. Waples v. Overaker, 77 Tex. 7, 13 S.W. 527 (1890); Marion v. Bowers, 371 S.W.2d 575 (Tex.Civ.App., Amarillo 1963, no writ, per Denton, C. J.). Cf. Tex.Bus. and Com.Code § 2.708 (1968), V.T.C.A. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2624424/ | 200 P.3d 146 (2008)
345 Or. 460
NGUYEN
v.
NGUYEN.
No. (S056583).
Supreme Court of Oregon.
December 10, 2008.
Petition for review denied. | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1662491/ | 930 S.W.2d 196 (1996)
AMERICAN STATES INSURANCE COMPANY OF TEXAS, Appellant,
v.
Eoline Smith ARNOLD and American Fire & Indemnity Insurance Company, Appellees.
No. 05-95-00706-CV.
Court of Appeals of Texas, Dallas.
August 9, 1996.
Rehearing Overruled September 23, 1996.
*198 E. Thomas Bishop, Mark D. Johnson, Alexander N. Beard, Dallas, E. Thomas Bishop, P.C., for Appellant.
Mary Lou Flynn-Dupart, Fred A. Simpson, Jackson & Walker, L.L.P., Houston, for Appellee.
Before OVARD, JAMES and HANKINSON, JJ.
OPINION
HANKINSON, Justice.
This case involves a dispute between two insurance companies concerning the duty to defend an underlying automobile accident lawsuit. American Fire & Indemnity Insurance Company ("American Fire"), as assignee and subrogee of the rights of Eoline Smith Arnold, American Fire's insured, filed a lawsuit against American States Insurance Company of Texas ("American States"), alleging that American States breached its duty to defend Arnold, an additional insured under an American States automobile policy. In response to the lawsuit, American States contended that it had no duty to defend Arnold, because its defense obligation terminated under the policy when it exhausted the policy limits by settling all claims against the named insured, Bessie M. Mayes. American Fire and American States each moved for summary judgment on the policy interpretation question. The trial court granted American Fire's summary judgment motion and denied American States's motion. American States appeals from that decision. We hold that under the unambiguous policy language at issue, the duty to defend terminates when the policy limits are exhausted; therefore, we reverse the trial court's judgment and render judgment in favor of American States.
FACTUAL BACKGROUND
On January 30, 1989, Eoline Smith Arnold was involved in a two-car collision while driving an automobile owned by Bessie M. Mayes and in which Mayes was a passenger. Mayes's vehicle struck another vehicle driven by Michael Rhodes and in which Michael Cassady was a passenger. Both Cassady and Rhodes were injured. Mayes was killed in the accident.
American States insured Mayes's vehicle. The policy provided a $50,000 bodily injury policy limit per person, per occurrence, and included coverage for permissive drivers of Mayes's vehicle. Arnold was an additional insured or "covered person" under the American States policy because she was a permissive driver of Mayes's vehicle. American States's policy provided: "If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits." At the time of the accident, Arnold was also insured under her own automobile insurance policy issued by American Fire. That policy provided a $20,000 policy limit per person, per occurrence.
Cassady presented to American States his claims for property damage against both Arnold and Mayes's estate and a personal injury claim solely against Mayes's estate, all based on Mayes's negligent entrustment of the vehicle to Arnold. Cassady demanded American States's policy limits of $50,000 to settle the personal injury claims against Mayes's estate. Cassady did not present to American States his personal injury claim against Arnold. Instead, Cassady presented that claim to Arnold's insurer, American Fire. Cassady demanded American Fire's policy limits of $20,000 to settle the personal injury claim against Arnold.
*199 Mayes's estate also asserted a wrongful death claim against Arnold. The estate initially presented the claim to American Fire, who referred it to American States. American States and the estate agreed to compromise the estate's claim against Arnold for $5,500, and American States agreed to pay its policy limits of $50,000 to secure the estate's release from Cassady's personal injury claim against Mayes's estate. American States also paid Cassady's property damage claim in the amount of $10,139.55, securing a release on behalf of both Mayes's estate and Arnold.
American Fire refused to settle Cassady's claim against Arnold. After American States settled his claim against Mayes's estate, Cassady sued Arnold. American Fire and Arnold demanded that American States defend Arnold in the lawsuit. Because American States had already exhausted its policy limits settling Cassady's claim against Mayes's estate, it refused to defend and indemnify Arnold. American States based its refusal to defend on specific language in its policy, which provided that American States's "duty to defend ends when [its] limit of liability for this coverage has been exhausted." American Fire defended Arnold in the Cassady lawsuit.
Despite its refusal to defend or indemnify Arnold, American States paid $20,000, an amount equal to American Fire's policy limits, to protect and release Arnold from Cassady's lawsuit. American States still refused, however, to pay any costs of defending Arnold in the Cassady lawsuit, asserting that the earlier exhaustion of its policy limits excused performance.
PROCEDURAL BACKGROUND
American Fire brought this lawsuit against American States to recover its costs of defending Arnold in the Cassady lawsuit. American Fire asserted both contractual and extracontractual claims against American States. The contract claim alleged a breach of the insurance policy, and the extracontractual claims alleged violations of Texas Insurance Code article 21.21 and the Texas Deceptive Trade Practices-Consumer Protection Act, breach of the duty of good faith and fair dealing, breach of fiduciary duty owed to Arnold, intentional infliction of emotional distress, fraud and constructive fraud, and gross negligence. American States asserted a counterclaim against American Fire for reimbursement of the $20,000 indemnity it paid to protect Arnold's interests in the Cassady lawsuit.
American States moved for partial summary judgment on the grounds that: (1) the extracontractual claims were barred by limitations; (2) appellees were not entitled to a 180-day extension of the limitations period under article 21.21, section 16(d) of the Texas Insurance Code; (3) the claims of fraud and constructive fraud were improperly pleaded in the petition; (4) American Fire had no extracontractual claims, except as the assignee of Arnold; and (5) no valid tort action existed against American States to support an award of punitive damages. The trial court granted American States a partial summary judgment on the extracontractual claims, leaving pending only American Fire's breach of contract claim and American States's counterclaim for reimbursement.
The parties mediated the remaining claims and entered into a partial settlement agreement. The parties then presented their agreement to the trial court in an agreed order, which the trial court signed. The agreed order provided that the breach of contract claim "shall be" decided by the trial court on cross-motions for summary judgment. The order also provided that American Fire would recover contract damages in the amount of $13,697.32 if it prevailed on its motion for summary judgment. The order further dismissed with prejudice all American Fire and Arnold's other claims against American States and dismissed with prejudice American States's counterclaim against American Fire. Finally, the order severed American Fire's claim for attorneys' fees incurred in prosecuting this breach of contract actiona claim the parties agreed would be decided by binding arbitration if American Fire ultimately prevailed on its contract claim.
Both parties then moved for summary judgment on the breach of contract claim. The trial court granted American Fire's motion *200 and denied American States's motion. As also contemplated by the settlement agreement and required by the agreed order signed by the trial court, American States brought this appeal.
STANDARD OF REVIEW
This Court reviews a summary judgment de novo to determine whether a party's right to prevail is established as a matter of law. See Capitan Enters., Inc. v. Jackson, 903 S.W.2d 772, 775 (Tex.App.El Paso 1994, writ denied). When both parties move for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law. Guynes v. Galveston County, 861 S.W.2d 861, 862 (Tex.1993). In this case, the agreed order provided that the breach of contract claim "shall be" decided by the trial court on cross-motions for summary judgment. This Court, therefore, should decide all legal questions presented and may render the judgment the trial court should have rendered. See Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988)(orig. proceeding).
DISCUSSION
In its third and fourth points of error, American States asserts that the trial court erroneously ruled on the parties' cross-motions for summary judgment. American States argues in support of both points that the policy language terminating the duty to defend upon the payment of policy limits is unambiguous and that other courts specifically addressing this issue have held that similar language is unambiguous and precludes a duty to defend the additional insured. American Fire counters that the policy language is ambiguous, has more than one reasonable meaning, and should be interpreted to favor the claimed coverage for defense costs. The interpretation of the insurance policy in this case presents an issue of first impression in Texas.
The interpretation of insurance contracts in Texas is governed by the same rules as the interpretation of other contracts. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). In determining the scope of an insurer's duty to defend under a particular policy, courts look to the language of the policy itself and the allegations in the complaint against the insured. Nationwide Property & Casualty Ins. v. McFarland, 887 S.W.2d 487, 492 (Tex.App.Dallas 1994, writ denied) (citing Fidelity & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 (Tex.1982)). In construing the language used in a particular policy, courts look to the written expression of the parties' intent; all parts of the policy must be construed together to effectuate this intent. Forbau, 876 S.W.2d at 133; McFarland, 887 S.W.2d at 492.
The intent of the parties is derived by examining the words used, the subject matter to which they relate, and the matters naturally or usually incident to them. McFarland, 887 S.W.2d at 492. Where the language is plain and unambiguous, it must be given its plain meaning. Id. Language in insurance provisions is ambiguous when an uncertainty exists about which of two or more meanings was intended; only then will the courts adopt the interpretation most favorable to the insured. See id. The insured and the insurer are likely to take conflicting views of coverage, but neither conflicting expectations nor disputation creates an ambiguity. Forbau, 876 S.W.2d at 134.
The operative language in this policy provided:
PART A: LIABILITY COVERAGE: INSURING AGREEMENT
We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident. Property damage includes loss of use of the damaged property. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted.
(emphasis added). Through the unambiguous language of the insuring agreement, American States promised to settle or defend any claim or lawsuit for damages covered under the policy. American States further *201 promised to pay all defense costs in addition to the policy's limit of liability. The promise to defend is immediately qualified in the same paragraph by the statement, "Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted." The language manifests the parties' intent to limit the duty to defend to the time before policy limits are exhausted. See Forbau, 876 S.W.2d at 133; McFarland, 887 S.W.2d at 492.
This policy language can be characterized only as precise, plain, and clear. Read as a whole, these provisions are not subject to more than one reasonable interpretation; therefore, the policy is not ambiguous. See Forbau, 876 S.W.2d at 133; McFarland, 887 S.W.2d at 492. We hold that the only reasonable interpretation of this policy language is that the insurer will defend or settle any claim, but the defense obligation will terminate if and when the insurer's policy limits are exhausted.[1]See Forbau, 876 S.W.2d at 133; McFarland, 887 S.W.2d at 492.
American Fire asserts that this interpretation will frustrate public policy, as expressed in the Texas Motor Vehicle Safety Responsibility Act ("the Act"),[2] by allowing American States to exhaust its bodily injury policy limits without paying $20,000 under Mayes's policy to settle Cassady's personal injury claims against Arnold. American Fire contends the maximum bodily injury policy limit paid on behalf of Mayes was $30,000, resulting in American States's gratuitous payment of $20,000 on Mayes's behalf. Thus, American Fire argues, American States's duty to defend Arnold existed after it paid the $50,000 policy limits to settle Cassady's claims against Mayes's estate because American States failed to reserve or to pay, before Cassady's suit, the $20,000 coverage on Arnold's behalf. We disagree.
The Act requires proof of financial responsibility that may be established by an insurance policy giving owners and operators of nonexempt motor vehicles the ability to respond in damages for all losses resulting from the ownership, maintenance, or use of a motor vehicle. See Segal v. Southern County Mut. Ins. Co., 832 S.W.2d 617, 621 (Tex. App.Dallas 1992, no writ). An insurance policy must with respect to each motor vehicle *202 provide a minimum of $20,000 coverage for bodily injury to one person in one accident, and under its terms, must pay on behalf of the named insured and any other person using a covered motor vehicle with the express or implied permission of the named insured. Act of June 7, 1951, 52nd Leg., R.S., ch. 498, §§ 1, 21, 1951 Tex. Gen. Laws 1210, 1211, 1220 (repealed 1995) (current versions at TEX. TRANS. CODE ANN. §§ 601.072(a)(1), 601.076(2) (Vernon Pamph. 1996) ("pay, on behalf of the named insured or another person") (emphasis added)). "One person in one accident" refers to the person actually involved and physically or emotionally injured in the accident. See McGovern v. Williams, 741 S.W.2d 373, 374-75 (Tex.1987) (holding loss of consortium not a bodily injury for purposes of recovery under the Act). American States's policy provided for limited liability:
If separate limits of liability for bodily injury and property damage liability are shown in the Declarations for this coverage the limit of liability for "each person" for bodily injury liability is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one auto accident. Subject to this limit for "each person", the limit of liability shown in the Declarations for "each accident" for bodily injury liability is our maximum limit of liability for all damages for bodily injury resulting from any one auto accident. The limit of liability shown in the Declarations for "each accident" for property damage liability is our maximum limit of liability for all damages to all property resulting from any one auto accident.
If the limit of liability shown in the Declarations for this coverage is for combined bodily injury and property damage liability, it is our maximum limit of liability for all damages resulting from any one auto accident.
This is the most we will pay regardless of the number of:
1. Covered persons;
2. Claims made;
3. Vehicles or premium shown in the Declarations; or
4. Vehicles involved in the auto accident.
We will apply the limit of liability to provide any separate limits required by law for bodily injury and property damage liability. However, this provision will not change our total limit of liability.
As owner of the vehicle, Mayes was a "covered person" under her policy. As a permissive user of the vehicle, Arnold was also a "covered person" under Mayes's policy. The policy expressly limited liability to each person injured in any one accident, regardless of the number of covered persons. The policy also provided a minimum of $20,000 coverage for Cassady's injuries resulting from this accident, as required by the Act. When American States paid Cassady its policy limits, that amount included the $20,000 coverage required under the Act. The liability limitation is not enlarged simply because Cassady could have sued two covered persons under the policy. See Manriquez v. Mid-Century Ins. Co., 779 S.W.2d 482, 485 (Tex.App.El Paso 1989, writ denied) (when two covered persons exist under policy, $50,000 liability limitation for "each person" for bodily injury not enlarged to $100,000 limitation for "each accident"). Because Mayes's policy included the minimum mandated coverage designed to respond to Cassady's damages resulting from the ownership or use of Mayes's motor vehicle, American States's payment of the policy's limits does not frustrate public policy. Thus, American Fire's contention that American States's duty to defend existed after it paid Cassady the policy limits is without merit.
The parties do not dispute that American States paid $50,000 to settle all Cassady's personal injury claims presented to it. As part of that settlement, American States secured a release on behalf of its named insured, Mayes. The $50,000 payment exhausted American States's policy limits. We conclude that, under the unambiguous policy language and circumstances of this particular case, American States's settlement of Cassady's personal injury claim against Mayes's estate for its bodily injury policy limits terminated any obligation to defend Arnold, as an additional insured, in the Cassady *203 lawsuit. Because American States had no duty to defend Arnold, the trial court erred in granting summary judgment in favor of American Fire and in denying American States's motion for summary judgment. We, therefore, sustain points of error three and four. Because of our disposition of these points, we need not address American States's points of error one and two,[3] which mount additional challenges to the trial court's granting of American Fire's motion for summary judgment. See TEX.R.APP. P. 90(a).
We reverse the trial court's judgment and render judgment for American States that Arnold and American Fire take nothing by their claims against American States.
NOTES
[1] Our decision today comports with the decisions of other courts construing the same or similar policy language. See, e.g., Johnson v. Continental Ins. Cos., 202 Cal. App. 3d 477, 248 Cal. Rptr. 412, 414 (1988) (policy language unambiguous; duty to defend terminates when policy limits paid); Underwriters Guar. Ins. Co. v. Nationwide Mut. Fire Ins. Co., 578 So. 2d 34, 35 (Fla.Dist.Ct.App. 1991) (duty to defend all actions terminates upon payment of policy liability limits); Zurich Ins. Co. v. Raymark Indus., Inc., 118 Ill. 2d 23, 112 Ill. Dec. 684, 697-99, 514 N.E.2d 150, 163-65 (1987) (obligation to defend all actions, including pending actions, limited to time before payment of judgment or settlement exhausting policy limits). Cf. Heredia v. Farmers Ins. Exch., 228 Cal. App. 3d 1345, 279 Cal. Rptr. 511, 518 (1991) (language not an exclusion under policy but simply establishes order and priority of available coverage); Godur v. Travelers Indem. Co., 567 So. 2d 1028, 1030-31 (Fla.Dist.Ct.App.1990) (in absence of bad faith, insurer relieved of duty to defend when it paid policy limits through settlement and obtained a release on behalf of insured); Anderson v. United States Fidelity & Guar. Co., 177 Ga.App. 520, 339 S.E.2d 660, 661 (1986) (in terminating duty to defend, "exhaust" means payment of settlement or judgment, wholly depleting policy amount which then discharges duty to defend insured); Pareti v. Sentry Indem. Co., 536 So. 2d 417, 420-21 (La.1988) (holding policy unambiguous; defense obligation terminates when insurer's policy limits exhausted through good faith settlement); Aetna Casualty & Sur. Co. v. Sullivan, 33 Mass.App.Ct. 154, 597 N.E.2d 62, 66 (1992) (insurer's tender of policy limits does not terminate duty to defend unless payment made after judgment or settlement); Brown v. Lumbermens Mut. Casualty Co., 326 N.C. 387, 390 S.E.2d 150, 155 (1990) (policy language ambiguous such that unilateral tender of policy limits without effecting settlement does not terminate duty to defend); Maguire v. Ohio Casualty Ins. Co., 412 Pa.Super. 59, 602 A.2d 893, 895 (insurer excused from duty to defend when paid policy limits while acting in good faith), appeal denied, 532 Pa. 656, 615 A.2d 1312 (1992); Viking Ins. Co. v. Hill, 57 Wash.App. 341, 787 P.2d 1385, 1390 (1990) (policy may specifically provide for termination of duty to defend upon payment of policy limits, but public policy requires insurer to act in good faith in interest of insured).
[2] Act of June 7, 1951, 52nd Leg., R.S., ch. 498, §§ 1, 21, 1951 Tex. Gen. Laws 1210, 1211, 1220, amended by Act of May 30, 1983, 68th Leg., R.S., ch. 535, §§ 1, 5, 1983 Tex. Gen. Laws 3122, 3122, 3129, repealed by Act of May 21, 1995, 74th leg., R.S., ch. 165, § 24(a), 1995 Tex. Gen. Laws 1870, 1870-71 (current versions at TEX. TRANS. CODE ANN. §§ 601.072(a)(1), 601.076(2) (Vernon Pamph.1996)).
[3] These points of error claim that American Fire's petition does not allege ambiguity and public policy violations, which were the specific grounds on which American Fire based its motion for summary judgment. In its first point of error, American States asserts that American Fire did not plead in its petition the grounds supporting its motion for summary judgment. In its second point of error, American States asserts that the judgment entered in favor of American Fire does not conform to American Fire's pleadings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1684986/ | 348 S.W.2d 549 (1961)
CONNECTICUT GENERAL INSURANCE COMPANY, Appellant,
v.
Loyd H. REESE, Appellee.
No. 3886.
Court of Civil Appeals of Texas, Waco.
July 5, 1961.
Rehearing Denied August 3, 1961.
*550 Bowyer, Thomas, Crozier & Harris, Dallas, for appellant.
Baker, Jordan, Davey & Shaw, Dallas, for appellee.
WILSON, Justice.
Appellee recovered judgment against appellant for total and permanent disability benefits upon a certificate issued under his employer's group insurance policy.
Appellant says the undisputed evidence shows he is not totally and permanently disabled under the terms of the certificate, and there is insufficient evidence, or none, to support the jury verdict to the contrary. The contract provides an employee shall be considered totally and permanently disabled if, after effective date, "he is unable to work, and will presumably be unable during his life to pursue any occupation for wages or profit." Appellee admitted that after his alleged injury he and his father painted his house by working two or three hours a day and his going home to rest for a similar period; that 4 months later, with help of two men, he nailed shingles on his two-room house and put one coat of paint on it and another small house over 5 day periods, during which he intermittently went home to rest when his back hurt; and that he assisted in other work. He couldn't work a full day, or do anything requiring stooping or lifting. This work "put him to bed" for a week. As custodian of a church, he opens the church on Sundays and Wednesdays, turning on lights and stoves. His wife and daughter clean the church. Two or three hours a day he has folded and delivered clothes, helping his father in a washateria, without pay, until the father could get someone to take it over. He thereafter ran an unsuccessful campaign for County Commissioner. Appellant says this and other favorable evidence requires reversal. It says appellee "is not a helpless cripple."
Without detailing it, we state there is ample evidence in the record to sustain the verdict and judgment. It was not required that appellee be a helpless cripple. The definition in this contract is not nearly as exacting as that in Prudential Ins. Co. of America v. Tate, Tex.Sup., 1961, 347 S.W.2d 556. Under the rules there quoted and applied, we overrule the points.
Appellant says that the suit is based on a master policy of group insurance, and since plaintiff introduced the individual certificate issued to him, but failed to introduce the master policy, the judgment must be reversed. It relies on Wann v. Metropolitan Life Ins. Co., Tex. Com.App., 41 S.W.2d 50. We do not think the Wann holding is applicable. There the certificate stated it was "subject to the terms and conditions" of the group policy. Here, on the contrary, there is not only an absence of such adoptive language, but the certificate issued by appellant expressly negatives that intent: It certifies that its specified group policies insure employees of the employer, and that "a description of the benefits contained in these policies is set forth in this certificate"; that "the insurance described in this certificate replaces and supersedes the insurance described in any and all certificates and riders previously issued under any and all group policies issued." It then contains eight printed pages entitled, "The following provisions are extracts from the group *551 life insurance policy." Appellant admitted issuance of group policy and certificate, and pleaded that the group policy was delivered by it to the employer, a Connecticut corporation, in Connecticut; and that the employer delivered the certificate to appellee. We think this case is more properly governed by the opinions in Blue Bonnett Life Ins. Co. v. Reynolds, Tex. Civ.App., 150 S.W.2d 372, 374, writ ref., and Pacific Mut. Ins. Co. v. Talbert, Tex. Civ.App., 271 S.W.2d 487, 490, 492, no writ. As said in the Reynolds case, "Here the policy of insurance was issued and delivered to the deceased and was sufficient in itself to show the essentials of a contract and did not, as apparently did the certificate in the Wann case, refer to a group policy or similar instrument, as containing the terms and conditions under which the insurance was to be effective." See Insurance Code, Art. 3.50, Vernon's Ann.Tex.Stat., and Cox, Group Insurance Contracts, 38 Tex.L.Rev. 211.
Error is assigned to exclusion from evidence of the petition and agreed judgment in appellee's workmen's compensation suit in which he alleged he was totally and permanently disabled. Appellee settled this case for $1,500, although benefits for disability claimed in his petition in that suit would have been for several times this amount. These documents were offered as admissions, on the theory that by compromising his claim for less than the maximum amount of compensation recoverable under the Act he admitted his incapacity was less than total and permanent. The record shows the Industrial Accident Board had dismissed his claim for failure to file it within the jurisdictional statutory period, and because he had failed to establish good cause for the failure. The agreed judgment offered recites it was entered pursuant to a compromise settlement agreement between appellee and the compensation carrier made with the court's approval. That agreement was not tendered.
The court properly excluded these documents. In Brannam v. Texas Employers' Ins. Ass'n, 151 Tex. 210, 248 S.W.2d 118, 120, it was contended an ineffective and unapproved compromise settlement agreement was admissible to show plaintiff's "Attitude in respect to the nature and extent of his injuries." The Supreme Court in rejecting the contention said, "the entire context of the instrument refutes any intent on the part of petitioner to state the nature and extent of his injuries or the amount of his damages `for any other purpose than compromise." See also Myers v. Thomas, 143 Tex. 502, 186 S.W.2d 811; San Antonio & A. P. Ry. Co. v. Tucker, Tex.Civ.App., 157 S.W. 175, 176, writ dis.; Caswell v. Satterwhite, Tex.Civ.App., 277 S.W.2d 237, 240, writ ref., n.r.e.; Skyline Cab Co. v. Bradley, Tex.Civ.App., 325 S.W.2d 176, 182, writ ref., n. r. e.; IV Wigmore, Evidence (3rd ed.) Sec. 1061; 2 McCormick & Ray, Evidence, Sec. 1142; 31 Tex.L.Rev. 239, 258.
Reversal is asked because the court refused appellant's requested special issues. Several issues and instructions were requested en masse in a single instrument. Among these was a definition of permanent incapacity varying from that contained in the contract, and an issue on partial incapacity which was simply the negative of the issue of total incapacity submitted. This is not a statutory workmen's compensation action. Under these circumstances it was not error to refuse such requested issues. Edwards v. Gifford, 137 Tex. 559, 155 S.W.2d 786, 788; Davis v. Massey, Tex.Civ.App., 324 S.W.2d 242, 243.
Appellant urges that the court erred in awarding 12% interest and attorneys' fees. The group policy was issued in Connecticut. The record does not make it completely clear to us whether the certificate was, or not, issued by appellant *552 in Texas.[1] It is not necessary for us to decide this question. It is undisputed that at all material times, appellant was doing business in this State, having a general agent and an agent for service. Otherwise it could possibly be said, under the decisions in Metropolitan Life Ins. Co. v. Wann. 130 Tex. 400, 109 S.W.2d 470, 472, 115 A.L.R. 1301, and International Brotherhood of Boiler Makers, Etc., v. Huval, 140 Tex. 21, 166 S.W.2d 107, 112, that the decision in Boseman v. Connecticut General Life Ins. Co., 301 U.S. 196, 57 S. Ct. 686, 81 L. Ed. 1036, 110 A.L.R. 732, might make Connecticut law applicable, if proved, under Art. 21.42, Texas Insurance Code. In the Boseman case, however, it was established the insurer did no business in Texas; and in the Wann case it was stipulated that "no law, either statutory or common" [130 Tex. 400, 109 S.W.2d 472] existed in the state of issuance authorizing recovery of penalty or fees.
Here appellant invoked Connecticut law in its pleading, asserting that under the laws of that State penalty and interest are not recoverable. It did not utilize the procedure afforded by Rule 184a, Texas Rules of Civil Procedure, to authorize the court to judicially notice the common and statutory law of a sister state, nor the provisions of Art. 3718, Vernon's Ann.Civ. Stat., to prove the statutory provisions of Connecticut. It sought to make the proof by the testimony, over objection, of its Texas attorney of record that he "had been examining the laws and statutes of the State of Connecticut" and "there is no provision in such laws imposing on an insurance company a penalty and liability for attorneys' fees in a law suit where it denies liability on a policy of insurance issued in the State of Connecticut."
Although it has been held that nonexistence of a statutory provision may be established by parol, Ruggles v. Seedig, Tex.Civ.App., 247 S.W. 650, 651, no writ; Grange v. Kayser, Tex.Civ.App., 80 S.W.2d 1007, 1009, no rehearing, we think the quoted testimony falls short of negativing existence of a Connecticut statute equivalent to the provisions of Art. 3.62, Insurance Code, that if a company "liable therefor" shall "fail to pay" a claim after demand, these items shall be recoverable; and this is particularly true since the testimony is qualified by limitation to cases of denial of liability, and to policies issued in that State. If it could be construed to negative existence of a statute, since the testimony relates to a "provision" in Connecticut laws, it is doubtful that it could be said to establish either of the items is irrecoverable under its common or case law. This, and appellant's other points have been considered and are overruled. The judgment is reformed to provide that attorneys' fees be taxed as costs, and as modified is affirmed.
NOTES
[1] See the article by the General Counsel of appellant's reinsurer, 38 Tex.L.Rev. 211, 221, in which it is stated Boseman v. Connecticut General Life Ins. Co., 1937, 301 U.S. 196, 57 S. Ct. 668, 81 L. Ed. 1036, 110 A.L.R. 732, relied on by appellant, is not binding on Texas courts in the respects there considered; and the discussion of the factual basis necessary for determining whether an agency relationship exists between employer and insurer in delivering the certificate. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2395482/ | 262 F.Supp.2d 1297 (2003)
EVERGREEN FOREST PRODUCTS OF GEORGIA, LLC, et al. Plaintiffs,
v.
BANK OF AMERICA, N.A. Defendant.
No. CIV.A.03-1-10-N.
United States District Court, M.D. Alabama, Northern Division.
May 13, 2003.
*1298 Walter B. Calton, Calton & Rutland LLC, Eufaula, for Evergreen Forest Products of Georgia, LLC, Lanier J. Edwards, Charles H. Thomas, Jr., plaintiffs.
James C. Huckaby, Jr., John W. Scott, L. Jackson Young, Jr., Kimberly W. Geisler, Huckaby Scott & Dukes, PC, Birmingham, for Bank of America, NA, defendant.
MEMORANDUM OPINION AND ORDER
ALBRITTON, Chief Judge.
I. INTRODUCTION
This cause is before the court on a Motion to Remand (Doc. # 7) filed by Plaintiff *1299 Lanier J. Edwards.[1]
The Plaintiff originally filed his Complaint in the Circuit Court of Barbour County, Alabama on December 3, .2002, In the Complaint, the Plaintiff asks the court to vacate an arbitration award entered in favor of the Defendant, Bank of America, N.A., and to enjoin the Defendant from executing liens upon the Plaintiff tiffs real and personal property located in, Alabama.
The Defendant filed its Notice-of. Removal on January 3, 2003, stating that this court has jurisdiction over the case based upon diversity of citizenship (Doc. "# 1). On January 13, 2003, the Defendant filed its Answer, Affirmative Defenses, and Counterclaims (Doc. # 2). With regard to the counterclaims against the Plaintiff, the Defendant seeks confirmation of the arbitration award pursuant to the Federal Arbitration Act, 9 U.S.C. § 9, and raises a state law breach of guaranty claim based on the Plaintiffs alleged failure to pay the amounts due under two promissory notes.[2]
The Plaintiff responded to the Defendant's Notice of Removal by filing the Motion to Remand presently before the court. For the reasons to be discussed, the Plaintiffs Motion to Remand is due to be DENIED.
II. MOTION TO REMAND STANDARD
Federal courts are courts of limited jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) 4 Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994); Wymbs v. Republican State. Executive Comm., 719 F.2d 1072, 1076 (11th Cir.1983). As such federal courts only have the power, to hear cases that they have been authorized to hear by the Constitution or the Congress of the United States. See Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673. Because federal court jurisdiction is limited, the Eleventh Circuit favors remand of removed cases when federal jurisdiction is not absolutely clear. See Burns, 31 F.3d at 1095.
III. FACTS
This suit arises out of a failed loan agreement between the Plaintiff, Lanier J. Edwards, and the Defendant, Bank of America, N.A. Edwards, a citizen of Georgia,[3] and Charles H. Thomas, a citizen of Mississippi, are the owners of Evergreen Forest Products of Georgia, LLC, a limited liability company organized under the laws of Georgia. In connection with a $12 *1300 million loan, Evergreen executed two promissory notes[4] on May 11, 19.98, in favor of Bank of America, a national "bank, organized under the. Laws of the United States with its principal place of business in North Carolina and branch offices in over twenty.states.[5] As additional security for the loan, both Edwards and Thomas; executed personal guaranty agreements on this same date.
In 2001 Evergreen defaulted on its obligations under the'.promissory notes. In response, Bank of America accelerated the indebtedess' on the loans and demanded arbitration against Evergreen, Edwards, and Thonias pursuant to the arbitration provisions in the promissory notes and guaranty agreements. Following a Hearingin Atlanta on July 10, 2002, the arbitrator issued a formal award in favor of Bank of America on September 5, 2002, for a sum in excess of $9.5 million.
On November 3, 2002, the Plaintiff filed suit against Bank of America in the Superior Court of Fulton County, Georgia, seeking an abrogation of the arbitration award as well as injunctive and declaratory relief (Civil Action No.2002 CV 59841). The Plaintiff also filed a second action in the Superior Court of Quitman County, Georgia, seeking identical relief (Civil Action No.2002 CV 102). After initiating those two actions,[6] the Plaintiff filed this suit in the Circuit Court of Barbour County, Alabama, on December 3, 2002. Therefore, three cases are currently pending regarding the validity of the arbitration award.[7]
IV. DISCUSSION
Removal of a case from state to federal court is. proper if the case could have been brought originally in federal court. See 28 § 1441(a). Bank of America argues that rernoval was proper because the court Alias jurisdiction over this case due to diversity of citizenship. See Diaz v. Sheppard, 85 F'.3d 1502, 1505 (11th Cir.1996) (stating that the party seeking removal to federal court, has the burden of establishing federal jurisdiction).
The diversity statute confers jurisdiction on the federal courts in civil actions 'between citizens of different states, in which the jurisdictional amount of greater than $75,000, exclusive of interest and costs, is met. See 28 U.S.C. § 1332(a)(1). According to the rule of "complete diversity," no plaintiff may share the same state citizenship with any defendant. See Riley v. Merrill Lynch, Pierce, Fenner & Smith Inc., 292 F.3d 1334, 1337 (11th Cir.2002). In this action, the Plaintiff contests the existence of both complete diversity and the amount-in-controversy requirement. Consequently, the court will evaluate each of these arguments in turn.
A. Diversity of Citizenship
The Plaintiff contends that diversity is absent because he is a citizen of Georgia *1301 and the Defendant is also a citizen of Georgia because it has branch offices in that state. The Defendant contends that diversity exists because it is a citizen only of North Carolina, where its main office is located, and not of any state where it maintains branches. The Defendant also. contends that the Plaintiff is a citizen of Alabama, not Georgia, and that the Defendant does not even maintain branches in. Alabama. . .".
This case presents an issue of first, impression in this district and circuit: how to determine the citizenship of a national bank for purposes of diversity jurisdiction? Ordinarily, a corporation is a citizen of its state of incorporation and the state where it maintains its principal place of business See 28 U.S.C. § 1332(c)(1). A national bank, however, does not have a state of incorporation because it is organized under federal law pursuant to the National Banking Act. See 12 U.S.C. § 22-24. As a result of this unique organizational structure, Congress enacted a separate jurisdictional statute that addresses the citizenship of national banks. According to 28 U.S.C. § 1348:
The district courts shall have original jurisdiction of any civil action commenced by the United States, or by direction of any officer thereof, against any national banking association, any civil action to wind up the affairs of any such association, and any action by a banking association established in the district for which the court is held, under chapter 2 of Title 12, to" enjoin the Comptroller of the Currency, or any receiver acting under his direction, as provided by such chapter.
All national banking associations, shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively, located.
Unfortunately, this statute fails: to clearly resolve the citizenship of a national ham\ in a diversity action. According to the sec ond paragraph, national banks involved" in diversity suits are deemed citizens of the states in which they are "located." Not surprisingly, both the parties in this case and the federal courts are divided over the ;meaning of this ambiguous term.
The United States Court of Appeals for the Ninth Circuit was the first court to address this issue. In American Surety Co. v. Bank of California, 133 F.2d 160, 161-62 (9th Cir. 1943), the court held that national banks are "located" for purposes of diversity jurisdiction in the state where they maintain their principal place of business.[8] Beginning with Connecticut National Bank v. Lacono, 785 F.Supp. 30 (D.R.I.1992), however, the overwhelming majority of federal courts interpreted "located" in section 1348 to mean that national banks are citizens of every state in which they maintain a branch office. See id. at 33-34; First Union Corp. v. Am. Cas. Co., 222 F.Supp.2d 767, 770 (W.D.N.C.2001); Roozenbloom v. U.S. Bank, 2000 WL 249403, at *3 (D.Or. *1302 Feb.22, 2000); Frontier Ins. Go. v. MTN Owner Trust, 111 F.Supp.2d 376, 376-81 (S.D.N.Y.2000); Ferraiolo Const., Inc. v. Keybank, NA., 978 F.Supp. 23, 25-27 (D.Me.1997); Norwest Bank Minn., N.A. v. Patton, 924 F.Supp. 114, 115 (D.Colo. 1996); Silver v. Bank Midwest) N.A., 1996 WL 328737, at *2 (D.Kan. May 15, 1996); Signet Bank v. Hitachi Credit Am. Corp., 1996 U.S. Dist. LEXIS 19358, at *7-13'' (E.D.Va. Oct. 4, 1996). But See Fin, Software Sys., Inc. v. First Union Nat'l Bank, 84 F.Supp.2d 594, 602 (E.D.Pa.1999) (holding that a'national bank is a citizen "only "of the state in which it maintains its principal place, of business"); Baker v. First Am. Nat'l Bank, ill F.Supp.2d 799, 800-01 (W.D.La.2000) (same). These courts declined to follow the rule announced in American Surety because of the Supreme Court's subsequent decision in Citizens & Southern National Bank v. Bougas, 434 U.S. 35, 98 S.Ct. 88, 54 L.Ed.2d 218 (1977).[9]Iacono, 785 F.Supp. at 32. The Plaintiff urges this court to adopt Iacono's interpretation of section 1348. According to this view, remand to state court is appropriate in this case because Bank of America, by virtue of its numerous branch offices in Georgia, is not diverse from Edwards, a citizen of Georgia.
In 2001, the United States Court of Appeals for the Seventh Circuit introduced a third interpretation of section 1348. See Firstar Bank, N.A. v. Faul, 253 F.3d 982 (7th Cir.2001). Disagreeing with both American Surety and Iacono, Firstar held that "a. National bank is located' in, and thus a citizen of the state of its principal of business and the state listed in its organizational certificate." Id. at 994 (emphasis added). Since this decision, every istrict court that has construed section 1348. has adopted Firstar. See Pitts v. First Union Nat'l Bank, 217 F.Supp.2d 629, 630-31 (D.Md.2002); Bank of Am., N.A. v. Johnson, 186 F.Supp.2d 1182, 1183-84 (W.D.Okla.2001). Bank of America argues that this court should join the growing list of Firstar disciples. Applying Firstar's reasoning to the facts of this case, Bank of America contends that it is completely diverse from the Plaintiff because it maintains its principal place of business in North Carolina and lists North Carolina in its organizational certificate. See Johnson, 186 F.Supp.2d at 1184 (holding that Bank of America, N.A. is a citizen of North Carolina for diversity purposes).
Because the Eleventh Circuit has yet to determine this issue,[10] this court must decide without binding authority, whether to adopt Amecican Surety, Iacono, or Firstar *1303 as the law of this case.[11] As the foil owing discussion explains, this court generally embraces the well-reasoned Firstar decision, but deviates slightly from its ultimate holding. The court agrees with Firsldr, that a national bank is a citizen of the> state where it maintains its principal place of business. However, rather than using a national bank's original organizational cata tificate as the second component this citizenship determination, this court believes that a Bank's most recent articles of association provide a more accurate standard for determining a Bank's current citizenship. This decision is supported by statutory construction of section 1348 in light of its history and purpose.
1. History & Purpose of U.S.C. § 1348
If a pure. Textual analysis does not reveal, the meaning of a statutory terrtf,[12] courts must look to the purpose, of the legislation. See Natl Wildlife' Fed'n v. Marsh. 721 F.2d 767, 778 (11th Cir.1983) ("The statutory language is to be interpreted in a way that accomplishes the obvious purpose of Congress in enacting the statute.") This general rule of statutory construction is amplified by the following principle: when judicial interpretations have settled the meaning of an existing statutory phrase, repetition of the same language in an amended version of a statute indicates an intent to incorporate prior interpretations as well. See Bragdon v. Abbott, 524 U.S. 624, 645, 118 S.Ct.2196, 141 L.Ed.2d 540(1998). As the following *1304 discussion of' section 1.348's history, and development reveal?, these two wiles of construction help to illuminate the meaning of the word "located."
Section 1348 is the; current version of a statutory provision that, originated in an 1864 amendment to the National Bank Act. Fin. Software Sys., 84 F.Supp.2d. at 599. According to the initial version of the statute, national banks had the power to "make contracts, she and be sued, complain, and defend, in any court of law and equity as fully as natural persons." Act of June 3, 1864, ch. 106, § 8, 13 Stat. 99, 101. The Supreme Court interpreted this phrase to mean that all suits by or against national banks arose under federal law, thus any action involving a national bank automatically created federal question jurisdiction. See Fin. Software Sys., 84 F.Supp.2d at 599 (citing Leather Mfrs' Nat'l Bank v. Cooper, 120 U.S. 778, 780, 7 S.Ct. 777, 30 L.Ed. 816 (1887) (holding that a suit by or against a national bank is necessarily a suit arising under the laws of the United States because a national bank is a federally chartered corporation)). In 1882, however, Congress amended the statute to state the following: "The jurisdiction for suits hereafter brought by or against ... [a national bank] ... shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under any law of the United States." Act of July 12, 1882, ch 290, § 4, 22 Stat. 162, 163. According to the Supreme Court, this amendment "was evidently intended to put national banks on the same footing as banks of the state where they were located for all the purposes of the jurisdiction of the courts of the United States." Leather Mfrs. Nat'l Bank, 120 U.S. at 780; see Petri v. Commercial Nat'l Bank, 142 U.S. 644, 648, 12 S.Ct. 325, 35 L.Ed. 1144 (1892) (stating that after the 1882 amendment, "the jurisdiction of the circuit courts over suits by or against national banks could no longer be asserted on the ground of their federal origin, as they were placed in the same category with banks not organized under the laws of the United States." Therefore national banks could no longer invoke federal question jurisdiction simply because of their federal charter. See Petri 142 U.S. at 648, 12 S.Ct. 325.
In 1887, Congress amended the jurisdictional statute once again and introduced the language that would later form the basis of section 1348:
[A]ll national banking associations established under the laws of the United States shall, for the purposed of all actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located; and in such cases the circuit and district courts shall not have jurisdiction other than such as they would have in cases between individual citizens of the same state.
Act of March 3, 1887 §4, 24 Stat. 552. 554-55(emphasis added). Although this amendment altered the laguage of the 1882 statute, Congress did not intend to change the former statute's fundamental purpose. As the Supremen Court explained in Petri v. Commercial National Bank, 142 U.S. 644, 651, 12 S.Ct. 325, 35 L.Ed. 1144 (1892), the 1887 amendment merely reaffirmed the notion that national banks should not have additional access to the federal courts by virtue of their federal charter. Id. at 651, 12 S.Ct. 325 (stating that federal courts should not have "jurisdiction because of the federal origin of the bank") Furthermore, the Court interpreted the language of the new statute *1305 that national banks shall be "deemed citizens of the States in which they are respectively located"in such a way that preserved the "jurisdictional parity" between national banks and state corporations. Firstar, 253 F.3d at 982; see Petri, 142 U.S. at 650-51, 12 S.Ct. 325 ("No reason is perceived why it should be held that congress intended that national banks should not resort to federal tribunals as other corporations and individual, citizens might").
In 1948, Congress enacted section 1348 and did not provide any textual modifications that indicated an intent to alter prior judicial constructions of the statute. See Firstar, 253 F.3d at 988. Indeed, absent such textual changes, Congress is presumed to have enacted section 1348 against the backdrop of prior Supreme Court precedent, which unequivocally held that national banks should have the same degree of access to the federal courts as state banks and corporations. See Fin. Software Sys., 84 F.Supp.2d at 601 ("For the last century, the law as understood by the Supreme Court has been to extend federal jurisdiction to suits by or against national banks in like fashion as to state banks.").
With the goal of "jurisdictional parity" between national and state banks serving as an interpretive guide, the meaning of the word "located" as found in section 1348 begins to come into focus. In order to maintain this parity with state banks, national banks must have two independent components that determine their citizenship. State banks are organized under state corporate law, see, e.g., Ala.Code §§ 5-5A-1 to 9, thus they are citizens, for diversity purposes, of the state where they maintain their principal place of business and of their state of incorporation. See 28 U.S.C. § 1332(c). National banks obviously have a principal place of business, however,-they do.not have a state, of incorporation because they are organized Under federal law. Due to the absence of a state, certificate of incorporation, Firstar reasoned that a national Banks's Brganization a certificate would serve as an-appropriate substitute because it requires a bank-to disclose the "place where its operations' of discount and deposit are to be carried on, designating the State, Territory, or District, and the particular county and' city, town, or village." See Firstar, 253 F.3d at 994; 12 U.S.C. § 22. This analogy proved useful in Firstar given the fact that Firstar Bank maintained its "operations of discount and deposit" in the same state listed in its original organizational certificate issued in 1863. See Letter From Eric Thompson, Director, Bank Activities & Structure, Comptroller of the Currency, to Scott Cammarn. Associate General Counsel, Bank of America, N.A. 6 (Oct. 23, 2002), available at http://www. occ.treas.gov/interp/feb03/int952.pdf (Defendant's Notice of Filing of Supplemental Authority, Ex. A, Doc. # 13). The analogy is less helpful in the present CSSGj ciS Bank of America no longer has its "operations" in the state listed in its original organizational certificate.
Bank of America, N.A. Is the product of a 1999 merger in which NationsBank merged into Bank of America Trust & Savings Association. According to its original certificate of organization, Bank of America maintained its "operations of discount and deposit" in San Francisco, California. Following the merger, however, Bank of America moved its operations to the main office of the old NationsBank, in Charlotte, North Carolina. Consequently, Bank of America presently has its "main *1306 office" and "operations of discount and deposit" in North' Caroplina, .even though its original section 22 organizational certificate states that these operations are in California[13] See id at 1-7.
As-a result of. This disparity betvyeeri the true location of Bank; of America's "operaitions" *arid the. Information detailed in its organizational certification,' the court declines to adopt Firstar's holding that a NationalBank is also located, for purposes of section' 1348, in the state listed `in its organization certificate. In rejecting Firstar's approach, this court is persuaded.by an opinion letter issued by the Comptroller* of the Currency[14] that states the following:
[Firstar's] use of the state listed in the organizational certificate as the analogue to the state of incorporation was incomplete. While most national banks do not change the location of their main office from the state originally listed in the organizational certificate some do. As set out above, the state that was listed in the organizational certificate can be changed under statutes that provide for changing the location of the main office When this occurs, the original organizational certificate document itself is not changed. The change in designation of the place of operations (including state) is reflected in other documents, particularly the articles of association .
Letter From Eric Thompson to Scott Cammarn, Associate General Counsel Bank of America, N.A. 6 (Oct.23, 2002), available at http/www.occ.treas.gov/interp/feb03/int952.pdf (Defendant's Notice of Filling of Supplemental Authority, Ex. A, Doc#13).
In the event a national bank moves its "main office" or "operations of discount and deposit" to a new location, this change must be reflected in the Bank's articles of association . See 12 C.F.R. § 5.40(d)(2) *1307 (stating that a national bank must "[a]mend its articles of association" if it relocates its "main office"); see also 12 U.S.C. § 21a (stating that national banks may amend their articles of association).-Conversely, federal law does not require a national bank to make an analogous', amendment to its original section 22 certificate of organization. This distinction is, important to the present case because', it renders Bank of America's organizational certificate inaccurate. As discussed above Bank of America lists California as the location in its original section 22 certificate, however, it has since moved its "main office" and "operations of discount and de^ posit" to North Carolina. If this court applied Firstar's holding to these facts, Bank of America would be a citizen of California, despite the fact it no longer has its "main office" or "operations" in that state. This potential conclusion reveals a flaw in Firstar's reasoning. Without some method to account for the fact that a national bank can change the location of its operations, application of Firstar could result in national banks being deemed citizens of states where they no longer maintain significant contacts. See Letter From Eric Thompson to Scott Cammarn, at 6. Unlike a state bank, which is governed by the laws of the state of its incorporation, a national bank is not governed by the laws of the state listed in its organizational certificate. Therefore, there is no logical reason for the organizational certificate to have any significance in the context of citizenship. Because a national bank's articles of association are updated regularly, this court believes they provide a much more accurate indication of a national bank's true location.
Contrary to the Plaintiffs assertion, the court would undermine the jurisdictional parity at the heart of section 1348 if it adopted the rule that a national bank is a citizen of every state in which it has a branch office. Under the Plaintiffs construction of section. 1348, national banks would have far less access to federal Courts via diversity jurisdiction than state banks, because they might be citizens of numerous states. For example, Bank of America has branch offices in over twenty states, thus its access to the federal courts though diversity jurisdiction would-be far more limited than an analogous state bank, that is a citizen of, at most, two states pursuant to 28 U.S.C. § 1332(c). "Although the Plaintiff argues that his construction of section 1348 is consistent with the modern trend of limiting the breadth of diversity jurisdiction, see Norwest Bank, 924 F.Supp. at 115, this court is unwilling to disregard congressional intent in order to further such a general trend. The court finds no basis for allowing the advent of interstate branch banking to limit the access of national banks to federal courts to less than that afforded to state banks.
In accord with foregoing analysis, this court believes that 28 U.S.C. § 1348 is best understood to mean that a national bank is "located" in, and thus a citizen of, the state of its principal place of business and the state listed in its most recent articles of association. According to the undisputed submissions of the parties, Bank of America maintains it principal place of business in Charlotte, North Carolina and lists North Carolina as the location of its "main office" in its most recent articles of association. See Letter From Eric Thompson to Scott Cammarn, at 6-7. Consequently, Bank of America is a citizen of North Carolina for purposes of diversity jurisdiction. Whether the Plaintiff is a citizen of Georgia, as he contends, or of Alabama, as the Defendant contends, either *1308 way complete diversity exists between the parties;
B, Amount in Controversy
Having concluded that the parties in this `case' are completely diverse from each other the court will next consider whether the $75,000.00 amount-in-controversy requirement is met. Because the Plaintiff seeks only declaratory and injunctive relief, the amount in controversy is measured-by the value of the object of the litigation' from the Plaintiffs perspective. See Ericsson Mobile Communs., Inc. v. Motorola Communs. & Elecs., Inc., 120; F.3d 216, 218^19 (1997). "In other words, the value of the requested injunctive relief is the monetary value of the benefit that would flow to the plaintiff if the injunction were granted." Cohen v. Office Depot, Inc., 204 F.3d 1069, 1077 (11th Cir.2000). According to his Complaint, the Plaintiff asks the court void the $9.5 million arbitration award and enjoin Bank of America from placing liens against his Alabama property. See Complaint, If 14-22. From the Plaintiffs perspective, the pecuniary consequences of such relief would be well in excess of the $75,000.00 jurisdictional minimum. See, e.g., Sirotzky v. New York Stock Exchange, 2002 WL 1052029, at *1, (N.D.Ill. May 20, 2002) ("When a party seeks to vacate an arbitration decision and the underlying award exceeds $75,000, the amount-in-controversy requirement is clearly satisfied.").
Nevertheless, the Plaintiff argues that his objection to the arbitration award is currently pending in the Georgia state court actions, thus "the only issue before this court is the injunctive relief." See Plaintiffs Brief In Support of Motion to Remand, p. 16. This argument is without merit, as the Plaintiffs Complaint clearly seeks to void the arbitration award, See Complaint, ¶¶ 14-16. Moreover, the fact that this same issue may be pending in a state court proceeding is of no consequence to this court's determination of whether it has jurisdiction over this case. See Colo. River Water conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct 1236, 47 L.Ed.2d 483 (1976) (Generally as between state and federal courts, the rule is that the pendency of an action in the state court is no bar to proceedings concerning the same matter int eh Federal court having jurisdiction....' ") In the end, the Plaintiff requests that this court vacate an arbitration award that exceeds $75,000.00, therefore the amount-in-controversy requirement is met in this case.
V. CONCLUSION
For the reasons stated above, the court concludes that the two requirements for diversity jurisdiction are present in this case: the parties are completely diverse and the amount in controversy exceeds $75,000.00. Accordingly, it is hereby ORDERED as follows:
1) The Motion to Remand (Doc.#7) is DENIED.
2) The Motion For Leave To File Supplemental Evidence (Doc.#14) is DENIED as moot.
3) Plaintiff Lanier j. Edawards is DIRECTED to file an Amended Complaint clarifying the identify of the plaintiffs in this action by May 23, 2003. Such Amended Complaint must conform to the requirements of Local Rule 15.1
NOTES
[1] At the outset, the court notes a conflict between the parties as to the identity of the plaintiffs in this action. The caption of the Complaint lists three plaintiffs: Edwards, Charles H. Thomas, Jr., and Evergreen Forest Products of Georgia, LLC ("Evergreen"). Additionally, the Complaint seeks relief that impacts both the collective group as well as Edwards individually. Nevertheless, the Complaint's "Parties" section only lists Edwards and all subsequent court filings refer to Edwards as the singular "Plaintiff." Because the presence of Thomas and Evergreen Forest have no impact on the court's remand analysis, the court will assume, for purposes of this motion only, that Edwards is the only plaintiff in the case. However, as explained in the Order accompanying this Memorandum Opinion, the court directs Edwards to clarify the parties in this litigation.
[2] In addition to the counterclaim asking the court to confirm the arbitration award, the Defendant filed a separate "Application for An Order Confirming Arbitration Award" on January 31, 2003 (Doc. # 6).
[3] Although the Defendant disputes Edwards's assertion that he is a citizen of Georgia for purposes of diversity jurisdiction, the court assumes, without deciding, that this representation is correct.
[4] The first note was for $11.5 million. The second note was for $500,000.
[5] Although NationsBank, N.A. was the named payee in the notes at issue in this case, Bank of America is the successor in interest to NationsBank.
[6] The Plaintiff believes that the Georgia state court actions will be consolidated into a single proceeding.
[7] In all three actions, Bank of America has filed identical counterclaims against the Plaintiff for confirmation of the arbitration award and breach of the guaranty agreements.
[8] Although American Surety interpreted 28 U.S.C. § 41(16), this predecessor statute to 28 U.S.C. § 1348 contained the same material language. Compare Act of Mar. 3, 1911, CH. 231, § 24, para. 16, 36 Stat. 1091, 1092-93 ("[A]ll national banking associations established under the laws of the United States shall, for the purposes of all other actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located."), with. 28 U.S.C. § 1348 ("All national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located.").
[9] Addressing a prior version of the venue statute for national banks, 12 U.S.C. § 94 (amended 1982), Bougas held that a national bank was "located" in every county in which the bank maintained a branch office. Bougas, 434 U.S. at 46, 98 S.Ct. 88 (Stewart, J., concurring). Iacono concluded that this interpretation of "located" should also extend to section 1348, one of several statutes related to national banks that contains the word "located." Iacono, 785 F.Supp. at 33. As explained below, this court believes that Iacono 's interpretation conflicts with the history and purpose of section 1348.
[10] In Berkowitz v. Midlantic Corp., 1997 WL 452206, at *4 n. 1 (D.N.J. July 18,1997), the Federal District Court for the District of New Jersey cited an Eleventh Circuit case, In re First Nat'l Bank of Boston, 70 F.3d 1184, 1188 (11th Cir.1995), for the proposition that a "national bank is a citizen only of the state encompassing its principal place of business." This court believes that this citation is incorrect. First, the Eleventh circuit vacated this decision after the parties settled the case in the district court. In reFirst Nat'l Bank of Boston, 102 F.3d 1577, 1577 (11th Cir.1996). Second, the Boston court never engaged INA substantive discussion concerning the meaning of section 1348. Indeed, the only discussion about section 1348 occurs in a footnote in which the court states that "there is no actual evidence in the record that Bank of Boston was `located' in Florida through a branch office." Id. at n. 3. Notwithstanding this lack of analysis, at least one other federal district court believes this footnote "indicates that if the [Eleventh Circuit] had addressed the issue of the scope of `located,' it would have found that the term includes branch offices." Keybank, 978 F.Supp. at 26 (emphasis added). This court is unwilling to draw such a sweeping conclusion from an ambiguous footnote. The fact of the matter is that the Eleventh Circuit did not address the meaning of "located" as that term appears in section 1348. Furthermore, the footnote in Boston could be interpreted several ways. On one hand, the court may have genuinely intimated that "located" should be read to mean that national banks are citizens of all states in which they maintain branch offices. On the other hand, the court may have been saying that even if it had adopted this view of section 1348, the facts of Boston did not support such an argument because the bank did not establish the existence of any Florida branches. As a result of the uncertain tenor of this discussion, this court believes that Boston does not resolve the issue presented in this case.
[11] The only other district court within the Eleventh Circuit to interpret section 1348 held that a national bank is a citizen of the state where it maintains its principal place of business. See Landmark Tower Assocs. v. First Nat'l Bank, 439 F.Supp. 195, 196 (S.D.Fia.1977). In one paragraph of discussion, the court simply cited section 1348 for the proposition that national banks are citizens of the states in which they are located and went on to hold that the First National Bank of Chicago, by virtue of its principal place of business, is a citizen of Illinois. Id. The court did not address whether a national bank could be "located" in states where the bank maintains branch offices. Furthermore, the court did not cite any authority for its ultimate holding that a national bank is "located" only in the state where it maintains its principal place of business.
[12] A strict textual analysis of the word "located" is unhelpful in this case. Although "locate" generally means "to fix or establish in a place,'' such everyday definitions are of little assistance when the issue before the court is the "number or scope of places where a national bank is fixed or established." Firstar, 253 F.3d at 982.
[13] The court notes the existence of a textual inconsistency between the statute articulating the requirements for a national Bank's certificate of organization, 12 U.S.C. § 22, and the statute authorizing a national bank to move its location, 12 U.S.C. § 30(b). Section 22 provides that a national bank must indicate on its organizational certificate "the place where its operations of discount and deposit are to be carried on." 12 U.S.C. § 22. When Congress originally enacted section 30(b), it used identical terminology: "any national bank may change ... the place where its operations of discount and deposit are to be carried on." Act of May 1, 1886, ch. 73, § 2, 24 Stat. 18, 18. In 1959, Congress replaced the language in section 30(b) with the term "main office." Pub.L. No. 86-230, § 3, 73 Stat. 457, 457 (1959); see also 12 U.S.C. § 1831u(d)(1) (stating that following a merger, a resulting bank may "retain and operate, as a main office or a branch, any office that any bank involved in an interstate merger transaction was operating as a main office or a branch immediately before the merger transaction") Because Congress did not make a parallel amendment to section 22, courts are left to ponder whether a national Bank's main office" somehow differs from the location where its operations of discount and deposit are to be carried on." This court finds no fundamental inconsistency in these terms and believes, for purposes of Location, a national Bank's main office and the place where its operations of discount and deposit are to be carried on are the same. See Letter From Eric Thompson, Director, Bank Activities & Structure, Comptroller of the Currency, to Scott Cammarn, Associate General Counsel, Bank of America, N.A. 6 (Oct. 23, 2002 ) available at http/www occ.treas.gov/interp/feb03/int952.pdf (Defentants Notice of Filing of Supplemental Authority Ex. A.Doc# 13.)
[14] The Comptroller of the Currency is the bureau of the Department of Treasury that charters and regulates national banks See 12 U.S.C. §1. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2265587/ | 341 Pa. Superior Ct. 468 (1985)
491 A.2d 1352
COMMONWEALTH of Pennsylvania, Appellant,
v.
Mahlon W. DRUMGOOLE, Appellee.
Supreme Court of Pennsylvania.
Argued October 9, 1984.
Filed March 8, 1985.
Reargument Denied May 15, 1985.
*470 Maxine Stotland, Assistant District Attorney, Philadelphia, for Commonwealth, appellant.
Stanton M. Lacks, Doylestown, for appellee.
Before ROWLEY, McEWEN and HOFFMAN, JJ.
*471 OPINION OF THE COURT
ROWLEY, Judge:
In May, 1983, appellee Mahlon W. Drumgoole was convicted in a non-jury trial of robbery, aggravated assault and criminal conspiracy. During the robbery, which was committed on November 19, 1982, the sixty-one year old victim was shot by appellee's accomplice. At the subsequent sentence hearing, the Commonwealth requested that appellee be given a minimum sentence for robbery within the mitigated minimum range provided by the Pennsylvania Sentencing Guidelines. The mitigated minimum range provided by the Guidelines is thirty-nine (39) to sixty (60) months imprisonment. The trial court, however, imposed a five (5) year term of probation on the robbery charge and a concurrent sentence, on the aggravated assault charge, of "Time in to twenty-three (23) months". The "Time in", according to the trial court, was approximately two (2) months at the time of sentence. No sentence was imposed on the charge of conspiracy.
The Commonwealth filed a petition for reconsideration of sentence. The trial court vacated the sentence originally imposed but after further consideration reimposed the same sentence. The Commonwealth has filed this appeal claiming that the trial court, in imposing sentence, abused its discretion by unreasonably deviating from the Sentencing Guidelines. Since we agree, the judgment of sentence is vacated and the case remanded for resentencing.
Initially, it is important to consider whether the Commonwealth's appeal is properly before us. The Commonwealth claims that the appeal is taken pursuant to 42 Pa.C.S.A. § 742 and 42 Pa.C.S.A. § 9781(b). Section 742, however, does not grant a right of appeal to any party but merely provides for the exclusive appellate jurisdiction of this Court from final orders when a right of appeal exists. Section 9781, however, is part of the "Sentencing Code" and extends to the Commonwealth the right to appeal the discretionary aspects of a sentence imposed for a felony or a *472 misdemeanor. Section 9781(b) further provides, however, that an appeal of the discretionary aspects of a sentence is to be taken by filing a petition for allowance of appeal with the appropriate appellate court. The subsection goes on to provide that "[a]llowance of appeal may be granted at the discretion of the appellate court where it appears that there is a substantial question that the sentence imposed is not appropriate under this chapter." The Commonwealth has not filed a petition for allowance of appeal and this Court, prior to argument, had not determined that an appeal should be granted to the Commonwealth.
However, the Supreme Court of Pennsylvania by amendment to the Note following Pa.R.A.P. 902 provided:
Section 9781 of the Sentencing Code (42 Pa.C.S. § 9781) provides that the defendant or the Commonwealth may file a `petition for allowance of appeal' of the discretionary aspects of a sentence for a felony or a misdemeanor. The notice of appeal under this chapter (see Rule 904 (content of the notice of appeal)) operates as the `petition for allowance of appeal' under the Sentencing Code. It automatically raises all possible questions under 42 Pa. C.S. § 9781 and is available and appropriate even where no issue relating to guilt or the legality of the sentence (in the sense that the sentence falls outside of the range of discretion vested by law in the sentencing court) is presented. No additional wording is required or appropriate in the notice of appeal.
In effect the filing of the `petition for allowance of appeal' contemplated by the statute is deferred by these rules until the briefing stage, where the question of the appropriateness of the discretionary aspects of the sentence may be briefed and argued in the usual manner.
At the same time, the Supreme Court amended the Note accompanying Pa.R.A.P. 341. As that Note now provides, in part:
Section 9781 of the Sentencing Code (42 Pa.C.S. § 9781) states that the defendant or the Commonwealth may `petition for allowance of appeal' of the discretionary *473 aspects of a sentence for a felony or a misdemeanor. The practice under these rules is to file a notice of appeal. See Note to Rule 902 (manner of taking appeal). If the defendant has a right to an appeal with respect to the discretionary aspects of a sentence, the appellate court must, of course, entertain the appeal. Otherwise such an appeal may be entertained by an appellate court if, but only if, it appears to the court that there is a substantial question that the sentence imposed is not appropriate under the applicable guidelines.
Thus, although the Commonwealth, in seeking to appeal from the discretionary aspects of a sentence, may initiate such an appeal by merely filing a notice as required by Pa.R.A.P. 902, the appellate court, before proceeding to the merits of the issue raised by the appeal, must determine whether or not there is a substantial question that the sentence imposed is not appropriate under the Sentencing Guidelines. Our review of the record convinces us that a substantial question exists in this case and, therefore, the Commonwealth's appeal will be allowed.
The legislature has provided that the appellate court, in reviewing the discretionary aspects of a sentence on appeal, shall affirm the trial court's sentence unless it finds: (1) that the guidelines were erroneously applied; (2) that the sentence, even though within the guidelines, is "clearly unreasonable"; or (3) that the sentence, if outside the guidelines, "is unreasonable." In any one of these three circumstances, we are required to vacate the trial court's sentence and remand the case with instructions. 42 Pa.C. S.A. § 9781(c). In determining whether a particular sentence is "clearly unreasonable" or "unreasonable", the appellate court must consider the defendant's background and characteristics as well as the particular circumstances of the offense involved, the trial court's opportunity to observe the defendant, the pre-sentence investigation report, if any, the Sentencing Guidelines as promulgated by the Sentencing Commission, and the "findings" upon which the trial court based its sentence. After reviewing the record in this *474 case, we find that the guidelines were erroneously applied and that the trial court's "findings" do not warrant the sentence imposed.
On the charge of robbery, the trial court calculated the offense gravity score as nine (9) and the prior record score as zero (0). The minimum sentence range under those circumstances is thirty-six (36) to sixty (60) months imprisonment. The guidelines further provide that when a deadly weapon is used, either by the defendant or an accomplice, in the commission of the offense under consideration, an additional twelve (12) to twenty-four (24) months confinement "shall be added" to the sentence prescribed in the guidelines. 204 Pa.Code §§ 303.2(5) and 303.4 (deadly weapon enhancement). Inclusion of the deadly weapon enhancement provision evidences the Sentencing Commission's and the Legislature's recognition of the potential for violence and serious personal injury or death in such situations. Therefore, the minimum range of the applicable guideline sentence in this case is forty-eight (48) to eighty-four (84) months. This, then, was the starting point for the trial court in calculating an appropriate sentence under the applicable guidelines. In completing the sentence form and considering the guidelines, the trial court, however, determined that the deadly weapon enhancement provisions of the guidelines were not applicable. This was error. The sentencing court has not been given discretion to determine whether or not consideration should be given to the fact that a deadly weapon was used in calculating the guideline sentence ranges. Although the trial court is vested with the right, in the proper exercise of its discretion, to sentence outside the guidelines, it is imperative that before making that determination the correct starting point in the guidelines be determined. Since that was not done in this case, it is necessary that the sentence be reconsidered.[1]
*475 In addition we find that the sentence imposed is "unreasonable" and that the trial court's "findings" do not warrant going outside the guidelines on the basis of the record before us. The court is required, when imposing a sentence outside the guidelines, to provide a statement of the reason or reasons for the deviation. However, the reasons expressed by the sentencing court in this case are not adequate to support the sentence of probation, given that the most lenient guideline sentence applicable would require at least thirty-nine (39) months imprisonment. On the sentencing form, the trial court listed as its reasons for deviating from the guidelines:
"(1) lack of prior record;
(2) solid support at home;
(3) prior community activity; and
(4) not actual shooter"
The trial court's first reason for deviating from the guidelines is that the appellee lacked a prior record. However, the pre-sentence report, as well as the mental health evaluation, show that appellee has a prior conviction as an adult for harassment. Thus, the court erred in declaring that the defendant had "no" prior record. Moreover, the guidelines inherently give credit to those who have led a relatively law-abiding life. An accused's prior record, or lack thereof, is one of the two elements utilized in determining the guideline sentence ranges. The guideline sentence as computed in this case is based on a prior record score of zero (0). Thus, to assign the lack of, or even a minimal, prior record as a reason for deviating from the guidelines is to, in effect, give an accused credit for the same factor twice. Such an evaluation is error.
In addition, the basis for the trial court's conclusion that the appellee's "prior community activity" warranted the deviation from the guidelines is not clear. The trial court made no findings and made no specific comments about appellee's activities. The record shows that a friend of appellee stated that once, when he was twelve years old, *476 he lived with appellee's family and appellee helped him stay out of trouble. The defendant and his mother testified similarly, in conclusory terms. However, the record is not clear as to the nature or duration of such help or involvement by the appellee. In the absence of specific findings by the trial court regarding appellee's "community involvement," we cannot say that the deviation, for that reason, is reasonable.
Finally, the trial court stated that the appellee was not the actual shooter. However, the record, viewed in the light most favorable to the Commonwealth, discloses that the appellee, when told by his accomplice that he was going to "pull a stickup", handed him a handgun which was used within minutes to shoot the victim of the robbery. The record also shows that at the time appellee gave him the gun, the accomplice appeared to be "high". There is a distinction between a conspirator who is surprised when his accomplice uses a firearm of which the conspirator had no prior knowledge, and a conspirator who furnishes the firearm with which the offense is committed. The fact that appellee's accomplice, rather than he, actually pulled the trigger makes very little difference under the facts of this case and does not warrant the extreme deviation from the guidelines that was adopted.
Therefore, we conclude that the order of probation, which is outside the Sentencing Guidelines, is unreasonable on the basis of the record before us. Consequently, the record must be remanded for resentencing. In resentencing appellee, the trial court must take into account the dangerous weapon provision of the guidelines, appellee's prior record, and the fact that appellee furnished the gun with full knowledge that it was to be used in a robbery. The court should also make findings regarding appellee's alleged "community involvement." Judgment of sentence vacated *477 and case remanded to the sentencing court for resentencing.[2]
Jurisdiction is relinquished.
NOTES
[1] The trial court did not complete the sentence form for, or make reference to, the calculation of a guideline sentence for the charge of aggravated assault. Nevertheless, it is clear that the sentence imposed is also outside the guideline range on that charge.
[2] Appellee also suggests that to grant the relief sought by the Commonwealth "would appear to be a violation of the Fifth Amendment Constitutional guarantee against double jeopardy." This argument has been resolved contrary to appellee's claim. United States v. DiFrancesco, 449 U.S. 117, 101 S.Ct. 426, 66 L.Ed.2d 328 (1980), Commonwealth v. Love, 295 Pa.Super. 276, 441 A.2d 1230 (1982) (Hoffman, J., Concurring, joined by Cirillo, J.). Also see Commonwealth v. Anderson, 304 Pa.Super. 476, 450 A.2d 1011 (1982). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1192797/ | 9 Cal. 3d 502 (1973)
509 P.2d 950
108 Cal. Rptr. 6
ALBERT FRANCIS SKELLY, Petitioner,
v.
THE STATE BAR OF CALIFORNIA, Respondent.
Docket No. S.F. 22903.
Supreme Court of California. In Bank.
May 22, 1973.
*503 COUNSEL
John F. Moran, P.M. Barceloux, Burton J. Goldstein, Albert E. Levy, Ralph Golub, Goldstein, Barceloux & Goldstein and M. Reed Hunter for Petitioner.
F. LaMar Forshee, Herbert M. Rosenthal and Christopher M. Reuss for Respondent.
OPINION
THE COURT.
This is a proceeding to review a recommendation of the disciplinary board that petitioner be disbarred.
*504 Petitioner, a 64-year-old attorney who was admitted to practice in 1934, has no prior disciplinary record. In the instant proceeding he was charged in a notice to show cause with violating his oath and duties as an attorney (Bus. & Prof. Code, §§ 6103, 6067, 6068) and committing acts involving moral turpitude (Bus. & Prof. Code, § 6106). It was charged that in particular he gave certain sums from fees paid him by three clients (Glidden Company, General Foods Corporation and American Home Products Company) to Russell Wolden, then Assessor of the City and County of San Francisco, under the guise of referral fees with the corrupt intent to influence Wolden's action regarding assessments upon certain property to the benefit of those clients (counts one through three)[1] and that petitioner conspired with Wolden to engage in a plan whereby Wolden would refer corporations owning property subject to his assessment to petitioner as law clients and whereby petitioner would divide fees from the clients with Wolden under the guise of referral fees and whereby Wolden then would unlawfully grant favorable assessments upon the corporations' property and that in pursuance of that conspiracy petitioner and Wolden engaged in specified conduct relating to the same clients named in the other counts (count five).
Following hearings the local committee, by a vote of two to one, found that all the charges "are untrue" and recommended that the notice to show cause be dismissed.
The board did not receive any additional evidence, but, after being addressed by counsel, found: During 1960 through 1965, $77,700 was paid petitioner by Glidden, General Foods, and American Home Products as legal fees in connection with tax matters, and petitioner paid Wolden $57,000 of that amount pursuant to an arrangement between them that he would pay Wolden a substantial portion of the fees received. Wolden performed little, if any, work in connection with the cases. The three clients had property in San Francisco that was under Wolden's jurisdiction as assessor. Wolden substantially reduced the assessment of each client resulting in favorable tax treatment for them. Although denied by petitioner, it is inconceivable that petitioner was unaware of the property of his clients in San Francisco that was subject to assessment by Wolden, and petitioner knew that such property was subject to such assessment. Petitioner also knew, or should have known, *505 that the companies might receive favorable tax assessment treatment. Petitioner knew that Wolden was prohibited by law from engaging in any business or professional work which conflicted with his duty as assessor,[2] but nevertheless entered into an arrangement with Wolden by accepting clients referred by Wolden who had property in San Francisco that was subject to assessment and then sharing his fees from the clients with Wolden under the guise of referral fees. The board unanimously recommended that petitioner be disbarred.
In the petition for review petitioner contends that the evidence does not support many of the board's findings including, among others, that Wolden performed little, if any, work in connection with the cases of the three named clients and that petitioner knew of the property in San Francisco of those clients that was subject to assessment by Wolden.[3]
The Facts
This proceeding arises out of petitioner's association with Wolden, who at the time of the events here in question was a member of the State Bar. Wolden was subsequently convicted on eight counts of bribery (Pen. Code, § 68) and one count of conspiracy to commit bribery (Pen. Code, 182), and the judgment was affirmed in People v. Wolden (1967) 255 Cal. App. 2d 798 [63 Cal. Rptr. 467]. The essence of the charges against Wolden was that he accepted bribes to lower assessments upon property. (See People v. Wolden, supra, at p. 802.) At the instant hearings petitioner testified that Glidden, General Foods, and American Home Products "were not involved in the bribery charges" against Wolden.
At the hearings pursuant to stipulation portions of the testimony given at Wolden's trial by Max Newstat, a former deputy assessor under Wolden, were read into the record or the contents thereof were stipulated to. It appears therefrom Newstat stated that, after consultations with Wolden, Glidden and General Foods were given substantial reductions in assessed valuations for 1960 to 1965 by Wolden's office, which reductions would not have been allowed by Newstat had the decision been his to make. According to Newstat, in 1962 an auditor recommended that allowances requested by Glidden not be given for 1960 through 1962, and subsequently *506 no effort was made to collect a deficiency from Glidden. Newstat's testimony does not connect petitioner with the reductions given Glidden and General Foods[4] or even mention American Home Products. Newstat admitted having "lied" to the district attorney and the grand jury and having his judgment influenced on assessments by money he received.
Petitioner, who was called as a witness by the State Bar and thereafter took the stand in his own behalf, testified as follows:
He attended high school and college with Wolden, and over the years they were personal friends. During a period when petitioner was a deputy city attorney, he represented Wolden as assessor at Wolden's request, and for a while petitioner was the attorney for the Wolden family. After petitioner left the city attorney's office to go into private practice Wolden referred many matters to him commencing around 1956. In 1955 when Wolden was investigated by a grand jury and exonerated he decided it was bad politically for him to practice law and told petitioner he would refer some legal matters to him. Pursuant to an informal agreement they generally split the fees in the middle although in some cases in which petitioner did a tremendous amount of work he retained over 50 percent while in other cases he remitted over 50 percent to Wolden. Also on occasion if Wolden needed extra money petitioner would give it to him and then take it out of another case. He always had maybe six or eight cases in his office referred by Wolden. In response to a subpoena by the district attorney's office petitioner reviewed his records and ascertained that over a seven-year period [which it may be inferred included the years here involved] he received 52 percent and Wolden 48 percent out of the total fees of about $240,000 of cases referred by Wolden to petitioner.
Petitioner further testified that Glidden was referred to him by Wolden in 1963 in connection with a franchise tax case in Sacramento, and petitioner worked on that case in 1963, 1964, and 1965. Petitioner's name, and not Wolden's, was on the retainer agreement and any billings to the client, and the same was true as to General Foods and American Home Products. During the stated three years petitioner received $25,200 from Glidden, of which amount he paid Wolden $17,500. The $25,200 was paid entirely for the foregoing tax matter and consisted of a $5,000 annual retainer for three years plus $10,200. At Wolden's request, petitioner *507 turned over to Wolden each of the $5,000 retainer fees plus an additional $2,500. When asked if Wolden stated why he wanted the full amount of the retainer fee, petitioner replied: "He did not, but he was sending me a lot of business, and I didn't ask any questions ... I had a very substantial practice ... and much of it came from Wolden...." Petitioner stated that he did most of the work on the franchise tax case that such cases were his specialty.
Petitioner also testified: Wolden referred General Foods to him in connection with personal property tax matters in Alameda County in 1962, and petitioner represented that client in those matters from 1962 through 1964. He was paid $22,500 by General Foods, of which amount he gave Wolden $18,250. He arrived at this split by retaining compensation for the time he spent on the matter each year and sending the rest to Wolden. Petitioner "would work" on the figures with a representative of that company, "put it together," and then call Wolden, who usually would say "Send it to me and I will take it from here." Wolden "would handle it from there on." Wolden was an expert in that field and was "supposed to check over [the] figures." Most of the time Wolden used a tax consultant named Bill Brothers to file the documents. Petitioner made no "inquiry to find out what action Wolden had taken on the assessments."
Petitioner further testified: Wolden referred American Home Products to him in connection with personal property tax matters in Alameda County, and for work done from 1961 to 1964 petitioner received from that company $30,000, of which amount he paid Wolden $23,000. He arrived at this split in the same manner as that relating to General Foods, and he and Wolden handled the matters in the same way as that involving General Foods. According to his recollection of Newstat's testimony, the assessment for American Home Products' assets in San Francisco had been greatly reduced.
Petitioner denied knowing at the time he represented Glidden, General Foods and American Home Products that they "were filing in San Francisco"[5] and denied that he had any understanding with Wolden that any *508 consideration in the form of reduction in assessments of the three clients would flow by reason of his sharing the fees from the clients with Wolden.
Petitioner further testified: Representatives of the district attorney's office checked petitioner's records before the Wolden trial and asked "these companies in the east" (presumably the three clients in question) what these sums were paid for, and petitioner never heard that any consideration was given by the federal or state government to having him charged with bribery or conspiracy. Also petitioner's income tax returns show that he made the payments to Wolden, and petitioner was audited yearly for 10 years and reaudited "when the Wolden case was coming up" and was "cleared each time" by the Internal Revenue Service.
From Newstat's statements and petitioner's testimony it further appears that during the period petitioner shared fees with Wolden petitioner represented in Wolden's office three other clients (Standard Brands, Worthington Corporation, and Victor Equipment Company), all of whom received reduced assessments. Petitioner did not give Wolden any of the fees received from these clients.
At the hearings petitioner presented evidence of his good character.[6] He also testified that Wolden "was entitled to practice law as long as there was no conflict of interest in his office." It was further stipulated that if called to testify Judge Ray O'Connor would testify that Wolden could practice law outside of San Francisco.
Whether Evidence Sustains Charges
(1) Charges of unprofessional conduct on the part of an attorney should be sustained by convincing proof and to a reasonable certainty. (Bodisco v. State Bar, 58 Cal. 2d 495, 497 [24 Cal. Rptr. 835, 374 P.2d 803]; Black v. State Bar, 57 Cal. 2d 219, 222 [18 Cal. Rptr. 518, 368 P.2d 118].) Any reasonable doubts should be resolved in favor of the accused, and if equally reasonable inferences may be drawn from a fact, the inference *509 which leads to a conclusion of innocence rather than one leading to a conclusion of guilt will be accepted. (Vaughn v. State Bar. 6 Cal. 3d 847, 852 [100 Cal. Rptr. 713, 494 P.2d 1257]; Himmel v. State Bar. 4 Cal. 3d 786, 793-794 [94 Cal. Rptr. 825, 484 P.2d 993].)
(2) The findings of the local committee and the board are, or course, not binding on this court, which will weigh the evidence and pass upon its sufficiency. (Black v. State Bar, 7 Cal. 3d 676, 683 [103 Cal. Rptr. 288, 499 P.2d 968]; Bodisco v. State Bar, supra, 58 Cal. 2d 495, 497.) "Since it is difficult to pass upon the weight to be given the testimony of a witness when only the written record is before a reviewing body, it is proper to give great weight to the action of the local administrative committee which heard the witnesses and which was in a better position than the Board ... or this court to pass upon the truthfulness of the testimony. (Browne v. State Bar, ... 45 Cal.2d at p. 170 [287 P.2d 745]; Werner v. State Bar, 13 Cal. 2d 666, 676-677 [91 P.2d 881].)" (Brawner v. State Bar, 48 Cal. 2d 814, 818-819 [313 P.2d 1].)
(3) Under the foregoing standards we are of the view that the evidence is insufficient to sustain the charges against petitioner. Insofar as the first three counts are concerned, petitioner admittedly gave Wolden approximately three-fourths of specified fees paid him by Glidden, General Foods, and American Home Products, but in our opinion it was not adequately proven that petitioner did so with the corrupt intent of influencing Wolden's action regarding assessments upon property in San Francisco to the benefit of those companies or that petitioner even knew at the time he was representing those companies that they had property in San Francisco that was subject to assessment by Wolden.
The State Bar's evidence consists primarily of the prior testimony of Newstat and petitioner's own testimony. Although the evidence discloses a number of suspicious circumstances, petitioner's explanations, if believed, exonerate him of the charges.
According to the prior testimony of Newstat, after consultations with Wolden, Glidden and General Foods received reduced assessments from Wolden's office commencing in 1960,[7] and Newstat would not have allowed the reductions had the decision been his to make. Petitioner admitted having a long and close relationship with Wolden before Wolden's conviction on bribery and conspiracy charges. Petitioner also admitted doing most of the work in the Glidden franchise tax matter and yet giving Wolden most of the fee paid by that company. As appears from the recited *510 evidence, the amount of work Wolden did on the Alameda County personal property tax matters of General Foods and American Home Products is not clearly established, but even if the amount of work he performed did not justify the percentage of the fees he received, the foregoing would constitute merely further suspicious circumstances insofar as the present charges are concerned.[8]
Petitioner explained that he had an informal agreement with Wolden under which they divided evenly the fees of the cases referred to him by Wolden, although in individual cases the split might differ depending upon the work performed and Wolden's need for money and that over a seven-year period petitioner received 52 percent of the fees of cases referred to him by Wolden. It may be inferred from the heretofore recited facts that petitioner agreed to the split in order to get the referrals and out of friendship for Wolden.[9]
Petitioner further explained that at the time he represented the three companies concerning the franchise tax case in Sacramento and personal property tax matters in Alameda County he did not know that they were filing concerning property in San Francisco. Although the board found that he knew of those companies' property in San Francisco that was subject to assessment by Wolden, there is no direct evidence of such knowledge, and it does not appear from the recited facts that there is sufficient circumstantial evidence thereof to remove all reasonable doubts on that issue.
*511 A majority of the local committee, which heard the testimony and had an opportunity to observe petitioner while testifying, evidently believed his explanations, since that majority exonerated him of the charges. The district attorney's office reviewed petitioner's records and contacted the companies, and it may be inferred that office found insufficient proof to bring bribery and conspiracy charges against petitioner. The record of petitioner has heretofore been unblemished during his 39 years as a member of the State Bar, and his reputation for honesty and integrity is good. We conclude that the charges in the first three counts were not adequately proven.
The charge in count four involving Standard Brands is also not sustained by the record as is conceded by the State Bar, and in our opinion the heretofore recited evidence is insufficient proof that petitioner conspired with Wolden to engage in the common plan alleged in count five.
Since, as hereinabove indicated, it is the conclusion of this court that none of the charges in the notice to show cause is sufficiently supported by the evidence, this proceeding is dismissed.
McCOMB, J.
I dissent. As has been pointed out by this court on innumerable occasions (see, e.g., In re Plotner, 5 Cal. 3d 714, 716 (1) [97 Cal. Rptr. 193, 488 P.2d 385]), the burden is on petitioner to show that the disciplinary board's recommendation is erroneous or unlawful. In my opinion, petitioner has not met this burden.
The majority state: "Insofar as the first three counts are concerned, petitioner admittedly gave Wolden approximately three-fourths of specified fees paid him by Glidden, General Foods, and American Home Products, but in our opinion it was not adequately proven that petitioner did so with the corrupt intent of influencing Wolden's action regarding assessments upon property in San Francisco to the benefit of those companies or that petitioner even knew at the time he was representing those companies that they had property in San Francisco that was subject to assessment by Wolden.
"The State Bar's evidence consists primarily of the prior testimony of Newstat and petitioner's own testimony. Although the evidence discloses a number of suspicious circumstances, petitioner's explanations, if believed, exonerate him of the charges."
As I see it, additional suspicious circumstances, not pointed to by the majority, amply warrant the findings made by the disciplinary board, as *512 a result of which the board's recommendation of disbarment should be followed.
Petitioner testified that Wolden introduced him to the particular individuals from the corporations. In an exhibit to his answer to the original notice to show cause, petitioner lists the corporations' representatives with whom he dealt, as follows:
1. GLIDDEN COMPANY.
All of [petitioner's] dealings were with Donald E. Erskine, controller, 900 Union Congress Building, Cleveland, Ohio.
2. GENERAL FOODS CORP.
Most of [petitioner's] dealings were with John Reynaud, manager of the property tax department, 250 North Street, White Plains, New York. The contract signed with this Company was handled by Mr. Parrington of the tax department.
3. AMERICAN HOME PRODUCTS.
[Petitioner] dealt with Robert Greenlaw, now treasurer and formerly head of the tax department. Also, Assistant Charles Canevari, manager of the tax department, 685 Third Avenue, New York City, New York.
4. STANDARD BRANDS INC.
[Petitioner] dealt with Ed S. Short, who would visit him a couple of times a year. Mr. Short is now retired, residing at R.F.D. 2, Oyster Bay, Soundview and Harbor Road, New York.
In the points and authorities filed by petitioner with the local committee, he alleges, as follows: "It also appears from Newstat's testimony that the following companies were represented by tax men from the East, who visited here [in San Francisco] with Wolden:
I. GLIDDEN Mr. Erskine, Koberg (pg 602)
II. GENERAL FOODS Mr. Reynaud (pg 628)
IV. STANDARD BRANDS Mr. Short (pgs 554, 562)" (Italics
added.)
It is inconceivable to me that representatives from these corporations would have contacted Wolden in person in San Francisco for the sole purpose of obtaining a recommendation from him of an attorney to handle matters for them elsewhere in California. They were all apparently *513 from the East or Mid-West; and their coming to San Francisco and having personal meetings with Wolden would suggest to the normal person, I believe, that at least some of them had business dealings with him on behalf of the corporations they represented with respect to property owned by the corporations in San Francisco. Furthermore, in view of petitioner's very close relationship to Wolden and his acknowledging that Wolden introduced him to the representatives with whom he later dealt, it is reasonable to conclude that petitioner was aware of the fact that the above named persons visited in San Francisco with Wolden and undoubtedly had business dealings with him regarding the assessment of property owned by the respective corporations there and that part of the so-called "referral fees" petitioner turned over to Wolden constituted a bribe to him to give favorable tax treatment to the corporations involved.
In his answer to the amended order to show cause, petitioner specifically alleges that "GLIDDEN COMPANY was not filed for by [petitioner], but by Mr. Erskine, and Mr. Hoberg....
"As To GENERAL FOODS, the evidence is that a Mr. Reynaud came out here from the East and had many discussions with WOLDEN and he had actually filed for GENERAL FOODS." (Italics added.)
It will be noted that two of the persons who, according to petitioner's allegations, filed on behalf of Glidden and General Foods in Wolden's office for property belonging to those corporations in San Francisco (one of whom he admitted "had many discussions" with Wolden) were two of the persons petitioner testified he dealt with in the tax matters he handled for Glidden and General Foods.
As pointed out in the majority opinion, the record shows that during 1963 through 1965 petitioner handled a franchise tax matter for Glidden in Sacramento, receiving fees totaling $25,200, of which he paid Wolden $17,500; that during 1962 through 1964 he handled tax matters for General Foods relating to the company's personal property in Alameda County, receiving fees totaling $22,500, of which he paid Wolden $18,250; and that during 1961 through 1964 he handled tax matters for American Home Products relating to that company's personal property in Alameda County, receiving fees totaling $30,000, of which he paid Wolden $23,000.
With respect to his work relating to the personal property tax matters in Alameda County, petitioner testified: "THE CHAIRMAN: In other words, your work consisted then entirely of what you did in your own office which included any contacts with the clients. THE WITNESS: Yes, and preparing *514 the figures and the deductions and that. THE CHAIRMAN: And the preparation of the pertinent documents? THE WITNESS: Yes, sir." Petitioner further testified that when he completed his work, he would telephone Wolden, who would direct petitioner to send the papers to him and would tell him he would "take it from there." Petitioner said that Wolden had Bill Brothers do the actual filing.
According to petitioner's testimony, he made no effort to find out what action Wolden took or what results were achieved in Alameda County on behalf of his clients. Thus, he testified: "THE CHAIRMAN: And he [Wolden] stated to you that he would attend to them [the General Foods and American Home Products personal property tax matters] personally? THE WITNESS: He said, `I will take it from there,' was his expression. THE CHAIRMAN: Did you follow up on them at all or check to see what the outcome was? THE WITNESS: No, sir. THE CHAIRMAN: Did you learn anything afterwards as to what the result was of the application? THE WITNESS: Yes, I did, as far as American Home is concerned. THE CHAIRMAN: Who advised you about those results? THE WITNESS: What happened on that was when Bill Brothers was being investigated by the Grand Jury in Alameda County THE CHAIRMAN: Just before this came up, did you learn about what the results of the assessments were? THE WITNESS: No, sir. THE CHAIRMAN: You did not know about it at all until after the case broke, as it were? THE WITNESS: Yes, sir. THE CHAIRMAN: Did you make any inquiry to find out what action Wolden had taken on the assessments? THE WITNESS: No, sir." (Italics added.)
Petitioner further testified: "THE CHAIRMAN: Is it your testimony that at no time did you know of or were you made aware of the reduction of the assessment for any of these clients that you had represented? THE WITNESS: In Alameda County? THE CHAIRMAN: In Alameda County. THE WITNESS: The only thing I knew were the deductions which we worked up which we felt they were entitled to, in other words, deductions from total cost of inventory. They were legitimate deductions that they were entitled to, and that is all I knew." (Italics added.)
Petitioner also testified that he forwarded Wolden $18,250 of the $22,500 paid to him by General Foods and paid Wolden $23,000 of the $30,000 paid to him by American Home Products, because in those two cases he kept track of the time he had spent working on the clients' matters and retained an amount sufficient to compensate him for his time, turning the balance over to Wolden. As hereinabove indicated, petitioner made no effort to find out how much work, if any, Wolden did. This fact would suggest to the normal person that petitioner did not want to have personal knowledge of how very little work Wolden apparently spent on *515 the cases,[1] so that he could hide his head in the sand, so to speak, and deny that he knew that Wolden, although receiving approximately three-fourths of the fees, actually did almost none of the work.[2]
I find it unthinkable that a reputable attorney would do the rather minimal amount of work performed by petitioner, as described by him, with respect to the personal property tax matters, seeking reductions in behalf of a client, and then have the audacity to bill the client in substantial amounts for his services (a total of $22,500 for work on one client's assessment matters for three years and a total of $30,000 for work on another client's assessment matters for five years) without ascertaining what results had been accomplished in the client's behalf.
Accordingly, in my opinion, petitioner has shown himself unworthy of belief; and the disciplinary board properly concluded that, in spite of his denials, he had knowledge (1) that Glidden, General Foods, and American Home Products were required to file in San Francisco and (2) that they received substantial reductions in their assessments there after petitioner had forwarded "referral fees" to Wolden, allegedly for the latter's share of fees received by petitioner from the corporations relating to work in Sacramento or Alameda County.
The position of the disciplinary board is fortified by factual determinations of the trial court in the Wolden criminal case and by the Court of Appeal in People v. Wolden, 225 Cal. App. 2d 798 [63 Cal. Rptr. 467]. In the proceedings before the Court of Appeal, the basic issue was not sufficiency of the evidence as to the guilt of Wolden, but whether this petitioner and three other witnesses required corroboration under Penal Code section 1111 because they were accomplices. Presiding Justice Draper for a unanimous court noted that another attorney "and Skelly had full title to the fees from which they paid defendant and could be found to intend the payments to influence his official actions toward their clients, thus maintaining the flow of fees to them ... [they] exemplified both characteristics of the bribe giver each paid his own funds and each sought *516 a personal benefit from the official action sought to be induced by the gift. Any inference that any of the three acted from motives of philanthrophy or friendship would be completely unreasonable on all the evidence." In sum, the Court of Appeal found that this petitioner was not an accomplice and did not need to be corroborated, because he was a bribe giver, not a bribe taker, and "the two crimes require different motives" (id., p. 804). We are here concerned not with a crime per se but with the moral turpitude of a member of the bar, and in this context the moral deficiency of the bribe giver is little different from that of the taker.
Under the circumstances, I would order petitioner's disbarment, in accordance with the recommendation of the disciplinary board.
Mosk, J., concurred.
NOTES
[1] The same charge was made in count four except that it related to Standard Brands, Incorporated. Although the board found in part that petitioner shared his legal fees received from Standard Brands with Wolden, the State Bar concedes that this finding is not sustained by the record. Petitioner denied that his fees from this client were split with Wolden, and no evidence to the contrary was introduced.
[2] According to the State Bar examiner, at the applicable time section 222 of the Charter of the City and County of San Francisco provided: "No ... officer ... of the City and County shall engage in any activity ... which is inconsistent ... or in conflict with his duties as ... [an] official ... of the City and County...."
[3] In addition to his attack upon the findings, petitioner makes several other contentions, but it is unnecessary to consider them in view of our conclusion that there is insufficient evidence to sustain the charges.
[4] Newstat stated that during a conversation with Wolden regarding Glidden, Newstat told Wolden he "can shoot holes full of these deductions" and asked what should be done and that Wolden replied "... Let's go along with him and with these deductions...." The State Bar points to the italicized statement, but the evidence does not establish to whom the "him" referred.
[5] With respect to Glidden, petitioner also testified (1) that, although he was raised in San Francisco and practiced law here, he did not know at the time he was representing Glidden that his client had property in San Francisco and (2) that he did not learn until the time of the Wolden trial that Glidden was "filing in San Francisco." Petitioner stated that he had been positive Glidden did not have property in San Francisco because he "assumed they would have discussed it with me."
The State Bar alleges that the assessor's records show that in 1963 through 1965 Glidden owned a paint factory that occupied almost a square block at 1300 and 1400 Seventh Street and 1000 and 1006 Sixth Street in San Francisco, and the State Bar suggests that we take judicial notice of those alleged facts (see Evid. Code, §§ 452, subd. (h), 459). However, even if we could, and did, take judicial notice of those facts, they would not show that petitioner was aware of that factory.
[6] Judge Raymond Arata, who had known petitioner over 30 years, when asked, "What would you say [petitioner's] reputation for truth, honesty and integrity was and is?" replied, "Very good." Judge Edward O'Day and George Cronin, a partner in Brobeck, Phleger, and Harrison, both of whom had known petitioner for many years, gave testimony of a similar character, and a favorable letter regarding petitioner's integrity from Reverend Charles Dullea, the president of the University of San Francisco, was also introduced. In addition it was stipulated that if called to testify several other named persons would testify as to petitioner's good reputation for honesty and integrity.
[7] It was not until 1962 and 1963 that those companies were referred by Wolden to petitioner.
[8] Petitioner was not charged with splitting legal fees in a manner that was not in proportion to the services performed or responsibility assumed by each. In this connection it may be noted that in 1972 rule 22, Rules of Professional Conduct, was adopted which prohibits a member of the State Bar from dividing a fee for legal services with another attorney who is not a partner in or an associate of his law firm or law office unless, among other things, the division is made in proportion to the services performed or responsibility assumed by each. Rule 22 had its origin in Disciplinary Rule 2-107 of the American Bar Association Code of Professional Responsibility (see 47 State Bar J. 138), and rule 2-107 was based on former canon 34 of the Canons of Professional Ethics of that association (see generally 1 Witkin, Cal. Procedure (2d ed. 1970) pp. 80-81.)
[9] Although People v. Wolden, supra, 255 Cal. App. 2d 798, 804-805, in discussing a claim that it was error to instruct that Skelly and certain other witnesses were not accomplices, states, inter alia, that Skelly and two other witnesses "exemplified both characteristics of the bribe giver" and "Any inference that any of the three acted from motives of philanthropy or friendship would be completely unreasonable on all the evidence," the face of the opinion does not show that the statements were made in connection with Skelly's conduct relating to the clients named in the instant charges, and in any event all the evidence at the Wolden trial is not before us and on the evidence presented at the instant hearings it is completely reasonable to infer that Skelly agreed to the split out of his long professional association with and friendship for Wolden and in order to get the referrals of clients.
[1] The disciplinary board found, among other things, that "Russell L. Wolden performed little, if any, work in connection with said cases."
[2] Again inconceivably, petitioner denied knowledge of what results had been achieved with respect to the personal property tax matters he handled for two clients on whose behalf he sought reductions in the assessments against them in San Francisco and from whom he received fees which, admittedly, he did not share with Wolden. In this respect, he testified: "THE CHAIRMAN: When did you learn, however, that their assessments had been reduced? THE WITNESS: I don't know if the assessments were reduced. The only thing I knew is what Newstadt testified to. Now, what the reductions were or what the deductions were they were entitled to, I don't know anything about it." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2122374/ | 29 Cal. App. 3d 777 (1973)
105 Cal. Rptr. 775
In re CHRISTOPHER W., a Person Coming Under the Juvenile Court Law.
LAREN A. BECKLEY, as Chief Probation Officer, etc., Plaintiff and Respondent,
v.
CHRISTOPHER W., Defendant and Appellant.
Docket No. 31333.
Court of Appeals of California, First District, Division Three.
January 4, 1973.
*779 COUNSEL
P. Terry Anderlini, under appointment by the Court of Appeal, for Defendant and Appellant.
Evelle J. Younger, Attorney General, Edward A. Hinz, Jr., Chief Assistant Attorney General, William E. James, Assistant Attorney General, W. Eric Collins and Nancy S. Reller, Deputy Attorneys General, for Plaintiff and Respondent.
OPINION
CALDECOTT, J.
This is an appeal from an order adjudging appellant Christopher W., a ward of the court and a minor described by section 602 of the Welfare and Institutions Code.
On September 27, 1971, four students approached Oscar Groves, the assistant principal of the high school, and told him a sack of marijuana was *780 in locker B-51. He opened the locker with a master key and found a sack of marijuana. He ascertained that the locker was assigned to the appellant. He then went to the principal, Mr. Dew, and together they checked the locker. They then summoned the appellant and had him open the locker. He made no comment, and when his attention was directed to the sack, he acted surprised. There followed a half-hour conference during which the appellant denied any knowledge of the sack. He was sent home with the suggestion that he get legal counsel, and told to report in the morning. The appellant's mother was contacted at that time.
The next morning the appellant reported to Mr. Groves. After he again denied any knowledge, he was suspended pending a police investigation. The appellant then sought out Mr. Dew and, after asking his confidence, he confessed that he had bought the marijuana at school from a nonstudent, and that he feared for his life if he identified the source. The appellant was allowed to return to school after a day and a half.
The appellant has argued for the application of the search and seizure rules of the Fourth Amendment of the United States Constitution to the search of high school students' lockers by school officials. The appellant does not address himself at length to the differences between adults and children in application of the Fourth Amendment. (1) It is clear that the Fourth Amendment does not extend as far when a minor is involved. The United States Supreme Court has made this clear on numerous occasions. (See In re Thomas G., 11 Cal. App. 3d 1193 [90 Cal. Rptr. 361], citing Ginsberg v. New York, 390 U.S. 629, 638 [20 L. Ed. 2d 195, 203, 88 S. Ct. 1274]; Prince v. Commonwealth of Massachusetts, 321 U.S. 158, 168 [88 L. Ed. 645, 653-654, 64 S. Ct. 438].) (2) A further limitation on the application of the Fourth Amendment in this case is the holding in prior California cases that high school officials are not governmental officials within the meaning of the Fourth Amendment. (In re Donaldson, 269 Cal. App. 2d 509, 511 [75 Cal. Rptr. 220].) It is clear, however, that the Constitution is not wholly inapplicable to students, and that it does place some limits on the conduct of school officials.
The limitation of the Constitution is not the only factor affecting the activities of school personnel. While the Constitution imposes a limit on their power, the doctrine of in loco parentis expands their authority. The courts have long recognized that parents do exercise a large amount of responsibility and control over their children. Thus in Vandenberg v. Superior Court, 8 Cal. App. 3d 1048 [87 Cal. Rptr. 876], the court held that a father's consent to a police search of his son's room, over his son's objection, was sufficient authorization for the search. (3) School officials are said to stand in loco parentis, in the place of parents, to their students, with similar *781 powers and responsibilities. (In re Donaldson, supra, 269 Cal. App. 2d 509, 513.) This conclusion is compelled by an examination of the statutes relating to teacher duties, as well as by case law. The California Administrative Code charges school officials with the "moral condition" of their schools, and specifically charges them to eliminate "Gambling; immorality; profanity; and the use or possession of tobacco, intoxicating liquor, narcotics or other hallucinogenic or dangerous drugs or substances." (Cal. Admin. Code, tit. 5, § 301, p. D-33.) The Education Code authorizes the school district to "exclude children of filthy or vicious habits, ..." (Ed. Code, § 10552.) Section 10603, subdivision (a), authorizes suspension of any student "[f]or the protection of other pupils in the public schools" who has "used, sold, or been in possession of narcotics or other hallucinogenic drugs or substances."
The doctrine of in loco parentis gives the school authorities the powers and responsibilities of parents, and at times this power and responsibility will apparently conflict with the rules set forth under the Fourth Amendment. This conflict has been before the courts before, and the outcome of the present action is controlled by those cases.
The three cases primarily applicable to this case are In re Donaldson, supra, 269 Cal. App. 2d 509; In re Thomas G., supra, 11 Cal. App. 3d 1193; and In re Fred C., 26 Cal. App. 3d 320 [102 Cal. Rptr. 682]. In In re Donaldson, a student reported that she could buy methedrine at school. On instructions from the vice principal, the student purchased some pills. Thereafter, a search of the seller's locker produced marijuana. The court cited Stapleton v. Superior Court, 70 Cal. 2d 97 [73 Cal. Rptr. 575, 447 P.2d 967], for the proposition that the Fourth Amendment rules do not apply to searches by a private person and stated that school officials are not governmental officials. After discussing the school's responsibilities, the court concluded: "[t]he school stands in loco parentis and shares, in matters of school discipline, the parent's right to use moderate force to obtain obedience [citations], and that right extends to the search of the appellant's locker under the factual situation herein related." (In re Donaldson, supra, at p. 513.)
In In re Thomas G., supra, the dean and principal received a report that the student was seen taking pills and acting intoxicated. After taking the student out of class, the dean found amphetamine pills in his pocket. The court found the report to the dean to be the equivalent to the report of a citizen informer, and to constitute probable cause. Once probable cause was established, the school authorities had three options: to make a citizen's arrest or otherwise initiate police proceedings; to ignore the situation; or to make an informal investigation. The school authorities chose the third, and the court approved the choice. The opinion cites Ginsberg, supra, and *782 Prince, supra, for the proposition of lesser applicability of Fourth Amendment procedures to children.
The most recent case on point is In re Fred C., supra, 26 Cal. App. 3d 320. The vice principal had received a report that a student had been selling dangerous drugs that morning. When asked the contents of his pouch and pockets, the student produced $20 from his pouch, but refused to reveal the contents of his pockets, and resisted the attempt by two vice principals to search him. After a juvenile officer was summoned, a search produced dangerous drugs and marijuana, packaged in the manner in which they are usually sold. The court held that school authorities have the authority to use force, including searches, in the course of their duties. The court also held that one of their duties was the protection of other students from the sale of drugs. Although the Constitution prevents searches at the whim of the officials, searches are permitted whenever they reasonably fall within the scope of the school's duties and responsibilities. The test for cause is whether or not there was enough information to start a police investigation. In other words, whether the search was reasonable.
(4) We believe that the appropriate test for searches by high school officials is two-pronged. The first requirement is that the search be within the scope of the school's duties. The second requirement is that the action taken, the search, be reasonable under the facts and circumstances of the case. Although in loco parentis is applicable, the Fourth Amendment limits that power to acts that meet above requirements. In this case, prevention of the use of marijuana is clearly within the duties of school personnel and the action taken, the verification of the report, was reasonable. The evidence was properly admitted.
The appellant contends that use of the confession given to the high school principal violates the Constitution. His argument is based on applying rules for police conduct to high school officials. As already stated, high school personnel are not government officials for purposes of the constitutional rules regulating police conduct.
(5) The appellant argues that the confession was obtained by the principal and vice principal through inducements. However, by the time the confession occurred, Christopher had already been suspended and the marijuana had been sent to the police. The inducements complained of, that it would be easier on Chris, and the police would not be involved, had already evaporated. In addition, Mallory v. United States, 354 U.S. 449 [1 L. Ed. 2d 1479, 77 S. Ct. 1356], cited by the appellant, makes clear that the rule is based on fear of delay in custody between arrest and arraignment; however, in the present case Chris was not taken into custody.
*783 (6) Appellant argues that the principal should have warned him that his confession could be used against him before listening to it, however, the principal had no legal duty to issue Miranda warnings. Miranda dealt with custodial interrogations, before or after arrest. Here no public officials were involved. In addition, Chris was not in custody. He had just been suspended and desired to see the principal, over the vice principal's discouragement.
Appellant suggests that the action of the principal in accepting Chris' confession deprived him of legal counsel. The situation is one of misplaced trust. The principal honored Chris' trust as long as he legally could. It was only in court that he revealed the confession.
(7) Finally, the appellant contends that the condition of probation prohibiting him from driving a motor vehicle (except under certain specified conditions) is invalid.
Section 730 of the Welfare and Institutions Code contains the statutory language authorizing courts to establish probation conditions in juvenile cases.[1] We have been unable to find any cases interpreting this language. It is, however, very similar to the language in Penal Code section 1203.1, authorizing probation conditions in criminal proceedings.[2] Therefore, the cases discussing adult probation provisions are useful in determining the scope of discretion in juvenile cases.
In re Bushman, 1 Cal. 3d 767 [83 Cal. Rptr. 375, 463 P.2d 727], adopted the formulation of People v. Dominguez, 256 Cal. App. 2d 623, 627 [64 Cal. Rptr. 290], for the boundaries of judicial discretion. "A condition of probation which (1) has no relationship to the crime of which the offender was convicted, (2) relates to conduct which is not in itself criminal, and (3) requires or forbids conduct which is not reasonably related to future criminality does not serve the statutory ends of probation and is invalid." (Dominguez at p. 627.) In the present case, the order making appellant a ward of the court was based on a finding of possession of marijuana. The appellant had purchased the marijuana at school, so that a car was not involved in the possession offense. Driving has no relationship to the crime charged and there was no evidence that he drove while using marijuana. *784 Driving itself is not criminal. Although the use of a car might facilitate obtaining marijuana in the future, there is not a reasonable connection between the two, as the drug is apparently available at school. Driving is not reasonably related to future criminality. The condition that the appellant not drive does not serve the statutory ends of probation, and therefore is not reasonable within the meaning of Welfare and Institutions Code section 730. The condition is invalid.
However, though a court cannot as a punishment prohibit the juvenile from driving, this is not to say that the court, in an appropriate case, cannot find that it is necessary for the reformation and rehabilitation of the juvenile, that during the period of probation, he be prohibited from driving a motor vehicle. No such finding was present here.
The order of the juvenile court is modified by striking the prohibition against driving a motor vehicle and as so modified the order is affirmed.
Draper, P.J., concurred.
NOTES
[1] "The court may impose and require any and all reasonable conditions that it may determine fitting and proper to the end that justice may be done and the reformation and rehabilitation of the ward enhanced." (Welf. & Inst. Code, § 730.)
[2] "The court may impose and require ... other reasonable conditions, as it may determine are fitting and proper to the end that justice may be done, that amends may be made to society for the breach of the law, for any injury done to any person resulting from such breach and generally and specifically for the reformation and rehabilitation of the probationer...." (Pen. Code, § 1203.1.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2144619/ | 36 Ill. 2d 228 (1966)
221 N.E.2d 645
THE PEOPLE OF THE STATE OF ILLINOIS, Appellee,
v.
LARRY WATSON, Appellant.
No. 39829.
Supreme Court of Illinois.
Opinion filed December 1, 1966.
*229 DAVID R. NISSEN, of Rockford, appointed by the court, for appellant.
WILLIAM G. CLARK, Attorney General, of Springfield, and WILLIAM R. NASH, State's Attorney, of Rockford, (FRED G. LEACH, Assistant Attorney General, and PHILIP G. REINHARD, Assistant State's Attorney, of counsel,) for the People.
Reversed and remanded.
Mr. JUSTICE SOLFISBURG delivered the opinion of the court:
The defendant was indicted in Winnebago County for attempt to commit the offense of forgery. A jury trial resulted in a guilty verdict and the defendant was sentenced to a term of one to five years in the penitentiary. He has appealed directly to this court on the grounds that a question has arisen under the sixth and fourteenth amendments to the United States constitution and under section 9 of article II of the constitution of Illinois. Specifically defendant, an indigent, contends that the trial judge's refusal to *230 provide him with funds with which to obtain the services of a questioned document examiner deprived the defendant of due process in that he was not allowed to call witnesses in his favor. Along with the constitutional issue, defendant alleges several other grounds for reversal, the most important of these being the court's refusal to allow defendant to offer evidence that a check similar to that which the defendant was accused of attempting to forge was forged and cashed after he was in custody.
In August, 1965, Stanwood Trein purchased some $50 worth of American Express traveler's checks. Later, on the day of the purchase, Trein picked up a stranger in his automobile and gave him a ride from Rockford to Dixon, Illinois. When Trein arrived home, he noticed that $30 or $40 of the traveler's checks were missing. Some days thereafter a person entered a Rockford tavern and asked the bartender to cash a ten-dollar traveler's check. The person presenting the check signed it in the bartender's presence, but since the name signed was not the same as that on the top of the check, the bartender called the manager who inquired about the disparity of signatures. After a short conversation, the person attempting to cash the check left the tavern, leaving the check behind. The manager then called the police.
The following day two police officers brought the defendant to the Rockford tavern and at that time both the bartender and the manager identified the defendant as the person who had tried to cash the check the day before. During the trial, the defendant was also identified as the person who had ridden in the Trein car from Rockford to Dixon and the check was identified as one of those purchased by Trein.
Prior to trial the defendant, through his court-appointed attorney, filed a motion requesting the court to provide him with funds, because of his indigency, in order to obtain the services of a questioned document examiner. Attached to *231 the motion was an affidavit of defense counsel stating, in substance, that the charge was attempted forgery of an American Express traveler's check, that the State would produce a witness who will testify that the check was signed by the defendant in his presence, that the State has not obtained the opinion of an expert as to whether defendant signed the check or whether his fingerprints appear thereon, that an examination of the check by a qualified expert will show that defendant did not sign it and that his fingerprints do not appear thereon, and that in his opinion the testimony of such an expert is essential to provide defendant with an adequate defense and to establish his innocence. The State contended, in urging the motion be denied, that since the charge against the defendant was attempt to commit forgery by delivery of a forged check, the handwriting of the defendant was not in issue. Furthermore, the State contended that the motion should be denied since there is no statutory authority for appointment of expert witnesses in noncapital cases. After arguments, the court denied the motion.
During the course of the trial defense counsel requested the court to order the prosecution to produce a check which the defense believed was also one of Trein's and which was signed and cashed after defendant was in custody. The court refused to order the production of the other check on the ground that it was irrelevant and immaterial to the question of defendant's guilt with regard to the check presented in the Rockford tavern.
At the outset, it is the opinion of this court that defendant should not have been precluded from offering evidence to prove that a similar traveler's check was forged and cashed after the defendant was in custody. Although the indictment charges defendant with attempt to commit forgery by delivery of a forged check, the prosecution's own witness testified that defendant signed the check in the presence of the bartender. If then, the signature on a check cashed *232 subsequent to defendant's being placed in custody, was the same as that on the check defendant is accused of attempting to deliver, the jury could infer that defendant could not have signed or attempted to deliver either one. In making his offer of proof defense counsel indicated that he could summon witnesses to testify that this other check was signed in the presence of a drug store employee. Surely the signatures on both checks deserve comparison, for if they were both signed by the same person, defendant might have a complete defense. Even though he is not charged with signing the check, the facts of the case point out that if he did not sign it, he did not deliver it. A person charged with a crime should be allowed to make all proper defense and if the evidence offered is competent, it should be permitted to go to the jury for all it is worth. (People v. Colegrove, 342 Ill. 430.) Since the question of whether defendant did sign the check at the Rockford tavern is crucial to his defense, the trial court should have allowed the admission of evidence showing that another of Trein's checks was cashed at a later date. The jury could have reached another verdict had the evidence been allowed and therefore we conclude that its rejection constituted reversible error. People v. Wolff, 19 Ill. 2d 318.
Because of our ruling on the admission of evidence relating to the other check, it is necessary to turn to the constitutional issue raised by the defendant. It is foreseeable that an expert witness will be necessary to compare the signatures on the two checks and therefore we must determine whether or not defendant, as an indigent, can look to the court for the funds with which to hire a questioned document examiner.
It has long been a major goal of our entire judicial system to see that all persons charged with a crime "stand on an equality before the bar of justice in every American court." (Chambers v. Florida, 309 U.S. 227, 241, 84 L. Ed. 716, 724.) Such cases as Gideon v. Wainwright, 372 U.S. 335, *233 9 L. Ed. 2d 799, 83 S. Ct. 792, and Griffin v. Illinois, 351 U.S. 12, 100 L. Ed. 891, 76 S. Ct. 585, have gone far to achieve this goal by assuring indigent defendants, even in noncapital cases, the right to counsel and to appellate review. The problem now facing the court concerns the production of witnesses on behalf of indigents. The Illinois constitution provides, in section 9 of article II, that in criminal prosecutions the accused is entitled to have process to compel the attendance of witnesses in his behalf. In almost identical language the sixth amendment to the United States constitution provides that the accused in criminal cases is entitled to have compulsory process for obtaining witnesses in his favor. Thus it is at once apparent that the right to summon witnesses is fundamental to our legal system. It is defendant's contention that a right so fundamental should not be made to depend upon the financial circumstances of the defendant. We share this view.
The court recognizes that there is a distinction between the right to call witnesses and the right to have these witnesses paid for by the government, but in certain instances involving indigents, the lack of funds with which to pay for the witness will often preclude him from calling that witness and occasionally prevent him from offering a defense. Thus, although the defendant is afforded the shadow of the right to call witnesses, he is deprived of the substance.
The value of an expert witness's testimony lies in his experience and, more particularly, in his preparation. Although a subpoena would suffice to compel his appearance at trial, this appearance by itself would be of no value unless he had been able to make findings upon which to base his testimony. It is the cost of making these preparatory findings which the defendant feels should be borne by the government.
Indeed, the State legislature has taken a similar view but only in certain instances, the most pertinent of these being in capital cases where the court is allowed to order the *234 county treasurer to pay a reasonable fee, not to exceed $250 for each defendant for expert witnesses in support of the accused. (Ill. Rev. Stat. 1965, chap. 38, par. 113-3(e).) While we commend this legislative policy, we are of the opinion that in certain instances this policy should be extended to noncapital felonies. The constitutional provisions for compelling the attendance of witnesses make no distinction between capital and noncapital cases and neither should the safeguards for a fair trial.
Whether it is necessary to subpoena expert witnesses in order to assure a fair trial will depend upon the facts in each case. There are instances in noncapital cases where an expert might be necessary to establish a defense. Here a handwriting expert could give a professional opinion as to whether the defendant signed the check he is accused of attempting to deliver, and could compare the signature on that check with the signature on the check which was signed and delivered while defendant was in custody. If it is his opinion that defendant could not have signed it, then the jury could be permitted to draw the conclusion that defendant is innocent. Despite the language of the indictment, the issue of handwriting goes to the heart of the defense. The opinion of a handwriting expert in this case then may have been crucial, and defendant's lack of funds prevented him from presenting to the jury evidence which may have established his innocence. We hold that under the facts presented in this case defendant was entitled to a reasonable fee for the purposes of hiring a questioned document examiner. Recognizing that the payment of expert witness fees is an appropriate subject for the legislature, as is the payment of legal costs and fees, (see People ex rel. Conn v. Randolph, 35 Ill. 2d 24,) we trust the General Assembly will consider the expansion of section 113-3(e) to include noncapital cases where expert testimony is deemed by the trial judge to be crucial to a proper defense. Such a step has been taken by the California legislature, (Cal. C.C.P.A., sec. *235 1871,) and appears to have met with satisfactory results. In view of our decision regarding the admissibility of the subsequently presented check and the defendant's right to an expert witness, this cause must be remanded for a new trial.
We shall briefly consider some of the other points raised by the defendant since they relate to matters which foreseeably might arise at the new trial. He first contends that the indictment charging him with attempt fails to charge an offense since "failure" was not alleged. Section 8-4 of Criminal Code of 1961 clearly points out that all that need be shown in a charge of attempt is the intent to commit a specific offense and an overt act constituting a substantial step toward commission of the crime. (People v. Richardson, 32 Ill. 2d 497, 502.) As the committee comments to the statutory provision point out, it is no longer the law in Illinois that the attempt must fail.
The defendant contends that the indictment misnames him and that substantial injustice resulted therefrom. Although the defendant was named in the indictment as "Larry Watson" he asserts that his true name is Donald McCain. We are unable to ascertain from the record just how this mix-up in names occurred but we note that the indictment was returned and the defendant arraigned, and a pretrial motion to dismiss on the grounds that the indictment failed to allege an offense was filed and denied before the defendant's "true name" was revealed in his motion requesting the court to order funds enabling him to hire an expert witness.
Despite the fact that this motion for funds revealed defendant's true name, it was not until four days later that defense counsel renewed his motion to dismiss the indictment on the additional ground that the defendant was misnamed. This motion was likewise denied.
We note that throughout the presentation of the State's case the defendant was referred to as "Larry Watson" *236 without objection. It was not until the defense presented its sole witness that defendant's true name was disclosed to the jury on direct examination. After the trial defendant filed a motion for a new trial and a motion for arrest of judgment, neither of which mentioned or challenged the misnomer. Both of these motions were denied.
It is our conclusion that the misnaming resulted in no substantial injustice to the defendant. Moreover, since both names do appear in the record, defendant could not be subject to double jeopardy. For the sake of clarity, however, we trust that future reference to the defendant will indicate his true name.
Another contention of the defendant is that the court erred in allowing a police officer to testify that a witness had identified the defendant as the person who signed and presented the check in defendant's presence. The police officers further testified that defendant remained silent. Although ordinarily conversation in the presence of defendant is hearsay and inadmissible, there is a recognized exception in cases where a defendant stands mute in the face of an accusation. When, as here, an incriminating statement is made in the presence and hearing of the accused, and such statement is neither denied nor objected to, both the statement and the fact of his failure to deny are admissible as evidence of the truth of the accusation. (People v. Norman, 28 Ill. 2d 77; People v. Braverman, 340 Ill. 525.) We make note of the fact that defendant was sentenced prior to the effective date of Miranda v. Arizona, 384 U.S. 436, 16 L. Ed. 2d 694, as determined in Johnson v. New Jersey, 384 U.S. 719, 16 L. Ed. 2d 882.
The defendant also contends that the court erred in failing to order the production of a police report made from notes which a police officer made while interviewing one of the identifying witnesses. Defendant contended that this was a "statement" made by the witness and, relying on our decision in People v. Wolff, 19 Ill. 2d 318, cert. den. 364 U.S. 874, *237 5 L. Ed. 2d 96, requested that the police report be turned over to him. In the Wolff case we announced our adherence to the Federal rule as stated in Palermo v. United States, 360 U.S. 343, 3 L. Ed. 2d 1287. (Codified in Title 18, U.S.C., sec. 3500.) A review of this rule will point out that the term "statement" includes "a stenographic * * * recording * * * or a transcript thereof, which is a substantially verbatim recital of an oral statement made by said witness to an agent of the government and recorded contemporaneously with the making of such oral statement." (Title 18, U.S.C., sec. 3500, subsection e.) In this case the police officer testified that his notes contained exactly what the witness told him and that the report was made up from the notes. Such being the case, the report contained a "statement" to which the defendant was entitled. Although defendant was supplied a copy of the report before the close of the trial, he was entitled to have it during the testimony of the witness from whom it was taken. The error was harmless in view of defendant's later obtaining the report, but it was nevertheless error.
The court has examined the other points raised by the defendant, and finds them to be without merit.
The judgment of the trial court is reversed and the cause remanded for a new trial in accordance with the views expressed in this opinion.
Reversed and remanded.
Mr. JUSTICE HOUSE, specially concurring.
I concur with the holding that defendant under the circumstances of this case was entitled to have an expert witness examine the questioned document, but I do believe that the majority has gone too far when it apparently equates the legislative pronouncement in section 113-3(e) of the Code of Criminal Procedure, (Ill. Rev. Stat. 1965, chap. 38, par. 113-3(e),) with the requirements of due process. I feel that the defendant in this case had the right to have the *238 check examined by handwriting and fingerprint experts, but I do not think he is "entitled to a reasonable fee for the purposes of hiring a questioned-document examiner".
Section 113-3(e) provides, "In capital cases, in addition to counsel, if the court determines that the defendant is indigent the court may, upon the filing with the court of a verified statement of services rendered, order the county treasurer of the county of trial to pay necessary expert witnesses for defendant reasonable compensation stated in the order not to exceed $250 for each defendant." The legislature has seen fit to limit this provision to capital cases. To expand the philosophy and force of this section to cover this case is to legislate by judicial metaphysics.
We have held on several occasions that the refusal to furnish an indigent defendant with an expert witness or witnesses in addition to those already produced by the People on the same issue does not constitute a denial of due process in the absence of a showing that the People's expert witness or witnesses gave other than their honest and unprejudiced opinion based upon their special knowledge and examination. People v. Carpenter, 13 Ill. 2d 470 (psychiatrist); People v. Myers, 35 Ill. 2d 311 (psychiatrist); People v. Nash, post 275 (ballistics).
In this case the People produced no expert testimony as to whether defendant signed the check or whether his fingerprints appeared on it. Under the facts of this case, we have decided that there is a reasonable doubt of defendant's guilt and that such opinion evidence is necessary in order to convict defendant. It seems to me our opinion should go no further than this. To hold that defendant should hire a questioned-document examiner is in effect asking him to prove himself innocent. If the People do produce such testimony, then the rulings in Carpenter, Myers and Nash become operative.
For still another reason, I think that the majority opinions has gone beyond the requirements of due process of *239 law. It holds that the indigent defendant should be provided with funds to hire a questioned-document examiner. This is in sharp contrast with the constitutional provision guaranteeing the right to counsel, which has never been construed to mean that funds should be paid to an indigent defendant with which to pay counsel of his choice. The legislature in section 113-3(b) has provided that the trial court shall appoint an attorney for an indigent defendant and not that the court furnish funds with which an indigent may retain counsel.
I think this court should go no further than to state that defendant was not proved guilty beyond a reasonable doubt and reverse and remand the cause for a new trial. In my opinion, the majority has exceeded the bounds of judicial restraint in ordering the county treasurer to pay the fees of an expert witness hired by defendant.
Mr. JUSTICE UNDERWOOD, concurring in part and dissenting in part:
I agree that this case must be remanded for a new trial because of the trial court's error in precluding defendant from offering evidence that a similar traveler's check was forged and cashed after defendant was in custody, but I cannot agree with the extension of the defendant's right to the assistance of expert witnesses which is accomplished by the majority opinion.
The General Assembly has (Ill. Rev. Stat. 1965, chap. 38, par. 113-3(e)) provided for public payment of a maximum of $250 as fees to necessary expert witnesses for indigent defendants in capital cases. It seems to me that this legislative expression of the extent to which the State must provide expert witnesses for indigent defendants is binding upon this court unless we are prepared to say that either the State or Federal constitutions give such persons a greater right. No United States Supreme Court decision of which I am aware so holds. The majority opinion in this *240 case cites decisions of that court (Gideon, Griffin) in which the rights there proclaimed were found to be constitutionally guaranteed, but the majority here do not specifically hold the newly announced rights of indigent defendants to expert witnesses at public expense to be constitutional in nature. Nor, in the absence of a compelling Supreme Court decision, could such conclusion easily be reached, for we have indicated the contrary in three recent cases, in the last of which the opinion was adopted only last term, (People v. Nash, post 275; People v. Myers, 35 Ill. 2d 311; People v. Carpenter, 13 Ill. 2d 470), none of which are even mentioned, much less over-ruled, by the majority herein. If these decisions are correct, as I believe them to be, the sole remaining basis for the majority opinion is that those who concur therein disagree with the wisdom of the legislative action in that they regard it as too restrictive. That such is the case seems further evident from the "trust" announced by the majority that "the General Assembly will consider the expansion of section 113-3(e) to include noncapital cases where expert testimony is deemed by the trial judge to be crucial to a proper defense."
I do not quarrel with the majority premise that the bare right to subpoena expert witnesses is of little value, for without an opportunity for pre-trial preparation the value of the expert's testimony would be, in all likelihood, substantially reduced. And, while an expert may undoubtedly be subpoenaed and compelled to appear, it seems to me there are substantial constitutional questions (deprivation of property without due process) as to whether a court may compel him to expend his time and apply his expertise to pretrial examination of documents without compensating him therefor. But these factors do not invalidate the legislative limitation upon the type of case in which expert assistance shall be available to indigent defendants unless the right thereto is constitutional in dimension. There are, in fact, compelling reasons for such limitations. It would be unrealistic *241 to assume that the holding in the majority opinion that there are "instances in noncapital cases" where experts must be furnished indigent defendants will result in other than a request for such assistance by such defendants in most cases involving issues upon which an expert could conceivably be employed. We are aware, from the substantial number of records coming before us, that the trial courts frequently refer defendants to clinics or private physicians for the purpose of pretrial competency examinations. In all of such cases, presumably, the indigent defendant will now also be entitled to examination by his own psychiatrist or psychologist or both. Cases involving signatures, finger prints, chemical analyses and ballistics, to mention only a few, will automatically qualify as may every case in which an expert in any field appears for the State either as a witness or assists in pretrial investigative or preparatory activities.
While it is not my intention to make an ad terrorem presentation, it seems proper to point out the substantial arguments against the result reached by the majority without any constitutionally imposed necessity for so doing, and in the face of legislative decision to the contrary.
I would abide by our earlier indications in Nash, Myers and Carpenter and uphold the trial court's action in denying defendant's request for expert assistance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1956671/ | 19 B.R. 713 (1982)
In the Matter of CHAPTER 13, PENDING AND FUTURE CASES.
Bankruptcy No. 82-5002.
United States Bankruptcy Court, W.D. Washington.
February 24, 1982.
On Reconsideration May 7, 1982.
*714 Gene S. Anderson, U.S. Atty. by David E. Wilson, Asst. U.S. Atty., Seattle, Wash., for United States.
Quigley, Hatch, Loveridge & Leslie by Thomas T. Glover, Seattle, Wash., for respondent.
OPINION
PETER M. ELLIOTT, Bankruptcy Judge, sitting by special assignment.
Irwin Kleinman is before the court to show cause why he should not be removed as Chapter 13 trustee in all pending cases. In addition, Kleinman seeks reconsideration of this court's order of August 14, 1981 terminating his appointment as Standing Trustee for Chapter 13 cases.
The issue is whether Irwin Kleinman sexually harassed his employees and, if so, is sexual harassment cause for termination of his appointment and removal from pending cases.
The order to show cause re removal as trustee from pending cases and respondent Kleinman's motion for reconsideration of the order of August 14, 1981 terminating him as standing trustee as to future Chapter 13 cases came on regularly for hearing on February 8 and 9, 1982 and were submitted for decision.
I have not considered the findings of the Washington State Human Rights Commission. I have drawn no inferences from the fact that Kleinman is being prosecuted by the State of Washington for the crime of indecent liberties, a felony, or from the fact that Kleinman asserted his privilege against testifying in the hearing before me under the Fifth Amendment to the United States Constitution.
TERMINATION OF APPOINTMENT AS STANDING TRUSTEE
11 U.S.C. § 1302 authorizes the court to appoint a trustee in Chapter 13 cases. If the number of cases are high enough, the court may appoint a standing trustee, § 1302(d). If a court has a standing trustee, he automatically serves as trustee in all Chapter 13 cases in the district.
If a person is competent to perform the duties and has an office in or adjacent to the judicial district, he or she is eligible to be appointed as trustee, 11 U.S.C. § 321. The only other requirement is that they be able to post a bond.
Except for the foregoing requirements, the judge's discretion in appointing a trustee is unfettered. The judge may decide not to appoint an eligible individual because he doesn't like the color of his or her hair. The disappointed would-be trustee is not entitled to a hearing; he has no vested interest in the position as to future appointments.
*715 The court's order of August 14, 1981, terminating Kleinman as standing trustee as of August 21, 1981 as to new cases filed after August 21, 1981 is entirely proper and a valid exercise of judicial discretion. Therefore, Kleinman's motion for reconsideration should be denied.
REMOVAL AS TRUSTEE IN EXISTING CASES
Kleinman is the duly appointed and qualified trustee in all Chapter XIII cases filed under the former Bankruptcy Act and in all Chapter 13 cases filed before August 21, 1981 under the new Bankruptcy Code.
The procedure for removal of Kleinman as trustee in both Chapter XIII cases and Chapter 13 cases is the same. Notice and hearing is required and cause for his removal must be shown. Bankruptcy Rule 13-211(c) and 11 U.S.C. § 324.
Kleinman has been the standing trustee in Chapter 13 and Chapter XIII cases since 1975. In 1977 he hired Ferrol Carlson as a clerk in his office. Carlson worked continuously for Kleinman until June 19, 1981 at which time she was fired by Kleinman's assistant. That evening, after normal office hours, Carlson approached Kleinman concerning her termination. Kleinman rescinded her termination and held her, kissed her, and fondled her breast. Kleinman then exposed his penis and caused her to masturbate his penis. Carlson submitted to Kleinman because she was afraid of him and because she felt that her continued employment depended on her submission.
Collette Beares worked for Kleinman in his Chapter 13 office between December 1979 to July of 1980. Kleinman made numerous unwelcome advances to Mrs. Beares, fondled her, kissed her and forced her to masturbate his penis. Mrs. Beares finally quit to escape Kleinman's attentions.
The testimony of Beares was corroborated by another employee, Michelle Berry. Ms. Berry observed Kleinman's conduct towards Mrs. Beares. Ms. Berry was also the recipient of an unwelcome advance by Kleinman. Kleinman's propensity to force himself upon women was corroborated by Mary Champux. Ms. Champux sought employment in Kleinman's office. During the interview, he offered her $1,000 per month to start, substantially more than she was then earning. Kleinman trapped her against the wall, kissed her and suggestively pushed his body against hers. She was frightened and offended and did not accept the employment.
The evidence is overwhelming that Irwin Kleinman sexually harassed at least two of his female employees.
There are no reported cases under the new Code as to cause for removal as trustee, but quite a few under the Act. From those cases it appears that cause for removal as trustee involves the performance of his official duties.
In re Carothers & Farmington Shoe Co., 192 F. 691 (W.D.Pa.1912) A trustee should be removed when he neglects his duty or fails to pursue voidable transfers.
Zimmerman v. Farmington Shoe Co., 31 F.2d 405 (1st Cir. 1929) Trustee removed: conflict of interest, bias, dishonesty, inability to work efficiently with creditors, best interests of estate.
Matter of Oliveri, 45 F. Supp. 32 (E.D.N.Y.1942), conflict of interest disclosed after appointment, trustee had been officer and attorney of bankrupt's corporate landlord.
In re Savoia Macaroni Mfg. Co., 4 F. Supp. 626 (E.D.N.Y.1933), trustee removed clash of interests, trustee removed to restore harmony among creditors and trustee.
Bollman v. Tobin, 239 F. 469 (8th Cir. 1917), trustee removed where he had lost the confidence of the creditors and cooperation was impossible.
Matter of Stephens & Co., 30 F.2d 725 (S.D.Cal.1928), trustee improperly taking compensation before approval received; carelessness and negligence in rendering accounts; purchased property of the estate.
In re Allen B. Wrisly Co., 133 F. 388 (7th Cir. 1904), trustee removed after concealing facts and making false representations to creditors in order to obtain agreement to composition.
*716 In re Freeport Italian Bakery, Inc., 340 F.2d 50 (2nd Cir. 1965), trustee removed where he had concealed his blood relationship with officers of the bankrupt and had exaggerated a claim in his own behalf and on behalf of relatives; fraud or actual injury to interest of the estate required.
In re Marraccini, 187 F. Supp. 610 (N.D. Cal.1960), referee directed to conduct hearings on whether trustee was elected by attorneys in exchange for promise to retain them; such a bargain would justify denial of fees or removal.
In re Automated Business Systems, Inc., 642 F.2d 200 (8th Cir. 1981), creditor properly brought fraudulent conveyance action where trustee refused to act; dicta: trustee who fails to perform duties may be removed.
At 63 Am.Jur.2d 752, the editors state: § 202. Removal for cause.
Instead of enumerating particular causes for the removal of public officers, their superiors in authority may be empowered to remove them for "cause." The phrase "for cause" in this connection means for reasons which the law and sound public policy recognize as sufficient warrant for removal, that is, legal cause, and not merely cause which the appointing power in the exercise of discretion may deem sufficient. It has been implied that officers may not be removed at the mere will of those vested with the power of removal, or without any cause. Moreover, the cause must relate to and affect the administration of the office, and must be restricted to something of a substantial nature directly affecting the rights and interests of the public.
The eccentric manner of an officer, his having an exaggerated notion of his own importance, indulgence in coarse language, or talking loudly on the streets, however offensive, will not warrant any interference with his incumbency. Rudeness of an officer not amounting to illegality of conduct, or to oppression under color of office, is not such misconduct as will give cause for removing him from office.
Kleinman has efficiently and honestly performed his duties as Chapter 13 trustee. His sexual harassment of his female employees and Ms. Champux is reprehensible, but it is not legal cause for his removal.
Separate findings of fact and conclusions of law with respect to this ruling are unnecessary. The within Opinion shall constitute my findings of fact and conclusions of law.
MEMORANDUM OF DECISION
On Reconsideration
The government has moved for reconsideration of my opinion dated February 24, 1982 and to amend the order to effect the removal of respondent Kleinman in Chapter 13 cases and Chapter XIII cases in which he was appointed trustee before August 18, 1981.
Cases cited by the government, such as Turner v. Campbell, 5th Cir., 581 F.2d 547 and Wathen v. United States, 208 Ct. Cl. 342, 527 F.2d 1191, involving termination of government employees are distinguishable. There are published regulations defining conduct which is criminal, immoral, indecent or disgraceful in nature as being cause for termination of the employee for the "efficiency of the service." The federal employee is on notice that he or she may be terminated for such conduct.
Trustees serving the bankruptcy court are independent contractors. In the Western District of Washington, the Chapter 13 trustee is appointed by the court under 11 U.S.C. § 1302(a).
Subsection (a) provides administrative flexibility by permitting the bankruptcy judge to appoint an individual from the panel of trustees established pursuant to 28 U.S.C. § 604(f) and qualified under section 322 of title 11, either to serve as a standing trustee in all chapter 13 cases filed in the district or a portion thereof, or to serve in a single case.
Senate Report No. 95-989, 95th Cong., 2d Sess. (1978) 139, U.S.Code Cong. & Admin.News 1978, pp. 5787, 5925.
28 U.S.C. § 604(f) provides that the Director of the Administrative Office of the *717 United States Courts shall name qualified persons to membership on a panel of trustees for each bankruptcy court. That section further provides that the qualifications of persons named to the panel of trustees shall be determined by rules and regulations adopted by the Director. I will take judicial notice that to date the Director has not promulgated any rules or regulations as to the qualifications of trustees. It is interesting to note that § 604(f) also provides that the Director may remove a person from the panel of trustees for cause. This case illustrates that perhaps the Director should consider rules and regulations patterned after the regulations governing the conduct of government employees.
The government also cites cases arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq. But there is no evidence that Kleinman is an "employer" or engaged in "commerce" as those terms are defined in 42 U.S.C. § 2000e(b) and (g). Therefore, he is not covered by the Act. However, Kleinman is subject to the law of the State of Washington.
RCW 49.60.180(3) states that:
It is an unfair practice for any employer:. . . . (3) To discriminate against any person in compensation or in other terms or conditions of employment because of such person's age, sex, marital status, race, creed, color, national origin, . . .
The comparable Federal statute, 42 U.S.C. § 2000e-2(a) provides in part:
It shall be an unlawful employment practice of an employer . . . to discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment, because of such individual's race, color, religion, sex, or national origin;
I found no case in the annotations to RCW 49.60.180 involving sexual harassment by an employer. However, it is appropriate to consider the rulings of Federal courts under 42 U.S.C. § 2000e-2(a) because laws in pari materia should be construed with reference to each other.
The case of Barnes v. Costle, 561 F.2d 983 (C.A.D.C.1977), 46 A.L.R.Fed. 198, and the cases collected at 46 A.L.R.Fed. 224, show that sexual advances by an employer are not actionable under Title VII of the Civil Rights Act of 1964 unless they are imposed as a condition or term of employment.
I found in my opinion dated February 24, 1982 that Ferrol Carlson submitted to Kleinman's advances because she was afraid of him and because she felt her continued employment depended upon her submission. Her feelings concerning employment were reasonable in view of the fact that immediately before the event her employer, Kleinman, had rescinded the termination of her job.
Barnes v. Costle, supra, as well as Tomkins v. Public Serv. Electric & Gas Co., C.A.3d (1977) 568 F.2d 1044 and Miller v. Bank of America, C.A.9th, 600 F.2d 211 indicate a strong Federal policy against women employees being forced to endure offensive and unwelcome sexual advances by their supervisor or employer. I am persuaded that this is also the policy of the State of Washington under RCW 49.60.180 and should be the policy of the United States Bankruptcy Court. Therefore, the government's motion to amend the February 24, 1982 Order should be granted.
Separate findings of fact and conclusions of law with respect to this ruling are unnecessary. The within memorandum of decision shall constitute my findings of fact and conclusions of law. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1968508/ | 123 A.2d 121 (1956)
William D. SPORBORG, Jr., Elizabeth S. Morse, Sidney N. Morse, Jr., Sidney N. Morse, Morton M. Adler, Helen Adler, Nathan Kelmenson, Austin Tobey, and Benjamin M. Gruenstein, Plaintiffs,
v.
CITY SPECIALTY STORES, Inc., a Delaware Corporation, Defendant.
Daniel P. SHEPARD and Mary L. D. Shepard, Plaintiffs,
v.
CITY SPECIALTY STORES, Inc., a Delaware Corporation, Defendant.
Court of Chancery of Delaware, New Castle.
June 8, 1956.
*123 Frank O'Donnell (of Berl, Potter & Anderson), Wilmington and William D. Sporborg, Jr., Port Chester, N. Y., for plaintiffs, except Daniel P. Shepard and Mary L. D. Shepard.
George T. Coulson (of Morris, Steel, Nichols & Arsht), Wilmington, for defendant.
SEITZ, Chancellor.
As a consequence of a merger of Oppenheim Collins & Co., Inc. ("Opcol") and Franklin Simon & Co. into City Specialty Stores, Inc., certain owners of stock of Opcol dissented and requested an appraisal of their shares. The appraiser fixed the value at $30.61 per share as of January 30, 1953, the effective date of the merger. Both the corporation and the dissenting shareholders have filed exceptions to the report of the appraiser and this is the decision thereon.
Preliminarily, it is well established that in an appraisal proceeding under our statute the shares must be valued on a going concern basis. Tri-Continental Corp. v. Battye, 31 Del. Ch. 523, 74 A.2d 71.
Opcol was an old well established specialty sales business, dealing primarily in ladies' apparel and accessories. At the merger date it had about 15 retail stores located in several large and medium sized cities.
The following chart shows the results of the appraiser's findings:
Values of Shares Wgt. Given Value attributable
Value Elements Based on Element Element to Element
-------------- ---------------- -------- ------------------
Assets 42.35 40% 16.94
Earnings 18.50 25% 4.625
Sales 25.27 25% 6.318
Market Value 27.25 10% 2.725
_______
Value of Share 30.608
-------
*124 I believe all exceptions can be determined under the headings which follow.
1. Did the Appraiser Err in Giving Market Value Independent Weight?
I agree with the appraiser that market value is one of the elements to be considered in this type of proceeding. However, after considering it, I do not think it should have been given any independent weight here because the evidence shows that there was no dependable market value at or about the effective date of the merger. Compare Tri-Continental Corp. v. Battye, above. Prior to January 31, 1950, City Stores or Bankers Security controlled 50.84% of Opcol stock. Thereafter additional purchases were made by them so that by January 30, 1953, they controlled 96.21%. For at least two years prior to the merger, City Stores (or Bankers Security, which is treated the same) maintained the market in Opcol with a bid of $27.25 per share, and virtually every transaction during that period was effected for their account. In the last calendar year, 1800 of the 1900 shares traded were purchased by them. Thus the purchases were made almost entirely at a fixed price and at a time when that Corporation was already its majority stockholder. The expert testimony also sustains the artificiality of the $27.25 market value attributed to the stock. Compare Sterling v. Mayflower Hotel Corp., Del.Ch., 93 A.2d 107, 38 A.L.R. 2d 425.
The appraiser held that the situation here differs from the Mayflower case, saying:
"* * * for here the inference that the majority knew that the price it was paying was a fair price or better, is at least of equal validity to the inference that it was paying a greater price than would be justified in a more normal market. In the Mayflower Hotel case, the majority interests had just purchased a large single block of stock and wanted to avoid a charge that they gave `special treatment' to one group."
The difficulty with this alleged distinction is that it ignores the fact of the absence of a market other than that made by one party in interest. The more reasonable inference is that the stockholder holding most of the stock desired to acquire 100% control and thereby remove the problems incident to minority stock ownership. I take judicial notice of the fact that such acquisitions are frequently made at premium prices. To the extent the offering price should be considered, I believe it is fairly reflected in the value elements hereinafter found.
I therefore conclude that the exception to the appraiser's use of market value should be sustained.
2. Did the Appraiser Err in His Computation of Earnings Value?
In arriving at the earnings value to be capitalized the appraiser considered only the fiscal year immediately preceding the effective date of the merger ($1.85). He compared such earnings with comparable stores and apparently concluded that the last year's earnings of Opcol were a reliable figure upon which to capitalize earnings. The appraiser thus appears to have rejected the principle that, rather than immediate prospective income, the average income to be expected over a reasonable period of time is the rule to be followed in making an appraisal. This principal is pointed out in In re General Realty & Utilities Corp., 29 Del. Ch. 480, 52 A.2d 6, 12:
"The stock market valuations are influenced appreciably by prospects for immediate increase and decrease in income; but the long-range prospects furnish the basis for sound valuation."
In Vol. 1 Bonbright, Valuation of Property, p. 253, the author states:
"There is still an agreement among writers that a capitalization of average earnings over a period of 3 to 5 *125 years (occasionally 10 to 15 years) is preferable, in most cases, to a capitalization of the earnings of any single year."
True, the upward trend of this Corporation in the last fiscal year may suggest the likelihood that future earnings may be even greater than those of preceding years. But this does not justify the use of only a single year's earnings. I doubt that the stockholders would have urged the 1952 figures as the sole basis for future earnings' estimates if, instead of being a peak year, it had been an unusually poor one.
Defendant's exception on this point is sustained but as hereafter appears, the final earnings value price employed will be that suggested by defendant.
The defendant Corporation contends that the capitalization rate should have been five and not ten as used by the appraiser.
The task of finding a realistic capitalization rate is fraught with difficulties. Moreover, it can be misleading if the figures are used apart from the facts surrounding the particular corporation involved. Compare Cottrell v. Pawcatuck Co., Del.Ch., 116 A.2d 787; 1 Dewing, Financial Policy of Corporations, 5th Ed., p. 287 et seq.; 1 Bonbright, Valuation of Property, p. 262 et seq.
Mr. Dewing in his work on Financial Policy of Corporations describes the various rates and I believe that Opcol would come under the class discussed in the following quotation from Vol. 1, p. 390:
"Businesses, well established, but involving possible loss in consequence of shifts of general economic conditions. They are strong, well established businesses, but they produce a type of commodity which makes them vulnerable to depressions. They require considerable managerial ability, but little special knowledge on the part of the executives 15%, a value approximately seven times the net earnings."
The capitalization rate of ten used by the appraiser is nearly the top value assigned to an individual business and very few are on this level. It embraces old established businesses with a minimum of risk. Certainly Opcol did not fit this classification. Rather, I believe Opcol optimistically falls within the six to eight capitalization range. The defendant Corporation concedes (brief p. 58) that the earnings value should be $13.00 on the basis of a price earnings comparison which takes into consideration the trend in 1952 and also the five year average.
Since this conceded figure is greater than that reached by capitalizing the average of five years' earnings based even on a multiplier of eight, I will adopt defendant's earnings figure of $13.00 per share.
3. Did the Appraiser Err in Considering "Sales Value" or "Investment Value" as an Independent Element of Value?
Apparently all parties agreed that "Sales Value" or "Investment Value" was a "new" factor insofar as appraisal proceedings are concerned. The element involves the hypothesis that all earnings of a mercantile venture must come from its sales, and management "can" convert an ascertainable portion of the sales into earnings, in this case 25%. Defendant describes it as a constructed market value based upon sales volume. Although, I agree with the appraiser's hypothesis, I do not believe sales value need be used as an independent element of value. It is in effect but another and even more theoretical method of determining earnings value. It thus duplicates that element in these proceedings without purpose.
I have seen no authority for its use as an independent element of value in an appraisal proceeding. New York cases[1] talk of "investment value" but they say:
"* * * investment value * * * takes account of such factors *126 as the capitalization of the company, earnings and dividend record, position in the industry, prospects of the business and the industry, and the over-all value of its securities in relation to general market conditions and the market values of comparable securities."
This is not the type of "investment value" which plaintiffs and the appraiser had in mind. They relied upon a percentage of sales volume. While this may be a practical valuation process for some purposes, for the reasons stated I do not believe it should be employed here.
The exception to the appraiser's use of "sales value" will be sustained.
4. Did the Appraiser Err in Finding an Asset Value of $4,225,000 for the Real Estate Owned by Opcol?
Opcol through wholly owned subsidiaries owned stores in Buffalo, Brooklyn and Philadelphia. The appraiser held that capitalization of net rental value was the best guide to the value of the real estate of the type here involved, basing his opinion on the evidence presented by the real estate experts. He then capitalized such income at the rate of six per cent to arrive at the asset value of such property.
The appraiser, in selecting his approach, must realize that the type of property under investigation is second in importance only to the purpose for which the appraisal is being made. The approach taken by the appraiser here seems to be well recognized and was a proper method when we keep in mind that the assets must be judged on a "going concern" basis.
In the Appraisal of Real Estate, 2d Ed., American Institute of Real Estate Appraisers 1951, at page 76, it is said:
"To estimate investment value in the appraisal of income-producing properties, the income approach will be the dominant approach. But only in rare cases will the estimate of value be based solely on a single approach."
Since the Corporation must be considered as a "going concern" in valuing the stock, rather than as a corporation in liquidation, I see no error committed by the appraiser in using the income capitalization approach here. Nor did the appraiser err when he used the rentals called for in the lease between Opcol and its wholly owned subsidiary. The mere fact that the leases were between a parent and wholly owned subsidiary, does not indicate that the rentals called for were not the fair rental values, particularly when he took into account the testimony of the real estate experts and compared his figures with the rentals of other like stores. Other evidence in the record lends additional support to his conclusion.
The stockholders say the appraiser erred in not considering other methods of arriving at the asset value of such assets. I have reviewed the evidence and find it unnecessary to rule on this point because the resultant difference is not sufficiently great to say that the figures employed by the appraiser are beyond the range of reason when compared with such value based on other valuation methods.
Should the fair value of such assets have been determined by capitalizing the net income at the rate of 5½ per cent, as called for by the stockholders, or seven as asked by the corporation? The appraiser used the rate of six per cent. As the court pointed out in Jacques Coe & Co. v. Minneapolis-Moline Co., 31 Del. Ch. 368, 369, 75 A.2d 244, and Heller v. Munsingwear, Del.Ch., 98 A.2d 774 (cases dealing with capitalization rate of earnings), if the multiplier employed by the appraiser is within the range of reason, the court will adopt it as its own. The reason for this rule is implicit in the imponderables of the valuation process. A review of the evidence shows that the capitalization rate of six per cent is well within the range of reason and therefore the court concludes that its use was proper.
Plaintiffs urge that the list of charge accounts represents an asset to be *127 valued independently. Other stores, in the same line as Opcol have like lists of charge account customers. Certainly the value of such property is here reflected in the earnings element of value. Moreover, plaintiffs agreed that good will should be omitted as a factor here. I cannot see that the list of charge accounts should be separately valued here.
The exceptions to the appraiser's determination of asset value as $42.35 are overruled.
5. Did the Appraiser Err in the Weight He Accorded the Elements of Value?
Since the appraiser gave independent weight to "market" and "sales" values and since I have ruled that such should not have been done, it will serve little purpose to discuss the various weightings employed by the appraiser.
We have here only two elements of value which in my opinion are entitled to independent weight asset value ($42.35) and earnings value ($13).
Normally much greater weight is accorded the earnings value element for obvious reasons. However, I believe the asset value element must be given somewhat greater weight here because, for some time, Opcol was using more than an average amount of its assets to expand and improve its business activities and much of this was not yet reflected in earnings. Also the degree of the disparity between conceded asset value and earnings value is some further tentative proof that the earnings figure is low. My conclusion is supported in part by a comparison with similar businesses.
I therefore conclude that because of the special circumstances here present the asset value should be weighted at 40% and earnings at 60%. This results in a per share appraised value of $24.74.
6. Interest and Costs
The plaintiffs also except to the appraiser's failure to make an allowance of interest at 6% compounded annually since January 30, 1953.
Costs and interest are provided by statute, 8 Del.C. § 262(h):
"The cost of any such appraisal, including a reasonable fee to and the reasonable expenses of the appraiser, but exclusive of fees of counsel or of experts retained by any party, may on application of any party in interest be determined by the Court and taxed upon the parties to such appraisal or any of them as appears to be equitable, * * *. The Court may, on application of any party in interest, determine the amount of interest, if any, to be paid upon the value of the stock of the stockholders entitled thereto."
Preliminarily, I think under the statute the question of interest is probably a matter for the Court and not the appraiser. So viewing the matter, I believe simple interest should be allowed here for the full period from the effective date of the merger to the date of payment. I decline to engage in a prolonged analysis of the record to attempt to fix blame for the fact that the matter was clearly drawn out too long. The fact is that the defendant Corporation had the use of plaintiffs' money during this period without any ownership obligation toward plaintiffs.
The parties disagree on the rate of interest to be allowed. No evidence was presented to me as to the going rate of money during the period involved. This obligation, as I read the statute, rested with the stockholders. I do not believe the statute necessarily calls for the legal rate. Otherwise, there would have been no purpose to the use of language which appears to leave the matter open. If the parties cannot agree on the rate or do not desire to have a further hearing thereon, it will be fixed at 4% based on the going money rate fixed in a recent case. Compare Speed v. Transamerica Corp., D.C., 135 F. Supp. 176. I do not suggest this is the only approach to a determination of the proper rate of interest.
*128 Costs are generally assessed against the resulting corporation in this type of proceeding. However, this rule is altered if bad faith or other such factors appear. See Meade v. Pacific Gamble Robinson Co., 30 Del. Ch. 509, 58 A.2d 415; Tri-Continental Corp. v. Battye, above. The defendant Corporation charges plaintiffs were guilty of bad faith, occasioned unnecessary expense and made use of the proceeding for the purpose of being bought off. Most of this charge stems from what defendant believes was an unconscionable use of discovery proceedings before the appraiser. However, in substance, the appraiser found no abuse and while the proceedings "got out of hand" I am not prepared to say that the record supports a finding of bad faith, etc.
The costs will therefore be assessed against the defendant Corporation.
Order on notice.
NOTES
[1] Application of Behrens, Sup., 61 N.Y.S.2d 179, 183. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1303719/ | 527 N.W.2d 565 (1995)
In re the ADOPTION OF: A.M.R. and D.N.R. by Carrie Ann Ruppel.
No. C7-94-1429.
Court of Appeals of Minnesota.
February 7, 1995.
Review Denied April 18, 1995.
Greg A. Engel, Engel Law Firm, St. Cloud, for appellant Ruppel.
A. Rhett Taber, Caldecott, Forro & Taber, Minneapolis, for respondent Schum.
Considered and decided by SHORT, P.J., and PETERSON and FOLEY,[*] JJ.
*566 OPINION
DANIEL F. FOLEY, Judge.
Appellant challenges the trial court's order denying her motion to terminate the maternal grandfather's visitation rights upon termination of his daughter's parental rights when appellant stepmother adopted the children.
FACTS
This case arises from the adoption proceedings commenced by appellant Carrie Ann Ruppel to adopt her husband's two children from a former marriage. The children's mother, Kathy Lynn Steo, consented to the stepmother's adoption of her children. The dissolution decree dissolving the marriage of Kathy and David Ruppel awarded David physical custody of the children. After the divorce was finalized, the maternal grandfather, respondent Robert Schum, petitioned for, and was granted, visitation of the children under Minn.Stat. § 257.022, subd. 2 (Supp.1993).
Schum moved to intervene in the adoption proceedings, asking that the adoption not vitiate his visitation rights previously granted in the dissolution proceeding. Ruppel moved the court to terminate the visitation rights previously granted to Schum. The district court denied this motion and reaffirmed its prior visitation order. Ruppel then filed this appeal. Subsequent to the filing of this appeal, the adoption was completed and the trial court again affirmed Schum's visitation rights.
ISSUE
Do the visitation rights previously granted the maternal grandfather pursuant to an order authorized by Minn.Stat. § 257.022, subd. 2 (Supp.1993) survive termination of his daughter's parental rights and the adoption of the children by their stepmother?
ANALYSIS
Appellant contends that the district court erred in determining that the maternal grandfather's visitation rights granted under Minn.Stat. § 257.022, subd. 2 (Supp.1993) survive termination of his daughter's parental rights and adoption of his grandchildren by appellant, the children's step-mother. She argues that Minn.Stat. § 257.022, subd. 3 (1992) and case law support her claim that respondent grandfather's visitation rights were automatically terminated when the court terminated his daughter's parental rights and granted her petition to adopt respondent's grandchildren. We disagree.
The authority of the court to determine visitation rights is a question of law that this court reviews de novo. Simmons v. Simmons, 486 N.W.2d 788, 790 (Minn.App. 1992).
Previously, a grandparent's visitation rights were only derivative through their children. In re Niskanen, 301 Minn. 53, 56-57, 223 N.W.2d 754, 756 (1974). Thus, when a child was adopted, the natural grandparent did not have a legal right to visitation. Id. at 57, 223 N.W.2d at 756. Because of the harshness of this rule, three specially concurring justices in Niskanen requested legislative action. Id. at 57-58, 223 N.W.2d at 757.
Soon after the Niskanen decision, the legislature enacted a statute providing for grandparent visitation when the parent who is their child is deceased or when the parent's marriage is dissolved. 1976 Minn.Laws ch. 198, § 1, codified at Minn.Stat. § 257.022, subds. 1, 2 (1976). This statute has since been amended to expand the list of family court proceedings in which a grandparent may seek a grant of visitation rights. See Minn.Stat. § 257.022, subd. 2 (providing right to seek order granting visitation rights "after commencement of" or "any time after completion of" proceedings for "dissolution of marriage, legal separation, annulment, or determination of parentage"). Under this statute, the court may grant visitation rights to a grandparent "if it finds that visitation rights would be in the best interests of the child and would not interfere with the parent child relationship." Id. Here, respondent grandfather sought and was granted visitation rights in conjunction with the dissolution of his daughter's marriage.
Appellant argues that Minn.Stat. § 257.022, subd. 3 requires that respondent grandfather's visitation rights must be terminated *567 once the children are adopted. Subdivision 3 provides:
[Minn.Stat. § 257.022] shall not apply if the child has been adopted by a person other than a stepparent or grandparent. Any visitation rights granted pursuant to this section prior to the adoption of the child shall be automatically terminated upon such adoption.
Minn.Stat. § 257.022, subd. 3 (emphasis added). Appellant contends that this section means that a stepparent's visitation rights are not affected by an adoption by that parent, or that the grandparent's visitation rights are not affected by a later adoption by that grandparent. We disagree. Appellant's proposed interpretation would vitiate the above provision, rendering it meaningless. If a stepparent or grandparent adopts a child there could be no dispute regarding his or her visitation rights and no reason to preserve those rights because he or she would have physical custody of the child after adoption. We do not adopt the construction of Minn.Stat. § 257.022, subd. 3 proposed by appellant. See Minn.Stat. §§ 645.16 (statute "shall be construed, if possible, to give effect to all its provisions"), .17(1) (1992) (court may not construe statute to provide "a result that is absurd").
We now address the proper construction of the statute. This court has previously stated that when a person who adopts a child is not a stepparent, section 257.022, subd. 3 precludes the grandparent's application of the statute to obtain visitation rights. In re Welfare of R.A.N., 435 N.W.2d 71, 72-73 (Minn.App.1989). Although this statement was not the basis for this court's decision in R.A.N., it is illustrative of the plain meaning of the statute. The first sentence in Minn. Stat. § 257.022, subd. 3 expressly excludes application of the statute "if the child has been adopted by a person other than a stepparent or grandparent." Minn.Stat. § 257.022, subd. 3. The second sentence in subdivision 3 provides that visitation granted under section 257.022 shall terminate "automatically" upon "such adoption." Id. The term "such adoption" clearly refers to an adoption described by the previous sentence; i.e., an adoption by a person other than a stepparent or grandparent. Thus, Minn. Stat. § 257.022 does not automatically terminate grandparent visitation rights when, as here, a stepparent adopts the child. See Minn.Stat. § 645.16 (when words of statute are not ambiguous, court must construe statute as it reads, giving effect to the clear meaning of its language).
Appellant argues that our decision in R.A.N. supports her position. We disagree. The cornerstone of our decision in R.A.N. is that grandparent visitation rights are limited "only in those situations specifically listed" in the statute. Id. at 73. R.A.N.'s mother and father were never married to each other, and R.A.N.'s paternity was determined in a paternity action. Id. at 71. This court applied a prior version of Minn.Stat. § 257.022, subd. 2 which did not include paternity proceedings as a situation under which grandparent rights could be granted. Id. at 72-73 (applying 1986 version of statute). Thus, this court held that the paternal grandparents did not have a statutory right to visitation, but could only claim a common law derivative right to visitation. Id. at 73. Because their son's parental rights were terminated, leaving him with no visitation rights with R.A.N., the paternal grandparents had no derivative right to visitation under common law. Id.
In contrast to R.A.N., the grandparent here possessed a statutory right to visitation before termination of his daughter's parental rights. Thus, the issue is not whether those rights exist, but whether respondent's visitation rights survive adoption by appellant. Further, here the adoptive parent is a stepparent, whereas the adoptive parent in R.A.N. was a foster parent.
Appellant's reliance on Olson v. Olson, 518 N.W.2d 65 (Minn.App.1994), pet. for rev. granted (Minn. Aug. 29, 1994), is unfounded. In Olson, we held that the grandparent's rights to visitation were "completely dependent upon, and secondary to, the parent-child relationship" and "[could not] be enforced against the holder of the primary right." Id. at 66. Appellant contends that Olson applies here to bar the maternal grandfather's visitation rights because she now holds the primary right previously held by the children's natural mother. We disagree. In Olson, the *568 maternal grandparent sought visitation rights over the objection of her daughter, who was divorced and remarried and had physical custody of the child. Id. But for the divorce proceeding, the maternal grandmother would not have been able to seek visitation over the objection of her daughter. Id. at 67. We concluded that the statute did not provide the grandmother a right against the wishes of her daughter after a divorce, but only against a custodial parent who had been an in-law. Id. at 66-67.
The situation we discussed in Olson is precisely the case here. Respondent grandfather brought an action under Minn.Stat. § 257.022, subd. 2 and obtained visitation rights against the wishes of his former son-in-law, the children's custodial parent. Subdivision 3 of the statute provides that these visitation rights do not automatically terminate when a stepparent, like appellant, later adopts the children. To follow appellant's argument that she stepped into the shoes of the natural mother when she adopted the children, and thus has the same primary right of the mother recognized in Olson, is contrary to the terms of the statute and cannot prevail. See Minn.Stat. §§ 645.16 (court must give effect to clear meaning of statute), .17(1) (court may not construe statute to produce an absurd result). Notwithstanding appellant's status as the children's adoptive mother, her objection to the maternal grandfather's continued visitation rights is distinguishable from the daughter's objection in Olson and does not defeat his visitation rights.
Finally, appellant argues that public policy supports her interpretation of Minn.Stat. § 257.022. This court previously has construed Minn.Stat. § 257.022 narrowly and, in doing so, we noted that its statutory interpretation conforms with prior decisions of this court that
recognize the public policy reasons that support a denial of visitation to uphold the independence and decision-making integrity of the newly created family unit.
R.A.N., 435 N.W.2d at 73, quoted in Olson, 518 N.W.2d at 67; accord Kulla v. McNulty, 472 N.W.2d 175, 183-84 (Minn.App.1991) (recognizing that, although visitation by unrelated third party may be in best interests of the child, court must deny visitation that interferes with relationship between custodial parent and child), pet. for rev. denied (Minn. Aug. 29, 1991).
This case does not, however, similarly impact the important public policy regarding the integrity of a newly created family. Here, the district court previously granted visitation rights to respondent grandfather under Minn.Stat. § 257.022, subd. 2 after making the required finding that those rights would not interfere with the parent child relationship. See Minn.Stat. § 257.022, subd. 2 (requiring certain findings to support grant of visitation rights). At the time the court granted those rights, the children were living with their father, the custodial parent, and appellant. There has been no claim that anything has changed since then, save for the adoption of the children by their stepmother. On this record, we conclude that survival of visitation rights previously granted under Minn.Stat. § 257.022 upon the necessary showing that such rights would not interfere with the parent child relationship, does not impact the public policy reasons discussed above when, as here, a child is adopted by a stepparent. The district court did not abuse its discretion in denying appellant's motion to terminate the grandfather's visitation rights.
DECISION
Maternal grandfather's visitation rights, granted under Minn.Stat. § 257.022 prior to stepmother's adoption of his grandchildren, did not automatically terminate as a matter of law when his daughter's parental rights were terminated in the adoption proceedings. The district court did not abuse its discretion in determining that the maternal grandfather's visitation rights survived the adoption of his grandchildren by their stepmother.
Affirmed.
NOTES
[*] Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 2. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1817319/ | 471 So. 2d 325 (1985)
AETNA CASUALTY & SURETY COMPANY
v.
DOLEAC ELECTRIC COMPANY, INC.
No. 54571.
Supreme Court of Mississippi.
March 6, 1985.
Petition for Rehearing Withdrawn July 10, 1985.
*326 Aultman, Tyner, Weathers & Gunn, Lawrence C. Gunn, Jr., Hattiesburg, for appellant.
M. Ronald Doleac, Finch, Wicht & Doleac, Hattiesburg, for appellee.
Before ROY NOBLE LEE, P.J., and DAN M. LEE and PRATHER, JJ.
PRATHER, Justice, for the Court:
This appeal addresses liabilities of a surety on a public works construction bond. Three "co-prime" contractors were awarded contracts by the Mississippi State Building Commission to construct a public building. Doleac Electric Company (Doleac), one of the "co-prime" contractors sued the surety, Aetna Casualty and Surety Company (Aetna), of another prime contractor on the same construction project for breach of contract. From a judgment awarded against Aetna in the Chancery Court of Forrest County, both parties appeal.
Aetna appeals assigning as error:
(1) The chancery court erred in proceeding with the suit where the obligee failed to publish notice of final acceptance of the project and appellee failed to publish notice of the pendency of the suit as required by Miss. Code Ann. §§ 31-5-7 and 31-5-15 (1972).
(2) The chancery court erred in awarding damages for extra labor costs where the work performed was required under the terms of the initial contract;
(3) The chancery court erred in awarding Doleac damages for fixed overhead expenses.
Doleac cross-appeals assigning as error:
(1) The trial court erred in denying appellee damages for loss of profit resulting from breach of contract;
(2) The lower court erred in denying Doleac prejudgment interest on its damages;
(3) The lower court erred in denying Doleac attorney's fees as an item of damage.
I.
On October 15, 1973, the Mississippi State Building Commission, obligee, awarded three separate and substantially identical "co-prime" contracts for the construction of a Student Union Building on the Campus of the University of Southern Mississippi at Hattiesburg. These contracts were with Hanberry Corporation, for the general building construction, Mississippi Mechanical Contractors, Inc., for the mechanical installations and construction, and appellee, Doleac Electric Co., Inc., for the electrical work. The appellant, Aetna Casualty *327 & Surety Co., entered into a performance-payment bond as surety for Mississippi Mechanical Contractors, Inc.
Each of the three co-prime contractors agreed in their respective contracts with the State Building Commission to coordinate their work and cooperate with each other so as to facilitate the completion of the project within 487 days.
On June 2, 1975, Mississippi Mechanical withdrew from the job, defaulting in the performance of its contract with the state. The mechanical construction was completed by another construction company secured and paid by the appellant, Aetna Casualty & Surety Co.
On September 3, 1981, Doleac instituted this action against Aetna for damages caused by the delay in construction resulting from Mississippi Mechanical's default. The suit was originally filed in circuit court with another similar suit by the third co-prime contractor, Hanberry, on the same project. The suit was transferred to chancery court because of the complex issues involved, and according to the briefs, the suit by Hanberry was settled and is not in issue.
II.
The first issue is whether the lack of publication notice of final acceptance and the lack of publication of notice of the pendency of this suit defeated the jurisdiction of the trial court?
The statutory basis of this suit is founded on Miss. Code Ann. § 31-5-1 (1972) et seq. governing public works contracts. The purpose of these provisions is to provide protection for persons providing labor and materials on public construction projects in the absence of mechanics' and laborers' lien rights on public property. Miss. Fire Ins. Co. v. Evans, 153 Miss. 635, 120 So. 738 (1929); National Surety Co. v. Hall-Miller Decorating Co., 104 Miss. 626, 61 So. 700 (1913); Yarbrough, Rights and Remedies Under Mississippi's New Public Construction Bond Statute, 51 Miss.L.J. 351 (1980). The procedure requires two publication notices: (1) by the obligee, State Building Commission, stating that the construction has been given final acceptance to trigger the limitation of actions period and (2) a second publication by a party initiating a suit for unpaid labor or materials against the surety to notify all other unpaid laborers and materialmen who may desire to intervene. The second notice contemplates that only one lawsuit will be filed against a surety. United States Fidelity and Guaranty Co. v. Plumbing Wholesale Co., 175 Miss. 675, 166 So. 529 (1936). Any person entitled to sue may intervene within the time allowed for bringing suit. Miss. Code Ann. § 31-5-9 (1972).
Appellant argues that the chancery court lacked jurisdiction to proceed with this suit because the statutory prerequisites of the two above publications on a performance payment bond for a public construction project have not been met.[1] Miss. Code Ann. § 31-5-7 (1972) provides as follows:
When suit is instituted by any of such persons on a bond, it shall not be commenced until after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract and not later. If the contractor quits or abandons the contract before its completion, suit may be instituted by any such person on said bond and shall be commenced within one year after such abandonment and not later. But said time for the institution of said action shall not begin to run until the obligee shall have made said final settlement or determined said abandonment and published notice thereof in some newspaper published in said county, or if there be none then in some newspaper having a general circulation therein. (Emphasis added).
*328 Additionally, Miss. Code Ann. § 31-5-13 (1972) provides as follows:
In all suits instituted under the provisions of this chapter, notice of the pendency of such suits shall be made by publication in some newspaper of general circulation published in the county or town where the contract is being performed, and if there be no such paper, then in a paper having a general circulation therein, for at least three weeks, the last publication to be at least one week before the trial of said cause. In all such suits the parties interested shall be summoned as provided by section 85-7-145. (Emphasis added).
This Court has repeatedly held that notice of final acceptance and notice of pendency of the suit by laborers and materialmen provided by the statutes governing public work contracts are jurisdictional. Stanton & Associates, Inc. v. Bryant Construction Co. (No. 54,599, decided Feb. 20, 1985, but not yet reported); Travelers Indemnity Co. v. Munro Oil & Paint Co., 364 So. 2d 667 (Miss. 1978); U.S.F. & G. Co. v. Plumbing Wholesale Co., supra; Kershaw v. Day, 176 Miss. 757, 169 So. 690 (1936); Dunn, "Federal and State Statutory and Case Law Pertinent to Construction Contract Claims and Litigation Suits on Public Bonds And Suits on Private Bonds", Construction Litigation 137 (1976). In the case sub judice, it is undisputed that the State Building Commission never published final acceptance of the Student Union Project and Doleac failed to publish notice of the pendency of its suit.
Doleac argues that the above statutory requirements do not apply to a suit by one co-prime contractor against the surety of another "co-prime" contractor, citing Hanberry Corp. v. State Building Commission, 390 So. 2d 277 (Miss. 1980). The Hanberry case arose out of this same Student Union building contract. Hanberry Corp., the general building contractor, sued Aetna as surety for Mississippi Mechanical, claiming as Doleac does in the case at bar that it suffered damages as a result of Mississippi Mechanical's default in the completion of the project. This Court's decision in Hanberry was grounded in the two contracts of the parties. First, the contract of Hanberry with the Building Commission provided that all three co-prime contractors would coordinate their operations with those of the other parallel contractors and settle with the other parallel contractors for any damage to the work for negligence acts. Secondly, the payment/performance bond between Aetna and its principal provided that Aetna would guarantee to perform "all the undertakings, covenants, terms, conditions, and agreements of said contract with [the State Building Commission] ..." undertaken by its principal. 390 So. 2d 281.
This Court concluded in Hanberry that the contract of each co-prime contractor made the other parallel contractors third party beneficiaries. Having determined that third-party beneficiary rights applied, the court concluded that the express terms and extent of Aetna's undertaking under its bond would control its liabilities. Aetna contracted to perform all "undertakings, covenants, conditions, and agreements of said contract" between the Building Commission and Mechanical. A breach was alleged against Aetna "who stepped into the shoes of Mechanical," and a cause of action was stated.
This Court's opinion in Hanberry does not discuss the threshold jurisdictional question raised by appellant's first assignment of error that the failure to give the two statutory notices makes this suit premature.
Therefore, the question which must be addressed is whether a suit by one co-prime contractor against the surety of another co-prime contractor based upon a performance payment bond obtained pursuant to this state's Public Works Contracts statute is subject to the publication and notice requirements of that statute?
To answer this threshold question, this Court notes that Hanberry was appealed to this Court on the sustaining of demurrers by the trial court. The substantive rights of third party beneficiaries under *329 parallel contracts, or co-prime contracts, were addressed by this Court and that cause remanded for a trial on the merits as to Hanberry and Aetna. It was not intended by this Court that, upon remand, the necessary publication notice to creditors to confer jurisdiction to the trial court would not be followed. Rather, it was expected that having settled the unanswered substantive questions of law of Hanberry, that the necessary procedural requisites would be followed. That decision did not hold the publication notice unnecessary, but expected the necessary jurisdictional notices to be given as statutorily required.
The reason and necessity for our expectation is obvious. The purpose of a surety bond on a public works contract is to protect potential claims of unpaid laborers and materialmen. Without the publication notice to this statutorily-protected class, the monetary limit of the surety bond could be exhausted by suits between co-prime contractors leaving unpaid laborers and materialmen without a remedy.
This Court notes that this building contract was let by the State Building Commission to three separate prime contracts. The letting of separate multiple prime contracts is not the usual practice in the construction industry. See Lerner, "Arbitration of Construction Industry Disputes", Construction Litigation at 149-153 (1976).[2] It is unlikely that such a practice was contemplated by the legislature when it enacted sections 31-5-1 et seq. for the protection of those furnishing labor or materials on a public construction project. Further indication that multiple prime contracts were not contemplated by the legislature is the fact that as between co-prime contractors, as one class, and laborers and materialmen, as another class, the statutes Miss. Code Ann. § 31-5-1 et seq., do not address priority of claims as between (1) co-prime contractors and (2) laborers and materialmen.
Having noted this practice of issuing multiple prime contracts, and turning back to the issue before us, this Court holds that the notice requirements of sections 31-5-7 and 31-5-13 are jurisdictional prerequisites to suits between parallel or co-prime contractors under public construction contracts when a surety bond under Miss. Code Ann. § 31-5-1 et seq. is involved. Accordingly, the failure of appellee Doleac to publish notice of the pendency of this suit does render invalid the judgment of the court below to Doleac.
Therefore, in order to protect the potential claims of unpaid laborers and materialmen on this project, we reverse the judgment of the trial court in favor of Doleac and remand for a new trial after such time as appellee Doleac gives notice of this suit as provided by section 31-5-13. If, during the statutory time period for bringing suit, see section 31-5-7, additional claims materialize these claims should, upon application of Aetna, be tried together. See section 31-5-9.
III.
In our supervisory capacity, we address the other assignments of error to avoid a second appeal directed to the same subject matter.
The trial court awarded Doleac $29,495.17 for additional labor costs; $923.16 for the additional cost of builder's risk insurance coverage; $11,924.12 for additional over-head during the over-run period; and $841.34 for interest on retainage.
Aetna does not contest the award for builder's risk insurance coverage, nor the award for interest on retainage funds withheld by the State Building Commission from Doleac during the time of the over-run. Additionally, Aetna concedes that Doleac is entitled to $3,293.32 for increased labor cost as a result of Union pay scale increases which occurred after the scheduled completion date. The bulk of the trial court's award of damages for additional labor and the lower court's award of damage for additional overhead are challenged *330 by appellant's remaining assignments of error.
A. ADDITIONAL LABOR COSTS:
The general rule with respect to damages resulting from breach of contract is that where complete performance is prevented by either party, the other who is willing to perform is entitled to damages sufficient to make him whole. Beech v. Johnson, 102 Miss. 419, 59 So. 800 (1912). The plaintiff in such a case is entitled to recover any damages directly attributable to the defendant's breach. Luria Brothers & Co. v. United States, 369 F.2d 701 (Ct.Cl. 1966); J.D. Hedin Construction Co. v. United States, 347 F.2d 235, (Ct.Cl. 1965).
An element of damage claimed in the case sub judice is loss of productivity of its labor.
That loss of productivity of labor resulting from improper delays caused by defendant is an item of damages for which plaintiff is entitled to recover admits of no doubt, Abbett Electric Corp. v. United States, 162 F. Supp. 772, 142 Ct. Cl. 609 (1958); nor does the impossibility of proving the amount with exactitude bar recovery for the item ... (citations omitted).
It is a rare case where loss of productivity can be proven by books and records; almost always it has to be proven by the opinions of expert witnesses. However, the mere expression of an estimate as to the amount of productivity loss by an expert witness with nothing to support it will not establish the fundamental fact of resultant injury nor provide a sufficient basis for making a reasonably correct approximation of damages. See Wunderlich Contracting Co. v. United States, 351 F.2d 956, 968, 173 Ct. Cl. 180, 199 (1965).
Luria Brothers, supra, at 712-713.
Donald Doleac, duly qualified as an expert in the field of electrical construction, testified that the failure of Mississippi Mechanical to coordinate its work with the other contractors resulted in a substantial loss of productivity on the part of Doleac. Mr. Doleac testified, for example, that the failure of Mississippi Mechanical to insulate pipes prevented the general contractor from installing the ceiling grid; this in turn prevented Doleac from installing the light fixtures. Additionally, Doleac testified that conduit previously installed had to be re-routed as a result of the failure of Mississippi Mechanical to coordinate its work; that no electrical work could be performed in the tunnel area because water had seeped in as a result of Mississippi Mechanical's breach; a boiler couldn't be installed because of unfinished duct work; and that his men had to be moved around in a cost-ineffective manner to work piecemeal in areas of the building.
Malcolm Wetsell, inspector for Benham & Perkins, inspecting architects on the project, also testified that, as a result of duct work left incomplete by Mississippi Mechanical, light fixtures could not be installed by the electrical contractor. George Reed, architect with Landry & Reed, the principal architects on the project, testified that the delay in the progress of the general and electrical contractors was the result of the delay by Mississippi Mechanical. Among the examples given by Mr. Reed were the fact that conduit could not be put in place because Mississippi Mechanical had not installed the necessary ducts and the fact that final electrical connections could not be made because Mississippi Mechanical had failed to install the necessary motors.
In the case sub judice, the unrebutted testimony of Donald Doleac was, unlike the testimony offered in Luria Brothers, corroborated in several material respects. The chancellor's award was not, as appellant suggests, based solely on the testimony of Donald Doleac.
This assignment of error is without merit.
B. OFFICE OVERHEAD:
Aetna acknowledges the general rule that home office overhead is a well-recognized item of damage for delay and an injured party is entitled to recover it. Guy James Construction Co. v. Trinity Industries *331 Co., 644 F.2d 525 (5th Cir.1981); J.D. Hedin Construction Co. v. United States, 347 F.2d 235 (Ct.Cl. 1965); General Insurance Co. of America v. Hercules Construction Co., 385 F.2d 13 (8th Cir.1967).
In the case sub judice Mr. Doleac testified that the overhead expense was calculated by taking the percentage of the overhead attributable to the project (5.9 percent) and applying it to the total overhead expense during the over-run period.
Recovery for office overhead is allowed where the cost of overhead attributable to the particular job is applied prorata to the additional time required to complete the job as a result of the breach. See General Insurance Co. of America v. Hercules Construction Co., supra at 22; Luria Brothers, supra at 710-711; J.D. Hedin Construction Company, supra, at 259.
This assignment of error is without merit.
IV.
On the cross-appeal of Doleac, the first assignment challenges the lower court's denial of appellee Doleac's damages for loss of profit.
It was stipulated at trial that a reasonable amount of profit for an electrical contractor to make on a project such as this is ten percent. Doleac argues that the trial court erred in failing to award damages for profit of $4,141.93 or 10% of the additional labor ($29,495.17) and overhead expense ($11,924.12) awards. In support of this position, Mr. Doleac testified that he would compute profit as 10 percent of the additional labor and overhead expense. Doleac also testified to the necessity of his laborers having to redo items of improperly performed work.
In J.D. Hedin Construction Co., supra, the Court expressly denied a contractor's claim to a profit of 10% on the excess costs incurred upon the defendant's breach of contract. 347 F.2d at 259. This Court finds no error in the chancellor's denial of damages for loss of profit under Doleac's admission of negligence. This Court affirms the trial court's ruling on this issue.
V.
Did the trial court err in denying appellee Doleac prejudgment interest?
Doleac argues that it is entitled to interest of 8% per annum as of July 13, 1976, the date Aetna denied Doleac's claim by letter.
An award of prejudgment interest rests in the discretion of the awarding judge. Glantz Contracting Co. v. General Elec. Co., 379 So. 2d 912, 918 (Miss. 1980); Dunn v. Koehring Co., 546 F.2d 1193, 1201 (5th Cir.), Reh'g Denied in Part, Granted in Part, 551 F.2d 73 (5th Cir.1977). Under Mississippi law prejudgment interests may be allowed in cases where the amount due is liquidated when the claim is originally made, or where the denial of the claim is frivolous or in bad faith. Stanton & Associates, Inc. v. Bryant Construction Co., supra; McDaniel Bros. Construction Co. v. Jordy, 195 So. 2d 922, 927 (Miss. 1967); Cf. O.J. Stanton & Co., Inc. v. Dennis, 360 So. 2d 669, 673 (Miss. 1978); Home Ins. Co. v. Olmstad, 355 So. 2d 310, 314 (Miss. 1978).
In the case sub judice, damages were unliquidated. Doleac does not allege that Aetna's denial of responsibility for damages was either frivolous or in bad faith. To the contrary, the record reflects a legitimate dispute as to the amount of damages.
Therefore, the lower court did not err in denying Doleac's claim for prejudgment interests.
VI.
Did the trial court err in denying appellee Doleac Attorney's fees?
At trial, Doleac's attorneys proved services totaling $5,521.42 (R. 676-682). Doleac argues that the lower court should have awarded attorney's fees since the fees were a direct and immediate consequence of the breach.
*332 The general rule is that exemplary damages are not ordinarily recoverable in actions for breach of contract. 22 Am.Jur.2d, Damages, § 245 (1965). This Court has accordingly held that an award of attorney's fees is improper where the infliction of punitive damages is not justified. Stanton & Associates, Inc. v. Bryant Construction Co., supra; Aetna Casualty & Surety Co. v. Steele, 373 So. 2d 797 (Miss. 1979).
Punitive damages are recoverable in an action for breach of contract where the breach was intentionally wrong or amounted to such insult, abuse or gross negligence as to consist of an independent tort. (R. 367) College Life Ins. Co. of America v. Byrd, 367 So. 2d 929 (Miss. 1979). As stated above, Doleac did not allege or prove conduct on the part of Aetna justifying punitive damages. Accordingly, the trial court's refusal to award attorney's fees was not error.
Finding the appeal premature, the judgment of the lower court is reversed and the cause remanded for giving of proper statutory notice and retrial.
REVERSED AND REMANDED.
WALKER and ROY NOBLE LEE, P.JJ., and HAWKINS, DAN M. LEE, ROBERTSON and ANDERSON, JJ., concur.
PATTERSON, C.J., and SULLIVAN, J., not participating.
NOTES
[1] In 1980, the statutes governing surety bonds on public construction projects were amended, changing the law in this area significantly. However, since the contract upon which this suit is based was entered into before April 1, 1981, the case sub judice is governed by the former statutes. See 51 Miss.L.J. 351 (1981).
[2] The Hanberry decision pointedly acknowledged that this unusual practice "might be questioned in the construction industry ..." 390 So.2d at 282. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3100832/ | The State of TexasAppellee/s
Fourth Court of Appeals
San Antonio, Texas
June 5, 2014
No. 04-12-00540-CR
Ruben ARCE,
Appellant
v.
THE STATE OF TEXAS,
Appellee
From the 111th Judicial District Court, Webb County, Texas
Trial Court No. 2012CRM000033-D2
The Honorable Mark R. Luitjen, Judge Presiding
ORDER
Sitting: Catherine Stone, Chief Justice
Marialyn Barnard, Justice
Patricia O. Alvarez, Justice
The panel has considered the Appellant’s Motion for Rehearing, and the motion is
DENIED.
_________________________________
Patricia O. Alvarez, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 5th day of June, 2014.
___________________________________
Keith E. Hottle
Clerk of Court | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1757782/ | 719 So. 2d 421 (1998)
Angela Armstrong HICKEY and Shawn Edward Hickey
v.
CENTENARY OYSTER HOUSE, et al.
No. 97-C-1074.
Supreme Court of Louisiana.
October 20, 1998.
David A. Szwak, Bodenheimer, Jones & Szwak, Shreveport, for Applicant.
W. Eugene Golden, Huey L. Golden, Joseph M. Clark, Shreveport, for Respondent.
LEMMON, Justice.[*]
This is an action brought by the patron of a restaurant to recover damages sustained when she was shot by an unknown assailant during an armed robbery in the parking lot. Defendants include a private security company, who provided security at the restaurant, and the security company's general liability insurer. The case is before this court in the pre-trial stage to resolve a conflict between the circuits on whether the extremely broad assault and battery exclusion in the general liability insurance policy issued to a private security company conflicts with the public policy of protecting the public from unqualified security agents set out in the Private Security Regulatory and Licensing Law, La. Rev.Stat. 37:3270-3298.
Facts
On October 1, 1994, plaintiff and a group of friends were socializing at the Centenary Oyster House. Upon leaving shortly before closing time, the group proceeded to Centenary's rear parking lot, where plaintiff began unlocking the car she was to drive. An *422 armed robber wearing a ski mask approached the group on the passenger's side of the car and demanded the purses of the two women standing on that side. At the same time, plaintiff opened the door on the driver's side, illuminating the inside car lights and apparently startling the robber. The robber responded by firing his gun at plaintiff through the passenger window and shooting her with two bullets. This suit followed against, among others, (1) Centenary; (2) Melvin Ashley d/b/a Security Professionals of Shreveport, the company that provided security for Centenary at the restaurant; and (3) Colony Insurance Company, who issued Ashley a commercial general liability insurance policy.
Colony filed a motion for summary judgment, urging lack of coverage based on the assault and battery exclusion in the policy. Plaintiff opposed the summary judgment on several bases. As to the pertinent contention, plaintiff argued that the assault and battery exclusion removed from coverage almost every injury for which a security company would be liable to a person whose injury was caused solely or partially by the negligent or intentional act or omission of an employee of the security company. Relying on the requirement in La.Rev.Stat. 37:3276E that a private security agent must have in effect a general liability insurance policy with specified minimum limits in order to maintain its license, plaintiff further argued that an insurance policy with such pervasive exclusions did not comply with the statutory requirement and was against public policy.
The trial court granted the motion for summary judgment and dismissed Colony from the action.
The court of appeal reversed. 29,221 (La. App.2d Cir.2/26/97); 690 So. 2d 858. The intermediate court held that the public policy stated in La.Rev.Stat. 37:3270, which sets forth the purpose of the Private Security Regulatory and Licensing Law, and the statutory requirement of liability insurance as a prerequisite to the licensing of a security agent override the assault and battery exclusion in the insurance policy issued by Colony. Noting the legislative intent to protect the public against negligent or intentional injury caused by an unqualified private security agent and to require insurance coverage for such an injury, the court concluded that the assault and battery exclusion defeats the purpose of requiring a private security agent to provide liability insurance. The court further reasoned that the Legislature had dictated compulsory insurance beyond an ordinary insurance contract and held that a "liability insurer who writes the required coverage for a private security company may not, by a policy provision, narrow the liability coverage reasonably contemplated and required by the statute." 29,221 at p. 8; 680 So.2d at 863.
On Colony's application, we granted certiorari, 97-1074 (La.6/20/97); 695 So. 2d 1339, to address the public policy issue and to resolve the conflict between the decision by the court of appeal in this case and the decisions in Jackson v. Rogers, 95-0486 (La.App. 1st Cir.11/9/95); 665 So. 2d 440, and Michelet v. Scheming Security Services, Inc., 95-2196 (La.App. 4th Cir.9/4/96); 680 So. 2d 140, cert. denied, 96-2419 and 96-2429 (La.12/13/96); 692 So. 2d 371, 372.
Private Security Law
The purpose of the Private Security Regulatory and Licensing Law, which generally regulates private security agents, is stated in La.Rev.Stat. 37:3270, as follows:
A. The Legislature of Louisiana declares that it is necessary to require the licensure of private security agents and businesses to be in the best interest of the citizens of this state.
B. The purpose of this Chapter is to require qualifying criteria in a presently unregulated professional field in which unqualified individuals may injure the public. The requirements of this Chapter will contribute to the safety, health, and welfare of the people of Louisiana.
The Act generally provides for a board of examiners, who examine and investigate applicants and issue licenses, and for qualifications of licensees. A licensee is specifically required to carry general liability insurance *423 in a specified minimum amount,[1] and an armed security guard is required to have a firearm permit issued by the state. The Act also provides detailed rules regarding training, uniforms, and license fees and renewals. Overall, the Act is a detailed licensing scheme for the profession of private security agents.
Other states, in the exercise of their police power, have adopted similar statutory schemes. John C. Williams, Annotation, Regulation of Private Detectives, Private Investigators, and Security Agencies, 86 A.L.R. 3d 691 (1978); see, e.g., Ohio Rev.Code Ann. § 4749.03 (requiring, among other things, that a licensee maintain liability insurance coverage in a specified minimum amount). The purpose and goal behind these enactments is "to provide regulation for, and raise the standards of, private investigators," "`to legitimatize and professionalize' the private security business and to `drive the crooks out of the industry.'" Comment, Reality and Illusion: Defining Private Security Law in Ohio, 13 U. Tol. L.Rev. 377, 386 n. 38 (1982). Stated otherwise, these enactments set minimal standards to weed out "crooks, rapists, and burglars from upstanding career security professionals." Julie Brienza, Guards Offer Protection but Pose Potential Liability Problems, 30 Trial 12, 13 (Aug.1994). The requirement of general liability coverage is simply one aspect of the qualifying criteria required to obtain a license.
Assault and Battery Exclusions
A general liability insurance policy is not intended to cover injuries arising from intentional acts. Lee R. Russ and Thomas F. Segall, 7 Couch 3d on Insurance § 101:22 (1997). Nonetheless, liability policies generally contain specific exclusions from coverage for bodily injuries which are intentionally inflicted. William Shelby McKenzie and H. Alston Johnson, 15 Louisiana Civil Law TreatiseInsurance Law and Practice § 164 (1986). Some policies contain an express exclusion for assault and battery, which has been held effective regardless of whether the insured was a participant in the altercation. Id. Assault and battery exclusions have become commonplace in policies issued to operators of bars, restaurants and similar businesses with a party atmosphere to expressly exclude such acts from coverage. Kimberly J. Winbush, Validity, Construction, and Effect of Assault and Battery Exclusion in Liability Insurance Policy at Issue, 44 A.L.R. 5th 91 (1996).
Louisiana courts have routinely upheld assault and battery exclusions in other contexts. See Ledbetter v. Concord General Corp., 95-0809 (La.1/6/96); 665 So. 2d 1166, which upheld the validity of a policy provision excluding coverage of an innkeeper's liability for the rape of a guest by an unknown assailant whose entry into the guest's room was facilitated by the innkeeper's failure to repair a defective lock.[2]See also Eric Mills Holmes, 4 Holmes' Appleman on Insurance 2d § 23.4 (1998) (noting "[i]ncreasingly, policies are excluding coverage for assaults and batteries" and citing cases enforcing such exclusions). The question presented here is whether the status of the insured as a private security agent, as opposed to an innkeeper or other type of business enterprise, warrants a different result, at least as to this particular exclusion which provides:
This insurance does not apply to Bodily Injury or Property Damage arising from:
A) Assault and Battery committed by any insured, any employee of any insured, or *424 any other person, whether or not committed by or at the direction of any insured,
B) The failure to suppress or prevent assault and battery by a person in A) above,
C) The failure to provide an environment safe from assault and battery or failure to warn of the dangers of the environment which could contribute to assault and battery,
D) The negligent hiring, supervision or training of any employee of the insured in A) above,
E) The use of any force to protect persons or property whether or not the bodily injury or proeprty [sic] damage was intended from the standpoint of the insured or committed by or at the direction of the insured.
Plaintiff contends that such a pervasive assault and battery exclusion in a general liability insurance contract issued to a private security agent to fulfill its statutory licensing requirement is not in harmony with the public policy espoused by the Act of protecting the public from unqualified security agents.
Public Policy
The court of appeal in this case, agreeing with plaintiff's public policy argument, reasoned:
We discern the purpose of the statute in requiring licensed private security guards to have liability insurance is to protect citizens who may suffer injury caused, either intentionally or negligently, by a private security guard. It is not inconceivable that a licensed and armed private security guard may intentionally or negligently shoot a citizen or that a robber threatening a citizen, whose "safety" the guard is responsible for guarding or protecting, might intentionally shoot a citizen. In either instance, where legal responsibility might attach because of particular circumstances, to allow the required liability policy to exclude "assault and battery" coverage would defeat the purpose of requiring such insurance of the licensed security guard who fails in the responsibility.
29,221 at p. 8; 690 So.2d at 863. The intermediate court acknowledged the contrary holding in Jackson v. Rogers, 95-0486 (La. App. 1st Cir.11/9/95); 665 So. 2d 440, but noted the Jackson opinion did not consider this stated legislative purpose of protecting public safety.
The protection of public safety is a prominent aspect of liability insurance in general. As the court noted in Sledge v. Continental Casualty Co., 25, 770 (La.App.2d Cir.6/24/94); 639 So. 2d 805, Louisiana courts have recognized the public policy that liability insurance should protect innocent accident victims. That public policy has been cited as requiring certain coverage be included in every automobile liability policy.
In drawing an analogy to cases involving automobile liability insurance policies, the court of appeal in the present case stated:
From time to time courts of this state have similarly voided liability policy provisions that were in derogation of compulsory insurance laws in the context of automobile insurance coverage. The ultimate coverage of such compulsory insurance is dictated from time to time by the legislature. Statutes may impose coverage obligations on the insurer that are beyond the ordinary insurance agreement or contract in some specified circumstances. (citations omitted).
29,221 at pp. 8-9; 690 So.2d at 863. Based on that analogy, the court of appeal concluded that the assault and battery exclusion violates the legislative policy of the Private Security Regulatory and Licensing Act.
Analogizing public policy concerns in the context of mandatory automobile insurance to other contexts is an "uphill battle," although it may be "tempting" to do so. Lee R. Russ and Thomas F. Segall, 7 Couch on Insurance 3d § 101:18 (1997). We decline to apply that analogy in the context of the present case for two reasons.
First, as the court of appeal in Jackson stressed, neither La.Rev.Stat. 37:3276E of the Private Security Regulatory and Licensing Law nor the Louisiana Insurance Code (Title 22) require any particular form of general liability insurance policy. La.Rev.Stat. 37:3276E, in requiring "general liability insurance" to be provided by the "licensee," *425 does not mandate coverage of, or prohibit exclusion of, injuries resulting from assaults and batteries or from negligent hiring, training or supervision of security agents. Neither does the statute require that the insurer issue, or that the insured obtain, a policy with unrestricted or "all-risk" coverage. Moreover, La.Rev.Stat. 22:6(4) defines liability insurance simply as "[i]nsurance against the liability of the insured for the death, injury or disability of an employee or other person, and insurance against the liability of the insured for damage to or destruction of another person's property." Additionally, the Insurance Code expressly permits an insurer to impose limitations on its liability in the form of exclusions. La.Rev.Stat. 22:620.
Hence, unlike the automobile insurance and uninsured motorist statutes, the Private Security Regulatory and Licensing Law does not expressly mandate specific elements of liability coverage (such as omnibus coverage) that must be provided and does not impose any duties on the insurer. Rather, it merely mandates that the licensee maintain a minimal level of general liability coverage. There is no indication in the licensing law itself, in its stated purpose, or in its legislative history that the Legislature intended to require insurance coverage for security agents without the usual exclusions and restrictions.
Another significant impediment to the analogy drawn by the court of appeal between mandatory automobile insurance and the liability insurance coverage mandated for licensing private security agents is that the mandatory automobile insurance provisions are directed to insurance companies. On the other hand, the requirement of general liability insurance for the licensing of private security agents is expressly directed to the security agent.
Second, when the statutory enactment asserted as the basis of a public policy attack neither requires a certain element of coverage nor prohibits a certain exclusion, the operative question is "whether the language of the policy is `in harmony' with the enactment, requiring that the enactment's underlying goals and purposes be ascertained." Lee R. Russ and Thomas F. Segall, 7 Couch on Insurance 3d § 101:18 (1997).
As outlined above, the purpose and goal of the Act at issue in this case is to provide a detailed licensing scheme for the profession of private security agents in order to protect the public from "unqualified individuals [who] may injure the public" and to weed out such individuals. La.Rev.Stat. 37:3270. Plaintiff's attempt to utilize the protection of public safety, which is the broad purpose underlying the Act, as a basis for requiring coverage for injuries caused by assault and battery is a long leap.
The fact that the purpose of liability insurance, in general, is to protect the public, and not just the insured, does not mean that exclusions are not to be enforced. "Absent a conflict with statutory provisions or public policy, insurers, like other individuals, are entitled to limit their liability and to impose and to enforce reasonable conditions upon the policy obligations they contractually assume." Louisiana Insurance Guarantee Association v. Interstate Fire, 93-0911 (1/14/94); 630 So. 2d 759, 763.
As discussed above, the exclusion's purported conflict in this case is not with the express wording of the statute, but rather with the broadly stated public policy behind the Private Security Regulatory and Licensing Law of protecting the public from unqualified security agents. Although protecting the public from unqualified security agents is listed among the stated policies to be served by the Act, and although the Act mandates minimum liability coverage, and although we acknowledge that general liability policies "are issued primarily for the protection of the public rather than the insured [private security company], it is not the public policy of this state to protect and provide compensation to injured persons at all times." Hearty v. Harris, 574 So. 2d 1234 (La.1991) (addressing automobile liability exclusions). Furthermore, the public policy expressed in La.Rev.Stat. 37:3270B emphasizes protection of the public from unqualified security agents, and the Act contains many provisions for promoting this objective, such as licensing and training. Only one provision relates to insurance coverage, and the only specification in that provision refers to the amount of coverage, and not to requirements *426 of specific coverages or to prohibitions of specific exclusions.
Additionally, Colony's commercial general liability policy, contrary to plaintiff's assertions, does provide extensive coverage for the acts and omissions of employees of a private security agent. There is coverage for an injury caused by a kidnapping, as in Ledbetter. There is coverage in many other situations.
Finally, the insured security agent could have requested coverage of assaults and batteries for an increased premium. There is no evidence that Ashley, on whom the statute placed the responsibility of obtaining general liability insurance coverage, made such a request to Colony or to Ashley's agent (an unjoined party against whom a breach of contract action may still lie if specific coverage was requested and not obtained).[3]
Hence, we conclude that public policy does not preclude the application of Colony's assault and battery exclusion so as to bar plaintiff's recovery. See also Michelet v. Scheuring Security Services, Inc., 95-2196 (La.App. 4th Cir.9/4/96); 680 So. 2d 140, cert. denied, 96-2419 and 96-2429 (La.12/12/96); 692 So. 2d 371, 372 (rejecting the public policy argument of the Board of Private Security Examiners and holding that "La. R.S. 37:3276E requires only `general liability insurance of at least one hundred thousand dollars'").
Decree
For the foregoing reasons, we reverse the decision of the court of appeal and reinstate the judgment of the trial court that granted a summary judgment to Colony Insurance Company.
JOHNSON, J., dissents and assigns reasons.
JOHNSON, Justice, dissenting.
The majority has decided to ignore the expressly stated legislative purpose of protecting the public by requiring private security agencies to have general liability insurance coverage.
The statutory requirement for general liability coverage, La. R.S. 37:3270 et seq., expressly states that one of the legislative purposes of the Private Security Regulatory and Licensing Law is to assure some recovery for individuals injured as a result of legally liable private security agents or businesses. La. R.S. 37:3272(12), defines "security guard" as follows:
"Security guard" means an individual who is principally employed by a contract security company whether armed or unarmed, who is principally employed to protect a person or persons or property or both, and whose duties include but are not limited to the following:
(a) Prevention of unlawful intrusion or entry.
(b) Prevention of larceny.
(c) Prevention of vandalism.
(d) Protection of property or person.
(e) Prevention of abuse.
(f) Prevention of arson.
(g) Prevention of trespass on private property.
(h) Control, regulation, or direction of the flow or movements of the public, except on public streets, whether by vehicle, on foot, or otherwise.
(i) Street patrol service or merchant patrol service, which is any contract security company that utilizes foot patrols, motor vehicles, or any other means of transportation in public areas or on public thoroughfares in the performance of its security functions.
As defined by the statute, a security guard's duties include, among other things, protection of property or persons. The assault and battery exclusion, as written in this policy of insurance, excludes from coverage the security guard's actions and failures to act under nearly all circumstances, including his failure to provide an environment safe from assault and battery and the failure to warn of an unsafe environment. Such a provision conflicts, in my mind, with his duty of protection of persons. Therefore, I am of *427 the opinion that the exclusion conflicts with the duties of a security guard, as defined by statute. See La. R.S. 37:3272(12)(d). See also, Ledbetter, 665 So.2d at 1169, citing Reynolds, 634 So.2d at 1183.
The presence of an armed security guard in uniform at an establishment or location creates an expectation that such person will provide protection for individuals' safety. Under the assault and battery exclusion in this policy, the security guard could stand by and watch an altercation or robbery ensue or in progress, fail to act, yet be completely shielded from liability. The purpose of any compulsory insurance statute is primarily to provide compensation to innocent victims who suffer injuries. The majority asserts that, "the Private Security Regulatory and Licensing Law does not expressly mandate specific elements of liability coverage (such as omnibus coverage) that must be provided." It would be inconsistent for the state legislature to mandate general liability insurance coverage to protect the public and then allow insurers to deny, by exclusions in the policy, coverage for the very risk which they contracted to insure against. Strictly construing the assault and battery exclusion against the insurer, I find that the exclusion conflicts with the stated legislative policy of the Private Security Regulatory and Licensing Law.
The majority has chosen to overlook the legislative purpose and to put the safety, health, and well-being of the Louisiana citizenry at risk. For reasons expressed herein, I would hold that the assault and battery exclusion of the insurance policy in the present case is contrary to the legislative purpose of the Private Security Regulatory and Licensing Law, La. R.S. 37:3270 et seq., and I respectfully dissent.
NOTES
[*] Calogero, C.J., not on panel. Rule IV, Part 2, § 3.
[1] At the time of this accident, La.Rev.Stat. 37:3276E provided as follows:
The licensee shall be required to have in effect general liability insurance of at least one hundred thousand dollars with the state of Louisiana named as an additional insured and shall provide to the board a certificate of insurance issued by the carrier.
In 1997, the Legislature amended this provision to increase the required minimum coverage to five hundred thousand dollars.
[2] The assault and battery exclusion in the Ledbetter case provided:
Notwithstanding anything contained herein to the contrary, it is understood and agreed that this policy excludes claims arising out of Assault and Battery, whether caused by or at the instigation of, the insured, his employees, patrons, or any causes whatsoever.
[3] The court of appeal placed on the insurer the responsibility of including coverage for assaults and batteries, while the statute only imposes on the insured the responsibility of obtaining general liability insurance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1850924/ | 337 So. 2d 1021 (1976)
David Wayne GREENFIELD, Appellant,
v.
STATE of Florida, Appellee.
No. 75-1731.
District Court of Appeal of Florida, Second District.
September 24, 1976.
Rehearing Denied October 25, 1976.
Jack O. Johnson, Public Defender, Robert H. Grizzard, II, Asst. Public Defender, and Paul J. Martin, Legal Intern, Bartow, for appellant.
Robert L. Shevin, Atty. Gen., Tallahassee, and William I. Munsey, Jr., Asst. Atty. Gen., Tampa, for appellee.
McNULTY, Chief Judge.
On this direct appeal appellant Greenfield assails his conviction of sexual battery. The sole issue on appeal relates to the denial of a motion for new trial predicated on the ground that the prosecutor prejudicially commented in summation on appellant's exercise *1022 of his right to remain silent at the giving of his Miranda rights at the time of his arrest. We affirm.
Most significantly, in this case, appellant pleaded not guilty by reason of insanity. Accordingly, there was no real dispute as to the essential objective facts herein. They are that the prosecutrix, having sunned herself on a local beach in Sarasota in the late morning or early afternoon on the day of the offense, was returning to her car because of the threat of rain. It was necessary that she pass through a wooded area bordering the beach. While in this wooded area she was accosted by appellant and dragged to a more secluded area of the beach where the sexual assault occurred. Upon her release by appellant the prosecutrix drove immediately to the police station and reported the incident, describing appellant. A police officer promptly returned to the scene of the assault and in the vicinity thereof spotted appellant as one fitting in considerable detail the description given by the prosecutrix. He arrested appellant and read him his Miranda rights.
The officer testified that he explained these rights, that appellant thanked him for explaining them, and that appellant said he understood them and did not wish to speak to the officer until he spoke to an attorney. Shortly thereafter at the police station appellant was again interviewed by other officers, again reminded of his rights and again he reiterated that he did not wish to speak to the officers, that he wanted to speak to an attorney. In fact, he was permitted to and did call an attorney. No objection was made to the introduction of this evidence relating to the giving of the Miranda rights and to appellant's responses thereto.
During closing arguments, however, the prosecutor made the following comments:
"But let's go on from what she stated. Let's go on to Officer Pilafant who took the stand, who the psychiatrists, both defense psychiatrists, never even heard about, never even talked to. He states that he saw this fellow on the beach and that he went up to him, talked to him and then arrested him for the offense. The fellow voluntarily put his arms behind his back and said he would go to the car. This is supposedly an insane person under the throes of an acute condition of schizophrenic paranoia at the time. He goes to the car and the officer reads him his Miranda rights. Does he say he doesn't understand them? Does he say `What's going on? No. He says `I understand my rights. I do not want to speak to you. I want to speak to an attorney.' Again an occasion of a person who knows what's going on around his surroundings, and knows the consequences of his act. Even down as going down [in] the car as you recollect Officer Pilafant said he explained what Miranda rights meant and the guy said and Mr. Greenfield said `I appreciate that, thanks a lot for telling me that.' And here we are to believe that this person didn't know what he was doing at the time of the act, and then even down at the station, according to Detective Jolley he's down there. He says, `Have you been read your Miranda rights?' `Yes, I have.' `Do you want to talk?' `No.' `Do you want to talk to an attorney?' `Yes.' And after he talked to the attorney again he will not speak. Again another physical overt indication by the defendant."
At this point, counsel for defendant strenuously objected on the basis that such comments were improper references to appellant's insistence on his Fifth Amendment right to silence. We cannot agree.
While we do agree that, at least in the face of an objection, testimony or prosecutorial comment relating to a defendant's insistence on his right to remain silent generally constitutes reversible error,[1] we are of the view that under the circumstances of this case the general rule ought not apply.
When insanity is raised by plea as a defense, and evidence thereof is forthcoming *1023 prima facie sufficient to raise a reasonable doubt, the state no longer can travel on the presumption of sanity; it must establish sanity beyond a reasonable doubt as with every element of the offense charged.[2] Certainly, evidence of the conduct and apparent state of mind and awareness of an accused, particularly where, as here, it is connected closely in point of time to the crime charged, is relevant to this issue; and it would be manifestly unfair to permit a defendant prima facie to establish a defense and then preclude the state from meeting it by barring relevant evidence to the contrary because of the "Miranda" rationale.[3]
Here, for example, the evidence relied upon by the state was perhaps the most competent evidence on appellant's mental capacity at the time of the offense available, being so closely connected to the res gestae. It was neither unfair to introduce it[4] nor improper to comment upon it in summation; and, though considered in a somewhat different context (i.e., with respect to a defendant's right to silence during a psychiatric evaluation ordered by the court), we concur with the observations of Mr. Justice Adkins in Parkin v. State:[5]
"When the plea of not guilty by reason of insanity was entered, it was done so with knowledge of the existing statutes and case law on the subject. There is no constitutional right to plead this defense, and if the statutes and case law permit a defendant the privilege of raising it, he must waive certain constitutional rights with respect to it, including the privilege against self-incrimination... ."
In view whereof, the judgment and sentence appealed from should be, and they are hereby, affirmed.
HOBSON, J., concurs.
GRIMES, J., dissents with opinion.
GRIMES, Judge (dissenting).
There is considerable logic in Judge McNulty's opinion. Yet, it is an appreciable step beyond Harris v. New York in which the U.S. Supreme Court held that when a defendant took the stand he could be cross-examined on inconsistent statements he had given to the police in violation of his Miranda rights. That decision was based upon the premise that a person should not be entitled to commit perjury and at the same time hide behind the constitutional right to remain silent.
Here, there is no question of perjury because the appellant did not take the stand, and I cannot equate interposing a defense of insanity with the giving of perjured testimony. The testimony of Officer Pilafant, had it been objected to, and the comments of the prosecutor in closing argument, which were objected to, would require reversal under Bennett v. State, supra. The fact that this evidence was probative on the sanity issue cannot deprive appellant of his constitutional protections.
Moreover, had the state been conscious of the possibility that Pilafant's testimony might result in a violation of Miranda principles, the problem could have been avoided with a minimum of prejudice to the state's case. The questions and answers could have been couched in such a manner as to permit the officer to convey to the jury the fact that the appellant carried on a perfectly rational conversation without specifically stating that he chose to avail himself of his right to remain silent.
In view of the present posture of the law on this subject, I must respectfully dissent.
NOTES
[1] Shannon v. State (Fla. 1976), 335 So. 2d 5 (Opinion filed June 30, 1976); Bennett v. State (Fla. 1975), 316 So. 2d 41; Clark v. State (Fla. App.2d, 1976) 336 So. 2d 468 (Opinion filed July 28, 1976).
[2] See, e.g., Farrell v. State (Fla. 1958), 101 So. 2d 130; Byrd v. State (Fla.App.2d, 1965), 178 So. 2d 886.
[3] Cf. Harris v. New York (1971), 401 U.S. 222, 91 S. Ct. 643, 28 L. Ed. 2d 1.
[4] No issue is made herein about the postural sequence in which the evidence came in. That is, the evidence came in during the state's case in chief before there was any evidence from the appellant as to his insanity. But no objection was made at the time. So, by objecting to prosecutorial comments thereon during summation, the appellant is in no different position than he would have been in had such evidence been introduced in rebuttal, when it would have been, as we hold here, proper.
[5] (Fla. 1970), 238 So. 2d 817. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1719977/ | 676 So. 2d 893 (1996)
Jimmy LOVETT
v.
Roger BRADFORD.
No. 92-CA-00802-SCT.
Supreme Court of Mississippi.
May 30, 1996.
*894 David A. Barfield, Kirkland & Barfield, Jackson, for Appellant.
Hugh W. Tedder, Jr., Jackson, for Appellee.
Before PRATHER, P.J., and JAMES L. ROBERTS, Jr. and SMITH, JJ.
PRATHER, Presiding Justice, for the Court:
I. INTRODUCTION
Roger Bradford (Bradford) filed suit against his independent insurance agent (Lovett), alleging that his agent negligently completed his application to Aegis Security Insurance Company for fire insurance on his mobile home. One of the questions on Bradford's application asked whether he had sustained a fire loss within the last five years. Bradford testified that he gave the following answer, "Well, I told Mr. Lovett that I had a farm [sic], that I thought it's been over five years. I wasn't sure on it." Lovett testified that Bradford told him he had not had a fire loss. Lovett marked "no" in response to this question; the application was clearly marked "If yes, do not submit." After the application was completed, Bradford reviewed it and signed it.
In fact, Bradford had received over $41,000 in fire insurance proceeds some 4 1/2 years previously. Lovett had no personal knowledge that Bradford had ever had a previous fire loss. According to Lovett, if Bradford had told him of the previous fire loss, then he would have needed further information on the fire before processing Bradford's application.
Thereafter, on February 6, 1991, Bradford's home was completely destroyed by fire. The parties stipulated that the losses exceeded the amount of policy coverage.
The parties also stipulated to the following: (a) Bradford had mortgaged his mobile home with the Bank of Morton; (b) the insurance company paid the bank $16,539.28 on Bradford's mortgage, but denied Bradford further proceeds because the company contended that Bradford made a misrepresentation on his application for insurance; (c) the policy was for $28,000 in coverage, and Bradford had received the benefit of $16,539.28 of this coverage; and (d) "the total amount of insurance proceeds which the Aegis Security Insurance Company denied Bradford was $11,460.72."
Bradford testified that, if he had known that his fire loss would not be covered, he would have attempted to get other insurance. However, Lovett testified that, if Bradford had disclosed the previous fire, then none of the insurance companies for which Lovett worked would have accepted Bradford's application. Lovett did not know whether Bradford could have obtained insurance elsewhere.
A jury returned a verdict against Lovett, the insurance agent, in the amount of $11,460.72. On appeal, Lovett raises the following issues:
A. WHETHER THERE WAS EVIDENCE ESTABLISHING THE APPROPRIATE STANDARD OF CARE AND EVIDENCE THAT LOVETT VIOLATED OR BREACHED THE APPROPRIATE STANDARD OF CARE?
B. WHETHER, ASSUMING, ARGUENDO, THAT A STANDARD OF CARE *895 AND BREACH THEREOF WERE ESTABLISHED, THERE WAS EVIDENCE THAT SUCH NEGLIGENCE PROXIMATELY CAUSED BRADFORD'S DAMAGES?
C. WHETHER THE TRIAL COURT ERRED IN REFUSING TO GRANT LOVETT'S MOTION FOR DIRECTED VERDICT AND, SUBSEQUENTLY ERRED IN NOT GRANTING LOVETT'S PEREMPTORY JURY INSTRUCTION D-1?
D. WHETHER THE JURY VERDICT WAS AGAINST THE OVERWHELMING WEIGHT OF THE EVIDENCE?
E. WHETHER, ALTERNATIVELY, THE TRIAL COURT ERRED IN REFUSING TO GIVE LOVETT'S JURY INSTRUCTION D-11?
II. LEGAL ANALYSIS
A. WHETHER THERE WAS EVIDENCE ESTABLISHING THE APPROPRIATE STANDARD OF CARE AND EVIDENCE THAT LOVETT VIOLATED OR BREACHED THE APPROPRIATE STANDARD OF CARE?
Lovett's first argument is that, because insurance agents are licensed professionals with specialized training, this case is a professional malpractice action. As such, Lovett contends that expert testimony was necessary to establish the standard of care that an insurance agent owes to his client. Indeed, "[e]xpert testimony is required `to support an action for malpractice of a professional man in those situations where special skills, knowledge, experience, learning or the like are required.'" Wirtz v. Switzer, 586 So. 2d 775, 780 (Miss. 1991) (involving accounting profession) (citations omitted); Flight Line, Inc. v. Tanksley, 608 So. 2d 1149, 1160 (Miss. 1992) (involving aviation profession); Hickox By and Through Hickox v. Holleman, 502 So. 2d 626, 635 (Miss. 1987) (involving legal profession); Dean v. Conn, 419 So. 2d 148, 150 (Miss. 1982) (involving legal profession).
However, this Court has not held that insurance salesmen belong to such a profession. In addition, there is no evidence that "special skills, knowledge, experience, learning or the like" were required in this case. See Wirtz, 586 So.2d at 780. Therefore, regardless of whether expert testimony should be required in most cases against insurance agents, this does not appear to be a case that involves underwriting or actuarial tables or anything so complicated as to necessitate the testimony of an expert witness. Rather this is a negligence case based on Bradford and Lovett's discussion of Bradford's application for insurance a matter that a layman can understand based on common sense and practical experience. See Palmer v. Anderson Infirmary Benev. Ass'n, 656 So. 2d 790, 795 (Miss. 1995); see also M.R.E. 702. Therefore, expert testimony was not necessary to establish the standard of care in this case.
B. WHETHER, ASSUMING, ARGUENDO, THAT A STANDARD OF CARE AND BREACH THEREOF WERE ESTABLISHED, THERE WAS EVIDENCE THAT SUCH NEGLIGENCE PROXIMATELY CAUSED BRADFORD'S DAMAGES?
C. WHETHER THE TRIAL COURT ERRED IN REFUSING TO GRANT LOVETT'S MOTION FOR DIRECTED VERDICT AND, SUBSEQUENTLY ERRED IN NOT GRANTING LOVETT'S PEREMPTORY JURY INSTRUCTION D-1?
Lovett next challenges the sufficiency of the evidence. The standard of review in such cases is well-settled.
[T]his Court should
consider the evidence in the light most favorable to the appellee, giving that party the benefit of all favorable inferences that may be reasonably drawn from the evidence. If the facts so considered point so overwhelmingly in favor of the appellant that reasonable men could not have arrived at a contrary verdict, [we are] required to reverse and render. On the other hand if there is substantial evidence in support of the verdict, that is, evidence of such quality and weight that reasonable and fair minded jurors in the exercise of impartial *896 judgment might have reached different conclusions, affirmance is required.
Leaf River Forest Products, Inc. v. Ferguson, 662 So. 2d 648, 659 (Miss. 1995) (citations omitted).
In order to prevail on a negligence claim, a plaintiff must prove by a preponderance of the evidence each element of negligence: duty, breach of duty, proximate causation, and injury. See Palmer, 656 So.2d at 794. Lovett contends that he owed no duty to Bradford and that, even if Lovett did breach a duty to Bradford, that Bradford was not harmed. That is, Lovett contends that Bradford did not prove that he would have been able to get insurance elsewhere.
1. Duty/Breach of Duty
"An insurance agent owes a duty to his principal to procure insurance policies with reasonable diligence and good faith. The duty owed is to provide the level of skill in procuring insurance reasonably expected of one in that profession." Taylor Machine Works, Inc. v. Great American Surplus Lines Insurance Co., 635 So. 2d 1357, 1362 (Miss. 1994).
The jury could have believed that, in his haste to collect a premium, Lovett did not exercise reasonable diligence in investigating Bradford's statement on previous fire loss. There is substantial evidence that Bradford disclosed the fire to Lovett. Lovett admitted that, if Bradford had made the statements which he claimed he made, then he would have needed to have done further investigation. Therefore, Lovett's argument with regard to this issue is without merit.
2. Causation/Proximate Cause
Lovett's next argument is that, even if he breached a duty to Bradford, Bradford has not proven that he would have been able to have obtained insurance elsewhere. However, Bradford testified that, if he had known he was uninsured, he would have continued searching for insurance. Lovett testified that none of the other carriers for whom he worked would have insured Bradford, due to the previous fire losses. Lovett did not know whether Bradford could have obtained insurance elsewhere. The jury could have reasonably inferred that, had Bradford continued to look, he could have found insurance elsewhere.
D. WHETHER THE JURY VERDICT WAS AGAINST THE OVERWHELMING WEIGHT OF THE EVIDENCE?
Lovett also contends that the verdict was against the overwhelming weight of the evidence. Whether the trial judge should have granted a new trial on this basis was within his discretion. American Fire Protection, Inc. v. Lewis, 653 So. 2d 1387, 1390 (Miss. 1995). "... [A]bsent an abuse of discretion, this Court is `without power to disturb such a determination.'" Id. (citations omitted). Based on the analysis above, it does not appear that the trial judge abused his discretion by denying Lovett's motion for a new trial. Therefore, this argument is without merit.
E. WHETHER, ALTERNATIVELY, THE TRIAL COURT ERRED IN REFUSING TO GIVE LOVETT'S JURY INSTRUCTION D-11?
Lovett's final contention is that the following, proposed jury instruction D-11, should have been given:
For Roger Bradford to prevail, he must prove by a preponderance of the evidence that, considering that he had had a fire within the last five years, he could have obtained fire insurance from another insurance company. If you find that Roger Bradford has failed to prove that he could have obtained fire insurance from another company, considering that he had had a fire within the last five years, then any negligence on the part of Jimmy Lovett was not proximate cause of any damages allegedly sustained by Roger Bradford; therefore, you must find for Roger Bradford.
The standard for reviewing jury instructions is as follows:
On appeal, this Court does not review jury instructions in isolation; rather, they are read as a whole to determine if the jury was properly instructed. Accordingly, defects *897 in specific instructions do not require reversal "where all instructions taken as a whole fairly although not perfectly announce the applicable primary rules of law." However, if those instructions do not fairly or adequately instruct the jury, this Court can and will reverse.
Peoples Bank and Trust Company v. Cermack, 658 So. 2d 1352, 1356 (Miss. 1995) (citations omitted).
The record reflects that the jury was properly instructed with regard to the elements of negligence and with regard to foreseeability in relation to proximate cause. Therefore, this instruction was not required. See Id.
III. CONCLUSION
The issues raised by Lovett on appeal are without merit, and the judgment of the trial court is affirmed.
JUDGMENT IS AFFIRMED.
DAN LEE, C.J., SULLIVAN, P.J., and PITTMAN, BANKS, JAMES L. ROBERTS, Jr., and SMITH, JJ., concur.
McRAE and MILLS, JJ., concur in result only. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1540398/ | 229 N.J. Super. 138 (1988)
550 A.2d 1278
THERESA MANOLE, PLAINTIFF-APPELLANT,
v.
THOMAS CARVELLAS, DEFENDANT-RESPONDENT.
Superior Court of New Jersey, Appellate Division.
Argued November 1, 1988.
Decided December 6, 1988.
*139 Before Judges PRESSLER, SCALERA and STERN.
Patrick Randazzo argued the cause for appellant (Patrick Randazzo, attorney; Patrick Randazzo and Debra Ann Murphy, on the brief).
John D. Allen, III argued the cause for respondent (Harwood Lloyd, attorney; John D. Allen, on the brief).
The opinion of the court was delivered by PRESSLER, P.J.A.D.
*140 Plaintiff Theresa Manole, whose husband Leon Manole sues per quod, appeals, on leave granted, from a summary judgment dismissing her personal-injury automobile-liability action against defendant Thomas Carvellas. The issue raised by this appeal is whether, at the time of the accident, Carvellas was plaintiff's coemployee. The resolution of this issue is dependent on whether Carvellas had, at that time, already commenced work within the intendment of the so-called going and coming rule. Guided by the principles recently articulated by the Supreme Court in Livingstone v. Abraham & Straus, Inc., 111 N.J. 89 (1988), we conclude that Carvellas had not yet then commenced work and hence that there is no bar to this action based on the exclusivity of the workers' compensation remedy. Accordingly, we reverse.
There is no substantial dispute of relevant fact. According to the record on defendant's successful motion for summary judgment, both parties were employed by Abraham & Straus, Inc. (A & S) in its Paramus Park store on December 13, 1984. Plaintiff was a full-time employee whose shift ended at 6:00 p.m., and defendant was a part-time seasonal employee whose shift began at 6:00 p.m. The accident took place shortly after that hour.
Explication of the manner in which the accident occurred requires a geographical context. Paramus Park is a large shopping center in Paramus, New Jersey, anchored on the north end by A & S and on the south end by Sears. As we understand the record, the shopping center lies between Route 17, a north-south highway, on its west and the Garden State Parkway, also a north-south highway, on its east. The center does not abut Route 17; access from the west is afforded by two public streets running easterly from Route 17, A & S Drive and, to its south, Sears Drive. Each is a four-lane thoroughfare with two lanes for each direction. The easterly terminus of each of these streets is Ring Road, another four-lane thoroughfare, *141 which, more or less, encircles the shopping center, giving access to its numerous parking lots. Ring Road, we understand from the record, is not a public street.
Ordinarily, A & S employees were required to park in those northerly lots of the shopping center designated 12 to 14, which were also available to customers choosing to park there. We gather that from time to time A & S management wished to have all of lots 12 to 14 available for its customers and at predetermined times, directed its employees to park in a southerly, so-called Sears lot. These lots were a considerable distance from A & S, and A & S accordingly provided its employees with shuttle service between the store and the Sear's lot. At the time in question, such service was being provided by A & S's independent contractor, defendant Tenafly Taxi, by way of a van operated by Tenafly Taxi's employee, defendant William M. DiIorio. Plaintiff left the A & S store at her regular quitting time and, together with other employees, there boarded the van for transport to the Sears lot. The van's route was southerly on Ring Road, past its intersection with A & S Drive to Sears Drive. It would then make a right turn onto Sears Drive and then a left turn off Sears Drive into the designated parking lot. The distance was approximately a mile.
Defendant Carvellas came to work that day to start his 6:00 p.m. shift by his customary route: east off Route 17 onto A & S Drive to its T intersection with Ring Road. In order to park in the northerly lots, he would then have turned left onto Ring Road. On this day, because of the special instruction, it was his intention to turn right, travel south on Ring Road to Sears Drive, turn right on Sears Drive and then turn left into the Sears lot. He got as far as the A & S Drive intersection with Ring Road. As he was making his right turn onto Ring Road, his car collided with the van in which plaintiff was a passenger. She was injured and sued all three defendants: Carvellas, Tenafly Taxi, and DiIorio.
*142 During the pendency of this action in the Law Division, this court filed its opinion in Livingstone v. Abraham & Straus, 216 N.J. Super. 685 (App.Div. 1987), holding that for purposes of the going and coming rule as codified by N.J.S.A. 34:15-36, the employee there, an A & S employee in a Monmouth County shopping mall, had reached her employer's premises after she had parked her car in the portion of the mall parking area in which employees were instructed to park. Consequently, the injuries she sustained when she was struck by a coemployee's car while walking from the lot to the store were held compensable under the workers' compensation law. The Law Division granted Carvellas' motion for summary judgment having concluded that the facts here were virtually indistinguishable from those in Livingstone. We granted plaintiff's motion for leave to appeal, and while the appeal was pending, the Supreme Court affirmed our decision in Livingstone by a 4-3 vote, 111 N.J. 89 (1988).
We are persuaded by our review of the record and the arguments of counsel that the Livingstone construction of the going and coming rule excludes Carvellas from the ambit of work-relatedness. In brief, the Supreme Court in Livingstone concluded that the 1979 amendment of N.J.S.A. 34:15-36, which imposed a more stringent definition of employment than had evolved from judicial construction of the going and coming rule, was not intended to overrule the body of case law which fixed the commencement of the day's employment at the time of arrival in the parking lot made available to employees by the employer. Thus, the Court held in Livingstone that employer ownership of the lot or even exclusive control thereover was not essential to a finding of compensability in the circumstances there the principle of the parking-lot cases continued to apply even if the employer had merely designated a section of the common area for its employees.
Here there is no question that at the time of the accident plaintiff had not yet left her employer's premises and *143 control. Clearly, if her work day began when she entered the designated lot, it did not end until she left it. But just as obviously, it is not her status as an A & S employee which is critical but rather that of Carvellas. If he was not yet within the scope of his employment when the vehicles collided, the fact that he was also an employee of A & S would be a mere coincidence without legal significance, and plaintiff would be as free to sue him in a third-party action as anyone else. We are satisfied that this is so. When the collision occurred, Carvellas was at least half a mile away from the designated lot. He was in the process of leaving a public street and entering a service road, which itself was not within A & S's "control" as defined by Livingstone, 111 N.J. at 104. Before arriving at the designated lot, he was required to traverse yet another public street. Thus, in our view and in Livingstone terms, he had not yet arrived at his employer's premises. He was en route and would have arrived only upon entering the designated lot.
As emphasized by Livingstone, application of the going and coming rule is highly fact-sensitive. A case-by-case analysis is required in order to ensure that the remedial purpose of workers' compensation legislation will be fulfilled while at the same time that the mandate of N.J.S.A. 34:15-36, designed to limit "judicially-created exceptions to the general noncompensability of off-premises accidents," is complied with. 111 N.J. at 103. The result of the factual analysis here falls short of the Livingstone prescription. At the point at which the accident occurred, Carvellas was not yet within the course of his employment. He was still on the way to work at a physical location beyond his employer's control in any relevant sense.
The summary judgment is reversed, and the matter is remanded for trial. Because of the lengthy delay in the trial proceedings resulting from our grant of leave to appeal and the ensuing stay of appellate proceedings to await the Supreme Court's opinion in Livingstone, we direct that this action proceed to trial as expeditiously as is consistent with fairness to the litigants. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1540399/ | 213 B.R. 888 (1997)
In re 400 MADISON AVENUE LIMITED PARTNERSHIP, Debtor.
Bankruptcy No. 96-B-45776 (PCB).
United States Bankruptcy Court, S.D. New York.
October 14, 1997.
*889 *890 Kleinberg, Kaplan, Wolff & Cohen, P.C. by David Parker, Lauri K. Goodwyn, New York City, for David Parker as Receiver.
Janvey, Gordon by Hiram D. Gordon, New York City, for Debtor.
Herrick Feinstein, L.L.P. by Andrew C. Gold, New York City, for Madison 47-48 Equities LLC.
Carolyn Schwartz, United States Trustee by Paul Schwartzberg, New York City.
MEMORANDUM DECISION APPROVING STIPULATION AUTHORIZING RETENTION OF ATTORNEYS BY RECEIVER LEFT IN POSSESSION UNDER CODE § 543(d) AND CERTAIN OTHER RELIEF
PRUDENCE CARTER BEATTY, Bankruptcy Judge.[*]
At the time the debtor's Chapter 11 petition was filed, a receiver was in possession of the debtor's real property, having been appointed in a pending foreclosure action. Pursuant to agreement between the debtor and its secured creditor, the receiver was left in possession, as permitted by Bankruptcy Code ("Code") § 543(d)(1).[1] The receiver made application to this Court to continue the retention of his prepetition counsel. His counsel was owed fees for services rendered during the month preceding the filing of the Chapter 11 petition.
The U.S. Trustee objected to the retention on the grounds that the proposed attorneys were not disinterested within the meaning of Code § 101(14) because the firm was a creditor of the debtor as a result of its unpaid prepetition fees. The U.S. Trustee argued that the retention was therefore barred under Code § 327(a) because of a lack of disinterestedness. After the U.S. Trustee filed a written objection to the retention application on these grounds, the Court advised the U.S. Trustee that the Court was of the view that the objection was ill-founded. The U.S. Trustee confirmed by letter its intention to stand on its objection and stated that it believed that its objection was mandated by the decision in In re 245 Associates, LLC, 188 B.R. 743 (Bankr.S.D.N.Y.1995) (Bernstein, J.).[2] In short, the U.S. Trustee viewed the matter as one of policy.
Several weeks after taking this seemingly unalterable policy position, the U.S. Trustee agreed to the retention pursuant to a stipulation under which the matter was resolved by allowing the receiver to transfer an amount equal to the amount of the counsel's unpaid prepetition fees to the mortgagee. The stipulation *891 then provided for the mortgagee to pay counsel and take an assignment of counsel's claim. To this Court the solution embodied in the stipulation is objectional as a mere sleight of hand and one that should not become standard practice. Because the Court would have approved the retention without the necessity of this convoluted device, the Court has concluded that it should sign the stipulation and issue this opinion to explain its reasoning due to the significance of the issue in real estate Chapter 11 cases.
This is only the Court's second decision interpreting and applying Code § 543, which deals with turnover by custodians in possession of the debtor's property. In a decision written over thirteen years ago, this Court considered whether an Article 7A administrator was a custodian required to turn over the debtor's real property and concluded the administrator was not. See Matter of Kennise Diversified Corp., 34 B.R. 237 (Bankr. S.D.N.Y.1983). That decision charted new territory as the Bankruptcy Code was but five years old and the definition of custodian was as yet untested with regards to Article 7A administrators.
This case, in contrast, presents no tabula rasa. Rather it requires a plain reading of Code § 327(a) and recharting old territory with respect to Code § 543. The predecessors to Code § 543 under the former Bankruptcy Act, §§ 2a(21), 69d, 257(Chap.X) and 507(Chap.XII) and the related former Bankruptcy Rules, Rules 201, 209, 212 and 218, are the Rosetta Stone to understanding the section. No doubt the drafters of the Bankruptcy Code considered the practices under the Bankruptcy Act so well understood that it would puzzle them to find that eighteen years later no memory remains of what was once standard.
Based on the following findings of fact and conclusions of law, this court holds that Code § 327 does not apply to the retention of attorneys by a receiver retained in possession under Code § 543(d)(1). Since Code § 327(a) with its requirement of disinterestedness does not apply, the prepetition fees due the receiver's counsel are not a bar to the receiver's continued retention of the firm. Code § 543(c) provides that the receiver is to pay, subject to the bankruptcy court's approval, the prepetition debts incurred during the receivership as soon as practicable after a bankruptcy case is filed. Thus, payment of the fees of the receiver's counsel is assured and does not depend on whether or not a plan of reorganization will be confirmed.
STATEMENT OF FACTS
The Debtor filed a Chapter 11 petition on October 25, 1996.[3] The Debtor's petition stated that its total assets were $12,005,671.85 and its total liabilities were $43,302,288.82 at book value, except land stated at cost, as of September 30, 1996. The business of the Debtor is the ownership of a multi-story building containing retail and office space located at 400 Madison Avenue, New York, New York (the "Property"). According to its petition the Debtor acquired the Property in 1982 pursuant to a series of transactions that included the raising by Prudential-Bache Securities, Inc. of $12 million from 99 investors throughout the United States. Investment units ranged in size from $82,500 to $330,000.
In November 1993, Heller Financial, Inc., the then holder of the mortgage on the Property,[4] commenced a foreclosure action in the Supreme Court of the State of New York, New York County (the "Supreme Court"). The amount of the mortgage is approximately $39 million. The Debtor contested the foreclosure action and asserted counterclaims for breach of the duty of good faith and fair dealing, breach of contract and negligent misrepresentation. By order entered on July 27, 1995, the Supreme Court granted the secured creditor's motion for summary judgment to permit foreclosure and dismissed *892 the Debtor's counterclaims. The Debtor appealed the decision and it was expected that the appeal would be heard during the March 1997 term of the Appellate Division, First Department.
David Parker (the "Receiver") was appointed as the receiver for the Property by the Supreme Court on November 15, 1993 and was acting as receiver at the time the Debtor filed its Chapter 11 petition. This Court authorized Parker to remain as Receiver pursuant to a Stipulation (the "Stipulation") among the Secured Creditor, the Debtor and the Receiver.[5] The primary purpose of the Stipulation was to excuse compliance by the Receiver with Code § 543(a) which requires turnover of property held by a custodian,[6] unless turnover is excused by the bankruptcy court pursuant to Code § 543(d)(1). In its Chapter 11 petition, the Debtor had stated that it did not anticipate seeking a turnover of the Property from the Receiver.[7]
The Stipulation recited the parties' agreement that the Receiver continue and act in accordance with the terms of the orders of the State Court, except as otherwise expressly set forth in the Stipulation. Paragraph 1 of the Stipulation provided that the Receiver could pay the expenses and impositions of the Property incurred subsequent to the filing of the Chapter 11 petition as permitted by the orders of the State Court. The Receiver was also given the right to pay the expenses and impositions of the Property incurred prior to the petition as set forth on an attached schedule, which listed expenses of $1,743,973.37, including real estate taxes of $1,262,459.53, subject to paying expenses other than real estate taxes first. Paragraph 1 excluded the Receiver's commissions and his counsel's compensation from the scope of the items to be paid at that time.
Paragraph 6 of the Stipulation contained provisions relative to the Receiver's commissions and the attorney's compensation. It provided as follows:
"The Receiver shall have no obligation to file interim applications under Section 330 of the Bankruptcy Code in order for the Receiver and those professionals acting on his behalf as previously approved in the State Court Orders to be paid and receive compensation for services rendered. The Receiver shall pay no fees to professionals acting on his behalf who have not been retained pursuant to Section 327 of the Bankruptcy Code. The Receiver shall pay no Receiver's commissions to himself or fees to professionals acting on his behalf until 10 days following his providing the U.S. Trustee with a statement of his intention to make such payment, together with the method of calculation or other documentation supporting such payment."
As provided for in Paragraph 6 of the Stipulation, the Receiver thereafter sought authority to continue his retention of the law firm of Kleinberg, Kaplan, Wolff & Cohen, P.C. (the "Attorneys"), a firm in which he is a partner. The Attorneys are the law firm that had been authorized by the Supreme Court to represent him in his capacity as Receiver. Attached to the December 18, 1996 application were copies of all of the Supreme Court's orders relating to the Receiver's authority, including the order of March 4, 1994 authorizing the Receiver's retention of the Attorneys.
The Attorneys were included by the Debtor on its petition in its required list of the 20 largest creditors. The U.S. Trustee has pointed to this listing as an admission by the Debtor that the Attorneys are creditors of the Debtor.[8]
*893 The U.S. Trustee's Office apparently advised the Receiver orally that it objected to the December 18, 1996 application because that application omitted any reference to the prepetition fees owed the Attorneys. An amended application was thereafter submitted. In the amended application the Receiver disclosed that the Attorneys were owed $36,444.71 for fees and expenses incurred for services rendered to the Receiver from October 1 through 25, 1996. The amended application went on to state that it was anticipated that these fees would be paid to the Attorneys shortly as the Receiver was then preparing a stipulation for court approval to authorize the payment of these fees with the Secured Creditor's consent.
SUMMARY OF PARTIES' LEGAL ARGUMENTS
The Office of the U.S. Trustee filed a written objection to the amended application. The basis of the objection was as follows:
"8. Pursuant to Bankruptcy Code § 327(a), a trustee may only employ attorneys that, among other things, do not hold interests adverse to the estate, and that are disinterested persons, as that term is defined by Bankruptcy Code § 327(a).
"9. Because a receiver who continues in possession is the functional equivalent of a trustee, a receiver must also obtain court approval prior to retaining an attorney. In re 245 Assocs., LLC, 188 B.R. 743, 750 (Bankr.S.D.N.Y.1995); In re Uno Broadcasting Corp., 167 B.R. 189, 201 (Bankr. D.Ariz.1994); In re Posadas Assocs., 127 B.R. 278, 280 (Bankr.D.N.M.1991). * * *
"10. The professionals retained by a receiver, therefore, must be disinterested. In re LCL Income Properties, L.P. VI, 177 B.R. 872, 875 (disinterestedness is required of the professionals hired by a custodian) * * *."
As for the Receiver, his amended application pointed out that the Receiver is not the Debtor. Further the Receiver noted that the state court orders governing his actions would not have permitted him to pre-pay his attorneys. He stated that the Attorneys' October fees had not even been billed at the time the Debtor filed its petition.[9] Finally he stated that disqualifying the Attorneys from representing him would be truly anomalous since they were in the best position to do so due to their prior experience and any new law firm would have to incur countless hours to get up to speed.
DISCUSSION
When interpreting the Bankruptcy Code, careful attention should be paid to the actual statutory language. See United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989); Patterson v. Shumate, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992); Pennsylvania Department of Public Welfare v. Davenport, 495 U.S. 552, 110 S. Ct. 2126, 109 L. Ed. 2d 588 (1990); Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992); Pioneer Investment Services Company v. Brunswick Associates Limited Partnership, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993). See also In re Palm Coast, Matanza Shores Limited Partnership, 101 F.3d 253 (2nd Cir.1996) (Since Code § 327(d) on its face only permits a trustee to retain his own firm as attorneys or accountants and makes no reference to real estate consultants, a trustee may not employ his own real estate firm as real estate consultant). In this court's view, a facial reading of Code § 327(a)[10] refutes the U.S. Trustee's position.
Code § 327(a), on which the U.S. Trustee relies, provides as follows:
"Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more attorneys * * * that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the *894 trustee in carrying out the trustee's duties." (emphasis added)
There can be no dispute that the term "trustee" as used in the language just quoted includes a trustee appointed in a Chapter 11 case under Code § 1104.
It is also well settled that the debtor in possession in a Chapter 11 case is within the meaning of trustee as used in Code § 327(a) when no trustee has been appointed. Code § 1101(1) provides that "`debtor in possession' means debtor except when a person that has qualified under section 322[11] of this title is serving as trustee in the case". Thus, the Debtor in this case is a debtor-in-possession because no trustee has been appointed under Code § 1104 even though the Receiver remains in possession of the Property. Code § 1107(a) provides that the debtor-in-possession has "all the rights, other than the right to compensation under section 330 of this title, and powers, and shall perform all the functions and duties, except the duties specified in sections 1106(a)(2), (3), and (4) of this title, of a trustee serving in a case under this chapter."
Nowhere is there a provision in the Code stating that the term "trustee" is to be read in Code § 327(a) or elsewhere to include a receiver retained in possession under Code § 543(d).[12] Under the Bankruptcy Code, the bankruptcy court is expressly prohibited from appointing a receiver, see Code § 105(b),[13] although the bankruptcy court can continue a prepetition receiver's appointment under Code § 543(d)(1). Importantly nowhere in the Code is there even a hint that a "continued" receiver is subject to some or all of the duties imposed on a Chapter 11 trustee by Code § 1106. For example, Code § 1106 imposes on a Chapter 11 Trustee the duty to investigate the debtor (Code § 1106(a)(3)), the duty to file a report of any investigation (Code § 1106(a)(4)), and the obligation to file a plan of reorganization or recommend conversion or dismissal of the case (Code § 1106(a)(5)).
The duties of a receiver retained in possession under Code § 543(d) are limited to the preservation and care of the property under his control.[14] Since no section of the Code includes a receiver who remains in possession within the definition of trustee, the receiver does not take on the obligations and duties of a Chapter 11 trustee nor the somewhat different ones of a debtor-in-possession set forth in Code § 1107. Simply put the receiver has absolutely no responsibility to ensure the progress of the case by filing a plan of reorganization or negotiating with *895 creditors or to perform any other duties which are the prerogative and burden of a debtor-in-possession and a trustee.
The purpose of Code § 543 was succinctly stated in the House and Senate Reports on the Bankruptcy Reform Act of 1978 as follows:
"This section requires a custodian appointed before the bankruptcy case to deliver to the trustee and to account for property that has come into his possession, custody, or control as a custodian. `Property of the debtor' in section (a) includes property that was property of the debtor at the time the custodian took the property, but the title to which passed to the custodian. The section requires the court to protect any obligations incurred by the custodian, provide for the payment of reasonable compensation for services rendered and costs and expenses incurred by the custodian, and to surcharge the custodian for any improper or excessive disbursement, unless it has been approved by a court of competent jurisdiction. Subsection (d) reinforces the general abstention policy in section 306[15] by permitting the Bankruptcy Court to authorize the custodianship to proceed notwithstanding this section." S.Rep.No. 95-989, 95th Cong. 2nd Sess. at 85, 1978 U.S.Code Cong. Ad.News at pp. 5787, 7871; H.Rep.No. 95-595, 95th Cong. 2nd Sess. at 370, 1978 U.S.Code Cong. Ad.News at pp. 5785, 6326.
The legislative history just quoted states that Code § 543(d), which permits the court to allow the custodian to remain in possession, is in the nature of abstention. Code § 305(a)(1), which is also referred to, allows the Bankruptcy Court to suspend or dismiss all proceedings in a case if the interests of the creditors and the debtor would be better served by suspension or dismissal. In contrast, Code § 543(d)(1) lets the court suspend the provisions of the Code that contemplate a Chapter 11 debtor in possession will manage and operate so much of its property as is in the hands of a receiver at the filing date. See Code §§ 1107 and 1108. The premise that leaving the receiver in place is a form of abstention is consistent with the Code's express prohibition on the appointment of receivers by the bankruptcy court, Code § 105(b).
The receiver left in possession by the bankruptcy court has no role in the bankruptcy case other than to manage and preserve the property in his charge in accordance with the orders governing his appointment. A receiver could be left in possession even if a Chapter 11 trustee were appointed. It is possible to conceive of fact patterns in which there are two or more prepetition receivers which had been appointed for different properties. Under those circumstances, the bankruptcy court could, after notice and hearing, determine that it was in the best interests of creditors to leave one receiver in possession but not another based on the evidence of value, the nature of the claims against each property, and any other relevant evidence.
That a receiver remains in possession after a Chapter 11 filing in a single asset real estate case is generally an indication that (a) the debtor does not have a high probability of success in confirming a Chapter 11 plan and/or (b) no reason exists to disrupt management of the property by the receiver in favor of management by the debtor in possession.[16] For example, in this case, the *896 Debtor is involved in an appeal of an adverse ruling made by the state court in the foreclosure action, the outcome of which is likely to be determinative of the success of this case.
This court finds none of the three cases relied on by the U.S. Trustee to be persuasive. See In re Uno Broadcasting Corp. ("Uno"), 167 B.R. 189 (Bankr.D.Ariz.1994); In re Posadas Associates, ("Posadas"), 127 B.R. 278 (Bankr.D.N.M.1991); and In re 245 Associates, LLC ("245 Associates"), supra. None of the cases consider the pre-Code predecessors to Code § 543.
In Uno the debtor filed a Chapter 11 petition only after its major creditor obtained a large judgment against it and a receiver had been appointed. The purpose of the receivership was to liquidate the debtor's assets to satisfy the judgment. The debtor's assets consisted principally of four pairs of radio stations involving eight licenses. The lender alleged the debtor acted in bad faith in filing the Chapter 11 petition and also pointed to the guilty plea on which the debtor's principal was awaiting sentencing.
The bankruptcy court correctly observed that the receiver had been appointed solely to protect the interests of the judgment creditor. 167 B.R. at 201. However, the bankruptcy court found the debtor offered no serious alternative to the turnover motion. The sole shareholder of the debtor, who was the person previously in charge of the debtor's operations, was unable to manage the business as he was in prison. His wife to whom he had given a power of attorney had no experience in the broadcast industry and no substantial general business experience. She did propose to engage a management consultant whose duties were not well-defined. The bankruptcy court determined that the receiver should stay in place with the powers and duties enumerated in the district court order of appointment subject to modification by order of the bankruptcy court.
This court disagrees with the concluding section of the Uno decision in which the bankruptcy court undertook a role clarification with respect to the receiver's duties. The bankruptcy court found that the receiver, having been excused from turnover, was the functional equivalent of a trustee and "must now have obligations and responsibilities to all creditors of the estate and, assuming solvency, to the equity security holders of the estate." 167 B.R. at 201. After declining to consider the debtor as a debtor in possession because the receiver was in possession, the bankruptcy court suggested that one option was to treat the receiver as an examiner with expanded powers.[17] In this court's view, the better issues to consider would have been the actual capability of the receiver to effect a sale of the stations, the probable proceeds of sale and the likelihood that any lien the judgment creditor had on the assets was voidable.[18] The Uno court's decision to require the receiver to comply with Code § 327(a) simply follows from its decision to treat the receiver as a trustee with another name.
*897 The other two cases relied on by the U.S. Trustee also conclude that receiver's counsel needs to apply for retention under Code § 327(a). In neither case was the custodian actually left in possession beyond the initial weeks of the case. In In re Posadas Associates, supra, the Bankruptcy Court was principally concerned with the fees sought by the custodian in resisting turnover. It held that "where the custodian incurs costs not for complying with the turnover provisions of the Code but for resisting turnover, the Court finds that prior court approval is necessary in order for the fees and costs to be considered for administrative expense priority." 127 B.R. 282.
In re 245 Associates, LLC, supra, cites both Uno Broadcasting and Posadas Associates with approval. While I respectfully disagree with my colleague's application of Code § 327(a) to receiver's counsel, I do not disagree with his result, disallowance of fees for opposing turnover. I simply decline to follow the analysis in Posadas Associates and 245 Associates, LLC which relies on parsing Code § 503(b)(3) and (b)(4) and Code § 543(d)(1) to find a distinction between winding up duties by a receiver and his counsel for which they require no retention order, see In re 245 Associates LLC, 188 B.R. at 748, and those duties required by a continuing receiver and his counsel, id at 749, for which they do. I prefer a more broadly focused analysis of the function and place of a receiver in the bankruptcy scheme established by the Code, with due consideration given to the prior history under the former Bankruptcy Act. This Court finds its power to supervise the fees of the receiver's counsel in Code § 543 itself and in Code § 541.[19] Code § 541 creates an estate of the debtor's property which is deemed to be in custodia legis under the exclusive supervisory power of the Bankruptcy Court unless and until the automatic stay is lifted. See also Code § 541(a)(3).
It was well settled under the former Bankruptcy Act that receivers required to turnover property could not be compensated for opposing turnover.[20] "Receivers have never been regarded as adverse claimants, as they hold only for the court which appoints them and have no personal interest in the property." 4 Remington on Bankruptcy (1957) § 1784 at 579. Compare In re Rimsat, Ltd., 193 B.R. 499 (Bankr.N.D.Ind.1996) (Receiver not a party in interest under Code § 1109). Since the Code so plainly directs turnover by the custodian, it must be presumed that Congress intended that no compensation would be available for opposing that statutory duty.
That it was the bankruptcy court, and not the state court which had appointed the receiver, that was to supervise the receiver and fix the fees was firmly established under the former Bankruptcy Act by the decision of the United States Supreme Court in Gross v. Irving Trust Co., 289 U.S. 342, 53 S. Ct. 605, 77 L. Ed. 1243 (1933). In Gross the Supreme Court held
"The jurisdiction of the Bankruptcy Court being paramount, the power of the state court to fix the compensation of its receivers and the fees of their counsel necessarily came to an end with the supervening bankruptcy. When the Bankruptcy Court acquired jurisdiction, the sole power to fix such compensation and fees passed to that court." 289 U.S. at 345, 53 S.Ct. at 607 (emphasis added).
*898 If the receiver has counsel at the time the bankruptcy case is filed, there should already have been an order entered authorizing the receiver to obtain counsel and approving the specific selection of counsel.[21] Post-bankruptcy the receiver remains subject to the terms of the prepetition orders of appointment which describe his duties and powers, including the right, if any, to retain counsel and accountants once bankruptcy intervenes. The bankruptcy court has the supervisory power over a receiver and supersedes the authority of the state or federal court which appointed the receiver. The Bankruptcy Court may issue such additional orders or amendments of prior orders as it deems appropriate to govern the receiver's management of estate property. Regular reports of the operations of the property under the receiver's supervision can be directed so that all parties remain informed. Should those reports not be satisfactory or raise questions any party in interest may seek to have the bankruptcy court direct the receiver to appear and respond to the inquiries.
When turnover occurs, the Bankruptcy Court is required to protect the persons to whom the custodian is indebted. See Code § 543(c)(1)[22] It cannot be disputed therefore that, if the Receiver had turned the Property over to the Debtor, the Court would be required to provide for the payment of all of the Receiver's unpaid bills, including those of his counsel, subject only to a determination of reasonableness.
This Court fails to see as a policy matter why there should be any different treatment of those expenses when the custodian is retained than when he is not. The U.S. Trustee points to the initial phrase of Code § 543(d)(1) which allows the Bankruptcy Court to excuse compliance with subsection (c) when turnover is not required. Since it is subsection (c) which provides for the allowance and payment of the custodian's prepetition expenses, the U.S. Trustee reasons that application of subsection (c) is not mandatory and it is not intended that the custodian's pre-petition expenses be paid when the custodian is retained. Accord In re Posadas Associates, supra, and In re 245 Associates, LLC, supra. The Court finds this hypertechnical reading at odds with the plain meaning of Code § 543. In this Court's view, if the inclusion of (c) is not a drafting error, its inclusion should be viewed as simply preserving the flexibility of the bankruptcy court to deal with any circumstances that might arise. For example, the bankruptcy court might not wish to direct immediate payment if the receivership appears to be insolvent or cash poor.
It makes absolutely no sense to put the prepetition obligations of a receiver on a worse footing if a receiver is excused from turnover than if he is not. If it were otherwise, the receiver and the receivership creditors would be placed in the position of having an interest in whether or not turnover occurred, something which they should manifestly not have, and a position that has been rejected since long before the adoption of the Bankruptcy Code. The rights of the secured creditor who opposes turnover to the debtor would not be protected if the receiver, or the *899 receivership creditors, opposed the secured creditor's position in order to protect their own. And, after all, it is the secured creditor and not the receiver who should make application to have the receiver excused from the turnover objection imposed by Code § 543(a).[23]
Since the Bankruptcy Court can excuse compliance with the turnover requirement of Code § 543(a) only after notice and hearing, any issues concerning the propriety of the receiver's prior conduct, including his choice of counsel, can be considered at the time of any hearing. It would no doubt be desirable to request that a receiver place in the record of the bankruptcy case the information about his attorneys that would be found in the usual retention application.
The so-ordered Stipulation in this case provided that the Receiver would make application to this Court for the retention of the Attorneys. He has done so and nothing indicates to this Court that the Attorneys' retention should not be continued. The fact that the receiver is a member of the firm is not an obstacle. The state court obviously found no problem with this relationship. This court looks to the Code's provisions with respect to trustees for guidance and finds trustees are permitted to retain their own law firms. See Code § 327(d). Compare In re Ira Haupt & Co. (Knapp v. Seligson), 361 F.2d 164, 168 (2nd Cir.1966).
The attorneys' prepetition claim will be paid under Code § 543(c) as soon as possible along with the other prepetition debts of the receivership. This is a straightforward issue that need not be dealt with in the future in a convoluted way. The status of the fees due a receiver's attorneys is in stark contrast to the prepetition claim of the debtor's prepetition attorneys. That claim can only be paid pursuant to the terms of a confirmed Chapter 11 plan or a Chapter 7 trustee's distribution and may not be paid in full, even if the debtor is successful in confirming a plan.
In summary this court agrees that a receiver would be required to make application to the Bankruptcy Court for the retention of an attorney if no prior court order permitting retention existed. As this court earlier indicated, it does not agree that a new retention application is required when bankruptcy intervenes if there is already a retention order in place in the receivership. Certainly some scrutiny should be given to the receiver and his counsel if turnover is not directed and that can be done in connection with the request to the court to excuse compliance with the turnover requirement of Code § 543(a). For the reasons set forth earlier, this court most emphatically does not agree that a receiver's attorneys are disqualified from retention because they are owed fees for prepetition services. In all but the smallest cases in which few legal services are required, it is impossible to imagine that the receiver's attorneys will not have an outstanding bill. This court declines to adopt a standard that would have the effect of disqualifying a receiver's prepetition counsel from continuing in virtually every case.[24]
NOTES
[*] Formerly known as Prudence Beatty Abram.
[1] Code § 543(d)(1) provides as follows:
"(d) After notice and hearing, the Bankruptcy Court
(1) may excuse compliance with subsection (a), (b), or (c) of this section if the interests of creditors, and, if the debtor is not insolvent, of equity security holders would be better served by permitted a custodian to continue in possession, custody, or control of such property * * *."
[2] It was certainly appropriate for the Office of the United States Trustee to rely on In re 245 Associates, LLC in objecting to the Receiver's application if it found the decision persuasive. However, the decision cannot be viewed as controlling law. The authorities are in agreement that a decision issued by a single bankruptcy judge in a multi-judge bankruptcy court is not binding on the other bankruptcy judges. See, e.g., In re Suburban Motor Freight, 134 B.R. 617, 626 (Bankr.S.D.Ohio 1991) (The doctrine of stare decisis does not bind one bankruptcy court to follow the decision of another bankruptcy court, even if that decision is from another bankruptcy judge in the same district). Indeed, the decision of a single district judge in a multi-judge district has been held not to be binding on the bankruptcy court. See, e.g., In re Gaylor, 123 B.R. 236, 240-242, (Bankr.E.D.Mich.1991)(Since a decision of an individual district judge does not bind other district judges in the same district, the doctrine of stare decisis cannot be invoked to require the bankruptcy court to follow the decision of a single district judge); and In re Rheuban, 128 B.R. 551, 554-555 (Bankr.C.D.Cal. 1991). Thus, in this district, which has both a multi-judge bankruptcy court and a multi-judge district court, only decisions of the Second Circuit Court of Appeals are controlling.
[3] The facts which follow are drawn from the Debtor's case file in addition to the various retention papers. Obviously the facts are found only for the purpose of placing the present ruling in context and should not be used for any other purpose.
[4] Madison 47-48 Equities LLC (the "Secured Creditor") has succeeded to the interests of Heller.
[5] See Case Document No. 10.
[6] The term "custodian" is defined in Code § 101(11) and includes a receiver appointed in a non-bankruptcy case. It is undisputed that the Receiver is a custodian as that term is used in Code § 543.
[7] See Paragraph 10 of the Affidavit Under Local Bankruptcy Rule 52 accompanying the Debtor's Chapter 11 petition (Case Document No. 1).
[8] The Attorneys were never retained by the Debtor. It is far from clear that the Attorneys are unsecured creditors of the Debtor since they were retained by the Receiver and not the Debtor. The Attorneys do have a right to be paid by the Receiver out of the rents which are being collected by the Receiver. The Attorneys' claim to be paid out of the rents can be likened to the interest of a non-recourse secured creditor in a debtor's property.
[9] It should be obvious that a receiver has no control over a debtor's choice whether or not to file a bankruptcy petition and that a debtor may choose not to give any prior notice to a receiver of its intention to file.
[10] Code § 327(a) is found in Chapter 5 of the Code. Code § 103(a) provides for the application of Chapters 1, 3 and 5 in Chapter 11 cases.
[11] Code § 322 does not apply to the Receiver. It applies only to persons selected as trustee under Code §§ 701, 702, 703, 1104, 1163, 1202, or 1302.
[12] In re LCL Income Properties, L.P.VI, 177 B.R. 872 (Bankr.S.D.Ohio 1995) relied on by the U.S. Trustee does not support its position. The court held that there is no statutory requirement of disinterestedness as to a custodian retained under Code § 543(d). No similar issue as to the custodian's counsel was before that court.
[13] In contrast, under the former Bankruptcy Act, § 2a(3), the bankruptcy court could, and frequently did, appoint receivers. Under the former Bankruptcy Act and Rules, a receiver appointed by the bankruptcy court was required to be disinterested. See former Bankruptcy Rules 201(f) and 209(d). Under the former Bankruptcy Act, the Bankruptcy Rules required the receiver and the receiver's counsel to meet the same standards of eligibility as were applicable to a trustee and trustee's counsel. See former Bankruptcy Rules 102(f) ("Only a person who is eligible to be a trustee under Rule 209(d) may be appointed a receiver,"); Rule 209(d) ("A trustee shall have no interest adverse to the estate and shall be competent to perform the duties of his office,") and Rule 215(a) ("If the attorney [whose retention is sought by the trustee or receiver] * * * represents or holds no interest adverse to the estate in the matters upon which he is to be engaged, and his employment is in the best interest of the estate, the Court may authorize his employment").
[14] Black's Law Dictionary (6th ed.1990) defines a receiver as
"A person appointed by a court for the purpose of preserving property of a debtor pending an action against him, or applying the property in satisfaction of a creditor's claim, whenever there is danger that, in the absence of such appointment, the property will be lost, removed or injured. An indifferent person between the parties to a cause, appointed by the court to receive and preserve the property or fund in litigation, and receive its rents, issues and profits, and apply or dispose of them at the direction of the court when it does not seem reasonable that either party should hold them."
[15] As enacted the section referred to became Code § 305.
[16] As a matter of practice, in single asset real estate cases before this judge, the receiver is generally left in possession when the receivership is well-established. If a receiver has only recently been appointed and not yet fully taken over management, the debtor is likely to end up managing the property as debtor in possession. However, where the debtor goes into possession, it will almost always provoke a dispute with the secured creditor over the debtor's right to use the rents to manage the property. See this court's decision in In re Princeton Square Associates, L.P. 201 B.R. 90 (Bankr.S.D.N.Y.1996). There normally is a stipulation between the debtor-in-possession and the secured creditor detailing management issues such as required leasing approvals, advertising, selection of the managing agent and the fee to be paid to the managing agent.
In refusing to remove the custodian on the debtor's challenge, the court in In re LCL Income Properties, L.P. VI, supra, wrote
"[I]n the event that reorganization does not occur, it would appear that the second mortgagee would be in a position to proceed with its foreclosure. Were that to happen, doubtless it would reinstall the present receiver. The dislocation in management caused by two changes in management organization would obviously result in unnecessary trouble and expenses. By leaving matters in the status quo as it has existed for more than two years, debtor will have the opportunity to reorganize contemplated by the bankruptcy laws, and at the same time the interests of creditors will be protected." 177 B.R. at 876.
[17] As discussed, supra, this Court finds no inherent conflict between the concepts of excusing turnover under Code § 543(d) and having a debtor in possession. Accord, In re LCL Income Properties, L.P. VI, supra. Moreover, this court sees no need to create offices not explicitly provided for in the Code in the absence of highly unusual circumstances. A Chapter 11 trustee would plainly have had all the rights, powers and powers needed in the Uno case and there would be no debtor in possession. Moreover, expanding a receiver's duties to be almost equivalent to those of a trustee fails to respect the prohibition in Code § 105(a) on the appointment of receiver by the bankruptcy court.
[18] An analysis of the facts in Uno Broadcasting indicates yet another problem in retaining the receiver. Could the receiver prosecute an appeal of the creditor's judgment for the benefit of the estate or file avoidance actions? If a creditors' committee were appointed, it could be authorized to prosecute the appeal and any available avoidance actions. See In re STN Enterprises, 779 F.2d 901 (2d Cir.1985).
[19] Code § 105(a) which authorizes the court to issue any order, process, or judgment that is necessary to carry out the provisions of the Code, also grants the court adequate authority to do what is necessary to make the Code work.
[20] The former Bankruptcy Act contained provisions similar to those now found in Code § 543 with respect to receivers appointed by other courts. Section 2(a)(21) of the Act permitted the bankruptcy court to require receivers to deliver property in their possession to a trustee or receiver appointed under the Act, unless the appointment had been made more than four months earlier. In Chapter X, the trustee or debtor in possession was expressly vested with the rights, if any, of the prior receiver and with the right to immediate possession. See former Act § 257. The court was required to make such provisions as were equitable for the protection of the obligations incurred by the receiver in the prior proceeding and for the payment of the reasonable costs and expenses incurred therein. See former Act § 258. Similar provisions applied in Chapter XII cases. See former Act § 506-8.
[21] If a motion is made to excuse compliance with the turnover requirement, that is the time for the Bankruptcy Court to examine whether the receiver and/or his then attorneys have such connections that their continuation would be inappropriate. Certainly, the interests of all creditors may not well served by a custodian or the custodian's counsel who cannot meet the requirements of disinterestedness, other than unpaid fees, that the Code places on trustees and their counsel. Under the former Bankruptcy Act it does not appear that there was a distinction drawn between receivers appointed by the bankruptcy court and those appointed by other courts and left in after the bankruptcy case was commenced. See Footnote 13, supra.
[22] Code § 543(c) provides that once the turnover has occurred the court, after notice and a hearing, shall
"(1) protect all entities to which a custodian has become obligated with respect to such property or proceeds, product, offspring, rents or profits of such property;
(2) provide for the payment of reasonable compensation for services rendered and costs and expenses incurred by such custodian; and
(3) surcharge such custodian * * * for any improper or excessive disbursement, other than a disbursement that has been made in accordance with applicable law or that has been approved, after notice and a hearing, by a court of competent jurisdiction before the commencement of the case under this title."
[23] A debtor may be best able to garner the secured creditor's consent to a plan by agreeing not to disturb a long-standing prepetition receivership, as the Debtor did in this case. Most Chapter 11 cases with real estate in foreclosure involve only a single property, one or a few mortgagees, a few small unsecured creditors and the debtor. The unsecured creditors will be wiped out unless the debtor is able to negotiate a plan with the secured creditor. In light of the Second Circuit's decision in In re Boston Post Road Ltd., 21 F.3d 477 (1994), it is virtually impossible in this Circuit for a debtor to confirm a plan without the secured creditor's consent.
[24] Apparently recognizing the problem their objection poses, the U.S. Trustee originally proposed that the Receiver retain the Attorneys as special counsel because special counsel need not be disinterested. See Code § 327(e) ("The trustee, with the court's approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interest of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed"). This court finds that approval no more appropriate since Code § 327(b) is equally inapplicable to the receiver. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1744049/ | 507 S.W.2d 518 (1974)
Geneva NICHOLS et vir, Petitioners,
v.
Dr. Jack C. SMITH, Respondent.
No. B-3887.
Supreme Court of Texas.
February 27, 1974.
Rehearing Denied March 27, 1974.
Vecchio & Vecchio, James S. Vecchio, Arlington, for petitioners.
Cantey, Hanger, Gooch, Cravens & Munn, William B. David and Richard L. Griffith, Fort Worth, for respondent.
WALKER, Justice.
The opinion delivered in this case on October 31, 1973, is withdrawn, and the following is substituted therefor:
This is a medical malpractice case. Mrs. Geneva Nichols, joined by her husband, petitioners, sued Dr. Jack C. Smith, respondent, for injuries she allegedly sustained *519 during an operation performed by Dr. Smith on June 27, 1966. Petitioners' original petition was filed on August 5, 1970, and the trial court granted respondent's motion for summary judgment on the ground that the suit was barred by the two-year statute of limitations. Article 5526, Vernon's Ann.Tex.Civ.St. The Court of Civil Appeals affirmed. 489 S.W.2d 719. We affirm.
Petitioners' allegations in the trial court may be summarized as follows: On June 20, 1966, geneva Nichols was hospitalized by Dr. Robert Wayne Moore, a general practitioner, whose diagnosis was that she was suffering from a hiatus hernia, a duodenal ulcer, and possibly other difficulties. A hiatus hernia is a herniation of the stomach through the esophageal opening in the diaphragm separating the chest and abdominal cavities. Dr. Moore consulted with respondent, who concurred in the diagnosis of hiatal hernia and recommended that the condition be surgically repaired. On June 27, 1966, respondent operated with the assistance of Dr. Moore and purported to repair the hernia. In the course of the operation, respondent severed both branches of the vagus nerve, which controls the secretion of acids in the stomach. The surgical severance of both branches of the vagus nerve is called a complete vagotomy. When a complete vagotomy is performed, the digestive processes are materially affected and it is necessary to enlarge the valve at the end of the stomach to provide more adequate drainage. This latter procedure, called a pyloroplasty, was not performed on Mrs. Nichols. She has suffered from disorders of her digestive system ever since the operation and eventually had corrective surgery which did not fully alleviate her problems. It is necessary that she take drugs to supplement her digestive processes, and she constantly suffers from diarrhea, constipation, and nausea. At no time was she advised that there was even the possibility that her vagus nerve might be cut, and at no time did she consent to the severing of same.
Petitioners further alleged that "the defendant and Dr. Moore fraudulently concealed from plaintiff and her husband the fact that they had performed a vagotomy upon her and, when they finally advised her that a vagotomy had been performed, they advised her further that it would regenerate itself and would cure itself. It was not until approximately 1969 that plaintiff for the first time learned what had been done to her and its effects.... Because of the fraud of the defendant in concealing from Geneva Nichols what he had done and because of her inability to discover what had occurred until a time within two years prior to the filing of this suit, the suit is not barred by the two year statute of limitation."
When the defendant is under a duty to make a disclosure but fraudulently conceals the existence of a cause of action from the one to whom it belongs, the guilty party will be estopped from relying on the defense of limitations until the right of action is, or in the exercise of reasonable diligence should be, discovered. Barnard v. Thompson, 138 Tex. 277, 158 S.W.2d 486; Owen v. King, 130 Tex. 614, 111 S.W.2d 695; 51 Am.Jur.2d Limitation of Actions, § 147. The summary judgment proofs in the present case consist of the deposition and affidavit of Geneva Nichols and the depositions of respondent and Dr. Moore. Both doctors testified that the right vagus nerve was severed during the operation because the hernia could not be properly repaired without doing so. They also testified that following the operation they told Mrs. Nichols that her right vagus nerve had been severed, and Mrs. Nichols admitted that she was so advised by respondent on September 10, 1966. If she ever had a cause of action for the cutting of her right vagus nerve, therefore, it is clearly barred by limitation.
As previously indicated, petitioners alleged that respondent severed both branches of the vagus nerve, and that this fact was fraudulently concealed from them by respondent and Dr. Moore.
*520 The Court of Civil Appeals concluded that the burden was on petitioners to offer proof raising a fact issue of fraudulent concealment. They had not done so, and the summary judgment in respondent's favor was accordingly affirmed. Petitioners' application for writ of error was granted, because several members of the Court were of the view that under our holding in Torres v. Western Cas. Co. and Sur. Co., Tex.Sup., 457 S.W.2d 50, the burden was on respondent to negate the claim of fraudulent concealment. After further consideration, however, we agree with respondent that the case is governed by "Moore" Burger, Inc. v. Phillips Petroleum Co., Tex.Sup., 492 S.W.2d 934, and that the Court of Civil Appeals was correct in concluding that petitioners had the burden of supporting the allegations by which they sought to avoid the defense of limitations.
It was held in Gulf, C. & S. F. Ry. Co. v. McBride, 159 Tex. 442, 322 S.W.2d 492, that when the plaintiff moves for summary judgment in a case where the defendant has alleged an affirmative defense, the motion should be granted upon a showing by the plaintiff that there is no material issue of fact concerning the elements of his claim unless the defendant comes forward with summary judgment proof sufficient to raise at least an issue of fact with respect to his affirmative defense. In other words the pleading of an affirmative defense will not, in itself, defeat a motion for summary judgment by a plaintiff whose proof conclusively establishes his right to an instructed verdict if no proof were offered by his adversary in a conventional trial on the merits.
The plaintiff in Torres filed his claim for workmen's compensation one year and six months after the injury. He had pleadings of good cause for the delay but offered no summary judgment proof to support the allegations. The defendant's motion for summary judgment was granted by the trial court, and the Court of Civil Appeals affirmed. These judgments were reversed and the cause was remanded to the trial court, because the defendant had not discharged its burden of establishing conclusively that, on the plaintiff's case as pleaded, the defendant was entitled to prevail as a matter of law. In rejecting the defendant's contention that the case was governed by McBride, we said:
There is one situation where the opponent of a summary judgment motion must come forward himself to raise a fact issue by proof rather than allegation, the movant having presented no proof on the issue, and that is to support the non-movant's own affirmative defense. Gulf, Colorado & Santa Fe Ry. v. McBride, 159 Tex. 442, 322 S.W.2d 492 (1958). Affirmative defenses are well recognized under our rules. It would unduly confuse summary judgment practice to reshape our previous holdings so as to shift the burden of presenting proof to levels of avoidance of an opponent's proof.
This statement must be read in the light of our subsequent opinion and holding in "Moore" Burger. The nonmovant plaintiff there was relying on promissory estoppel to avoid defendants' affirmative defense of the statute of frauds, which was established as a matter of law. It was held that the plaintiff, if it wished to prevent the granting of a summary judgment against it, had the burden of coming forward with proofs raising an issue of fact with respect to promissory estoppel. The Court reasoned:
Promissory estoppel is a defensive plea; it is a plea in confession and avoidance. We so held in Wheeler v. White, 398 S.W.2d 93, 96 (Tex.1965), ... The plea is being used in this case in an effort to avoid the statute of frauds defense which is established as a matter of law. A defendant who seeks a summary judgment on the theory that the plaintiff's suit is without merit has the burden of establishing as a matter of law that there is no genuine issue of fact as to at least one essential element of the *521 plaintiff's cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827 (Tex.1970). This, however, is not that type of case; here, the summary judgment evidence establishes the affirmative defense as a matter of law. In this situation we hold that the Gibbs rule did not impose the burden on the defendants to negative "Moore" Burger's defensive plea; rather, the burden was on "Moore" Burger, if it wished to avoid the granting of summary judgment against it, to adduce evidence raising a fact issue concerning its promissory estoppel defense. Cf. Gulf, Colorado & Santa Fe Railway Co. v. McBride, 159 Tex. 442, 322 S.W.2d 492 (1958).
The present case is quite similar to "Moore" Burger. Subject to a question as to the applicability of the discovery rule, which is discussed below, the defense of the statute of limitations is established by the record as a matter of law, and petitioners are relying on fraudulent concealment to avoid that defense. It was their burden, therefore, to come forward with proof raising an issue of fact with respect to fraudulent concealment. Since they failed to do so, the allegations of fraudulent concealment do not defeat respondent's right to a summary judgment.
The holding in Torres is sound and will not be disturbed. Although Article 8307, § 4a, V.A.T.S., authorizes the Board "for good cause" to waive strict compliance with the statutory requirement that a claim for compensation be made within six months after the injury, "good cause" in the trial of a workmen's compensation case in the district court is not a plea in confession and avoidance of an affirmative defense. Proof of good cause is simply an alternative method of establishing performance of a condition precedent to the insurance carrier's liability. It is for this reason that the carrier, if it wishes to obtain a summary judgment on the ground that the claim was not filed within six months, must negate with proof the plaintiff's allegations of good cause for the delay.
In so far as Mrs. Nichols bases her claim on the alleged severance of both branches of the vagus nerve, it could be argued that the case is governed by the discovery rule applied in Gaddis v. Smith, Tex. Sup., 417 S.W.2d 577, and Hays v. Hall, Tex.Sup., 488 S.W.2d 412. The judgment of the trial court cannot be reversed on that ground, however, because petitioners confined their points of error and argument in the Court of Civil Appeals to the contention that the allegations of fraudulent concealment precluded a summary judgment in respondent's favor. As pointed out by the Court of Civil Appeals in its opinion, petitioners indicated in their brief in the intermediate court that they did not expect or wish the discovery rule to be extended to this case. Our action in affirming the judgment of the trial court is not to be understood, therefore, as holding that the discovery rule has no application here.
Respondent's motion for rehearing is granted; the judgment rendered in this cause on October 31, 1973, is set aside, and the judgment of the Court of Civil Appeals is now affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2985250/ | December 17, 2013
JUDGMENT
The Fourteenth Court of Appeals
TERRENCE DARCEL JARMAN, Appellant
NO. 14-13-00478-CR V.
THE STATE OF TEXAS, Appellee
________________________________
This cause was heard on the transcript of the record of the court below.
Having considered the record, this Court holds that there was no error in the
judgment. The Court orders the judgment AFFIRMED.
We further order appellant pay all costs expended in the appeal.
We further order this decision certified below for observance. | 01-03-2023 | 09-23-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1774694/ | 654 So. 2d 1073 (1995)
BOARD OF COMMISSIONERS OF the ORLEANS LEVEE DISTRICT
v.
Harry F. CONNICK, as District Attorney for the Parish of Orleans.
No. 94-C-3161.
Supreme Court of Louisiana.
March 9, 1995.
*1074 Ira J. Middleberg, Alan D. Weinberger, Rebecca J. King, Middleberg, Riddle & Gianna; John Wilson Reed, J.E. Smith, Graymond F. Martin, Charles W. Salley, Ira J. Rosenzweig, Hon. William J. Guste, Jr., Lewis O. Unglesby, Arthur A. Lemann, III, for applicant.
William F. Wessel, Mark D. Pethke, Camille B. Tifft, James A. Smith, II, for respondent.
Ellis P. Adams, Jr., for amicus curiae, Louisiana Dist. Attys. Ass'n.
Joseph P. Brantley, IV, for amicus curiae, Louisiana Casino Cruises.
CALOGERO, Chief Justice.[*]
This case arises out of an action for declaratory and injunctive relief filed by the Board of Commissioners for the Orleans Levee District (hereinafter the "Levee Board") against Harry F. Connick, District Attorney for the Parish of Orleans, an action which seeks to prevent Connick from investigating or indicting for criminal violations the operators and/or employees of Showboat Star Casino, which is operating under a riverboat gaming license issued by the Riverboat Gaming Enforcement Division of the Louisiana State Police. See LSA-R.S. 4:501 et seq. ("Louisiana Riverboat Economic Development and Gaming Control Act"). In response to a motion by the Levee Board for a preliminary injunction against Connick, the trial court ruled that LSA-R.S. 14:90(D) represents an unconstitutional intrusion into the constitutionally defined power of the district attorney.[1]See La. Const. Art. V, § 26(B). The trial judge accordingly signed a judgment denying the plaintiff's request for a preliminary injunction, dissolving an extant temporary restraining order, dismissing the defendant's pending exceptions of no right and no cause of action, and declaring LSA-R.S. 14:90(D) unconstitutional.
The Levee Board appealed that decision, invoking this Court's appellate jurisdiction under Article V, § 5(D)(1) of the Louisiana Constitution of 1974. Based upon our review of the record and relevant principles of Louisiana constitutional and statutory law, we vacate the trial court's order that LSA-R.S. 14:90(D) is an unconstitutional exercise of legislative authority. We affirm, however, the trial court's denial of the motion for a preliminary injunction and the trial court's ruling dissolving the temporary restraining order, thus freeing the district attorney to continue his investigation and/or prosecution of this case in criminal district court. Finally, we sustain Connick's exception of no cause of action and accordingly dismiss the plaintiff's lawsuit.
I. Facts and Procedural History
LSA-R.S. 14:90(A) defines the crime of "gambling" as "the intentional conducting, or directly assisting in the conducting, as a business, of any game, contest, lottery or contrivance whereby a person risks the loss of anything of value in order to realize a profit." LSA-R.S. 14:90(D) provides, however, that the activities otherwise barred by LSA-R.S. 14:90(A) do not constitute the crime of "gambling" and "shall not be suppressed by any state or local law enforcement officer" if they are conducted "upon a riverboat as defined and authorized in R.S. 4:501 through R.S. 4:562." The latter statutory sections include LSA-R.S. 4:525(B)(1)(a), which maintains that, subject to certain limited exceptions, *1075 "no gaming may be conducted while a riverboat is docked."
On November 18, 1994, District Attorney Connick contacted, among others, the owners of the Showboat Star Casino and informed them that he believed their practice of conducting gaming activities while not cruising violated LSA-R.S. 4:525(B)(1)(a)'s conditional prohibition of dockside gambling. Connick asserted that this violation removed the casino operators from the protective scope of LSA-R.S. 14:90(D), and that those operators therefore could face prosecution for gambling activities under LSA-R.S. 14:90(A). On December 8, 1994, the Orleans Parish grand jury opened an investigation into possible state criminal violations stemming from the operation of the Showboat Star Casino, located at South Shore Harbor on Lake Pontchartrain in New Orleans.
On December 16, 1994, the Levee Board filed a lawsuit against Connick in the Civil District Court for declaratory and injunctive relief.[2] In its petition the Levee Board prayed for the immediate issuance of a temporary restraining order, to be followed by a preliminary injunction, and ultimately a judgment declaring that Connick has no power "to indict or promote the indictment or prosecute or promote the prosecution" of any person operating under a license "to conduct gaming activities on a riverboat."[3]
The Civil District Court, through the duty judge, issued a temporary restraining order prohibiting Connick "from indicting or urging the indictment" of "any officer or employee of the Showboat Star Partnership for any violation of La.R.S. 14:90" as long as that person is under the authority of a valid riverboat gaming license. In his reasons for judgment, the duty judge concluded that "the Legislature intended to vest the gaming enforcement division with exclusive jurisdiction to enforce" the Riverboat Gaming Control Act. The duty judge went on to note that "[i]f, as the District Attorney suggests, local authorities are allowed to prosecute because they believe the failure to sail is culpable, the statute would be effectively neutered."
Connick responded to this ruling with a motion to dissolve the temporary restraining order. He also filed exceptions of no right and no cause of action, claiming that the Levee Board lacks any standing to bring its action (and thus enjoyed no right of action) and additionally that its petition sets forth no cause of action. On December 20, 1994, the trial court conducted a hearing on the Levee Board's motion for a preliminary injunction, Connick's motion to dissolve the temporary restraining order, and the latter's peremptory exceptions of no right and no cause of action.
On December 21, 1994, the trial court issued a judgment in which it declared LSA-R.S. 14:90(D) to be an unconstitutional exercise of legislative power because it "seeks to limit the power of the District Attorney in the area of riverboat gambling." The trial court found this to be an infringement of the broad discretion accorded prosecutors in the investigation and prosecution of violations of state criminal statutes under Article V, § 26(B) of the Louisiana Constitution of 1974.[4] The trial judge raised the question of the statute's constitutionality on her own motion; it was not raised or argued by either party in any pleading or at any hearing.
Based upon this finding of constitutional infirmity, the trial court dissolved the temporary restraining order and denied the Levee Board's motion for a preliminary injunction. The trial judge also ordered the defendant's exceptions of no right and no cause of action dismissed, presumably finding it unnecessary to reach the merits of these exceptions in *1076 light of its finding that LSA-R.S. 14:90(D), which the plaintiff claimed exempted licensed riverboat gaming operators from LSA-R.S. 14:90(A)'s gambling prohibition, was unconstitutional.
The Levee Board appealed that decision to this Court. In addition, an association of riverboat gaming interests ("the Association"),[5] with an avowed interest in these proceedings, has appealed the decision as well. See LSA-C.C.P. Art. 2086. We denied the Levee Board's motion, filed in conjunction with this appeal, for an order to stay the district attorney's grand jury investigation regarding the Star Casino. Board of Comm'nrs of the Orleans Levee District v. Connick, 94-CD-3121, 648 So. 2d 907 (La. 1995). However, we did stay the effect of the Civil District Court's order in the case insofar as it declared LSA-R.S. 14:90(D) unconstitutional, pending disposition of this appeal. Board of Comm'nrs of the Orleans Levee District v. Connick, 94-CD-3129, 648 So. 2d 907 (La.1995).
We now entertain this case under Article V, § 5(D)(1) of the Louisiana Constitution of 1974 which provides this Court with appellate jurisdiction over all cases in which "a law or ordinance has been declared unconstitutional." In addition, we consider all other issues ruled upon by the trial court pursuant to Article V, § (5)(F), which grants this Court "appellate jurisdiction over all issues involved in a civil action properly before it." See Church Point Wholesale Beverage v. Tarver, 614 So. 2d 697, 700 (La.1993).
II. The Trial Court's Ruling that LSA-R.S. 14:90(D) is Unconstitutional
As earlier indicated, no party to this proceeding, either in the Civil District Court below or in this Court, has challenged the constitutionality of LSA-R.S. 14:90(D). Rather, the trial court raised the issue of the statute's constitutionality on its own motion. Given the facts and legal issues presented in this particular case, the trial court erred in doing so.
As a general rule, courts should not reach the question of a statute's constitutionality when its unconstitutionality has not been placed at issue by one of the litigants. See Vallo v. Gayle Oil Co. Inc., et al, 94-CA-1238, 646 So. 2d 859 (La.1994). Unless a statute as drawn is clearly unconstitutional on its face, it is preferred that the parties to a dispute uncover any constitutional defects in a statute through the dialectic of our adversarial system; for a court sua sponte to declare a statute unconstitutional is a derogation of the strong presumption of constitutionality accorded legislative enactments. See State v. Cinel, 94-KA-0942, 646 So. 2d 309, 313 (La.1994) (citations omitted) ("[w]henever it is possible, [Louisiana] courts have the duty to interpret statutes in a manner consistent with" our state and federal constitutions).
Courts should both respect legislative enactments and at the same time seek to provide substantial remedies to wrongly aggrieved persons; a balancing of these often competing directives leads us to the formulation of this general rule: "a judge should not judicially declare a statute unconstitutional until the question of constitutionality is tendered for decision [or] unless it must be decided in order to determine the right of a party litigant." State v. Watkins, 176 La. 837, 147 So. 8 (1993). See also Diaz v. Allstate, 433 So. 2d 699, 702 (La.1983) ("a court should not pass on the constitutionality of legislation unless it is essential to the decision of a case or controversy").
In this case, the trial judge appears to have found the statute unconstitutional based upon her reading of it as divesting the district attorney of a portion of his constitutionally conferred prosecutorial power. Such a reading is a strained interpretation of LSA-R.S. 14:90(D); the provision is clearly *1077 definitional in nature, intended to provide an exception for the general prohibition on "gambling" found in LSA-R.S. 14:90(A). As such it is not remarkably different from a number of such exceptions which abound in our criminal code, and nothing about its language or placement supports the proposition that its application impairs the district attorney's prosecutorial authority. Because we conclude that a consideration of LSA-R.S. 14:90(D)'s constitutionality was not required for the trial court to properly dispose of the issues before it, we vacate the trial court's order declaring the statute unconstitutional.
III. The Trial Court's Ruling Denying the Levee Board a Preliminary Injunction and Dismissing Connick's Peremptory Exception of No Cause of Action
In this case the true threat to the constitutional power of the district attorney arises not from any influence exerted by LSA-R.S. 14:90(D), but instead from the prospect of the district attorney's authority to investigate and prosecute state criminal offenses being curtailed by an injunction issued by the Civil District Court for the Parish of Orleans. We find that the Levee Board's petition fails to allege the extraordinary circumstances required to justify the granting of such relief, and the record is similarly devoid of any evidence indicating the existence of such circumstances. Therefore, for the reasons discussed infra we affirm the trial court's ruling dissolving the temporary restraining order and denying the Levee Board a preliminary injunction.
Our jurisprudence admits of only a limited number of instances in which a state criminal prosecution may be enjoined prior to the institution of criminal proceedings in a court exercising criminal jurisdiction, i.e. prior to the filing of a misdemeanor affidavit or bill of information by the district attorney or the issuance of an indictment by a legally constituted grand jury. See La. Const. Art. I, § 15; LSA-C.Cr.P. Art. 382. These limitations upon the power of a court exercising civil jurisdiction arise from a respect for the constitutional prerogative of the district attorney, as well as an appreciation of the different purposes served by a trial court's exercise of civil, as opposed to criminal, jurisdiction.
Article V, § 26 of the Louisiana Constitution of 1974 provides the district attorney with broad and sweeping powers as part and parcel of his role as the state's prosecuting attorney. "A district attorney is a constitutional officer who serves in the judicial branch and exercises a portion of the sovereign power of the state within the district of his office." Diaz, supra, 433 So.2d at 701. "The district attorney has entire charge and control of every criminal prosecution instituted or pending in his district and determines whom, when and how he shall prosecute." State v. Perez, 464 So. 2d 737, 744 (La.1985). Furthermore, "there is no provision of law that defines or limits the type of cases a district attorney may prosecute." Id. See also State v. Sykes, 364 So. 2d 1293, 1297 (La.1978). Finally, the jurisdiction of the district attorney to prosecute those who violate state criminal statutes is exclusive; it can only be constrained or curtailed when it operates to the prejudice of a contrary constitutional mandate, and even then only with due deference to the district attorney's constitutional prerogative. City of Baton Rouge v. Short, 345 So. 2d 37, 40 (La.1977).
We have in the past recognized only two particular scenarios in which the egregiousness of the threat to constitutionally protected interests warrants the staying of a district attorney's investigation prior to the initiation of prosecution in a court of criminal jurisdiction. The first of these is presented by a case where the district attorney is attempting to prosecute a prospective defendant under a statute which is "manifestly unconstitutional." Knights of Columbus v. Louisiana DPS, 548 So. 2d 936, 938 (La.1989) (citing cases).[6] A statute (or ordinance) is *1078 "manifestly unconstitutional" when it is invalid on its face, e.g. when the statute is unconstitutionally vague or overbroad. The drastic remedy of injunctive relief to restrain enforcement of such a statute is necessary because such a statute by its very existence threatens to "chill" the citizenry's exercise of constitutionally protected speech and assembly. See Plaquemines Parish Comm'n Council v. Perez, 379 So. 2d 1373, 1384-1385 (La.1980), citing Dombrowski v. Pfister, 380 U.S. 479, 85 S. Ct. 1116, 14 L. Ed. 2d 22 (1965). Outside of the narrow context of "manifestly unconstitutional" statutes,[7] however, "[t]he proper forum for testing the constitutionality of the statute is by a motion to quash in a criminal prosecution if and when that occasion arises." LaBauve v. Louisiana Wildlife and Fisheries Comm'n, 289 So. 2d 150, 153 (La.1974).
The second situation in which we have approved a civil court's enjoining a district attorney's investigation arises when the district attorney abuses the powers of his office by subjecting an individual to a harassing investigation without any good faith belief that the individual has committed any crime. Compare In re Grand Jury Subpoenas Issued to Certain Members of Orleans Levee District, 95-KK-0042, 648 So. 2d 864 (La. 1995) (per curiam). The issuance of an injunction is warranted in such cases because "there [is] a federal right to be free of a bad faith prosecution."[8]Perez, supra, 379 So.2d at 1385 (footnote omitted), discussing Shaw v. Garrison, 467 F.2d 113 (5th Cir.1972), cert denied, 409 U.S. 1024, 93 S. Ct. 467, 34 L. Ed. 2d 317 (1972). A plaintiff who seeks to enjoin such "bad faith" investigations must show, at a minimum, that he is threatened with an investigation which is "unnecessarily abusive, harassing or illegal, and without any possibility of ultimate indictment supported by probable cause for prosecution." Perez, supra, 379 So.2d at 1385.[9]
*1079 In the absence of one of these threshold showings,[10] however, a court exercising civil jurisdiction cannot restrain the district attorney from the exercise of his constitutional powers. Nothing in the Levee Board's petition or any other of the pleadings filed below suggests such a threshold showing has even been attempted in this case, much less made. For this reason, we affirm the trial court's dissolution of the temporary restraining order as improvidently granted, and affirm as well the trial court's decision denying the Levee Board a preliminary injunction.
The Levee Board and the Association have argued strenuously, both in brief and orally before this Court, that the district attorney is attempting to prosecute the operators of the Showboat Star Casino for conduct that the Legislature, by virtue of its general power to define crimes and its specific mandate to "define and suppress" gambling, has exempted from the definition of criminal "gambling." Compare LSA-R.S. 14:90(A), (D). In other words, the appellants complain that the district attorney has no authority to investigate and prosecute the casino operators because his constitutional authority only extends to the investigation and prosecution of conduct which is criminal, and not to an activity which the legislature has specifically "authorized."[11] The appellants contend that to allow the district attorney's investigation and/or prosecution to continue undermines the Legislature's authority to prescribe what conduct is criminal by allowing the district attorney the discretion to ascertain the criminality vel non of the casino operator's activities.
The appellants' argument is in this respect premature. The dispositive question at this juncture of the proceedings is not whether dockside gambling is a criminal offense under LSA-R.S. 14:90(A), but rather which is the proper judicial forum and the applicable procedural regime for answering that question. The appellants are incorrect insofar as they frame the question in terms of the tension between the constitutional authority of the Legislature and the district attorney, since as a constitutional matter the ultimate determination of whether a given course of conduct invites a legislatively imposed penal sanction is a role assigned to courts and petit juries, not the Legislature.
The Legislature's role in this instance is normative; the structure of our criminal justice system, where not dictated by constitutional considerations, is established by legislative enactment. Further, although the Legislature may mold the variety of prohibitions, procedures, and punishments which guide courts and juries in their duties, it is the distinct and varied facts of each individual case which determine the ultimate result in a given prosecution. Facts in our system of criminal justice do not exist a priori, but are found to exist after consideration of proper evidence adduced before a fair and impartial tribunal. The particular interest which the sovereign has in pursuing criminal justice dictates that those facts be presented and *1080 this case resolved according to the procedures which the Legislature has determined should apply in criminal matters.
In granting the temporary restraining order below, the duty judge of the civil district court noted that "[a] civil court is by far a more effective arena in which to wage this contest than would be a criminal prosecution." Such reasoning fails to appreciate the fundamental difference between criminal and civil matters. A trial court exercising its civil jurisdiction offers the prospect of the sovereign as referee, and the "looser" and more flexible civil procedural rules reflect that role insofar as they place great discretion and latitude of action in the hands of the respective parties. See Albert Venn Dicey & J.H.C. Morris, The Conflict of Laws, P. 77 (9th ed. 1973). This is so even when one of the parties is the sovereign acting in its proprietary role or haled into court because of a waiver of sovereign immunity.[12]
A crime, as opposed to any manner of civil offense, is a direct affront to the sovereign;[13] the sovereign qua sovereign is therefore a party to such suits in its role as prosecutor. See LSA-C.Cr.P. Art. 381; Berger v. United States, 295 U.S. 78, 88, 55 S. Ct. 629, 633, 79 L. Ed. 1314 (1935); Ledwith v. Douglas, 568 F.2d 117 (1978); Commonwealth v. Shelley, 374 Mass. 466, 373 N.E.2d 951 (1978). Because the sovereign has a direct interest in the initiation and resolution of a criminal proceeding, the rules of procedure applicable to it differ considerably from those applicable to a civil action. See United States v. Baptista-Rodriguez, 17 F.3d 1354 (11th Cir. 1994); State v. McNab, 642 So. 2d 41, 42 (Fla.App.1994). See also 1 Sir James Fitzjames Stephen, A History of the Criminal Law of England, P. 5 (1883). In addition, because a criminal action offers the prospect of a citizen opposed by the vast and impersonal resources of the state, constitutional protections come to the fore in the criminal context, sculpting the applicable substantive and procedural mechanisms far more comprehensively than in a civil setting. In short, when it addresses a criminal cause the sovereign is not concerned with providing an "effective arena" for two relatively equal litigants to match wits; rather, it is concerned with providing an effective way of vindicating its interest in promoting criminal justice while respecting the "fundamental fairness" that due process and related constitutional guarantees ensure colors the exercise of criminal jurisdiction. See Heath v. Alabama, 474 U.S. 82, 106 S. Ct. 433, 88 L. Ed. 2d 387 (1985); United States v. Flores, 289 U.S. 137, 53 S. Ct. 580, 77 L. Ed. 1086 (1933); Huntington v. Attrill, 146 U.S. 657, 13 S. Ct. 224, 36 L. Ed. 1123 (1892).
Under the Louisiana constitution it is the district attorney who is charged with the duty of seeking out potential criminals and bringing them to trial for their alleged wrongs. Where the constitution is silent, the Legislature defines the procedures to be followed in such trials when it sets forth the parameters of a trial court's criminal jurisdiction. See LSA-C.Cr.P. Art. 15. The constitutional role of the district attorney is incipient to the criminal process; his decision to file charges in a court of criminal jurisdiction is the event which incites a trial court's exercise of that jurisdiction. An injunction granted by a civil court halting a district attorney's investigation and preventing the filing of criminal charges therefore impairs not only the district attorney's constitutional prerogative, but also undercuts the Legislature's determination that certain issues of direct interest to the sovereign be resolved according *1081 to a certain set of procedural rules in a specified forum.
"No person is immune from prosecution in good faith for his alleged criminal acts." Douglas v. City of Jeannette, 319 U.S. 157, 163, 63 S. Ct. 877, 881, 87 L. Ed. 1324 (1943). "Nor is any person immune from a criminal investigation." Perez, supra, 379 So.2d at 1386. If the district attorney is incorrect in his appreciation of the criminality of a given defendant's course of conduct, the remedy is a fair trial or any of the pretrial remedies, such as a motion to quash, afforded by our Code of Criminal Procedure. Id. The district attorney, as long as he is not flagrantly violating the constitution by doing so, has the right and the duty to ferret out wrongdoers wherever he perceives them to be lurking, and then to bring them before a tribunal exercising criminal jurisdiction so that their guilt or innocence may be determined from the facts and the law adduced in that forum. A preliminary injunction in this case, on the showing made below, would deny that right and undermine that duty. Therefore we affirm the trial court's denial of such relief.
Furthermore, the same principles which militate against the issuance of the preliminary injunction also instruct us that the declaratory judgment action below should not be maintained. The root of our holding today is that a criminal prosecution may be preempted by recourse to civil relief only in exceptional circumstancesthose of constitutional significancewhich the appellants here have failed to demonstrate. This determination is a result of the balancing of the plaintiff's interest in obtaining civil relief against the district attorney's right to investigate and prosecute state crimes, a balancing which is weighted towards the district attorney because of the singular interest of the sovereign in criminal matters and the way in which that interest is vindicated in the criminal justice system.
The lawsuit for a declaratory judgment filed by the Levee Board is an attempt to bypass this system by obtaining a preliminary judicial determination of lack of criminal culpability in a forum which is not intended nor designed for the resolution of criminal matters, i.e. it is an attempt to bypass the criminal justice process. However, the Levee Board has failed to demonstrate any of the extraordinary and overriding constitutional concerns which might permit such a circumvention of this process. Thus, for the same reasons posited in the preceding subsection of this opinion, we conclude that the Levee Board's petition fails to state a cause of action sufficient to maintain a declaratory judgment action seeking a preliminary determination of the merits of a prospective criminal prosecution.[14]
In accordance with this finding, we reverse the trial court's dismissal of Connick's exception of no cause of action and, finding that it has merit, sustain it. Furthermore, based upon the record before us we find that there is no need to remand this case to the district court, and therefore dismiss the plaintiffs' lawsuit. See LSA-C.C.P. Art. 934.
As a result of this judgment, District Attorney Connick is free to proceed, in good faith, with his investigation and/or prosecution of violations of state criminal statutes pursuant to his authority under the Louisiana Constitution of 1974. We also observe that in this opinion we have had no occasion to pass upon the nature or the scope of the exemption from criminal culpability for "gambling" provided by LSA-R.S. 14:90(D). Rather, we conclude that, given the showing made by the Levee Board in the record before us, an interpretation of this criminal statute should be made in a district court exercising its original jurisdiction over criminal prosecutions.
Accordingly, we vacate the trial court's order finding LSA-R.S. 14:90(D) unconstitutional, as the order was entered upon the court's own motion when no party litigant raised the issue and it was not necessary for a determination of the rights of any party. We affirm the trial court's denial of the injunctive relief sought by the Levee Board *1082 since the Board has failed to make a showing of exceptional circumstances which warrant the issuance thereof. For the same reason, we reverse the trial court's judgment dismissing the defendant's exception of no cause of action and, finding that the exception has merit, sustain it and dismiss the plaintiff's lawsuit. The district attorney is free to continue his investigation and/or prosecution into allegedly illegal gambling activities which the plaintiff in this case has attempted to enjoin.
DISTRICT COURT'S ORDER DECLARING LSA-R.S. 14:90(D) UNCONSTITUTIONAL VACATED; JUDGMENT DENYING PLAINTIFF INJUNCTIVE RELIEF AFFIRMED; EXCEPTION OF NO CAUSE OF ACTION SUSTAINED, AND CASE DISMISSED.
JOHNSON, J., concurs in part, dissents in part and will assign reasons.
NOTES
[*] Judge Charles R. Lindsay, Court of Appeal, Second Circuit, sitting by assignment in place of Justice James L. Dennis. Pursuant to Rule IV, Part 2, § 3, Justice Catherine D. Kimball was not on the panel that heard and decided this case. See State v. Barras, 615 So. 2d 285, 286 n. 1 (1993).
[1] The portions of LSA-R.S. 14:90 pertinent to this opinion read as follows:
§ 90. Gambling
A. (1)(a) Gambling is the intentional conducting, or directly assisting in the conducting, as a business, of any game, contest, lottery or contrivance whereby a person risks the loss of anything of value in order to realize a profit.
D. The intentional conducting or assisting in the conducting of gaming activities upon a riverboat as defined and authorized in R.S. 4:501 through R.S. 4:562, whereby a person risks the loss of anything of value in order to realize a profit is not gambling and shall not be suppressed by any state or local law enforcement officer.
[2] The Levee Board has leased to the Star Casino a portion of its harbor space; the Board allegedly receives as much as 30% of its current operating revenue from this lease arrangement.
[3] Such licenses are issued by the Gaming Enforcement Division according to the provisions of the Riverboat Gaming Control Act. See LSA-R.S. 4:525(A).
[4] This provision reads as follows:
(B) Powers. Except as otherwise provided by this Constitution, a district attorney, or his designated assistant, shall have charge of every criminal prosecution by the state in his district, be the representative of the state before the grand jury in his district, and be the legal advisor to the grand jury. He shall perform other duties provided by law.
[5] The "Association" includes American Entertainment, L.L.C.; Crescent City Capital Development Corporation; Grand Palais Riverboat, Inc.; Horseshoe Entertainment, a Louisiana Limited Partnership; Louisiana Casino Cruises, Inc.; Louisiana Riverboat Gaming Partnership; Louisiana-I Gaming, a Louisiana Partnership in Commendam; Players Lake Charles, Inc.; Queen of New Orleans at the Hilton Joint Venture; St. Charles Gaming Company, Inc.; Showboat Star Partnership; Treasure Chest Casino, Inc.; and The Riverboat Casino Association of Louisiana.
[6] Even if such a threshold showing is made, in the case of a "manifestly unconstitutional" statute a plaintiff must additionally show a threat of irreparable injury and that existing property rights will be destroyed by the statute's enforcement before an injunction may lawfully issue. Knights of Columbus, 548 So.2d at 938 (citing cases). We note that in Dumestre v. Police Jury, Parish of Jefferson, 195 La. 492, 197 So. 209 (1940), this Court granted a plaintiff injunctive relief against the enforcement of a municipal ordinance by the district attorney which endangered significant property interests of that plaintiff without either a showing of "manifest unconstitutionality" or the "bad faith" of the district attorney. Dumestre is inapposite for two reasons. First, it did not address directly the question of the broad powers constitutionally granted to the district attorney, powers which we have recognized were expanded even further by the Constitution of 1974. See State v. Neyrey, 341 So. 2d 319, 323-324 (La.1976) (on rehearing). Second, Dumestre involved a prosecution under a municipal ordinance, not a "state" criminal offense, i.e. a crime designated as such by the Legislature. The district attorney's constitutional power extends over the investigation and prosecution of all "state" offenses; if and when a district attorney prosecutes offenses created by a political subdivision, e.g. an ordinance enacted by a municipality's legislative arm, the exercise of his prosecutorial discretion simply does not possess the same constitutional dimension that it does when he is prosecuting under a state criminal statute.
[7] Even when such a statute exists, the appropriate remedy is merely to enjoin the enforcement of that statute. The issuance of a general injunction restraining the district attorney from proceeding in an investigation which might discover conduct proscribed by other, valid, state criminal statutes is far too broad, and presents far too significant an intrusion into the district attorney's constitutional prerogative.
[8] In Perez, supra, 379 So.2d at 1385 (emphasis added), we discussed the parameters of this prosecutorial "bad faith:"
In denying an injunction against threatened arrest in Holmes v. Giarrusso, 319 F. Supp. 832 (E.D.La.1970), because of the absence of a showing that the arrest would be made in bad faith, the court defined a bad faith arrest as one made with no expectation of conviction but merely to discourage the exercise of protected rights. Similarly, in Scott v. Frey, 330 F. Supp. 365 (E.D.La.1971), the court found that federal injunctive relief against threatened prosecution was available only upon a showing of irreparable injury based on bad faith prosecution or proven harassment.
* * * *
The petition alleges that the district attorney's investigatory activities are motivated by personal animosity and by a personal desire to protect his own financial motives. Such bad motives are a part, but are not sufficient to constitute, by themselves, the kind of "bad faith" which would overcome the force of the strong public interest in identifying and prosecuting wrongdoers.
[9] In Perez, supra, 379 So.2d at 1378, we also noted that moving to recuse the district attorney, a procedure which is both statutorily and constitutionally provided for, is an alternative and perhaps more appropriate remedy in cases where the personal vindictiveness of the district attorney is the motivating force behind a "bad faith" investigation and/or prosecution. See LSA-C.Cr.P. Art. 680.
[10] We do not wish to say that a showing of "manifest unconstitutionality" or "bad faith" as defined supra are the exclusive grounds upon which a civil court may limit a district attorney's investigation. An investigation which directly treads upon constitutionally protected interests, e.g. an investigation which unjustifiably targets a "suspect class," might well warrant such judicial intervention at the investigatory stage. See State v. Coleman, 465 So. 2d 709, 711 (La.1985), citing Oyler v. Boles, 368 U.S. 448, 82 S. Ct. 501, 7 L. Ed. 2d 446 (1962). To this point, however, our jurisprudence marks only the two situations noted above as demonstrating the grave urgency needed to condone the derailing of the criminal justice process by means of civil injunction.
[11] We note that we do not in this opinion pass upon the merits of the appellants' claim that licensed riverboat gambling is "authorized" and therefore falls within the exemption from criminal culpability for "gambling" created by LSA-R.S. 14:90(D). The appropriate forum in which to litigate that issue, including the related issue of the extent to which, if at all, the civil regulations found within the Riverboat Gaming Act interact or interrelate with the exemption provided for under LSA-R.S. 14:90(D), is a district court exercising its exclusive criminal jurisdiction over felony prosecutions. See LSA-C.Cr.P. Art. 479, 531. Insofar as the appellants' argument may be read to urge a legislative divesting of the district attorney's authority, or even the creation of a concurrent authority in the Gaming Division to prosecute under state criminal statutes, we consider that argument meritless under the jurisprudence discussed supra. See Short, supra, 345 So.2d at 40 (district attorney's control over all state prosecutions in his district is exclusive).
[12] We note at this juncture that because of our disposition of this case we do not here address the district attorney's argument that he enjoys sovereign immunity against a declaratory judgement action. See La. Const. Art. XII, § 10; Chamberlain v. State Through DOTD, 624 So. 2d 874 (La.1993).
[13] This fundamental principle is mirrored in the conflict of laws principle that whereas a civil cause of action is "transitory," and thus may be brought in any state where personal jurisdiction over the defendant lies, the prosecution of criminal matters is purely a "local" concern. "This is based upon the idea that the crime is an offense against the sovereignty and good order of the State within whose jurisdiction it occurs, and that each State must attend to the vindication of its own sovereignty." Raleigh C. Minor, Conflict of Laws, § 204, P. 498 (1901). See also Conflict of Laws, §§ 620, 621 (8th ed. 1883) (citation omitted).
[14] For this reason, we have no need to address Connick's exception of no right of action, which challenges the standing of the Levee District to maintain such an action. See American Waste v. St. Martin Parish, 627 So. 2d 158, 162 (La.1993) (citation omitted); Church Point Wholesale Beverage v. Tarver, 614 So. 2d 697, 701 (La.1993). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1192796/ | 212 Kan. 180 (1973)
509 P.2d 1125
THE STATE OF KANSAS, Appellee,
v.
EDWARD E. WELCH, Appellant.
No. 46,958
Supreme Court of Kansas.
Opinion filed May 12, 1973.
G. Knute Fraser, of Wichita, argued the cause, and was on the brief for the appellant.
Reece C. Jones, Deputy District Attorney, argued the cause, and Vern Miller, Attorney General, Keith Sanborn, District Attorney, and Stephen M. Joseph, of Wichita, were on the brief for the appellee.
The opinion of the court was delivered by
PRAGER, J.:
This is a direct appeal in a criminal case in which the defendant-appellant Edward E. Welch was convicted of burglary and larceny. The single issue on this appeal is whether the defendant was afforded a speedy trial as guaranteed by Section 10 of the Bill of Rights of the Kansas Constitution and as implemented by K.S.A. 1971 Supp. 22-3402. (State v. Davis, 209 Kan. 225, 495 P.2d 965.) A determination of this appeal requires the application of K.S.A. 1971 Supp. 22-3402, to the peculiar facts and circumstances presented here.
K.S.A. 1971 Supp. 22-3402 provides in part as follows:
"... (1) If any person charged with a crime and held in jail solely by reason thereof shall not be brought to trial within ninety days after his arraignment on the charge, he shall be entitled to be discharged from further liability to be tried for the crime charged, unless the delay shall happen as a result of the application or fault of the defendant, or a continuance shall be ordered by the court under subsection (3).
"(2) If any person charged with a crime and held to answer on an appearance bond shall not be brought to trial within 180 days after arraignment on the charge, he shall be entitled to be discharged from further liability to be *181 tried for the crime charged, unless the delay shall happen as a result of the application or fault of the defendant, or a continuance shall be ordered by the court under subsection (3).
"(3) The time for trial may be extended beyond the limitations of subsections (1) and (2) of this section for any of the following reasons:
"(a) The defendant is incompetent to stand trial;
"(b) A proceeding to determine the defendant's competency to stand trial is pending and a determination thereof may not be completed within the time limitations fixed for trial by this section;
"(c) There is material evidence which is unavailable; that reasonable efforts have been made to procure such evidence; and that there are reasonable grounds to believe that such evidence can be obtained and trial commenced within the next succeeding ninety days. Not more than one continuance may be granted the state on this ground, unless for good cause shown, where the original continuance was for less than ninety days, and the trial is commenced within one hundred twenty days from the original trial date;
"(d) Because of other cases pending for trial, the court does not have sufficient time to commence the trial of the case within the time fixed for trial by this section. Not more than one continuance of not more than thirty days may be ordered upon this ground."
The record here discloses a well-documented calendar of the events which occurred in this case from the time the prosecution was commenced until the defendant Welch was convicted by a jury on May 26, 1971. The factual situation is undisputed and is essentially as follows: On August 25, 1970, the Court of Common Pleas of Sedgwick County bound over the defendant Welch for trial in the district court on three counts of burglary and larceny. On August 27, 1970, the state filed an information in the district court charging three counts of burglary and larceny. On September 9, 1970, Welch appeared before Judge Howard C. Kline for arraignment. Jack Turner, counsel previously appointed by the Court of Common Pleas, appeared for Welch and was reappointed by the district court. Defendant waived formal arraignment and the case was set for trial on October 19, 1970. It should be observed at this point that Welch's arraignment on September 9, 1970, brought into play the provisions of K.S.A. 1971 Supp. 22-3402 and placed upon the state the burden of bringing Welch to trial within the time limitations provided by that statute. Welch was in jail on September 9, 1970, when he appeared for arraignment and was released on bond on October 2, 1970.
On October 19, 1970, the defendant appeared with counsel and moved the court to continue the trial date. It is important to note that at this time the state called the court's attention to the fact that one of its witnesses, Mrs. Marley C. Hedges a resident of *182 Phoenix, Arizona, was pregnant and that her condition might complicate her availability for trial in the future. After some discussion the court reset the case for trial on November 16, 1970, at the request of the defendant.
On November 16, 1970, the state appeared ready for trial. Neither the defendant nor his counsel appeared. A bond forfeiture was declared and an alias warrant was issued. On February 2, 1971, Welch was arrested on the alias warrant and was brought before Judge Kline the next day, February 3, 1971. At that time the state reviewed the procedural facts of the case and stated that defendant Welch did not appear on November 16, 1970, for trial because he allegedly was in the hospital, that defendant failed to appear after his discharge from the hospital, and that defendant's bondsman thereafter placed the defendant in custody. Judge Kline set aside the bond forfeiture and ordered defendant's trial set for March 1, 1971. The judge advised the state to so inform Jack Turner, defendant's counsel. On March 1, 1971, defendant and Turner appeared before Judge Tom Raum. Turner asked leave to withdraw as defendant's counsel due to a schedule conflict. It appeared that another case had been filed against defendant Welch which was then pending in the Court of Common Pleas. Jim Foster had been appointed to represent defendant in that case. Judge Raum permitted Turner to withdraw as counsel and immediately appointed Jim Foster to represent Welch in this case. Judge Raum continued the case to allow new counsel time to confer with the defendant.
On March 29, 1971, the case was called for trial. Because of her pregnancy Mrs. Marley C. Hedges could not travel from her home in Phoenix, and hence was unavailable for trial. There is nothing in the record to indicate any dispute about her physical condition. The state informed the court that Mrs. Hedges was an essential witness since she was the sole occupant of the motel room which was burglarized and only she could testify as to the loss of the property. The defendant objected to the continuance contending that the time limit for trial under K.S.A. 1971 Supp. 22-3402 would be exceeded. Defendant then moved the court to discharge the defendant under K.S.A. 1971 Supp. 22-3402, which motion was denied. The court continued the trial to April 26, 1971, due to the fact that a material state witness was unavailable. On March 30, 1971, the defendant who had been in custody since February 2, 1971, was released on bond.
On April 26, 1971, the parties appeared and the state again announced *183 the unavailability of Mrs. Hedges. Her long-awaited baby had not yet arrived and her doctor again would not permit her to come to Wichita because of her physical condition. The state requested a month's continuance. The case was reset for trial on May 24, 1971, due once again to unavailability of a material witness, Mrs. Hedges.
On May 24, 1971, the case was called for trial. Counsel for defendant moved the court to discharge the defendant on the grounds he had been denied a speedy trial under K.S.A. 1971 Supp. 22-3402. Judge Kline denied the motion. Judge Noone declined entertaining the motion again because it had been denied by Judge Kline. Defendant was tried before a jury. The jury returned a verdict of guilty on count one burglary and larceny; not guilty on count two; and guilty of larceny and not guilty of burglary on count three. The defendant does not complain of any trial errors or the sufficiency of the evidence to sustain the verdict of guilty on counts one and three. Defendant appeals only from the denial of his motion for discharge under K.S.A. 1971 Supp. 22-3402 and from the trial court's judgment of conviction and sentence.
The record discloses that following his arraignment on September 9, 1970, the defendant was incarcerated in jail until October 2, 1970, when he was released on bond, a period of 13 days. He was also in jail during the period from February 2, 1971, when he was arrested on the alias warrant after the bond forfeiture, until his release on bond on March 30, 1971. This was a period of 56 days making a total time spent in jail 79 days. It is also undisputed in the record that the defendant was out on bond from October 2, 1970, until November 16, 1970, when he failed to appear for trial and his bond was forfeited. This is a period of 45 days. In addition the defendant was out on bond from March 30, 1971, until the time trial commenced on May 24, 1971, a period of 55 days. The total period the defendant was out on bond between arraignment on September 9, 1970, and the date trial commenced on May 24, 1971, was a total of 100 days. During the remaining days between arraignment and trial the defendant was a fugitive from the date of the bond forfeiture, November 16, 1970, until he was arrested on the alias warrant on February 2, 1971. This was a period of 78 days.
The defendant points out that 22-3402 covers only situations where the defendant is either in jail or on bond and does not cover cases *184 where the defendant awaiting trial spends part of his time in jail and part on bond. He contends that this court should apply a formula based upon an allowance of two days for all time spent in custody and one day for all time spent on bond. The problem is how to apply 22-3402 to a combination of time spent in custody and time spent on bond. We believe and find that it was the intention of the legislature that an unexcused trial delay of 180 days establishes the outside limit during which time the state must bring the defendant to trial in any event. Time spent in jail after arraignment must exceed the 90-day statutory period before a person charged with crime is entitled to discharge. We consider this interpretation reasonable when the provisions of 22-3402 are considered as a unified whole.
The statute is also silent on situations where the defendant fails to appear for trial and a bond forfeiture is ordered along with the issuance of an alias warrant. Obviously the defendant is neither in jail nor on bond during the period he is a fugitive. A problem arises where the defendant is subsequently arrested on the alias warrant and there is a delay in rescheduling the case for trial. The test to be applied is whether the subsequent delay was the result of the application or fault of the defendant following rearrest on an alias warrant. The state should be allowed a reasonable time to have the trial court reschedule the case for trial. This period should be considered as the fault of the defendant. After the expiration of a reasonable time further delay should be considered to be the fault of the state. Each case, of necessity, must be determined on its own facts and a more specific rule is not possible in view of the broad language of the statute.
As pointed out in the beginning the question for us to determine is whether under the factual circumstances here the defendant is entitled to be discharged under the provisions of 22-3402. Here a total of 257 days elapsed between defendant's arraignment and the commencement of the trial. The record discloses that there were three excusable delays which were the result of the fault or application of the defendant. First, on October 19, 1970, when the case was first set for trial, the defendant was granted a continuance until November 16, 1970. Since the defendant applied for the continuance this period of 28 days from October 19 to November 16 is properly charged to the defendant and is excluded from the computation under 22-3402.
Second, on November 16, 1970, the case was called for trial and *185 the defendant failed to appear. Defendant's bond was forfeited and an alias warrant was issued. Defendant was arrested on that warrant on February 2, 1971. He was brought before the court on February 3, 1971. The trial court charged a period of delay of 79 days against the defendant. In so ruling the court was somewhat generous toward the defendant since the defendant could also have been held responsible for the period from the time of his arrest on the alias warrant until the expiration of a reasonable time for the state to reschedule the case for trial.
The third excusable delay occurred on March 1, 1971, when the case was called for trial and defendant's counsel requested leave to withdraw. At that time new counsel was appointed and time was allowed for him to confer with defendant and prepare for trial. The case was reset for trial on March 29, 1971. The trial court properly considered this period of 28 days defendant's fault and that period was properly excluded from the computation of trial delay under sections (1) and (2) of 22-3402.
The fourth and fifth delays totaling 56 days were the result of continuances ordered by the court under subsection (3) of the statute. The case was called for trial on March 29 and April 26, 1971. On both occasions the state applied for and was granted a continuance because the pregnancy of a material witness, Mrs. Marley C. Hedges, made her unavailable for trial. The defendant does not suggest that the state failed to exercise reasonable diligence or that the continuances were not properly granted to the state by the court. The fact that the defendant was subsequently acquitted on count 2 of the information charging burglary and larceny of property from Mrs. Hedges' motel room did not render these extensions impermissible. Obviously Mrs. Hedges' testimony was critical to the state in presenting its evidence under count two. It should be noted in passing that the second continuance was entirely proper since the first was less than 90 days and the trial commenced within 120 days from March 29, 1971, the trial date on which the first continuance was granted.
As pointed out heretofore the total period of time between arraignment and trial was 257 days. Of this period a delay of 135 days was the result of the application or fault of the defendant. 56 days were permissible extensions of time granted to the state under the provisions of K.S.A. 1971 Supp. 22-3402 (3) (c) making a total delay of 191 days which is not to be counted against the *186 state. The remaining 66 days of trial delay between arraignment and trial were clearly within the permissible limits set forth in K.S.A. 1971 Supp. 22-3402. It follows that the trial court properly denied the defendant's motion for discharge.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1472128/ | 332 S.W.2d 411 (1959)
RED BALL MOTOR FREIGHT, INC., Appellant,
v.
Ann Bernard BAILEY et al., Appellees.
No. 6928.
Court of Civil Appeals of Texas, Amarillo.
December 7, 1959.
Rehearing Denied January 4, 1960.
Curtis White and John Fox Holt, Dallas, for appellant.
Leachman, Gardere, Akin & Porter, Dallas, John Stigall Jr., and John F. Maxfield, *412 Dallas, Carrington, Johnson & Stephens, Brundidge, Fountain, Elliott & Bateman, and Goldberg, Fonville, Gump & Strauss, Dallas, for appellees.
CHAPMAN, Justice.
Appellant, Red Ball Motor Freight, Inc., instituted this suit against Ann Bernard Bailey (formerly Ann Bernard Myers) and her husband, D. W. Bailey, First National Bank of Dallas, Republic National Bank of Dallas, Texas Bank and Trust Company of Dallas, Mercantile National Bank of Dallas, and Titche-Goettinger Company to recover the sum of $51,116.97 representing the total amount of 161 negotiable instruments made out by Ann Bernard Myers to fictitious persons while an employee of appellant, the endorsements to which she forged and the funds from which she collected and converted to her own use without the knowledge or consent of appellant.
For convenience and brevity and to conform to the briefs Red Ball Motor Freight, Inc., will be hereinafter referred to either as Red Ball or appellant, Ann Bernard Myers Bailey will be referred to as Mrs. Bailey, First National Bank of Dallas will be referred to as First National; Republic National Bank of Dallas will be referred to as Republic, Texas Bank and Trust Company of Dallas will be referred to as Texas Bank, Mercantile National Bank of Dallas will be referred to as Mercantile and Titche-Goettinger Company will be referred to as Titche except where the banks are referred to as collecting banks, endorsing banks or depository banks.
Texas Bank and Mercantile were sought to be held as drawees and First National, Republic and Titche were sought to be held liable on their respective endorsements of the 161 claim drafts. Upon trial to the court judgment was rendered for Red Ball against Mrs. Bailey for $51,116.97 and the recovery denied Red Ball against all other defendants. From the trial court's judgment for the four banks and Titche appellant perfected its appeal to the Court of Civil Appeals of the Fifth Supreme Judicial District at Dallas and the case was transferred to us by the Supreme Court of Texas for determination. In its first point appellant asserts error of the trial court in refusing to permit it to recover from Texas Bank the amount of money represented by those instruments drawn on it bearing forged endorsements, and collected by said "drawee bank." In its second point appellant asserts the same alleged error as to Mercantile. Its points 3 through 8 seek to invoke the no evidence, insufficient evidence and great weight and preponderance of the evidence rules which it says the trial court violated in refusing to give judgment in favor of Red Ball against the two depository banks on the 161 instruments because any agreement between it and such banks as to liability concerning such instruments was not any different than would the liability of such banks be on checks drawn on its account.
The facts are relatively simple. Mrs. Bailey, then Ann Bernard Myers, became an employee of Red Ball initially in 1936, filling different positions through the years with them until she was finally placed in charge of the Loss and Damage Claim Department sometime prior to September, 1953. The record indicates it was her duty to inspect and verify claims made for freight loss and damage and present the instruments to Mr. O. B. English, or others of Red Ball having authority to execute and sign the claim drafts to pay their losses. After obtaining the signature or signatures of proper officers or forging Mr. English's signature on the drafts and then endorsing the names of fictitious persons Mrs. Bailey negotiated them at First National, Republic and Titche. Seventy-eight of the instruments were made payable to E. D. Stevens, Bowie, Texas, and endorsed by the names E. D. Stevens and Mrs. E. D. Stevens. Sixty-seven instruments were made payable to A. L. Allen, Jasper, Texas, and endorsed by the names A. L. Allen and Mrs. A. L. Allen. Sixteen such instruments were made payable to L. S. Hardin, Longview, Texas, and endorsed by the names L. S. Hardin *413 and the name Mrs. A. L. Allen. The period of time covered by this fraudulent conduct on the part of Mrs. Bailey was from September 3, 1953 through November 15, 1957. Mrs. Bailey wrongfully obtained $51,116.97.
On October 5, 1953, Mrs. Bailey opened a savings account in Republic with a cash deposit in the name of Mrs. E. D. Stevens, General Delivery, Dallas, and on November 21, 1953, opened a checking account in the same bank by the same name. On May 15, 1954, she opened a savings account in First National by a $20 cash deposit in the name of Mrs. A. L. Allen, Jasper, Texas, and on December 4, 1954, she opened a checking account with the same bank in the same name by transferring $250 from her savings account. Six of the instruments made payable to L. S. Hardin were presented to Titche, for which Mrs. Bailey received full value. Titche endorsed its six. All the 161 instruments were presented to the collecting banks, First National and Republic, and endorsed by them as follows;
"Pay to the order of any bank or trust company. Prior endorsements guaranteed."
Typical of the 161 instruments is that shown in the footnote.[1]
During the times involved Red Ball had not shipped to anyone with the names and addresses used on the claim drafts and was not indebted to any such persons.
From 1942 to January 1, 1955, appellant did its banking business with Texas Bank. From January 1, 1955, through November 15, 1957, it did its banking business with Mercantile. In 50 of the instruments in the total amount of $17,440.47 Texas Bank was named as the drawee bank. The other 111 totaling $33,676.50 Mercantile was named as the drawee bank.
The record shows that prior to 1945 all loss and damage claims were paid by check. During that year while Texas Bank was *414 their depositor bank, Red Ball's accounting firm set up for them the "claim draft system," which was continued with Mercantile under an almost identical procedure when Red Ball started doing business with it. The only difference was that Texas Bank, at the time of delivery and at the request of Red Ball stamped the claim drafts "paid" while Mercantile did not. The claim draft system consisted of an arrangement by which four classes of drafts including the type of the 161 drafts here involved were drawn by Red Ball to be picked up daily by them at the bank whose name was imprinted on the draft. Each draft type had its distinct color and content. As they came to the depository banks through the various banking channels they were picked up daily by an officer or employee of appellant who came physically to the respective depository banks and paid for the drafts by checks drawn on Red Ball's deposit account. That arrangement was handled by oral agreement between the depository banks and Red Ball and it is uncontradicted that it was initiated by and at the request of the latter.
Upon receipt of such items they were taken back to the office of appellant and passed out to employees responsible for the particular type draft. The claim drafts here involved were passed to Mrs. Bailey, who, during all the period here involved, had charge of appellant's claim department with power and authority to approve the payments of claim drafts.
The question to be here determined in the first eight points of appellant is whether a banker-depositor relationship existed whereby Texas Bank and Mercantile were simply cashing checks for their customer-depositor or whether the banks were merely receiving the drafts for Red Ball, who "bought" the claim drafts each day. If the instruments are checks and the depository banks are drawees unquestionably the case of Liberty Mut. Ins. Co. v. First Nat. Bank in Dallas, 151 Tex. 12, 245 S.W.2d 237, is applicable and the depository banks are liable to Red Ball on the 161 instruments involved.
Mr. Cole, Vice-President and Cashier of Mercantile, in testifying as to how the draft plan works said: "It is initiated by the customer apparently as a matter of convenience, * * * and involves items * * * which the customer wishes to have in his possession as rapidly as possible after issuance * * * as such items appear in the course of business they would be accumulated in the Collection Department * * *; the customer notified daily of the totals and the customers * * * would come to the bank * * * and give the bank a check for the accumulated drafts." Mr. Cole further testified:
"Q. And in all draft arrangements, the parties that comes and picks them up can determine whether or not he wants to pay them on account of the signature, can he not? A. Yes.
* * * * * *
"Q. Yes, sir, if you will; what is your practice in that regard? A. I will put it this way: That we regard ourselves not responsible for signatures, endorsements, dates, and so forth, on the drafts which Red Ball picks up and pays for.
"Q. Is it customary for Red Ball to return any items that they should not have paid? A. They have the right to do so.
"Q. They have that right, do they not? A. If they don't want to pay them.
* * * * * *
"Q. You stated they couldn't know whether the signature of the payees were genuine or not; I believe you made that statement, didn't you? A. No, I saidI said that Red Ball, in taking those items up, as far as we are concerned, they accept the responsibility for all features, which would include the signature, dates, any irregularity."
Under the arrangement described appellant insists the instruments here involved *415 are checks and Red Ball is entitled to recover under the authority of the Liberty Mut. Ins. Co. case above cited. We do not believe the record in this case brings it within the application of the Liberty Mut. Ins. Co. case [151 Tex. 12, 245 S.W.2d 243] in view of the fact that case, among other pronouncements, held, "Depositor's loss occurred only when Bank charged the checks against depositor's account without legal right to do so and in breach of its contract." Clearly, in our case the claim drafts were not charged against the depositor's account except in those rare instances where mistakes were made, and those drafts were "bought" back by Red Ball the next day. The only instruments charged to Red Ball's account were the checks that paid for the claim drafts each day. (Emphasis added.) Thus, we believe Red Ball by its special arrangement with the depository banks was both a drawer and drawee of the instruments here involved, such instruments were "through" items, and Texas Bank and Mercantile were simply agents for Red Ball. Tyler Bank & Trust Co. v. Saunders, Tex., 317 S.W.2d 37.
Also in Fidelity & Deposit Co. of Maryland v. Union Trust Co. of Rochester, New York, 129 F.2d 1006, 1008, a Second Circuit case with facts substantially the same as ours that court said:
"The reasonable inference from the practice of Chemical (Texas Bank and Mercantile in our case) to pay drafts only when approved by London and when reimbursed is that it acted only as a disbursing agent whose rights as drawee passed to London when the latter paid for the draft. London acquired no claim against Chemical and was in effect the drawee or payor of the draft in spite of the fact that the instrument was addressed to Chemical."
Cases from other jurisdictions which we believe support the proposition that there was not a banker-depositor relationship in our case and that so far as the claim drafts are concerned Texas Bank and Mercantile were only agents for Red Ball are Insurance Co. of North America v. Fourth Nat. Bank of Atlanta, 5 Cir., 28 F.2d 933; Popkin v. Gilmour, 178 Misc. 1074, 37 N.Y.S.2d 747; Central Trust Co. of Cincinnati v. Eureka-Security Fire & Marine Ins. Co., 50 Ohio App. 308, 198 N.E. 62; Armour v. Greene County State Bank, 7 Cir., 112 F. 631.
No findings of fact or conclusions of law were requested or filed. We presume, therefore, that the trial court resolved in Texas Bank and Mercantile's favor every issue of fact raised by the evidence, and must view the evidence in the light most favorable to such findings, disregarding all that is contrary thereto. McWilliams v. Muse, 157 Tex. 109, 300 S.W.2d 643; North East Texas Motor Lines v. Dickson, 148 Tex. 35, 219 S.W.2d 795. It is true that appellant raised the great weight and preponderance of evidence rule but this case having been tried to the court and no findings of fact and conclusions of law having been made the rules announced in the cases just cited are the applicable rules.
Applying these principles to our case it is our opinion that Red Ball and the depository banks had an understanding that with the adoption of the "claim draft" system, initiated at the request of Red Ball, the check system of paying claims terminated and Red Ball thereafter "bought" and paid for the claim drafts. To say the least such understanding was implied through their actions and conduct in dealing with each other on the claim drafts. "`The manifestation of mutual assent may be made wholly or partly by written or spoken words or by other acts or conduct' * * * `words are not the only medium of expression. Conduct may often convey as clearly as words a promise or an assent to a proposed promise.'" Texas & N. O. Ry. Co. v. New, Tex.Civ.App., 95 S.W.2d 170, 175, (writ dismissed). Stated in another way the Austin Court has said: "* * * it now seems clear that the only distinction between express contracts and contracts implied in fact is in the character of proof required to show how mutual assent is *416 manifested. The determining factor therefore is whether such agreement is made, not how it is arrived at." Ricks v. Smith, Tex.Civ.App., 204 S.W.2d 12, 14.
Appellant's points 9 through 14 assert, from different approaches, error of the trial court in refusing it recovery on the endorsements of the collecting banks and Titche, the genuineness of which it insists those three appellees guaranteed in writing. By appropriate counterpoints Republic and First National argue the trial court was correct because Red Ball had no privity of contract with them and hence no right of action on the restrictive endorsements.
This question has given this writer much concern because we have cases in Texas sharply conflicting. In Agricultural Ins. Co. v. North Texas Nat. Bank, Tex.Civ. App., 57 S.W.2d 229, 230, where an endorsement was almost identical to the endorsements in the case at bar, the El Paso Court said:
"The general rule as to commercial paper appears to be that a transferor warrants the signatures of all prior parties to be genuine, * * * therefore, when it appears that the signatures are forgeries, as it is admitted here, then the indorser would become liable under his warranty. But it further appears here that the North Texas National Bank did not stop at a plain indorsing of the instrument, but went further and guaranteed all prior indorsements.
"Under such a state of facts, it is our opinion that it would be liable to any person who suffered loss by reason of such indorsement."
We cannot gainsay that the case just cited did not hold endorsers liable but that opinion indicates the judgment of the trial court was actually rendered on the theory of the applicability of the equitable maxim that where one of two innocent parties must suffer, he through whose agency the loss occurs must bear it. The opinion does not indicate there was any contention by the bank that the action was not on the endorsements, which the parties seemed to have assumed.
The case just cited was decided in February, 1933. In November of that same year our Commission of Appeals in an opinion by Justice Critz in the case of Fidelity & Deposit Co. of Maryland v. Fort Worth Nat. Bank, 65 S.W.2d 276, 278, held:
"Though there is some authority to the contrary, the great weight is on the side which holds that a collecting bank which accepts a check on another bank on a forged indorsement acquires no title thereto, and holds the proceeds thereof, when collected from the drawee bank, for the rightful owner, who may recover from the collecting bank as for money had and received, even though such bank has fully paid over and accounted for the same to the forger without knowledge or suspicion of the forgery." (Emphasis added.)
Since the Agriculture Ins. opinion, and the opinion of the Commission of Appeals just cited and quoted from, the El Paso court, in United States Fidelity & Guaranty Co. v. First Nat. Bank, Tex.Civ.App., 93 S.W.2d 562, 564, has said: "We feel that the holding in Fidelity & Deposit Co. of Maryland v. Fort Worth National Bank, 65 S.W.2d 276, by the Commission of Appeals, fixing the liability of a collecting bank which accepts a check on another bank on a forged indorsement to be for money had and received, is conclusive as to the nature of appellants' suit." Thus, the same court which announced the opinion in the Agriculture Insurance case later followed the authority of the Fidelity & Deposit Co. of Maryland case by the Commission of Appeals. Then in 1944 it reaffirmed that holding by saying, "It is true there was no privity between the drawer and the endorsers as to the endorsements." Republic National Bank of Dallas v. Maryland Casualty *417 Co., Tex.Civ.App., 184 S.W.2d 496, 500.
We also have cases from other jurisdictions that limit recovery by the maker against indorsers, such as Republic and First National in our case, to action for wrongful appropriation, or for money had and received. For example, in Graton & Knight Mfg. Co. v. Redelsheimer, 28 Wash. 370, 68 P. 879, 881, the Supreme Court of the State of Washington has said:
"It is doubtless true that the respondent is liable as indorser only to the subsequent holders in due course, but the appellant's right of action is founded upon an entirely different principle. The appellant's action is founded upon the claim that the respondent received certain checks belonging to it, indorsed in its name by a person having no authority or apparent authority so to do, collected the same, and appropriated the proceeds thereof to its own use. If this be true, * * * he is responsible to the appellant therefor, and can be sued as for conversion, or for money had and received to the appellant's use. It can make no difference that he did not personally collect the checks from the payee. As between him and the appellant, his subsequent indorsers are but his instruments for the collection of the checks. To them he may be liable upon his contract as indorser, but to the appellant he is liable, if liable at all, as for a wrongful appropriation of its property." (Emphasis added.)
The Supreme Court of Texas has not committed itself directly on this point except in refusing a writ in the Agriculture Insurance Co. case and in following the recommendation of its Commission of Appeals in reversing and rendering the judgment of the trial court and court of civil appeals in Fidelity & Deposit Co. of Maryland v. Fort Worth National Bank, supra, which Commission of Appeals holding was contrary to the Agriculture Insurance Co. case.
Though we realize the Supreme Court of Texas may not agree we believe the greater weight of authority and the better reasoning is contained in Justice Critz's opinion in the Fidelity & Deposit Co. of Maryland case, the cases following that authority, and the authorities it follows, to the effect that if the maker has a cause of action on an endorsement such as made by First National and Republic it is for money had and received and not on the endorsement itself. First National and Republic have a number of other counterpoints asserting reasons why appellant cannot recover on the endorsements in question but if we are correct in our holding it is decisive of the point and further writing would only extend this opinion to unnecessary lengths.
By its points 15 through 19 appellant asserts its right to recovery because of the negligence of the collecting banks in not identifying Mrs. Bailey and disclaims any negligence on its part that led to the endorsements. Republic and First National meet the points with a counterpoint to the effect that the evidence amply sustains the implied finding of the trial court that the negligence and laches of Red Ball precluded recovery by it. We believe the evidence is overwhelming that it does. The drafts in question were dated from September, 1953 through 1954, 1955, 1956 and most of the year 1957. The president of Red Ball, Mr. English, admitted that if he had checked sooner he would have discovered the very thing he did discover when some drafts got out of the office unsigned and were returned to his office for his signature. In that bunch of drafts he noticed some of the signatures did not look like his signature. He then sent for the claim files to see what supported the claim drafts and there were no claim files. Mrs. Bailey was confronted *418 and admitted then to all the forgeries. As to why he had not checked the claim drafts carefully enough through all those years to discover the fraud he said, "Well, I just never did do it." The evidence by both Mr. English and Red Ball's secretary, Mr. Carrell, was in substance that they had done some spot checking. Obviously it was of a most careless sort or they would have discovered some of the 161 instruments made payable to people with whom they had never had an account and with whom they had never done any business during the more than four years involved. Certainly the testimony is amply sufficient for the trial court to have impliedly found negligence and laches on appellant's part.
Again the law applicable to this question is stated in the Fidelity & Deposit Co. of Maryland case by Justice Critz when he said "* * * the right of the payee or rightful owner to recover on this class of checks from the collecting bank is conditioned on the absence of any fault or laches on his part, and on the absence of a ratification of the forged or unauthorized indorsement by him."
It is textually stated in 58 C.J.S. Money Received § 28, p. 934 that: "As a defense to an action for money had and received defendant may show such facts as will entitle him to retain the money on either legal or equitable grounds, and ordinarily he must do so. Thus he may interpose any defense which shows that in equity and good conscience plaintiff is not entitled to recover * * *".
Our Supreme Court in Staats v. Miller, 150 Tex. 581, 243 S.W.2d 686, 687, has quoted with approval from the same text as follows:
"`The question, in any action for money had and received, is to which party does the money, in equity, justice, and law, belong. All plaintiff need show is that defendant holds money which in equity and good conscience belongs to him.' 58 C.J.S. Money Received § 4a, p. 913. Again, it has been declared that a cause of action for money had and received is `less restricted and fettered by technical rules and formalities than any other form of action. It aims at the abstract justice of the case, and looks solely to the inquiry, whether the defendant holds money, which * * * belongs to the plaintiff.' United States v. Jefferson Elec. Mfg. Co., 291 U.S. 386, 54 S. Ct. 443, 449, 78 L. Ed. 859."
In Aetna Casualty & Surety Co. v. Corpus Christi Nat. Bank, Tex.Civ.App., 186 S.W.2d 840, 842, where a drawee bank paid a raised check without notice of that fact and advised the collecting bank that same had been paid, that court held concerning the endorsement:
"Under such circumstances it would be inequitable to permit the drawee bank, or any one standing in its position, to recover from the innocent collecting bank. The collecting bank reaped no benefit nor gained any advantage from the transaction. It is true that this suit is one for money paid and received, which is in form a legal action but is one which always addresses itself to the equitable consideration of the court.
"We have found no Texas case directly in point. We have been cited to the cases of City National Bank of Houston v. First National Bank of Houston, 45 Tex. 203; Marlin National Bank v. Reed, Tex.Civ.App., 164 S.W.2d 260, but we do not consider these cases as being in point. The case which we feel sheds more light on the questions raised here than any other case is Crocker-Woolworth National *419 Bank v. Nevada Bank, 139 Cal. 564, 73 P. 456, 458, 63 L.R.A. 245, 96 Am.St. Rep. 169. We quote the following from that opinion:
"`The governing principle is this: that where equally innocent persons have dealt with one another under a mistake the burden of loss resulting from the common error ordinarily will be left where the parties themselves have placed it, and so recovery can only be had where in equity and good conscience the defendant should be called upon to refund. Holly v. Missionary Society, 180 U.S. 284, 21 S. Ct. 395, 45 L. Ed. 531. * * *'
* * * * * *
"Under the facts and circumstances of the case at bar we cannot say that in equity and good conscience the collecting bank should be called upon to refund to the drawee bank or its assignee, the Aetna Casualty and Surety Company."
In the case at bar the cashing banks do not have any of Red Ball's money. They paid money to one of its employees on drafts issued by it and their trusted employee is the one who has the money, or should have it. We believe the trial court from the facts adduced had the right to find that most any investigation that could be called an investigation would have revealed the entire fraudulent scheme. Under these circumstances indulging the fiction that cashing banks have plaintiff's money would be completely inequitable instead of doing equity. Accordingly, under the facts and circumstances of our case we cannot say that in equity and good conscience First National and Republic should be required to refund to Red Ball.
Judgment of the trial court is in all things affirmed.
NOTES
[1] Trucking Employs
"American More Than 3½ Million
Trucking Assns. Inc. People
Red Ball Motor Freight, Inc.
Smiling Service
Dallas, Texas
Claim D
Draft No. 66495
Everything Americans Eat, Use, Wear, Comes
All Or Part Way By Truck
Mercantile National Bank At Dallas
Dallas, Texas
32-61
1110
Red Ball
Motor FRT $363 & 97 CTS
Pay Date Amount
5/22/56 363.97
To the
Order of A. L. Allen
Red Ball Motor Freight, Inc.
/Signed O. B. English/
This Is
Motor Truck
Money
* * * America's Cities, Great And Small, Depend
On Motor Truck For Food * * *" | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1116060/ | 492 So.2d 807 (1986)
Harold LITTLE, Appellant,
v.
STATE of Florida, Appellee.
No. BL-144.
District Court of Appeal of Florida, First District.
August 11, 1986.
Harold Little, pro se.
No appearance for appellee.
MILLS, Judge.
Appellant Harold Little appeals pro se from an order denying his Rule 3.850, Fla. R.Crim.P., motion to vacate sentence. We affirm.
Appellant was charged by information with writing a worthless check. After discussing the merits of his case with his attorney, he decided to plead guilty in hopes of receiving a probationary sentence. His attorney made this recommendation based on Little's assurance that he had not been convicted of any prior felonies and that he was not currently on probation. The State Attorney's Office, also relying on this information, agreed to nolle prosequi a second charge and to recommend probation in this case if Little would plead guilty.
Little's plea of guilty was accepted by the trial judge after he was satisfied that Little had freely, knowingly and voluntarily given the plea with full knowledge that the maximum sentence could be five years. However, he withheld sentencing pending the results of a presentence investigation.
The presentence investigation uncovered the fact that Little had been charged on numerous occasions with writing a worthless check and had been convicted on five of those counts. He was currently serving probation on four of those counts when the instant offense occurred. Based on this information, the trial judge chose to sentence *808 Little to four and one-half years imprisonment. Little made no attempt to withdraw his plea.
Before a plea of guilty may be accepted, the trial court must determine, among other things, that the defendant understands the nature of the charge and the consequences of his plea. Williams v. State, 316 So.2d 267 (Fla. 1975). We find that prior to accepting Little's plea, the trial judge made the necessary inquiry into whether the guilty plea was freely, knowingly and voluntarily given with full knowledge of the possible consequences. We are satisfied with his findings.
Appellant now seeks to enforce the original agreement between himself and the State, claiming that his guilty plea was induced by a plea bargain and that he was denied due process when that plea bargain was not kept. However, it is well settled that a judge is never bound in sentencing by negotiations which occurred between the prosecuting attorney and defense counsel. Davis v. State, 308 So.2d 27 (Fla. 1975). Similarly, the trial court is under no duty to provide the defendant with a clear opportunity to withdraw his plea at sentencing where there is no suggestion that the trial court promised the sentence recommended by the State, or that the trial court was a party to the plea negotiations, and there was no assertion that the trial court refused a request by the defendant to withdraw his plea or that such request was ever made. Lepper v. State, 451 So.2d 1020 (Fla. 1st DCA 1984). Accordingly, appellant's conviction will be affirmed.
WIGGINTON and NIMMONS, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1931789/ | 222 So.2d 820 (1969)
E.E. MORGAN, Appellant,
v.
UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee.
No. 45195.
Supreme Court of Mississippi.
April 14, 1969.
Rehearing Denied June 9, 1969.
*822 Cox, Dunn & Clark, Jackson, for appellant.
Butler, Snow, O'Mara, Stevens & Cannada, Jackson, Snow, Covington, Temple & Watts, Meridian, for appellee.
PATTERSON, Justice:
This is an appeal by E.E. Morgan from a decree of the Chancery Court of Hinds County which was entered pursuant to the prayer of a bill of complaint filed by United States Fidelity & Guaranty Company, appellee and cross-appellant.
The gist of the bill of complaint, which is in the nature of a "creditor's bill," is that United States Fidelity & Guaranty Company is a judgment creditor of E.E. Morgan under a 1965 decree of the Chancery Court of Hinds County in the sum of $2,642,568.35, plus attorneys' fees of $125,000[1]; that as a result of this judgment a lien was created against all of Morgan's assets and properties for the benefit of the complainant; that Morgan was the owner of certain assets and properties which were subject to this lien, but that appellant concealed such assets and property and engaged in a fraudulent course of conduct deliberately designed to hinder, delay, and defraud appellee of the benefits of its lien and thereby evade and defeat the decree against him. The bill further alleges that under the provisions of the 1965 decree Morgan was obligated and specifically required, upon request, to furnish complainant a financial statement showing his current financial status. The bill sought specific performance of this obligation. Additionally, the bill averred that Morgan had a considerable amount of money and other assets, the location, value and particulars of which were unknown to the complainant, and which should in justice and equity be applied to the satisfaction of the judgment against Morgan. The bill contained a detailed prayer for relief, including a prayer for discovery of Morgan's assets and the appointment of a receiver.
In advance of filing his answer, Morgan, by leave of court, filed a special plea of res judicata, merger and estoppel, based upon the judgment in the parent case. After a hearing, the plea of res judicata was overruled and Morgan was granted leave to plead further. Thereupon he filed his answer which incorporated (1) a general demurrer, (2) a plea of nonjoinder of necessary parties, (3) a plea of res judicata, merger and estoppel by the former judgment, and (4) a denial of the legality of the writ of execution.
Paragraphs 8 and 9 of the bill of complaint are as follows:
(8)
Complainant further avers that the money judgment in favor of complainant *823 against defendant is and remains in full force and effect and has been affirmed by the Mississippi Supreme Court and there is now actually due to complainant thereon the principal amount of $2,968,962.11, together with lawful interest thereon from the date of the rendition thereof, together with the 5% damages provided by Section 1971, Mississippi Code of 1942, plus attorneys' fees of $25,000 allowed by the Supreme Court. Said judgment has been duly enrolled and constitutes a lien on the property of defendant. Complainant is informed and believes, and upon such information and belief avers that defendant has a considerable amount of money and of legal and equitable debts, claims and demands due to him from different persons, the names of whom are unknown to complainant, and that said defendant has a large amount of oil, gas and mineral interests and other interests in real estate, stocks of different kinds, securities, promissory notes and other evidences of debt, and other personal property, either in his possession or held in trust for him by others, the situation, value and particulars of which are unknown to complainant, and which ought in justice and equity be applied to the satisfaction of the aforesaid money judgment. Complainant avers upon information and belief that defendant has concealed his assets and resorted to other devices for the purpose of hindering, delaying and defrauding complainant of its rights as a judgment creditor, and complainant has no plain, adequate, speedy and complete remedy at law.
(9)
Complainant avers that in equity and good conscience the assets and property of the defendant should be applied to the satisfaction of complainant's judgment against said defendant, and defendant should be compelled to discover, set forth and disclose all the estate, real and personal, of every description, including goods, chattels, money, book accounts, notes, bonds, mortgages, securities, evidences of debt and choses in action belonging to said defendant, whether standing in his name or in the name of or in the hands of any other person or persons for his use or in trust for him, and the names of the persons who have the possession, custody or control of such real or personal property.
In answering these allegations Morgan admitted the validity and finality of the money decree and that it constituted a lien on his assets, but declined to answer the remaining allegations of Paragraph 8, stating on oath that an answer in this regard might tend to incriminate him. He expressly invoked the privilege against self-incrimination under the Fifth and Fourteenth Amendments to the Federal Constitution and Article 3, Section 26, Mississippi Constitution (1890).
A motion was filed by the complainant for determination of defendant's claim of privilege to refuse to answer. A preliminary hearing was held and the claim of privilege was rejected by the court on the premise that it had not been made apparent that a full answer would incriminate the appellant. Therefore, Morgan was ordered to answer on penalty of having the unanswered allegations of the bill taken as confessed.
Thereupon Morgan filed a supplemental answer under oath which reiterated his claim of the privilege against self-incrimination and continued to decline to answer the allegations of Paragraphs 8 and 9, answering in regard thereto as follows:
Without admission or denial of implication in the crimes involved, this Defendant states on his oath that he fears that an answer could tend to incriminate him under several Mississippi criminal statutes, to which his attention has been called, including those referred to by his Counsel on said hearing, and that further factual explanation would tend to *824 destroy the privilege which he claims under the Constitution of the United States and State of Mississippi.
Thereafter, the court reconsidered its order directing an answer to be filed and acknowledged the applicability of Mississippi Code 1942 Annotated section 2252 (1956), entitled "Larceny removing property subject to lien out of the county selling," to a judgment lien. It held that the allegations of concealment in the bill of complaint were sufficient to bring the answer within the constitutional privilege against self-incrimination and that this privilege did extend to an answer in chancery. The court concluded, however, that there had been a specific contractual waiver of the constitutional privilege under the terms of a bond application which provided that appellant would present a financial statement, on request, to the surety companies involved in that particular project. United States Fidelity & Guaranty Company was one of these companies.
Nevertheless, the chancellor upheld the claim of privilege as to that portion of the complaint which stated: "* * * defendant has concealed his assets and resorted to other devices for the purpose of hindering, delaying, and defrauding complainant of its rights as a judgment creditor." It was the opinion of the chancellor that "To hold otherwise would * * * possibly deny the right of immunity from self-incrimination in view of Section 2252, Code of 1942, Recompiled," and that "being forced to answer * * * runs head-on into Section 2252 of the Code which does make such action a crime." The court further ruled that "* * * such averment shall not be taken as having been admitted or confessed by reason of defendant's failure to make answer thereto, nor shall it be considered that defendant has denied said above quoted averment of the Bill of Complaint." Other than the above statement the court reconfirmed its prior order and held that each averment of Paragraph 8 should be taken as admitted.
Thereafter, the hearing was held on the complaint and answer, including the pleas incorporated therein. The demurrer, plea of nonjoinder, plea of res judicata, merger and estoppel by judgment, were all preliminarily overruled. At the trial the complainant presented detailed evidence in support of its bill of complaint. Morgan could not be located for service of process, did not appear at trial, did not testify or offer testimony, and rested his case.
At the conclusion of the hearing the court held (1) that the creditor's bill was not maintainable under Mississippi Code 1942 Annotated section 1327 (1956), but was proper under the ancient equity practice, (2) that a course of conduct was shown indicating concealment of assets when regard was had to Morgan's failure to testify, (3) that the case did not justify an injunction requiring Morgan to pay the judgment on pain of contempt, (4) that complainant was entitled to a full discovery of identity, status and location of assets of every kind, including the names of persons having possession, custody or control of assets, (5) that a receiver should be appointed for collection of appellant's assets, and (6) that Morgan should be enjoined from disposing of any assets which might be owned by him. As to the discovery feature of the opinion, the chancellor ruled that he would require the appellant to furnish a financial statement and that in any event the complainant was entitled to a full discovery, stating: "* * * and whether this be done by a statement by way of discovery or by a financial statement, I think it matters very little." A decree was taken in accord with this opinion from which Morgan appeals.
The court allowed supersedeas of those portions of the final decree which required the filing of financial statements and the making of discovery. Otherwise the application for supersedeas was denied.
On September 11, 1967, over a month after the entry of the final decree of August 7, 1967, appellant filed two motions. *825 One motion was to vacate the final decree as being void, and the other was to disqualify and remove Frank J. Buchanan, the appointed receiver. The first motion was primarily addressed to the jurisdiction of the court. It urged that there had been less than fifteen days between the issuance of the writ of execution and the return date in violation of the requirements of Mississippi Code 1942 Annotated section 1900 (1956). This motion was overruled as the court was of the opinion that since Morgan had perfected an appeal prior to the filing of the motions, it had no jurisdiction to vacate its prior final decree though the court expressed itself as without jurisdiction in the first instance.
With regard to the second motion, the court ruled that the receivership was proper and necessary and therefore should be continued. However, the receiver's power to pursue and collect Morgan's assets, granted by the decree of August 7, 1967, was ordered to be held in abeyance and the receiver was directed to exercise no powers whatsoever except the following: "(a) to hold and preserve the assets which have heretofore been or may hereafter be conveyed and delivered to him as receiver, (b) to make disposition thereof only after first having obtained an order of this Court specifically authorizing such disposition, and (c) such other powers and authority as may, from time to time, be granted by this Court." It was further ordered that in the event the decree is affirmed by the Supreme Court of Mississippi, the receiver shall have and may exercise all of the powers originally granted by the decree. From the latter portion of this decree United States Fidelity & Guaranty Company perfected its cross appeal.
The principal questions presented by the direct appeal, which may also be considered as assignments of error, are:
1. Is a creditor's bill maintainable without a legal execution, followed by a return of nulla bona?
2. Can discovery be compelled against the claim of a privilege against self-incrimination under the Federal and State Constitutions?
Subordinate questions presented are:
1. The validity of the decree for specific performance.
2. The propriety of the appointment of appellee's agent as receiver with broad visitatorial and inquisitorial powers.
The cross-appellant, United States Fidelity & Guaranty Company, assigns as error, among other things, that the lower court erred in holding and directing that any of the powers of the receiver should be held in abeyance pending decision by the Supreme Court.
The first assignment of error is based upon the appellant's September 11, 1967, motion to set aside the final decree of the court because jurisdiction was never acquired due to irregularities in the issuance of a writ of execution and its "nulla bona" return, and therefore the court had no authority to enter a decree. The appellant argues in support of the motion that the issuance of a writ of execution, with a nulla bona return, is the only manner other than under the provisions of Mississippi Code 1942 Annotated section 1327 (1956), in which the chancery court can acquire jurisdiction to hear a creditor's bill.[2]
*826 The chancellor was of the opinion that the appellant's motion was meritorious. He expressed the conviction that the writ had been returned less than fifteen days after it was issued and was void under the provisions of Mississippi Code 1942 Annotated section 1900 (1956), and therefore the court had lacked jurisdiction to hear the bill in the first instance. However, he stated: "(T)his Court has no jurisdiction to decide the questions presented by movant regarding jurisdiction vel non, since this case is on appeal to the Supreme Court of Mississippi * * *."
It is our opinion that the chancellor's conclusions were erroneous except as to the loss of jurisdiction due to the perfection of this appeal. One of the greater maxims of equity is that it delights to do complete justice and not justice by halves. In discussing this principle this Court stated in Shaw v. Owen, 229 Miss. 126, 132-33, 90 So.2d 179, 181 (1956):
It is settled beyond question in this jurisdiction that where a suit is brought in the chancery court and the court takes jurisdiction on any one ground of equity, it will proceed in the one suit to a complete adjudication and settlement of every one of all the several disputed questions materially involved in the entire transaction, awarding by a single comprehensive decree all appropriate remedies, legal as well as equitable, although all the other questions involved would otherwise be purely of legal cognizance * * * Griffith's Chancery Practice, Sec. 28; McClendon v. Mississippi State Highway Commission, 205 Miss. 71, 38 So.2d 325; Myers v. Giroir, [226] Miss. [335], 84 So.2d 525; Duvall v. Duvall, [224] Miss. [546], 80 So.2d 752, 81 So.2d 695.
This principle has been held to apply, though the equitable ground on which the court obtained jurisdiction fails, and only strictly legal matters remain for determination. In Duvall v. Duvall, 224 Miss. 546, 554-55, 80 So.2d 752, 755, 81 So.2d 695 (1955), we held:
"And in this state, the rule goes even to the extent that if the ground of equity fail under the proof, the cause may still be retained to a complete final decree on the remaining issues although the latter present legal subjects only and the decree would cover only legal rights and grant none but legal remedies that having taken jurisdiction the power of the court to administer full relief is limited by nothing but justice itself."
In this cause the following types of relief were sought by the appellant's bill of complaint: specific performance of contractual obligations, discovery, appointment of a receiver, and the issuance of an injunction. In Griffith, Mississippi Chancery Practice section 24 (2d ed. 1950) a number of subjects are set out over which a court of equity can assume jurisdiction. Among these are suits involving the specific performance of a contract, appointment of a receiver, discovery, and injunctive relief. We conclude that if the chancery court lacked jurisdiction to entertain this suit as a common law creditor's bill, there were allegations which put in issue other theories upon which the court could properly base its jurisdiction. We think it evident that the prayer in the bill of complaint for the appointment of a receiver was sufficient to vest the chancery court with jurisdiction and having once acquired jurisdiction, it extended to all issues in the case. See Shaw, supra, and Duvall, supra, and cases cited therein. We are of the opinion that this assignment of error is not well taken.
We think it appropriate, however to comment on the lower court's opinion in regard to the manner in which a creditor's bill may be brought in the chancery court. Prior to the enactment of Mississippi Code sections 1843, 1844, and 1845 in 1880 the only way in which a creditor's action could be maintained in chancery was by reducing a debt to a judgment in a court of law, having a writ of execution issued on the judgment, followed by a nulla bona return thereon. Once this was accomplished a creditor had run the gauntlet of exhausting *827 his remedies at law and might thereafter entreat the power of equity to grant aid in his behalf. Our cases in regard to this procedure seem to be in accord. In Brown Bros. & Co. v. Bank of Mississippi, 31 Miss. 454, 458 (1856), this Court stated:
It is universally agreed that a creditor cannot go into a court of equity until he has first obtained a judgment at law upon his debt, and issued execution, and had a return of "nulla bona."
The reason for these strict requirements seems to have been based on problems of jurisdiction rather than procedure. The early case of Parish & Co. v. Lewis, 1 Free. ch. 299, 306-07, explained the situation as follows:
* * * [I]f you wish to reach legal assets of your debtor, and to remove obstacles which obstruct your course at law, it is sufficient that you show a judgment, creating a lien upon those assets; but if you wish to reach equitable assets, or other things not subject to execution at law, you must show that you have exhausted your remedies at law, by a return of an execution unsatisfied, as the foundation of your right to come into this court. In such case, the complainant's right to relief in this court depends upon his having run his execution at law without being able to satisfy his judgment. It is not a mere technical objection, but goes to the very foundation of the suit, and is not waived even by a general answer. The complainant must show an execution returned unsatisfied, and no state of facts will excuse such a return. Brinkerhof v. Brown, 4 John. Ch.R. [N.Y.] 671, 687; McElwain v. Willis et al. 9 Wendall [N.Y.] 548; Screven v. Bostick, 2 McCord's C.R. [S.C.] 416 [16 Am.Dec. 664]; Hadden v. Spader, 20 John. R. [N.Y.] 554; Moore v. Young, 1 Dana's R. [Ky.] 516.
From these early cases it is apparent that the primary function of a "nulla bona" return on a writ was to show an exhaustion of legal remedies, so that a court of equity could assert jurisdiction.
In 1880 the legislature enacted the fore-runner of what is now Mississippi Code 1942 Annotated section 1327 (1956), to "* * * prevent the necessity of a creditor resorting first to a court of law to recover a judgment and then going into equity to secure its satisfaction. * * *" Griffith, Mississippi Chancery Practice section 500 (2d ed. 1950). The statute reads in part as follows:
The said court shall have jurisdiction of bills exhibited by creditors who have not obtained judgments at law, or, having judgments, have not had executions returned unsatisfied, whether their debts be due or not, to set aside fraudulent conveyances of property, or other devices resorted to for the purpose of hindering, delaying or defrauding creditors; and may subject the property to the satisfaction of the demands of such creditors as if complainants had judgments and execution thereon returned "no property found." (Emphasis ours.)
It is evident from the statute that it had profound effects on the prerequisites for the maintenance of a creditor's bill. The procedure of obtaining a writ of execution and a nulla bona return was no longer necessary where sufficient facts could be pled to bring the cause within the purview of Section 1327. We are of the opinion that since the legislature has provided a means whereby a creditor can enter a court of equity by an appropriate bill of complaint, the requirement that he must resort to the more involved and antiquated common law procedure is no longer absolute and controlling. Here the complainant inter alia specifically alleged that appellant had "resorted to other devices for the purpose of hindering, delaying, and defrauding complainant of its rights as a judgment creditor." These are the precise words contained in Section 1327 and we think when taken in conjunction with *828 other allegations, are sufficient to state a cause of action thereunder.
We are of the opinion that the court had jurisdiction in this case, and the fact that the nulla bona return was not made within the time prescribed by statute, did not divest the court of its jurisdiction. We do not mean by the foregoing to hold that a complainant cannot resort to the common law method to establish jurisdiction in a creditor's bill, but this procedure is no longer exclusive, as an action in the nature of a creditor's bill is also maintainable under Section 1327.
The second predominant question of the suit is concerned with whether the constitutional privilege against self-incrimination afforded under the Fifth and Fourteenth Amendments to the Constitution of the United States and under Article 3, Section 26 of the Mississippi Constitution of 1890, applies in civil actions for discovery or to enforce disclosures under a bill of complaint which requires answer under oath, and which is directed by a final decree. If the constitutional privilege is applicable, we must also reach the question of whether it was waived through estoppel.
The peculiar facts of this case are of particular import in considering the second assignment of error. The suit was brought to enforce a prior decree of the chancery court which adjudicated that complainant is entitled to specific performance of the obligations assumed by appellant under each of the various bond applications and indemnity agreements signed by him. It is a civil suit by a judgment creditor to enforce rights under an equity decree. It thus distinguishes itself from the cases cited by the appellant which relate to grand jury investigations and criminal cases. The privilege against self-incrimination in criminal prosecutions is absolute unless effectively waived. However, in civil cases the privilege is not so unequivocal. As a result there are material differences in the rules governing the invocation of the privilege in criminal and civil cases. The following illustrations point to some of the differences. An accused in a criminal case may not be required to take the stand or give any testimony. To the contrary, a witness, if called, in a civil case must take the stand and answer all questions except those which would require him to give incriminating evidence. United States v. Housing Foundation, 176 F.2d 665 (3d Cir.1949) and 98 C.J.S. Witnesses § 441 (1957). Additionally, an adverse inference can be drawn from a defendant's refusal to testify in a civil case whereas no comment or inference might be drawn from the failure of a defendant in a criminal case so to do. In Duratron Corp. v. Republic Stuyvesant Corp., 95 N.J. Super. 527, 533, 231 A.2d 854, 857 (1967), it is said:
No constitutional protection is absolute. Traditionally, the courts have weighed each alleged assault on a constitutional right by comparing the social values, public or private, attending the measures impugned as invalid, with the degree of hazard if any to which the constitutional right or privilege was subjected by such conduct. See Camara v. Municipal Court, 387 U.S. 523, 87 S.Ct. 1727, 18 L.Ed.2d 930 (1967). The interest of the general public in the fair adjudication by courts of civil disputes between citizens ranks very high in the American polity. The permissible drawing by the factfinder of an inference of inability truthfully to deny a civil claim from a defendant's failure to testify as to relevant facts within his personal knowledge which might refute the evidence adduced against him, is a logical, traditional and valuable tool in the process of fair adjudication. It subserves private justice. We conclude that it does not impair the privilege against self-incrimination.
Moreover, the claim of privilege in a civil case is to be determined by the court and not by the witness as in a criminal case. State v. Myers, 244 Miss. 778, 146 So.2d 334 (1962); Hoffman v. U.S., 341 U.S. 479, 71 *829 S.Ct. 814, 95 L.Ed. 1118 (1951); and Rogers v. U.S., 340 U.S. 367, 71 S.Ct. 438, 95 L.Ed. 344 (1951). The yardstick of adjudication to be used by the courts in ruling upon the privilege in a civil case is whether there is a real and substantial hazard of incrimination resulting from a witness's answer to a bill of complaint or from his testimony in open court. See Marchetti v. U.S., 390 U.S. 39, 53, 88 S.Ct. 697, 705, 19 L.Ed.2d 889, 901 (1968), wherein it is stated:
The central standard for the privilege's application has been whether the claimant is confronted by substantial and "real," and not merely trifling or imaginary, hazards of incrimination. * * *
The chancellor first ruled there was not a substantial and real hazard of self-incrimination involved in the answer under oath, the discovery or the testimonial requirement of the decree; however, on reconsideration he was of the opinion that the claim of privilege should be upheld as to the bill of complaint wherein it states: "* * * Defendant has concealed his assets and resorted to other devices for the purposes of hindering, delaying, and defrauding complainant of its right as a judgment creditor." It was his opinion that: "To hold otherwise would * * * possibly deny the right of immunity from self-incrimination in view of Section 2252, Code of 1942, Recompiled," and that "being forced to answer * * * runs head-on into Section 2252 of the Code which does make such action a crime."
In analyzing the chancellor's findings of fact and their relation to Mississippi Code 1942 Annotated sections 2250 and 2252 (1956), which make criminal the acts of removing property subject to liens out of the state or out of the county without consent or with intent to defraud, we are unable to say that he was manifestly wrong as to the facts or that he misapplied the law with regard to Paragraphs 8 and 9 since the appellant was permitted the privilege as it related to these paragraphs of the bill of complaint. Though we think the chancellor's opinion in regard to Paragraphs 8 and 9 is contradictory to the decree permitting discovery, we cannot state that he erred in legal principle, the error, if any, consisting of the lack of conformity between the decree and the opinion. We conclude this specification of error is not well taken.
We do not reach the broad question of the application of the principles to the other aspects of the suit, i.e., answer under oath, discovery of assets subject to judgment, or testimony as to the location thereof, since it is not necessary to the opinion in view of our subsequent holding that there was a waiver of the privilege.
The next question for consideration and perhaps the most cogent of the suit is whether the appellant waived his constitutional privilege against self-incrimination. There is no doubt that an individual may waive the personal protections and privileges provided by the United States Constitution. See Shepard v. Barron, 194 U.S. 553, 24 S.Ct. 737, 48 L.Ed. 1115 (1904). He may, of course, also waive the personal protections and privileges afforded by the Mississippi Constitution (1890). Waiver may be accomplished by a specific written agreement or by a course of conduct which indicates an intention to forego the privilege. The methods by which the privilege may be lost are discussed at length in 8 Wigmore on Evidence section 2275 (McNaughton Rev. 1961) where it is stated:
Waiver: (a) By contract. It has never been doubted that the privilege against self-incrimination, like all privileges (§§ 2196 and 2197 supra), is waivable. There are two possible ways of waiving: (a) By contract or other binding pledge before trial, or (b) by voluntarily testifying in the case (§ 2276 infra). As to the first of these ways, may a waiver be made irrevocably by contract before trial?
Unless the contract is one which by its circumstances has come within the doctrine of duress or oppression, and is thus voidable on general principles of contract, *830 there is no reason in its present aspect why it should not be binding. The promise to waive may be embodied in an express contract or in a contract implied by the conduct of the parties. In either case, however, two distinctions should be drawn:
(1) A bare contract to waive the privilege will not be enforced specifically. Rather, it will be enforced, where possible, by indirect sanctions similar to those (short of arrest and contempt) available to punish civil litigants who refuse to comply with orders to make discovery e.g., dismissal of the action. Or the sanction may be loss of employment or of pension or of the right to do business with the government.
(2) Where there are not only the ingredients of an express or implied contract to waive privilege but also a fiduciary relation or other elements of public policy making recognition of privilege unconscionable, the waiver of privilege may be specifically enforced and the witness held in contempt for failure to make disclosure. * * * (Emphasis ours.)
These principles have been applied in a strikingly similar situation by the United States Supreme Court. In Zap v. U.S., 328 U.S. 625, 66 S.Ct. 1277, 90 L.Ed. 1477 (1946), we find:
As we have pointed out in Davis v. United States [No. 404, decided this day 328 U.S. 582, ante, 1453, 66 S.Ct. 1256, 90 L.Ed. 1453], the law of searches and seizures as revealed in the decisions of this Court is the product of the interplay of the Fourth and Fifth Amendments. But those rights may be waived. And when petitioner, in order to obtain the government's business, specifically agreed to permit inspection of his accounts and records, he voluntarily waived such claim to privacy which he otherwise might have had as respects business documents related to those contracts. 328 U.S. at 628, 66 S.Ct. at 1279, 95 L.Ed. at 1481-82.
The elements of public policy necessary for the application of estoppel are apparent in the Zap case since the contracts involved there were with the United States Navy. We think that sufficient fiduciary obligations and questions of public policy exist in this instance to uphold the judgment of the lower court which held that the appellant had specifically waived the privilege.
This Court has heretofore adjudicated that the appellant is obliged to perform each and every obligation assumed by him under each of the indemnity agreements. Morgan v. United States Fidelity & Guaranty, 191 So.2d 917 (Miss. 1966). See also Morgan v. United States Fidelity & Guaranty, 191 So.2d 851 (Miss. 1966), of interest to the former case and this opinion. In the first Morgan case the agreement of indemnity which was entered into with relation to a construction project in Shively, Kentucky was expressly passed upon by the lower court and held to be binding upon Morgan, and this decree was upheld by this Court. By necessity the lower court must have also considered in connection therewith the letter of Morgan accepting the conditions of the Shively application agreement. These instruments, hereinafter detailed, give rise to the equivalent of a fiduciary relationship, that of a principal and surety. 59 Am.Jur. § 221 (1944). There can be little doubt that the surety is entitled to be protected by his principal, in this instance the appellant. Fidelity & Deposit Co. of Maryland v. Deposit Guaranty Bank & Trust Co., 164 Miss. 286, 144 So. 700 (1932) and Ames v. Dorrah, 76 Miss. 187, 23 So. 768 (1898).
In January 1960 R.V. Tyler Co., Inc. and Hyde Construction Company executed an "Application for Performance and Payment Bonds and Indemnity Agreement" Form No. 1. Its purpose was to obligate the appellee as a surety for the performance of a contract entered into by Hyde *831 Construction Company and the City of Shively, Kentucky. The appellant obligated himself to the payment of this bond by letter as follows:
"Date January 25, 1960
"United States Fidelity and Guaranty Company
Baltimore, Maryland
National Surety Corporation
San Francisco, California
Gentlemen:
Re: Your Co-surety Bond Covering Contract $2,721,419.00
R.B. TYLER COMPANY, INC., & HYDE CONSTRUCTION
COMPANY, A JOINT VENTURE
Favor: City of Shively, Kentucky For construction
of Sewage System for City of Shively, Ky.,
Contracts 1, 2, 3, 4, 5 & 6
Contract & Bond dated January 25, 1960
Attached is `Application for Performance and Payment Bonds and Indemnity Agreement' on Form No. 1 duly executed by R.W. Tyler Company, Inc., a Kentucky corporation, Louisville, Kentucky and R.W. Hyde, Jr., an individual d/b/a Hyde Construction Company, Jackson, Mississippi.
In consideration of your executing as co-sureties the above described bond or bonds, I hereby agree as follows:
That the signing and furnishing of this letter obligates me to the terms and conditions of the enclosed `Application for Performance and Payment Bonds and Indemnity Agreement' on Form No. 1 just as though I were named as one of the applicants therein and my signature were duly affixed thereto.
Yours very truly,
/s/ E.E. Morgan
E.E. Morgan"
It is apparent that this letter is the product of an astute business man. He, of course, knew or should have known that one of the terms of the application was that the surety would have access at all reasonable times to the books and records of the applicant. Another term of the application is: "* * * applicants and any of them will furnish to sureties, upon request and at such reasonable intervals of time as sureties may designate, financial statements showing the current financial position of the applicant of whom such request or statement is made." In view of the terms of this application, appellant's letter acknowledging acceptance of such terms, and our prior opinion that the Shively agreement was a valid and binding instrument, we do not find it necessary to discuss whether or not the technical requirements of a waiver or estoppel were complied with. The case stands in a posture similar to that which existed in Shepard, supra, wherein the Court held that certain property *832 owners had waived or were estopped to assert a denial of due process of law. In explaining the Court said:
Provisions of a constitutional nature, intended for the protection of the property owner, may be waived by him, not only by an instrument in writing, upon a good consideration, signed by him, but also by a course of conduct which shows an intention to waive such provision, and where it would be unjust to others to permit it to be set up. * * * 194 U.S. at 568, 24 S.Ct. at 742, 48 L.Ed. at 1120-21.
* * * * * *
* * * A defense of this nature and upon these facts need not be placed entirely upon the strict and technical principles of an estoppel. While it partakes very strongly of that character, it also assumes the nature of a contract, implied from the facts * * *. It does not in the least matter what we may call the defense, whether it be estoppel or implied contract, or one partaking of the nature of both * * *. 194 U.S. at 565, 24 S.Ct. at 741, 48 L.Ed. at 1119.
Judgments and decrees are entitled to proper respect when rendered and public policy requires nothing less. The citizenry of the state has the right to expect their orderly enforcement and surely the litigants, who have a direct personal or pecuniary interest in the outcome of a suit, have the basic right to demand the enforcement of the judicial processes. The effectiveness of our entire court system rests upon the court's ability to enforce its judgments; otherwise they would become mere "scraps of paper" evidencing only the good intentions of the court, and reducing its orders and the attempted enforcement thereof to an exercise in futility. The thought pervades that the constitutional privilege is largely related to criminal prosecution, which is only to say that the government or state must prove its case against an accused without the aid of the accused's testimony, if he desires to invoke the privilege. However, in a civil proceeding we express doubt that it was ever intended that the privilege could be transformed into an affirmative device whereby a judgment debtor can effectively thwart the processes of the court. Under the peculiar circumstances of this case, a deliberate course of conduct by a judgment debtor to evade the effects of a lawful judgment, we are of the opinion that the lower court did not err in holding that the appellant waived the right to assert the claim of constitutional privilege. The trial judge was under no duty to broaden the privilege against self-incrimination to a point which would effectively place it beyond waiver. See Zap, supra, and Crest Catering Co. v. Superior Court, 62 Cal.2d 274, 42 Cal. Rptr. 110, 398 P.2d 150 (1965).
The next assignment of error is that there can be no specific performance of the contractual provision to produce a financial statement. The appellant contends that there can be no specific performance of this agreement as required by the "Shively" indemnity application since it is barred by res judicata or estoppel by judgment. The appellant argues that in the former case the appellee expressly sought relief by way of specific performance of the obligations assumed in the several bond applications including the one in question, and that the court declined to grant specific performance. An examination of the decree referred to indicates that the court found to the contrary and in fact adjudicated: "Said defendants are obligated to perform specifically each and every obligation assumed by them under the terms of each of the various bond applications and indemnity agreement signed by them in regard to the jobs and bonds described in the *833 bill of complaint as amended," and the decree specifies the various construction projects for which bonds were sought, one of which was:
"1/25/60 City of Shively, For construction $2,721,419.00 of
Kentucky Sewage System for City
of Shively, Kentucky;
Contracts 1, 2, 3, 4, 5 & 6
The indemnitors on this job being: R.W. Hyde, Jr., E.E. Morgan, Hyde Construction Company, Inc. * * *"
We find no merit in this assignment of error.
The last question presented on direct appeal is the propriety of the judge's action in appointing a former employee of the appellee as receiver for collection of appellant's assets. Appellant vigorously asserts that the receiver should be a completely disinterested party; however, we note a lack of convincing authority to this effect.
In regard to this problem, we find in Griffith, Mississippi Chancery Practice section 474 (2d ed. 1950), the statement that:
While it is the usual and better practice to appoint as receiver an entirely disinterested person, one indifferent as to all the parties, yet inasmuch as competency and capacity to perform the important duties assigned to him in the particular case in hand are requisites, it is within the discretion of the court to appoint one of the parties on good bond, if he stand in no improper relation to the cause. The chancellor acts in this matter upon his own judgment and in his own sound discretion, and is therefore not obliged to accept a person recommended or proposed by the parties; in fact, it may sometimes be his duty not to do so. * * *
We agree with the statement that the chancellor is largely left to his own discretion in selecting a receiver and generally is bound only by the qualification that such individual does not stand in an improper relation to either of the parties. After a close reading of the record we are agreed that the chancellor was well aware of the law in this regard, was satisfied that the individual selected was qualified and found no improper relations with either party. In the absence of a proof of abuse of discretion in the appointment of the receiver we uphold the chancellor's action in this regard. We conclude this assignment is not well taken.
The only assignment of error on cross appeal is the action of the lower court in holding certain powers of the receiver in abeyance pending this appeal because of objections to his competence by appellant. There is no need to reach this question in view of our decision that the chancellor was without error in his selection of the receiver. Since the decree of the lower court provides that the full powers of the receiver would be restored if the appeal resulted in an affirmance, which it does, we withhold further comment.
Affirmed on direct and cross appeals and remanded.
ETHRIDGE, C.J., and JONES, INZER and ROBERTSON, JJ., concur.
NOTES
[1] This decree was affirmed by this Court on November 7, 1966, in Morgan v. United States Fidelity & Guaranty Co., 191 So.2d 917.
[2] This motion asserted, in addition, that the writ of execution had been executed against only one judgment debtor, appellant, although the judgment was against several parties, including R.W. Hyde, and therefore was in violation of Miss.Code 1942 Ann. § 1901 (1956). This argument is not persuasive since (1) the appellee had separate and several judgments against appellant and (2) Hyde surrendered all assets which had not been taken over by appellant. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2026461/ | 172 Ill. App.3d 325 (1988)
526 N.E.2d 591
THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee,
v.
FRED MOORE, Defendant-Appellant.
No. 86-1875.
Illinois Appellate Court First District (5th Division).
Opinion filed June 30, 1988.
*326 William C. Starke, of Chicago, for appellant.
Richard M. Daley, State's Attorney, of Chicago (Kenneth T. McCurry, *327 Kim A. Novi, and Jerry D. Bischoff, Assistant State's Attorneys, of counsel), for the People.
Judgment affirmed.
JUSTICE SULLIVAN delivered the opinion of the court:
Following a jury trial defendant, Fred Moore, was found guilty of two counts of theft and was sentenced to serve a term of five years in the Department of Corrections. On appeal he contends that the trial court erred in denying his motion to quash his arrest, that he was prejudiced by the prosecutors' closing and rebuttal arguments and that the State failed to prove ownership of the property allegedly stolen.
At the hearing on defendant's motion to quash, Chicago police officer Emil Kos testified that at 6:45 p.m. on Sunday, October 14, 1984, he was on routine patrol with his partner, Officer Robert Smith, when he saw a group of six to eight men transferring boxes of merchandise from a green U-Haul van, which was parked in a vacant lot at 6356 South Maryland, to a white pickup truck parked a few feet away. Defendant was standing next to the truck. The doors to both vehicles were open and Kos saw 12 to 15 boxes moved from the van to the truck.
Kos and Smith parked their squad car behind the truck, which had no license plates or any markings, and exited their vehicle. As the officers approached, defendant closed the side door to the truck and the other men walked away from the scene. Kos asked defendant why he was moving goods from a rented U-Haul van to an unmarked truck in a residential neighborhood. Defendant explained that he had been making a delivery and that the truck he had been driving broke down on the Dan Ryan expressway at 95th Street, which is approximately five miles from 6356 South Maryland. He had been transferring the merchandise from the disabled truck to the white pickup truck for safekeeping until he could complete his delivery the next morning. Defendant stated that he had just recently purchased the pickup truck but he failed to explain the presence of the van.
When asked to produce an invoice to establish ownership of the goods, defendant fumbled through his wallet momentarily and then announced that he had left the invoice on the disabled truck. He added that the truck had been towed but stated that he did not know who towed the truck or where it had been taken. Defendant gave Kos permission to open the door to the pickup truck and said that the contents, which included boxes labeled as sump pumps, microwave ovens, high-powered polishers and air hammer sets, were to be delivered to his employer, Files Electric Company. Defendant offered to take the *328 officers to his company.
The police transported defendant in their squad car to Files Electric Company at 333 West 70th Street. Kos testified that although defendant was not under arrest, he was placed in handcuffs as a safety precaution because he had been acting combative and argumentative and there was no protective barrier between the front and back seats of the squad car. Kos stated that defendant appeared to be very nervous and that he gave evasive answers to his questions. Upon arriving at Files Electric, the handcuffs were removed and defendant produced a set of keys and unlocked the doors.
The building contained office space and a small storage area which was not large enough to accommodate the merchandise in the pickup truck. Kos observed that there were no goods stored on the premises or described in the company's catalogs that resembled the merchandise on the truck. The owner of the business could not be reached. While the police and defendant were at the offices of Files Electric, defendant removed some money from his pants pocket, put it in his shirt pocket and said, "Can we do something about this?" Kos and Smith detained defendant for further questioning.
Defendant was transported in handcuffs to the 3rd District police station, where he told theft investigators that he had purchased the merchandise at a bulk sale in Detroit, Michigan, and had received a "slip," not an invoice, to document the transaction. Defendant, however, could not produce any such document. Upon determining that the property was taken from the W.W. Granger Company without its permission, defendant was placed under arrest. The police did not have a warrant to arrest defendant or search his vehicles or place of employment.
At the hearing on his motion, defendant testified that on October 14, 1984, he resided in the third-floor rear apartment at 6354 South Maryland in Chicago. At about 6 p.m., he was coming home in a green U-Haul van he had rented. He parked the van in a vacant lot adjacent to his apartment building, exited the vehicle and walked to the back of the van to retrieve two six-packs of beer when the police approached him and asked him what he was doing. Defendant told them that he was getting some beer out of his van. The officers then asked him what was in the pickup truck. Defendant said that there was nothing unusual in the truck, and he refused to give them permission to inspect the truck, whereupon the police handcuffed him, placed him in the squad car and searched both vehicles.
After searching the vehicles the officers informed defendant that the merchandise in the pickup truck appeared to have been stolen. *329 When he protested that "no crime has been committed," they pointed out that there was no invoice for the goods. Defendant responded that he was not required to keep an invoice with him at all times. The police took defendant to Files Electric Company and ordered him to admit them to the premises, which they searched. The officers then returned defendant to the scene and directed him to drive his pickup truck to the local police station. Defendant was allowed to drive the vehicle by himself, although he was followed by a squad car.
Defendant testified that he considered himself to be under arrest from the time he was first handcuffed and placed in the squad car. He denied that he or anyone else had transferred any boxes of merchandise from the van to the truck on the evening of October 14, 1984. Two other witnesses, Willie Young, a longtime friend, and his nephew, Burnell Young, who resided in the second-floor rear apartment at 6354 South Maryland, corroborated portions of defendant's testimony on the motion to quash.
The court found that defendant was arrested when he was first placed in handcuffs and stated that the issue was whether the police had probable cause to arrest him at that time. Characterizing this question as "very close," the court found that Officer Kos was more credible than the defendant and his witnesses and held that under all of the circumstances the police had probable cause to arrest defendant. Accordingly, the motion to quash was denied.
Officer Kos' testimony at trial was substantially the same as his testimony on the motion to quash. The police recovered 30 cartons of Teel sump pumps, 7 cartons of Sharp microwave ovens, 24 cartons of Wilton vases, 15 cartons of Skil rotohammers, 14 cartons of Skil circular saws, 3 cartons of Dayton tap and dye sets, 8 cartons of Dayton alternator power plants, 43 cartons of Black & Decker hammer drills, 39 cartons of Milwaukee seven-inch power polishers, 41 cartons of Milwaukee one-half-inch magnum hammers and 10 cartons of Milwaukee belt sanders from defendant's pickup truck. They also found a rental agreement for the U-Haul van signed by defendant in which he named "M & M Resale," not Files Electric, as his employer, and gave an address other than 6354 South Maryland as his residence.
Defendant told Kos that he had picked up the merchandise in Detroit, Michigan, and was supposed to deliver it to the Files Electric Company warehouse at 333 West 70th Street. There was no warehouse at that address, however. In Officer Kos' presence, defendant told a theft investigator that he did not have an invoice for the merchandise because no invoices are given for bulk sales transactions. Defendant never produced a bill of sale, a receipt or any documentation *330 to establish rightful ownership or possession of the goods.
Investigator David Kutz interviewed defendant shortly before midnight on October 14, 1984. Defendant told Kutz that he had purchased the property with a credit card in Detroit, Michigan, which is 300 miles from Chicago, between 2 p.m. and 3 p.m. that afternoon.[1] Defendant, however, could not produce either the credit card or the receipt for the goods. Kutz stated that the markings on the merchandise indicated that it belonged to the W.W. Granger Company. At the time of his arrest, defendant had $1,190 in cash in his possession.
John L. Demand, Jr., the security and safety manager for W.W. Granger Company, a nationwide distributor of industrial and commercial products, also testified. Demand inspected more than 200 cartons of merchandise recovered from defendant's pickup truck and determined, on the basis of special stock numbers printed on or affixed to the cartons, that the contents thereof belonged to the Granger Company. He identified photographs of the property which were introduced into evidence.
Demand stated that the serial numbers on the seven cartons containing the Sharp microwave ovens had been stamped on the cartons at Granger's distribution center in Niles, Illinois. Upon checking those numbers, Demand determined that the ovens had been shipped to the center on October 11, 1984. A receiving audit indicated that the ovens were being held in the reserve stock of the distribution center as of Friday, October 12, 1984. None of Granger's branch offices had ordered seven microwave ovens and if any such order had been received, it would have been filled from the "picking line" of older inventory, not from the reserve stock. The distribution center and the branch offices are closed on weekends. Each microwave oven was worth in excess of $350.
Demand testified further that none of Granger's branch offices had sold in a bulk sale the specific goods found in defendant's truck and there were no records of any branch office having ordered any of the items in the quantities recovered. Although Files Electric Company was one of Granger's customers, it ordered only small quantities of electrical equipment. The president and owner, James Files, told Demand in late October or early November 1984 that he had not ordered any of the items that the police recovered. Nor did Files mention the purchase of a bulk lot of merchandise in Detroit, Michigan.
Demand estimated that the wholesale value of the property recovered *331 from defendant's pickup truck was more than $50,000. Defendant was not employed by W.W. Granger and did not have permission to take the property found in his truck.
James Files, the president of Files Electric Company, an electrical contracting firm, testified for defendant. Files stated that defendant had worked for him on various occasions for more than 10 years prior to his arrest. Defendant picked up tools and supplies and took them from one jobsite to another. He also purchased supplies for him.
Files testified that on Sunday morning, October 14, 1984, he gave $12,500 in cash to defendant and asked him to drive to an auction in Detroit, Michigan, to bid on materials and equipment he had used in his business. He stated that he had given cash to defendant on other occasions for similar purposes. Files, however, had no business records to show where the $12,500 came from or that he ever gave the money to defendant. Defendant did not give him a receipt for the cash.
Files stated that sometime after defendant was released on bond following his arrest, he produced a "bill of sale" from the auction which identified "Jones Contractors, Ltd.," as the seller but gave no address. Files could not recall the address of the warehouse in Detroit where the auction allegedly took place. The bill of sale was signed not by an agent of the seller, but by defendant. Files never received either the merchandise defendant allegedly purchased for him, which was confiscated by the police and later turned over to W.W. Granger, or the cash he had given to defendant. Files admitted that he had not sued anyone to recover the $12,500, and that he had not claimed the loss on his corporate income tax return.
Files stated that his company is an electrical contractor and not a retail outlet. The merchandise acquired at the auction was to be used in his business and not held for resale. Files admitted, however, that he had no use for microwave ovens.
After defendant rested his case, the State called James Files and Investigator Kutz in rebuttal. Files stated that defendant was not an employee but an independent contractor. Files had no business records on defendant.
Kutz testified that he spoke with Files on October 17, 1984. Kutz told Files that defendant had been arrested and had stated that he was employed by Files Electric Company. Kutz also told Files that defendant had claimed that the property recovered from his truck belonged to Files Electric. Files denied any knowledge of the incident and never mentioned the $12,500 in cash or the Detroit auction.
*332 OPINION
Defendant initially contends that the trial court erred in denying his motion to quash his arrest. We disagree.
1 As we have previously noted, the trial court found that defendant was arrested when he was first placed in handcuffs and held that the police had probable cause to arrest him at that time. A finding of probable cause may not be disturbed unless it is manifestly erroneous. (People v. Davis (1981), 98 Ill. App.3d 461, 463, 424 N.E.2d 630.) Upon our review of the facts, we are unable to conclude that the court's finding of probable cause was erroneous.
On Sunday evening, October 14, 1984, Officer Kos saw a group of men transferring boxes of merchandise from a rented U-Haul van to an unmarked pickup truck without license plates in a residential neighborhood. As Kos and his partner approached, defendant, who was standing next to the pickup truck, closed the side door to the truck and the other men walked away.
Upon being questioned, defendant explained that he had been making a delivery and that the truck he had been driving broke down on the Dan Ryan expressway at 95th Street. That location, however, is five miles from where the officers found defendant and his two vehicles. Defendant said that he had been moving the merchandise from the disabled truck to the white pickup truck for safekeeping until he could complete his delivery the next morning, but he could not produce an invoice to establish rightful ownership or possession of the goods. The invoice had been left in the disabled truck, which defendant said had been towed. Defendant, however, did not know who towed the truck or where it had been taken.
Defendant allowed Kos to open the door to the pickup truck and Kos noted that the contents included boxes labeled as sump pumps, microwave ovens, high-powered polishers and air hammer sets. Defendant said that he had picked up the merchandise in Detroit, Michigan, and that he was going to deliver it to his employer, Files Electric Company, at 333 West 70th Street. Defendant appeared to be very nervous.
2 Probable cause to arrest exists when the facts and circumstances within the arresting officer's knowledge are sufficient to warrant a person of reasonable caution in believing that an offense has been committed and that defendant has committed the offense. (People v. Davis (1981), 98 Ill. App.3d 461, 464, 424 N.E.2d 630.) The determination of whether probable cause exists depends on the totality of facts and circumstances known to the officer when the arrest is made. 98 Ill. App.3d at 464.
*333 In our judgment, the totality of facts and circumstances known to Officer Kos when defendant was arrested warrants the conclusion that the officer had reasonable grounds to believe that a theft had been committed and that the offense had been committed by defendant. Those facts and circumstances include: the area where the boxes of merchandise were being transferred (residential); the time of day (evening) and the day of the week (Sunday); the vehicles involved (a rented U-Haul van and a pickup truck with no markings or license plates); defendant's furtive conduct (closing the side door to the pickup truck); the type and variety of merchandise found in the truck (sump pumps, microwave ovens, high-powered polishers and air hammers); defendant's failure to explain why he was using the U-Haul van; his nervousness and evasiveness; the implausible story about a truck breakdown that allegedly occurred five miles from where the police saw the men transferring the boxes of merchandise; defendant's inability to produce an invoice for the goods; and his professed ignorance regarding who had towed his truck and where it had been towed.
Facts similar to those present here have been held to constitute probable cause for an arrest. (See People v. Struhart (1981), 93 Ill. App.3d 534, 417 N.E.2d 676.) The facts in People v. Reynolds (1983), 94 Ill.2d 160, 445 N.E.2d 766, cited by defendant, are distinguishable from those present here. Accordingly, we find that the trial court did not err in denying defendant's motion to quash his arrest.
3 Defendant next contends that he was prejudiced by the prosecutors' closing and rebuttal arguments. Although defendant cites 21 instances of allegedly improper comment, we note that defense counsel failed to object to most of these comments at trial or specify them in his motion for a new trial. It is well established that alleged errors must be objected to at trial and noted in the post-trial motion in order to be preserved for review. (See People v. Thomas (1983), 116 Ill. App.3d 216, 220-21, 452 N.E.2d 77 (and the cases cited therein).) Errors not properly preserved are waived. We turn to an examination of those errors that were preserved.
In closing argument, the prosecutor stated that defendant rented a truck when he could have used one of Files Electric Company's vehicles. When defense counsel objected, noting that defendant did not have access to any of the company vehicles, the prosecutor corrected himself and accurately restated Files' testimony. The balance of the argument on this matter was addressed to defendant's possible reasons for transferring the boxes of merchandise from the rental van to the unmarked, unlicensed pickup truck, which was a legitimate area *334 of comment.
In rebuttal, the other prosecutor stated that W.W. Granger had records showing that the seven Sharp microwave ovens had been delivered and were on the premises on October 12, 1984. An objection to this statement was overruled. Although defendant asserts that this comment misstated the evidence, we disagree.
John Demand, W.W. Granger's security manager, testified that he determined, on the basis of the serial numbers stamped on the cartons containing the microwave ovens, that the ovens had been shipped to the distribution center on October 11, 1984. A receiving audit indicated that the ovens were being held in the reserve stock as of Friday, October 12, 1984. Demand admitted on cross-examination that he had not personally seen the microwave ovens on the premises and the prosecutor never said otherwise. Demand's testimony, however, fully supported the prosecutor's statement that Granger's business records proved that the ovens had been delivered to the distribution center and were on the premises on October 12, 1984.
4 In rebuttal, the prosecutor claimed that James Files told John Demand that he did not purchase any merchandise in Detroit, Michigan. Defense counsel objected on the grounds that the prosecutor had misstated the evidence. The objection was overruled. Although Demand actually testified that Files never mentioned making a bulk purchase of tools and equipment in Detroit, we do not believe that defendant could have been prejudiced by the prosecutor's comment. Another witness, Investigator Kutz, testified that Files denied any knowledge of the property recovered from defendant's pickup truck. Moreover, in overruling the objection, the court instructed the jury to reject statements made in closing arguments that were not based on the evidence or were not reasonable inferences therefrom.
Also in rebuttal, the prosecutor argued that the bill of sale defendant introduced into evidence was "discovered * * * almost two years later [i.e., after the theft occurred]." An objection to this comment was overruled.
The theft in this case was alleged to have taken place on or about October 14, 1984. The prosecutors did not learn of the existence of the "bill of sale" until May 13, 1986, during the direct examination of defendant's witness, James Files. Files stated that defendant gave the bill of sale to him sometime after he was released on bond. Files admitted that he never disclosed the existence of the document to the police or to anyone associated with W.W. Granger.
5 In the context of the entire trial, it would appear that the prosecutor was disparaging the evidentiary significance of defendant's *335 "bill of sale" because it had not been disclosed in pretrial discovery or shown to anyone other than Files and defense counsel. We do not believe that the prosecutor was suggesting that defense counsel fabricated the document.
At the beginning of his rebuttal argument, the prosecutor stated: "Ladies and gentlemen, Fred Moore is a thief. That has been proven beyond any doubt from the evidence you have heard." An objection to this comment was overruled, and properly so, in our opinion.
6 In People v. Grover (1983), 116 Ill. App.3d 116, 124, 451 N.E.2d 587, the court stated that "[a]n argument based upon evidence in the case which characterizes the accused in terms of the charges or the evidence in the proceedings then pending against him is not error." In Grover, the court held that the prosecutor's description of the defendant as a "rapist" was not improper where the comment was based on the evidence. (Accord People v. Fleming (1980), 91 Ill. App.3d 99, 109, 413 N.E.2d 1330; People v. Ganter (1977), 56 Ill. App.3d 316, 326, 371 N.E.2d 1072.) In our judgment, the prosecutor's description of defendant as a "thief" was a legitimate comment on the evidence.
7 Defendant also complains of the prosecutor's comment in rebuttal that defense counsel had spread a lot of "horse manure" around the courtroom. This pungent remark appears to be a variation on the more familiar "smoke screen" argument which has often been held to be improper but has seldom been found to be prejudicial. (See People v. Hunter (1984), 124 Ill. App.3d 516, 548, 464 N.E.2d 659; People v. Robinson (1980), 91 Ill. App.3d 1138, 1146, 415 N.E.2d 585 (and the cases cited therein).) We believe that the comment was improper but do not believe that it could have prejudiced defendant.
We are foreclosed from reaching the merits of defendant's argument regarding the prosecutor's comments on the receipt defendant obtained for the U-Haul van he rented because defendant has not included the receipt in the record on appeal. Moreover, defendant has not identified any testimony in the record that supports his argument in this matter.
Finally, defendant contends that the State failed to prove ownership of the property allegedly stolen. We disagree.
John Demand, the security manager for the W.W. Granger Company, testified that at 2 a.m. on October 15, 1984, he went to the 3rd District police station to examine the property recovered from defendant's pickup truck. He inspected more than 200 cartons of merchandise and determined, on the basis of special stock numbers printed on or affixed to the cartons, that the contents thereof belonged to W.W. *336 Granger. At trial Demand also identified photographs of the merchandise taken at the police station, which he stated truly and accurately depicted the recovered property. Demand transported the goods to the company's distribution center in Niles, Illinois. The serial numbers on the seven cartons containing the Sharp microwave ovens had been stamped on the cartons at the distribution center. The ovens had been shipped to the center on October 11, 1984, and a receiving audit indicated that they were on the premises as of Friday, October 12, 1984. The distribution center is closed on weekends and none of Granger's branch offices had ordered a quantity of seven ovens. Defendant did not object to any of this testimony.
8 In our judgment, Demand's testimony proved beyond a reasonable doubt that the property recovered from defendant's pickup truck had been stolen from the W.W. Granger Company. See People v. Smith (1977), 51 Ill. App.3d 87, 366 N.E.2d 426.
9, 10 We find no merit in defendant's argument that the goods themselves should have been introduced into evidence, as there is no such legal requirement. (See People v. Banks (1974), 17 Ill. App.3d 512, 515, 308 N.E.2d 247; People v. Hasty (1970), 127 Ill. App.2d 330, 335, 262 N.E.2d 292.) Nor do we find any merit in the argument that the photographs were improperly admitted into evidence. This issue was not preserved in defendant's motion for a new trial. Moreover, we have reviewed the record and have determined that there was an adequate foundation for admission of the photographs. (See People v. Smith (1972), 5 Ill. App.3d 648, 653-54, 283 N.E.2d 727.) Furthermore, any error in admitting the photographs must be deemed to be harmless because, entirely apart from the photographs, Demand's testimony established ownership of the goods.
In our opinion, defendant was proved guilty beyond a reasonable doubt of theft. Accordingly, we affirm the judgment of the circuit court of Cook County.
Judgment affirmed.
LORENZ, P.J., and MURRAY, J., concur.
NOTES
[1] The receipt for the U-Haul van indicated that defendant had rented the vehicle shortly after 1 p.m. on October 14, 1984. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1678645/ | 516 So. 2d 119 (1987)
Ethel HALL, Natural Tutrix of Danielle Hall
v.
Daniel HALL, et al.
No. 87-C-2208.
Supreme Court of Louisiana.
December 11, 1987.
PER CURIAM.
Daniel Hall applies for writ of certiorari to the Court of Appeal, Fifth Circuit, Number 87-KA-212, Parish of Jefferson. Writ granted.
On June 2, 1983, Ethel Hall (an unmarried mother), as natural tutrix of then minor Danielle Hall, filed a petition for damages against Daniel Hall (alleged father of Danielle). It was alleged Daniel Hall had caused psychological damage to Danielle by thirteen specifically enumerated acts. On January 11, 1984 a supplemental petition was filed by Danielle, in her own name, substituting herself as party plaintiff because she had reached majority. Danielle was born September 22, 1965.
Several of the acts alleged in the petition were against third persons, with Danielle asking for damages for mental anguish due to her seeing the injuries being inflicted by the defendant upon the third persons. The trial court, with the court of appeal affirming, dismissed these counts on the ground there is no cause of action for the mental anguish in such a case. This portion of the judgment has not been challenged by the plaintiff.
The other acts in Danielle's petition alleged sexual abuse directly against Danielle by the defendant. The alleged acts commenced when Danielle was eight and *120 one-half years old, and continued until she was thirteen and one-half years old. The trial court dismissed these counts on the ground they were liberatively prescribed inasmuch as the suit was not filed until 1983, while the last alleged tort was in 1979. The court of appeal reversed, saying that prescription was suspended by Civil Code art. 3469 and did not begin to run until Danielle reached the age of majority.
The court of appeal erred in relying on La.Civ.Code Ann. art. 3469 (West Supp. 1987) (effective January 1, 1983 by Acts 1982, No. 187, § 1), holding that prescription for the alleged torts committed prior to 1979 was suspended and did not begin to run until September 22, 1983. In 1979 when the last alleged tort was committed, La.Civil Code Ann. art. 3541 (West 1953) (now repealed) applied.
La.Civ.Code Ann. art. 3541 (West 1953) provided:
The prescription mentioned in the preceding Article, those provided in Paragraphs I and II of Section Three of Chapter Three of this title, and those of thirty years, whether acquisitive or liberative, shall run against minors and interdicted persons, reserving, however, recourse against their tutors or curators.
La.Civ.Code Ann. art. 3536 (West 1953) provided:
The following actions are also prescribed by one year:
That for injurious words, whether verbal or written, and that for damages caused by animals, or resulting from offenses or quasi offenses. (emphasis ours).
Article 3536 was located in § 1 of Section Three of Chapter Three of Title XXIII of the Civil Code. Thus, the prescriptive period set forth in Article 3536 ran against minors. See, Goodwin v. Bodcaw Lumber Co., 109 La. 1050, 34 So. 74 (1902); Gordon v. Coca-Cola Bottling Co., 408 So. 2d 1007 (La.App.3d Cir.1982); Ayo v. Johns-Manville Sales Corp., 771 F.2d 902 (5th Cir. 1985).
Thus, plaintiff's cause of action was barred by liberative prescription prior to January 1, 1983, when La.Civ.Code Ann. art. 3469 (West Supp.1987) became effective. The enactment of that article could not revive the already prescribed action.[1] Accordingly, defendant's exception of prescription is granted and plaintiff's petition is dismissed.
NOTES
[1] We note that La.R.S. 9:571 (West 1965) does not affect the outcome of this decision. Section 571 provides:
The child who is not emancipated cannot sue:
(1) Either parent during the continuance of their marriage, when the parents are not judicially separated; or
(2) The parent who is entitled to his custody and control, when the marriage of the parents is dissolved, or the parents are judicially separated.
In this case there was no marriage; therefore, Section 571 does not apply. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2758699/ | COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00354-CR
NO. 02-14-00355-CR
RHONDA LORENE LADON APPELLANT
V.
THE STATE OF TEXAS STATE
----------
FROM CRIMINAL DISTRICT COURT NO. 3 OF TARRANT COUNTY
TRIAL COURT NOS. 1373995D, 1374235D
----------
MEMORANDUM OPINION 1
----------
Appellant Rhonda Lorene Ladon pled guilty and judicially confessed to
possession of less than one gram of methamphetamine and theft. Under the
terms of plea bargain agreements, the trial court sentenced her to nine months’
confinement in each case, with the sentences running concurrently. In each
case, the trial court signed a certification stating that appellant had entered a plea
1
See Tex. R. App. P. 47.4.
bargain and had “NO right of appeal.” Appellant and her trial counsel also signed
the certifications. Nonetheless, appellant brought these appeals.
We sent a letter to appellant in which we informed her of the contents of
the certifications and stated that we could dismiss the appeals unless, by
September 18, 2014, she filed a response showing grounds for continuing the
appeals. She has not responded. Thus, in accordance with the trial court’s
certifications, we dismiss these appeals. See Tex. R. App. P. 25.2(a)(2), (d),
43.2(f), 44.3; Chavez v. State, 183 S.W.3d 675, 680 (Tex. Crim. App. 2006).
PER CURIAM
PANEL: LIVINGSTON, C.J.; DAUPHINOT and GARDNER, JJ.
DO NOT PUBLISH
Tex. R. App. P. 47.2(b)
DELIVERED: December 4, 2014
2 | 01-03-2023 | 12-09-2014 |
https://www.courtlistener.com/api/rest/v3/opinions/1419788/ | 531 S.E.2d 896 (2000)
STATE of North Carolina
v.
Gary Francis HENDRICKS.
No. COA99-835.
Court of Appeals of North Carolina.
July 5, 2000.
*898 Attorney General Michael F. Easley, by Associate Attorney General Vandana Shah, for the State.
John T. Hall, Raleigh, for defendant-appellant.
LEWIS, Judge.
Defendant was indicted for one count of felonious larceny, one count of felonious breaking and entering, and one count of felonious possession of stolen property. On 4 May 1999, defendant pled guilty to all three offenses. He was sentenced to consecutive sentences for the larceny and breaking and entering offenses, but judgment was arrested as to the possession offense. Defendant now appeals, asserting errors at both his plea hearing and his sentencing hearing.
Before a judge can accept a guilty plea, our statutes explicitly mandate that the judge must address the defendant personally and inform him of several things, including his right to remain silent and his maximum possible sentence. N.C. Gen.Stat. § 15A-1022(a)(1), (6) (1999). The trial judge also must determine whether defendant understands the nature of the charges against him and whether his plea is the product of any threats or improper pressure. N.C. Gen. Stat. § 15A-1022(a)(2), (b).
Here, there is no question that the trial judge failed to comply with the procedural requirements outlined above. He did make some of the statutorily-required inquiries, but he never personally addressed defendant on any of the above matters. Although the transcript of plea entered into between defendant and the prosecutor covered all the areas omitted by the trial judge, our legislature's explicit reference to the trial judge addressing the defendant personally and informing him of his rights illustrates that reliance on the transcript of plea alone (with which the judge has no involvement in the first place) is insufficient to meet section 15A-1022's procedural requirements.
This is not the most desirable method of adjudicating a plea. As previously stated by this Court, "We recognize the potential for harm that is present if this method of taking a plea of guilty becomes vogue." State v. Williams, 65 N.C.App. 472, 481, 310 S.E.2d 83, 88 (1983). That sentiment bears repeating here. Nonetheless, just because the trial court failed to comply with the strict statutory requirements does not entitle defendant to have his plea vacated. Defendant must still show that he was prejudiced as a result. N.C. Gen.Stat. § 15A-1443(a). Defendant has not met that burden here. He has not argued that he would have changed his plea had the judge complied strictly with the procedural requirements, nor has he asserted that his plea was not in fact knowingly, voluntarily, and with understanding, made. In sum, defendant simply points out the court's non-compliance and contends that he is entitled to replead as a result. A similar argument was made to this Court in Williams. We rejected the argument there, as do we here. Williams, 65 N.C.App. at 480-81, 310 S.E.2d at 83.
In analyzing the prejudicial error standard, our courts have "refuse[d] to adopt a technical, ritualistic approach" in the context of section 15A-1022 violations. State v. Richardson, 61 N.C.App. 284, 289, 300 S.E.2d 826, 829 (1983). Instead, we must look to the totality of the circumstances and determine whether non-compliance with the statute either affected defendant's decision to plead or undermined the plea's validity. Williams, 65 N.C.App. at 481, 310 S.E.2d at 83. In this regard, the transcript of plea signed by defendant, along with what questions the trial court did ask of him, are particularly relevant. In the transcript of plea, the question was posed to defendant whether he understood that he had a right to remain silent and whether he understood the nature of the charges against him. To both of these questions, defendant answered, "Yes." The transcript of plea also includes the question whether defendant's plea is the *899 result of any threats or improper promises, to which he responded, "No." Finally, the worksheet attached to the transcript of plea listed the maximum possible punishment for each offense as being thirty months. In light of these circumstances, we hold that the trial court's failure to strictly follow the statute resulted in no prejudice to defendant. See also State v. Crain, 73 N.C.App. 269, 271-72, 326 S.E.2d 120, 122 (1985) ("The State's evidence from the plea transcript, the court's questions to defendant and the testimony of defendant's attorney all tend to support the State's contention that defendant was properly and adequately informed of the consequence of his plea and that he entered into the plea arrangement freely, knowingly and voluntarily."); State v. Thompson, 16 N.C.App. 62, 63, 190 S.E.2d 877, 878 ("The record reveals that the defendant signed the `transcript of plea' contained in the record and that the trial judge, after the defendant was sworn to tell the truth, made careful inquiry of the defendant regarding his pleas of guilty. The record is replete with evidence to support the adjudication that the defendant's pleas of guilty were in fact freely, understandingly, and voluntarily given."), cert. denied, 282 N.C. 155, 191 S.E.2d 604 (1972).
Next, defendant contends that he received an unfair sentencing hearing. He points to the fact that Mrs. Gardner, one of the larceny victims here, spoke at the sentencing hearing without ever being sworn in. The requirement that a witness be sworn in is contained within our rules of evidence. N.C.R. Evid. 603. For purposes of sentencing hearings, however, the rules of evidence do not apply. N.C. Gen.Stat. § 15A-1334(b) (1999). Thus, the trial court committed no error by allowing Mrs. Gardner's unsworn victim impact statement. Cf. State v. Jackson, 302 N.C. 101, 111, 273 S.E.2d 666, 673 (1981) (emphasizing that the rules of evidence do not apply at sentencing hearings in holding that it was not error to allow a witness to testify even though her testimony would not have been admissible at trial). Furthermore, defendant never objected at the hearing to Mrs. Gardner's unsworn testimony. He has thus waived any such argument for purposes of appeal. Cf. State v. Robinson, 310 N.C. 530, 539-40, 313 S.E.2d 571, 577-78 (1984) (holding that the defendant's failure to object to a witness not being sworn in at trial prevented him from arguing it on appeal).
Defendant also contends that his sentencing hearing was unfair in that the judge exhibited a pro-victim bias that unfairly prejudiced him. Specifically, defendant cites the following statement made by the judge after the conclusion of Mrs. Gardner's victim impact statement: "Today is a classic example of why victims need to be recognized and the court system needs to become their friends, not their enemy." (Tr. at 13). We do not feel the above statement manifests a bias against defendant. At most, it only illustrates an affinity for the use of victim impact statements, a procedure that is specifically endorsed by our statutes. N.C. Gen.Stat. § 15A-825(9).
Finally, defendant contends there was insufficient evidence to support the trial court's finding of an aggravating factor. In particular, he attacks the evidentiary basis for the aggravating factor that his larceny involved the "taking of property of great monetary value." N.C. Gen.Stat. § 15A-1340.16(d)(14). We find there was sufficient evidence, both in the indictment and at the plea hearing, to support this factor.
Defendant's indictment listed the value of the property taken as $17,000. When defendant pled guilty to larceny, his plea served as an admission of guilt as to all facts listed in the indictment. State v. Thompson, 314 N.C. 618, 624, 336 S.E.2d 78, 81 (1985). Thus, defendant admitted to taking $17,000 in property. This alone is sufficient to support the trial court's finding of great monetary value. See generally State v. Barts, 316 N.C. 666, 695, 343 S.E.2d 828, 846-47 (1986) (upholding finding of great value based upon evidence of $3200 in property taken); Thompson, 314 N.C. at 623-24, 336 S.E.2d at 81 ($3177.40); State v. Coleman, 80 N.C.App. 271, 277, 341 S.E.2d 750, 753-54 ($3000), disc. review denied, 318 N.C. 285, 347 S.E.2d 466 (1986).
There was also sufficient evidence adduced during the plea hearing to support the finding of this aggravating factor. In summarizing *900 the facts for the judge so that he could determine whether a factual basis for the guilty plea existed, the prosecutor pointed out that "the house had been ransacked" and that "at least $17,000 was gone." (Tr. at 6). Defendant did nothing to rebut this evidence and it therefore was sufficient to substantiate the trial court's finding. See generally Thompson, 314 N.C. at 624-25, 336 S.E.2d at 81-82 (stating that the trial court may rely on any evidence adduced that is not rebutted or otherwise challenged by defendant).
In closing, we note that there is a clerical error in one of the judgments. The judge sentenced defendant to two consecutive sentences of twelve-to-fifteen months' imprisonment on the larceny and breaking and entering charges. The judge then arrested judgment on the charge of possession of stolen property because all its elements were contained within the larceny charge. However, the court inadvertently listed larceny as the offense for which it was arresting judgment, as opposed to the possession offense. The result is that defendant has two judgments as to the larceny offense (one sentencing him and one arresting judgment) and no judgment as to the possession offense. We therefore remand to the trial court for entry of a corrected judgment.
No prejudicial error, but remanded for correction of judgment.
Chief Judge EAGLES concurs.
Judge EDMUNDS concurs with separate opinion.
EDMUNDS, Judge, concurring with separate opinion.
I concur with the majority's conclusion that the failure of the trial court to follow the requirements of N.C. Gen.Stat. § 15A-1022 was not prejudicial to defendant in this case. However, despite this holding, I write to emphasize that judges should conscientiously follow the mandates of that statute when accepting a guilty plea. Although time is a precious commodity in the trial courts, it is not an undue burden to take the minutes necessary to conduct a complete colloquy with the defendant, who may be facing years of imprisonment. By so doing, the judge can ensure that the plea is properly executed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1760930/ | 961 S.W.2d 673 (1998)
THE SUBSEQUENT INJURY FUND, STATE OF TEXAS, Appellant,
v.
SERVICE LLOYDS INSURANCE COMPANY and Darrell Tompkins, Appellees.
No. 01-96-00431-CV.
Court of Appeals of Texas, Houston (1st Dist.).
January 22, 1998.
*674 Harry Deckard, Joseph A. Pitner, Austin, for Appellant.
Dean G. Pappas, Evelyn T. Ailts, Houston, for Appellees.
Before SCHNEIDER, C.J., and HEDGES and O'CONNOR, JJ.
OPINION ON SECOND MOTION FOR REHEARING
HEDGES, Justice.
We grant the second motion for rehearing of the Subsequent Injury Fund, grant appellant's motion to correct the opinion, withdraw our opinions dated April 24, 1997 and August 29, 1997, and substitute the following opinion in its place.
*675 Appellant, the Subsequent Injury Fund (SIF), appeals a summary judgment rendered in favor of appellee, Service Lloyds Insurance Company (Lloyds), dismissing its equitable bill of review because the legal remedy of writ of error was available. SIF contends that a writ of error was not available as a means to attack the judgment, leaving a bill of review as its only option. We reverse the judgment of the trial court and remand this cause to the trial court for further proceedings consistent with this opinion.
COMPENSATION SCHEME
The SIF is a statutorily created fund[1] designed to compensate workers for income benefits not required to be paid by an insurance carrier.[2] In 1993, the legislature amended the Texas Workers' Compensation Act to provide that an insurance carrier could be reimbursed by the SIF for any benefit overpayments it made. TEX. LAB. CODE ANN. § 410.205(c) (Vernon 1996).[3] The SIF is funded by death benefits paid into it by insurance carriers when a compensable death occurs and there is no legal beneficiary. TEX. LAB.CODE ANN. § 403.007(a) (Vernon 1996).
The legislature has established a four-tier system for disposition of claims by the Texas Workers' Compensation Commission (TWCC) under the Texas Workers' Compensation Act. See TEX. LAB.CODE ANN. §§ 410.021-410.308 (Vernon 1996). Each step is a prerequisite to the succeeding one. See TEX. LAB.CODE ANN. § 410.024, 410.169, 410.205 (Vernon 1996). The process begins with an informal resolution of claims through a non-adversarial "benefit review conference" conducted by a "benefit review officer." TEX. LAB.CODE ANN. §§ 410.021-.034 (Vernon 1996). The benefit review officer has the authority to order or decline to order benefits. TEX. LAB.CODE ANN. §§ 410.032 (Vernon 1996). If the officer orders payments of benefits, an insurance carrier must begin making payments at that time. TEX. LAB. CODE ANN. § 410.032 (Vernon 1996). From the benefit review conference, the parties may proceed, by agreement, to arbitration from the benefit review conference. TEX. LAB.CODE ANN. § 410.104 (Vernon 1996). If there is no agreement to arbitrate, a party may seek relief at a contested case hearing. TEX. LAB.CODE ANN. §§ 410.151-410.169 (Vernon 1996). At the third tier of the disposition process, a party may seek review by an administrative appeals panel. TEX. LAB.CODE ANN. §§ 410.201-410.208 (Vernon 1996). Finally, an aggrieved party may seek judicial review of the appeals panel decision. TEX. LAB.CODE ANN. §§ 410.251-410.308 (Vernon 1996). If a court of last resort reverses or modifies an appeals panel award, then the insurance carrier may seek reimbursement from the SIF. TEX. LAB.CODE ANN. § 410.205(c) (Vernon 1996).
FACTS
In this case, Darrell Tompkins[4] sought and was awarded workers' compensation benefits by the TWCC. Lloyds, who was obligated to pay the benefits as the insurance carrier for Tompkins's employer, paid the benefits and appealed the TWCC's award to the district court (trial court). On October 3, 1994, the trial court rendered judgment for Lloyds after Tompkins did not answer Lloyds' discovery requests. In the judgment, the trial court ordered SIF to reimburse Lloyds any benefits that it had paid pursuant to the TWCC's decision. On January 26, 1995, Lloyds applied for reimbursement from the SIF and presented the trial *676 court's judgment to the TWCC.[5] On March 14, 1995, SIF filed a bill of review assailing the trial court's judgment in the underlying workers' compensation case. Lloyds filed a motion for summary judgment seeking to dismiss the bill of review as an improper remedy. The trial court agreed, reasoning that because SIF learned of the judgment against it within six months of the judgment, it could have brought a writ of error proceeding.
PROPER REMEDY
In its sole point of error, SIF contends that the trial court erred in granting summary judgment for Lloyds on the basis that SIF should have attacked the judgment by writ of error instead of by bill of review. SIF contends that it could not have brought a writ of error complaining about defective service because it was not a party to the underlying suit. Therefore, SIF concludes, its only option in attacking the trial court's judgment ordering reimbursement was by bill of review.
Standard of Review
Summary judgment is proper only when a movant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex.1995). In reviewing the summary judgment, we must indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor. Wornick Co. v. Casas, 856 S.W.2d 732, 733 (Tex.1993). In reviewing the granting of a motion for summary judgment, this Court will take all evidence favorable to the nonmovant as true. Thompson v. Vinson & Elkins, 859 S.W.2d 617, 619 (Tex.App. Houston [1st Dist.] 1993, writ denied). A defendant is entitled to summary judgment if the evidence disproves as a matter of law at least one element of each of the plaintiff's causes of action. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex.1991). When the trial court's order explicitly states the ground relied on for the summary judgment ruling, the summary judgment can be affirmed only if the theory relied on by the trial court is meritorious; otherwise, the case must be remanded. State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993). The issues to be reviewed by an appellate court must have been actually presented to and considered by the trial court. Id.
Analysis
To set aside a final judgment, a bill of review petitioner must plead and prove (1) a meritorious defense to the cause of action; (2) that it was prevented from making by the fraud, accident, or wrongful act of its opponent; (3) unmixed with any fault or negligence of its own. Transworld Fin. Servs. Corp. v. Briscoe, 722 S.W.2d 407, 408 (Tex. 1987); Alexander v. Hagedorn, 148 Tex. 565, 226 S.W.2d 996, 998 (1950); Hill v. Steinberger, 827 S.W.2d 58, 61 (Tex.App.Houston [1st Dist.] 1992, no writ). The petitioner must also show that it has exercised due diligence to avail itself of all adequate legal remedies against a former judgment and that at the time it files the bill of review, there remains no adequate legal remedy. Tice v. City of Pasadena, 767 S.W.2d 700, 702 (Tex. 1989); Hill, 827 S.W.2d at 61.
In its motion for summary judgment, Lloyds attacked the third bill of review requirement. It asserted that even though SIF was aware of Tompkins's suit at its inception and knew about the final judgment as early as January 26, 1995 (approximately three and a half months after the judgment), it did not pursue a writ of error before filing an equitable bill of review. Lloyds contended that writ of error was an available remedy that SIF was required to pursue in attacking the judgment on the basis of defective or lack of service. Therefore, Lloyds asserted that SIF's own negligence in not pursuing a writ of error barred SIF's entitlement to equitable relief. We must decide, therefore, whether SIF had an adequate remedy by way of writ of error.
*677 A writ of error may be brought (1) within six months from the signing of the judgment; (2) by a party to the lawsuit; (3) who did not participate in the trial on the merits; and (4) where there is error apparent on the face of the record. Withem v. Underwood, 922 S.W.2d 956, 957 (Tex.1996); Stubbs v. Stubbs, 685 S.W.2d 643, 644 (Tex. 1985); Hesser v. Hesser, 842 S.W.2d 759, 765 (Tex.App.Houston [1st Dist.] 1992, writ denied). Appeal by writ of error is usually available only to parties of record. Gunn v. Cavanaugh, 391 S.W.2d 723, 724 (Tex.1965); Mercure Co. v. Rowland, 715 S.W.2d 677, 680 (Tex.App.Houston [1st Dist.] 1986, writ ref'd n.r.e.). As an exception to this general rule, it is available (1) to a party whose privity of estate, title, or interest appears from the record of the cause in the court below or (2) to a person who is a party under the doctrine of virtual representation. Gunn, 391 S.W.2d at 725; California & Hawaiian Sugar Co. v. Bunge Corp., 593 S.W.2d 739, 740 (Tex.Civ.App.Houston [1st Dist.] 1979, writ ref'd n.r.e.).
Privity is generally defined as a mutual or successive relationship to the same rights in property. Amstadt v. United States Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996); Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex.1971); Kirby Lumber Corp. v. Southern Lumber Co., 145 Tex. 151, 196 S.W.2d 387, 388 (1946). All persons are privy to a judgment whose succession to the rights of property therein adjudicated are derived through or under one or the other of the parties to the action and which accrued after the commencement of the action. Amstadt, 919 S.W.2d at 653; Benson, 468 S.W.2d at 363; Kirby Lumber Corp., 196 S.W.2d at 388. A privy is one so connected in law with a party to the judgment as to have such an identity of interests that the party to the judgment represented the same legal right. Benson, 468 S.W.2d at 363; Finger v. Southern Refrig. Servs. Inc., 881 S.W.2d 890, 895 (Tex.App.Houston [1st Dist.] 1994, writ denied); see Amstadt, 919 S.W.2d at 653. This definition includes (1) those who control an action although not a party to it; (2) those whose interests are represented by a party to the action; and (3) successors in interest. Amstadt, 919 S.W.2d at 653; Benson, 468 S.W.2d at 363. The test in determining whether a person is covered by the doctrine of virtual representation is whether that person is bound by the judgment of the trial court by virtue of the fact that he or she was "represented" by a party to the original suit. Bunge Corp., 593 S.W.2d at 740.
In this case, SIF was not a party of record in the workers' compensation suit between Lloyds and Tompkins, and was not in privity with either Lloyds or Tompkins. SIF has no mutual or successive relationship with either party to the same rights in property, does not derive any rights to property from either party, has no identity of interests with either party, and was not "represented" by either party in the workers' compensation suit. The only connection that SIF had with the workers' compensation suit was that the judgment ordered SIF to reimburse Lloyds. The nexus is clearly inadequate to make SIF a party under any applicable theory. "Party" status cannot be created at entry of judgment where none existed before by the mere inclusion of a person or entity in a judgment. Appeal by writ of error, therefore, was not available to SIF.
Lloyds relies on Jernigan v. Jernigan, 677 S.W.2d 137, 140 (Tex.App.Dallas 1984, no writ), in contending that being named in a judgment makes one a party in a lawsuit. In Jernigan, the court allowed beneficiaries of a trust to attack a judgment against the trustee. Jernigan, 677 S.W.2d at 140. It reasoned that they were clearly bound by the judgment in that the judgment deprived them of part of their interest in the trust fund even though they were not named in the judgment. Id. In Jernigan, the trustee clearly had a relationship with the beneficiaries because of his statutorily created powers. In this case, there was no such relationship that would bind SIF to the judgment. Simply put, SIF had no interest in the underlying lawsuit.
Lloyds also relies on numerous cases holding that a party must avail itself of all legal remedies even if it was never served with process in the underlying suit. See Winrock Houston Assoc. v. Bergstrom, 879 S.W.2d *678 144, 149 (Tex.App.Houston [14th Dist.] 1994, no writ); Hesser, 842 S.W.2d at 765; Axelrod R & D, Inc. v. Ivy, 839 S.W.2d 126, 128 (Tex.App.Austin 1992, writ denied). We agree that a party must avail itself of all legal remedies before pursuing a bill of review. SIF had no legal remedies available to it, however.
Remedies
For the first time on rehearing, Lloyds contended that because we determined that SIF was not a party to the underlying suit, SIF has no standing to bring a bill of review. We disagree. SIF's bill of review is a collateral attack on the judgment in favor of Service Lloyds. "A collateral attack on a judgment is an attempt to avoid its binding effect in a proceeding not instituted for such purpose...." Akers v. Simpson, 445 S.W.2d 957, 959 (Tex.1969). This remedy is available only to set aside a void judgment. Glunz v. Hernandez, 908 S.W.2d 253, 255 (Tex.App. San Antonio 1995, writ denied). A judgment is void only in the following circumstances: (1) lack of jurisdiction over a party or property; (2) lack of jurisdiction over the subject matter; (3) lack of jurisdiction to enter a particular judgment; or (4) lack of jurisdiction to act as a court. Cook v. Cameron, 733 S.W.2d 137, 140 (Tex.1987). The requirement of a bill of review need not be met when a party collaterally attacks a void judgment. Texas Dep't of Transportation v. T. Brown Constructors, Inc., 947 S.W.2d 655, 659 (Tex.App.Austin 1997, n.w.h.); see Sibert v. Devlin, 508 S.W.2d 658, 662 (Tex.Civ. App.Texarkana 1974, no writ); Outlaw v. Noland, 506 S.W.2d 734, 735 (Tex.Civ.App. Houston [1st Dist.] 1974, writ ref'd n.r.e.).
Appellant has established that the underlying judgment is void and unenforceable against SIF because it was never made a party to the underlying suit. SIF is entitled to prosecute this bill of review action to declare the judgment void and unenforceable.
We reverse the judgment of the trial court and remand this cause to the trial court with instructions to return the parties to the position they were in before the motion for summary judgment was filed and proceed with SIF's bill of review.
NOTES
[1] TEX. LAB.CODE ANN. § 403.006 (Vernon 1996).
[2] If a subsequent compensable injury, with the effects of a previous injury, results in a condition for which the injured employee is entitled to lifetime income benefits, the insurance carrier is liable for the payment of benefits for the subsequent injury only to the extent that the subsequent injury would have entitled the employee to benefits had the previous injury not existed. TEX. LAB.CODE ANN. § 408.162(a) (Vernon 1996). The subsequent injury fund shall compensate the employee for the remainder of the lifetime income benefits to which the employee is entitled. TEX. LAB.CODE ANN. § 408.162(b) (Vernon 1996).
[3] Act of May 22, 1993, 73rd Leg., R.S., ch. 269, § 1, 1993 Tex. Gen. Laws 987, 1209.
[4] Although included as an appellee on appeal, Tompkins has not filed a brief.
[5] The insurance carrier must present a copy of the judgment of the court of last resort. 28 TAC § 116(b)(3)(B) (1992). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2430526/ | 339 S.W.2d 384 (1960)
FIVE STAR TRANSFER & TERMINAL WAREHOUSE CORPORATION et al., Appellants,
v.
Andy FLUSCHE et ux., Appellees.
No. 7236.
Court of Civil Appeals of Texas, Texarkana.
September 6, 1960.
Rehearing Denied September 27, 1960.
*385 Sam Dawkins, Jr., Leffingwell, Dawkins & Oehmann, Dallas, for appellants.
Hughes, Donosky & McCracken, Joe H. McCracken, III, Dallas, for appellees.
FANNING, Justice.
Andy Flusche and wife sued Five Star Transfer and Terminal Warehouse Corporation, as well as Bill C. Smith and Dan McRea, both individually, and as partners, seeking to rescind, or to recover damages for $18,810 paid in on May 22, 1957 to defendants in exchange for 1,710 shares of Stock in Five Star Transfer and Terminal Warehouse Corporation (less a certain credity by virtue of defendants repurchasing 500 shares of said stock from the Flusches), with the Flusches praying for judgment for a balance of $14,553. Briefly stated the suit in essence was a fraud action against individuals and a business entity operated by such individuals as a partnership but showing on the surface to be a corporation.
Trial was to a jury upon special issues. Various fraud issues were found favorably to plaintiffs. The jury found that defendant Smith, prior to the purchase of the stock in question by Flusche, represented that the corporation was in good financial condition and was only indebted for current bills, that the corporation had an I.C.C. permit, and that the corporation was the owner of a considerable amount of trucks, tractors and trailers. The jury further found that each and all of these representations by Smith were false and untrue, that Flusche believed and relied upon same, that the same induced Flusche to buy the stock in question, and that such representations were of material facts. The jury also found that the repurchase transaction whereby flusche received $4,257 from defendants for 500 shares of stock was not in an alleged agreement for full satisfaction of Flusche's claim against defendants, and that Flusche had not thereby waived all future rights of action, if any, against defendants.
The jury in response to Special Issue No. 17 found that the reasonable market value of the stock in question in dallas County, Texas, at the time of its delivery was $18,810. Prior to the submission of this issue plaintiffs filed their written objections thereto, and among the grounds therefor alleged to the effect that plaintiffs elected to pursue their remedy of rescission, and that it was an undisputed fact that plaintiffs suffered injury through the purchase of the stock in question.
Plaintiffs filed a motion for judgment on the verdict of the jury, and in this motion requested the trial court to disregard the jury's answer to Issue No. 17, stating in part as follows:
"Plaintiffs would further move the Court to disregard the jury's answer of `$18,810.00' to Special Issue No. 17, the reason that said issue is a damage issue and before submission of the charge to the jury, Plaintiffs attorney took exception and objection to the submission of said damage issue, advising the Court of his election to stand upon his remedy of rescission, as specifically set forth in Plaintiffs pleading, and it being undisputed that plaintiff suffered injury."
Defendants also filed a motion for judgment on the verdict of the jury.
The trial court evidently disregarded the jury's answer to Special Issue No. 17 as it rendered judgment for plaintiffs in the sum of $13,310, interest and court costs, against defendants, jointly and severally, conditioned *386 upon the plaintiffs tendering into the registry of the court the 1,210 shares of stock held by plaintiffs in said alleged corporation. The trial court in its judgment, preceding the decretal portions of the judgment, stated in part as follows: "And it appearing to the court, from a consideration of the pleadings, the jury's findings, all of the evidence, and the undisputed issues, that Plaintiffs are entitled to relief and judgment." (Emphasis added).
Appeal from the judgment of the trial court has been perfected by defendant corporation and by defendant Bill C. Smith. Defendant McRea has not appealed.
Appellants present three points on appeal. Their first point reads as follows: "the trial court erred in rendering and entering a judgment of recission in favor of plaintiffs because the jury affirmatively found that plaintiff sustained no damage which is an essential element of plaintiff's case." Appellees counter with their first counterpoint as follows: "The trial court properly entered judgment for the Appellees because it was conclusively shown and undisputed that the Appellees suffered injury by virtue of the transaction in question, and for the further reason that there is no evidence to support the finding of the jury to the damage issue."
The undisputed testimony shows that at on time there was a corporation in existence by the name of Five Star Transfer and Terminal Warehous Corporation, that the partnership of defendants Smith and McRea purchased the assets of said corporation, that the business of such entity was conducted as a partnership business by the partnership, that the assets of the entity were owned and held by the partnership, that the partnership signed a written partnership agreement when it borrowed money from a bank, and as a partnership gave mortgages on the motor vehicles of the partnership. The bank account of the entity was a partnership account and not a corporate account. It was also undisputed that the $18,810 paid by Flusche for the alleged "stock" in question was placed in the partnership account and in a short time thereafter was largely withdrawn and expended by the partnership. The alleged corporation at the time of the sale of the stock in question (nor at any time thereafter as shown by the record) had no bank account or assets of any character. Whatever was owned by the alleged entity was owned and held by the partnership, but on some occasions the entity was purportedly or ostensibly held but to be operating as a corporation, as when it sold "stock" in the entity represented to Flusche as a "solvent going corporation."
The material evidence amply supports the fraud findings of the jury, and such findings have not been attacked by appellants.
There was also no really genuine issue as to whether plaintiffs were damaged by paying $18,810 for the "stock" of the corporation that had no assets and was not a going concern. Even if the assets of the partnership could be considered as belonging to the corporation, which the evidence conclusively negatives, the evidence is conclusive that the partnership was clearly in a precarious and falsely represented financial condition when Flusche was induced to purchase the "stock" in question. Before Flusche purchased the stock, the partnership had a bank account of $2.42, and assets of questionable value, including heavily mortgaged rolling stock (which later was lost by foreclosure for nonpayment of indebtedness), and was in an unquestioned precarious and falsely represented financial condition, and Flusche's $18,810 was not put into the corporation but was put into the partnership bank account. Furthermore, Flusche was not given any interest in the partnership where his money went and which held the ostensible assets of the ostensible corporation, but Flusche was given for his money only the worthless stock in what was in truth and fact merely a "dummy corporation". We hold that the evidence was undisputed and conclusive that plaintiffs were damaged by the purchase of the worthless stock in question.
*387 We further hold that the trial court did not err in disregarding the jury's answer to Special Issue No. 17 because it was not necessary for said issue to have been submitted in the first place as the evidence was undisputed and conclusive that plaintiffs suffered damages in the purchase of the worthless stock in question. The jury was evidently confused in answering Issue No. 17 as there was no evidence of probative force in the record which would have supported the jury's answer to such issue.
Since in was undisputed and conclusive that plaintiffs were damaged, both pecuniarily and otherwise, in purchasing the worthless stock in question, plaintiffs were clearly entitled to pursue their remedies of rescission and damages. Russell v. Industrial Transp. Co., 113 Tex. 441, 251 S.W. 1034, 258 S.W. 462, A.L.R. 1; Nance v. McClellan et al., 126 Tex. 580, 89 S.W.2d 774, 106 A.L.R. 117, opinion adopted by Texas Supreme Court.
Appellants' first point is overruled.
Appellants' second point reads as follows: "The trial court erred in entering a judgment of recission against Bill C. Smith because the evidence is without contridiction that the stock was purchased by plaintiffs from Five Star Transfer & Terminal Warehouse Corporation."
We hold that the trial court was correct in entering judgment against defendant Smith because the evidence conclusively established that Smith actively participated in and benefited by the fraud perpetrated on plaintiffs by a corporate fiction.
The partaking of the benefits of a fraudulent transaction makes the participants principals and liable as such. 20-A Tex.Jur., Fraud and Deceit, Sec. 64, p. 124.
We agree with appellees that the theories stated in the case of O'Neal v. Jones, Tex.Civ.App., 34 S.W.2d 689, are applicable in that when a supposed or ostensible corporation is a mere "dummy" under the management of individuals who control same in the form of a partnership, then the corporation and the partnership are mere alter egos, and the corporate veil should be pierced to effectively do justice to an injured party. In O'Neal v. Jones, supra, it was stated in part as follows:
"* * * In view of these allegations, established facts by stipulation, the corporate entity of the O'Neal Furniture Company must be ignored, and the corporation held to be simply the alter ego of O'Neal and Allen.
"In re Rieger et al, reported in D.C., 157 F. 609 a case in bankruptcy was under consideration, in which the assets of a corporation owned by the bankrupt firm were being administered as a part of the bankruptcy estate. The court announced the doctrine that a corporate entity is not so sacred that a court of equity, looking through forms to the substance of things, may not, in a proper case, ignore its existence to preserve rights or circumvent fraud. Commenting on this decision, Wormser, in his work entitled `Disregard of the corporate Fiction and Allied Corporate Problems', at page 49 said: `* * * The argument, of course, was made in behalf of the bankrupt and the corporation that the corporation existed as a separate and distinct entity. The court brushed aside this contention and declared that the doctrine of corporate entity is "not so sacred" that courts, looking through shams and forms to the actual substance of things may not ignore the concept in order to preserve the rights of innocent parties or to circumvent fraud. The corporation, it was pointed out, was organized merely to give these disingenuous individuals a double line of credit, and to hinder and delay their creditors in the event of insolvency. * * * The corporate organization was but an alter ego of the partnership. * * * One was subsidiary and auxiliary to the other. To allow the doctrine of corporate entity *388 to intervene would be to convert a court of justice into a public laughingstock.'"
Appellants' second point in overruled.
Appellants' third point reads as follows: "The trial court erred in overruling defendants' special exceptions and motions to suppress evidence on the allegations in Plaintiffs' Second Amended Original Petition of the dissipation of corporate assets by a partnership as such allegations were not material or relevant and were intended to inflame and prejudice the jury."
The allegations and proof sought to be suppressed by defendants' motion were simply those of the material facts in the transaction, as well as the allegations and proof of the true structure of the business entity involved, and were relevant and admissible. 20-A Tex.Jur., Fraud and Deceit, Sec. 115, p. 216. Appellants' third point is overruled.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2365331/ | 768 F. Supp. 264 (1991)
The CAPITAL GROUP, INC., a Domestic Corporation, and Douglas Gowan, an individual, Plaintiffs,
v.
GASTON & SNOW, a Foreign Partnership, and Richard Santagati, an individual, and Roger D. Feldman, an individual, Defendants.
Civ. A. No. 91-C-0442.
United States District Court, E.D. Wisconsin.
July 25, 1991.
Douglas Gowan, pro se.
David P. Lowe, Friebert, Finerty & St. John, Milwaukee, Wis., for defendants.
*265 ORDER
MYRON L. GORDON, Senior District Judge.
FACTS
On May 2, 1991, Douglas Gowan commenced this action pro se by filing a complaint on behalf of himself and The Capital Group, Inc. The Capital Group, Inc., is a professional services corporation of which Mr. Gowan is the president and sole shareholder (Complaint ¶ 1). Mr. Gowan alleges that Gaston & Snow, a Boston, Massachusetts law firm, engaged him and The Capital Group, Inc., to work on a number of litigation and other matters for Gaston & Snow clients. Mr. Gowan further alleges that Gaston & Snow and the individual defendants, two Gaston & Snow partners, are liable to The Capital Group, Inc. and him, for unpaid fees arising from the work that the plaintiffs performed for Gaston & Snow clients. The complaint set forth fifteen claims for relief based on theories of breach of contract, promissory estoppel, misrepresentation, legal malpractice, and RICO violations.
On June 17, 1991, defendants moved to dismiss the complaint as to The Capital Group, Inc., on the ground that The Capital Group is not represented by an attorney. On June 27, 1991, Mr. Gowan filed a brief in opposition to the motion. Mr. Gowan asserts that he should be permitted to represent both himself and The Capital Group, Inc., because: (1) he is the sole shareholder and officer of The Capital Group, Inc., (2) The Capital Group, Inc., has assigned all its interests in current assets to him, and (3) The Capital Group, Inc., cannot afford counsel. For the reasons below, this court will grant defendants' motion.
ANALYSIS
Appearances before a federal court are governed by 28 U.S.C. § 1654, which provides:
In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.
Although § 1654 permits an individual to proceed pro se in federal court, the statute does not permit an individual to appear on behalf of a corporation. Strong Delivery Ministry Association v. Board of Appeals, 543 F.2d 32, 34 (7th Cir.1976). Moreover, a corporation "is an abstraction, and an abstraction may not appear pro se." Scandia Down Corp. v. Euroquilt, Inc., 772 F.2d 1423, 1427 (7th Cir.1985). For this reason, the Court of Appeals for the Seventh Circuit has held that a corporation must appear by counsel or not at all. See Strong Delivery Ministry Association, 543 F.2d at 33-34; Scandia Down, 772 F.2d at 1427. This rule ensures that the various interests in the corporate party are effectively represented. A corporation is "just a complex web of contracts among managers, workers, and suppliers of equity and debt capital," and all those interests may not be aligned with those of the lay person seeking to represent the corporation. Scandia Down, 772 F.2d at 1427. This rule further protects the court and the public from irresponsible behavior by lay advocates who lack many of the attorney's ethical and legal responsibilities and who often are incapable of presenting legal arguments in an articulate, concise manner. See Lewis v. Lenc-Smith Manufacturing Co., 784 F.2d 829, 830-31 (7th Cir.1986).
Mr. Gowan does not escape this rule because he is the president and sole shareholder of The Capital Group, Inc., or because he purports to have been assigned The Capital Group, Inc.'s interest in this lawsuit. In Scandia Down the court of appeals for the seventh circuit noted that a non-lawyer may not appear on behalf of a corporation, even if that person is the president and sole shareholder of the corporation. Scandia Down, 772 F.2d at 1427.
Other federal courts of appeals have expressly disapproved the procedure of assigning a corporation's claims to a non-lawyer in order that the non-lawyer might prosecute the corporate claims. See Jones v. Niagara Frontier Transportation Authority, 722 F.2d 20, 23 (2d Cir.1983); National Independent Theater Distributors, *266 Inc. v. Buena Vista Distribution Co., 748 F.2d 602, 610-11 (11th Cir.1984).
For these reasons, this court will dismiss The Capital Group, Inc., from this action, without prejudice. The Capital Group, Inc., may rejoin this action as a party by filing an amended complaint signed by an attorney admitted to practice before this court. Any future pleadings, motions, or other papers, on behalf of The Capital Group, Inc., shall also be signed by an attorney admitted to practice before this court.
Therefore, IT IS ORDERED that The Capital Group, Inc., be and hereby is dismissed from this action, without prejudice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2380992/ | 250 F. Supp. 2d 1352 (2003)
MONY SECURITIES CORPORATION, Plaintiff,
v.
Leland BORNSTEIN and Judith A. Bornstein, Defendants.
No. 2:02-CV-9-FTM-29DNF.
United States District Court, M.D. Florida, Fort Myers Division.
February 26, 2003.
Kathy M. Klock, Gerry S. Gibson, Jonathan B. Butler, Steel, Hector & Davis, West Palm Beach, FL, for MONY Securities Corp., plaintiff.
Joel A. Goodman, Kalju Nekvasil, Stephen Craig Krosschell, Goodman & Nekvasil, P.A., Clearwater, FL, for Leland Bornstein, Judith A. Bornstein, defendants.
MEMORANDUM AND ORDER
MAGNUSON, District Judge.
This matter is before the Court[1] on Defendants' Motion to Compel Arbitration *1353 or in the alternative, for Summary Judgment on Plaintiffs claims. For the reasons that follow, the Court grants Defendants' Motion for Summary Judgment.
BACKGROUND
Defendants Leland and Judith Bornstein invested large sums of their money in viatical settlements, following the advice of Lawrence Keller. In a viatical settlement, an insured sells his or her life insurance policy for an immediate payment approximating the discounted present value of the policy. The investor acquires an interest in the insured's policy, and upon the insured's death, the investor receives the benefits of the policy. Lawrence Keller worked as an independent contractor for Plaintiff MONY Securities Corp. ("MONY") and various other investment firms. The viatical settlements that he sold to the Bornsteins were not investments offered by MONY, but were offered through another company not a party to this lawsuit. After losing much of their money, the Bornsteins contacted MONY in an effort to formally complain. They also eventually filed claims with the National Association of Securities Dealers (the "NASD") against MONY. The NASD requires arbitration of disputes between members, such as MONY, and their customers. MONY filed this declaratory and injunctive action as an alternative to the NASD's arbitration proceedings and argues that arbitration before the NASD is inappropriate in this case.
In November 1997, the Bornsteins contacted Keller in response to an advertisement that they had seen in a newspaper. Keller came to their home and described several investment opportunities, ranging from mutual funds to viatical settlements. In addition, Keller expressly informed the Bornsteins that he worked with MONY, gave them a business card with the MONY logo on it, the corporations' address, phone number, fax number, and Keller's name printed over the words "Certified Fund Specialist." The business card also listed the following e-mail address for Keller: "lkeller@notes.mony.com." (Clerk Doc. No. 83 [hereinafter L. Bornstein Dep.] Ex. 52.) While Keller also gave the Bornsteins a second business card with the words "Comprehensive Viaticals" over a different address, it is not clear from the face of the business card whether "Comprehensive Viaticals" is the name of a company or a type of product offered by MONY or some other company. (See Clerk Doc No. 89 [hereinafter Keller Dep.] Ex. 3.) Keller provided the Bornsteins with a financial profile report. (Id. Ex. 28.) The MONY logo is printed at the bottom of every page of the financial profile report. (Id.) In a letter to his MONY supervisor, Keller explained that "running the profile" is part of the routine he follows to sell viatical settlements. (Clerk Doc. No. 87 [hereinafter Wright Dep.] Ex. 27.) Keller and the Bornsteins also exchanged several letters. These letters show that before the Bornsteins agreed to purchase the viatical settlements, Keller wrote to them exclusively using the MONY letterhead. (Compare id.) Exs. 29-32 (all pre-sale letters on MONY letterhead) with id. Exs. 15-17, 22-26 (all post-sale correspondence under the Comprehensive Viaticals name.) As a result, the Bornsteins thought they had purchased the viatical settlements from MONY. (L. Bornstein Dep. Ex. 13 Ml 4-10.)
The record also shows that Keller was an "associated person" of MONY for the purposes of registering with the NASD. First, Keller entered into a stipulation and *1354 consent agreement with the Securities and Finance Division of the Florida Department of Banking and Finance. (Clerk Doc. No. 79 [hereinafter Pinto Dep.] Ex. 16.) In that stipulated agreement, Keller is referred to as an associated person under the NASD rules. (E.g. id. ¶ 2, 3B.) In addition, when investigating the Bornsteins' transaction with Keller, MONY itself referred to him as an associated person. (Pinto Dep. Ex. 19 at IV.) Other documents reflect this status as well. (See, e.g., Wright Dep. Exs. 7, 12; Clerk Doc. No. 85 [hereinafter Brant Keller Dep.] at 8.) Finally, numerous documents demonstrate that MONY supervised Keller and other representatives as part of its standard business activity. (Brant Keller Dep. at 24; Wright Dep. Exs. 15-18, 26; Keller Dep. Ex. 5.)
The Bornsteins brought their claims before the NASD in November 2001. In January 2002, MONY initiated this lawsuit seeking injunctive and declaratory relief. MONY argues that as an NASD member, an obligation to arbitrate before the NASD arises under only two circumstances. First, a contract can give rise to an obligation to arbitrate. Second, the NASD requires arbitration when its members are involved in disputes with parties eligible for arbitration. MONY argues that it has no contractual obligation to participate in the Bornsteins' NASD arbitration claims. In addition, even though it is a member of the NASD and is bound by the NASD rules that require arbitration, MONY claims that the Bornsteins are not eligible parties for arbitration under the NASD rules. The Bornsteins now seek to compel arbitration or, in the alternative, ask for summary judgment on MONY's claims. Because the Bornsteins' dispute satisfies the eligibility requirements for arbitration under the NASD rules, the Court grants Defendants' Motion.
STANDARD OF REVIEW
Rule 56(c) provides that a motion for summary judgment shall be granted only if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(e). Genuine issues surface when a reasonable trier of fact could return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202. A material fact is one that may effect the outcome of the suit. Id. The burden of demonstrating that there are no genuine issues of material fact rests on the moving party. Celotex Corp. v. Catrett, All U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Rice-Lamar v. City of Ft. Lauderdale, 232 F.3d 836, 840 (11th Cir.2000).
When considering a motion for summary judgment, the Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the non-moving party. Jaques v. Kendrick, 43 F.3d 628, 630 (11th Cir.1995). If the moving party has carried its burden, the non-moving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Anderson, All U.S. at 256, 106 S. Ct. 2505; Hilburn v. Murata Elecs. N. Am., Inc., 181 F.3d 1220, 1225 (11th Cir.1999). A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials and must do more than simply show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). The Court does not weigh conflicting evidence or make credibility determinations. Hilburn, 181 F.3d at 1225.
In addition, courts will resolve all doubts in favor of arbitration for purposes *1355 of determining the scope of the NASD arbitration requirements. John Hancock Life Ins. Co. v. Wilson, 254 F.3d 48, 58 (2d Cir.2001) ("any ambiguity in the language must be construed in favor of arbitration"); In Re Prudential Ins. Co. of Am., 133 F.3d 225, 234 (3rd Cir.1998).
DISCUSSION
A. Law of the Case
On February 8, 2002, Judge John E. Steele issued an order denying MONY's Motion for a Preliminary Injunction because MONY failed to demonstrate that its claims were substantially likely to succeed on the merits. (See MONY Sec. Corp. v. Bornstein, No. 02-09 (M.D.Fla. Feb. 8, 2002) (Clerk Doc. No. 31) [hereinafter Order].) In his Order, Judge Steele made several important findings of law that continue to govern the proceedings in this case. First, Judge Steele "conclude[d] that MONY, by virtue of its membership in [the] NASD and its agreement to comply with the NASD rules and procedures, has agreed to arbitrate those claims which are within the scope of the provisions of the NASD Code of Arbitration."
Judge Steele went on to analyze these provisions of the NASD Code. Two NASD rules pertain to this action. First, Rule 10101 of the NASD Code provides that NASD members agree to arbitrate "any dispute, claim, or controversy arising out of or in connection with the business of any member of the Association ... (c) between or among members or associated persons and public customers, or others...." NASD, NASD Manual 1128 (Dec. 13, 2002) [hereinafter NASD Code]. Second, Rule 10301(a) of the NASD Code provides that "[a]ny dispute, claim, or controversy eligible for submission under the Rule 10100 Series between a customer and a member and/or associated person arising in connection with the business of such member or in connection with the activities of such associated persons shall be arbitrated under this Code...." NASD Code § 10301(a). Judge Steele concluded that the NASD Code requires the arbitration of disputes that have both of the following characteristics: (1) the dispute must be between a customer and a member of the NASD or an associated person of an NASD member; and (2) the dispute must arise out of or in connection with the business activities of the NASD member or the associated person of the NASD member. (See Order at 6-7.)
While MONY argues that Judge Steele erred in his characterization of the NASD Code requirements, other courts have considered the issue and reached the same conclusion that Judge Steele did. See Vestax Sec. Corp. v. McWood, 280 F.3d 1078, 1082 (6th Cir.2002); John Hancock Life Ins. Co. v. Wilson, 254 F.3d 48, 59 (2d Cir.2001) (holding that customers of registered representative were also customers of the NASD member); Hornor, Townsend & Kent, Inc. v. Hamilton, 218 F. Supp. 2d 1369, 1375-76 (N.D.Ga.2002) ("[I]n order for a claim to fall within [NASD Code § 10301], it must be a dispute between a customer and a member and/or associated person, and the dispute must arise in connection with the business of the member or in connection with the activities of the associated person.") (citations omitted); Investors Capital Corp. v. Brown, 145 F. Supp. 2d 1302, 1307-08 (M.D.Fla.2001) (Presnell, J.) (adopting broad interpretation that customers of associated persons are also customers of the NASD members).
Finally, Judge Steele made important findings of fact based on the evidence available to him at that time. While the factual findings at the preliminary injunction stage do not bind this Court now that the parties have completed discovery, in this case, it is apparent that Judge Steele *1356 had much of the same evidence before him at the preliminary injunction as the Court has before it now. Therefore, the factual findings, while not binding, are instructive. First, Judge Steele found that the "facts establish without dispute that MONY is a securities broker/dealer," and "that Keller was an associated person of MONY within the meaning of the NASD Code...." (Id. at 6-7.) Second, Judge Steele determined that the business of MONY is giving investment advice and "includes some level of supervision of its associated persons." (Id. at 8.) In doing so, Judge Steele concluded that the activity of supervision can form the basis for an arbitration claim under the NASD. Further, in deciding that the actions of Keller are intricately connected with the business of MONY (investment advice and supervision of its agents), Judge Steele adopted the reasoning from First Montauk Securities Corporation v. Four Mile Ranch Development Company, 65 F. Supp. 2d 1371, 1379 (S.D.Fla.1999). In that case, the court held that "[a] dispute that arises from a firm's lack of supervision over its brokers arises in connection with its business." Id., quoted in John Hancock Life Ins. Co., 254 F.3d at 58-59. Third, citing the NASD Rule 0120(g), Judge Steele also concluded that the Bornsteins were indeed customers of MONY within the meaning of the NASD Code. (Id, at 9.) Rule 0120(g) provides that "the term `customer' shall not include a broker or dealer." NASD Code § 0120(g). While this definition is exclusive, a different section of the NASD Code defines "customer" in an inclusive way.
The term "customer" means any person for whom securities are purchased or sold or to whom securities are purchased or sold whether on a regular way, when issued, delayed or future delivery basis. It will also include any person for whom securities are held or carried and to or for whom a member organization extends, arranges, or maintains any credit. The term will not include... a broker or dealer from whom a security has been purchased or to whom a security has been sold ....
NASD Code § 2520(a)(3).
These conclusions constitute the law of the case. In denying the preliminary injunction request, this Court held that the Bornsteins were customers of MONY and that their dispute with MONY arose out of the business activities or in connection with the business activities of MONY. According to those conclusions, the NASD Code requires arbitration of these claims. Therefore, the appropriate question to ask in adjudicating the Motion is whether the record at this time creates a question of fact on any of Judge Steele's initial findings.
B. Record of the Case
The NASD requires arbitration of disputes that: (1) are between a customer and a member of the NASD or an associated person of an NASD member; and (2) arise out of or in connection with the business activities of the NASD member or the associated person of the NASD member. (See Order at 6-7.) There are no issues of fact on either of the two requirements.
First, the dispute is "between a customer and a member and/or associated person." NASD Code § 10301. MONY concedes that it is an NASD member and the record shows that Keller was an associated person of MONY. (See Pinto Dep. Exs. 16, 19; Brant Keller Dep. at 8; Wright Dep. Exs. 7,12.) The NASD Code defines "customer" as anyone for whom securities are bought or sold, except that a customer cannot be a broker or a dealer of securities. NASD Code §§ 0120(g), 2520(a)(3). As part of his attempt to sell viaticals to the Bornsteins, Keller supplied them with a MONY business card, (L. Bornstein Dep. Ex. 52), provided the Bornsteins *1357 with a financial profile report over the MONY logo and made with a MONY template, (Keller Dep. at 82 and Ex. 28), and wrote to the Bornsteins exclusively on MONY letterhead until after they had agreed to purchase viaticals, (compare id. Exs. 29-32 with id. Exs. 15-17, 22-26.) Thus, the Bornsteins were customers of Keller, who was an associated person of MONY, and nothing in the record raises a question of fact on Judge Steele's earlier pronouncement that the Bornsteins were therefore customers of MONY. (See Order at 8-9.)
Second, the dispute arises out of or in connection with the business activities of the NASD member or an associated person of the member. The Bornsteins' NASD claims directly arise from the actions of Keller. MONY's business is giving investment advice. Because of the representations Keller made to the Bornsteins, the investment advice that he gave them on behalf of MONY, and because of his status as an associated person of MONY, Keller's meetings and negotiations with the Bornsteins are in connection with the business activities of MONY. Further, as Judge Steele found, supervision is part of MONY's business activities. (Order at 8 (citing First Montauk Securities Corporation, 65 F.Supp.2d at 1379).) Just as in First Montauk, the Bornsteins' dispute arises from MONY's lack of supervision over its brokers. Therefore, the dispute arises in connection with MONY's business. See First Montauk Sec. Corp., 65 F.Supp.2d at 1379, quoted in John Hancock Life Ins. Co., 254 F.3d at 58-59.
CONCLUSION
The record does not create a question of fact on either of the two NASD arbitration requirements. Accordingly, after review of the record, files and proceedings herein, IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment (Clerk Doc. No. 76-2) is GRANTED and the ease is hereby DISMISSED with prejudice. The Clerk shall enter judgment accordingly and close the file. The Clerk is further directed to terminate any previously scheduled deadlines and pending motions as moot.
NOTES
[1] This matter was originally assigned to the Hon. John E. Steele. Pursuant to an inter-circuit assignment under 28 U.S.C. § 294(d), the undersigned is now the Judge of record in this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1396929/ | 143 S.W.3d 671 (2004)
STATE of Missouri, Respondent,
v.
Miguel A. RAMIREZ, Appellant.
No. WD 62996.
Missouri Court of Appeals, Western District.
September 14, 2004.
*672 Andrew A. Schroeder, Kansas City, MO, for appellant.
Deborah Daniels, Assistant Attorney General, Jefferson City, MO, for respondent.
Before JOSEPH M. ELLIS, Chief Judge, JAMES M. SMART, JR., Judge and THOMAS H. NEWTON, Judge.
JOSEPH M. ELLIS, Judge.
Miguel A. Ramirez ("Appellant") was charged by amended information with one count of domestic assault in the first degree, *673 § 565.072, RSMo 2000, a class B felony. After a bench trial, he was found guilty and sentenced to serve a term of eight years of imprisonment in the custody of the Missouri Department of Corrections. In this direct appeal, Appellant contends that the trial court plainly erred when it accepted his request for a bench trial in that the record shows that the court failed to ascertain with unmistakable clarity that Appellant's waiver of his right to a jury trial was voluntary, knowing, and intelligent.
Appellant does not contest the sufficiency of the evidence to support his conviction. Viewed in the light most favorable to the trial court's findings and judgment of conviction, the facts adduced at trial were as follows. In July 1999, Appellant started dating Michelle Abron ("Abron"). They continued to date for about a year and a half, but broke up about eight to nine months before the events leading to Appellant's conviction. In the early morning hours of February 25, 2002, about a year after Appellant and Abron had broken up, Abron encountered Appellant at Jimmy's Steakhouse, a restaurant located at 29th and Prospect in Kansas City, Missouri. While inside the restaurant, Appellant made eye contact with Abron. Abron was afraid of and felt threatened by Appellant since he had hit her several times in the past. After receiving the food she had ordered, Abron decided to leave, telling her female friend, with whom she had spent the evening up to that point, that Abron would wait for her outside in the car. This was around 1:45 a.m., and Jimmy's Steakhouse closes at 3:00 a.m.
Abron left the restaurant and went out to the car, which was parked across the street from Jimmy's Steakhouse and belonged to her father. She noticed that Appellant's car, which was distinctive because it was a white Chevy Lumina with two blue doors, was parked right behind her car. As Abron was putting her food into her father's car, Appellant grabbed her from behind and threw her to the ground face down. Appellant, who was wearing cowboy boots, explained that he loved her too much to allow anyone else to be touching or looking at her. Although she was trying to cover her head with her arms, Appellant subsequently kicked Abron several times in the face and head, striking a solid blow to the area surrounding her right eye.
Abron screamed, forcing Ramirez to relent long enough for her to crawl into the car and lock the door. Appellant then began beating on the car window and demanding that she drive herself to his apartment. Abron told Appellant that she had her father's car and that she needed to take it back home to him, but Appellant continued beating on the window, saying that he would "fuck that car up" if she did not go to his apartment. Abron, who was "scared to death" at this point, acceded to Appellant's demand, and Appellant followed close behind in his car, speeding up whenever she would speed up and going in whatever direction she went.
When she arrived in the driveway outside Appellant's apartment, Appellant got out of his car and again began banging on the window of Abron's vehicle, demanding that she open the door or else he'd really "fuck this car up." When she complied, Appellant dragged her out of the car by her arm and began striking her on the head with his fists. Although she briefly escaped his grip and tried to run away, Appellant caught her and pulled her into his apartment by her left arm. In an effort to forestall further attacks, Abron told Appellant that she loved him, didn't want to be with anyone else, and would always want him.
*674 Appellant took Abron's purse and car keys and pushed a couch up against the front door to his apartment. He then treated the victim's injuries with a towel to stop the bleeding from her nose, mouth, and right eye, an ice pack to reduce the swelling around her right eye, and some Tylenol to ease the pain. Abron then told Appellant she needed to go to the hospital, but Appellant told her: "No. You are not going nowhere." Appellant then offered to give Abron $300.00 in cash, to "make things all right" between them. At about 2:00 a.m., when Appellant briefly went into another room, Abron called her daughter Drachele and quickly said, "He got me. He got me," before hanging up. Drachele testified that her mother's voice sounded as if she was terrified, scared, or nervous. Drachele stated, "She [Abron] was a little whispering like she was scared and distressed."
When Appellant returned to the room, he continued to tend to Abron's injuries. He then took Abron into the bedroom and held her down on the bed, in which he was also laying. Abron eventually fell asleep, and when she woke up at about 8:00 a.m., she noticed that Appellant had just gone to the rear of the apartment, which had a back exit. She quickly grabbed her shoes, coat, purse, and keys, which were located in various places around the front room, pushed the couch out of the way, ran out to her car in the driveway, and drove to her father's house. After running into her father's house and washing up, Abron was taken to the hospital by Drachele. At the hospital, in addition to facial cuts and bruises, an X-ray revealed that the orbital bone around Abron's right eye was fractured and that she had also suffered damage to her legs and the tendons in her right shoulder. These injuries resulted in long-term impairment numbness in her right arm and deteriorating vision in her right eye. Hospital personnel called the police, and Appellant was arrested on June 13, 2002.
Appellant and his wife Rashel, whom he had married while still in jail awaiting trial in the case sub judice, both testified for the defense at trial. Appellant's theory of the case was that Abron was a spurned lover who had not been attacked by him, but was actually assaulted by Rashel during the course of a fight (initiated by Abron) between the two women that took place outside Jimmy's Steakhouse at about 1:15 a.m., and that he merely tried to break them up. Rashel testified that she struck and kicked Abron in defense of herself and Appellant, but did not report the altercation to police since she had an outstanding warrant for her arrest.
After reviewing all of the evidence, the trial court ultimately concluded that "Mr. Ramirez was the one involved in this incident, [and] that it did happen as Ms. Abron testified that it did." The court found Appellant guilty as charged, and on March 13, 2003, sentenced him to a term of eight years of imprisonment in the custody of the Missouri Department of Corrections. This court permitted Appellant to file a notice of appeal out of time, resulting in this appeal.
In his sole point on appeal, Appellant contends that the trial court plainly erred when it accepted his request for a bench trial in that the record shows that the court failed to ascertain with "unmistakable clarity" that Appellant's waiver of his right to a jury trial was voluntary, knowing, and intelligent, in violation of Rule 27.01 and his constitutional rights to a jury trial, to due process of law, and to a fair trial.
"`[A] criminal defendant has a right to waive his constitutional right to a jury trial provided such waiver is voluntarily, knowingly and intelligently made.'" *675 State v. Sharp, 533 S.W.2d 601, 605 (Mo. banc 1976). As to that right, Rule 27.01(b) states:
The defendant may, with assent of the court, waive a trial by jury and submit the trial of any criminal case to the court, whose findings shall have the force and effect of the verdict of a jury. In felony cases such waiver by the defendant shall be made in open court and entered of record.
"The requirement in the rule that the waiver, in cases of felonies, must be `in open court and entered of record,' does not require that it be in writing, although it is preferred." Luster v. State, 10 S.W.3d 205, 210 (Mo.App. W.D.2000). Still, "[u]nder the Constitution and Rule 27.01(b), a waiver by the accused and an assent of the court must appear from the record with unmistakable clarity." State v. Bibb, 702 S.W.2d 462, 466 (Mo. banc 1985).
The record shows that on the day before trial was to begin, the trial court addressed Appellant on the record, in open court, as follows:
THE COURT: We are going to take up CR02-03735, State of Missouri v. Miguel Ramirez. The other case that was scheduled today has pled out. So we are trying to arrange an appropriate time to start this trial. Come on up, Mr. Ramirez. Okay. We got ready for your trial today. Come on up.
THE DEFENDANT: Okay.
THE COURT: It looks like we are going to have to start the trial tomorrow morning. Okay?
THE DEFENDANT: (Witness nods head.)
THE COURT: Mr. Price [defense counsel] tells me you are waiving a jury trial. You want the case to be heard by me. Is that right?
THE DEFENDANT: I don't know. Whatever you said.
THE COURT: I can't hear you. You are going to try the case to me? You want me to decide the case?
THE DEFENDANT: Yes.
THE COURT: Okay. Not a jury?
THE DEFENDANT: Yeah.
THE COURT: Okay. That's what we are going to do. I think we will start tomorrow morning. Is there a plea offer?
MS. SIPE: Yes, Your Honor.....
After a brief discussion about the terms of the plea agreement, a five-year deal which was evidently rejected by Appellant before the start of trial the following day, defense counsel informed the trial court that he had "relayed that [plea offer] to him [Appellant] also just a couple of minutes ago. Also we talked about waiving the jury trial and that the trial would be held before this Court. That's really all I have. I think I'm clear on that." The court's written trial minutes reflected the waiver as follows: "On February 11, 2003, came the attorney for the State, Robin Sipe, and defendant appeared in person and by attorney, John Price. Defendant waives trial by jury and requests a Court trial."
Since the record in this case clearly and unmistakably demonstrates that Appellant's waiver and the court's assent thereto were made in open court and entered of record and Appellant cites no authority to the contrary, there was no violation of Rule 27.01(b). See generally State v. Northern, 472 S.W.2d 409, 412 (Mo.1971).
The record also demonstrates that neither Appellant nor his counsel ever objected to or complained about proceeding without a jury at any time before, during, or after trial. To the contrary, Appellant appeared in open court and expressly *676 waived his right to a jury trial, affirmatively indicating that he wanted to have his case tried by the court rather than by a jury. Furthermore, this was done after Appellant had conferred with his attorney, who stated that he had discussed the issue with Appellant. And, in Appellant's oral motion for a new trial, there was no allegation that the trial court erred in proceeding without a jury. In fact, in requesting a new trial, defense counsel conceded that he had little legitimate reason to request one. Counsel stated: "We would request a new trial. We don't have any basis. We got a fair trial and got in all of our evidence." Nor was there any complaint, by Appellant or his counsel, at sentencing or at any other time prior to appeal. Appellant concedes that the error alleged in his point relied on was not properly preserved for review and requests review for plain error under Rules 29.12(b) and 30.20.
At the outset, we note that plain error review is intended to correct only "evident, obvious and clear error" that resulted in manifest injustice or miscarriage of justice. State v. Bozarth, 51 S.W.3d 179, 181 (Mo.App. W.D.2001). "[P]rejudice exists, under the `plain error' rule, only where the error complained of impacts so substantially upon the rights of a defendant that manifest injustice or a miscarriage of justice will result if left uncorrected." State v. Seibert, 103 S.W.3d 295, 298 (Mo.App. S.D.2003).
In explaining why the Sixth Amendment prohibits a trial judge from directing a verdict for the prosecution in a jury-tried criminal case, the United States Supreme Court has noted: "Where that right [to a jury trial] is altogether denied, the State cannot contend that the deprivation was harmless because the evidence established the defendant's guilt; the error in such a case is that the wrong entity judged the defendant guilty." Rose v. Clark, 478 U.S. 570, 578, 106 S. Ct. 3101, 3106, 92 L. Ed. 2d 460, 471 (1986). Consequently, in cases such as this, where a criminal defendant's right to trial by jury has allegedly been altogether denied by the State, the applicable standard of prejudice is not whether that denial was determinative of the ultimate outcome of the trial, but whether the defendant was convicted by the proper finder of fact. For this reason, we reject the State's claim that in order to demonstrate manifest injustice or a miscarriage of justice in such cases, "the appellant must show that the error was `outcome determinative.'"
"[T]his Court may decline, within its discretion, claims of plain error that do not facially establish substantial grounds for believing a manifest injustice or miscarriage of justice occurred." State v. Rhodes, 988 S.W.2d 521, 526 (Mo. banc 1999). In this case, Appellant's unpreserved claim of error does not facially establish substantial grounds for believing that plain error occurred. Therefore, under the circumstances presented in this case, we decline to review for plain error.
As held by the Missouri Supreme Court in Sharp, in order to be entitled to relief on direct appeal under the plain error rule, a criminal defendant claiming a denial of his right to trial by jury has the burden to show that his waiver thereof was not voluntarily, knowingly and intelligently made:
[A] determination of guilt by a court after waiver of jury trial [cannot] be set aside and a new trial ordered except upon a plain showing that such waiver was not freely and intelligently made. If the result of the adjudicatory process is not to be set at naught, it is not asking too much that the burden of showing essential unfairness be sustained by him who claims such injustice *677 and seeks to have the result set aside, and that it be sustained not as a matter of speculation but as a demonstrable reality. Simply because a result that was insistently invited, namely, a verdict by a court without a jury, disappointed the hopes of the accused, ought not to be sufficient for rejecting it.
Sharp, 533 S.W.2d at 605 (quoting Adams v. United States ex rel. McCann, 317 U.S. 269, 281, 63 S. Ct. 236, 242, 87 L. Ed. 268, 275-76 (1942)).[1] Thus, Appellant is not entitled to relief under the plain error rule unless we are convinced that his waiver of trial by jury was not voluntarily, knowingly and intelligently made, keeping in mind that he bore the burden of showing essential unfairness not as a matter of speculation but as a demonstrable reality. Moreover, as another prerequisite to plain error relief, Appellant must also show that, had he been adequately apprised of his right to trial by jury, "he would have insisted on having his guilt or innocence determined by a jury, rather than the trial court." Luster, 10 S.W.3d at 212. These are both required showings, because only if the waiver was invalid could Appellant's constitutional right to trial by jury have been abridged, and only if Appellant would otherwise have insisted on being tried by a jury could he have been prejudiced by having his guilt or innocence determined by a fact-finder he did not voluntarily choose.
In the case at bar, Appellant has failed to make either showing. In arguing this point in his brief, Appellant does not even allege, as a demonstrable reality rather than as a matter of speculation, that he did not make a voluntary, knowing, and intelligent waiver. As correctly noted by the State, Appellant does not allege that he did not voluntarily waive his right to a jury trial (e.g., that he was threatened or induced by false promises to do so); that he did not knowingly waive it (e.g., that he was under the influence of drugs or alcohol when he did so); or that he did not intelligently waive it (e.g., that he did not understand what he was giving up). Instead, Appellant only complains that the trial court should have conducted a more thorough inquiry before acceding to his request for a bench trial.
Likewise, as to the second required showing, Appellant alleges only that had he properly "understood the importance of being adjudged by twelve jurors of his peers, whose duty it would be to arrive at a unanimous verdict, it is doubtful that he would have waived that right" in favor of a trial by the court. But "doubtful" is not sufficient to convict the trial court of plain error. As explained supra, Appellant must show that he would not have waived his right to a jury trial had he been adequately apprised of his right to such a trial. Moreover, under the circumstances of this case, there is no reason to believe that Appellant was not properly informed of the role and duties of a jury, because the record clearly indicates that he was counseled by his attorney before making his decision. On this record, there simply is no basis for a finding that counsel's advice to Appellant on the waiver issue was deficient, particularly in light of the fact that "[a] strong presumption exists that trial counsel was effective and an appellant bears a heavy burden of overcoming that presumption[.]" State v. Tokar, 918 S.W.2d 753, 761 (Mo. banc 1996). Accordingly, since Appellant has failed to even allege, much less demonstrate, either of the two requirements set forth supra, *678 he is not even entitled to plain error review, much less plain error relief. Point denied.
The judgment of conviction and sentence for felony domestic assault in the first degree is affirmed.
All concur.
NOTES
[1] Sharp involved the former Rule 27.20(c), id., the substance of which is now found in Rules 29.12(b) and 30.20. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1436984/ | (2008)
David AL-TAWAN, et al., Plaintiffs,
v.
AMERICAN AIRLINES, INC., et al., Defendants.
No. 07-CV-14687.
United States District Court, E.D. Michigan, Southern Division.
July 28, 2008.
OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS
PAUL D. BORMAN, District Judge.
Before the Court is Defendant American Airlines, Inc.'s ("Defendant") April 29, 2008 Motion to Dismiss pursuant to Fed. R.Civ.P. 12(c). (Doc. No. 23). Plaintiffs (David Al-Tawan, Talal Cholagh, Ali Alzerej, Hasan Al-Zerej, Mohammad Al-Saedy, and Hussein Alsalih) filed a Response on June 2, 2008. The Court held a motion hearing on July 16, 2008. Having considered the entire record, and for the reasons that follow, the Court DENIES Defendant's motion.
I. BACKGROUND
This case arises from Plaintiffs' allegations that in connection with a scheduled flight from San Diego, California to Chicago, Illinois, members of the Defendant's flight crew impermissibly discriminated against Plaintiffs by removing them from an airplane without reasonable security concerns. Plaintiffs further allege that Defendant caused them to be detained and interrogated at the airport by law enforcement officials in front of other the passengers on the flight.
David Al-Watan, Hasan Al-Zerej, Hussein Alsalih, and Mohammad Al-Saedy are residents of Dearborn, Michigan. (Compl. ¶ 2). Talal Cholagh resides in Sterling Heights, Michigan. (Id. at ¶ 3). Ali Al-Zerej is a resident of the Detroit, Michigan. (Id. at ¶ 4). Plaintiffs are all originally of Iraqi descent. (Id. at ¶ 22).
The following facts are taken from Plaintiffs' Complaint, as is required by a Rule 12 motion to dismiss. On or about August 28, 2007, Plaintiffs had purchased tickets for Defendant's flight 590 from San Diego to Chicago. (Id. at ¶ 8). Plaintiffs boarded the plane with the other passengers, and had separate seats onboard the aircraft. (Id. at ¶ 10). Before taking off, Plaintiffs allege that unnamed members of the flight crew falsely identified Plaintiffs as security risks. (Id. at ¶ 11). The pilot returned the airplane to the gate, then removed all of the roughly 120 passengers from the plane, including Plaintiffs (Id. at ¶¶ 19-20). Defendant and the San Diego Police then separated, interrogated, and searched Plaintiffs for one hour or more, in front of Defendant's staff and other passengers. (Id. at ¶¶ 25-27). As a result of the plane's return to the gate, the flight was cancelled, due to San Diego's curfew restrictions. Plaintiffs, and the other passengers, were not able to reach their destination until the following day. (Id. at ¶ 29).
On October 31, 2007, Plaintiffs filed the instant Complaint in this Court, alleging the following causes of action:
Count I: 49 U.S.C. § 40127, Discrimination in Air Transportation
Count II: 42 U.S.C. § 2000a, Discrimination in Places of Public Accommodation
Count III: 42 U.S.C. § 1983, Violation of Civil Rights under Color of State Law Count IV 42 U.S.C. § 1981, Denial of Equal Rights under the Law
Count VI: False Imprisonment (state law)
Count VII: Intentional Infliction of Emotional Distress (state law)
Count VIII: Negligence (state law)[1]
On April 29, 2008, Defendant filed a motion to dismiss all Counts on the following bases: (1) Plaintiffs failed to plead facts that would establish the inapplicability of 49 U.S.C. § 44902(b); (2) the Airline Deregulation Act ("ADA"), 49 U.S.C. § 41713(b)(1), and the Federal Aviation Act ("FAA"), 49 U.S.C. § 40101 et seq, preempt Plaintiffs' state law claims; (3) Plaintiffs' IIED claim fails to state a claim; and (4) Plaintiffs do not have a private right of action under 49 U.S.C. § 40127.[2]
II. ANALYSIS
A. Motion to Dismiss Standard under Rule 12(c)
The United States Court of Appeals for the Sixth Circuit has recognized that a "Rule 12(c) motion for judgment on the pleadings for failure to state a claim upon which relief can be granted is nearly identical to that employed under a Rule 12(b)(6) motion to dismiss." Kottmyer v. Maas, 436 F.3d 684, 689 (6th Cir.2006). The Sixth Circuit has further clarified the post-Twombly formulation of the standard of review:
"The Supreme Court has recently clarified the pleading standard necessary to survive a Rule 12(b)(6) motion." Factual allegations contained in a complaint must "raise a right to relief above the speculative level." Twombly does not "require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." "In reviewing a motion to dismiss, we construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." When a court is presented with a Rule 12(b)(6) motion, it may consider the Complaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to defendant's motion to dismiss so long as they are referred to in the Complaint and are central to the claims contained therein.
Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir.2008) (internal citations omitted).
B. Federal Discrimination Claims
Section 40127(a) of Title 49 United States Code states that "[a]n air carrier or foreign air carrier may not subject a person in air transportation to discrimination on the basis of race, color, national origin, religion, sex, or ancestry." At the same time, § 44902(b) of the same Title states that "[s]ubject to regulations of the Under Secretary [of Transportation], an air carrier, intrastate air carrier, or foreign air carrier may refuse to transport a passenger or property the carrier decides is, or might be, inimical to safety."[3]
Defendant essentially contends that Plaintiffs have failed to plead sufficient facts to overcome the discretion given to Defendant under § 44902(b) to refuse to transport a passenger that it decided to be "inimical to safety." Plaintiffs respond that: (1) their factual allegations are sufficient on their face to state a claim; and (2) § 44902(b) does not provide blanket immunity to Defendant's decisions.[4]
The Sixth Circuit has not yet addressed the substantive analysis to be applied when a passenger alleges that an airline, citing security concerns, impermissibly removes him or her from an airplane on the base of race or national origin. In the recent case Cerqueira v. American Airlines, Inc., 520 F.3d 1 (1st Cir.2008), the First Circuit utilized the following analysis when evaluating a claim of discrimination under § 1981 when the airline asserts its statutory authority under § 44902(b):
As a matter of federal policy, under the Federal Aviation Act, "assigning and maintaining safety [ranks] as the highest priority in air commerce." Thus, the highest priority is assigned to safety, even though the federal aviation statute also has a general prohibition on race and national origin discrimination. "An air carrier . . . . may not subject a person in air transportation to discrimination on the basis of race, color, national origin, religion, sex or ancestry." Plaintiffs suit is brought under 42 U.S.C. § 1981 . . . .
In 49 U.S.C. § 44902(a), which became effective in 1961, Congress mandated air carriers to refuse to transport passengers and property where a passenger does not consent to a search of his person or property for dangerous weapons, explosives, or destructive substances. In addition to mandating that some passengers be refused transport, Congress also authorized, at subsection (b), air carriers to engage in "permissive refusal":
Subject to regulations of the Under Secretary, an air carrier, intrastate air carrier, or foreign air carrier may refuse to transport a passenger or property the carrier decides is, or might be, inimical to safety.
Thus Congress supplemented the discretion airlines already had under common law to exclude certain passengers, in light of their duty of utmost care to all passengers. It is obvious that § 44902(b) was enacted in furtherance of the first priority of safety in air traffic.
The legislative history confirms this.
The permissive refusal authorization in § 44902(b) has several distinct components. The statute says the air carrier "may" refuse to transport, thus vesting discretion over the decision in the air carrier. That discretion is very broad.
The carrier need not decide that the passenger or property is inimical to safety; the authorization extends to situations in which the carrier decides the passenger or property "might be" inimical to safety. The congressional authorization is granted to the air carrier to make the decision. The only limit contained in the statute on that discretion is that it be subject to regulations of the Under Secretary of Transportation for Security.
In turn, the Under Secretary has not promulgated regulations limiting the airline's discretion directly under 49 U.S.C. § 44902(b). However, one other regulation is directly pertinent, as it states that:
The pilot in command of an aircraft is directly responsible for, and is the final authority as to the operation of that aircraft.
In other words, the pilot in command stands in the role of the air carrier for a decision to remove a passenger from a flight. The authorization in, § 44902(b) also applies to decisions by others than the pilot not to rebook a passenger based on safety concerns. In this case, that decision was made by another person, based on information from the pilot. While it is true, as amicus for plaintiff points out, that the statute refers to the air carrier's decision, the appropriate focus is on the actual decisionmaker: the pilot in command of the aircraft where the passenger is removed from the pilot's flight. That is so as a matter of law under 14 C.F.R. § 91.3. In practice in this context, it is not the air carrier that makes the decision to refuse transport to the passenger on the flight, but the pilot in command, who acts for the air carrier.
Section 44902 itself does not provide for judicial review of decisions to refuse transportation by the pilot in command. Nonetheless, courts have entertained actions involving § 44902(b) brought under other general statutes which prohibit discrimination, such as § 1981 and Title VI of the Civil Rights Act.
Accordingly, the parties have assumed that the protections of 49 U.S.C. § 44902 and the U.S. Department of Transportation administrative enforcement mechanisms to protect the rights of passengers, 49 U.S.C. §§ 46101, 46301, do not preclude the filing of actions under 42 U.S.C. § 1981, and we will assume the same. It is clear that § 44902(b), being the more specific statute, applies to this case. Congress has, by statute, explicitly given safety the highest priority.
Some courts have described an air carrier's reliance on § 44902(b) as a defense in the nature of an immunity. In our view, § 44902(b) does not merely create a defense: the statute is an affirmative grant of permission to the air carrier. Congress specifically authorized permissive refusals by air carriers; Congress did not say § 44902 was merely creating a defense. It is the plaintiff who carries the burden to show that § 44902(b) is inapplicable.
The courts, by judicial construction of § 44902(b), have adopted a standard for liability for an airline's permissive refusal to transport decisions. This standard reconciles the primary priority of safety with other important policies, such as § 1981's prohibitions on racial discrimination. The standard most frequently articulated is that developed by the Second Circuit in Williams: that the air carrier's decision to refuse air transport must be shown to be arbitrary or capricious. The arbitrary or capricious standard was later adopted by the Ninth Circuit in Cordero v. Cia Mexicana De Aviacion, S.A. We agree with Williams and hold that an air carrier's decisions to refuse transport under § 44902(b) are not subject to liability unless the decision is arbitrary or capricious. There is no need here to repeat the cogent reasoning in Williams.
We also agree with Williams that Congress did not intend the non-discrimination provisions of the FAA or of § 1981 to limit or to render inoperative the refusal rights of the air carrier. Congress left decisions to refuse passage to the air carrier, and any review in the courts is limited to review for arbitrariness or capriciousness. Congress was also well aware that the air carriers' decisions to deny transport have to be made very quickly and based on limited information. Section 44902(b) must be interpreted in that light. Congress "did not contemplate that the flight would have to be held up or cancelled until certainty was achieved."
Id. at 11-15 (emphases in original) (internal citations and footnotes omitted), reh'g en banc denied, 520 F.3d 20 (1st Cir.2008). The First Circuit agreed with other courts that have applied an "arbitrary and capricious" analysis to an airline's decision. See, e.g., Williams v. Trans World Airlines, 509 F.2d 942, 948 (2d Cir.1975); Cordero v. Cia Mexicana De Aviacion, S.A, 681 F.2d 669, 671 n. 2 (9th Cir.1982); Al-Qudhai'een v. America West Airlines, Inc., 267 F. Supp. 2d 841, 846 (S.D.Ohio 2003). This Court will apply an "arbitrary and capricious" analysis to an airline's decision.
In assessing Defendant's argument that Plaintiffs have not plead sufficient facts to overcome a Rule 12(b)(6) dismissal, the Court finds instructive the New Jersey district court decision Dasrath v. Continental Airlines, Inc., 228 F. Supp. 2d 531 (D.N.J.2002). In Dasrath, the defendant made a similar argument that the plaintiff failed to plead sufficient facts to overcome § 44902(b). Id. at 537. The district court found that the plaintiffs complaint satisfied the "basic requirement" that the defendant's motivation did not involve safety concerns, but rather an arbitrary decision motivated by racial discrimination. Id. at 539-40.
But, the instant Plaintiffs have satisfied their basic pleading requirement, with the implication being that Defendant had arbitrary and capricious motives, rather than a reasonable concern for safety.
The district court in Dasrath pointed out:
It must be emphasized that this ruling is in the context of [a] motion to dismiss, when plaintiffs have the benefit of every favorable inference to be drawn from the facts as alleged. Plaintiffs' burden will be greater on a motion for summary judgment, which must be decided on the basis of undisputed or disputed facts (not allegations) and inferences favorable to the non-moving party to be drawn from such facts. In this case Plaintiffs' burden will be a heavy one considering the heightened actual dangers arising from the increased risk of terrorist acts, the catastrophic consequences in the case of air travel of the failure to detect such acts in advance, and the necessity that pilots make safety decisions on short notice without the opportunity to make extensive investigations.
Id. at 540 (emphasis in original). So too in the instant case.
Therefore, since Plaintiffs' Complaint alleges sufficient facts to state a claim under the relevant federal discrimination statutes, the Court DENIES Defendant's motion to dismiss Counts I to IV.[5]
C. Preemption of State Law Claims
A more complicated issue is whether, and if so to what extent, federal law preempts Plaintiffs' state law intentional tort and negligence claims.[6]
The ADA's preemption section states:
Except as provided in this subsection, a State, political subdivision of a State, or political authority of at least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart.
49 U.S.C. § 41713(b)(1). However, the pertinent law contains a "savings clause" that states that "[a] remedy under this part is in addition to any other remedies provided by law." 49 U.S.C. § 40120(c).
On two occasions, the Supreme Court has addressed whether the ADA preempted a pertinent state law. In Morales v. Trans World Airlines, Inc., 504 U.S. 374, 112 S. Ct. 2031, 119 L. Ed. 2d 157 (1992), an airline contended that the ADA preempted a state law purporting to set detailed standards for "the content and format of airline advertising, the awarding of premiums to regular customers (so-called "frequent flyers"), and the payment of compensation to passengers who voluntarily yield their seats on overbooked flight." Id. at 379, 112 S. Ct. 2031. In concluding that § 1305(a)(1) (now § 41713(b)(1)) preempted the state law at issue, the Court made the following conclusions:
Section 1305(a)(1) expressly pre-empts the States from "enact[ing] or enforc[ing] any law, rule, regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of any air carrier. . . ." For purposes of the present case, the key phrase, obviously, is "relating to." The ordinary meaning of these words is a broad one"to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with"and the words thus express a broad pre-emptive purpose. . . . Since the relevant language of the ADA is identical [to that in the ERISA statute], we think it appropriate to adopt the same standard here: State enforcement actions having a connection with or reference to airline "rates, routes, or services" are pre-empted under 49 U.S.C.App. § 1305(a)(1).
....
Next, petitioner advances the notion that only state laws specifically addressed to the airline industry are preempted, whereas the ADA imposes no constraints on laws of general applicability. Besides creating an utterly irrational loophole (there is little reason why state impairment of the federal scheme should be deemed acceptable so long as it is effected by the particularized application of a general statute), this notion similarly ignores the sweep of the "relating to" language. We have consistently rejected this precise argument in our ERISA cases: "[A] state law may `relate to' a benefit plan, and thereby be preempted, even if the law is not specifically designed to affect such plans, or the effect is only indirect."
Last, the State suggests that pre-emption is inappropriate when state and federal law are consistent. State and federal law are in fact inconsistent here the DOT opposes the obligations contained in the guidelines, and Texas law imposes greater liabilitybut that is beside the point. Nothing in the language of § 1305(a)(1) suggests that its "relating to" pre-emption is limited to inconsistent state regulation; and once again our ERISA cases have settled the matter: "`The pre-emption provision . . . . displace[s] all state laws that fall within its sphere, even including state laws that are consistent with ERISA's substantive requirements.'"
It is hardly surprising that petitioner rests most of his case on such strained readings of § 1305(a)(1), rather than contesting whether the NAAG guidelines really "relat[e] to" fares. They quite obviously do.
....
One cannot avoid the conclusion that these aspects of the guidelines "relate to" airline rates. In its terms, every one of the guidelines enumerated above bears a "reference to" airfares. And, collectively, the guidelines establish binding requirements as to how tickets may be marketed if they are to be sold at given prices. Under Texas law, many violations of these requirements would give consumers a cause of action (for at least actual damages) for an airline's failure to provide a particular advertised fare-effectively creating an enforceable right to that fare when the advertisement fails to include the mandated explanations and disclaimers. This case therefore appears to us much like Pilot Life, in which we held that a commonlaw tort and contract action seeking damages for the failure of an employee benefit plan to pay benefits "related to" employee benefit plans and was preempted by ERISA.
In any event, beyond the guidelines' express reference to fares, it is clear as an economic matter that state restrictions on fare advertising have the forbidden significant effect upon fares. Advertising "serves to inform the public of the. . . prices of products and services, and thus performs an indispensable role in the allocation of resources." Restrictions on advertising "serve to increase the difficulty of discovering the lowest cost seller . . . . and [reduce] the incentive to price competitively." Accordingly, "where consumers have the benefit of price advertising, retail prices often are dramatically lower than they would be without advertising." As Judge Easterbrook succinctly put it, compelling or restricting "[p]rice advertising surely `relates to' price."
....
In concluding that the NAAG fare advertising guidelines are pre-empted, we do not, as Texas contends, set out on a road that leads to pre-emption of state laws against gambling and prostitution as applied to airlines. Nor need we address whether state regulation of the nonprice aspects of fare advertising (for example, state laws preventing obscene depictions) would similarly "relat[e] to" rates; the connection would obviously be far more tenuous. To adapt to this case our language in Shaw, "[s]ome state actions may affect [airline fares] in too tenuous, remote, or peripheral a manner" to have pre-emptive effect. In this case, as in Shaw, "[t]he present litigation plainly does not present a borderline question, and we express no views about where it would be appropriate to draw the line." Finally, we note that our decision does not give the airlines carte blanche to lie to and deceive consumers; the DOT retains the power to prohibit advertisements which in its opinion do not further competitive pricing[.]
Id. at 383-391, 112 S. Ct. 2031 (emphasis in original) (footnotes and internal citations omitted).
Several years later in American Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S. Ct. 817, 130 L. Ed. 2d 715 (1995), the Supreme Court considered whether the plaintiffs could assert state law consumer protection and breach of contract claims against an airline based upon allegations that the airline retroactively changed the terms and conditions of its frequent flyer program. Id. at 221-22, 115 S. Ct. 817. Therein, the Court concluded that whereas the statutory consumer protection acts were barred, the breach of contract claims could proceed:
We do not read the ADA's preemption clause, however, to shelter airlines from suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline's alleged breach of its own, self-imposed undertakings. As persuasively argued by the United States, terms and conditions airlines offer and passengers accept are privately ordered obligations "and thus do not amount to a State's `enact[ment] or enforce[ment] [of] any law, rule, regulation, standard, or other provision having the force and effect of law' within the meaning of [§ ] 1305(a)(1)." A remedy confined to a contract's terms simply holds parties to their agreements-in this instance, to business judgments an airline made public about its rates and services.
....
The United States maintains that the DOT has neither the authority nor the apparatus required to superintend a contract dispute resolution regime. Prior to airline deregulation, the CAB set rates, routes, and services through a cumbersome administrative process of applications and approvals. When Congress dismantled that regime, the United States emphasizes, the lawmakers indicated no intention to establish, simultaneously, a new administrative process for DOT adjudication of private contract disputes. We agree.
Nor is it plausible that Congress meant to channel into federal courts the business of resolving, pursuant to judicially fashioned federal common law, the range of contract claims relating to airline rates, routes, or services. The ADA contains no hint of such a role for the federal courts. In this regard, the ADA contrasts markedly with the ERISA, which does channel civil actions into federal courts[.]
The conclusion that the ADA permits state-law-based court adjudication of routine breach-of-contract claims also makes sense of Congress' retention of the FAA's saving clause, § 1106, read together with the FAA's saving clause, stops States from imposing their own substantive standards with respect to rates, routes, or services, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated. This distinction between what the State dictates and what the airline itself undertakes confines courts, in breach-of-contract actions, to the parties' bargain, with no enlargement or enhancement based on state laws or policies external to the agreement.
Id. at 228-29, 232-33, 115 S. Ct. 817 (footnotes and internal citations omitted).
The Sixth Circuit has not addressed the instant precise issuewhether the ADA preempts a plaintiffs' state law tort claims of false imprisonment, intentional infliction of emotional distress, and negligence. In Wellons v. Northwest Airlines, Inc., 165 F.3d 493 (6th Cir.1999), the Sixth Circuit spoke to a different issuewhether the ADA preempted the plaintiff employee's state law claims of employment discrimination, intentional infliction of emotional distress, fraud, and misrepresentation. The Sixth Circuit concluded that the ADA did not preempt the plaintiffs state law employment discrimination claim:
The United States Supreme Court has made it clear that notwithstanding the breadth of 49 U.S.C. § 41713, the "related to" language does not vitiate the normal presumption against preemption. And the Supreme Court has cautioned that "`[s]ome state actions may affect [airline fares] in too tenuous, remote, or peripheral a manner' to have pre-emptive effect." State law claims of racial discriminationas opposed to claims of discrimination on the basis of physical characteristics that might have some bearing on the individual's ability to render service safely and efficientlyare not preempted, in our view; they bear "too tenuous, remote, or peripheral" a relation to airline rates or services.
Neither air safety nor market efficiency is appreciably hindered by the operation of state laws against racial discrimination. An employee's race, as opposed to his eyesight or physical size, has no arguable connection to safety. "Unlike the regulation of marketing practices at issue in Morales or the regulation of frequent flyer programs at issue in [Wolens], whether an airline discriminates on the basis of age (or race or sex) has little or nothing to do with competition or efficiency."
....
It seems to us that an employee's race has less to do with the services he renders for the airline than his age or physical condition might. Unwilling to create a circuit split as far as race is concerned, we hold that [the plaintiffs] state law race discrimination claims are not preempted.
Id. at 495-96 (emphasis in original) (footnotes and internal citations omitted).[7]
Courts in other jurisdictions have reached differing conclusions based upon the factual bases for state law torts and whether they relate to a rate, route or service of an air carrier. See, e.g., Shqeirat v. U.S. Airways, Inc., 515 F. Supp. 2d 984, 1006-07 (D.Minn.2007) (surveying the varying interpretations of the § 41713(b)(1)'s use of the term "service" generated by the Fourth, Fifth, Seventh, Eighth, and Eleventh Circuits).
Defendant offers a variety of broad propositions that since Plaintiffs' false imprisonment, intentional infliction of emotional distress, and negligence claims implicate an airline's "safety" concerns, therefore impermissibly "relating to" Defendant's "rates, routes, and services." Defendant further maintains that even if Plaintiffs' IIED claim was not preempted, they have otherwise failed to state a claim upon which relief can be granted.
Although the underlying incidents giving rise to Plaintiffs' state law claims occurred in California, both parties refer to Michigan law in their briefing.
1. False Imprisonment
In support of their false imprisonment claim, Plaintiffs allege that Defendant removed them from the airplane against their will and that they were detained and interrogated in front of the other passengers for an hour or more by Defendant and the San Diego Police.
Under Michigan law, the elements of false imprisonment include: "(1) an act committed with the intention of confining another, (2) the act directly or indirectly results in such confinement, and (3) the person confined is conscious of his confinement." Moore v. Detroit, 252 Mich.App. 384, 387, 652 N.W.2d 688 (2002). False imprisonment requires that the restraint must have occurred without probable cause to support it. Peterson Novelties, Inc. v. City of Berkley, 259 Mich.App. 1, 18, 672 N.W.2d 351 (2003).
The Court must determine, pursuant to Morales and Wolens, whether these allegations relate to Defendant's rates, routes, or services. Defendant cites a variety of cases in support of its central thesis that an aircrew's decision to remove passengers from the airplane for reasons involving "safety" relate integrally to an airline's prices, routes, or servicesnone of which particularly advance Defendant's cause.[8]
In Chrissafis v. Continental Airlines, Inc., 940 F. Supp. 1292 (N.D.Ill.1996), the district court discussed decisions concerning whether the ADA preempted state law false arrest and/or false imprisonment claims. The district court initially observed:
Those cases concluding that the ADA preempts false arrest and false imprisonment claims involve incidents in which the airline refused or failed to provide a service to a passenger.
....
In contrast, where the gist of the false arrest and false imprisonment claim is that the airline caused the passenger to be arrested by authorities without a proper factual basis, courts have held that the claims are not related to services and, therefore, are not preempted.
Id. at 1298. In that case, the plaintiff had boarded an airplane, at which point she realized that she still had her friend's keys in her possession. Id. at 1294. The flight attendant on board permitted the plaintiff to exit the plane to return the keys. Id. After delivering the keys to her friend in the boarding area, another airline employee refused to permit the plaintiff to reboard the plane. Id. at 1295. As the second employee was closing the gate door, the employee's forearm brushed up against the plaintiff. Id. The employee then threatened to call the police. Id. Eventually, both the second employee and the plaintiff talked to the pilot about the situation. Id. The pilot asked that the plaintiff leave the aircraft. Id. When the plaintiff reentered the boarding area, the Chicago police arrested her for battery. Id. The charges against her were ultimately dismissed. Id.
The district court concluded:
"Certain actions taken by airline personnel (e.g., a flight attendant assaulting a passenger) are undoubtedly not `services,' but only because, objectively speaking, they are not part of any contractual arrangement with the airline." Like assaulting a passenger, furnishing false information to police and thereby causing a false arrest and incarceration are not part of a contractual arrangement between an airline and its passenger. Nor does causing a false arrest and false imprisonment reasonably further the provision of an airline service.
Because these actions exceed the scope of the agreement between an airline and passenger, they do not constitute services within the meaning of the ADA. Simply put, "[a]n airline responsible for the false arrest, false imprisonment, or the defamed reputation of a passenger is not providing an airline `service.'" Since the allegedly false accusations made to the Chicago Police were not "services" within the meaning of the ADA, [the plaintiffs] false arrest and false imprisonment claims are not preempted.
The court notes that this holding is consistent with the ADA's purpose of preempting state economic regulation of the airline industry. The ADA is intended to preempt economic regulation of airlines by states and is not a safe harbor for airlines from civil tort claims. Allowing Chrissafis's tort claim to proceed will not significantly impact [the defendant's] rates, routes, or services. Any economic effect this suit may have on [the defendant] is "too tenuous, remote, or peripheral" to justify preemption. Additionally, this holding accords with Congress' decision to retain the savings clause to protect the states' ability to control non-economic matters concerning airlines within their state. Therefore, the court holds that the ADA does not preempt [the plaintiffs] false arrest and false imprisonment claims.
Id. at 1299-1300 (internal citations omitted).
Similarly, in Peterson v. Continental Airlines, Inc., 970 F. Supp. 246 (S.D.N.Y. 1997), the district court found that the plaintiffs state law claims, including false arrest and false imprisonment, were not preempted where the plaintiff had alleged that the airline had called the police to remove him from his seat without explanation. The district court explained:
Even assuming that [the plaintiffs] claims directly implicate an airline service, [the defendant's] preemption argument fails under the third prong of the inquiry because the issue of whether [the defendant] acted reasonably remains in dispute. Under [the plaintiffs] version of the facts surrounding her arrest, [the defendant] cannot be said to have provided any airline service in a reasonable manner. Specifically, [the plaintiff] claims that after the seat conflict arose, she was directed to leave the airplane without explanation. Moreover, [the plaintiff] argues that by contacting the police without justification, the flight crew acted in an abusive, unprofessional and malicious manner. As such, [the plaintiffs] claims allege "outrageous conduct that goes beyond the scope of normal aircraft operations."
....
Finally, the Court notes that the holding in this case is consistent with the policy underlying the preemption clause of Section 41713. Section 41713 is an economic deregulation statute designed to promote competitive rates, routes and services among the nation's airlines. [The plaintiffs] state law tort action neither frustrates the goal of economic deregulation in the airline industry nor significantly affects [the defendant's] competitive posture. [The defendant] is alleging intentional torts "which represent the civil offspring of criminal behavior." The ADA is not intended to be a "safe harbor for airlines from civil prosecution for the civil analogues of criminal offenses."
Id. at 250-51 (footnotes and internal citations omitted).[9]
Defendant's primary contention is that an air crew's decision to remove a passenger for "safety" reasons, to contact law enforcement, and then to detain and interrogate the individual constitute an airline "service," therefore preempted from state regulation. Again, at the motion to dismiss stage, the Court finds the reasoning in Chrissafis and Peterson persuasive. Here, allegations that members of an aircrew improperly profiled the plaintiffs on the basis of race or national origin, used that basis to remove them from the aircraft, and finally caused law enforcement authorities to detain them for a period of time are sufficient to survive this motion to dismiss.
As in Peterson, Plaintiffs' instant false imprisonment claim does not frustrate the economic deregulation goals of § 41713. Defendant's arguments here confuse the merits of the underlying claimswhether in fact the aircrew had a reasonable basis for removing the plaintiffs as a security riskwith the true inquiry for preemptionwhether the plaintiffs allege state law causes of action whose factual underpinnings do not relate to an airlines rates, routes, or services.
This claim too will be subject for determination on summary judgment.
2. Intentional Infliction of Emotional Distress
Defendant contends that: (1) the ADA preempts the IIED and negligence claims; and (2) even if not preempted, Plaintiffs have failed to state a claim for IIED.
The Michigan Court of Appeals has recently provided the standards for a claim of intentional infliction of emotional distress:
To establish a claim for intentional infliction of emotional distress, plaintiffs must show (1) extreme and outrageous conduct, (2) intent or recklessness, (3) causation, and (4) severe emotional distress. "Liability attaches only when a plaintiff can demonstrate that the defendant's conduct is `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.'"
Frohriep v. Flanagan, 278 Mich.App. 665, 2008 WL 1884097 (2008) (internal citations omitted).
The Fourth Circuit has expressly recognized that where a plaintiff alleges an IIED claim based upon allegations that an airline held a passenger "without any legitimate safety or security justification, a claim based on such actions would not relate to any legitimate service and would not be preempted." Smith, 134 F.3d at 259 (citing Chrissafis, 940 F.Supp. at 1298-99); see Kalantar, 402 F.Supp.2d at 141; Alshrafi, 321 F.Supp.2d at 162. The Court agreed with these cases that have held that where an IIED claim is coupled with allegations of impermissible discrimination, these situations bear at the very most a tenuous connection to an airline's "rates, routes, or prices."
To the extent that Defendant argues that Plaintiffs' factual allegations, even if true, would not support a claim of IIED, the Court finds that further factual development is necessary to rule on the merits of such claim.
3. Negligence
Plaintiffs allege that Defendant was negligent in the following manner: (1) failure to train its agents to assess, manage, and investigate security threats; (2) failure to train its agents in principles of nondiscrimination; (3) negligent hiring and retention of employees; and (4) failure to supervise its agents to prevent unlawful discrimination. The question here, as above, is whether Plaintiffs' negligence claim relates to Defendant's rates, routes, or services.
District courts have recognized that the ADA does not generally preempt negligence actions against airlines based upon theories of failure to train and failure to supervise if those actions are not related to the airline's rates, routes, or services. See, e.g., Margolis v. United Airlines, Inc., 811 F. Supp. 318, 324 n. 5 (E.D.Mich.1993) (holding that the FAA did not preempt the plaintiffs' failure to train or to supervise claims arising out of an injury sustained by a luggage carrier falling out of an overhead compartment); Snyder-Stulginkis v. United Airlines, Inc., No. 01-185, 2001 WL 1105128, *5-6 (N.D.Ill. Sept.20, 2001) (unpublished) (recognizing that the ADA does not preempt failure to train claims not expressly preempted by federal law); Von Hundertmark v. Boston Prof. Hockey Ass'n, Inc., No. 93-1369, 1996 WL 118538, *7 (S.D.N.Y. Mar.7, 1996) (unpublished) (holding that the plaintiff, a flight attendant, could state a failure to train claim against the airline arising out of allegations that passengers ripped her blouse and took photos of her breasts).
Here, the allegations that Defendant failed to train, to supervise, to hire, or to manage its employees raise a potential issue of discriminatory motive. These actions, at best, may relate to Defendant's rate, routes, and services.
Accordingly, the Court finds that at this stage, this issue is best reserved for summary judgment determination.
III. CONCLUSION
For the foregoing reasons, the Court DENIES Defendant's motion to dismiss.
SO ORDERED.
NOTES
[1] The Complaint does not include a Count V.
[2] Although Defendant filed its motion to dismiss on the above date, the Magistrate Judge entered a scheduling order on January 17, 2008. The parties are currently conducting discovery.
[3] Although the statute refers to regulations promulgated by the Under Secretary, the Under Secretary has not to date issued regulations pertinent to § 44902(b).
[4] In support of their Response to Defendant's motion, Plaintiffs attach two exhibitsa San Diego police report concerning the incident, and a few pages from the deposition of San Diego police officer Clyde Williams. (Pl. Br. Exs. A & B). Federal Rule of Civil Procedure 12(d) provides that "[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Defendant responds that Plaintiffs' exhibits are not permissible for the Court to consider on a Rule 12(c) motion. (Def. Reply 2).
Although the police report may be arguably a "public record" upon which the Court may rely under Rule 12, for the purposes of the instant motion, the Court declines to consider matters outside the pleadings, and consequently convert the instant motion to dismiss into a motion for summary judgment.
[5] In support of dismissing Count I, Defendant makes an additional argument that § 40127(a) does not create a "private cause of action." While this technically may be true, a plaintiff can use § 40127(a) as a vehicle for general federal statutes which prohibit discrimination. See Cerqueira, 520 F.3d at 13 (collecting cases). Here, Plaintiffs allege violations of 42 U.S.C. §§ 1981, 1983, and 2000a.
[6] Although the underlying acts forming the basis of the state law claims occurred in California, both parties refer to Michigan law in their briefs.
[7] During the 2007 term, the Supreme Court considered whether Federal Aviation Administration Authorization Act ("FAAAA") of 1994 preempted two particular sections of a Maine law that: (1) only permitted Maine-licensed tobacco retailers to accept an order for delivery of tobacco; and (2) requiring retailers to use a recipient verification service to ensure, inter alia, that the recipient was correct and of legal age to purchase tobacco. See Rowe v. New Hampshire Motor Transp. Ass'n, ___ U.S. ___, 128 S. Ct. 989, 993-94, 169 L. Ed. 2d 933 (2008). The Supreme Court analogized the FAAAA's preemption provision to that in the ADA, and held that the relevant Maine law: (1) directly and significantly impacted "motor carrier services"; (2) ran contrary to the "competitive market forces" rationale for deregulation by requiring carriers to offer a service that the market did not provide; and (3) did not fall into a "public health exception." Id. at 995-98.
[8] In Smith v. Comair, Inc., 134 F.3d 254 (4th Cir.1998), the plaintiff alleged, inter alia, a state law claim of false imprisonment arising out of the airline's refusal to permit him to board an aircraft due to the fact that the airline employees failed to ask for his photo identification at his point of origin. Id. at 256. When the plaintiff became frustrated with the airline employee, the employee called over two security guards, one of which was a police officer, to remove the plaintiff from the terminal. Id. After a discussion, the police officer convinced the airline employee to permit the plaintiff to return to his point of origin. Id. at 257. In discussing the defendant's preemption argument, the Fourth Circuit concluded:
To the extent [the plaintiff's] intentional tort claims are premised on [the defendant's] refusal to permit him to board his flight, we believe they are preempted. To determine whether a claim has a connection with, or reference to an airline's prices, routes, or services, we must look at the facts underlying the specific claim. [The plaintiff's] tort claims are based in part upon [the defendant's] refusal of permission to board. Undoubtedly, boarding procedures are a service rendered by an airline. Therefore, to the extent [the plaintiff's] claims are based upon [the defendant's] boarding practices, they clearly relate to an airline service and are preempted under the ADA.
We agree with [the plaintiff] that, to the extent his claims are based on conduct distinct from [the defendant's] determination not to grant permission to board, his false imprisonment and intentional infliction of emotional distress claims are not preempted. Suits stemming from outrageous conduct on the part of an airline toward a passenger will not be preempted under the ADA if the conduct too tenuously relates or is unnecessary to an airline's services. If, for example, an airline held a passenger without a safety or security justification, a claim based on such actions would not relate to any legitimate service and would not be preempted.
Id. at 259 (internal citations omitted).
In Travel All Over the World, Inc. v. The Kingdom of Saudi Arabia, 73 F.3d 1423 (7th Cir.1996), the plaintiff, a travel agency, sued an airline, alleging state law breach of contract, tortious interference, defamation, slander, fraud, and IIED claims. Id. at 1428. The plaintiff alleged that the defendant airline cancelled its passenger's tickets and made false verbal statements about the plaintiff to harm its business interests. Id. The Seventh Circuit initially concluded that the plaintiff's slander and defamation claims were not preempted, since they did not relate to the defendant's "rates, routes, or services." Id. at 1433. However, the court found that the plaintiff's tortious interference, IIED, and fraud claims were preempted:
In contrast to the claims for slander and defamation, the intentional tort claims expressly refer to airline "services," which include ticketing as well as the transportation itself. These tort claims are based on the airline's refusal to transport passengers who had booked their flights through [the plaintiff]. Such tort claims clearly "relate to" the airline's provision of services.
The plaintiffs argue that their claims cannot be preempted because the actions of [the defendant] were not taken in the normal exercise of its business judgment, but were part of a vengeful and ongoing course of conduct designed to harm the business interests of the plaintiffs. Yet the proper examination under Morales is not why the airline refused to provide its services, but whether the claims at issue either expressly refer to the airline's services (which they clearly do) or would have a significant economic effect on the airline's services. The subjective motivations of [the defendant's] employees are irrelevant to determining what constitutes "services" within the meaning of the ADA. Under our approach, "services" include all elements of the air carrier service bargain. Certain actions taken by airline personnel (e.g., a flight attendant assaulting a passenger) are undoubtedly not "services," but only because, objectively speaking, they are not part of any contractual arrangement with the airline. The crucial inquiry is the underlying nature of the actions taken, rather than the manner in which they are accomplished.
Id. at 1434 (internal citations and footnote omitted).
Finally, in Ruta v. Delta Airlines, Inc., 322 F. Supp. 2d 391 (S.D.N.Y.2004), the plaintiff alleged, inter alia, state claims of breach of contract, wrongful ejectment, negligence, IIED, negligent infliction of emotional distress, and defamation arising out of an air crew's decision to remove the plaintiff from the airplane for being disruptive and intoxicated. The plaintiff did not assert claims of false arrest or false imprisonment. Id. at 401. The district court held that the plaintiff's wrongful ejectment, negligence, IIED, and NIED claims were preempted since they "ultimately stem[med] from [the captain's] decision to remove [the plaintiff] from the airplane[.]" Id. However, the district court permitted the plaintiff's defamation claim based upon her allegations that the gate agent accused her of being intoxicated and of kicking the gate agent in the leg in front of other passengers. Id. at 403-05.
[9] Other courts have recognized that in various factual contexts the ADA does not preempt state law claims of false arrest and false imprisonment. See, e.g., Kalantar v. Lufthansa German Airlines, 402 F. Supp. 2d 130, 141 (D.D.C.2005) (holding that the ADA did not preempt the plaintiff's false arrest/imprisonment claims arising from allegations that the airline called the police to arrest him for being a disturbance at the ticket counter); Lewis v. Continental Airlines, Inc., 40 F. Supp. 2d 406, 414-15 (S.D.Tex.1999) (finding that the plaintiff's claim against the airline that he was falsely arrested after making allegedly terrorist threats after having travel difficulties was not preempted by the ADA); Rombom v. United Air Lines, Inc., 867 F. Supp. 214, 224 (S.D.N.Y.1994) ("Because the flight crew's decision to have [the plaintiff] arrested was allegedly motivated by spite or some unlawful purpose, [the plaintiff's] subsequent tort claims arising out of this decision are at best tenuously related to an airline service"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1495755/ | 869 F. Supp. 133 (1994)
JACKSON SQUARE ASSOCIATES, a New York Limited Partnership, Plaintiff,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Buffalo Office Region II, Defendant.
No. 88-CV-859C.
United States District Court, W.D. New York.
November 8, 1994.
*134 John J. Phelan, Buffalo, NY, for plaintiff.
Patrick H. NeMoyer, U.S. Atty. (Donald P. Simet, Asst. U.S. Atty., of counsel), Buffalo, NY, for defendant.
DECISION AND ORDER
CURTIN, District Judge.
BACKGROUND
This is an action by plaintiff Jackson Square Associates ("Jackson Square") *135 against defendant United States Department of Housing and Urban Development ("HUD") over the amount of payments due under a Housing Assistance Payments ("HAP") contract entered into by the parties in 1979. Plaintiff brought suit for breach of contract and to enforce payments granted by defendant to Jackson Square in a final agency action on August 29, 1980.[1] Defendant seeks summary judgment to dismiss the action on four separate grounds. HUD claims that: (1) the plaintiff failed to establish the contract alleged in the amended complaint's first cause of action; (2) this court lacks jurisdiction over the second cause of action under the Administrative Procedure Act, 5 U.S.C. § 701 (1977) because HUD's decision to increase rents covered by HAP contracts are committed to agency discretion by law and because an adequate remedy at law exists; (3) plaintiff has failed to show that HUD's administrative action was arbitrary, capricious, or otherwise not in accordance with law; and (4) this action is barred by the statute of limitations.
FACTS
Jackson Square owns a 160-unit low-income housing development in the Town of Amherst, New York. Effective March 13, 1979, it entered into a HAP contract with HUD, pursuant to 42 U.S.C. § 1437f, under which HUD agreed to make rental assistance payments to Jackson Square for the development's eligible tenants. After Jackson Square commenced performance of the contract, it discovered that the cost of providing hot water to the tenants and the heating of the common areas of the project had been grossly underestimated.
Plaintiff notified HUD of the error; and on February 18, 1980, Boyd Barton of the HUD Buffalo area office replied that the rental assistance payments would be increased by a factor of 1.048 effective March 13, 1980, to make up the shortfall. Item 43. On July 17, 1980, HUD's Buffalo Office wrote its headquarters to ask for authority to increase the HAP contract by $45,098, or 6 percent, to correct the processing error which led to inadequate coverage of utility costs. Item 46. However, the rents listed in the request document did not include the 4.8 percent annual adjustment for 1980. Item 39, ¶ 1. Assistant Secretary Lawrence B. Simons wrote to Buffalo Area Office Manager James F. Anderson ("Simons letter") on August 29, 1980, approving the suggested 6 percent rent increases. Item 47. In a letter dated October 1, 1980, the Buffalo office informed Jackson Square that a rent adjustment had been approved, amounting to a 6 percent overall increase, or 1.2 percent above the annual adjustment. Item 48.
On October 21, 1980, Jackson Square responded with "shock and dismay" that the approved increases "reflected a 1.2% raise, not the 6% expected...." Item 55. Frank Levin from Jackson Square met with Edward Izsak of the Buffalo HUD office on December 3, 1980, and was shown for the first time the correspondence between Simons and Anderson. From the meeting and the letters, Levin surmised that Jackson Square's rents were increased by a total of 6 percent in 1980, but that this 6 percent included an annual adjustment factor of 4.8 percent. Levin wrote to Izsak on December 11, 1980, and asked that the new approved contract rents reflect separate adjustments for the annual 4.8 percent and the 6 percent to cover the mistake in utility cost estimates. Item 57.
Thereafter, Jackson Square and HUD held several meetings and engaged in correspondence discussing further modification of the HAP contract. On July 25, 1983, HUD informed Jackson Square that plaintiff's claim was being denied after HUD had "reviewed our processing of the rental adjustment ... and found that is [sic] was consistent with Secretary Simon's memo of August 29, 1980." Item 40, Ex. 3. Plaintiff apparently made no further efforts to press its claim until 1988 when, after receipt of some HUD documents under the Freedom of Information Act, it submitted the dispute to HUD's Buffalo office. The Buffalo office denied Jackson *136 Square's claim on March 21, 1988. Plaintiff appealed this decision to the Secretary of HUD, who denied it on May 13, 1988.
Plaintiff claims that its HAP contract was modified by the Simons letter and sues for breach of contract for HUD's failure to follow the modification with increased payments of $45,098 per annum. Since HUD only pays an additional $9 per unit or $17,280 over and above the original contract rent subsidies, plaintiff is faced with an annual shortfall of $15 per unit or $28,800 in utility bills. Item 31 at ¶¶ 10-12, 21. In its second cause of action, plaintiff claims that the Simons letter represented HUD's final agency decision and seeks enforcement of that decision. Jackson Square requests damages of the past annual shortfall plus $28,800 per annum for the balance of the 20-year HAP contract, together with interest and costs. Id. at ¶ 14.
DISCUSSION
I. Breach of Contract.
Plaintiff's first cause of action is for breach of contract. Jackson Square alleges that HUD agreed to a modification of the parties' 1979 HAP contract to address the shortfall created by the error in the estimation of utility costs, as evidenced by Simons' letter. According to the plaintiff, HUD breached this agreement by paying a 1.2 percent increase rather than the 6 percent promised in the alleged contract modification. Items 40 at ¶ 3; 42 at 2.
Defendant urges the court to find that, as a matter of law, no modification of the contract occurred and thus, there was no breach. "Where `a question of intention is determinable by written agreements, the question is one of the law, appropriately decided ... on a motion for summary judgment.'" Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir.1989), quoting Mallad Construction Corp. v. County Fed. Sav. & Loan Ass'n, 32 N.Y.2d 285, 291, 298, 344 N.Y.S.2d 925, 298 N.E.2d 96 (1973).
To establish a contract with the Government, a party must demonstrate: (1) mutual intent to contract, including a communicated offer, acceptance and consideration; (2) lack of ambiguity in the offer and acceptance; and (3) actual authority on the part of the Government agent. Solar Turbines v. United States, 23 Cl.Ct. 142, 150 (Cl.Ct.1991). A valid contract modification must meet the same standard. Id. According to defendants, Jackson Square never agreed to the rent level actually approved by HUD, and HUD never accepted the higher rent levels Jackson Square asserts in its complaint. Thus, the contract was not modified by the amount alleged in the first cause of action.
The defendant points out that Simons' letter to Anderson was an internal memorandum, not addressed or initially sent to plaintiff. Further, the letter does not specifically say that the contract will be modified. It merely approves the increases suggested by the Buffalo office pursuant to HUD regulations. The defendant also asserts than even if this constituted an offer to modify the contract, it was not accepted by Jackson Square. On the contrary, the plaintiff reacted with "shock and dismay" that the approved increase was significantly less than anticipated.
Lastly, defendant argues that the HAP contract clearly states that all amendments to the contract must be in writing. Plaintiff has shown no such writing other than the Simons letter, which was merely an internal memo. Since plaintiff has failed to show a communicated offer, acceptance, and consideration, the court must find that the alleged modification of the contract never occurred and thus could not have been breached.
Jackson Square responds that 24 C.F.R. § 880.204(b)(1)(i)(B) (1990) provides that the approval of an increase in rents to correct a processing error must be made by the Assistant Secretary. At deposition, Simons testified that determination contained in his letter of August 29, 1980, was a final agency action. Item 60 at 20. Thus, even though the letter was not provided to the plaintiff until December, Jackson Square maintains that it constituted a modification of the contract.
The evidence on the record is insufficient to conclude that the Simons letter constituted a modification of the contract. The HAP contract unambiguously states at ¶ 1.1g that:
*137 This Contract, including ... exhibits, comprises the entire agreement between the parties hereto with respect to the matters contained herein, and neither party is bound by any representations or agreements of any kind except as contained herein or except agreements entered into in writing which are not inconsistent with this Contract.
Item 31, Ex. 1. The letter is in writing and approves an adjustment of the rents in the original contract, but it is unclear whether these adjustments were ever formally offered or accepted. Simons did not address or send the letter to the plaintiff. Jackson Square reacted with "shock and dismay" when informed by the Buffalo office of the amount of the increase. Nevertheless, the terms of the letter were put into effect. HUD commenced paying Jackson Square the overall 6 percent rent increase which Simons approved, and the plaintiff presumably accepted the added payment without conceding that it was accurate.
In order to withstand summary judgment on its breach of contract claim, however, Jackson Square must demonstrate a factual dispute on the more important question of whether the Simons letter actually approved the level of increase claimed by the plaintiff. Even assuming arguendo that the letter represented a bona fide modification, its clear language does not support the plaintiff's contention that it authorized a 6 percent increase in the rents over and above the annual adjustment. The letter states that the adjusted contract rents which would be approved were:
$331 1BR + $34 utility allowance
365 2BR + 42
414 3BR + 53
451 4BR + 64
These figures accurately represented the increases in rents received by Jackson Square. Therefore, even though the plaintiff has shown a genuine issue concerning the effect of the Simons letter on the contract, the content of the letter itself is unambiguous. In plain language and figures, it sets out the amount of the increase in rent which the defendant maintains is correct.
"Interpretation of a written agreement becomes a factual inquiry into the parties' intention only when the language of that agreement is ambiguous as a matter of law. Where the parties' intention is clear from `the four corners of the instrument,' no ambiguity exists requiring a factual inquiry into intention, and interpretation is a matter of law." Pharmaceutical Society of the State of New York, Inc. v. Cuomo, 856 F.2d 497, 501 (2d Cir.1988) (citations omitted). The clear terms of the Simons letter and the contract clause which mandates written modification preclude the court from examining parol evidence regarding the intent of the parties. Since the increases which the Simons letter approved in unambiguous terms were actually paid to Jackson Square by the defendant, the plaintiff has failed to state a cause of action for breach of contract. The first cause of action of Jackson Square's complaint must be dismissed.
II. Jurisdiction under the APA
A. Agency Discretion
HUD next argues that this court has no jurisdiction to enforce the increased payment alleged by plaintiff to be the agency's final determination because the Secretary's decision to increase rents is discretionary. The Administrative Procedure Act ("APA") provides for judicial review of final agency action except where precluded by statute or where "agency action is committed to agency discretion by law." 5 U.S.C. § 701(a) (1977). HUD cites well-established authority that the decision to increase rents is discretionary for the agency and therefore not reviewable. Reiner v. West Village Associates, 768 F.2d 31 (2d Cir.1985); Grace Towers Tenants Ass'n v. Grace Housing Dev. Fund Co., Inc., 538 F.2d 491 (2d Cir.1976).
Plaintiff responds that the cases cited by HUD are all attempts by third-party tenants to protest rent increases. Here, the plaintiff is a party to the contract. Plaintiff argues that the court has jurisdiction absent "clear and convincing evidence of a legislative intent to restrict access to judicial review...." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 91 S. Ct. 814, 820, 28 L. Ed. 2d 136 (1971). The Supreme Court has *138 found only a very narrow restriction on judicial review of actions "`committed to agency discretion.' ... The legislative history of the APA indicates that it is applicable in those rare instances where statute are drawn in such broad terms that in a given case there is no law to apply." 401 U.S. at 410, 91 S.Ct. at 821 (citation omitted). This court has previously determined that 42 U.S.C. § 1404a provides a waiver of sovereign immunity permitting Jackson Square to sue HUD for its action on the HAP contract. Item 30. Plaintiff asserts that disputes over 42 U.S.C. § 1437f regulatory contracts between a project sponsor and HUD are subject to judicial review as broadly as any commercial contract. F.H.A. v. Burr, 309 U.S. 242, 60 S. Ct. 488, 84 L. Ed. 724 (1940).
Defendant counters that the rationale for preclusion of judicial review of the agency's decision to increase rents applies with equal force to project owners and tenants. In Langevin v. Chenango Court, Inc., Judge Friendly stated that:
[I]t would be most unusual for Congress to subject to judicial review discretionary action by an agency in administering a contract which Congress authorized it to make. Other factors tending in the direction of nonreviewability are the managerial nature of the responsibilities confided to the FHA, the need for expedition to achieve the Congressional objective, ... and the quantity of appeals that would result if FHA authorizations to increase rents were held reviewable....
447 F.2d 296, 303 (2d Cir.1971) (citations omitted). HUD claims that the decision to increase the rents in this case was a managerial determination of the appropriate rent level for the project. Defendant asserts that there is no greater reason for judicial review here than was presented in other cases simply because the level of increase is challenged by the project owner rather than the tenants. Defendant also argues that while this court may have jurisdiction under 42 U.S.C. 1404a to review a contract claim, that section does not expand the limited grant of jurisdiction available under the APA. See Federal National Mortgage Assoc. v. LeCrone, 868 F.2d 190, 193 (6th Cir.) cert. denied, 493 U.S. 938, 110 S. Ct. 335, 107 L. Ed. 2d 324 (1989).
Plaintiff's argument that it is a party to a HUD contract and should not be barred from access to the courts to review an agency decision to correct a mutually acknowledged error in calculation is persuasive. The HAP contract itself contains a clause specifying that further adjustments can be made to cover special circumstances. Section 1.8c of the contract, entitled Special Additional Adjustments, reads in pertinent part that:
Special additional adjustments shall be granted, when approved by the Government, to reflect increases in the actual and necessary expenses of owning and maintaining the Contract Units which have resulted from substantial general increases in real property taxes, utility rates, or similar costs ... but only if and to the extent that the Owner clearly demonstrates that such general increases have caused increases in the Owner's operating costs which are not adequately compensated for by automatic annual adjustments....
Item 31, Ex. 1. In the event that the Owner disagrees with the implementation of an aspect of the contract, Section 2.8a of the contract provides that:
[A]ny dispute concerning a question of fact arising under this Contract which is not disposed of by agreement between the [HUD] field office and the Owner may be submitted by the Owner to the Secretary of [HUD]. The decision of the Secretary ... shall be final and conclusive, unless determined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence.
Section 2.8b explains that:
This Section does not preclude consideration of questions of law in connection with the decision rendered under paragraph a of this Section; Provided, however, that nothing herein shall be construed as making final the decision of any administrative official, representative, or board, on a question of law.
*139 Item 31, Ex. 1. Significantly, the disputes clause does not except matters over which HUD has "discretion as a matter of law" and specifically permits judicial review.
Unlike the cases cited by the defendant, Jackson Square is challenging a HUD decision made pursuant to a contract between the parties which contains a disputes clause covering the decision. The plaintiff seeks judicial review of the agency's determination that the Buffalo area office properly included Jackson Square's automatic annual adjustment in the 6 percent increase authorized by the Assistant Secretary. The plaintiff has the contractual right to request a special adjustment and disputes the calculations made by HUD's Buffalo office to determine the amount of increase needed to correct the error. This appears to be the kind of disagreement envisioned by the contract's disputes clause. Therefore, the APA's § 701(a) exception to judicial review does not apply to plaintiff's second cause of action.
B. Adequate Remedy at Law
The defendant next argues that review under the APA is precluded because Jackson Square has an adequate remedy in contract law. Section 704 provides that "[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review." The defendant asserts that Jackson Square's suit is contractual in nature, and this court has determined it has jurisdiction over the contract claim under 28 U.S.C. § 1331. Therefore, the plaintiff has an adequate remedy in this court under its contract claim, and its cause of action to enforce payment pursuant to a final agency action under the APA does not lie.
Plaintiff contends that defendant cannot argue that plaintiff has an adequate remedy because it does not concede that plaintiff has an enforceable contract claim. It urges that the APA's "exception that was intended to avoid such duplication [of previously established special statutory procedures] should not be construed to defeat the central purpose of providing a broad spectrum of judicial review of agency action." Bowen v. Massachusetts, 487 U.S. 879, 903, 108 S. Ct. 2722, 2736-37, 101 L. Ed. 2d 749 (1988).
According to the allegations in the amended complaint, plaintiff's second cause of action challenges the procedure by which HUD's Buffalo field office refused to implement the Assistant Secretary's authorization to increase Jackson Square's rents by $24 per unit to compensate for a processing error. Although the relationship between the parties is contractually defined, Jackson Square's second cause of action requires the court to interpret a process defined by statute and regulation.
In the cases cited by defendant as authority, § 704 is raised as a jurisdictional bar to suit in district court because the plaintiff has an adequate remedy in Claims Court. See, e.g., Estate of Watson v. Blumenthal, 586 F.2d 925 (2d Cir.1978); Alabama Rural Fire Insurance Co. v. Naylor, 530 F.2d 1221 (5th Cir.1976). In a prior order denying defendant's motion to dismiss, this court determined that its jurisdiction exists, not only for the contract claim, but over the entire suit. Item 33. Without citing any authority, HUD now asserts that a district court with subject matter jurisdiction over a contract claim to which HUD is a party is barred from judicial review of the agency's final determination that its actions regarding the contract were proper based on its empowering statute and regulations. In effect, HUD is arguing that if the plaintiff has a contract claim, it cannot also pursue a cause of action challenging the statutory interpretation of the agency which led to the allegedly erroneous decision resulting in the contract claim.
Even if this anomalous situation could occur, the nature of the relief sought by Jackson Square mandates this court's jurisdiction under the APA. In Bowen v. Massachusetts, the Supreme Court clarified that the primary thrust of § 704 was to codify the exhaustion requirement but that "Congress did not intend the general grant of review in the APA to duplicate existing procedures for review of agency action.... [Section] 704 does not provide additional judicial remedies in situations where the Congress has provided special and adequate review procedures." 487 U.S. 879, 903, 108 S. Ct. 2722, 2736 (1988). *140 The Court then analyzed the effect of this section on the exclusive jurisdiction of the Claims Court for suits against the United States for money damages over $10,000. It rejected the restrictive interpretation urged by the Secretary of the Department of Health, Education, and Welfare that § 704 should be construed to bar review of the agency action in the district court because monetary relief against the United States is available in the Claims Court under the Tucker Act. Noting that the Claims Court has no power to grant equitable relief, the Bowen Court determined that the availability of review in the Claims Court was doubtful and the nature of the plaintiff's claim "may make it appropriate for judicial review to culminate in the entry of declaratory or injunctive relief that requires the Secretary to modify future practices." 487 U.S. at 905, 108 S.Ct. at 2738. When the necessary relief may exceed the powers of the Claims Court, the remedy available to the plaintiff in that Court "is plainly not the kind of `special and adequate review procedure' that will oust a district court of its normal jurisdiction under the APA." 487 U.S. at 904, 108 S.Ct. at 2737.
The Federal Circuit Court of Appeals recently had an opportunity to apply Bowen to a contractually based suit very similar to this case. In Katz v. Cisneros, 16 F.3d 1204, 1208 (Fed.Cir.1994), the plaintiff also challenged HUD's calculation of HAP contract rents. The Katz court found that there was "no significant distinction" between the kind of relief sought in Bowen and that sought by the plaintiff.
HUD argues that unlike Bowen this case involves a contract, which calls for another outcome. This distinction is not determinative. Merely because the challenged regulations are tracked in the language of the contract between [plaintiff] Hollywood Associates and [defendant] does not mean that Hollywood Associates seeks a kind of relief different from that in Bowen ... `The answer to the sovereign immunity and jurisdiction questions depends not simply on whether a case involves contract issues, but on whether, despite the presence of a contract, plaintiffs' claims are founded only on a contract, or whether they stem from a statute or the Constitution.'"
16 F.3d at 1209, citing Transohio Sav. Bank v. Director, OTS, 967 F.2d 598, 609 (D.C.Cir. 1992).
Jackson Square is also seeking prospective and declaratory relief in its second cause of action in challenging HUD's determination not to adjust the rents to cover an error in calculating utility costs. It requests a declaratory judgment that HUD acted improperly in failing to correct the error after the Assistant Secretary gave authorization to do so pursuant to 24 C.F.R. § 880.204(b)(1)(i)(B) (1990). This requires the court to review HUD's interpretation of the statute and regulations which governs its decisions. Jackson Square also seeks prospective relief in the form of future payments. Although contractually based, these claims and requests for relief exceed the bounds of a contract action and require statutory and regulatory interpretation. Moreover, Jackson Square's contract claim has been dismissed. Therefore, § 704 of the APA does not deny subject matter jurisdiction to this court to adjudicate the second cause of action.
C. Arbitrary and Capricious
HUD next urges that even if the court finds jurisdiction under the APA, the agency is entitled to summary judgment because its decision was not "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). In general, the court is not empowered to conduct a de novo inquiry into the matter being reviewed but should make its decision on the basis of the factual record as it appeared before the agency. Florida Power and Light Co. v. Lorion, 470 U.S. 729, 744, 105 S. Ct. 1598, 1607, 84 L. Ed. 2d 643 (1985). HUD argues that the record clearly shows it acted within its considerable discretion to make special adjustments to project rents, and plaintiff has failed to allege any clear error of judgment.
As discussed above, there is a factual dispute regarding the significance of the Simons letter. The plaintiff maintains that the letter approved rent increases in the amount *141 sought by Jackson Square and constituted a final agency action which HUD failed to implement. HUD argues that this letter merely authorized the Buffalo field office to correct the utility cost error by raising the original rents. The affidavits and deposition excerpts produced by the parties offer support for both contentions and do not make clear the basis for the determination that Jackson Square would not get the requested increase. Clearly, there are genuine issues of facts regarding the decisionmaking process which preclude a grant of summary judgment under the arbitrary and capricious standard.
III. Statute of Limitations
The parties agree that plaintiff's claim for judicial review under the APA is governed by a six-year statute of limitations. HUD contends that plaintiff's claim accrued on October 1, 1980, when HUD advised the plaintiff of the rents it would approve for the project. Since plaintiff waited until 1988 to commence this lawsuit, HUD argues that this claim is time-barred. See Items 33, 63, and 69.
Jackson Square replies that after it received notification from HUD that the annual increase in rental assistance would be $17,280 per annum rather than the requested $45,098, it engaged in a series of meetings and communications with HUD in an effort to persuade HUD to make a further contract modification. It was not until July 25, 1983, that HUD notified plaintiff that it would not respond favorably to Jackson Square's claim. Item 40, Ex. 3. In its supplemental memorandum, Jackson Square argues that its right of action to a judicial review of HUD's administrative determination grounded in the "disputes" provision of the HAP contract did not accrue until May 13, 1988, when HUD informed Jackson Square that it would not "revisit" the dispute. Item 67 at 4, Ex. 9. On February, 8, 1988, the plaintiff wrote to the HUD Buffalo office director stating that it had recently obtained HUD documents under the Freedom of Information Act pertaining to the determination to increase Jackson Square's rents which disclosed that the Department's determination in 1980 was "considerably higher" than the actual increase received. Item 67, Ex. 6. The letter further stated that "[t]he records are devoid of any reason or justification for disregarding the increase approved by Washington," and requested reimbursement for $17 per month per unit difference between the authorized and the actual increase. Id. HUD's Buffalo office responded that it saw no inconsistency and thought the matter resolved. Jackson Square then submitted the dispute to the Secretary of HUD in accordance with the disputes clause of the HAP contract and was notified by letter dated May 13, 1988, that HUD would do nothing further to resolve the dispute. Plaintiff claims that its administrative remedy pursuant to the disputes clause was exhausted by the issuance of the May 13 letter, and its right of judicial review only accrued on that date.
Jackson Square cites Crown Coat Front Co. v. United States, 386 U.S. 503, 87 S. Ct. 1177, 18 L. Ed. 2d 256 (1967), to support this argument. In Crown Coat, the Supreme Court was asked to determine the accrual date of a claim arising under a disputes clause of a government contract. The Government argued that the date of accrual was the date of the completion of the contract. The Crown Coat Court noted that under the contract's terms, the contractor was required to submit his dispute to an administrative review process which could have taken longer than six years. If the Government's reckoning of the accrual date were correct, the contractor could then be barred from a judicial review of an adverse final agency decision. Thus, the Court determined that the contractor claims first accrues "upon the completion of the administrative proceedings contemplated and required by the provisions of the contract." 386 U.S. at 511, 87 S.Ct. at 1182. The Court reasoned that:
Under the typical government contract, the contractor has agreed in effect to convert what otherwise might be claims for breach of contract into claims for equitable adjustment.... [W]hether and to what extent an adjustment is required are questions to be answered by the methods provided in the contract itself. The contractor must present his claim to the contracting officer, whose decision is final unless *142 appealed for final action by the department head or his representative.... [T]he contractor's claim was subject only to administrative, not judicial, determination in the first instance, with the right to resort to the courts only upon the making of that administrative determination.
Id. at 511-12, 87 S.Ct. at 1182. The Court also noted that the basis for judicial review cannot be ascertained prior to the final agency action because:
The focus of the court action is the validity of the administrative decision. Until that decision is made, the contractor cannot know what claim he has or on what grounds administrative action may be vulnerable. It is only then that his claim or right to bring a civil action against the United States matures and ... he has the right to demand payment[,] ... the hallmark of accrual of a claim....
Id. at 513-14, 87 S.Ct. at 1183 (citation omitted). Jackson Square asserts that judicial review of its claim also did not ripen until the HUD secretary refused to reconsider the local office's decision in 1988.
HUD counters that Jackson Square's efforts to persuade the agency to provide further rent increases are only relevant to accrual of the statute of limitations if HUD's review constituted a necessary element of plaintiff's claim. The disputes clause of the contract states that "any dispute ... under this Contract which is not disposed of by agreement ... may be submitted by the owner to the Secretary...." Item 31, Ex. 1, ¶ 2.8 (emphasis added). The defendant argues that because Jackson Square was under no obligation to submit the dispute to the Secretary of HUD, Crown Coat does not apply. Rather, a permissive administrative remedy does not affect the creation of the plaintiff's rights. Lins v. United States, 688 F.2d 784, 231 Ct. Cl. 579 (1982), cert. denied, 459 U.S. 1147, 103 S. Ct. 788, 74 L. Ed. 2d 995 (1983).
HUD further claims that Jackson Square's suit should be barred even if the court finds that appeal under a permissive disputes clause may toll the statute of limitations because the plaintiff did nothing to pursue its claim between 1983 and 1988. HUD points out that, unlike the instant HAP contract, the Crown Coat contract included a 30 day deadline for appeal. The Court advised that when a contract has no time limitations of its own, "the contractor cannot delay unreasonably in presenting his claim." 386 U.S. at 519, 87 S.Ct. at 1186. HUD argues that Jackson Square could easily have kept within a six-year limitations period by acting promptly after receipt of the July 1983 letter.
Plaintiff does not respond to HUD's distinction between the tolling effect of permissive and mandatory administrative review processes. The court's own research has failed to reveal any definitive extension of the Crown Coat rule to cases in which the plaintiff chooses to pursue an administrative remedy without being required to do so. On the other hand, as discussed above, both parties agree that this court is limited to a review of a final agency action to determine whether it was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). The parties disagree about what constitutes final agency action for this purpose, but it is clear that a determination must be made in order to ascertain when Jackson Square's cause of action accrued.
Jackson Square has failed to persuade the court that there was no final agency decision prior to the May 13, 1988, letter from the Secretary of HUD. Mindful of the Crown Coat admonition that a plaintiff should not delay unreasonably in pursuing agency review even in the absence of specified time limits, the court cannot agree that the statute of limitations was tolled for five years while plaintiff waited to appeal the last letter it received from the Buffalo field office. Moreover, the Secretary's letter states in plain terms that the agency refused to "revisit" the dispute (Item 67, Ex. 9), indicating that the agency considered the issue closed.
However, HUD's assertion that the final agency action is represented by the October 1, 1980, letter is equally unpersuasive. The parties had submitted into the record a series of letters and memoranda which are dated between February 19, 1980, and July 25, 1983. Items 40, Ex. 3; 43-57; & 67, Exs. 4-5. In addition, Jackson Square maintains *143 without dispute by the defendant that several meetings and conversations concerning the adjustments occurred during this time period. The October 1, 1980, letter states that "[a]fter a thorough review of supporting documentation, we are approving an adjustment in your contract rents due to an underestimation of the project's utility expense." Item 48. It then details the new rents, which the plaintiff contends were incorrect. There is no terminology to suggest that this is a final determination which the local office had no ability to review. Indeed, a December 24, 1980, letter from the director of the Buffalo field office invites further review. It states that "[a]ny further consideration for additional adjustments will require supporting data and corrected financial statements for FY 1979.... [I]t is the judgment of this office that we have followed the proper procedure and no additional adjustments are required at this time." Item 51. It is unclear whether Jackson Square subsequently submitted further supporting data. However, it did point out to the local office what it considered a discrepancy between the amount of increase authorized by the Simons letter and the amount actually received. There is no written indication that HUD took into account and rejected Jackson Square's interpretation of the Simons letter until July 22, 1983, when the area manager wrote to Jackson Square that:
In regard to our July 5, 1983 meeting, you are advised that this Office has reviewed our processing of the rental adjustment to compensate for utility increases and found that is [sic] was consistent with Secretary Simon's memo of August 29, 1980.
Item 40, Ex. 3. Since Jackson Square claims that the Buffalo field office wrongly interpreted the Simons letter and that, by statute, HUD's local office was obliged to implement the approved increases authorized by the Assistant Secretary, the July 22, 1983, letter is the agency action which most reasonably can be construed as final for purposes of judicial review.
Jackson Square filed this suit in 1988, five years after receipt of the 1983 final agency action and within the six-year statute of limitations. Accordingly, the second cause of action is not time-barred.
CONCLUSION
For the reasons elucidated in this opinion, defendant HUD's motion for summary judgment to dismiss plaintiff Jackson Square's breach of contract action is granted. HUD's motion for summary judgment on the plaintiff's second cause of action is denied. The sole question left to be determined in this lawsuit is whether HUD acted arbitrarily, capriciously, with abuse of discretion, or not in accordance with the law in determining that Jackson Square was not entitled to the full rental adjustment requested.
The court will meet with the parties on November 28, 1994, at 3 p.m. to discuss a further schedule.
So ordered.
NOTES
[1] In a previous order, the defendant's motion to dismiss for lack of subject matter jurisdiction was denied, and plaintiff was permitted to amend its complaint. Jackson Square v. U.S. Dept. of HUD, 797 F. Supp. 242 (W.D.N.Y.1992). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1777936/ | 931 S.W.2d 655 (1996)
MILLER-ROGASKA, INC., Appellant,
v.
BANK ONE, TEXAS, N.A. and Citibank Delaware, Appellees.
No. 05-95-00767-CV.
Court of Appeals of Texas, Dallas.
August 6, 1996.
*657 Ronald E. Holub, Law Offices of Ronald E. Holub, P.C., Dallas, for Appellant.
Brian S. Book, Cynthia Hollingsworth, Gardere & Wynne, L.L.P., Julie E. Blend, Hughes & Luce, L.L.P., Dallas, for Appellees.
Before LAGARDE, WRIGHT and WHITHAM[1], JJ.
OPINION
WHITHAM, Justice (Retired).
This summary judgment appeal stems from events surrounding the payment of a check. Appellant Miller-Rogaska, Inc., as payee of the check, sued appellees Bank One, Texas, N.A. and Citibank Delaware, for conversion, negligence and gross negligence, money had and received, and breach of fiduciary duty. The trial court granted the banks' motions for summary judgment on all claims. Miller appeals from the resulting take-nothing summary judgment in favor of the banks. We conclude that the trial court did not err in granting the banks' motions for summary judgment. Accordingly, we affirm.
FACTUAL BACKGROUND
On or about November 23, 1991, Bullock's, Inc. issued a check in the amount of $87,184.26 made payable to Miller in payment of certain invoices rendered for the sale of merchandise. As it was Bullock's practice to mail checks in window envelopes, Miller's corporate office and mailing address, "225 Fifth Ave. #204, New York City, New York," appeared beneath its name on the face of the check. The Miller check became mixed in with a number of checks mailed to Fossil, Inc. in Dallas, Texas, another company with whom Bullock's did business. A Fossil check appeared in the window of the envelope. Fossil did not notice the Miller check in the group of checks it received from Bullock's and endorsed the check payable to Miller with a stamped "For Deposit" endorsement bearing the name of "Fossil Inc." Fossil did not forge Miller's endorsement. On December 5, 1991, Fossil deposited the check into its account at Bank One, Texas. At the time of the deposit, Miller, as payee, had not endorsed the check nor had it authorized Fossil to do so.
In early January 1992, Miller notified Bullock's that the invoices had not been paid. Bullock's advised Miller that a check had in fact been issued. Bullock's requested that Miller execute an affidavit of forgery since Miller had not received the check. On January 21, 1992, Miller's president went to the accounting department of Bullock's in Los Angeles, California, and saw a copy of the check with the unauthorized endorsement. While there, Miller's president executed an affidavit of forgery.
After the check cleared, Fossil noticed the error and contacted Bullock's for instructions. As per Bullock's instructions, Fossil *658 returned the money to Bullock's. Fossil issued a check to Bullock's on January 21, 1992. Bullock's deposited the monies into its account at Security Pacific National Bank on January 24, 1992.
Miller attempted to recover the funds from Fossil but learned that Fossil had repaid the funds to Bullock's. Miller then made demand upon Bullock's to replace the check. Bullock's refused to do so because a moratorium had been placed on the issuance of vendor checks commencing January 20, 1992. On January 27, 1992, Bullock's filed a petition in bankruptcy.
Between November 23, 1991, the date of the check in controversy, and January 27, 1992, the date Bullock's filed its petition in bankruptcy, Miller received payments totalling $56,579.01 from Bullock's on the following dates and in the following amounts:
November 30, 1991 $13,996.34
December 7, 1991 $ 9,918.92
December 14, 1991 $23,086.72
December 24, 1991 $ 9,047.47
December 30, 1991 $ 529.56
In response to discovery, Bank One admitted that:
Bullock's Inc. mistakenly sent [the check] in the amount of $87,184.26 to [Fossil]. The check, drawn on Bullock's account, was made payable to [Miller], but was deposited with a stack of other checks by [Fossil] into their Bank One account on December 6, 1991. Neither Fossil or Bank One noticed prior to deposit that the check was made payable to [Miller].
In response to discovery, Citibank answered as follows: "Bank One presented the check through the Federal Reserve System to [Citibank] for payment to Fossil's Bank One account. In paying over the funds to Bank One, through the Federal Reserve, [Citibank] was entitled to rely and did rely on Bank One's presentment."
In response to discovery, Bank One admitted:
That on November 23, 1991, Bullock's issued [the check] in the amount of $87,184.26 made payable to the order of [Miller].
That [Fossil] deposited the check into its bank account at Bank One.
That at the time Fossil deposited the check, Miller, as [p]ayee, had not endorsed the check.
That Bank One accepted the check from Fossil for deposit into Fossil's account on December 5, 1991.
That Citibank forwarded the funds evidenced by the check to Bank One who then credited the amount of said funds to the bank account of Fossil.
That Miller has made demand upon [Bank One] for payment of the funds and [Bank One] has refused to pay the same.
That Miller was the only named payee on the check.
In response to discovery, Citibank admitted:
That Bullock's wrote [the check], dated November 23, 1991, in the amount of $87,184.26 payable to [Miller].
That [Fossil] obtained possession of the check.
That the check was deposited at Bank One.
That Bank One accepted the check for deposit.
That Bank One presented the check through the Federal Reserve System and that the funds were transferred to Bank One through the system.
That Citibank did not contact [Miller] before Bank One received the funds through the Federal Reserve settlement process.
That Citibank did not contact Fossil before the funds were paid to Bank One through the Federal Reserve settlement process.
That [Miller] was the only named [p]ayee on the check.
At the time the trial court granted the banks' motions for summary judgment, Miller had received a distribution in the amount of $14,525.55 from Bullock's bankruptcy estate. Miller is uncertain whether it will receive any further distribution, and, if so, in what amount.[2]
*659 THE POSTURE OF THE PARTIES IN THE TRIAL COURT
Miller sued both Bank One and Citibank for conversion under section 3.419 of the Texas Business and Commerce Code (Texas UCC), conversion at common law, negligence and gross negligence, money had and received, and breach of fiduciary duty. Miller also alleged that Bank One failed to act in good faith and in accordance with reasonable commercial standards applicable to the banking industry. Both banks filed motions for summary judgment and maintained that Miller had no cause of action under any theory. On summary judgment, the banks contended that Miller did not receive delivery of the check and was, therefore, not a "holder" as required by the code. The banks asserted that Miller had no rights or ownership interest in the check which would allow it to maintain its causes of action. The banks further asserted that Miller could not maintain causes of action for breach of fiduciary duty or negligence against them because neither bank owed Miller these respective duties. The trial court agreed with the banks, granted their motions for summary judgment, and entered a take-nothing judgment against Miller on all its claims. Miller seeks a reversal of the trial court's summary judgment.
SUMMARY JUDGMENT STANDARD OF REVIEW
The function of a summary judgment is not to deprive a litigant of his right to a full hearing on the merits of any real issue of fact, but to eliminate patently unmeritorious claims and untenable defenses. Gulbenkian v. Penn, 151 Tex. 412, 416, 252 S.W.2d 929, 931 (1952). The standards for reviewing a motion for summary judgment are well established. As mandated by the Supreme Court of Texas, they are as follows:
1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.
2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true.
3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.
Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548-49 (Tex.1985). It is not the purpose of the summary judgment rule to provide either a trial by deposition or a trial by affidavit, but rather to provide a method of summarily terminating a case when it clearly appears that only a question of law is involved and that there is no genuine issue of fact. Gaines v. Hamman, 163 Tex. 618, 626, 358 S.W.2d 557, 563 (1962). Moreover, when the defendant is the movant, as in the present case, we must be alert to additional rules controlling the summary judgment practice. The question on appeal, as well as in the trial court, is not whether the summary judgment proof raises fact issues with reference to the essential elements of a plaintiff's claim or cause of action, but is whether the summary judgment proof establishes as a matter of law that there is no genuine issue of fact as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970). A defendant is entitled to a summary judgment if he establishes, as a matter of law, that at least one element of plaintiff's cause of action does not exist. See Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975).
CONVERSION AND THE TEXAS UCC
In its first three points of error,[3] Miller contends that the trial court erred in granting the banks' motions for summary judgment for these reasons:
(1) Miller had an ownership interest in the check because Bullock's issued the check by placing the check in the United States mail and because Miller is the named payee and owner;
*660 (2) Miller is not required to have possession of the check under Texas law; and
(3) the banks are liable to Miller under the common-law theory of conversion.
The thrust of Miller's argument under its three points of error focuses upon conversion, both statutory and common-law.
A. Statutory Conversion
The first conversion issue presented is whether a payee who never obtained possession of a negotiable instrument may maintain a cause of action under section 3.419 of the Texas UCC, which reads:
(a) An instrument is converted when
(1) a drawee to whom it is delivered for acceptance refuses to return it on demand; or
(2) any person to whom it is delivered for payment refuses on demand either to pay or to return it; or
(3) it is paid on a forged indorsement.
(b) In an action against a drawee under Subsection (a) the measure of the drawee's liability is the face amount of the instrument. In any other action under Subsection (a) the measure of liability is presumed to be the face amount of the instrument.
(c) Subject to the provisions of this title concerning restrictive indorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands.
(d) An intermediary bank or payor bank which is not a depositary bank is not liable in conversion solely by reason of the fact that proceeds of an item indorsed restrictively (Sections 3.205 and 3.206) are not paid or applied consistently with the restrictive indorsement of an indorser other than its immediate transferor.[4]
For the reasons that follow, we conclude that without possession, actual or constructive, Miller cannot be a holder as required by the Texas UCC and, therefore, cannot maintain a conversion cause of action.
Essential to Miller's cause of action for conversion is its status as a holder. A holder is defined as one in possession of an instrument drawn, issued or indorsed to the party or to its order.[5] The pertinent code provisions regarding issuance, delivery, and status of a holder are all predicated on the rights of a holder, and one cannot be a holder without possession. See Rex Smith Propane, Inc. v. National Bank of Commerce, 372 F. Supp. 499, 500 (N.D.Tex.1974) (applying Texas law). In Rex Smith, summary judgment was granted in favor of the defendant bank because the plaintiff/payee never had possession of the check. Id. We conclude that absent holder status, Miller had no rights in the check or its proceeds and may not maintain a conversion action against the banks under section 3.419.
Miller is not a holder because: (1) it did not have possession of the check; and (2) the check was not "issued" to Miller. "Issue" means the delivery of the check to a holder.[6] "Delivery" is defined as a voluntary transfer of possession. TEX.BUS. & COM.CODE ANN. § 1.201(14) (Vernon 1994). The undisputed summary judgment evidence establishes that Miller did not have actual possession of the check. Further, Miller never *661 obtained constructive possession of the check. Constructive possession results in two instances: (1) when a check was delivered to a copayee; and (2) when the check was actually delivered to an agent of the payee. See Benchmark Bank v. State Farm Lloyds, 893 S.W.2d 649, 651 (Tex.App.Dallas 1994, no writ); see also Lincoln Nat'l Bank & Trust Co. v. Bank of Commerce, 764 F.2d 392, 398 (5th Cir.1985) (applying Louisiana UCC which was substantially the same as the Texas UCC). In both situations, a payee is deemed to be in constructive possession of the instrument and therefore entitled to sue on said instrument. Neither of these situations applies here. The check had no copayee and was not delivered to any agent of Miller. Therefore, the lack of the instrument is fatal to Miller's claims because absent possession, actual or constructive, Miller may not become a holder. See Rex Smith, 372 F.Supp. at 500.
Nevertheless, Miller advances three propositions to support its conversion cause of action. First, Miller argues that it had a right to possession once the check was deposited into the United States mail. Based upon this "right to possession," Miller contends that it had certain ownership rights to the check and could, therefore, enforce payment of the check. Miller cites no authority for its "right to possession" proposition.
Second, Miller relies on Interfirst Bank v. Pioneer Concrete, 761 S.W.2d 857 (Tex. App.Dallas 1988, no writ), to support its contention that a payee is the true owner of a check and can sue to enforce payment of the check notwithstanding the payee's lack of status as a holder. In Pioneer Concrete, the plaintiff was a copayee on the check. Id. at 857-58. Thus, the plaintiff (copayee) obtained constructive possession of the check as required by the code. See, e.g., Benchmark, 893 S.W.2d at 651 (possession by one payee is constructive possession by the other).
Third, Miller attempts to distinguish Rex Smith. In Rex Smith, Noble Petroleum directed the bank to issue a check payable to the plaintiff. The cashier's check was typed up, signed by the bank officer, and a debit slip was drawn on Noble's account. That same day, Noble was placed into involuntary bankruptcy. The bank reversed the transaction and canceled the cashier's check. The cashier's check remained on the bank officer's desk and did not leave the bank's possession. Rex Smith, 372 F.Supp. at 500. The court granted the bank's motion for summary judgment because the plaintiff never had possession of the check and was, therefore, not a holder as required by the code. Id. The court, applying Texas law, noted that the UCC was based on the rights of a holder. Id. More importantly, the court found that a check does not operate as an assignment of funds and that a negotiable instrument is not valid until delivered. Id.
Miller would have this Court believe that the reasoning of Rex Smith is inapplicable to this case because the check in Rex Smith remained on the bank officer's desk. Regardless of where the check was in Rex Smith, the plaintiff in Rex Smith and Miller have the same problemneither received possession of the negotiable instrument at issue. Bullock's inadvertently mailing the check to Fossil does not establish delivery to Miller because there was no "voluntary transfer" of possession. Further, Miller's argument that being named payee gave it ownership of the check ignores the fact that at any time prior to delivery, Bullock's could have destroyed the check, decided not to pay Miller, or placed a stop payment on the check even after it was mailed. Miller's reasoning also overlooks the negotiation requirement for negotiable instruments. See id. We conclude that Rex Smith applies to this case and establishes that Miller had no ownership interest in the check because it was not "delivered."
It follows, and we conclude, that a negotiable instrument is the property of the holder under the code, and the code gives the right to enforce payment on an instrument to a holder. Indeed, we note that the legislature recently amended the code to expressly state "an action for conversion of an instrument may not be brought by ... a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or co-payee." See TEX.BUS. & COM.CODE ANN. § 3.420 (Vernon Supp.1996). This amendment simply resolves the confusion, *662 if any, regarding a payee's right of action absent its status as a holder and confirms our conclusion that Miller had to be a holder in order to maintain its conversion claim. See id. cmt. 1. We conclude that a payee who never obtained possession of a negotiable instrument may not maintain a cause of action for conversion under section 3.419 of the Texas Business and Commerce Code.[7]
B. Common-Law Conversion
Next, we consider whether Miller may maintain a common-law cause of action for conversion. The banks argue that section 3.419 displaced any common-law conversion claim that might arise under these facts. We agree. Not all common-law claims are displaced by the Texas UCC. The statute provides that "[u]nless displaced by the particular provisions of this title, the principles of law and equity ... shall supplement its provisions." TEX.BUS. & COM.CODE ANN. § 1.103 (Vernon 1994). However, commonlaw claims may only exist to the extent they do not conflict with code provisions. See Bryan v. Citizens Nat'l Bank, 628 S.W.2d 761, 764 (Tex.1982); Signal Oil & Gas Co. v. Universal Oil Prods., 572 S.W.2d 320, 330 (Tex.1978).
To prevail on a common-law claim for conversion, a plaintiff must prove it: (1) was the owner of the property; (2) had legal possession of the property; or (3) was entitled to possession of the property. Whitaker v. Bank of El Paso, 850 S.W.2d 757, 760 (Tex.App.El Paso 1993, no writ). We have already concluded that section 3.419 required that Miller be a holder of the check, and Miller could not be a holder without possession. See Rex Smith, 372 F.Supp. at 500; see also Friddell v. Greathouse, 230 S.W.2d 579, 580 (Tex.Civ.App.Dallas 1950, writ dism'd) (payee must be in possession to maintain suit on check). To allow a commonlaw conversion claim absent holder status would conflict with section 3.419. Therefore, we conclude that to the extent a common-law conversion claim could be maintained by Miller absent its status as a holder, such a right of action has been displaced by section 3.419.
For all of the above reasons, we conclude that: (1) Miller had no ownership interest in the check merely because Bullock's placed the check in the United States mail and because Miller was the named payee; (2) Miller was required to have possession of the check, either actual or constructive, to maintain an action for conversion under section 3.419; and (3) the banks are not liable to Miller under the common-law theory of conversion because such a cause of action, under these facts, was displaced by section 3.419. The trial court did not err in granting the banks' motions for summary judgment on Miller's conversion claims. We overrule Miller's first three points of error.
MONEY HAD AND RECEIVED
In its first and fourth points of error, Miller contends that the trial court erred as a matter of law in granting the banks' motions for summary judgment because Miller had the right to recover the funds from the banks based upon an action for money had and received. To maintain an action for money had and received, Miller had to establish that the banks held money which in equity and good conscience belonged to Miller. Staats v. Miller, 150 Tex. 581, 584, 243 S.W.2d 686, 687 (1951); Greer v. White Oak State Bank, 673 S.W.2d 326, 329 (Tex.App.Texarkana 1984, no writ). Essential to Miller's claim was that it had ownership in the proceeds of the check. See American Petrofina Co. v. Panhandle Petroleum Prod., Inc., 646 S.W.2d 590, 592 (Tex. App.Amarillo 1983, no writ). Money had and received is an equitable doctrine applied to prevent unjust enrichment.
Miller contends that the banks still hold money belonging to Miller because by paying the wrong party, they essentially paid their own funds to Fossil and are deemed to be presently holding the funds which came out of Bullock's account and rightfully belong to *663 Miller. We disagree. The check proceeds were paid to Fossil, which repaid the funds to Bullock's. Bullock's, the original payor of the funds, is now in possession of the check proceeds. The fact that a check was made out to Miller did not operate as an assignment of those funds to Miller absent delivery. See Rex Smith, 372 F.Supp. at 500. Because Miller was not a holder, it had no ownership interest in the check proceeds and could not maintain an action for money had and received. See American Petrofina Co., 646 S.W.2d at 592. We conclude the trial court properly granted summary judgment on Miller's claim for money had and received. We overrule Miller's first and fourth points of error.
NEGLIGENCE AND BREACH OF FIDUCIARY DUTY
In its first, fifth, and sixth points of error, Miller contends that the trial court erred in granting the banks' motions for summary judgment because the banks are liable to Miller under theories of (a) negligence and (b) breach of fiduciary duty, and because Texas courts have not held that section 3.419 abrogates these common-law theories of recovery. Assuming, without deciding, that the two common-law theories were not displaced by the code, we address negligence and breach of fiduciary duty separately and as follows.
Breach of Fiduciary Duty
Fiduciary relationships arise when a party occupies a position of confidence toward another. See Blue Bell, Inc. v. Peat, Marwick, Mitchell & Co., 715 S.W.2d 408, 416 (Tex.App.Dallas 1986, writ ref'd n.r.e.) (op. on reh'g). A fiduciary relationship arises as a matter of law out of certain formal relationships, such as attorney-client, partners, and joint venturers. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex.1962); see also Blue Bell, Inc., 715 S.W.2d at 416. Fiduciary relationships "may arise outside these usual situations when the dealings between the parties have continued for such a period of time that one party is justified in relying on the other to act in [its] best interest." Blue Bell, Inc., 715 S.W.2d at 416. Although the existence of a confidential relationship can be a question of fact, where there is no evidence to establish the relationship, it is a question of law. See Crim Truck & Tractor Co. v. Navistar, 823 S.W.2d 591, 594 (Tex.1992).
Miller was not a customer of Bank One or Citibank, nor did it have any relationship with either bank. Miller presented no summary judgment evidence, and no case authority, to remotely suggest the existence of a fiduciary relationship between it and either bank. Because Miller failed to produce any evidence establishing a fiduciary relationship with either bank, we conclude that as a matter of law, Miller had no fiduciary relationship with either bank. The trial court did not err in granting the banks' motions for summary judgment on Miller's breach of fiduciary duty claim. We overrule Miller's first and fifth points of error.
Negligence
Miller also argued that the banks were liable to it under a negligence theory. To maintain its negligence action, Miller had to first establish some duty owed to it by the banks. Whether a duty exists is a question of law for the court. Bird v. W.C.W., 868 S.W.2d 767, 769 (Tex.1994). This determination is based on the facts surrounding the occurrence in question. Oldaker v. Lock Constr. Co., 528 S.W.2d 71, 77 (Tex.Civ. App.Amarillo 1975, writ ref'd n.r.e.).
Miller relies on Continental State Bank v. Miles General Contractors, 661 S.W.2d 770 (Tex.App.Fort Worth 1983, no writ), to support its claim. In Continental State Bank, the plaintiff, a contracting company, had a contract with the bank to make roofing repairs. Id. at 772. The bank issued two checks against the contract to an employee of the contracting company. The checks were payable to the contracting company. The bank then cashed the checks on the employee's unauthorized endorsement. Id. The Fort Worth court concluded the evidence was sufficient to support the finding that the bank was negligent in cashing the check on the unauthorized endorsement. Id. at 774-75.
*664 We do not find Continental State Bank to be applicable in the present case. We have already concluded that Miller had no ownership interest or rights in the check because it was not a holder. Miller's lack of holder status eviscerates any claim it may or could have had on the instrument. Further, Miller was not a customer of either bank, nor did it have a relationship with either bank. Miller failed to produce any evidence establishing a legal duty owed to Miller by the banks. Consequently, as a matter of law, Miller's negligence action must fail. The trial court did not err in granting the banks' motions for summary judgment on Miller's negligence claim. We overrule Miller's first and sixth points of error.
THE EXISTENCE OF FACT ISSUES
In its points of error seven through ten, Miller contends that the trial court erred in granting the banks' motions for summary judgment because of the existence of genuine issues as to material facts and because:
(1) Miller's common-law theories of negligence, gross negligence, conversion, breach of fiduciary duty, and action for money had and received create genuine issues as to material facts;
(2) a genuine issue of material fact existed as to whether the banks' negligent payment of the funds to the wrong party was the proximate cause of Miller's damages; and
(3) a genuine issue of material fact existed as to whether Bank One acted in a commercially reasonable manner in paying the check based on an unauthorized endorsement.
A close reading of Miller's argument under these points identifies only two asserted genuine issues of material facts: first, whether the banks' payment of the funds to Fossil was the proximate cause of Miller's damages; and second, whether Bank One acted in a commercially reasonable manner in paying the check based on an unauthorized endorsement. Proximate cause was never reached as Miller's claims were defeated based upon its inability to prove other threshold elements of its claims. The reasonable commercial standards defense in order to avoid liability for conversion was never reached because Miller failed to state a cause of action for conversion. Because we have held that Miller's claims against the banks fail as a matter of law, we overrule Miller's points of error seven through ten.
Affirmed.
NOTES
[1] The Honorable Warren Whitham, Justice, Court of Appeals, Fifth District of Texas at Dallas, Retired, sitting by assignment.
[2] Miller mentions these "bankruptcy facts" in the summary of facts in its brief. Neither party thereafter refers to them. We do not consider these "bankruptcy facts" in our disposition of this appeal.
[3] Miller's first point of error is a global challenge to the trial court's granting of the summary judgment. Miller briefs this point with its more specific challenges. We will address point of error one with each of the specific challenges.
[4] Act of May 25, 1967, 60th Leg., R.S., ch. 785, § 1, 1967 Tex.Gen.Laws 2343, 2429, amended by Act of May 28, 1995, 74th Leg., R.S., ch. 921, § 1, 1995 Tex.Gen.Laws 4582, 4603 (current version at TEX.BUS. & COM.CODE ANN. § 3.420 (Vernon Supp.1996) (Texas UCC)). For purposes of this opinion, we will refer to this as section 3.419.
[5] Act of May 29, 1983, 68th Leg., R.S., ch. 442, § 12, 1983 Tex.Gen.Laws 2575, 2576, amended by Act of May 28, 1995, 74th Leg., R.S., ch. 921, § 2, 1995 Tex.Gen.Laws 4626, 4626 (current version at TEX.BUS. & COM.CODE ANN. § 1.201(20) (Vernon Supp.1996)).
[6] Act of May 25, 1967, 60th Leg., R.S., ch. 785, § 1, 1967 Tex.Gen.Laws 2343, 2408, amended by Act of May 24, 1983, 68th Leg., R.S., ch. 290, § 3, 1983 Tex.Gen.Laws 1530, 1531, amended by Act of May 28, 1995, 74th Leg., R.S., ch. 921, § 1, 1995 Tex.Gen.Laws 4582, 4584 (current version at TEX.BUS. & COM.CODE ANN. § 3.105(a) (Vernon Supp.1996)).
[7] We note the language in Stone v. First City Bank of Plano, N.A., 794 S.W.2d 537, 542 (Tex. App.Dallas 1990, writ denied), which states: "Generally, the fact that the draft in question did not reach the hands of the payee has been held to be immaterial." However, Stone involved a copayee situation, which constituted constructive possession of the check by the aggrieved party. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2310311/ | 187 F. Supp. 2d 1184 (2001)
ORACLE CORPORATION, a Delaware corporation, Plaintiff,
v.
Pier C. FALOTTI, an individual, Defendant.
No. C 00-02345 WHA.
United States District Court, N.D. California.
September 17, 2001.
*1185 *1186 W. Chelsea Chen, Steptoe & Johnson LLP, Los Angeles, CA, for Plaintiff.
E. Jeffrey Banchero, Banchero Law Firm LLP, San Francisco, CA, Richard A. Johnston, Jonathan D. Rosenfeld, Marc N. Henschke, Hale & Dorr LLP, Boston, MA, for Defendant.
ORDER GRANTING PLAINTIFF ORACLE CORPORATION'S MOTION FOR PARTIAL SUMMARY JUDGMENT; DENYING DEFENDANT PIER C. FALOTTI'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT
ALSUP, District Judge.
INTRODUCTION
In this employment case involving both Swiss and California law, this order GRANTS plaintiff's motion for partial summary judgment and DENIES defendant's cross-motion for partial summary judgment.
STATEMENT
Plaintiff Oracle Corporation seeks a declaratory judgment that it does not owe any unvested stock options to defendant Pier Carlo Falotti, a former high-level executive, who Oracle terminated. Mr. Falotti claims that he is entitled to unvested stock options (or their value) for breach of his employment contract or Oracle's stock-option plan. Both parties have filed cross-motions for partial summary judgment on the issue of entitlement to stock options, although Mr. Falotti seeks only to establish his right to options vesting no later than September of 2000, three months after Oracle told him he was terminated. Oracle also seeks summary judgment on Mr. Falotti's oral-contract and promissory-estoppel counterclaims under California law.
In 1996, Mr. Falotti was hired as Senior Vice President of EMEA, an unincorporated business division of Oracle Corporation, encompassing Oracle's European, Middle Eastern and African operations. Subsequently, he was promoted to Executive Vice President of EMEA and made a member of Oracle's Executive Committee. At the outset of his employment, he and Oracle entered into the contracts that provide the basis for this dispute: an employment contract governed by Swiss law, and a stock-option agreement controlled by California law.
Oracle notified Mr. Falotti of his termination on May 31, 2000. Subsequently, the committee that administered Oracle's stock-option plan determined that Mr. Falotti was not entitled to any stock options vesting after that date. In this action, Mr. Falotti argues that he was entitled to stock options vesting between June and September of 2000 (or their value) for two main reasons. First, he contends that Oracle's stock-option committee abused its discretion by determining that he was terminated on May 31, 2000, when under Swiss law, he should have been considered to be employed by Oracle until September 30. Second, *1187 he maintains that he was entitled to the value of the stock options vesting between June and September of 2000 as damages for the breach of his employment contract.
This order holds that Mr. Falotti is not entitled either to the unvested stock options or to their value. Mr. Falotti agreed up front as to what stock options he would receive upon termination before vesting. That agreement is dispositive to his stock-option claim. As an independent and alternative ground, the various stock-option grants conferred on Oracle's stock-option committee the authority to determine when Mr. Falotti ceased to be a "full-time employee." The record does not show that the committee abused its discretion in ruling against Mr. Falotti. Other points of contention will be discussed below.
The Employment Contract
Mr. Falotti began to negotiate his employment contract with Oracle in April of 1996 (Falotti Decl., dated Sept. 21, 2000, ¶ 6). On May 21, 1996, Oracle sent him an offer letter, which he declined to accept (ibid.). Oracle sent him a new offer letter on July 2, 1996, which he accepted and signed on July 10, 1996, a key exhibit herein.
The letter agreement gave Mr. Falotti the position of Senior Vice President of Europe, Middle East and Africa. It stated that Mr. Falotti would receive a base salary with incentives, and that (Henschke Decl., Exh. 1, at 2):
Following your acceptance of this offer by Oracle, we will agree on an employment contract that will be subject to Swiss law. The terms of the contract will include: (1) the start date of your employment, (2) your accrual of vacation at the rate of twenty days per year, (3) the provision by Oracle to you of benefits (including pension) tailored to your needs at a cost not to exceed 20% of your on-target earnings, and (4) during your employment, the leasing for your use of a car equivalent to the BMW 750iL.
The letter agreement also discussed stock options. It stated: "We will submit to the Board of Directors on July 15, 1996, a request to approve a grant to you of an option to purchase 600,000 shares.... The option will be issued under a written agreement and will be subject to qualification under all applicable securities regulations" (id. at 1).
The letter agreement further provided (id. at 1-2):
If you remain continuously employed by Oracle, you will be eligible to exercise your right to purchase the 600,000 option shares granted herein according to the following vesting schedule:
at six months from your starting date: 25%
at 18 months from your starting date: 50%
at 36 months from your starting date: 75%
at 48 months from your starting date: 100%
Stock option grants shall be provided from time to time as the board approves in its discretion commensurate with its evaluation of your contribution and responsibilities an the financial health of the company.
The letter also promised the following severance package, which had not been included in Oracle's original offer letter (id. at 2) (emphasis added):[1]
Further, the contract shall provide that if Oracle terminates your employment without cause Oracle will provide you total severance as follows: (1) payment of one year's on-target earnings as set *1188 forth herein ($1,000,000), payable in twelve equal monthly installments, (2) if such options have not already vested, accelerated vesting of the first 50% of the stock option grant as set forth herein, and (3) provision to you of health care coverage and pension payments for one year from your termination date.
As stated, Mr. Falotti countersigned this offer letter on July 10, 1996. As will be shown, this express provision is important in resolving this case.
In addition to the letter agreement, three other documents comprised Mr. Falotti's employment contract. The second document comprising his employment contract was a letter from Lawrence Ellison, Chairman and Chief Executive Officer of Oracle, and Raymond Lane, former President of Oracle, dated August 29, 1996, and signed by Mr. Falotti on September 10, 1996. It provided: "Your employment will be governed by the laws of Switzerland" (Henschke Decl., Exh. 2, at 1). Under "remuneration," it stated Mr. Falotti's annual base and on-target earnings and that an attached employment agreement would govern the terms of his employment (ibid.). Attached to the letter was the third document comprising his employment contract, the employment agreement. It was also signed by Mr. Falotti on September 10, 1996, and related primarily to trade secrets.
The fourth document comprising Mr. Falotti's employment contract was a letter from Mr. Lane, dated September 9, 1996, and signed by Mr. Falotti on September 10, 1996. It stated: "The purpose of this letter is to clarify how the various letters and agreements relate to one another" (Henschke Decl., Exh. 4, at 1). It explained: "the terms of your remuneration outside Switzerland shall be in accordance with the letter dated 2nd July, 1996, from myself and signed by you on 10th July 1996, (`the Letter')" (ibid.). It further provided (id. at 2):
In the event of any dispute between the Swiss law agreement and the Letter, the terms of the Letter shall prevail.... Furthermore, if Oracle terminates the Employee Agreement without cause the terms of the Letter shall prevail.
You further agree that any notice payable for termination without cause payable under your Swiss Employment Agreement shall be waived providing the payment due under the Letter shall have been paid.
The Stock-Option Agreement
Seven documents further addressed stock options. The first was entitled, "Oracle Corporation Non-Qualified Stock Option Grant Agreement," dated September 13, 1996 (Henschke Decl., Exh. 9). It provided, as promised in the offer letter, that Mr. Falotti was to receive 600,000 stock options, broken into four tranches of 150,000 shares each. The first tranche was scheduled to vest on March 13, 1997. The last tranche, the one at issue in this action, was scheduled to vest on September 13, 2000.
Subsequently, Oracle and Mr. Falotti entered into three similar grant agreements for smaller lots of options. The first, dated July 11, 1997, granted Mr. Falotti an additional 25,000 stock options due to vest on July 11 every year thereafter, up until the year 2001. The second, dated July 10, 1998, granted Mr. Falotti an additional 50,000 stock options due to vest on July 10 every year thereafter, up until the year 2002. The third, dated November 20, 1998, granted Mr. Falotti an additional 50,000 stock options due to vest on November 20 every year thereafter, up until the year 2002.[2] All four grant agreements *1189 were printed on a standard form, which provided that they were "subject to the terms and conditions attached hereto," and "subject to all the terms and conditions of the Company's 1991 Long-Term Equity Incentive Plan as amended to date" (ibid.). All four grant agreements were signed by Mr. Falotti and Bruce Lange, Oracle's Vice President and Corporate Treasurer.
The fifth document, one of the two documents incorporated by reference into the grant agreements signed by Mr. Falotti, was entitled "Oracle 1991 Long-Term Equity Incentive Plan" (Henschke Decl., Exh. 6). It contained questions and answers about the stock-option plan, and contained definitions of some of the terms. It explained that a compensation committee formed of members of Oracle's board of directors would administer the plan (id. at F0027). Its description of the stock-option plan was the same as the terms and conditions, which were attached to the grant agreements.
The sixth document, entitled "1991 Long-Term Equity Incentive Plan, Terms and Conditions" was appended to the grant agreements signed by Mr. Falotti and incorporated by reference (Henschke Decl., Exh. 7). It set forth the terms and conditions of the stock-option plan. Section 3 was entitled "Termination of Option." It provided (id. at 1):
Except as provided below in this Section, this Option shall terminate and may not be exercised if Optionee ceases to be employed by the Company or any Parent or Subsidiary or Affiliate of the Company. Optionee shall be considered to be employed by the Company for all purposes under this Section 3 if Optionee is an officer, director or full-time employee of the Company or any Parent, Subsidiary or Affiliate of the Company or if the Board determines that the Optionee is rendering substantial services as a part-time employee, consultant, contractor or advisor to the Company or any Parent, Subsidiary or Affiliate of the Company. The Board shall have discretion to determine whether Optionee has ceased to be employed by the Company and the effective date on which such employment terminated.
It further stated (id. at 3):
Any dispute regarding the interpretation of this Grant shall be submitted by Optionee or the Company forthwith to the Board or the committee thereof that administers the Plan, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Board or committee shall be final and binding on the Company and on Optionee.
The terms and conditions also contained an integration clause, which read (id. at 4): "The Plan and Notice and Exercise Agreement attached hereto are incorporated herein by reference. This Grant, the Plan and the Notice and Agreement constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof."
The seventh document was a form entitled Oracle Corporation Stock Option Exercise Notice and Agreement. Mr. Falotti signed this agreement every time he exercised stock options, most recently on April 5, 2000. The form contained an integration clause and choice-of-law provision, which read: "The Plan and Grant are incorporated herein by reference; this Agreement, the Plan and the Grant constitute my entire agreement with the Company and supersede all prior undertaking and agreements between us with respect to the subject matter hereof; this Agreement is governed by California law except *1190 for that body of law that pertains to conflict of laws" (Cooper Decl., Exh. 9, at 3).
In sum, Mr. Falotti signed grant agreements in September of 1997, July of 1997, July of 1998, and November of 1998. The grant agreements incorporated by reference two separate documents: the 1991 Long-Term Equity Plan, and the 1991 Long-Term Equity Plan Terms and Conditions. Every time Mr. Falotti exercised a stock option, he signed an Exercise and Notice Agreement, which also incorporated by reference the grant agreement, the 1991 Long-Term Equity Plan, and the 1991 Long-Term Equity Plan Terms and Conditions.
Mr. Falotti's Departure
In January of 2000, Mr. Falotti and Mr. Ellison began discussing various plans to have Sergio Giacoletto assume many or all of Mr. Falotti's duties, with Mr. Falotti assisting or training him (Ellison Dep. 154). According to Mr. Falotti, although compensation was not discussed, the two reached an oral agreement, whereby Oracle guaranteed him full-time employment from June 1, 2000, through June 1, 2001 (Falotti Dep. 197). According to Mr. Lane, Mr. Falotti's former boss (Lane Dep. 76-77):
The plan I had developed with Pier Carlo was to work halfway through the new fiscal year [May 31, 2000 to May 31, 2001], or work half time for the whole year, but that we would name Sergio Giacoletto as the new head of EMEA, and that Pier Carlo would be there to mentor him and to do customer activities and things like that.... I didn't think we should pay somebody full time at this rate ... So I told Larry my feelings, that I though he was wrong in this decision, and he said, "Well, that's what we've agreed to." So I called Pier Carlo back and said, "It's a done deal."
Mr. Falotti states that Mr. Ellison subsequently affirmed their agreement in the beginning of April, when he asked Mr. Ellison about it (Falotti Dep. 206-09).
Mr. Ellison, on the other hand, maintains that he was "intentionally ambiguous" with Mr. Falotti and denies reaching any definitive agreement with him (Ellison Dep. 155, 162). According to Mr. Ellison, by January of 2000, he had decided to terminate Mr. Falotti as soon as this could be done without hurting business in Europe (id. at 152-54). As of January, however, he had not ruled out the possibility of retaining Mr. Falotti in a different role than Executive Vice President, EMEA, to create a smooth transition in management. In his deposition, Mr. Ellison testified, "I didn't know if we needed Pier Carlo at that point for a year of transition or not. So I was keeping my options open" (id. at 154). At some point in time, Oracle's attorneys explained that Mr. Falotti could not be given a consulting job, because he would continue to vest in tens of millions of dollars worth of stock options every year (id. at 244-45). Thereafter, Oracle began contemplating Mr. Falotti's termination. Several termination letters were drafted, but none was ever sent.
On May 30, 2000, Mr. Falotti sent an email to Mr. Lane, stating: "Here is the announcement I will send out on June 1" (Moore Decl., Exh. H, at 1). The announcement stated that Mr. Falotti had decided to transfer all of his operational responsibilities to Mr. Giacoletto, so that Mr. Falotti could devote all his time to activities such as "helping the Account Management to reach higher levels of decision-makers in our customer base" and "strengthening management contacts with our partners" (id. at 1-2).
On the same day, Mr. Falotti visited his doctor, Raymond Hadorn, whom he had not seen for almost three years. The appointment was made by his wife, who had contacted Dr. Hadorn the day before, stating *1191 that Mr. Falotti was depressed and needed an appointment quickly. According to Dr. Hadorn, Mr. Falotti slumped in a chair and cried during the visit. Dr. Hadorn diagnosed Mr. Falotti with deep depression, resulting in a total incapacity to work. He gave Mr. Falotti a certificate stating this diagnosis. After leaving the doctor, Mr. Falotti returned to Oracle and worked until 7:30 in the evening. That night, he sent business emails from his home until 10:51 p.m.
Under Swiss law, any attempt to terminate an employee who cannot work due to illness is "null and void." Such incapacity is commonly proven by a medical certificate similar to the one provided by Dr. Hadorn.
Mr. Falotti worked on the morning of May 31, 2000. Later in the day, he returned a phone call from Vance Kearney, Vice President of Human Resources, EMEA. Mr. Kearney told Mr. Falotti that he was being terminated immediately (Kearney Dep. 224). According to Mr. Kearney, Mr. Falotti refused an offer of stock options due to vest in June and July in exchange for his retirement, stating "that's not acceptable, you know, I'll discuss this with Larry" (ibid.). Mr. Falotti then called his attorney and subsequently Mr. Ellison. According to Mr. Falotti, Mr. Ellison told him he was being terminated because he was "too expensive for his job" (Falotti Dep. 269). Mr. Ellison refused to honor the prior arrangement to retain Mr. Falotti through the fiscal year of 2001 and would not discuss the matter further, Mr. Falotti states. Mr. Ellison, on the other hand, states that in response to Mr. Ellison's offer of stock options due to vest in June and July (775,000 shares), Mr. Falotti responded that he wanted the stock options due to vest in September (1,350,000 shares) as well as those earlier. According to Mr. Ellison, when he refused the counterproposal, Mr. Falotti said: "You can't terminate me because I'm sick .... I've got a headache.... You don't work in Switzerland as long as I have without being familiar with Swiss law" (Ellison Dep. 213).
As of May 31, Mr. Falotti was relieved of his duties and performed no active work for Oracle. On May 31, Oracle changed his password and began clearing out his office (Boskin Dep. 154). On June 5, 2000, Mr. Falotti sent Dr. Hadorn's note to Oracle via certified mail. Oracle responded on June 22 with two letters. One stated that Mr. Falotti had been terminated as of May 31. The other read: "In case you persist in alleging that you are sick, you will be invited for a medical examination in due course" (Henschke Decl., Exh. 41). The same day, Mr. Falotti was admitted to La Ligniere hospital. La Ligniere released Mr. Falotti on July 5. Two days later, Mr. Falotti visited Dr. Hadorn, who declared him once again fit to work as of July 10. On July 7, Mr. Falotti's attorney wrote Oracle stating that Mr. Falotti would submit to a medical examination by a mutually-agreeable doctor, but that Mr. Falotti would be on vacation until August 4. No examination was ever performed.
The Determination by the Stock-Option Committee
The committee that administered Oracle's stock-option plan convened a special meeting by telephone on June 30 to determine whether Mr. Falotti was entitled to any stock options vesting after May 31. The committee was comprised of two of Oracle's outside directors: Michael Boskin and Donald Lucas. Also attending were Oracle's general counsel, Daniel Cooperman, and outside counsel from the law firm representing Oracle in the present litigation, Theodore Rhodes. Prior to the meeting, the committee members were provided with an information packet containing: (i) the offer-letter agreement *1192 signed by Mr. Falotti on July 10, 1996; (ii) the letter agreement dated August 29, 1996, and the attached employee agreement; (iii) the letter dated September 9, 1996, clarifying the relationship between Mr. Falotti's prior employment agreements; (iv) excerpts from the Oracle 1991 Long-Term Equity Incentive Plan; and (v) the letter dated June 22, 1996, from Oracle, stating that Mr. Falotti's termination was effective as of May 31, 2000. The minutes of the committee meeting read in part (Henschke Decl., Exh. 46):
Mr. Rhodes explained the background of the situation involving Mr. Falotti including the notice of termination, effective immediately, delivered by Mr. Ellison to Mr. Falotti on May 31, 2000, and the subsequent note produced by Mr. Falotti from his doctor indicating that Mr. Falotti was unable to perform his duties as of May 30, one day preceding the date notice was given by Mr. Ellison. Mr. Rhodes explained that under Swiss law notice of termination may not be effective if given while the employee is unable to work. Mr. Rhodes suggested to the Committee that it needed to interpret whether Mr. Falotti ceased to be employed for purposes of the Plan regardless whether the notice provided was effective under Swiss law. He pointed out that the purpose of the Plan, as set forth in Section 1 of the Plan, is to provide an incentive to eligible employees whose present and potential contributions are important to the success of the Company and to enable the Company to continue to enlist and retain in its employ the best available talent....
Mr. Lucas asked whether there was any additional information that they should know. Mr. Rhodes indicated that based on his investigation, there has never been another interpretation of this provision, so this is an issue of first impression.
The Committee, after deliberation, unanimously decided that for purposes of the Plan, Mr. Falotti ceased his employment with Oracle on May 31, 2000.
* * * * * *
On July 3, 2000, Oracle filed suit herein for a declaration that it does not owe Mr. Falotti any more stock options beyond those vesting on or before May 31, 2000. On September 1, 2000, Mr. Falotti filed suit against Oracle in Swiss labor court, still pending. He also filed counterclaims herein under Swiss and California law. After two motions to dismiss, his remaining counterclaims under California law are for: (i) a declaration that he is entitled to stock options; (ii) breach of contract; and (iii) promissory estoppel. He also contends that Oracle has violated the Swiss Code of Obligations Article 335c, which entitles an employee to a two-month notice period before his or her termination becomes effective, and the Swiss Code of Obligations Article 336c, which prohibits terminating an employee who cannot work due to illness.
ANALYSIS
Summary judgment must be granted insofar as no genuine issue of material fact exists and no reasonable trier of fact could find other than for the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). A party may seek summary judgment on "all or any part" of an action. Fed.R.Civ.P. 26(a). The moving party has the initial burden of production. It may carry this burden in either of two ways: it may offer evidence disproving an element of the plaintiff's case, or it may show the absence of any genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S. Ct. 2548. Once the moving party meets its burden, the non-moving party must "go beyond the pleadings and by [his] own affidavits, or by the *1193 depositions, answers to interrogatories and admissions on file, designate specific facts showing that there is a genuine issue for trial." Id. at 323-324, 106 S. Ct. 2548 (internal quotations omitted).
I. Severance Agreement
Mr. Falotti has raised a number of arguments regarding the interplay of Swiss law and the stock-option agreement. The dispositive contract in this action, however, is the express severance agreement Mr. Falotti negotiated. Regardless of when Mr. Falotti's termination became effective under Swiss law, he was entitled to the following total severance (Henschke Decl., Exh. 1, at 2) (emphasis added):
if Oracle terminates your employment without cause Oracle will provide you total severance as follows: (1) payment of one year's on-target earnings as set forth herein ($1,000,000), payable in twelve equal monthly installments, (2) if such options have not already vested, accelerated vesting of the first 50% of the stock option grant as set forth herein, and (3) provision to you of health care coverage and pension payments for one year from your termination date.
The letter Mr. Falotti signed on September 10, 1996, stated that to the extent that the provision above conflicted with his employment contract, the provision above controlled and that "if Oracle terminates the Employee Agreement without cause, the terms of the [July 2] letter shall prevail" (Henschke Decl., Exh. 4, at 1-2). Mr. Falotti was terminated without cause. From the plain language of his severance contract, which was specifically negotiated by him, he was entitled to the severance stated above. Since he had already received 50% of the stock-option grant discussed in the contract, he was entitled to no other stock options as total severance and no other accelerated vesting. This provision is dispositive for all the stock options at issue. By its breadth, this provision applied to any and all severance due to Mr. Falotti if he were terminated without cause. Accordingly, this order holds that Mr. Falotti was not entitled to any stock options vesting after May 31, 2000. As a separate and independent ground for this conclusion, this order holds that neither the stock-option agreement, nor his employment contract entitled Mr. Falotti to any stock options vesting after May 31 or to their value, as follows.
II. The Stock-Option Agreement
Stock-option contracts are interpreted under the normal rules of contract interpretation, looking to the specific language of the contract, the facts of the case, and the general contract-interpretation principles of the applicable law. Scribner v. Worldcom, Inc., 249 F.3d 902, 907 (9th Cir.2001). Entitlement to stock options, the parties argue, turns on the interpretation of the italicized language from the terms and conditions of the stock-option plan:
Except as provided below in this Section, this Option shall terminate and may not be exercised if Optionee ceases to be employed by the Company or any Parent or Subsidiary or Affiliate of the Company. Optionee shall be considered to be employed by the Company for all purposes under this Section 3 if Optionee is an officer, director or full-time employee of the Company or any Parent, Subsidiary or Affiliate of the Company or if the Board determines that the Optionee is rendering substantial services as a part-time employee, consultant, contractor or advisor to the Company or any Parent, Subsidiary or Affiliate of the Company. The Board shall have discretion to determine whether Optionee has ceased to be employed by the Company and the effective date on which such employment terminated.
*1194 In one of his central contentions, Mr. Falotti argues that he should have been "considered to be employed by the Company for all purposes of" the stock-option agreement because Swiss law prohibited his termination until September 30 Specifically, Mr. Falotti's employment contract was governed by the Swiss Code of Obligations, which applied to all employment contracts in Switzerland. Two provisions of the Swiss Code of Obligations bore on when Mr. Falotti was terminated under Swiss law. First, Article 335c of the Code of Obligations provided:
The employment relationship may be terminated at the end of a month during the first year of service with a notice period of one month, in the second and up to and including the ninth year of service with a notice period of two months, and thereafter with a notice period of three months.
These periods may be altered by written agreement, standard employment contract or collective employment contract. They shall, however, be reduced to less than one month only by collective employment contract and only for the first year of service.
Second, Article 336c of the Code of Obligations stated in part:
1. [T]he employer shall not terminate the employment relationship ...
b. during the period that the employee is prevented from performing his work fully or partially by no fault of his own due to illness or accident for 30 days in the first year of service, for 90 days as of the second year until and with the fifth year of service, and for 180 days as of the sixth year of service.
2. Notice given during one of the forbidden periods in paragraph 1 shall be null and void. If the notice is given prior to the beginning of such period, however, and if the notice has not expired prior to such period, the expiration shall be suspended and shall continue only after termination of the forbidden period.
Mr. Falotti argues that because he could not have been terminated when he was ill from May 30 until July 10, his two-month notice period did not begin running until July 10, when he had recovered. Since an employee cannot be terminated until the end of a month under Swiss law, his employment did not end until September 30, he maintains. Oracle, on the other hand, contends that under California law, which expressly governed the stock-option plan, Mr. Falotti was not a "full-time employee" eligible to vest in stock options after May 31 and that the compensation committee had discretion to determine when Mr. Falotti "ceased to be employed by the company and the effective date on which such employment terminated."
As both sides acknowledge, the stock-option agreement was governed by California law. Under California law, Mr. Falotti was not a full-time employee after May 31, since he was told he was terminated, he was relieved of his duties, his password was changed, his office was cleared out, and he performed no active work at all for Oracle. Mr. Falotti, however, maintains that Oracle breached the implied covenant of good faith and fair dealing because the stock-option committee abused its discretion. "The essence of the covenant of good faith is objectively reasonable conduct." Badie v. Bank of America, 67 Cal.App.4th, 779, 796, 79 Cal. Rptr. 2d 273 (1998) (quotation omitted). It was not an abuse of discretion for the compensation committee to apply California law, since the stock-option agreement required it to do so. Nor was the committee required to consider Swiss law. The choice-of-law provision and integration clauses in the stock-option agreement evidence that the *1195 plan was intended to be self contained, to be administered under rules familiar to the members of the committee and to apply similarly to all Oracle employees. See Northrop Corp. v. Triad Int'l Mktg., S.A., 811 F.2d 1265, 1270 (9th Cir.1987) ("choice-of-law and choice-of-forum provisions in international commercial contracts are an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction, and should be enforced absent strong reasons to set them aside") (quotation omitted). The committee's decision was in keeping with the stated purpose of the stock-option plan, since Mr. Falotti had made no present or potential contributions to Oracle after May 31, and the purpose of the plan was "to provide an incentive to eligible employees ... whose present and potential contributions are important to the continued success of the Company" (Cooper Decl., Exh. 6, at 1-2).
Thus, the committee's conclusion as to when Mr. Falotti ceased to be employed for purposes of the stock-option plan is a second and dispositive basis for denying him any stock options. In opposition to this conclusion, Mr. Falotti makes a number of contentions, each of which is addressed in turn below.
a. California Authority
Mr. Falotti's first attack on the committee's discretion is that California law prevented the committee from relying on the date he was wrongfully terminated according to Swiss law for the purpose of determining when he ceased to be employed under the stock-option plan. This argument is rejected because the decision upon which he relies in inapposite.
According to Mr. Falotti, Bertero v. National General Corp., 254 Cal. App. 2d 126, 62 Cal. Rptr. 714 (1967), held that "an employer cannot rely upon a wrongful date of termination established through breach of an employment contract as the effective date of termination for purposes of depriving an employee of additional vests under a stock option agreement" (Br. 23-24). In Bertero, the plaintiff was granted two stock options as part of his employment contract. The options gave him the right to purchase stock at his strike price within seven years, as long as he was an employee. Delaying the stock purchases gave the plaintiff considerable tax benefits. The plaintiff was fired without cause in violation of his employment contract, the precise terms of which were unclear in the court's decision. The court held that the plaintiff could still exercise the options, reasoning that he would still have been an employee but for his wrongful termination.
Bertero is not on point for the simple reason that the plaintiff in Bertero had already been granted the stock options the court's decision had nothing to do with vesting. Moreover, unlike Mr. Falotti, the plaintiff in Bertero was only terminable for cause. Thus at the time of contract formation, Mr. Bertero had a reasonable expectation that he would be able to postpone exercising the options for seven years. Most significantly, Bertero did not address the situation where, as here, there was a web of contracts governed by conflicting laws from different countries, much less require the terms of an employment contract to override an express choice-of-law provision in an internationally-administered stock-option plan. Bertero does not control here. This attack is rejected.
b. Inconsistency with Past Decisions by Stock-Option Committee
The second attack made by Mr. Falotti is that the stock-option committee's decision was an abuse of discretion because it was inconsistent with the committee's past *1196 decisions. The record, however, does not bear out this assertion.
According to Mr. Boskin, one of the compensation committee members, the committee's policy, was, with infrequent exceptions, to find that an optionee ceased to be employed for the purpose of the stock-option plan when he or she ceased actively working for Oracle (Boskin Dep. 125, 127-28). This statement is supported by the record. According to Robert Cortenraad, Director of Human Resources, EMEA, Oracle Switzerland has terminated 26 employees since 1996, and only one of them, Frank Moellhoff, was allowed to vest in options during his notice period (Cortenraad Decl. ¶¶ 7, 9). According to Mr. Boskin, "we gave Frank Moellhoff, as I recall, I think an extra 30 days, maybe, for vesting, something management had negotiated and recommended to us, and we agreed to" (Boskin Dep. 121). The committee, however, denied Mr. Moellhoff's claims that his employment contract entitled him to additional vesting beyond the one month. In his deposition, Mr. Moellhoff stated that it was his understanding that it was Oracle's policy to allow employees to vest during their notice periods (Moellhoff Dep. 106). He could not, however, identify anyone who was permitted to vest in stock options during a notice period after they had been terminated (id. at 184). His testimony does not establish that the committee's decision in the present case was not in keeping with its precedent.
In support of his contention, Mr. Falotti argues that Oracle allowed the following former executives to vest during their notice periods: Look Van Den Boog (Mr. Falotti's predecessor), Alistair Crawford, Keith Taylor, and Jean Claude Sainctavit (Br.10-11). Mr. Van Den Boog, however, was allowed to vest because he negotiated a "deed of settlement" with Oracle (Henschke Decl., Exh. 27). The settlement included no negative publicity and a release of claims (id. ¶¶ 9, 13-14, 16). This compromise does not amount to a policy or a concession by Oracle that the stock-option plan allowed Mr. Van Den Boog to vest during his notice period. At most, it shows that Oracle was aware that there was a tension between its stock-option plan and European law. Mr. Kearney testified in his deposition that both Mr. Crawford and Mr. Taylor negotiated settlements with Oracle as well (Kearney Dep. 39-42), and Mr. Falotti has not offered any evidence contradicting this. Mr. Sainctavit was allowed to purchase stock options that vested during his notice period, but the record is unclear as to why (Westerdahl Dep. 278-79). That one, or even a few, executives were allowed to vest by way of a compromise of threatened claims, or out of a desire to see an amicable separation does not amount to evidence of a policy or an admission by Oracle, or an abuse of discretion by the compensation committee in this case. This attack is therefore rejected.
c. Refusal to Recognize Swiss Law
Mr. Falotti's third attack is that the compensation committee abused its discretion by ignoring Swiss law. As already stated, the stock-option plan did not require the compensation committee to apply Swiss law. If the compensation committee was entirely unaware that Swiss law may have been applicable, perhaps an abuse of discretion could be found. That was not the case, however, since the materials given to the compensation committee included Mr. Falotti's Swiss-law employment contract, and the committee members testified that they discussed the relevance of Swiss law. Mr. Boskin testified that at the compensation-committee meeting (Boskin Dep. 171):
There was some brief discussion of the relevance of Swiss law, and thenthere *1197 was a discussion of it at the meeting, but I don't recall the specific content of it. What I do recall is the bifurcation, that California law governed with respect to administration of the plan, and therefore what Swiss law may have provided for, other aspects of things, was irrelevant to our determination.
Mr. Lucas also testified that he aware that Mr. Falotti's employment contract was governed by Swiss law (Lucas Dep. 72). Nor was the committee instructed to ignore Swiss law, as Mr. Falotti alleges. Mr. Boskin testified that Mr. Cooperman, in-house counsel, "said something like it's our view that the plan is clear that California law governs" (Boskin Dep. 161), and that outside counsel advised him that "the determination should be made under California law" (id. at 203). Neither of these statements were instructions to ignore Swiss law. There is no evidence that counsel misled the committee. The evidence suggests that the committee considered, and rejected, the theory that Swiss law entitled Mr. Falotti to any stock options, based in part on advice from counsel. That was not an abuse of discretion. Accordingly, this attack is also rejected.
d. Oracle's Recognition of Right to Vest
Mr. Falotti's fourth, and last, attack is that the committee abused its discretion because Oracle recognized that employee's were entitled to vest in stock options during their notice periods. The evidence offered, however, does not alter this order's conclusion.
In addition to the previously discussed treatment of former executives, a letter sent to EMEA executives in June of 2000, Mr. Falotti contends, demonstrates that Oracle was aware that employees were entitled to vest in stock options during their notice periods. In exchange for shares of stock, the letter asked the employee to relinquish the right to "unvested stock options granted under the 1991 Long-Term Equity Incentive Plan which would have vested during the notice period" (Henschke Decl., Exh. 52). Accompanying the letter was a note from Mr. Kearney, stating: "The change is effective from September 1st so your existing rights will remain unchanged until that date and the company will not dispute any entitlement to options vesting during notice before September 1, 2000" (Henschke Decl., Exh. 26). Additionally, he points to an email from Gary Bloom to Safra Catz, Senior Vice President, Oracle, which read: "There was mention from the legal review that our stock option agreements need to be tighter around the exclusion clause. While the agreement prevents employees from insisting on continued employment for stock to vest, it does not exclude the possibility of compensation for loss of stock options should the employment contract be unlawfully terminated" (Henschke Decl., Exh. 50, at 2). And he notes that Oracle has now revised its stock-option plan to provide no entitlement to stock-options once Oracle has notified the employee of termination "regardless of whether the notice or termination is lawful or unlawful" (Henschke Decl., Exhs. 53-54). None of these communications are evidence that Oracle understood that employees were entitled to vest during their notice periods. They simply show that in the wake of this litigation and similar disputes, Oracle sought to prevent these problems from occurring.
Last, Mr. Falotti argues that an email from Mr. Ellison demonstrates that Oracle was aware of his entitlement to stock options vesting during his notice period. It read (Henschke Decl., Exh. 21):
Lets give Pier Carlo his notice no later than April 30th. We will offer him a part consulting job after he completes his two month notice period ending June 30th. There will be no more stock vesting *1198 after June 30th at the latest. Prepare the papers immediately. We can accelerate Peir [sic] Carlo's termination date to before April 30th if that is in Oracle's interest.
Larry
This email suggests that Mr. Ellison believed that Mr. Falotti would be able to vest during his notice period. Indeed, in his deposition, Mr. Ellison stated: "there was certainly a time when I was told that he was entitled to two months of vesting, and there was a time when I was told he was not entitled to two months of vesting. Different lawyers told me different things" (Ellison Dep. 201). This statement does not mean that the stock-option committee abused its discretion.
It is true that Oracle's Chairman and CEO, Mr. Ellison, testified that his lawyers gave him contradictory legal advice as to Mr. Falotti's option rights. But this ambiguity does not warrant a jury trial. The material facts are not in dispute. There is no need for fact finding by a jury. What is in dispute is the legal conclusion to draw from the record. That the legal conclusion may be debatable does not justify holding a trial on this issue. The Court has the responsibility to decide the law. Holding a trial could not change that outcome.
In sum, the stock-option agreement gave the compensation committee the discretion to determine when Mr. Falotti ceased to be a full-time employee. For the reasons stated above, the committee's decision was fully consistent with the law and the stock-option plan. The record does not support the conclusion that the committee abused its discretion.
As a way around the stock-option agreement, Mr. Falotti argues that even if he was not entitled to any unvested stock options under the stock-option plan, he should receive the value of the unvested stock options as damages for breach of his employment contract. The thrust of this argument is that the value of the unvested stock options was either consequential damages or wages. As will be discussed below, even if the express severance provision did not foreclose this theory of recovery, it would nonetheless be rejected.
III. Employment Contract
As already stated, because of his illness until July 10 and his notice period, Mr. Falotti argues that under Swiss law, he could not be terminated until September 30. For his contention that breach of his employment contract entitled him to stock options, he relies on Article 337c of the Swiss Code of Obligations, which provides in part:
If the employer dismisses the employee without notice in the absence of a valid reason, the latter shall have a claim for compensation of what he would have earned if the employment relationship had been terminated by observing the notice period or entitle the expiration of the fixed agreement period.
The problem with this theory is that is that the notice period does not entitle an employee to reinstatement. The effect of the notice period is to provide an employee severance benefits in terms of salary to ensure that the employee is not deprived of an income source during job-transition periods. Beatrice B. v. Solothurn Cantonal Pub. Unemployment Fund, at 3 (Aug. 17, 1989).[3] Oracle had the right to relieve him of his duties and to preclude him from working during his two-month notice period. According to Mr. Falotti's own expert (Henschke Decl., Exh. 12, Aubert Expert Report, at 8):
*1199 It happens often in Swiss business practices that the employer that terminates the employment contract, continues to pay the salary but releases the employee from his obligations of working during the notice period. In this case, the employee continues on the payroll of the company until the end of the notice period and continues to be covered under social insurance. The employee may accept another job that is not in competition with his employer.
According to Mr. Falotti, he was totally incapacitated from working while he was ill from May 30 until July 9. Regardless of when his termination became effective under Swiss law, after May 31, he was either incapable of performing any active work or legally precluded from doing so. As he would not have been a full-time employee providing present or future contributions to Oracle after May 31, under its stated policy and California law, the compensation committee should not have allowed him to vest after this time. The value of the stock options vesting after May 31 was thus not "what he would have earned if the employment relationship had been terminated by observing the notice period."
Mr. Falotti also contends that he was entitled to the value of the stock options because the stock options were considered wages under Swiss law. Swiss Code of Obligations Article 322 reads: "The employer shall pay the employee the wages that are agreed, or are customary, or are fixed by standard employment contract." Mr. Falotti's employment contract, however, made no mention of stock options as wages. The contract he negotiated provided that stock options would be granted under a separate agreement. It also stated that he would receive some stock options as a severance benefit, but as already noted, he has already received all the severance due under his employment agreement.
According to Mr. Falotti's expert, the Swiss definition of wages is expansive (Aubert Rebuttal Report at 6). The Code of Obligations states that the following are wages: "a contractual right to a share of profits, or sales, or in some other manner a right to the proceeds of the business" (Art. 322a); a commission (Art. 322b); and a bonus (Art. 322d). Stock options are conspicuously absent from this list. According to Mr. Falotti's expert, no Swiss court has ever held that stock options are covered by Article 322a (Aubert Dep. 118). The only Swiss decision dealing with stock options, Mr. Falotti's expert states, is Paterno v. Guyerzeller Bank (ibid.).
The Guyerzeller Bank case, however, is too thin a reed to support the proposition that stock options are always considered to be wages as a matter of Swiss law. In Guyerzeller Bank, a bank set up a shell corporation, MHC, to provide executives with a "bonus" that corresponded to a percentage of the bank's profits (Cooper Reply Decl., Exh. 6 ¶¶ B, C). Employees were issued shares of MHC every year, which they could sell back to the bank after six years. According to the contract between the bank and its employees, if an employee was terminated, the employee could sell back shares for the value of the stock, if the employee was a "good leaver" (id. ¶ D). Otherwise, the employee was required to relinquish the stock at one dollar per share. The plaintiff, Damiano Paterno, was issued shares in 1995, 1996, and 1997 (id. ¶ G). In 1997, the bank sought to restructure the terms of the stock-option contract so that employees would no longer receive certain tax benefits. Mr. Paterno did not agree to the new contract, and was terminated in October of 1997. In 1998, he sued the bank for the value of the stock he owned. The Swiss court held (id. ¶ 4(b)):
The Defendant's argument to the effect that the amounts in dispute represent a *1200 non-payable and arbitrary incentive has to be rejected. Indeed, the litigation or the case in point does not bear on unpaid cash incentives being challenged by the employer as being due, but rather on those incentives which the employer has in fact granted (as confirmed by various messagessee Defendant's items 11 and 13) and which form an integral part of the employee's salary.
This decision did not hold that all stock options are a form of salary as a matter of law. Rather, it held that on the facts of the case, the "bonus" given to Mr. Paterno stock options that had already vested was an integral part of his salary. Moreover, the decision distinguished between unpaid incentives and ones which had already been granted.
This Court will not endorse a novel Swiss-law theory creating a rigid definition of stock options from this lone precedent. Based on the distinction between unpaid incentives and salary drawn by the Swiss court, Swiss law seems to recognize a flexible approach similar to the one recognized in California:
Treatises which describe employee stock options in the context of general corporations law strongly suggest that contractual rights to such benefits vary so widely as to preclude the accuracy of any but the most general characterizations of them. Thus, there is no compelling reason to require that employee stock options must always be classified as compensation exclusively for past, present, or future services. Rather, since the purposes underlying stock options differ, reference to the facts of each particular case must be made to reveal the features and implications of a particular employee stock option.
In re Marriage of Hug, 154 Cal. App. 3d 780, 784, 201 Cal. Rptr. 676 (1984).
Based on the facts of this case, this order holds that stock options under Oracle's stock-option plan were not salary. Oracle's stock-option plan stated that its purpose was the following (Cooper Decl., Exh. 5, at OR 40886-87):
to provide an incentive to eligible employees, officers, independent consultants, directors who are also employees or consultants, and advisers whose present and potential contributions are important to the continued success of the Company ... and to enable the Company to continue to enlist and retain in its employ the best available talent.
The stated purpose of Oracle's plan was incentive. "Consistent with the emphasis on incentive is the supposition that options are granted for future services, either primarily or exclusively." Hug, 154 Cal. App.3d at 786, 201 Cal. Rptr. 676. Both of Oracle's compensation committee members affirmed this. Mr. Boskin, for instance, stated (Boskin Dep. 93):
Q: What do you view the purpose of the stock-option grants to employees as being?
A: Purpose of the stock-option grant is a device to attract, retain, and incentivize people to excel in their performance.
Q: To what extent do you consider stock-option grants to be a reward for past performance?
A: I don't.
He testified that allowing Mr. Falotti to vest would have been inconsistent with the purpose of the stock-option plan (id. at 205):
Q: Inconsistent how?
A: Mr. Falotti had been terminated, so I don't see how we could have been incentivizing him to do anythingto do any work for Oracle, given he ceased to work. I don't see how the relevance of the plan to attract talent was relevant to that, because he hadhe was no longer with the firm. We didn't want to retain *1201 him. We weren't trying to attract him. Those are the three purposes of the plan.
Similarly, Mr. Lucas testified (Lucas Dep. 52):
Q: At Oracle were stock options granted to award past performance?
A: No.
Q: Why were they awarded?
A: Why were they awarded?
Q: Yes.
A: They were awarded as an incentive regarding future performance as long as the person was employed by the corporation.
Under Oracle's stock-option plan, the stock options were not salary: they were incentives for future performance.
Last, Mr. Falotti argues that Article 97 of the Swiss Code of Obligations entitled him to the value of stock options that would have vested in June, July, and September. This provision reads:
If the performance of an obligation can not at all or not duly be effected, the obligor shall compensate (Art. 43, 99 para. 2) for the damages arising therefrom, unless he proves that no fault at all is attributable to him.
According to Mr. Falotti, this general provision entitles a person to recover all foreseeable damages resulting from a breach of contract (Aubert Expert Report at 10; Aubert Rebuttal Report at 5). Assuming arguendo that Article 97 is applicable in the employment context, which is disputed, this argument fails for the same reasons already given: his employment contract did not entitle him to stock options.[4]
* * * * * *
Mr. Falotti compares this case to a number of American decisions involving stock options. These decisions subdivide into three categories, which are addressed in turn. For the reasons stated below, his analogies to these decisions miss the mark.
a. Stock Options as Wages
Mr. Falotti compares this case to decisions in which other courts allowed wrongfully-terminated employees to recover stock options as damages for breach of their employment contracts. The decisions he cites, however, all involved situations where the stock options were considered to be a form of wages. The analogy to these decisions fails, since the stock options at issue were not wages.
In Williamson v. Moltech Corp., 261 A.D.2d 538, 690 N.Y.S.2d 628 (1999), for instance, the plaintiff had a three-year employment contract, and his stock-option contract provided that he could exercise his stock options as long as he was employed. The court held that "if the plaintiff's employment had been wrongfully terminated, his stock option rights would not be terminated." Id. at 539, 690 N.Y.S.2d 628. This holding was echoed in Scully v. U.S. WATS, 238 F.3d 497, 506-07 (3d Cir. 2001), in which the plaintiff had a two-year employment contract, and in Haft v. Dart Group Corp., 877 F. Supp. 896, 903 (D.Del. 1995), which held: "Wrongful termination of an employee under a fixed term contract precludes an employer from denying an employee stock option rights." In all these decisions, the stock-option agreements were coupled with employment contracts with fixed durations, during which *1202 the employee could not be fired, except for cause. In such a situation, there was a clear expectation from the outset that the employee would continue to vest in stock options during the entire fixed term. Under those circumstances, the stock options were clearly contemplated as compensation. That is not the case here, where Mr. Falotti's employment contract allowed termination without cause and expressly provided for partial (but only partial) stock-option vesting by way of severance.
Similarly, in Langer v. Iowa Beef Packers, Inc., 420 F.2d 365 (8th Cir.1970), the plaintiff's contract provided that he would be able to exercise a stock option after he had worked for the defendant for two years, but that this right would terminate if the plaintiff ceased to be an employee of the defendant. Shortly after the plaintiff had completed two years of service, the defendant assigned the plaintiff's contract to another company without prior notice to the plaintiff. Applying Iowa law, the Eighth Circuit allowed the plaintiff to exercise the option, finding that plaintiff's working for the defendant for two years was "full consideration" for his right to exercise his stock options. Id. at 369. Langer is not on point for several reasons, the first being that the plaintiff's right to exercise the stock option in that case had already vested. It also fails as an analogy, because the court in Langer had determined that the plaintiff had given "full consideration" for the right to exercise the option. As already stated, that is not necessarily the case when there is an incrementally-vesting stock-option plan and the employee may be terminated without cause. For the reasons previously given regarding the specifics of Oracle's stock-option plan, the present case is not comparable to these decisions.
b. Discrimination Cases
The analogy made by Mr. Falotti to two decisions under anti-discrimination statutes is also unpersuasive. In Greene v. Safeway Stores, Inc., 210 F.3d 1237 (10th Cir.2000), for instance, an employee who was terminated in violation of the ADEA was allowed to recover damages for "unrealized stock option appreciation," because he was forced to exercise his options which had vestedbefore he would have had he not been terminated. Id. at 1243. In upholding this award, the Tenth Circuit emphasized that the ADEA allows a court to grant equitable relief necessary to uphold the purposes of the Act: deterrence, and providing compensation for injuries caused by illegal discrimination. Id. at 1243-44.
In contrast to Greene, the present case is simply for breach of contract. None of the policy considerations implicated in Greene come to bear. Rather, the policy behind the forbidden period and the notice period is to ensure that an employee has some income to sustain him or her during job-transition periods. Beatrice B., at 3 (Aug. 17, 1989).[5] The same holds true for Scarfo v. Cabletron Systems, Inc., 54 F.3d 931 (1st Cir.1995), in which the First Circuit upheld a trial court's determination that a plaintiff in a Title VII case was entitled to damages for the value of stock options she was not issued in contrast to her male counterparts. To the extent that either of these decisions suggested that an employee is entitled to unvested options, both are inapplicable here.
c. General Principles of Contract Law
Mr. Falotti also cites decisions for the even more general principle that a party should not be able to profit from its own wrongdoing. E.g., Kaneko v. Okuda, 195 *1203 Cal.App.2d 217, 15 Cal. Rptr. 792 (1961). According to Mr. Falotti, Oracle should not be allowed to profit by violating Swiss law, i.e., by trying to terminate him while he was incapacitated. This argument fails, because it is premised on the assumption that the stock-option committee would have allowed him to continue vesting when he had no job duties, Oracle did not want to retain him, and he was performing no active work. As stated, under Swiss law, an employer does not have to allow an employee to keep working during the notice period, and Mr. Falotti claims that he was unable to work while he was ill. Because he would not have contributed anything to Oracle after May 31, regardless of whether he was sick or entitled to a notice period, he would not have received any stock options after May 31.
IV. Date of Termination Under Swiss Law
While Mr. Falotti's employment contract did not entitle him to the value of unvested stock options as damages, Oracle still owes him the salary due under the severance agreement, since Oracle has not paid Mr. Falotti any salary since May 31, 2000. Under the severance provision, Mr. Falotti was entitled to one-year's salary from the date his termination became effective under Swiss law. For the reasons already discussed, in his cross-motion for partial summary judgment, Mr. Falotti contends that this date can be no earlier than September 30.
a. Illness
From the decisions cited by the parties' experts, it is apparent that questions of material fact exist as to whether Mr. Falotti was incapacitated from working on May 30, 2000, or thereafter. Given his tenure, under Swiss law, Mr. Falotti had a "forbidden period" of 90 days. During that time, he could not be terminated if he was fully or partially incapacitated from working. Mr. Falotti argues that the medical certificate from Dr. Hadorn establishes that as a matter of law, he had "total working incapacity" and could not be terminated. According to him, a medical certificate establishes a prima facie case that an employee is disabled, and if an employer wishes to contest a medical certificate, it must seek an independent medical examination "immediately." He relies on two decisions: Mrs. R. v. Ass'n X (Mar. 12, 1999) and Mrs. E. v. P. Inc. (Dec. 12, 1995).
In Mrs. R., the plaintiff was entitled to a 30-day forbidden period. On September 2, the plaintiff obtained a medical certificate from her doctor stating that she was disabled. She continued to work until September 12, when she was hospitalized. On October 4, the defendant informed the plaintiff that she would be terminated on November 30. The plaintiff argued that her termination was ineffective because her 30-day period did not begin to run until September 12, when she actually stopped working. The defendant, on the other hand, argued that the period began on September 2, the date that the plaintiff obtained her medical certificate, making its termination on October 4 more than one month after she became sick. The court stated: "The employee is responsible for providing proof of occupational disability. In the event of illness or accident, the employee will most often have recourse to a medical certificate. . . . However, the medical certificate does not constitute an absolute form of proof" (Cooper Decl., Exh. 18, Expert Report of Francois Bellanger, Exh. C at 6).[6] The court held that *1204 the termination was valid, because from the medical certificate and from her hospitalization only ten days later, it could infer that the plaintiff was suffering from a partial work disability on September 2, triggering the beginning of the forbidden period.
In Mrs. E., the plaintiff, who was pregnant, submitted a medical certificate stating that in addition to her pregnancy, she was disabled from working. Based on statements that she made, however, the cantonal court found that she was not sick and therefore not entitled to a forbidden period. A federal court reversed. It stated that while a medical certificate is not absolute proof of a disability, "the doubt cast on its veracity nevertheless supposes some serious reasons" (Henschke Decl., Exh. 13, page 267 of casebook of Gabriel Aubert).[7] The court further stated that an "employer has a right to have, at its own costs, the existence and the degree of the incapacity examined through a physician chosen by him. It is required that the employer ask for this second opinion immediately" (ibid.). It further noted that: "Concerning a question of valuation of evidence, the judge of the case has wide powers in this matter" (ibid.).
Mr. Falotti is correct that both these decisions hold that a medical certificate is entitled to a presumption of correctness. This presumption, however, can be rebutted, and the final determination rests with the finder of facta judge in Switzerland, and a jury here. While in Mrs. E. the court stated that it "is required" that an employer seek a second examination "immediately," the decision did not hold that an employer's failure to exercise its "right" to do so constitutes a waiver of its right to challenge the certificate's accuracy. Indeed, in Mrs. E., the court stated that other factors may prove dispositive, for instance: "The behavior of a salaried worker may be taken into account in particular, so as to invalidate a medical affidavit" (ibid.). Mr. Falotti's expert, likewise opined in one of his publications, Right to Wages, that: "this certificate does not carry absolute weight of evidence. Recent case law shows that the courts, now more often than before, do not hesitate to reject a medical certificate when circumstances cause it to appear to be a product of the employee's deceit with regard to his doctor or complicity by the doctor with regard to the employee" (Cooper Opp. Decl., Exh. 17).
Taking into account the presumption of correctness owed to Dr. Hadorn's certificate, whether Mr. Falotti was ever in fact incapacitated must be determined by a jury. Some of the circumstances surrounding his reported illness support an inference that he was not sick. For instance, he had not seen Dr. Hadorn for around three years, yet hurriedly met with him the day before he was told he was terminated. He continued to work, after he was declared to have total working incapacity. He did not mention his illness or submit his medical certificate to Oracle until after he was told he was terminated. He recovered suddenly, after Oracle had requested an independent medical examination. Oracle's experts have opined that Dr. Hadorn's examination was insufficient and his diagnosis inaccurate (Cooper Opp. Decl., Exh. 19, Expert Report of Dr. Robert Larsen). And, Mr. Falotti stood the possibility of considerable gain if he were sick. Viewing the inferences from this evidence in favor of the non-moving party, Oracle, it cannot be said that Mr. Falotti is entitled to summary judgment that he was suffering from a working incapacity.
b. Notice
Since Mr. Falotti worked for Oracle more than two years, but less than nine, he *1205 was entitled to a two-month notice period under Article 335c of the Swiss Code of Obligations. Article 335c also provides that notice period may be partially waived: "These periods may be altered by written agreement, standard employment contract or collective employment contract. They shall, however, be reduced to less than one month only by collective employment contract and only for the first year of service." The letter signed by Mr. Falotti on September 10, 1996, stated: "You further agree that any notice payable for termination without cause payable under your Swiss Employment Agreement shall be waived providing the payment due under the letter shall have been paid." This order does not reach the issue of waiver, since Mr. Falotti's notice period (of at least one month) would have been tolled for any period he was incapacitated from working. Whether Mr. Falotti was sick is a question of fact. The date of his effective termination must be determined at trial.
V. Oral Contract
Mr. Falotti maintains that in January of 2000, Mr. Ellison promised him continued employment through May of 2001, and that this amounted to an oral contract separate from his Swiss-law employment contract. This claim is governed by California law, because Mr. Falotti claims that the alleged contract was made in California, and it was entirely separate and distinct from his employment contract. Any such contract, however, fails to satisfy the statute of frauds. "An agreement that by its terms is not to be performed within a year from the making thereof" is invalid, unless it is "in writing and subscribed by the party to be charged or by the party's agent." Cal. Civ.Code 1624(a). By its terms, the alleged contract could not be completed until a year and several months after formation.
Mr. Falotti contends that the email he sent to Mr. Lane on May 30, 2000, was a writing that satisfied the statute of frauds. The email stated: "Here is the announcement I will send out on June 1" (Moore Decl., Exh. H, at 1). The announcement stated that Mr. Falotti had decided to transfer all of his operational responsibilities to Mr. Giacoletto, so that Mr. Falotti could devote all his time to activities such as "helping the Account Management to reach higher levels of decision-makers in our customer base" and "strengthening management contacts with our partners" (id. at 1-2). In response, on May 31, the day Mr. Falotti was told he was terminated, Mr. Lane wrote: "Looks fine" (Moore Decl., Exh. I, at 1). According to Mr. Falotti, Mr. Lane, who was President of Oracle at the time, ratified the agreement between Mr. Falotti and Mr. Ellison. Even assuming that Mr. Lane had the power to ratify the alleged agreement, and presuming this email did so (as opposed to approving of the announcement), this email fails to satisfy the statute of frauds. "[W]hen the aspect of the oral contract that brings it within the statute of frauds relates to its duration (`not to be performed within one year from its making'), both common sense and controlling authority indicate that to constitute a sufficient memorandum the writing must at least contain language indicating the duration promised was as claimed." Munoz v. Kaiser Steel Corp., 156 Cal. App. 3d 965, 975, 203 Cal. Rptr. 345 (1984). This email was silent as to how long Mr. Falotti would perform the services mentioned. Mr. Falotti argues that an earlier email he sent to Mr. Lane in April satisfies the date requirement. In the earlier email, Mr. Falotti wrote that the conclusion of a discussion he had with Mr. Ellison was: "As of June, I stay for 1 year full time focusing on helping Sergio to master the job . . ." (Moore Decl., Exh. G). The *1206 earlier email, however, was merely Mr. Falotti's description of the alleged discussion. It was not adopted by anyone at Oracle. Accordingly, Oracle's motion for summary judgment on the oral-contract claim is granted.
VI. Promissory Estoppel
The elements of a promissory-estoppel claim are: (i) a clear promise; (ii) that the promissor should reasonably expect to induce action or forebearance; (iii) upon which the promissee reasonably relies. Lange v. TIG Ins. Co., 68 Cal. App. 4th 1179, 1185, 81 Cal. Rptr. 2d 39 (1999). Whether Mr. Ellison actually promised Mr. Falotti continued employment is a question of fact. Oracle has not argued otherwise. Instead, it contends that it was unreasonable as a matter of law for Mr. Falotti to rely on anything Mr. Ellison told him, and unforeseeable to Oracle that Mr. Falotti would rely on any such statement (Br. 22-23). Whether reliance on Mr. Ellison's alleged promise was reasonable is also a question of fact. Since Mr. Ellison was the foremost decisionmaker at Oracle, any promise from him obviously carried great weight. Additionally, there is evidence in the record that others perceived such reliance was reasonable. For instance, Alan Laing, Oracle's former Vice President of Operations and General Counsel of EMEA, stated that he decided to step down as general counsel and to assume a role in the business side of Oracle based in part on Mr. Falotti's statement that Mr. Falotti and Mr. Ellison had agreed to Mr. Falotti continuing at Oracle in a "quasi chairman" role (Laing Dep. 105, 108-110).
Similarly, there is no merit in the argument that Mr. Ellison could not expect Mr. Falotti to rely on an alleged promise of employment. From Mr. Ellison's testimony it is clear that Mr. Ellison understood that if Mr. Falotti believed that he would not be terminated, he would continue to work for Oracle (Ellison Dep. 173-74). While there is no requirement that an at-will employee must be warned of his upcoming termination, this does not mean that an employer can promise employment in order to retain an employee, and then break the promise when it is convenient for the employer to terminate him. Whether Mr. Ellison actually made a promise or whether Mr. Falotti merely hoped to keep working for Oracle cannot be determined at the summary judgment stage.
How any reliance was detrimental, however, is problematic. Mr. Falotti testified that he did not receive any job offers between January of 2000, when the promise was allegedly made, or since (Falotti Dep. 16-17). He testified that after August of 2000, Siebel and another company asked him if he was interested in working for them, but that he stated he was not, because he did not want to work full-time (ibid.). Because no evidence shows that he looked for, or would have received or accepted other jobs between January and May 31, or thereafter, Oracle argues that Mr. Falotti cannot show any legal detriment. Mr. Falotti's sole argument in opposition is that "in reliance on that promise, he was not looking for another job" (Opp. 24). This theory, however, eliminates the detrimental-reliance requirement in a promissory-estoppel claim. While he has not advanced this point in his opposition to Oracle's motion for summary judgment, in opposition to an earlier motion to dismiss, Mr. Falotti argued that his legal detriment was that he continued to work for Oracle when he did not want to, despite the adverse effects job stress was having on his health. There is no evidence in the record supporting that his health deteriorated between January and May. His claim that he suddenly became incapacitated to work due to depression on May 30 is insufficient *1207 to show that he was previously working in the face of illness. At summary judgment he has the burden of putting forth some evidence of detrimental reliance. He has not.
Moreover, without detrimental reliance, Mr. Falotti cannot prove damages. He does not allege, much less provide any evidence, that he was promised any stock options or that he would be allowed to vest in prior grants under the new alleged agreement.[8] In his deposition, he stated that his compensation for the position he was allegedly promised was unknown (Falotti Dep. 211-12):
Q: All right. Was your compensation for 2001 going to change?
A: Well, I never assumed it was going to stay the same, but I suppose we would have decided when June 1st arrived.
There is no way to gauge with any certainty what salary he and Oracle might have agreed upon after June 1. While this uncertainty would not preclude him from recovering reliance damages, as already stated, nothing in the record shows that he suffered any reliance damages, since nothing shows that he would have received or accepted a job offer. Accordingly, summary judgment in favor of Oracle on this counterclaim must be granted.
CONCLUSION
1. Oracle does not owe Mr. Falotti any stock options under Oracle's stock-option plan, beyond options vesting on or before May 31, 2000.
2. Oracle does not owe Mr. Falotti any stock options or the value thereof under Mr. Falotti's employment contract.
3. When Mr. Falotti's termination became effective under Swiss law shall be determined by a jury, for purposes of his lost salary claim.
4. Oracle's motion for summary judgment on Mr. Falotti's counterclaim for breach of oral contract is GRANTED.
5. Oracle's motion for summary judgment on Mr. Falotti's counterclaim for promissory estoppel is GRANTED.
6. Mr. Falotti's cross-motion for summary judgment is DENIED.
The only question remaining in this action is when Mr. Falotti's termination became effective, and how much salary he is due as a result. A jury trial shall commence on October 15, 2001.
IT IS SO ORDERED.
NOTES
[1] Compare with Falotti Decl. dated Sept. 21, Exh. A.
[2] Mr. Falotti was also granted other stock options, including options vesting on June 4, 2000, but the agreements for these options are not in the record (Cooper Decl., Exh. 28).
[3] Cooper Decl., Exh. 21 at 3.
[4] Since there are provisions of the Employment Contracts section of the Code of Obligations (Title X) directly applicable to Mr. Falotti's employment, this more general provision appears to be inapplicable as a matter of Swiss statutory construction. In P v. SATA, for instance, the court held that because Article 324 was applicable to the issue of damages for breach of the employment contract: "the general provisions governing the consequences of the failure to fulfill contractual obligations (art. 97 . . .) are not, as a rule, applicable" (Cooper Reply Decl., Exh. 9, at 4).
[5] Cooper Decl., Exh. 21 at 3.
[6] Mr. Falotti has provided a different translation (Henschke Decl., Exh. 13). There is no significant difference in the two translations.
[7] Oracle's translation is similar (Cooper Opp. Decl., Exh. 21, at 7).
[8] Mr. Falotti's promissory-estoppel claim is based solely on the theory that the alleged promise by Mr. Ellison was entirely independent of Oracle's prior contractual relationship with him. If it were an oral modification of his existing contracts, it would be foreclosed by California law. Malmstrom v. Kaiser Aluminum & Chem. Corp., 187 Cal. App. 3d 299, 318, 231 Cal. Rptr. 820 (1986). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1125811/ | 342 So.2d 295 (1977)
Charles R. BRADY, Chairman, State Tax Commission, Petitioner-Appellant,
v.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Respondent-Appellee.
No. 48955.
Supreme Court of Mississippi.
January 12, 1977.
Rehearing Denied March 2, 1977.
*296 Joe D. Gallaspy, James H. Haddock, William N. Lovelady, Jr., Jackson, for petitioner-appellant.
Watkins, Pyle, Ludlam, Winter & Stennis, L. Arnold Pyle, David B. Grishman, Warren V. Ludlam, Jr., Jackson, for respondent-appellee.
Before PATTERSON, SMITH and LEE, JJ.
PATTERSON, Presiding Justice, for the Court:
The Mississippi State Tax Commission brings this appeal from a decree of the Chancery Court of the First Judicial District of Hinds County. It held John Hancock Mutual Life Insurance Company was not subject to Mississippi state income tax upon interest from its mortgage loan investments within this state. The decree reversed an order of the Mississippi State Tax Commission of May 15, 1973, assessing income tax and interest of $228,481.19 against John Hancock Mutual Life Insurance Company on interest income for the taxable years 1969, 1970 and 1971 from loans secured by real property situated in this state.
The appellee, John Hancock Mutual Life Insurance Company, hereinafter Hancock, is a foreign corporation qualified with the State Insurance Commission to conduct life, health, accident and variable insurance business in Mississippi. It is not qualified with the Secretary of State or other agency to conduct a different business within the *297 state. The mortgage investment and insurance activities of Hancock are separated into two divisions, but when combined, constitute the corporation. The Mississippi State Tax Commission, hereinafter Commission, contends the divisions of Hancock are interrelated and dependent upon each other because the premium income from insurance is invested into mortgage loans from which interest income is earned. This income is then employed by Hancock to service its insurance obligations and any surplus remaining is returned to its policy holders through dividends. We note that for two of the three years spanning this case Hancock experienced a net loss from its insurance business within the state, but when the mortgage investment income was included, a net profit resulted.
Hancock acknowledges that an insurance company must receive income from investments for the conduct of its business. It maintains, however, that the investments secured by property within this state are separate and apart from its insurance business.
As part of its overall business the appellee makes loans to local residents secured by mortgages on real property within the state. These loans are closed, the deeds of trust are recorded and foreclosures, when necessary, are conducted within this state. A member of the local bar is substituted as trustee by Hancock to transact foreclosures. All notes, deeds of trust and mortgages are transferred to Hancock's domicile in Massachusetts after the loans are closed and the deeds of trust are recorded in the county of the security.
Hancock maintains insurance offices and agents in the state. It engages a salaried employee who devotes his time exclusively to its mortgage lending business in Mississippi, Arkansas and Louisiana. This employee works from the appellee's office in Memphis, Tennessee one or more days each week. However, since he resides in Cleveland, Mississippi, the Commission contends he utilizes his home as an office the remainder of the week for the appellee's in-state mortgage lending activities. Hancock owned 300, estimated, Mississippi farm loans during the tax period in dispute.
Hancock's residential and commercial loans secured by local property were transacted through Bridges Loan & Investment Company of Jackson, Mississippi for the time involved. Bridges was without restriction to conduct similar business with other investment companies. Its activities for Hancock were substantial and paid for by a percentage of annual interest collected.
For the years 1969, 1970 and 1971 Hancock paid no state income tax on the interest income earned from its mortgage lending activities in Mississippi. The Commission, then chaired by Arny Rhoden, pursuant to Mississippi Code Annotated section 27-7-23(1)(a) (1972) and 27-7-49 (1972), assessed the company $223,456.60 in income taxes for these years. The assessment was based upon a net investment in Mississippi for interest income of $2,235,604 in 1969, $2,184,941 in 1970 and $2,160,993 in 1971.
The parties agree the promissory notes are "intangibles" for tax purposes.
On appeal from the Commission's order to the Chancery Court in a trial de novo [Mississippi Code Annotated section 27-7-73 (1972)] the court concluded:
The issue is simply whether the Commission's assessment should be upheld under the theory that the promissory notes in question have acquired a "business, commercial or actual situs" within this state, or whether in accord with Hancock's contentions, there is not a sufficient nexus to link evidences of ownership of intangible property with any such situs.
After stating the issue, the chancellor found, among other things:
... It is axiomatic that an insurance company must make investments and receive income therefrom for the proper conduct of its business... .
* * * * * *
Hancock makes mortgage loans to Mississippi residents, secured by real property within this state. Its lending activities *298 are separate and apart from its insurance business. .. .
The court concluded the agreement of Hancock with Bridges was nonexclusive and that the method utilized by it in investing mortgage money was the same as other nonresident investors. It also determined the officials of the Tax Commission, as well as former officials, were for many years aware of the exclusion from tax of intangible income secured by property in this state prior to the present assessment.
In construing Mississippi Code Annotated section 27-7-23 (1972), designating the items of gross income of foreign corporations classified as derivative from sources within this state, the trial judge was of the opinion the section contained conflicting specific and general provisions necessitating a choice between the two to determine which had application. He concluded the specific portion of the statute to be:
Net income of nonresident and foreign taxpayers:
(1) In the case of foreign corporations or of individuals, partnerships, trusts or estates, not residents of the State of Mississippi, the following items of gross income shall be treated as income from sources within the state:
(a) Income from intangible property of any kind or nature, if the evidence of ownership has acquired a business, commercial, or actual situs in this state;... (Emphasis added.)
Thus it prevailed over the last sentence of Subsection (1)(a) which the court considered general and nonspecific. It follows:
There shall be reported any and all income from activities or transactions engaged in within this state for the purpose of financial profit or gain, whether or not the taxpayer is qualified to do business in this state, maintains an office or place of business, or the activity or transaction is in, or connected with, interstate or foreign commerce.
The trial court construed the first section to require evidence of business situs. It thereby rejected the Commission's contention that the lands are protected by the laws of this state, the deeds of trust are of record in this state and the laws of this state protect the mortgagee and furnish the sole means of enforcing its lien. The basis for rejection was that the facts were insufficient to create a nexus between the security and the intangibles, the notes.
The trial court, in separate findings, held the evidence did not establish a business connection between Hancock's insurance division and investment division within the state so that the income-producing intangibles could be taxed here.
Finally, it held that the Commission regulations were so long continued they had, in effect, the force of law because the legislature, aware of the regulations, had acquiesced therein by not enacting laws to the contrary.
We first address the trial court's construction of the statute. In doing so we think the legislature's intention must be determined by the total language of the statute and not from a segment considered apart from the remainder that the overall intention may be decided without adjudicating which of two provisions prevails. It is also proper in considering intent to use the ordinary meaning of words at the time and under the circumstances in which they were written. In Fortenberry v. State, 190 Miss. 729, 1 So.2d 585 (1941), we stated:
In considering the meaning and effect of a new and supplemental enactment, which by an express provision disclaims the purpose to repeal any existing law, there is, more than in the ordinary case, the duty of the court to take into consideration all the facts and circumstances leading up to the new enactment, the developments in the history of the times and the particular characteristics of the specific evil which the new and supplemental statute was designed to curb, ... . (190 Miss. at 735-736, 1 So.2d at 587)
Regardless of whether the trial court was correct in finding the first portion of the statute was specific and prevailed over the latter and general portion of the statute, *299 there remains the necessity of deciding if the construction placed upon the specific portion correctly reflected the legislative intention.
We observe the times, history and interpretations of the statute as it progressed to its present form to determine the real intention of the legislature. See Zeigler v. Zeigler, 174 Miss. 302, 164 So. 768 (1935). The state's first income tax law was enacted in 1912. Section 15(1)(a), Chapter 132, Laws of 1924, expressed the law as it was rewritten in pertinent part:
Section 15. (1) That in the case of foreign corporations ... the following items of gross income shall be treated as income from sources within the state.
(a) ... [I]nterest on bonds, notes, or other interest bearing obligations of residents, ... provided, income from money loaned by ... foreign corporations ... shall not be included as taxable income. ... (Emphasis added.)
The law was rewritten in 1934 and 1936 without material change in the provisions now pertinent.
The Commission's contemporaneous interpretation of the statute, for administrative purposes, and part of its history appears in its Regulation Number 1 (1924), Article 166, as follows:
Nonresidents, foreign corporations, and citizens of foreign countries shall include as gross income from sources within the State all income of every sort derived from business done or property located within the State; except that interest on bonds, notes or other interest-bearing obligations of residents, corporate or otherwise, need not be included. (Emphasis added.)
The Commission's Regulations for 1928, 1932, 1934 and 1937 remained the same. We observe the statute and regulations by excepting from the income of nonresidents the interest on residents' notes or interest-bearing obligations, evidently led to the belief of a disparity between the assessment of interest income of domestic and foreign corporations.
A suit followed in 1938 for construction of Section 15(1)(a) above. This Court determined the legislature's intention was that domestic and foreign corporations were to be treated equally. In Mississippi Cottonseed Products Co. v. Stone, 184 Miss. 409, 184 So. 428 (1938), cert. den., 306 U.S. 656, 59 S.Ct. 774, 83 L.Ed. 1054 (1939), we held by considering the statute in its entirety that the legislature intended, in enumerating the items of gross income of a foreign corporation, to use the word "to" in the statute instead of the word "by" and substituted "to" for "by" so that the reading of Section 15(1)(a) was:
[P]rovided, income from any loan to nonresidents or foreign corporations or citizens of a foreign country, shall not be included as taxable income.... (Emphasis added.)
As a result the Commission altered its interpretation of the statute. Its Regulations in 1939, Article 245, read in part:
Nonresidents, foreign corporations, and citizens of foreign countries shall include as gross income from sources within the State all income of every sort derived from business done or property located within the State. (Emphasis added.)
This regulation concerning income of foreign corporations was carried forward in Regulation Number 7 (1942), Number 8 (1946) and Number 9 (1948).
It is apparent, as the trial court found, that after the Mississippi Cottonseed Products case, supra, the Commission gave literal application to the maxim mobilia sequuntur personam, meaning movables follow the person. The Commission's position prior to Mississippi Cottonseed Products was that interest on intangibles held by foreign corporations, secured by in-state real property, was not considered gross income for tax purposes because of the language of the statute. After the decision, the Commission concluded that such income must be included for tax assessment if derived from business done or from property located within the state. In practice, however, this meant that interest income from notes held out of state, though secured by in-state *300 property, was not considered generated here for tax assessments because it was thought the income was produced at the place where the note was held.
An exception, largely theoretical, to this practice existed if there was a nexus sufficient to connect the intangibles with a "business situs" in Mississippi. These conclusions and practices of the Commission are not inconsistent with Jahier v. Rascoe, 62 Miss. 699 (1885); City of Vicksburg v. Armour Packing Co., 24 So. 224 (Miss. 1898); and Gully v. C.I.T. Corporation, 168 Miss. 268, 150 So. 367 (1933), which hold that the situs of intangible property is generally the domicile of the owner. The cases acknowledge the difficulty of determining business situs, but conclude that it was, more or less, connected with a degree of permanence of location of the credits, or with a purpose to incorporate them when collected into the mass of property already in the state.
The difficulty in application of the exception did not pass unnoticed. In 1950 Henry N. Eason, Chief of the Division of Income Tax, and other officials of the Tax Commission, including the general counsel, appeared before a tax study committee of the legislature for the purpose of outlining recommendations for changes in the tax laws. Among those submitted were: That the income tax law be rewritten and that an amendment be made relating to the definition of "gross income received by a nonresident," because the Income Tax Division had consistently held income from intangible property held out of state could not be taxed unless there was an in-state business situs. On October 4, 1950, Eason submitted a report to the Chairman of the Commission detailing its recommendation to the legislature. It was:
[This Section] related to nonresidents or foreign taxpayers. Subsection 1(a) recites the items of gross income which shall be treated as gross income within the State. I quote a part of that Subsection:
Insurance premiums, interest on bonds, notes or other interest bearing obligations of residents, corporate or otherwise; the amount received as dividends from domestic corporations, provided, income from any loan to nonresidents or foreign corporations, or citizens of a foreign country, shall not be included as taxable income, or from foreign corporations of which more than fifty percent of the gross income was derived from sources within the State. This language should be stricken from the statute for the reason that we cannot tax the intangible income of a nonresident unless the evidence of ownership has acquired a business situs within Mississippi. There might be substituted therefor, "Insurance premiums and income from intangibles, when the intangible property which produces the income has acquired a business situs within this State... ." (Emphasis added.)
The next legislative session amended the Income Tax Law by rewriting Section 11, Chapter 402, Laws of 1952. It appeared as Section 9220-12, Mississippi Code of 1942, Recompiled, in part as follows:
(1) In the case of foreign corporations ... the following items of gross income shall be treated as income from sources within the State:
(a) Interest on ... notes or other interest-bearing obligations, ... if the evidence of ownership has acquired a business situs in this state. (Emphasis added.)
Afterward, the regulations of the Commission continued to recite that income from intangibles held out of state was to be considered as having an in-state source if it was derived from services rendered, business done, or from property located within the state, i.e. a business situs.
The critical issue remained as before, what criteria were employed in determining business situs. The Commission's attitude was perhaps best expressed by its Regulation Number 7 issued before the 1952 act and Regulations Numbers 10 and 11 thereafter repeating it. The regulation:
Intangible personal property has a business situs in this State if it is employed as capital in this State or the *301 possession and control of the property has been localized in connection with a business, trade or profession in this State so that its substantial use and value attach to and become an asset of the business, trade or profession in this State. For example ... if a nonresident maintains a branch office here and a bank account on which the agent in charge of the branch office may draw for the payment of expenses in connection with the activities in this State, the bank account has a business situs here. (Emphasis added.)
This interpretation was consistent with the Commission's policy for years. It maintained that a "business situs" required a degree of permanence evidenced by offices, agents, bank accounts or some such symbol. This premise was likely thought necessary to overcome the inference arising from the legal fiction of mobilia sequuntur personam as well as analogy to our case law. In the past we have held that promissory notes evidence the debt and deeds of trust evidence the security, and a mortgagee, until foreclosure, has only a chattel interest in the land because the mortgage is only a charge upon and not an interest in it. Buckley v. Daley, 45 Miss. 338 (1871).
The latest pronouncement of this rule is found in Baker v. Connecticut General Life Insurance Co., 196 Miss. 701, 18 So.2d 438 (1944), wherein it is stated:
The beneficiary in a deed of trust the character of the one here in question is not vested with the title to the land described therein. He has no estate in the land, and cannot convey it to another; he has an interest in it only to the extent that he can cause the trustee in the deed of trust to sell the land and apply its proceeds to the payment of the secured debt... .
By whatever means the Commission was influenced to its interpretation of the statute, in simple application it meant that promissory notes secured by real property in this state when transferred to a nonresident owner had the effect of transmitting the source of income to the nonresident's state. The "business situs" was thus indelibly stamped upon the state in which the intangible was held, thereby precluding income assessment in this state. The Commission's response to inquiries compels this conclusion. A letter of October 3, 1957, from the Income Tax Division to United Benefit Life Insurance Company of Omaha, Nebraska, is typical. It follows:
Your income from policy loans is derived from promissory notes executed by the policy holders. These notes, being intangible property, have a situs at your domicile unless they have acquired a business situs elsewhere. To give your notes from Mississippi policy holders a business situs in this state I believe that they would have to be accepted in Mississippi, be physically located here, the payments thereon be received and accepted here and, generally, all matters pertaining to the making, collection and handling of such notes be under the full authority of a Mississippi office as if your investment department had been decentralized to that extent.
The statute, now Mississippi Code Annotated section 27-7-23 (1972) again received the consideration of the legislature in 1958 when it was amended to its present language. That part of present concern is:
(a) Income from intangible property of any kind or nature, if the evidence of ownership has acquired a business, commercial or actual situs in this state .. . (Emphasis added.)
The legislative addition of "commercial or actual" preceding "situs," had no effect upon the Commission's assessment of income from intangibles.
The assistant to the Commission Chairman, H.I. Adcock, testified that he had been with the Commission since 1937 and that the 1958 act brought no change of policy toward intangible property held by nonresidents until a contrary position, the beginning of this suit, was taken in 1972.
Henry N. Eason was called by Hancock as an adverse witness and stated that he was Chief of the State Income Tax Division for many years preceding his retirement in *302 1965. He testified the Commission's policy, when intangible property was owned outside the state though secured by local property, was not to assess such income for income tax and neither the 1952 or 1958 legislative acts altered this position.
Attorney Henry A. Fly was employed by the Commission from 1947 to 1961. His primary duties were with income and franchise taxes. He testified the Commission's position was that notes held outside Mississippi, although secured here, did not have local business situs and interest therefrom was not taxable.
These positions were the same as expressed on January 5, 1953, through a certificate of overpayment executed by A.H. Stone, Chairman of the Commission, to the Auditor of Public Accounts, concerning a refund of taxes to Commonwealth Insurance Company. The certificate stated in explanation:
... It is well established that a nonresident may not be taxed on intangible income unless the assets which produce the income acquire a business situs in Mississippi... .
The trial court concluded that interest income from intangibles held out of state could not be subject to income tax unless (a) the evidence of indebtedness was kept in this state, in which case it would have an actual situs, or (b) such interest income was employed as capital in this state, or (c) such interest income was localized in this state with the business of such nonresident or foreign corporation, or (d) such interest had become an asset of the business of the foreign corporation in this state. It was further held that the Commission's policy, substantially as above, was well known to nonresidents and foreign corporations for many years prior to this assessment.
The issues presented are, whether the trial court correctly construed the legislature's intention in amending the statute in 1952 and 1958, whether there was error in finding the decentralization of Hancock for the conduct of its business separated the divisions for income tax assessments and finally, whether long-continued administrative construction has the effect of law.
We are of the opinion the lower court erred in its construction of Mississippi Code Annotated section 27-7-23 (1972) as did the Commission prior to the assessment. The Commission's recommendation to the legislature preceding the 1952 amendment referred to its inability to assess income from intangibles held by nonresidents. It specifically recommended:
... This language should be stricken from the statute for the reason that we cannot tax the intangible income of a nonresident unless the evidence of ownership has acquired a business situs within Mississippi. There might be substituted therefor, "Insurance premiums and income from intangibles when the intangible property which produces the income has acquired a business situs within this State... ." (Emphasis added.)
The legislature reacted to the Commission's plea, "we cannot tax the intangible income of a nonresident" by adopting the words "unless the evidence of ownership has acquired a business situs within Mississippi." This language was transferred almost verbatim from the recommendation into the existing statute so that it read:
(1) In the case of foreign corporations ... the following items of gross income shall be treated as income from sources within [this] state:
(a) [Interest on] ... notes or other interest-bearing obligations, . . if the evidence of ownership has acquired a business situs in this state. (Emphasis added.)
In our opinion the amendment expressed the legislative purpose of taxing income generated from out-of-state intangibles, secured here, by substituting "evidence of ownership" for the actual business situs concept previously thought essential provided such evidence had acquired an in-state business situs. It intended to deemphasize the importance the Commission had previously attached to business situs as a necessary element of the assessment. We are persuaded to this view by the words lifted *303 from the recommendation as well as those suggested by it but which were rejected. The adoption of the suggested words, "insurance premiums and income from intangibles when the intangible property which produces the income has acquired a business situs within the state" would have continued income assessments contingent upon there being an in-state business situs with its attendant connotations of permanence, agents, bank accounts and capital. We think the legislature intended to remove such impediments to the collection of taxes from intangibles by replacing it with "evidence of ownership," a less burdensome standard.
Incidental to the foregoing we have held the court's duty in construing statutes is to give consideration to the purpose and the object to be accomplished so the real intention of the legislature may be reached. We stated statutes should be given a reasonable construction, and if susceptible of more than one interpretation, they must be given that which will best effectuate their purposes rather than one which would defeat them. Akers v. Estate of Johnson, 236 So.2d 437 (Miss. 1970); Mississippi State Tax Comm'n v. Hinton, 218 So.2d 740 (Miss. 1969); Thornhill, et al. v. Ford, 213 Miss. 49, 56 So. 23 (1952); Conard Furniture Co. v. Mississippi State Tax Comm'n, 160 Miss. 185, 133 So. 652 (1931); and State Bd. of Education v. Mobile & O.R. Co., 72 Miss. 236, 16 So. 489 (1895). Moreover, meaning must be given to the amending words as they mesh into the statute because they were legislatively chosen for definite purpose. In construing the statute to diminish the burden of establishing business situs and replacing it with evidence of ownership of the intangible, we are able to give meaning to the amending words consistent with the legislature's purpose of collecting taxes, its real intention.
Unfortunately, the phrase "business situs" was retained in the statute thereby frustrating the legislative intent because the Commission's practices continued as before. The Commission's interpretation not only overlooked the amendment, but also the last portion of the statute,[1] which it complemented, requiring all income from business activities within the state to be reported.
Undoubtedly, this construction led to the 1958 amendment which added the following emphasized words to the statute, "if the evidence of ownership has acquired a business, commercial or actual situs in this state." This amendment reemphasized the legislature's intention to assess income from intangibles through evidence of ownership by broadening it beyond a business situs. Again, the words "commercial" and "actual" were deliberately chosen by the legislature in its wisdom for an intended purpose.
This elicits the query, what evidence of ownership did the legislature intend by "commercial" or "actual" situs in this state? The logical response in giving meaning to the words to accomplish the legislative purpose must be, we think, the evidences arising from the recorded security, the deed of trust, because it has commercial meaning in that it is connected with business trade and traffic in general as well as actual situs in the place of its recordation. Not only does the recordation "evidence" the security, it evidences the ownership of the intangible and thus protects the beneficiary's interest therein. It evidences also the nexus between the security and the promissory note for the business benefit of both the maker and the holder of the note.
This connection of security and debt, known to the legislature, springs directly from Mississippi Code Annotated section 89-7-3 (1972) which requires all deeds of trust whatsoever to be recorded to protect the beneficiary against the claim of subsequent creditors or purchasers. Section 89-5-17 directs that all assignments of indebtedness secured by a deed of trust be entered *304 on the margin of the record and provides penalty for failure to do so. Section 89-5-21 requires the satisfaction of a deed of trust to be entered upon the record and again provides penalty for failure to do so. Section 89-5-37 mandates that the name of the beneficiary be disclosed in the deed of trust and provides penalty for failure to comply. Finally, Section 89-5-45 voids the substitution of a trustee in deeds of trust unless it appears of record in the office of the county where the land is situated.
We conclude the legislature intended by evidence of ownership to refer to the instrument actually used to describe the security for the intangible because it names the beneficiary, the mode and time of payment, the assignments, and substitution of trustees, if any, as well as the note's satisfaction when paid, all of which "evidence" ownership. Moreover, when recorded, this evidence has an actual situs in the county of the security. We conclude the trial court erred in its construction of the statute because it defeated the legislative purpose. This gives recognition to the mortgagee's interest in the security even though it only be a charge upon the security and not a vested interest in it. Indeed, the rudimentary genesis of interest income is a combination of the security and debt and not a separation of it. The legal fiction of mobilia sequuntur personam transferring the interest generating intangible to the domicile of a foreign corporation or nonresident must give way to the business reality that the security breathes life into the note and is inextricably embedded in it, defying such separation.
We are of the further opinion that the division of the corporation by Hancock did not separate the insurance and investment functions for income assessment purposes. Hancock's argument appears paradoxical in that it contends on one hand that an insurance company must make investments and receive income therefrom for the conduct of its business and on the other that it is separated for tax purposes. But be this as it may, the evidence is overwhelming that Hancock has offices and agents conducting its insurance business within this state in substantial amount. It also reveals that for two of the three years spanning the assessments, the investments division income resulted in an overall profit for the corporation. It reflects also that the agents, and other personnel, when inquiry was made concerning loans, were instructed to direct loan applicants to its salaried investment employee for the conduct of this business. We are of the opinion the two divisions of Hancock are interdependent and related to each other for income tax assessments and that the trial court erred in finding they were separate and independent.
The finding that the administrative policy of the Commission had been consistent since 1924 until this assessment in 1972 is doubtless correct. The conclusion that the legislature knew or was presumed to have known of the policies is also supported in law. However, the trial court's conclusion that the legislature intended to abide by the Commission's interpretations because it did not define the term "business situs" was error. This determination overlooks the 1952 and 1958 statutory amendments which were designed to change the former constructions and practices so the income from intangibles would be taxed. We are of the opinion the construction for administrative purposes though continued was erroneous and does not have the force of law. In Commissioner v. Lake, 356 U.S. 260, 78 S.Ct. 691, 2 L.Ed.2d 743, reh. den., 356 U.S. 964, 78 S.Ct. 991, 2 L.Ed.2d 1071 (1958), it was held:
... Prior administrative practices are always subject to change through exercise by the administrative agency of its continuing rule-making power.
It follows that if an administrative body has the authority to change its practices, they are also subject to change by judicial opinion or legislative enactment. In Barr v. Delta & Pine Land Co., 199 So.2d 269 (Miss. 1967), we held the construction of a statute by those administering it is usually binding on them or their successors because the public relies upon it, but this did not mean *305 that an administrative body was powerless to change its interpretation by a new rule under changed situation or varied circumstance. We also held that legislative enactment or court decision supersedes administrative construction which places it beyond repeal by subsequent administrative rule change so long as the statute remains substantially unchanged. In sum, we are of the opinion the amendments were properly construed by the Commission in 1972 when this assessment was made and that the trial court erred in invalidating it.
On cross-appeal Hancock argues the trial court erred in not finding the Commission's assessment unconstitutional in that it transgresses upon the due process and equal protection provisions of Section 1 of the Fourteenth Amendment to the Constitution of the United States and Article 3, Section 14 of the Mississippi Constitution (1890) and impinges upon the interstate commerce provision of Article 1, Section 8, Clause 3, of the Constitution of the United States. We are of the opinion the cross-appeal is without merit in view of the holding in Curry v. McCanless, 307 U.S. 357, 59 S.Ct. 900, 83 L.Ed. 1339 (1938), and our holding in Akers v. Estate of Johnson, 236 So.2d 437 (Miss. 1970).
The decree of the chancery court is reversed and the order of the Tax Commission is reinstated.
REVERSED AND ORDER OF THE TAX COMMISSION IS REINSTATED.
GILLESPIE, C.J., INZER, P.J., and SMITH, ROBERTSON, SUGG, WALKER, BROOM and LEE, JJ., concur.
NOTES
[1] ... There shall be reported any and all income from activities or transactions engaged in within this state for the purpose of financial profit or gain, whether or not the taxpayer is qualified to do business in this state, maintains an office or place of business, or the activity or transaction is in, or connected with, interstate or foreign commerce. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2282559/ | 981 F.Supp. 988 (1997)
Francis RAWLINGS, Plaintiff
v.
Raydell A. PRATER, National Pizza Company A, B and C Corporation, and X, Y and Z Individuals, Defendants.
No. 3:97CV278LN.
United States District Court, S.D. Mississippi, Jackson Division.
July 10, 1997.
Lance L. Stevens, Stevens & Ward, Jackson, MS, Wayne Dowdy, Magnolia, MS, James Phillip Cothren, Jackson, MS, for Plaintiff.
Alfonso Nuzzo, Clyde X. Copeland, III, Markow, Walker, Reeves & Anderson, Jackson, MS, for Defendants.
MEMORANDUM OPINION AND ORDER
TOM S. LEE, Chief Judge.
This cause is before the court on the motion of plaintiff Francis Rawlings to remand pursuant to 28 U.S.C. § 1447. Defendant National Pizza Company opposes the motion and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes that plaintiff's motion should be denied.
Defendant removed this case on the ground that diversity jurisdiction arose upon plaintiff's having settled her claim against the sole nondiverse defendant, Prater. Plaintiff submits, however, that at the time of removal, her claim against Prater had not been finally dismissed such that there was no diversity. The facts leading to the removal are not in dispute.
*989 On May 10, 1996, plaintiff, a Mississippi resident, filed suit in the Circuit Court of Hinds County, Mississippi against National Pizza Company, a nonresident, and against Raydell A. Prater, a Mississippi resident, for injuries sustained in an automobile accident.[1] Plaintiff thereafter entered into settlement negotiations with Prater which, in January 1997, culminated in an oral agreement to settle the case in full accord and satisfaction of the plaintiff's claims against Prater. Upon reaching this agreement, Prater forwarded certain documents to plaintiff, including a Full and Final Release With Indemnity for plaintiff's signature, and a draft Agreed Judgment of Dismissal With Prejudice. When plaintiff failed to execute and return these documents, Prater filed in the state court a "Motion to Compel Enforcement of Settlement and Disbursement of Settlement Proceeds," setting forth the fact of the settlement and asking the court to enter an order compelling settlement and directing the disbursement of the settlement proceeds.
In her response to Prater's motion, plaintiff admitted each of the allegations in the motion but stated by way of explanation that an agreement as to the proper allocation of the settlement monies had not yet been achieved because two of plaintiff's medical providers had filed notice of liens against any settlement proceeds, as had two of plaintiff's former attorneys (one of whom, despite having filed his notice of lien, had not submitted a bill for his services and expenses). Nevertheless, plaintiff expressly "agree[d] that the Court should grant the relief requested by ... Prater, in his Motion to Compel Enforcement of Settlement and Disbursement of Settlement Proceeds," and "ask[ed] the Court to make an equitable distribution of the settlement proceeds among the claimants thereto." The court ruled on plaintiff's motion by order entered April 8, reciting the fact and amount of the settlement, as agreed by the parties, and, after noting that "[a]ny and all disputes between the Plaintiff and certain lienholders and assignees ha[d] been settled," ordered "that the Plaintiff execute Full and Final Release With Indemnity, and pursuant thereto, enter into a Voluntary Dismissal With Prejudice as to Prater as soon as reasonably possible." That same day, plaintiff's counsel signed, on his client's behalf, an "Agreed Order of Voluntary Dismissal With Prejudice as to Separate Defendant Raydell A. Prater," in exchange for which he received the settlement draft, made payable to plaintiff, her attorney, and the various lienholders.
As reflected by correspondence between the parties' attorneys also dated April 8, plaintiff's counsel had asked that defense counsel not enter the Agreed Judgment until he had the opportunity to finalize his revisions to the Full, Final and Absolute Release With Indemnity which had been prepared by Prater's attorney. In keeping with that request, the Agreed Judgment was not entered at that time, and in fact, has not been entered to date because on April 18, before the release documents were finally executed and judgment was entered, defendant removed the case to this court based on the dismissal of the resident defendant.
On the present motion, the parties agree that "when a party whose presence would defeat diversity is dropped from the state court action, the case becomes removable even though diversity did not exist when the state court action was commenced." 14A C. Wright, A. Miller and E. Cooper, Federal Practice and Procedure § 3723, at 314 (1985). Plaintiff maintains, however, that until such party is formally dismissed from the suit as a matter of record, then there is no diversity of citizenship and the case is nonremovable. Defendant, on the other hand, argues that the case became removable as soon as defendant received the documents evidencing plaintiff's unequivocal and unconditional voluntary abandonment of her claim against the resident defendant. With this, the court agrees. As one court has stated, "[w]here a plaintiff by his voluntary act has definitely indicated his intention to discontinue the action as to all non-diverse defendants, the case then becomes removable." Aydell v. Sterns, 677 F.Supp. 877, 880 (M.D.La.1988) (citing Erdey v. American Honda Co., Inc., 96 F.R.D. 593 (M.D.La. *990 1983)); DiNatale v. Subaru of America, 624 F.Supp. 340 (E.D.Mich.1985).
In the court's opinion, diversity jurisdiction arose in this case when the state court judge entered the order, upon, plaintiff's agreement and at her request, compelling enforcement of a settlement agreement and directing entry of a final judgment of dismissal, and upon plaintiff's signing, on the same date, the Agreed Judgment of Dismissal.[2] The court recognizes that the parties had informally agreed that the Agreed Judgment would be entered only after plaintiff had made her final revisions to the release agreement. However, the execution of the judgment had been specifically directed by the court at the urging of the parties and the entry of the judgment was inevitable, and the settlement irrevocable. Simply put, plaintiff does not and cannot dispute that she had entered into a final and binding settlement with defendant which she agreed constituted a "full accord and satisfaction" of her claim against Prater and thereby voluntarily abandoned her suit against that defendant.
Plaintiff does assert that there remained possible impediments to the final effectuation of the settlement even after the settlement check was tendered to her and after the Agreed Judgment was signed by the parties because (1) one of the lienholders might have refused to endorse the check, and (2) the final revisions to the release document had not been completed. Yet, as the state court had already found, "any and all disputes" between plaintiff and the lienholders had been resolved and plaintiff had only to go through the process of obtaining the required endorsements. Moreover, while plaintiff views it as significant that the release document had not been finalized, the only change she has indicated was required was the clarification that the settlement and release was only as to Prater, and not as to National Pizza Company. There was no question but that this was what the parties had agreed and the judge had ordered, so that the "revision" was merely perfunctory and could not conceivably have impeded entry of a final judgment.
Under these circumstances, there can be no reasonable argument made that plaintiff had not, in fact, voluntarily abandoned her claim against Prater, as evidenced by her execution of the Agreed Judgment. Accordingly, defendant's removal was proper on the basis of diversity jurisdiction.
It is therefore ordered that plaintiff's motion to remand is denied.
NOTES
[1] She also sued fictitious corporations and individuals, but has not identified them or served any other defendants. The court, therefore, disregards them for purposes of determining its jurisdiction. See 28 U.S.C. § 1441(a).
[2] 28 U.S.C. § 1446(b) states that if the case stated by the initial pleading is not removable, then the time for removal runs from the date defendant receives "a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case has become removable." Citing Judge Wingate's opinion in Sunburst Bank v. Summit Acceptance Corp., 878 F.Supp. 77 (S.D.Miss.1995), defendant argues that even though one of the papers it received, the Agreed Judgment, was not filed in the court record, it nevertheless constituted an "other paper" which demonstrated that the case had become removable. The court agrees, and has held that "other paper" within the meaning of § 1446(b) is not limited to papers that have actually been filed. Jackson v. Mississippi Farm Bureau Mut. Ins. Co., 947 F.Supp. 252 (S.D.Miss. 1996). The fact that this paper was not filed does not preclude defendant's reliance on it as the basis for removal if that paper evidenced plaintiff's abandonment of her claim against Prater. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1639516/ | 970 F.Supp. 279 (1997)
SIMON & SCHUSTER, INC. and William J. Bennett, Plaintiffs,
v.
DOVE AUDIO, INC., Defendant.
No. 95 Civ. 6012 (LBS).
United States District Court, S.D. New York.
July 11, 1997.
*280 *281 *282 Kay Collyer & Boose, LLP, New York City (Marcia B. Paul, Gregory J. Ikonen, of counsel), for Plaintiffs.
Kenneth David Burrows, New York City, (Hilary B. Miller, Stacy Grossman, of counsel), for Defendant.
OPINION AND ORDER
SAND, District Judge.
Plaintiffs Simon & Schuster, Inc. ("S & S") and William J. Bennett are the publisher and editor, respectively, of The Book of Virtues and related print and audiobook publications. Defendant Dove Audio, Inc. ("Dove") is the publisher of an audiobook, The Children's Audiobook of Virtues. When this action was filed, Dove also intended to publish a print book, The Children's Book of Virtues. Plaintiffs contend that Dove is liable for violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), common law trademark infringement and unfair competition, and violation of the New York anti-dilution statute, N.Y.Gen. Bus.Law § 368-d. The case is before the Court for findings of fact and conclusions of law after a bench trial.
PROCEDURAL BACKGROUND
Plaintiffs commenced this action on August 9, 1995. Pending final adjudication, Dove consented to be enjoined "from the manufacture, publication, advertisement, distribution and sale of any audio and/or print books under the title(s) The Children's Audiobook of Virtues and/or The Children's Book of Virtues, or under any other title confusingly similar to plaintiffs' title and alleged trademark `The Book of Virtues.'" Preliminary Injunction Upon Consent dated August 14, 1995. A condition of Dove's consent was that plaintiffs post a bond of $500,000 as surety for the preliminary injunction.
Dove subsequently moved for judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c). Dove contended, among other things, that plaintiffs' trademark "The Book of Virtues" is generic and therefore not entitled to trademark protection. Plaintiffs argued in opposition that the "The Book of Virtues" is a suggestive mark. Judge Allen G. Schwartz, to whom this case was then assigned, denied Dove's motion. See Simon & Schuster, Inc. v. Dove Audio, Inc., 936 F.Supp. 156 (S.D.N.Y.1996) (hereinafter, the "Opinion"). Judge Schwartz held that plaintiffs' mark "does not fall into the generic category." Id. at 161. Judge Schwartz also found that plaintiffs' trademark "does not rise to [the level of a suggestive mark], but rather falls into the category of descriptive marks." Id. at 162.
Dove subsequently filed a motion for reargument and clarification of the Opinion. Dove inquired whether it would be precluded from introducing evidence of the generic nature of plaintiffs' mark at trial. Judge Schwartz denied Dove's motion for reargument, holding that
[i]n its Opinion, the Court rejected defendant's argument that plaintiffs' mark is generic and found that, as a matter of law, "The Book of Virtues" mark is not generic. Accordingly, defendant is precluded from introducing evidence at trial to support its theory that plaintiffs' mark is generic; however, defendant is not precluded from introducing evidence showing that plaintiffs' mark lacks secondary meaning.
Order dated December 31, 1996, at 1-2. Judge Schwartz noted that, in reaching the earlier decision, "the Court considered certain factual materials submitted to the Court by defendant." Id. at 1 n. 1.
The case was subsequently transferred to the docket of the undersigned for trial. A bench trial commenced on January 27, 1997, and concluded on February 5, 1997. The following constitutes the Court's findings of fact and conclusions of law, pursuant to Fed. R.Civ.P. 52(a).
*283 FINDINGS OF FACT[1]
I. The Parties
S & S is a New York corporation engaged in the business of publishing with its principal place of business in New York City. SF 1. Bennett, a citizen and resident of the state of Maryland, is a well-known public figure who has served as Secretary of Education and Director of the Office of National Drug Control Policy. SF 2.
Dove is a California corporation engaged in the business of publishing with its principal place of business in Hollywood, California, and an office in Williamsville, New York. SF 3.
II. Plaintiffs' Publications and Adoption of the Mark
In November 1993, S & S published a hardcover print book entitled "The Book of Virtues" and subtitled "A Treasury of Great Moral Stories." SF 4. The book consists of an introduction by Bennett and ten chapters with headings such as "Self-Discipline," "Courage," "Honesty," and "Faith." Each chapter begins with a two-page commentary written by Bennett and includes a selection of stories, essays, poems, and other literary material, commented upon and edited by Bennett. The book "is intended to aid in the time-honored task of the moral education of the young." William J. Bennett, The Book of Virtues 11 (1993); Bennett Aff. ¶ 10.
Bennett chose the title "The Book of Virtues" by scribbling long lists of potential titles "until this one evolved. Immediately, I knew it was the right title: it conveyed my message, it stood out, it was distinctive, and it was effective and yet interesting." Bennett Aff. ¶ 14. He also testified that he considers himself "pretty well read" in philosophical literature, and he acknowledged that, before selecting the title, he had either read or was familiar with a number of philosophical tracts that have the word "virtue" in their titles. Tr. 15-18.
The Book of Virtues proved to be a tremendous commercial success. It reached the number one position on The New York Times best-seller list on January 16, 1994, and remained on that list for a total of 88 weeks. SF 8. The Book of Virtues also appeared on best-seller lists in USA Today and Publisher's Weekly. Martin Aff. ¶ 6. To promote The Book of Virtues, Bennett embarked on a national speaking tour, including numerous national television and radio appearances. SF 12, 27. By February 1994, four months after publication, the book was in its twelfth printing with 547,000 books in print. Overall, S & S has sold nearly 2.2 million hardcover copies since the book's publication. SF 7; JX 42. The book was an alternate selection for "The Book of the Month Club" and was advertised extensively in The New York Times, The Washington Post, The Los Angeles Times, and other national publications. SF 8; Martin Aff. ¶ 24.
Prior to the publication of The Book of Virtues, Bennett intended to publish a children's book entitled The Children's Book of Virtues, and he discussed that plan with his editor at S & S. SF 17. To date, plaintiffs have sold over 15 book products under the mark "The Book of Virtues" or a closely similar title, including the following hardcover books: The Children's Book of Virtues (published October 1995), an illustrated version of The Book of Virtues designed for very young children; The Moral Compass (published October 1995), a companion volume to The Book of Virtues; and The Book of Virtues for Young People (published March 1995), an educational reader published by an S & S affiliate for the school and library market. SF 4, 16, 19-22. S & S has also published five audiobooks: The Book of Virtues, Vol. I and The Book of Virtues, Vol. II (published May 1994 and November 1994, respectively); The Children's Book of Virtues *284 (published April 1996); The Moral Compass (published September 1995), and a compact disc entitled The Children's Book of Virtues Audio Treasury (published October 1995).[2] SF 14, 18-19.
The Book of Virtues and its related products have received substantial attention in the press, which has published numerous articles discussing the commercial success of the products as well as their identification with Bennett. Upon its release in November 1993 and in the following year, The Book of Virtues was reviewed in a wide variety of publications. JX 35. On December 20, 1993, Publisher's Weekly reported a retailer as saying "the book we can't get that everyone is screaming for is The Book of Virtues." JX 32. The book was included in the book section of New York magazine's "180 Best Christmas Gifts" in December 1993. SF 9. On March 7, 1994, a full-page essay in Time recounted the book's commercial success and popular appeal and concluded that "[t]he Bennett book ought to be distributed, like an owner's manual, to new parents leaving the hospital." JX 35. On June 13, 1994, Newsweek featured a cover story entitled "The Politics of Virtue: The Crusade Against America's Moral Decline," with caricatures of Bennett, Hillary Clinton, and Peggy Noonan on the cover. The Newsweek article stated that The Book of Virtues "remains hot beyond expectations," referred to Bennett as "a cottage industry of character education," and discussed his plans for a sequel, textbook versions, and a television series. SF 10; Bennett Aff. ¶ 24; JX 103. The Book of Virtues has also played a role in California and national politics. The book was featured in a 30-second campaign commercial which aired in California in 1994 for Representative Michael Huffington, a California Republican then running for the Senate.
Media attention continued in 1995 and 1996. In July 1995, The New Yorker reported that some of Bennett's friends refer to his "multimillion-dollar industry" as "Bennett, Inc." and that "his writings, and a heavy schedule of speaking engagements ... have transformed Bennett into a leading voice of the force that is driving American politics right now the national hunger for a moral society." JX 37. An article headlined "The Chairman of Virtue, Inc." appeared in the September 16, 1996, issue of Time magazine, which reported the "88-week ride on The New York Times best-seller list" of The Book of Virtues, which "spawned two profitable sequels and a cartoon show ... on PBS." JX 103. The television series itself has received substantial media coverage. JX 108.
Plaintiffs' mark "The Book of Virtues" is currently an unregistered trademark, although plaintiffs are attempting to register it with the Patent and Trademark Office ("PTO"). On January 23, 1997, the PTO approved the mark "The Book of Virtues" for publication in the Official Gazette in the categories for print and audio books without requiring proof of secondary meaning, PX 13, Tr. 127-131, a step which indicates that a PTO trademark examiner has deemed the mark to be a suggestive mark. Defendant intends to file an opposition with the PTO's Trademark Trial and Appeal Board. Tr. 131.
Bennett has received numerous requests to license the mark "The Book of Virtues" for such diverse products as porcelain dolls, television series, motion pictures, public radio, animated videos, multimedia children's series, calendars, and apparel. SF 28. Bennett has granted only a few such requests. See, e.g., SF 13; Bennett Aff. ¶ 36; JX 24. He has licensed the mark to Porchlight Entertainment, Inc. ("Porchlight") for "Adventures From The Book of Virtues," an animated public television series for children which began airing in September 1996. SF 62-64. Videos of the first six episodes are available for sale to the public under that name and mark. SF 64. With Bennett's approval, Porchlight has sublicensed the right to sell t-shirts and certain novelty items associated with the television series, and Porchlight is negotiating with an additional 15 to 20 prospective *285 licensees. See Bennett Aff. ¶ 34, SF 68-70.
Bennett retains full control and approval rights for the "Adventures From The Book of Virtues" television series and the products licensed by Porchlight. Bennett Aff. ¶ 35. Bennett has exercised similar control over the content of The Children's Book of Virtues and the related calendar. Rosen Aff. ¶ 5. Plaintiffs have actively policed unauthorized uses of the mark "The Book of Virtues." Rayman Aff. ¶ 22; JX 50-52, 97.
III. Defendant's Publications and Adoption of the Mark
In the late summer of 1994[3], Michael Viner, the president of Dove, announced to his staff and the staff of Dove's distributor his plan to publish, in early 1995, an audiobook entitled The Children's Audiobook of Virtues under the "Dove Kids" imprint. SF 34; Gilbert Aff. ¶ 7. Viner was solely responsible for selecting the title for The Children's Audiobook of Virtues. SF 38. Viner also planned to release a companion print book, The Children's Book of Virtues, at or about the same time. Viner Aff. ¶ 10; Gilbert Aff. ¶ 20. Only the audiobook was released as scheduled; distribution and advertising commenced in February 1995. SF 41, 46.
The audiobook, which is subtitled "A Library of Moral Learning," is a compilation of ten public domain stories, each read by a well-known actor and musically scored. SF 36; JX 63. Each of the stories was previously recorded and included on at least one other audiobook previously published by Dove. SF 37. As of December 31, 1996, Dove had net sales of 7,422 units of The Children's Audiobook of Virtues, for a gross profit of $23,105.80. SF 75.
As to the conceptual origin of the Dove books and their titles, Viner testified that "virtues is a subject with which I had grown up and in which I have always been interested." Viner Aff. ¶ 8. According to Viner, one of his grade school teachers required that he and his classmates keep a notebook called either a "Book of Virtues" or "Virtues" in which they collected stories about good deeds. Id.; Tr. 202-05. On cross-examination, Viner was asked, in essence, to explain why he decided to publish a "Book of Virtues" in the summer of 1994 some 45 years after grade school and six months after Bennett's success under the title "The Book of Virtues." Viner claimed to have been concerned with the idea of virtues throughout his lifetime, and that 1994 "was the first appropriate time" for publishing a "Book of Virtues" because it coincided with the beginning of Dove's children line. Tr. 204-05. He claimed that he was not "specifically aware" of Bennett's book The Book of Virtues at the time he decided to publish Dove's audiobook, and, although he "may have seen it in passing," he claimed to have "no recollection of it." Tr. 199. Viner acknowledged that he regularly reviewed best-seller lists, at least as to Dove's titles and sometimes more generally. Tr. 200. Plaintiffs' counsel asked Viner if it was his testimony that he "did not know that William Bennett's book, The Book of Virtues, was number one on virtually every best-seller list in the United States from the first week of January of 1994 for 88 consecutive weeks." Viner responded: "I assure you I absolutely did not know that until this moment.... I didn't know the length or the details about being on the best-seller list." Tr. 200-01.
We find it difficult to accept, as a matter of fact, Viner's testimony as to his extremely limited familiarity with plaintiffs' The Book of Virtues in the summer of 1994 and his explanation for his sudden interest in publishing a "Book of Virtues." We believe that Viner significantly understated his awareness of The Book of Virtues and its extraordinary success based on circumstantial evidence which permits us to draw certain adverse inferences and our observations of his demeanor during trial.
Both Sandi Gilbert, Dove's sales and marketing director, and Pat Collins, the sales administration director at Penguin USA, Dove's distributor, acknowledged that they *286 were aware of Bennett's book at the time they first learned that Viner intended to publish The Children's Audiobook of Virtues.[4] Gilbert Aff. ¶ 27; Tr. 140-41. In light of their testimony and the substantial publicity surrounding the publication of The Book of Virtues, including its prominent position on best-seller lists beginning in January 1994, it is hard to believe that a sophisticated publishing executive like Viner would not have been fully aware of the title, general contents, and commercial success of plaintiffs' book when he was deciding to publish books containing a similar mix of stories and fables with a morality message. In short, Viner's claim that he independently recalled the title and concept of his grade school project and that the timing of Dove's publications in relation to plaintiffs' success under a similar title was simply coincidental is not convincing.[5]
Viner testified that he decided to use "Book of Virtues" in Dove's title because "I thought it was a strong title which was likely to sell well, and because `audiobook of virtues' clearly describes the content of the work." Viner Aff. ¶ 12. He also testified that because he has been in the publishing business for more than 25 years, he was "aware of the fact that titles are in general not infringable or protectable," but nonetheless discussed his proposed title with legal counsel and relied on counsel's advice in publishing The Children's Audiobook of Virtues and in planning to publish the companion print book. Id. ¶ 13. Viner claimed that Dove "run[s] every title we publish past one of our attorneys." Tr. 209-10. Viner supplied no details as to the advice concerning The Children's Audiobook of Virtues, and no attorney testified concerning any legal advice given to Viner.
Plaintiffs first learned of Dove's audiobook and planned print book through an advertisement which appeared in the February 6, 1995, issue of Publisher's Weekly. Rayman Aff. ¶ 10; JX 114. By letter dated February 27, 1995, plaintiffs demanded that Dove cease and desist, asserting that Dove's titles were confusingly similar to plaintiffs' title and constituted unfair competition. Rayman Aff. ¶ 12; JX 56. The parties' attorneys exchanged letters through the spring and summer of 1995.
Viner spoke with Seth Gershel, the head of audiobooks at S & S, about Gershel's concern that Dove's planned print book would be confusingly similar to S & S's print book. Viner claimed to have reached an agreement with Gershel on steps Dove would take to avoid potential confusion between Dove's book and S & S's book: (1) the cover of Dove's book would have distinctive coloration, and (2) the "Dove Kids" logo would be moved from its usual place on the book's spine to the title, thereby changing the title so that the work would now be called "The Dove Kids Children's Book of Virtues." Viner testified that he sent a revised cover design to Gershel, and that Gershel responded that S & S's legal department "had reviewed [Dove's] proposed book cover and that they had no problem with it." Id. ¶ 16. Gershel disputed this version of events, testifying that he never reached any agreement with Viner on the proposed cover and title of Dove's book. Tr. 283. Although there is no corroborating documentary evidence supporting the existence of the agreement described by Viner, we find it possible, though unlikely, that Viner actually believed, from his conversations with Gershel, that S & S was satisfied with Dove's proposed changes. In any event, we find that there was in fact no such agreement.
IV. The Strength of Plaintiffs' Mark
Plaintiffs argued that Bennett played a role in resurrecting the word "virtue" from obscurity through the success of his book and his ideas about the importance of teaching *287 virtues. Bennett testified that he wanted to "reintroduce to the contemporary public a term ... which had fallen out of vogue." Bennett Aff. ¶¶ 2, 15. He further testified that "the public thinks of me, my ideas, and the values I publicly espouse, when they hear the words `The Book of Virtues.'" Id. ¶ 18. Indeed, Bennett testified that people have referred to him as "`The Book of Virtues guy'; it is almost as if the title of my book has become my own nickname." Id. ¶ 20.
Dove, on the other hand, introduced evidence primarily the expert testimony of Lynda Boose, professor of English at Dartmouth College in an effort to demonstrate that the "The Book of Virtues" lacks strength as a source-identifying mark. Boose testified that the word "book" or the phrase "the book of" in book titles is an extremely common literary convention, and that the word "of" in such titles almost always means "about" or "concerning." See Boose Aff. ¶¶ 6-13. According to Boose, hundreds, perhaps thousands, of book titles contain the phrase "the book of" where "of" means "about" citing examples such as The Book of Mormon, The Book of Dogs, and The Book of Time and that "very rarely is a book which includes `the book of' in its title the singular book about its subject matter, i.e., the book, so that the word `the' thus constitutes exactly the opposite of its usual meaning," connoting definitiveness. Id. ¶ 12.
Boose also testified that the phrase "book of virtues" or similar phrases have been used repeatedly as the title of works about virtues "since the earliest days of the recorded word." Id. ¶ 14. According to Boose, the earliest classical use of the phrase was Aristotle's book Of Virtue in the Nicomachean Ethics, the precursor of most philosophical works in the field of "virtue-ethics," and that Xenocrates (the third century head of Plato's school) and Theophrastus (successor to Aristotle) both wrote works with "the already standard, generic title Of Virtues." Id. ¶ 15. Cicero's The Book of Virtues ("De Virtutibus Libri") survives from the first century B.C., and the title Of Virtues was used by Epicurus (in Morals), Epictetus (in Discourses), Marcus Aurelis (in Meditations), and St. Thomas Aquinas (in his thirteenth-century Summa Theologica). Montaigne's Essays includes one entitled "Of Virtue," and similarly titled works appear from Spinoza (in the Ethics), John Locke (in Human Understanding) and Immanuel Kant (in The Metaphysics of Morals). Boose placed many of these works, both in title and content, into what she termed the "advice book" genre. She identified the features of this genre as setting forth the virtues defined by Aristotle, Plato, and other philosophers, and either discussing the virtues individually in laymen's terms or illustrating them with parables. Boose claimed that "plaintiffs' book is merely one more example of this type of book; it compiles non-original parables illustrative of the classical virtues and applies a non-original and time-tested `book of virtues' title."[6]Id. ¶ 20.
Notably lacking from Boose's testimony and report, however, was the mention of a single book sold to the American consuming public, other than plaintiffs', that has the title "The Book of Virtues" in the modern English language.[7] Tr. 172-76. At trial, Boose identified *288 one title in the modern English language, not mentioned in her report, which includes both the words "book" and "virtues" The Book of Bad Virtues. Tr. 172. However, that book is a parody published by S & S of Bennett's book and is thus largely irrelevant to the issues presented by this case.
The Court finds that Boose's expert opinion as to the source-identifying strength of the mark "The Book of Virtues," is entitled to reduced weight for two principal reasons. First, Boose's testimony is premised, at least in part, on her dissection of the mark in order to analyze it. Boose separately analyzed the phrase "The Book of" and the word "Virtues," Tr. 175, 189-90, thus failing to recognize that even if separate components of a mark are generic, the composite may nonetheless be protectable. Also, Boose's conclusion that "the same or closely similar marks have been used ... over and over again since the earliest days of recorded work" appears to rely on an overly broad definition of "the same or closely similar marks" that includes any title which uses the word "virtue" or any title that uses the word "book" and the word "virtue." Tr. 174-75. As previously noted, however, Boose failed to note one book in the modern English language with the exact title of plaintiffs' book, "The Book of Virtues." Second, Boose's report opines as to how the mark would be viewed by "scholars" and "literary scholars," Boose Aff. ¶¶ 4, 22, ignoring the fact that the academic book market is not the intended market for plaintiffs' or defendant's products. SF 44, 57. Boose admitted that she has no knowledge of the book-purchasing habits of parents with small children. Tr. 161-62.
Substantial evidence was presented at trial of news articles and other media references to plaintiffs' The Book of Virtues. E.g., JX 18, 32-41, 46, 103, 105. However, not a single such article or reference refers to a class of books as "books of virtue"; all use the phrase "The Book of Virtues" to refer specifically to Bennett's book and its spin-off products.
As noted above, Bennett has received numerous requests to license his mark on diverse products, offering advances, fees, and royalties. Although a few small publishers planned to publish their own collections of fables and poems with a morality message under the mark "The Book of Virtues" or a closely similar title, S & S and Bennett's attorney have objected to all such uses of the mark, and no publisher except for Dove has published under the challenged title. SF 58-60. Accordingly, the Court finds that there are no unchallenged uses of plaintiffs' mark "The Book of Virtues."
Plaintiffs introduced evidence, largely uncontested by Dove, demonstrating that plaintiffs' various products under the mark "The Book of Virtues" achieved tremendous, rapid success in the marketplace, and that S & S and Bennett have engaged in extensive promotional efforts to promote the products sold under this mark. Bennett also testified that he has received hundreds of letters recounting what his book means to people and their families, how they have used it, and what other kinds of materials they would like to see produced by plaintiffs.[8] Bennett Aff. ¶ 23; JX 104.
Plaintiffs have engaged in substantial advertising and promotional efforts for these products, including advertising in national media, Bennett's appearances on national television and radio programs and at paid lectures throughout the United States, elaborate point-of-purchase displays for retail outlets, and specialized promotional efforts for "niche" markets such as schools and libraries. E.g., Martin Aff. ¶ 25; Dooling Aff. ¶ 4; Dana Aff. ¶ 10; SF 26; JX 10. Plaintiffs have expended over $1.1 million promoting and advertising various The Book of Virtues products. SF 29. S & S also promoted the books in its various catalogues. JX 7. Retailers of these products have engaged in their *289 own promotional efforts, as has Porchlight, the producer of the PBS television series.
V. The Relevant Market and Consumers
Both parties' print books and audiobooks relevant to this litigation were intended to be marketed in retail outlets throughout the country, and the books are sold through the same marketing channels, to the same wholesale and retail customers. SF 57. Indeed, "it is almost inevitable that these titles will appear on the same shelf or in the same location" in certain stories. Martin Aff. ¶ 29. S & S's books and Dove's books also have comparable prices. Id.
There was conflicting evidence on whether purchases of the books at issue are "impulse-driven" purchases or whether they are the result of more extensive consideration by consumers. Viner testified that parents purchasing books for their children "are apt to exercise an extremely high degree of care in making their decisions." Viner Aff. ¶ 20. However, there was also evidence that while a consumer may initially go to a store intending to purchase a specific book, once in the store, the consumer's purchases are often impulse-driven, resulting in the purchase of another book or additional books because the title or cover captures the eye. See Jacoby Aff. ¶ 52. This more complex explanation of purchasing habits seems credible.
VI. Consumer Survey Evidence
The parties presented the results of two consumer surveys designed to assess the likelihood of actual confusion between S & S's books and Dove's books. Jacob Jacoby, a professor of consumer behavior and the president of a consumer research firm, designed plaintiffs' survey (the "Jacoby Survey"). Norman Passman, the chairman of a market research firm and an instructor on marketing, prepared Dove's survey (the "Passman Survey"). Dove also presented the expert testimony of Michael Rappeport, a partner at a consumer marketing company, who was retained to critique the Jacoby Survey.
Not surprisingly, the results of the two surveys diverged markedly. The Jacoby Survey concluded that approximately 36 percent of potential consumers are likely to be confused into believing that plaintiffs' and defendant's products are the same or emanate from the same source for reasons with trademark significance. Jacoby Aff. ¶ 51. The Passman Survey concluded that a maximum of 6.6 percent of survey respondents were confused for trademark-related reasons about the source or sponsor of Dove's books. Passman Aff. ¶ 18.
Jacoby and Passman used quite different approaches in designing their respective surveys. The Jacoby Survey used a product line-up or "Squirt" format.[9] Respondents are generally shown a line-up of products, including both the junior and senior marks, and then asked whether the junior and senior marks are put out by the same or different companies. See Itamar Simonson, "The Effect of Survey Method on Likelihood of Confusion Estimates: Conceptual Analysis and Empirical Test," 83 Trademark Rptr. 364, 370-71 (1993) (hereinafter, "Simonson"). The Passman Survey employed a variation of the "Eveready" format.[10] In such a survey, respondents are generally shown only the junior product (or brand name) and asked questions such as: (1) Who do you think puts out this product? (2) What makes you think so? and (3) Name any other products put out by the same concern which puts out this product. Respondents naming the senior manufacturer or its products provide evidence of likelihood of confusion. Simonson, supra, at 368-69.
In the Jacoby Survey, respondents were first shown a line-up of three books, one of which was always plaintiffs' audiobook The Children Book of Virtues, plaintiffs' print book The Children Book of Virtues, or a reproduction of the print book's cover; the other two items were controls unrelated to this litigation. These items were then replaced by three other items, one of which *290 was always Dove's audiobook, The Children's Audiobook of Virtues, or a reproduction of the cover art for Dove's unpublished print book, The Children's Book of Virtues; the other two items were controls. Respondents were then asked with regard to each of the items in the second array of products: "Is it or isn't this another version of any of the books[11] that I showed you earlier?" If the answer was in the affirmative, the respondent was asked to explain his or her reasons for saying that it was such a version, and the item was put aside. Only if the answer was in the negative, i.e., that the item in the second array was not a version of any item previously shown, were additional questions asked, such as whether the product was "another in the same series as any of the books[12] that I showed you earlier?" or whether the item was prepared by the same author or editor as an item previously displayed, whether the item came from the same publisher that put out one of the previous items, and whether the products are connected in any way. if the respondent answered any one of these questions affirmatively, the respondent was asked to explain his or her answer, the item was put aside, and the remaining questions were not asked.
Dove attacked the Jacoby Survey on several fronts, but we find that the survey suffered from only one significant flaw: the ambiguous wording of the main question designed to test for likelihood of confusion.[13] The question asked was: "Is it or isn't this another version of any of the books that I showed you earlier?" The problem with this question is the ambiguity of the word "version" in the context of a likelihood of confusion survey. A respondent's identification of a Dove product as another "version" of plaintiffs' product does not necessarily mean that the respondent cannot distinguish the products or believes plaintiffs are the source of Dove's product. The statement that one publication is another "version" of another publication may carry any number of possible meanings: that it is an earlier (but identical) edition; that it is the same work in a different medium; that it is part of a series of two or more similar and related works; that it is a translation of a work into another language; or that it is a variant form of works in the same genre. Rappeport provided a useful example of this ambiguity in his testimony. A respondent might agree that Coke and Pepsi are different "versions" of soft drinks, meaning that they are both different examples of the same class of beverage. The same respondent might also agree that Coke and Diet Coke are different "versions" of soft drinks, meaning that they are different examples of the same beverage. Rappeport Aff. ¶ 14. In these two cases, the word "version" obviously means different things. Neither statement necessarily has trademark significance because in both cases it is impossible to say whether the respondent was confused into believing anything about the source or origin of Coke, Pepsi, or Diet Coke. Another example of the ambiguity in the word "version" was provided at trial, when Jacoby was asked if "Batman" was another version of "Superman." Jacoby agreed that "it could conceivably be, yes.... It depends on how you define that version." Tr. 93.
But the Jacoby Survey never defined the word "version" or elicited a definition of "version" from the survey respondents. Thus, there is no way of knowing which meaning of the word "version" the respondents intended. Although the Jacoby Survey asked other questions which could be considered indicators of trademark confusion such as whether the books were in the same series, or whether the books were put out by the same publisher and editor these questions were only asked if the respondent answered the ambiguous "version" question negatively. In other words, survey respondents who stated *291 that they believed the Dove publication was another "version" of plaintiffs' publication were not asked the remaining questions. Thus, the Court cannot simply exclude from the survey the respondents who answered the ambiguous "version" question affirmatively. Because of the ambiguity of the "version" question, the Court assigns significantly reduced weight to the Jacoby Survey's results.
In the Passman Survey, respondents were shown either defendant's audiobook, The Children's Audiobook of Virtues, or the cover art for defendant's proposed print book, The Children's Book of Virtues. Respondents were not shown any of plaintiffs' products. The Dove item was removed from sight, and respondents were questioned regarding possible confusion with respect to the origin or sponsorship of the product which had been shown to them. Specifically, all respondents were asked "Have you seen or heard of this book before?" If the respondent answered affirmatively, certain follow-up questions were asked, including (1) "What made you say so?" (2) "What else, if anything, do you know about the book?" (3) "Can you tell me the name of the author or editor of the book you have seen or heard of?" and (4) "Can you tell me the name of the publisher of the book you have seen or heard of?" Regardless of their answer to the question "Have you seen or heard of this book before?" All respondents were asked whether they connected defendant's books with any other book, and, if so, they were asked the name, author, editor, and publisher of the book they associated with defendant's book.
Because respondents were not shown any of plaintiffs' products, Passman conceded that his survey confronted only conscious confusion, or "top-of-mind" awareness. Tr. 247-48. The Passman Survey did not attempt to determine the level of confusion that would might result on an "aided" awareness basis. Id. Nor did it attempt to ascertain whether respondents believed that defendant's and plaintiffs' products emanated from a common, albeit anonymous, source. Tr. 249. These factors may have tended to underestimate significantly the likelihood of confusion found. Perhaps most importantly, the "Eveready" survey design selected by Passman may not have been the most appropriate format given the type of product: at issue in this litigation. As one author in this area has recognized, surveys of this type are "less likely to reveal confusion if respondents think that the junior mark is the senior mark ... and do not know the name (or products) of the company that puts out the senior mark."[14] Simonson, supra, at 369. Because the marks at issue in this litigation are the titles of books rather than the names of common household products, the Passman Survey's underestimation of the likelihood of confusion may be significant. Only those persons who have heard of plaintiffs' books could be expected to show any confusion with defendant's books.
DISCUSSION
I. The Lanham Act Claim
Section 43(a) of the Lanham Act prohibits any person from using
in connection with any goods ... any word, term, name, symbol, or device, or any combination thereof ... which ... is likely to cause confusion, or to cause mistake, or to deceive ... as to the origin, sponsorship, or approval of his or her goods ... by another person.
15 U.S.C. § 1125(a). Its purpose is "to prevent consumer confusion regarding a product's source and to enable those that fashion a product to differentiate it from others on the market." Centaur Communications, Ltd. v. A/S/M Communications, Inc., 830 F.2d 1217, 1220 (2d Cir.1987). This section is the only provision in the Lanham Act that protects an unregistered mark like plaintiffs'. Id. "[T]he general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark *292 is entitled to protection under § 43(a)." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768, 112 S.Ct. 2753, 2757, 120 L.Ed.2d 615 (1992). In order to prevail on a claim of trademark infringement in violation of the Lanham Act, a plaintiff must show (1) that it has a valid mark that is entitled to protection, and (2) that use of the defendant's mark infringes, or is likely to infringe, the plaintiff's mark. See, e.g., Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1508 (2d Cir. 1997).
A. The Protectability of Plaintiffs' Mark
The first issue confronting us is whether plaintiffs' mark "The Book of Virtues" is eligible for protection under the Lanham Act. Since plaintiffs' mark is unregistered, they bear the burden of proving that "The Book of Virtues" is a valid trademark.[15]See Reese Publishing Co. v. Hampton Int'l Communications, Inc., 620 F.2d 7, 11 (2d Cir.1980). In Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4 (2d Cir. 1976), Judge Friendly set forth four categories of terms, each one conferring a differing degree of eligibility for trademark protection. "Arrayed in an ascending order which roughly reflects their eligibility to trademark status and the degree of protection accorded, these classes are (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful." Abercrombie & Fitch, 537 F.2d at 9. Suggestive, arbitrary and fanciful marks, because their intrinsic nature serves to identify a particular source of a product, are deemed inherently distinctive and are entitled to protection. Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 973 F.2d 1033, 1040 (2d Cir.1992). Generic marks are never entitled to protection, while a descriptive mark is eligible for protection if it has become distinctive of the producer's goods in commerce. This distinctiveness is generally called secondary meaning.[16]Id.
Judge Schwartz found in his prior Opinion that plaintiffs' mark was not generic. See 936 F.Supp. at 161. After analyzing the case law on the categorization of marks and taking into consideration factual material submitted in connection with Dove's Rule 12(c) motion Judge Schwartz concluded, in effect, that there were no material issues of fact on this issue that precluded him from finding that the mark "The Book of Virtues" was not generic.
At trial, plaintiffs urged the Court to categorize their mark as suggestive, as a PTO trademark examiner has done, while defendant continued to press its disagreement with Judge Schwartz's ruling that the mark was not generic. At the conclusion of trial, the Court directed the parties to submit proffers of additional evidence they would introduce if the Court were to reopen the inquiry into whether the mark is generic. As noted above, see supra n. 6, Dove's proffer consisted only of the unredacted, original report of its expert, Lynda Boose, and testimony consistent therewith.
Consideration of Dove's proffer satisfies the Court that no further proceedings are necessary with reference to the issue of whether the mark "The Book of Virtues" is generic. Dove's proffer did not consist of any additional factual material but rather Boose's opinion, based on facts already in evidence, that the mark "The Book of Virtues" is generic. The Court has reviewed Boose's unredacted expert report (Court Exhibit *293 I). Independently of Judge Schwartz's prior determination, we conclude that plaintiffs have adequately demonstrated that their mark is not generic. The evidence before the Court does not establish that the mark "The Book of Virtues" "refers, or has come to be understood as referring, to the genus of which the particular product is a species." Abercrombie & Fitch, 537 F.2d at 9. Plaintiffs' The Book of Virtues is not literally a "book of virtues," nor is it referred to as such in common speech or in news articles and book reviews. Compare Reese Publishing, 620 F.2d at 11 n. 1 ("Video Buyer's Guide" was generic because "it names a whole class of magazines, i.e. video buyer's guides"); CES Publishing Corp. v. St. Regis Publications, Inc., 531 F.2d 11 (2d Cir.1975) ("Consumer Electronics Monthly" was generic as applied to trade publication; "one might intelligibly speak of both plaintiff's and defendant's magazines as `consumer electronics monthlies'"). Rather, the evidence shows that The Book of Virtues and Dove's publications are referred to by consumers and journalists as books containing short stories, fables, and poems with a morality message. Unlike the situation in CES Publishing, it would not be difficult for Dove and other publishers to identify their collections of short stories and fables without using the phrase "book of virtues" in their titles. Compare CES Publishing, 531 F.2d at 15. Furthermore, while there have been numerous treatises on the subject of virtue with the word "virtue" featured in the title, there is no evidence of another book in the modern English language with the title "The Book of Virtues."
Plaintiffs' contention that the mark is suggestive is also not persuasive. A suggestive mark suggests or conveys an impression of the product, though it, may take imagination to grasp the nature of the product. E.g., Gruner + Jahr USA Printing & Publishing v. Meredith Corp., 991 F.2d 1072, 1076 (2d Cir.1993); Estee Lauder, 108 F.3d at 1509. In contrast, a mark is classified as descriptive if it "tells something about a product, its qualities, ingredients, or characteristics." Id. Plaintiffs' mark cannot be categorized as suggestive because it does not require thought and imagination to recognize that a product sold under the mark "The Book of Virtues" is a book touching upon the subject of virtues. In sum, we conclude that "The Book of Virtues" is a descriptive mark because it conveys an immediate idea of the ingredients, qualities, or characteristics of the plaintiff's product a book dealing in some fashion with the subject of virtues.
B. Secondary Meaning
A descriptive mark is entitled to protection under the Lanham Act only if it has acquired secondary meaning, that is to say, "an identity that consumers associate with a single source, even though the source itself may be unknown." Gruner + Jahr, 991 F.2d at 1076. A mark acquires secondary meaning when "it [is] shown that the primary significance of the term in the minds of the consuming public is not the product but the producer." Centaur Communications, 830 F.2d at 1221. Secondary meaning in a literary title occurs "where the title is sufficiently well known that consumers associate it with a particular author's work." Rogers v. Grimaldi, 875 F.2d 994, 998 (2d Cir.1989); Tri-Star Pictures, Inc. v. Leisure Time Productions, B.V., 749 F.Supp. 1243, 1252 (S.D.N.Y.), aff'd, 17 F.3d 38 (2d Cir.1994).
Plaintiffs must establish that their mark acquired secondary meaning "before its competitor commenced use of the mark." Paper-Cutter, Inc. v. Fay's Drug Co., 900 F.2d 558, 564 (2d Cir.1990); Black & Decker Corp. v. Dunsford, 944 F.Supp. 220, 227 (S.D.N.Y. 1996). Here, defendant began to advertise and sell its allegedly infringing audiobook in February 1995, so the question before the Court is whether plaintiffs have demonstrated that the mark "The Book of Virtues" acquired secondary meaning prior to February 1995.[17]
*294 The Second Circuit has identified six elements that a court should evaluate in determining the existence of secondary meaning: (1) advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and (6) length and exclusivity of the mark's use. Thompson Medical Co. v. Pfizer, Inc., 753 F.2d 208, 217 (2d Cir.1985); Centaur Communications, 830 F.2d at 1222. We consider each below.
1. Advertising Expenditures
As noted above, The Book of Virtues was advertised extensively in major publications. By the end of 1996, plaintiffs had spent over $1.1 million promoting and advertising their various products sold under the mark "The Book of Virtues." SF 29. Although plaintiffs have not broken down the $1.1 million figure to show how much was spent before February 1995 and how much was spent after that date, the record nonetheless reflects that plaintiffs promoted The Book of Virtues extensively in 1993 and 1994 through various means. Upon publication of The Book of Virtues, Bennett embarked on a national tour promoting the book on television and radio programs, and he publicized The Book of Virtues during dozens of paid lectures throughout the United States in 1993 and 1994. S & S also included The Book of Virtues in various of its catalogues, including its Fall 1993 catalogue. This factor favors plaintiffs.
2. Consumer Studies
Plaintiffs did not introduce any study attempting to demonstrate consumers' association of the mark "The Book of Virtues" with plaintiffs. Thus, this element is inconclusive.
3. Unsolicited Media Coverage
There was significant media coverage of The Book of Virtues from its publication in 1993 and continuing through early 1995 that appears to have been the result of independent editorial judgments that The Book of Virtues was newsworthy. Reviews of the book were printed in numerous newspapers and magazines, and New York magazine cited the book as one of 1993's best Christmas gifts. Time devoted a full-page essay to The Book of Virtues and the popular appeal of Bennett's message in March 1994. Newsweek featured Bennett on its cover in June 1994, stated that The Book of Virtues "remains hot beyond expectations," and referred to Bennett as "a cottage industry of character education" when discussing his plans for releasing future products in "The Book of Virtues" series. The Book of Virtues was also featured in a campaign commercial aired in California during the 1994 Senate race. The evidence establishes a significant amount of national and local media coverage of The Book of Virtues prior to defendant's entrance into the market.
4. Sales Success
Defendant concedes that this element favors plaintiffs. See Def. Mem. at 14. The Book of Virtues was a hit book upon its release in November 1993, reaching the number one position on The New York Times best-seller list in January 1994. By February 1995, The Book of Virtues had been on The New York Times best-seller list for 60 consecutive weeks S & S's two audiobooks based on The Book of Virtues published in May and November 1994 also sold well.
5. Attempts to Plagiarize
This element also weighs in plaintiffs' favor. There is compelling circumstantial evidence that Dove intentionally copied plaintiffs' mark "The Book of Virtues" in order to capitalize on plaintiffs' success. First, the titles and subtitles of the books at issue evidence deliberate copying. Plaintiffs' book, The Book of Virtues, is subtitled "A Treasury of Great Moral Stories." Dove's audiobook, The Children's Audiobook of Virtues, is subtitled *295 "A Library of Moral Learning." Second, the timing of Dove's publications in relation to plaintiffs' release of The Book of Virtues in hardcover and in audiobook format strongly supports an inference of deliberate copying. The Book of Virtues was published in hardcover in November 1993, and the first audiobook followed in May 1994. During the spring and early summer of 1994, the news media devoted significant attention to The Book of Virtues and the popular chord Bennett had apparently struck with the book. Sometime later that summer, Viner announced to Dove's staff his plan to publish The Children's Audiobook of Virtues and The Children's Book of Virtues. Viner testified that it was essentially a coincidence that Dove's publications were planned when they were, but this testimony is simply not credible. Viner equivocated when asked whether he was aware of plaintiffs' The Book of Virtues prior to deciding to publish Dove's books. As we have stated, supra at 285-286, the Court does not believe that a publishing executive as savvy as Viner, planning to release an audiobook containing children's stories with a morality message, would not have been familiar with plaintiffs' The Book of Virtues, which contained similar content and which had met with extraordinary commercial success. Viner's claim that he drew inspiration for the concept and title of Dove's books from a grade-school project 45 years before is also not persuasive. The nature of Dove's audiobook which was merely a repackaging, under a new title and cover, of ten stories that had been previously released on earlier Dove audiobooks suggests that Dove's audiobook was produced quickly from stock materials in order to capitalize on plaintiffs' success under The Book of Virtues mark, rather than being the product of Viner's independent creativity, inspired by grade-school memories.
While coincidences may sometimes occur, there is simply too much circumstantial evidence of deliberate copying to credit that explanation here.
6. Length and Exclusivity
"[N]o absolute time span can be posited as a yardstick in cases involving secondary meaning." Centaur Communications, 830 F.2d at 1225. Rather, the length and exclusivity of a mark's use must be evaluated "in light of the product and its consumers." Id. Although Dove's expert, Professor Boose, testified to uses of the word "virtue" and the word "book" in the titles of various classical and modern texts, she could point to no other book in the modern English language with plaintiffs' title, "The Book of Virtues." Thus, Boose's testimony does not significantly detract from plaintiffs' contention that they are the exclusive modern day user of the mark "The Book of Virtues." Plaintiffs used this mark on three separate products (the original hardcover book and two audiobooks) for 15 months before Dove published The Children's Audiobook of Virtues in February 1995. In the context of book sales, 15 months of exclusive use is a sufficiently lengthy period to conclude that this element weighs in favor of a finding of secondary meaning.
* * *
In sum, five of the six elements identified in Thompson Medical, supra, weigh in favor of a finding of secondary meaning in the title "The Book of Virtues." The absence of any consumer study bears only peripherally on the analysis of plaintiffs' mark; no single factor among the six is determinative, and "every element need not be proved." Thompson Medical, 753 F.2d at 217; Centaur Communications, 830 F.2d at 1222. Plaintiffs have presented sufficient evidence demonstrating that plaintiffs' print book and audiobooks sold under the title "The Book of Virtues" were well known among book consumers and that the title was closely associated in the public's mind with Bennett well before Dove released its audiobook in February 1995. Plaintiffs engaged in substantial promotional efforts, the press devoted significant unsolicited coverage to The Book of Virtues and its author, and The Book of Virtues was firmly entrenched on best-seller lists for much of 1994. Based on this evidence, as well as the circumstantial evidence of Dove's intentional copying of plaintiffs' title, the Court concludes that plaintiffs have demonstrated secondary meaning in their title "The Book of Virtues."
*296 C. Likelihood of Confusion
The test for trademark infringement is whether the defendant's use of a designation as a trademark creates a likelihood of confusion. Estee Lauder, 108 F.3d at 1508-09. "The issue of likelihood of confusion turns on whether `numerous ordinar[il]y prudent purchasers are likely to be misled or confused as to the source of the product in question because of the entrance in the marketplace of defendant's mark.'" Id. at 1510 (quoting Gruner + Jahr, 991 F.2d at 1077). Likelihood of confusion means a probability of confusion; "it is not sufficient if confusion is merely `possible.'" Id. (citation omitted).
1. First Amendment Concerns
Relying on Rogers v. Grimaldi, 875 F.2d 994 (2d Cir.1989), Dove contends that its titles cannot be found to violate the Lanham Act because they have artistic relevance to the underlying works and its titles do not "explicitly mislead" as to the source or content of Dove's works. See Def. Mem. at 2-4. While the Court agrees that concerns of free expression must inform our analysis, we disagree with Dove's contention that its titles must be found to be "explicitly" misleading in order to violate the Lanham Act.
In Rogers v. Grimaldi, the Second Circuit stated that "[t]he purchaser of a book, like the purchaser of a can of peas, has a right not to be misled as to the source of the product." Rogers, 875 F.2d at 997-98. Nonetheless, Rogers recognized that First Amendment concerns must "inform our consideration of the scope of the [Lanham] Act as applied to claims" involving the titles of artistic works. Id. at 998. Rogers involved a claim by Ginger Rogers that a movie entitled "Ginger and Fred" created the false impression that the film was about her and Fred Astaire or had her endorsement, when in fact it was an account of two fictional Italian cabaret performers who imitated Rogers and Astaire in their performances. The Second Circuit held that
in general the [Lanham] Act should be construed to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression. In the context of allegedly misleading titles using a celebrity's name, that balance will normally not support application of the Act unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work.
Id. at 999. In a footnote following this text, the Circuit stated that "[t]his limiting construction would not apply to misleading titles that are confusingly similar to other titles. The public interest in sparing consumers this type of confusion outweighs the slight public interest in permitting authors to use such titles." Id. at 999 n. 5.
In light of the Circuit's limitation on the reach of the Rogers standard, Dove's argument that its titles do not "explicitly mislead" (i.e. Dove's books are not titled "William Bennett's Book of Virtues") misses the mark. Rogers did not require that such a test be applied when a title is misleadingly similar to another title. Rather, Rogers set forth a balancing approach "generally applicable to Lanham Act claims against works of literary expression." Cliffs Notes, Inc. v. Bantam Doubleday Dell Publishing Group, Inc., 886 F.2d 490, 494-95 (2d Cir.1989) (applying Rogers to allegedly infringing parody of study guide); see also Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1379 (2d Cir.1993) (applying Rogers to allegedly infringing guide to television program). A literary title can be misleading "in the sense that it induces members of the public to believe the [b]ook was prepared or otherwise authorized by [plaintiffs]. This determination must be made, in the first instance, by application of the venerable Polaroid factors." Twin Peaks, 996 F.2d at 1379 (referring to factors for likelihood of confusion set forth in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961)). However, the finding of likelihood of confusion must be "particularly compelling to outweigh the First Amendment interest recognized in Rogers." Id. Accordingly, we consider the relevant Polaroid factors and whether plaintiffs have made a "particularly compelling" showing of likelihood of confusion that outweighs the public interest in free expression.
*297 2. The Polaroid Factors
a. Strength of the Mark
A mark's strength "ultimately depends on the degree to which the designation is associated by prospective purchasers with a particular source." Estee Lauder, 108 F.3d at 1510 (quoting Restatement (Third) of Unfair Competition § 21 comment I (1995)). The strength of a mark depends upon both its "conceptual" strength (i.e., whether the mark is categorized as generic, descriptive, suggestive, or arbitrary) and strength "in its commercial context." Centaur Communications, 830 F.2d at 1225-26; Hasbro, Inc. v. Lanard Toys, Ltd., 858 F.2d 70, 76 (2d Cir. 1988). In considering the strength of a trademark in a publication title, "the time and size of circulation and consumer identification are examined." Centaur Communications, 830 F.2d at 1226.
As a descriptive mark, the mark "The Book of Virtues" is, "by definition, somewhat weak. Yet, a mark's category is not alone controlling." Id. Here, as in Centaur Communications, there is persuasive evidence of the mark's strength in its commercial context: the tremendous and rapid sales success of The Book of Virtues, plaintiffs' extensive promotional efforts during 1993 and 1994, the substantial quantity of unsolicited media coverage during that period, and the number of third-party requests to license the mark. Considered together, we think this evidence demonstrates that an appreciable number of consumers associate the book title "The Book of Virtues" with Bennett, or, at least, a single anonymous source. The evidence of sales success and promotional activities is far more compelling here than it was in Centaur Communications, where the court nonetheless concluded that the descriptive magazine title "Marketing Week" had "achieved relative if not great strength in its market context." Id.
Despite the fact that "The Book of Virtues" is only a weak descriptive mark, plaintiffs' title had substantial source-identifying strength by the time Dove entered the market in February 1995.[18] Thus, this factor favors plaintiff.
b. Degree of Similarity
The second Polaroid factor is the degree of similarity between the senior and junior users' marks. "The comparison of marks is an inquiry designed to determine the `general impression conveyed to the purchasing public by the respective marks.'" Hasbro, 858 F.2d at 77 (quoting C.L.A.S.S. Promotions, Inc. v. D.S. Magazines, Inc., 753 F.2d 14, 17 (2d Cir.1985)).
Dove's titles "The Children's Audiobook of Virtues" and "The Children's Book of Virtues" although not identical to plaintiffs' title "The Book of Virtues" are nonetheless quite similar. The addition of the word "Children's" and the word "Audio" on Dove's audiobook do not fundamentally change the character of plaintiffs' mark. The two added words could foster a belief among consumers that the Dove books are special versions of The Book of Virtues emanating from the same source as plaintiffs' best-selling book. Moreover, the subtitles of the parties' respective books also share some similarities.
Defendant contends that the "Dove Kids" logo on the cover of its books gives its titles a degree of phonetic and visual distinction. However, the logo is relatively insignificant *298 in the overall scheme of the products' titles and covers. An employee of Dove's distributor testified, and the Court agrees, that the inclusion of the logo on the cover of Dove's proposed print book between the words "The" and "Children's Book of Virtues" did not make it part of the title. Tr. 57. Nevertheless, the presence of the Dove logo, and the absence of any reference to Bennett, are still relevant factors in assessing the likelihood of confusion.
On balance, this factor tips in plaintiffs' favor, especially when considered in conjunction with the products' close competitive proximity, discussed below.
c. Competitive Proximity
The third Polaroid factor is the "competitive proximity" of the products, which is measured, in part, with reference to the first two Polaroid factors. See, e.g., Centaur Communications, 830 F.2d at 1226. As Dove concedes, this factor favors plaintiffs. See Def. Mem. at 19. The parties stipulated that their respective publications were intended to be marketed in retail outlets throughout the country and that the books are sold through the same marketing channels, to the same wholesale and retail customers. Indeed, there was testimony that the parties' books will often appear on the same shelf or in the same location in certain stories.
d. Bridging the Gap
This factor looks to whether the senior user of the mark is likely to enter the market in which the junior user is operating, that is, "bridge the gap." Centaur Communications, 830 F.2d at 1227. "If the senior user can show such an intention, it `helps to establish a future likelihood of confusion as to source.'" Id. (quoting Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 874 (2d Cir.1986)).
Dove concedes the likelihood that plaintiffs would bridge the gap since the parties are direct competitors, but Dove argues that this factor is entitled to reduced weight because the parties are in the same business, book publishing. See Def. Mem. at 20. There is support for this view. See, e.g., Bristol-Myers Squibb, 973 F.2d at 1044. However, other cases indicate that although the parties operate in the same market, "this very fact indicates that a greater likelihood of confusion exists than if they operated in different markets." Hasbro, 858 F.2d at 78. Thus, we consider this factor to slightly favor plaintiffs.
e. Actual Confusion
The fifth Polaroid factor examines whether any consumers had actually been confused by the products bearing the allegedly confusing marks. Evidence is generally anecdotal in nature or takes the form of a market research survey. Centaur Communications, 830 F.2d at 1227. "Evidence of actual confusion is not required to prove the likelihood of confusion." Id.; see also Lois Sportswear, 799 F.2d at 875 ("actual confusion need not be shown to prevail under the Lanham Act, since actual confusion is very difficult to prove and the Act requires only a likelihood of confusion as to source").
Plaintiffs did not introduce any significant anecdotal evidence of actual consumer confusion. We decline to draw any negative inference from plaintiffs' lack of such evidence because of the relatively short time approximately six months that Dove's audiobook was on the market before sales were enjoined. See Hasbro, 858 F.2d at 78 (finding lack of actual confusion inconclusive where defendant's product was marketed for eight months); Lois Sportswear, 799 F.2d at 875 (where defendant's sales had been "minimal" thus far, "[i]t would be unfair to penalize [plaintiff] for acting to protect its trademark rights before serious damage has occurred").
The parties did, however, conduct consumer surveys designed to test the likelihood of confusion. The Jacoby Survey, commissioned by plaintiffs, demonstrated a fairly high 36 percent level of consumer confusion, but, as described above, supra at 290-291, there was an ambiguity in the wording of the Jacoby Survey's key question and we assign it significantly reduced weight. We cannot be assured that the 36 percent figure is a valid indicator of the percentage of survey respondents who were confused for trademark-related reasons. The Passman Survey, commissioned by Dove, found a relatively low 6.6 percent level of consumer confusion. However, as noted above, supra at 291, the *299 Passman Survey's methodology a variant of the Eveready survey format, which measures "top-of-mind" awareness may significantly underestimate the likelihood of confusion in cases where the survey respondents are not familiar with the senior users' product. Accordingly, we assigned reduced evidentiary significance to the results of the Passman Survey.
Evaluating the results of the two consumer surveys together, and giving due weight to their respective limitations, we conclude that the surveys are probative of a likelihood of confusion as to source, but only to a very limited degree. On balance, we consider this Polaroid factor to be neutral or, at most, tip only slightly in plaintiffs' favor.
f. Junior User's Good Faith
This factor examines the good faith of the junior user in selecting the mark. Evidence of intentional copying raises a presumption that a second comer intended to create a confusing similarity of appearance and succeeded. See, e.g., Warner Bros., Inc. v. American Broadcasting Cos., 720 F.2d 231, 246-47 (2d Cir.1983); Centaur Communications, 830 F.2d at 1228 ("awareness [of defendant's mark] can give rise to an inference of bad faith").
As discussed above in connection with secondary meaning, there is compelling circumstantial evidence that Dove copied plaintiffs' mark "The Book of Virtues" in order to capitalize on plaintiffs' success and the goodwill associated with plaintiffs' mark. See, e.g., Spring Mills, Inc. v. Ultracashmere House, Ltd., 689 F.2d 1127, 1134-35 (2d Cir. 1982) (discussing evidence that defendants adopted their mark "for no other purpose than to obtain a free ride on the good reputation of their successful competitor"). Viner's purported innocent explanation for the similarity of the marks and the timing of Dove's release essentially, that it was a coincidence is not persuasive. Viner also testified that he believed that book titles are, in general, not infringable or protectable and that he consulted with an attorney before proceeding with Dove's titles. It is hard to believe that an experienced publisher could seriously believe that book titles are "in general" not infringable or protectable. Had Viner received any legal advice concerning titles during his publishing career, he would undoubtedly have been informed, as the leading trademark treatise's section on literary and artistic rights begins, that "[i]n general, [literary] titles are protected according to the fundamental tenets of trademark and unfair competition law." 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 10:1, at 10-4 (4th ed.1996). His claim that he consulted with an attorney is not entitled to any weight because of the paucity of details concerning the substance of this alleged legal advice.[19]
Accordingly, this factor weighs in plaintiffs' favor. There is substantial circumstantial evidence of Dove's bad faith in intentionally copying plaintiffs' mark, and Dove has not offered a "credible innocent explanation." Centaur Communications, 830 F.2d at 1228; International Star Class Yacht Racing Ass'n v. Tommy Hilfiger, U.S.A., Inc., 80 F.3d 749, 753-54 (2d Cir.1996).
g. Quality of Junior User's Product
Neither party presented evidence on the quality of Dove's goods. Accordingly, this Polaroid factor favors neither party.
h. Sophistication of Consumers
The final Polaroid factor, the sophistication of the relevant consumer group, *300 is grounded on the belief that unsophisticated consumers aggravate the likelihood of confusion. Hasbro, 858 F.2d at 79 (citing Centaur Communications, 830 F.2d at 1228). This is especially true when the competing products' marks are similar and the inexpensive products are in competitive proximity. Id.
Dove contends that this factor clearly favors its position that there is no likelihood of confusion, citing Girl Scouts of the United States v. Bantam Doubleday Dell Publishing Group, Inc., 808 F.Supp. 1112, 1127 (S.D.N.Y.1992), aff'd, 996 F.2d 1477 (2d Cir. 1993), which stated that "purchasers of children's books are undoubtedly literate; moreover, undoubtedly they have in mind supplying quality reading material to a five or six year old. In short, they are not necessarily `unsophisticated' because the books are low-priced." Girl Scouts, 808 F.Supp. at 1130. Because the books and audiobooks at issue are priced several times higher than the inexpensive books in Girl Scouts, Dove argues that this factor weighs heavily in its favor.
Evidence presented at trial, however, did not uniformly support Dove's assumption that children's book purchasers are discriminating in making their selections. There was evidence that books are often impulse purchases based upon a publication's cover or title. Moreover, there is no particular consumer sophistication attached to likely purchasers of the books at issue, which are geared to a wide segment of the American public. In the Court's view, this factor does not favor either party.
i. Other Factors
The eight Polaroid factors are non-exclusive. The senior user's delay, if any, in asserting its trademark claim is a factor which may also be considered. See, e.g., Hasbro, 858 F.2d at 79. Based on the facts in the record, the Court finds no undue delay by plaintiffs in discovering Dove's use of the mark "The Book of Virtues" or in commencing the instant action.
3. Conclusion
Most of the relevant Polaroid factors support the conclusion that there exists a significant likelihood of confusion as to source as a result of Dove's use of the book titles "The Children's Audiobook of Virtues" and "The Children's Book of Virtues." Although there have been no demonstrated instances of actual consumer confusion between Dove's books and plaintiffs' The Book of Virtues, and although the consumer surveys introduced at trial are only marginally probative of a likelihood of confusion, a number of other factors including the strength of plaintiffs' title in its commercial context, the degree of similarity of the parties' titles, the extremely close competitive proximity of the products, and the evidence of Dove's intentional copying of plaintiffs' mark in bad faith demonstrate that numerous ordinarily prudent purchasers are likely to be misled or confused as to the source of Dove's books.
Our finding that there is a likelihood of confusion is sufficiently compelling, in light of all the circumstances, to outweigh any potential First Amendment interests. In our view, Dove has reflexively invoked the First Amendment without offering a persuasive explanation of why free speech interests are seriously threatened by Lanham Act liability in this case. Although this case involves literary titles, it is not a case like Rogers, Cliffs Notes, or Girl Scouts, supra, where trademark liability runs the risk of unduly restricting authors of parody or fiction from writing about certain subjects and titling their works appropriately.[20] Unlike *301 the film title in Rogers, Dove's title is not an "integral element" of its books and their creator's "artistic expressions." Rogers, 875 F.2d at 1001. Rather, the evidence shows that Dove deliberately gave its children's story books confusingly similar titles in a blatant and ill-conceived effort to piggy-back on the goodwill associated with Bennett's best-selling title. The public interest in sparing consumers this type of confusion confusion resulting from titles that are confusingly similar to other titles "outweighs the slight public interest in permitting authors to use such titles." Rogers, 875 F.2d at 999 n. 5.
D. Relief
1. Injunctive Relief
Plaintiffs have carried their burdens of proof under Section 43(a) of the Lanham Act and demonstrated a risk of irreparable injury to their unregistered mark. We have considered the equities and balanced the conflicting interests of the parties, see Jim Beam Brands Co. v. Beamish & Crawford Ltd., 937 F.2d 729, 737 (2d Cir.1991), and concluded that an injunction is necessary to protect plaintiffs' mark.[21] Accordingly, Dove and its agents will be permanently enjoined from the manufacture, publication, distribution, and sale of any audio and/or print books under the titles "The Children's Audiobook of Virtues" and "The Children's Book of Virtues," or under any other title confusingly similar to plaintiffs' title "The Book of Virtues." Plaintiffs also seek an order requiring Dove to recall from circulation and destroy, or certify the destruction of, all copies of the covers of Dove's publications The Children's Audiobook of Virtues and The Children's Book of Virtues. See Amended and Supplemented Consolidated Pre-trial Order at 3. This additional relief is appropriate under the circumstances and will be granted.
2. Profits, Costs, and Attorneys' Fees
Plaintiffs also seek an accounting of Dove's profits of $23,105.80 from the sale of The Children's Book of Virtues and an award of their costs, including survey costs, and attorneys' fees. Under Section 35(a) of the Lanham Act, successful plaintiffs are entitled, "subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action." 15 U.S.C. § 1117(a). The Act also provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." Id.
In this Circuit, an accounting of profits is normally available "only if the defendant is unjustly enriched, if the plaintiff sustained damages from the infringement, or if the accounting is necessary to deter a willful infringer from doing so again." George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir.1992) (citations and internal quotations omitted). Under any of these three theories for awarding profits, "a finding of defendant's willful deceptiveness is a prerequisite for awarding profits." Id.; see also International Star Class, 80 F.3d at 753. To recover under the unjust enrichment theory, a plaintiff must show that, were it not for defendant's infringement, the defendant's sales would otherwise have gone to the plaintiff. George Basch, 968 F.2d at 1538. To recover under the damage theory of profits, a plaintiff must demonstrate consumer confusion resulting from the infringement, id. at 1539, which may be shown through circumstantial evidence such as consumer surveys. See PPX Enterprises, Inc. v. Audiofidelity Enterprises, Inc., 818 F.2d 266, 271 (2d Cir. 1987).
We have examined the considerations for an accounting of profits set forth in George Basch and conclude that the equities weigh in favor of an accounting of profits under the deterrence theory.[22] We have already set *302 forth our finding that Dove infringed plaintiffs' title "The Book of Virtues" in bad faith in order to capitalize on the goodwill associated with Bennett's best-selling book, and that Dove failed to offer a credible innocent explanation. We believe that Dove's president did not testify forthrightly about his limited familiarity with plaintiffs' title and his intent in trading on its goodwill. We believe an accounting of profits in this case protects the public at large and "promote[s] the secondary effect of deterring public fraud regarding the source ... of consumer goods." George Basch, 968 F.2d at 1539. Accordingly, Dove will be awarded $23,105.80, the stipulated amount of Dove's infringing profits from the sale of The Children's Audiobook of Virtues.
Plaintiffs have also demonstrated an entitlement to the usual costs permitted under the local rules, which shall be taxed by the Clerk of the Court. However, plaintiffs have not demonstrated that they are entitled to recover the costs of conducting their consumer survey, and such costs shall not be recoverable.[23]
Deliberate and willful infringement can render a case "exceptional" and support an award of attorneys' fees. Centaur Communications, 830 F.2d at 1229; Quaker State Oil Ref. Corp. v. Kooltone, Inc., 649 F.2d 94, 95 (2d Cir.1981) (per curiam); Springs Mills, Inc. v. Ultracashmere House, Ltd., 724 F.2d 352, 357 (2d Cir.1983). Although we find that Dove willfully infringed plaintiffs' title "The Book of Virtues," we do not believe this case qualifies as "exceptional" in order to justify an award of attorneys' fees. This litigation presented a number of close and contested issues; the outcome was by no means a foregone conclusion. Under these circumstances, we decline to award plaintiffs' their attorneys' fees.
II. State Law Claims
Plaintiffs assert two claims under New York law: (1) common law trademark infringement and unfair competition, and (2) violation of the New York anti-dilution statute, N.Y. Gen. Bus. Law § 368-d.
Under New York law, the standards for a finding of unfair competition based on trademark infringement are substantially similar to those applied under the Lanham Act, except insofar as the state claim may require an additional element of bad faith or intent. See, e.g., Girl Scouts, 808 F.Supp. at 1131; Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044 (2d Cir.1980). Just as in a Lanham Act claim, plaintiffs must demonstrate the use of their mark in a way likely to confuse consumers as to the source of the products. See Girl Scouts, 808 F.Supp. at 1131. For the reasons set forth above, the Court finds that Dove has engaged in unfair competition in violation of New York law.
To prevail on a Section 368-d dilution claim, "a plaintiff must prove, first, that its trademark either is of truly distinctive quality or has acquired secondary meaning, and, second, that there is a `likelihood of dilution.'"[24]Deere & Co. v. MTD Products, Inc., 41 F.3d 39, 42 (2d Cir.1994) (quoting Sally Gee, Inc. v. Myra Hogan, Inc., 699 F.2d 621, 624 (2d Cir.1983)). Predatory intent, while not precisely an element of the claim, is a relevant consideration. Id. at 42, 45-46. Dilution is defined as either the blurring of a trademark's product identification *303 or the tarnishment of the affirmative associations a mark has come to convey, Id. at 42-43. Blurring may occur "where the defendant uses or modifies the plaintiff's trademark to identify the defendant's goods and services, raising the possibility that the mark will lose:its ability to serve as a unique identifier of the plaintiff's product." Id. at 43. For the reasons set forth above, we find that plaintiffs' title "The Book of Virtues" has acquired secondary meaning and that there is likelihood of blurring. Dove's titles are so similar to plaintiffs' as to create the likelihood that plaintiffs' mark will lose its status as a unique identifier of plaintiffs' products. Further, we find evidence of predatory intent.
Accordingly, plaintiffs' two state law claims provide further support for their requested relief.
CONCLUSION
For the reasons set forth above, we find that Dove has infringed plaintiffs' trademark in the title "The Book of Virtues" through its use of the confusingly similar titles "The Children's Audiobook of Virtues" and "The Children's Book of Virtues." Dove's actions violate Section 43(a) of the Lanham Act, constitute common law trademark infringement and unfair competition, and violate the New York anti-dilution statute. Dove will be permanently enjoined from using the above-mentioned titles or any other confusingly similar titles. Plaintiffs shall be awarded $23,105.80 (the amount of defendant's infringing profits) and the usual costs permitted under the local rules.
Settle judgment on five days notice.
SO ORDERED.
NOTES
[1] The parties stipulated to certain facts in the "Amended and Supplemented Consolidated Pretrial Order." The Court will use the designation "SF" to refer to these stipulations. Documentary exhibits are identified as they are in the pretrial order, as either joint exhibits ("JX"), plaintiffs' exhibits ("PX"), or defendant's exhibits ("DX"). Adhering to a format initially established by Judge Schwartz and relied upon by the parties in their pre-trial preparation, the direct testimony of most trial witnesses came in by affidavit; the Court will refer to these trial affidavits as "Aff." "Tr." refers to the trial transcript.
[2] In 1996, S & S also published paperback versions of The Book of Virtues and The Moral Compass, four paperbacks in a series of 13 books entitled "Adventures From The Book of Virtues" based upon a PBS television series licensed by Bennett, and The Children's Book of Virtues calendar. Plaintiffs intend to publish additional products in "The Book of Virtues" series. Martin Aff. ¶ 18; SF 23, 71, 73.
[3] At trial, Viner claimed that he decided to publish the audiobook sometime before the summer of 1994. Tr. 201-02. However, because Viner supplied no details on the timing of this decision, the Court will utilize the summer 1994 date.
[4] Collins also testified that at a sales conference in December 1994 concern was raised about whether there would be a problem with Dove's proposed title because of its similarity to plaintiffs' title, and "we [Penguin] were assured that there was no conflict." Tr. 51-52. Collins recalled that Viner attended the conference on behalf of Dove. Tr. 53.
[5] Viner's claim at trial that plaintiffs stole the idea for The Children's Book of Virtues from him, see Tr. 217-18, is even more incredible and, in fact, contradicted by stipulated evidence that Bennett and his editor discussed a children's version of his book as early as 1993. SF 17.
[6] Boose's direct testimony summarized the findings set forth in her expert report, DX F. Boose's expert report was redacted at trial in light of Judge Schwartz's ruling that Dove was precluded from introducing evidence as to the generic nature of the mark "The Book of Virtues." The parties and the Court, however, understood that Judge Schwartz's ruling did not preclude the parties from introducing evidence as to the conceptual strength of the mark, which is relevant to other issues in the case. Accordingly, material relating solely to Boose's conclusion that "The Book of Virtues" is a generic mark was deleted from her original expert report.
During trial, however, the Court asked the parties to submit proffers of evidence they would introduce if the Court were to reopen the inquiry into whether or not plaintiffs' mark is generic. Defendant represented to the Court that Boose's original, unredacted report would be the only such evidence they would introduce, and that Boose's direct testimony would have conformed to her original report. Tr. 273-74. The original report, while containing essentially the same factual background and analysis as the report introduced at trial, concludes with Boose's opinion that the title "The Book of Virtues" is generic. The unredacted report is marked Court Exhibit I and is made part of the record.
[7] Boose did, however, identify a book written in 1405 by Christine de Pizan, Le Livre des trois Vertus, which has been translated under the title "The Book of Three Virtues." DX F at 7-8; Tr. 191-92.
[8] Consumer awareness of the mark "The Book of Virtues" is also indirectly evidenced by S & S's marketing plan for subsequent publications in "The Book of Virtues" series, which demonstrates plaintiffs' efforts to trade on public awareness of the mark by expanding into additional product lines. See Martin Aff. ¶ 9; Rosen Aff. ¶ 3; Dana Aff. ¶ 6.
[9] The "Squirt" format takes its name from the case Squirt Co. v. Seven-Up Co., 207 U.S.P.Q. 12, 20-21 (E.D.Mo.1979), aff'd, 628 F.2d 1086 (8th Cir.1980).
[10] The "Eveready" format takes its name from the case Union Carbide Corp. v. Ever-Ready, Inc., 531 F.2d 366, 381-82 (7th Cir.1976).
[11] The question was modified to refer to "book on tape" or "book cover," as appropriate depending on the item displayed.
[12] Again, the question was modified as appropriate to the item displayed.
[13] The Court does not find Dove's other criticisms of the Jacoby Survey compelling, including its view that the Jacoby Survey asked improper leading and suggestive questions. Rappeport Aff. ¶¶ 21-23. Aside from the ambiguity of the question addressed above, the Jacoby Survey asked appropriate questions that did not improperly suggest the answer plaintiffs were seeking. The Court also finds that the Jacoby Survey defined an appropriate universe of respondents.
[14] In contrast, a limitation of the Squirt format, used in the Jacoby Survey, is that "it explicitly leads respondents to consideration of the association between the two marks, a question that might not have occurred to them in a normal purchase situation." Simonson, supra, at 371. "This limitation can have a significant effect on confusion estimates when the awareness level of the senior mark is low." Id. at 386.
[15] While the PTO examiner's action in approving plaintiffs' mark for publication in the Official Gazette without requiring proof of secondary meaning may be marginally relevant to our analysis, we do not believe that it entitles plaintiffs to a rebuttable presumption that their mark is suggestive or has secondary meaning. Cf. McGregor-Doniger Inc. v. Drizzle Inc., 599 F.2d 1126, 1132 (2d Cir.1979) (decision of PTO to register a mark without requiring proof of secondary meaning "affords a rebuttable presumption that mark is more than merely descriptive"); Arrow Fastener Co. v. Stanley Works, 59 F.3d 384, 393 & n. 6 (2d Cir.1995) (rebuttable presumption of secondary meaning arises when PTO issues registration after requiring proof of secondary meaning). Here, no registration has yet been issued by the PTO for plaintiffs' mark, and an opposition proceeding is anticipated.
[16] In the case of literary titles, the cases suggest that a showing of secondary meaning is required even if a mark is found to be suggestive, but this issue remains unsettled in this Circuit. See Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1378 & n. 4 (2d Cir.1993). We need not decide the issue here because of our conclusion that plaintiffs' mark is descriptive.
[17] Dove contends that it commenced use of the mark in August 1994 "when it announced to the trade and to its distributor its intention of releasing an audiobook and book bearing the mark (Pre-Trial Order Stipulated Fact No. 34)." Defendant's Post-Trial Memorandum of Law ("Def. Mem.") at 13. However, SF 34 actually states: "At a production meeting in the late summer of 1994, Michael Viner, president of defendant, announced his plan to publish an audiobook entitled The Children's Audiobook of Virtues in early 1995." Thus, SF 34 does not establish that Viner announced anything to the "trade" in August 1994; at most, SF 34 establishes that Viner announced his plans to Dove's staff and, possibly, certain employees of Dove's distributor.
At trial, Viner took a different position than his counsel now takes. He claimed that Dove publicly announced its books in its "spring announcement list of 1994." Tr. 213. However, there are no documents in the record corroborating this claim, and Dove's counsel has apparently retreated from this testimony.
[18] Plaintiffs urge the Court to take into consideration the evidence that there now exists a "family" of related marks with "The Book of Virtues" as a "recognizable common characteristic" that is associated with Bennett, see J & J Snack Foods Corp. v. McDonald's Corp., 932 F.2d 1460, 1462-63 (Fed.Cir.1991), including the evidence of the development of this "family" occurring after Dove's entry into the market. See McDonald's Corp. v. Druck and Gerner DDS., P.C., 814 F.Supp. 1127, 1131 (N.D.N.Y.1993) (where plaintiff requested only injunctive relief, which is prospective, "the strength of the `family of marks' and the `likelihood of confusion' [should be measured] from a present standpoint," rather than retroactively); but see Marion Labs., Inc. v. Biochemical/Diagnostics, Inc., 6 U.S.P.Q.2d 1215, 1988 WL 252477 (1988) (proponent of a family of marks must prove that, prior to the junior user's entry, all or many of the marks in the alleged family were used and promoted in such a way as to create public perception of the family mark as an indicator of source). In the circumstances of this case, we do not believe it is necessary to rely on plaintiffs' evidence of the development of a family of marks after Dove's entry into the market, and we do not rely on any such evidence in assessing the likelihood of confusion.
[19] Taking counsel's advice "does not ipso facto and in all circumstances shield the actor from the consequences of his act." Cuisinarts, Inc. v. Robot-Coupe Int'l Corp., 580 F.Supp. 634, 638 (S.D.N.Y.1984). Inquiry must be made as to the facts disclosed to counsel and whether counsel's advice was "timely requested" and "honestly relied upon in shaping one's conduct. Otherwise counsel's advice is a sham, a smokescreen set up to mask the actor's real intent." Id.
Viner never testified squarely that he had been specifically advised by counsel that plaintiffs' mark "The Book of Virtues" was in the public domain and therefore not entitled to trademark protection. Also, no attorney testified in support of Viner's claim that he relied in good faith on the advice of counsel, as often occurs when a defendant asserts its good faith reliance on advice of counsel. See, e.g., Estee Lauder, Inc. v. The Gap, Inc., 932 F.Supp. 595, 615 (S.D.N.Y. 1996), rev'd on other grounds, 108 F.3d 1503 (2d Cir.1997).
[20] For example, in Cliffs Notes, the Second Circuit applied the Rogers balancing approach to a parody, "in which expression, and not commercial exploitation of another's trademark, is the primary intent, and in which there is a need to evoke the original work being parodied," Cliffs Notes, 886 F.2d at 495, and concluded that First Amendment concerns predominated over the likelihood of confusion. In Girls Scouts, the Court rejected an attempt by the national Girl Scouts and Boy Scouts to impose Lanham Act liability on a publisher of children's fiction for using the word "scouts" to describe a youth organization in which children engage in "scouting"-type activities. See Girl Scouts, 808 F.Supp. at 1120. Liability in both of these cases would have posed a far graver threat to free expression that liability does here. Dove's books need not evoke plaintiffs' work, as a parody must, nor must Dove use the phrase "book of virtues" in order to describe accurately its collections of classic stories and fables.
[21] Dove has not proposed a disclaimer as an alternative to injunctive relief. If it is so inclined, Dove may apply for relief from the injunction and propose a disclaimer, recognizing that it would bear a "heavy burden ... to come forward with evidence sufficient to demonstrate that any proposed [disclaimers] would significantly reduce the likelihood of confusion." Home Box Office, Inc. v. Showtime/the Movie Channel Inc., 832 F.2d 1311, 1316 (2d Cir.1987); see also Jim Beam Brands, 937 F.2d at 729.
[22] We decline to award profits under the unjust enrichment or damage theories. Plaintiffs produced no compelling evidence suggesting that Dove's infringement actually caused any sales diversion, a requirement for recovery of profits under the unjust enrichment theory. See George Basch, 968 F.2d at 1541. As for the damage theory of profits, plaintiffs produced no evidence of actual confusion and plaintiffs' consumer survey was only minimally probative.
[23] There is well reasoned authority in this district holding that the costs of performing consumer surveys are not recoverable under Section 35(a) of the Lanham Act. See Gillette Co. v. Wilkinson Sword, Inc., No. 89 Civ. 3586, 1992 WL 30938, at *10 (S.D.N.Y. Feb.3, 1992) (citing West Virginia University Hosps., Inc. v. Casey, 499 U.S. 83, 111 S.Ct. 1138, 113 L.Ed.2d 68 (1991), for principle that "items of cost should not be awarded unless a statute explicitly provides for those items"). Even if the costs of plaintiffs' survey were recoverable under Section 35(a), we do not believe an award is appropriate in this case because of the minimally probative nature of plaintiffs' survey.
[24] Dove argues that Section 368-d "excludes cases where infringement is claimed by a direct competitor selling a similar product," see Defendant's Trial Memorandum of Law at 12, but this view has been expressly rejected by the Second Circuit. See Nikon Inc. v. Ikon Corp., 987 F.2d 91, 96 (2d Cir.1993). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3761133/ | Although I concur with the majority's resolution of the first assignment of error, I dissent from the majority's holding on the second assignment of error and would follow Harvey v.Brumback (1960), 113 Ohio App. 45, 17 O.O.2d 45, 177 N.E.2d 70, for two reasons. First, the language in R.C. 737.17 that the mayor "may, with the concurrence of the legislative authority, remove or appoint the employee" (emphasis added) clearly gives to the mayor the discretion not to finally appoint a police employee even though the council may unanimously recommend it. If the mayor is thus empowered to unilaterally deny final appointment to a police employee, it only logically follows that he can effectuate the removal of a probationary police employee by simply failing to bestow final appointment. I believe this result is intended by R.C. 737.17 and is in accordance with the broad authority which the Ohio Supreme Court has recognized to be vested in village mayors when it comes to matters involving the police.
"For those [villages] which do not [establish their own form of government] and which elect to remain within the general framework of village government as provided by the general statutes, the General Assembly has established a simple form of government which in large measure revolves around the village mayor. As pointed out, he is, or at times may be, virtually a seventh member of council. That it was intended that the mayor exert a potent force in all police matters in a village is further evidenced by the provision in Section 737.18, Revised Code, that `the marshall shall be the peace officer of a village and the executive head, under the mayor, of the police force.'" (Emphasis sic.) State ex rel. DeMatteo v. Allen (1960), 170 Ohio St. 375,380, 11 O.O.2d 78, 81, 165 N.E.2d 644, 648. *Page 61
Secondly, I believe that the interpretation given to R.C.737.17 by the majority creates a potential for political deadlock. Under the majority's interpretation, should the mayor and the village council never concur on whether to remove or finally appoint Dillingham, he could remain a "probationary" police officer for as long as such an impasse exists, even years. Such a result renders meaningless the statutory six-month probationary period and could cause numerous practical difficulties for the village. Clearly the legislature, in passing R.C. 737.17, could not have intended such a result.
For the foregoing reasons, I would affirm the judgment below. | 01-03-2023 | 07-06-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1552786/ | 199 B.R. 224 (1996)
Robert WELSH, Individually and as Administrator of the Estate of Dale H. Welsh, Plaintiffs,
v.
QUABBIN TIMBER, INC., Robert Chase, and Shawmut Bank, N.A., Defendants.
Civil Action No. 94-40041-NMG.
United States District Court, D. Massachusetts.
August 8, 1996.
*225 John A. Cvejanovich, O'Connell, Flaherty & Attmore, Springfield, MA, James T. Flaherty, O'Connell, Flaherty & Attmore, Hartford, CT, for Robert Welsh.
Herbert F. Travers, III, Travers, Murphy & O'Connor, Worcester, MA, for Quabbin Timber, Inc.
*226 Arthur W. Young, III, Boston, MA, Natasha C. Lisman, Sugarman, Rogers, Barshak & Cohen, Boston, MA, for Shawmut Bank, N.A.
MEMORANDUM AND ORDER
GORTON, District Judge.
Pending before this Court is a motion by Fleet National Bank, as successor in interest to Shawmut Bank, N.A. ("the Bank"), for summary judgment on Count V of plaintiff's Third Amended Complaint. In its entirety, Count V alleges that:
44. Defendant, Shawmut Bank, N.A., is a bank incorporated under the laws of and engaged in the business of banking in Massachusetts and Connecticut.
45. Defendant, Shawmut Bank, N.A., through its employee, officer, agent or representatives, intentionally, improperly and wrongly interfered with the advantageous business relationship which Plaintiff, Robert Welsh, Jr., had with Quabbin Timber, Inc., to wit: by demanding his severance as an officer and director of Quabbin Timber, Inc., demanding that he resign any and all officerships and/or directorships of Quabbin Timber, Inc., and by demanding that he be divested of all stock in Quabbin Timber, Inc.
46. As a result of the intentional, improper and wrongful acts by Shawmut Bank, N.A., Plaintiff Robert Welsh Jr. has suffered economic loss and damages.
On May 1, 1996, the Bank filed its motion for summary judgment an to Count V, on the grounds that under well-established principles of bankruptcy law, the plaintiff is both estopped from, and lacks standing to assert, the claims set forth in that Count. For the reasons elaborated on below, the Bank's motion will be allowed.[1]
I. The Summary Judgment Standard
Summary judgment shall be rendered where the pleadings, discovery on file and affidavits, if any, show "there is no genuine issue of material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The role of summary judgment is "to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required." Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992), cert. denied, 507 U.S. 1030, 113 S. Ct. 1845, 123 L. Ed. 2d 470 (1993). The Court must view the entire record in the light most favorable to the plaintiffs and indulge all reasonable inferences in their favor. O'Connor v. Steeves, 994 F.2d 905, 907 (1st Cir.1993).
With respect to a motion for summary judgment, the burden is on the moving party to show that "there is an absence of evidence to support the non-moving party's case." FDIC v. Municipality of Ponce, 904 F.2d 740, 742 (1st Cir.1990) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 2554, 91 L. Ed. 2d 265 (1986)). If the movant satisfies that burden, it shifts to the non-moving party to establish the existence of a genuine material issue. Id. In deciding whether a factual dispute is genuine, this Court must determine whether "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The nonmovant's assertion of mere allegation or denial of the pleadings is insufficient on its own to establish a genuine issue of material fact. Fed.R.Civ.P. 56(e).
II. Procedural Background
The case at bar was originally filed in March, 1994, by Robert Welsh ("Welsh") and his wife, Dale H. Welsh, against his former employer, Quabbin Timber, Inc. ("Quabbin Timber") and the fiduciary and administrator of Quabbin Timber's employee benefit plan. The plaintiffs filed a First Amended Complaint on October 17, 1994, which added the Bank as a defendant and alleged that it had: *227 intentionally, improperly and wrongly interfered with the advantageous business and employment relationship which [Mr. Welsh] had with [Quabbin], to wit: by demanding his severance as an officer and director of Quabbin, Inc.
First Amended Complaint, ¶ 46.
One year later, on October 2, 1995, Mr. Welsh filed his Second Amended Complaint, which substituted him as Administrator for his late wife's estate as a plaintiff. All the remaining allegations, including those against the Bank, were otherwise unaltered.
On January 17, 1996 two months before the then-scheduled trial Welsh moved for leave to file a Third Amended Complaint, which added, for the first time, the allegation that the Bank's tortious interference with plaintiff's advantageous business and employment relationship with Quabbin included "demanding that he be divested of all stock in Quabbin Timber, Inc." Third Amended Complaint, ¶ 45. This Court allowed that motion on February 21, 1996, and the Bank filed an answer to the Third Amended Complaint.
III. Factual Background
On March 15, 1996, the Bank took a second deposition of Mr. Welsh, focusing on the facts related to the "forced divestiture" theory raised for the first time in his Third Amended Complaint. The Bank asserts that it is Welsh's own deposition testimony that forms the principal basis for its motion for summary judgment. Welsh's testimony provides the following relevant factual background:
1. Welsh established a borrowing relationship with the Bank in the mid-1980s, first by obtaining commercial financing for Northeast Treaters (a company he had co-founded), and later by taking out a personal loan from the Bank's Private Banking department. Welsh Dep. Vol. II at 6-8. In 1989, Welsh played a critical role in obtaining from the Bank a commercial line of credit for Quabbin.[2] Welsh Dep. Vol. I at 10-11, 12-15, 39; Vol. II at 6, 16.
2. Prior to 1990, Welsh's involvement in managing Quabbin was limited. After he moved to Florida in 1990, however, Welsh decided to establish a southern branch of Quabbin. The Florida operation sustained a loss and closed in late 1990. See Welsh Dep. Vol. I at 36, 51-52, 81-82; Vol. II at 16, 22, 23.
3. In early 1991, Welsh became delinquent on his personal loan from the Bank, the amount of which exceeded $200,000 and in late July of that year plaintiff declared bankruptcy in Florida. Welsh Dep. Vol. II at 10, 23-25.
4. Before filing for bankruptcy, Welsh spoke on several occasions with Chase (Quabbin's day-to-day manager), who informed plaintiff about the Bank's reaction to Welsh's delinquency with respect to his personal loan. See Welsh Dep. Vol. II at 27-31, 36-38, 48-50, 53-57. Based upon those conversations, Welsh was aware that:
a) the Bank wanted him "to not own stock in Quabbin, to get out because of [his] delinquency on the personal loan," Welsh Dep. Vol. II at 30;
b) Chase thought Shawmut "would pull the line if [Welsh] owned stock in Quabbin Timber," Id. at 31;
c) the Bank "would continue loaning Quabbin [ ] money if [he] did not own stock," Id. at 36; and
d) the Bank's position remained the same in 1992 and 1993. Id. at 37-38.
5. To avoid having to comply with the Bank's condition that plaintiff be divested, Chase and Welsh looked, unsuccessfully, for alternative sources of financing for Quabbin. For example, before he filed for bankruptcy, Welsh made inquiries about mortgaging his Florida home. Welsh Dep. Vol. II at 26, 32-35, 49-50.
6. In Welsh's opinion, the value of his Quabbin stock was "very diminished" in 1991 because the Bank's position effectively turned him into a "forced seller." Welsh Dep. Vol. II at 43-44. Welsh felt that the Bank's position was "immoral" and, when he entered law school in 1992-93, he discussed it *228 with a professor who believed that the Bank's position was "illegal." Id. at 84-85, 122.
7. In his statement to the Bankruptcy Court of "Financial Affairs for Debtor Not Engaged in Business," Welsh listed his Quabbin stock as an asset. See Welsh Dep. Vol. II at 65-68; Exh. 4 at p. 19, Item t. Plaintiff did not, however, list any potential claims against the Bank in that statement. See id. at Exh. 4 at p. 18, Item q. Moreover, Welsh did not inform the Bankruptcy Trustee, the Trustee's attorney, or his own bankruptcy attorney of Shawmut's condition that it would terminate Quabbin's financing if he regained ownership of the stock. Welsh Dep. Vol. II at 84.
8. On August 11, 1993, plaintiff was granted discharge from his debts. Welsh Dep. Vol. II at 44-45; Exh. 3. Afterward, his father (Robert F. Welsh, Sr.) purchased plaintiff's stock from the Bankruptcy Trustee for resale to Chase. Welsh Dep. Vol. II at 81-82. Seven months after his discharge, Welsh commenced the instant action.
IV. Legal Analysis
The Bank advances two arguments in support of its motion for summary judgment: 1) Count V is barred by the doctrine of judicial estoppel, and 2) even if he is not estopped from bringing his claim, plaintiff lacks standing to assert the claims set forth in Count V.
A. Judicial Estoppel
The First Circuit has explained that, "in broad outline the doctrine [of judicial estoppel] precludes a party from asserting a position in one legal proceeding which is contrary to a position it has already asserted in another." Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 212 (1st Cir.1987). The Bank's argument that judicial estoppel precludes Welsh from prosecuting Count V reasons that:
1) based on Welsh's own deposition testimony, he was aware of the Bank's alleged wrongful conduct and the appreciable harm caused by that conduct before he filed for bankruptcy in Florida,
2) the cause of action asserted in Count V had fully accrued as of the time he filed for bankruptcy,
3) it is a fundamental tenet of bankruptcy law that a debtor must disclose all of his assets, including claims and causes of action and, accordingly,
4) Welsh's failure to disclose the cause of action against the Bank prevents his subsequent attempt to pursue Count V. See Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir.), cert. denied, 488 U.S. 967, [109 S. Ct. 495, 102 L. Ed. 2d 532] (1988).
Insight into the doctrine of judicial estoppel may be gleaned from Payless Wholesale Distributors, Inc. v. Alberto Culver (P.R.) Inc., 989 F.2d 570, 571 (1st Cir.), cert. denied, 510 U.S. 931, 114 S. Ct. 344, 126 L. Ed. 2d 309 (1993). In Payless, the plaintiff/former debtor ("Payless") had filed for bankruptcy, obtained a discharge of its debts, and then filed a lawsuit seeking damages for defendants' wrongful business practices which allegedly caused its bankruptcy. Noting that Payless had not even vaguely referred to its present claims in any of its bankruptcy filings, the First Circuit applied the doctrine of judicial estoppel to bar Payless' claims, observing that:
The basic principle of bankruptcy is to obtain a discharge from one's creditors in return for all one's assets, except those exempt, as a result of which creditors release their own claims and the bankrupt can start fresh. Assuming there is validity in Payless's present suit, it has a better plan. Conceal your claims; get rid of your creditors on the cheap, and start over with a bundle of rights. This is a palpable fraud that the court will not tolerate, even passively. . . . Payless, having obtained judicial relief on the representation that no claims existed, can not now resurrect them and obtain relief on the opposite basis. This may not be strictly equitable estoppel, as the court observed. Indeed, defendants may have a windfall. However, it is an unacceptable abuse of judicial proceedings.
Id. (internal citation omitted).
The Bank also relies upon Hoffman v. First National Bank of Akron, Iowa, 99 B.R. *229 929 (N.D.Iowa 1989), in which the Court applied the judicial estoppel doctrine to a case in which the plaintiff/former debtor obtained a creditor's approval of a plan of reorganization, and only then filed a lawsuit against the Bank/former creditor:
If a debtor has future plans for future litigation with a creditor, the creditor is entitled to know about it so that the creditor can plan its action in the bankruptcy case accordingly. Likewise, the [Bankruptcy] Court is entitled to know about it, to assist the Court in making a fully informed decision about plan confirmation.
99 B.R. at 935-36.
In Hoffman, the debtor argued that principles of estoppel should not be applied because he was not aware of his claim as of the date of filing. The Court rejected that assertion, however, concluding that:
[The proffered excuse] is not a valid reason to fail to disclose the claim. The Debtor knew all of the facts that were pertinent to its current lawsuit when it filed bankruptcy. No new information was acquired post-filing other than counsel's purported discovery of a legal basis for the lawsuit. The facts underlying the cause of action were known to Debtor long before the plan was confirmed. . . . Debtor had a duty to amend his schedules to reflect this claim and to disclose the existence of the potential cause of action to creditors in his plan and disclosure statement.
Id. at 933.
Applying the foregoing principles to the case at bar, this Court concludes that the doctrine of estoppel prevents Welsh from advancing the allegations of Count V against the Bank. Welsh's own deposition testimony demonstrates that, prior to his filing for bankruptcy, plaintiff was aware of the Bank's demand that he divest himself or be divested of his stock in Quabbin Timber, and that such demands depressed the value of his stock. Before obtaining his discharge from bankruptcy, Welsh had spoken with a law professor who indicated that he believed the Bank's position to be illegal. In short, Welsh sought and obtained a discharge from his debts, including his debt to the Bank, without disclosing his potential claims against the Bank either in his original schedule or in any amendment thereto. "[H]aving obtained judicial relief on the representation that no claims existed, [Welsh] cannot now resurrect them and obtain relief on the opposite basis." Payless, 989 F.2d at 571.[3]
B. Lack of Standing
A second reason warranting the dismissal of Count V is that Welsh lacks standing to assert it. In Carlock v. Pillsbury Co., 719 F. Supp. 791, 856 (D.Minn.1989), the Court observed that a cause of action "is a property right which passes to the trustee in bankruptcy, even if such cause of action is not included in schedules filed with the Bankruptcy Court." Moreover, "property that is not formally scheduled is not abandoned and therefore remains part of the estate." Rosenshein v. Kleban, 918 F. Supp. 98, 102-03 (S.D.N.Y.1996). Accordingly,
[c]ourts have held that because an unscheduled claim remains the property of the bankruptcy estate, the debtor lacks standing to pursue the claims after emerging from bankruptcy, and the claims must be dismissed.
Id. at 103; see also In re Drexel Burnham Lambert Group, Inc., 160 B.R. 508, 514 (S.D.N.Y.1993).
It follows ineluctably from the foregoing that Welsh's undisclosed claims against the Bank, if any, remained in his bankruptcy estate after his discharge and, accordingly, he lacks standing to assert them in his own name in the present action.
*230 ORDER
For the foregoing reasons:
1. Defendant's Motion to Strike [Docket # 50] is DENIED; and
2. Defendant's Motion for Summary Judgment [Docket # 45] is ALLOWED.
So ordered.
NOTES
[1] The Bank's Motion to Strike plaintiff's Opposition to its Motion for Summary Judgment, Docket # 50, will be DENIED.
[2] Quabbin previously had been owned entirely by the Welsh family, and its stock later was acquired in equal parts by Welsh and defendant Robert Chase ("Chase").
[3] This Court is unpersuaded by plaintiff's unsupported assertions that there exist genuine issues of material fact which preclude the grant of summary judgment. Indeed, a party wishing to avert summary judgment "cannot rely on an absence of competent evidence, but must affirmatively point to specific facts that demonstrate the existence of an authentic dispute." McCarthy v. Northwest Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995) (emphasis supplied). While repeatedly asserting that trialworthy issues of material fact exist, plaintiff fails to direct this Court's attention to any evidence that calls into dispute or rebuts the facts upon which this Court's conclusion is based. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1721689/ | 593 S.W.2d 739 (1979)
CALIFORNIA AND HAWAIIAN SUGAR COMPANY, Petitioner,
v.
BUNGE CORPORATION, Respondent.
No. 17474.
Court of Civil Appeals of Texas, Houston (1st Dist.).
November 15, 1979.
Rehearing Denied December 20, 1979.
*740 Eiken & Davey, Robert Eikel, Houston, for petitioner.
McLeod, Alexander, Powel & Apffel, James L. Ware, Galveston, for respondent.
WALLACE, Justice.
This petition for a writ of error arises out of a suit by Biehl and Company, (Biehl), a steamship agent, against Bunge Corporation, (Bunge), a wharf and grain elevator operator, seeking an injunction. A temporary injunction was issued and Bunge cross-acted for wharfage fees. The main action was settled and the cross-action was tried to the court which granted Bunge a judgment. California and Hawaiian Sugar Company, owners of the "Sugar Islander," the ship in question, brings this writ of error.
Bunge filed a motion to dismiss this writ on the grounds that petitioner was not a party to the proceeding below, or a party of record and thus has no standing to bring the writ. A writ of error can only issue at the instance of a party to the suit, or of one whose privity of estate, title, or interest appears from the record of the cause in the court below, or who may be the legal representative of such party. Smith & James v. Gerlach, 2 Tex. 424 (1847); Gunn v. Cavanaugh, 391 S.W.2d 723 (Tex.1965); Hubbard v. LaGow, 567 S.W.2d 489 (Tex.1978).
The general rule is that one must be a party to a lawsuit but did not participate in the suit in order to have standing to bring writ of error. Tex.Rev.Civ.Stat.Ann. art. 2249a (Vernon 1971); Industrial Generating Company v. Jenkins, 410 S.W.2d 658 (Tex.Civ.App.Austin 1966, no writ). There are three exceptions to the general rule, (1) a class action; (2) a will contest; (3) suits wherein the parties come under the doctrine of virtual representation. The first two exceptions are inapplicable here. Our inquiry is whether petitioner is covered by the doctrine of virtual representation. The test is whether the petitioner is bound by the judgment of the trial court by virtue of the fact that it was "represented" by Biehl. Grohn v. Marquardt, 487 S.W.2d 214 (Tex.Civ.App.San Antonio 1977, writ ref'd n. r. e.).
The records shows that the berthing agreement and tariff provided that the owners of the vessel were liable to Bunge for the charges in question. Bunge's assistant manager testified that he was aware that his contract was with the ship's owner as well as with Bunge.
Petitioner contends that in-as-much as its ownership of the vessel was disclosed to Bunge, and it could have been made a party to the original suit due to its liability under the application for berth and applicable tariff signed by Biehl, as its agent, it was "represented" by Biehl and thus has standing to prosecute this writ of error. All this proves is that petitioner could be liable for the charges had Bunge chosen to sue petitioner. However, Bunge chose to pursue its cause of action only against Biehl as it had the option to do under the application and tariff. The record does not disclose petitioner's obligation to Biehl or *741 Biehl's obligation to petitioner under the agency agreement. The evidence is insufficient to show petitioner was "represented" by Biehl, Grohn v. Marquardt, supra. Since petitioner was not represented in the trial court, it is not bound by the judgment. Therefore, it has no standing to prosecute this writ of error. The writ is dismissed.
COLEMAN, C. J., and DOYLE, J., also sitting. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1742386/ | 711 So. 2d 734 (1998)
Lori WALKER, et al., Plaintiffs-Appellants,
v.
ALLEN PARISH HEALTH UNIT, et al., Defendants-Appellees.
No. 97-1007.
Court of Appeal of Louisiana, Third Circuit.
April 1, 1998.
Rehearing Denied May 29, 1998.
*735 Mark Terrance Hoychick, Eunice, for Lori Walker, et al.
Glen Carl Reynaud, Baton Rouge, for Allen Parish Health Unit, et al.
Before SAUNDERS, SULLIVAN and GREMILLION, JJ.
GREMILLION, Judge.
This is an appeal from the trial court's granting of a motion for summary judgment in favor of the defendants, the State of Louisiana through the Department of Health and Hospitals (DHH) and the Allen Parish Health Unit (Health Unit), dismissing the claims of the plaintiffs, Lori and Marlan Walker. The Walkers sued individually and on behalf of their minor child, Terrance, for damages he and they received when he was pricked by a used needle while at the Health Unit. The trial court dismissed the Walkers' claims for negligent infliction of emotional distress, but denied the motion as it pertained to Terrance. The Walkers appeal this judgment. We affirm.
FACTS
On March 20, 1991, Lori was at the Health Unit with her three minor children, including Terrance who was twenty-eight months old. While waiting in an examination room, Terrance placed his hand in a "sharps" container and pricked his finger with the needle of a used vaccination syringe. After Lori informed the nurse and asked for the wound to be cleaned, the nurse reported the incident to her supervisor. Lori was then told that Terrance would have to be tested for hepatitis and AIDS. A baseline blood test done that day was negative. Since then, he has been periodically tested for the above named diseases. All tests have been negative.
On March 20, 1992, the Walkers filed suit against the Health Unit, DHH, and Winfield Industries,[1] the manufacturer of the "sharps" container. In their petition, they alleged that due to the negligence of the Health Unit, they sustained the following damages:
A) Extreme fear, depression, and mental anguish because of the danger of their minor child contracting the AIDS virus and/or other blood-borne diseases;
B) The reckless and grossly wanton conduct of defendants has inflicted emotional distress on the entire Walker family;
C) A loss of their relationship with their minor son and a diminishment of the *736 love, support and affection between them and their child;
D) An irreparable diminishment of their enjoyment of life.
On March 3, 1997, the Health Unit and DHH filed a motion for summary judgment as to the Walkers' and Terrance's claims for damages due to mental anguish and emotional distress. On April 3, 1997, the trial court issued an order granting the motion for summary judgment as to the Walkers' claim for negligent infliction of emotional distress, but denying it as to Terrance's claim. The trial court did not issue reasons for its ruling.
ISSUE
On appeal, the Walkers argue that the trial court erred, as a matter of law, in dismissing their claims by summary judgment.
SUMMARY JUDGMENT
Following the amendment of the summary judgment law, summary judgment is now favored. It shall be used to "secure the just, speedy, and inexpensive determination" of all actions, except those excluded by La. Code Civ. P. art. 969. La.Code Civ.P. art. 966(A)(2). The legislature's 1997 amendment, effecting change in the summary judgment law, is procedural and is to be applied retroactively. Kumpe v. State, 97-386 (La. App. 3 Cir. 10/8/97); 701 So. 2d 498. The trial court is required to render summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact, and that mover is entitled to judgment as a matter of law." La.Code Civ.P. art. 966(B). When faced with a motion for summary judgment supported by affidavits based on personal knowledge made by persons competent to testify on the matter, the opposing party cannot rest on his pleadings but must respond by affidavits, deposition testimony, or interrogatory answers that enumerate specific facts showing a genuine issue exists for trial. La.Code Civ.P. art. 967. Finally, it is well settled that the appellate review of summary judgment is de novo, applying the same standard as the trial court. Accordingly, we undertake a de novo review of the matter at bar.
In their brief, the Walkers argue that their claim is not a bystander claim, rather, it is for the negligent infliction of emotional distress which arises from La.Civ.Code art. 2315. On the other hand, the Health Unit and DHH argue that this is a bystander claim, under which the Walkers fail to satisfy the requirements of Article 2315.6. We agree with the Walkers that their petition does not seek Lejeune type damages. Lejeune v. Rayne Branch Hosp., 556 So. 2d 559 (La.1990). Thus, we will limit our discussion to the claim of negligent infliction of emotional distress.
NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS
Recovery for the negligent infliction of emotional distress is based on Article 2315, which provides, in pertinent part, that "[e]very act whatever of man that causes damages to another obliges him by whose fault it happened to repair it." To determine whether a plaintiff may recover damages under this article, courts employ a duty-risk analysis, which requires affirmative answers to the following questions:
1) Was the conduct in question a cause-in-fact of the resulting harm?
2) Did the defendant owe a duty to the plaintiff?
3) Was the duty breached?
4) Were the risk and the harm caused within the scope of protection afforded by the duty breached?
Entrevia v. Hood, 427 So. 2d 1146 (La.1983); Bordelon v. St. Francis Cabrini Hospital, 93-1331 (La.App. 3 Cir. 5/4/94); 640 So. 2d 476; Roberts v. Benoit, 605 So. 2d 1032 (La. 1991).
Recovery for negligent infliction of emotional distress has been limited to those cases involving the "especial likelihood of genuine and serious mental distress, arising from the special circumstances, which serves as a guarantee that the claim is not spurious." Moresi v. Department of Wildlife and Fisheries, 567 So. 2d 1081 (La.1990). Thus, in order to prove entitlement to damages for *737 negligent infliction of emotional distress, the Walkers must prove that an independent, direct duty was owed to them by the Health Unit, that the duty afforded protection to them for the risk and harm caused, that the duty was breached, and that the mental aguish suffered by them was genuine and serious. Norred v. Radisson Hotel Corp., 95-0748 (La.App. 1 Cir. 12/15/95); 665 So. 2d 753.
Did the Health Unit owe an independent, direct duty to the Walkers? Except for Lejeune type damages, Louisiana jurisprudence does not allow recovery for mental anguish occasioned by another's injury or suffering. Rivera v. United Gas Pipeline Co., 96-502, 96-503, 97-161 (La.App. 5 Cir. 6/30/97); 697 So. 2d 327. Pursuant to the State Sanitary Code, sharps are to be stored in "a secure manner and location which affords protection from theft, vandalism, inadvertent human and animal exposure, rain and wind." Thus, the Health Unit had a duty to store the used needles so as to protect against inadvertent human exposure. This they failed to do. However, this duty was owed to Terrance and not the Walkers. In order for them to recover for negligent infliction of emotional distress, the Health Unit must have owed them an independent duty. We find that there was such a duty.
A health care provider is bound to exercise the requisite amount of care toward a patient that the particular patient's condition may require. Bordelon v. St. Frances Cabrini Hosp., 93-1331 (La.App. 3 Cir. 5/4/94); 640 So. 2d 476. Here, the Health Unit performed a baseline blood test on Terrance immediately after the needle stick. They further told Lori that she should have Terrance tested in six months and then periodically for AIDS and hepatitis. That is all the Health Unit did. It did not administer the later tests, it did not try to locate the needle which stuck Terrance to determine if it was contaminated with any blood borne disease, nor did it try to determine if any of the persons vaccinated that morning were infected. The emotional distress suffered by the Walkers was a direct result of the Health Unit's failure to determine and provide them with such information. Holland v. St. Paul Mercury Ins., 135 So. 2d 145 (La.App. 1 Cir. 1961). Thus, we find that the Health Unit did owe a duty to the Walkers, which it breached by failing to take any further steps to relieve them of their fears.
The next enquiry is whether the duty owed the Walkers by the Health Unit afforded protection to them for the risk and harm caused. We pretermit our discussion here because we find that the harm suffered by the Walkers was not genuine and serious. Moresi, 567 So. 2d 1081. The only evidence presented was that the Walkers felt nervous and upset about the incident. This was shown through Lori's deposition which was submitted by the Health Unit and DHH in support of their motion for summary judgment. She thought she might have developed stomach problems for a few months for which she saw a physician and was successfully treated with Zantac. Considering the foregoing, we do not find that the emotional distress described by Lori reached the level of seriousness contemplated by Moresi.
The Health Unit and DHH also submitted the affidavit of Dr. Joseph Brown, who specializes in contagious diseases. Dr. Brown listed the probabilities of a person acquiring an infectious disease from a needle used for immunization of a member of the general public if it were not known that the person was infected with AIDS. He further stated that it was not reasonable to fear that a person stuck by a needle used for immunization of a member of the general public not known to be infected with HIV/AIDS, because the chances of acquiring the disease from the stick are so very small. Dr. Brown also stated that any fear of acquiring HIV/ AIDS six years after the needle stick and after testing negative for the disease is unreasonable.
The Walkers failed to respond to the evidence presented by the Health Unit and DHH by presenting evidence which would show that a genuine issue of material fact exists. Thus, we find that there is no genuine issue of material fact and that the trial court correctly granted the motion for summary judgment with regard to the Walkers' *738 claim of negligent infliction of emotional distress.
CONSORTIUM CLAIM
The Walkers further claim that the trial court erred in dismissing their claims for loss of consortium. The only issue before the trial court on the Health Unit's and DHH's motion for summary judgement pertained to the Walkers' claim for negligent infliction of emotional distress. The trial court's order dismissed only that claim. Since that issue was not passed on by the trial court, it is not properly before us on appeal. Brown v. Automotive Cas. Inc. Co., 93-2169 (La.App. 1 Cir. 10/7/94); 644 So. 2d 723, writ denied, 94-2748 (La.1/6/95); 648 So. 2d 932.
CONCLUSION
For the above stated reasons, we affirm the judgment of the trial court. The costs of this appeal are assessed to the plaintiffs-appellants, Lori and Marlan Walker. The matter is remanded to the trial court for further proceedings.
AFFIRMED AND REMANDED.
SAUNDERS, J., dissents.
NOTES
[1] Winfield Industries was eventually dismissed from this suit subsequent to a settlement with the parties. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1774439/ | 962 S.W.2d 541 (1998)
GEOCHEM TECH CORPORATION, Petitioner,
v.
Michael S. VERSECKES, GeoServ Company, Inc., Breckenridge Exploration Company, Inc., Johnny L. Rowe and James T. Clay, Respondents.
No. 96-1121.
Supreme Court of Texas.
February 13, 1998.
*542 Jerry K. Clements, Dallas, Brenda Seale Gray, Breckenridge, Stacy Jordan Rodriguez, Dallas, for Petitioner.
William G. Thompson, Linda Bass Cauffman, Breckenridge, John W. Bickel, II, J. Robert Arnett, Dallas, for Respondents.
OWEN, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, GONZALEZ, HECHT, ENOCH, SPECTOR, ABBOTT and HANKINSON, Justices, join.
The issue in this case is whether a nonsuit fixes venue in the county to which transfer is sought when the nonsuit is taken after a motion to transfer has been filed but before a ruling on venue has been made. The court of appeals concluded that the effect of a nonsuit under our current rules of procedure is the same as it was under the former venue rules and held that venue was fixed in the county to which transfer was sought. 929 S.W.2d 85. We hold that the effect of a nonsuit depends on the state of the record at the time it is filed and that under the facts of this case, venue was not fixed solely in Stephens County, a county to which transfer was sought.
In December 1993, GeoChem Tech Corporation sued GeoServ Company and Michael Verseckes in Dallas County. GeoChem sought damages and injunctive relief. Geo-Serv filed a motion to transfer asserting that venue was mandatory in Stephens County under TEX. CIV. PRAC. & REM.CODE § 65.023(a) (requiring a suit for injunctive relief to be tried in county of defendant's domicile). The same day, Verseckes filed a motion to transfer, relying on the same mandatory venue provision, but requested that the lawsuit be transferred to Van Zandt County, a county in which he claimed to reside. Subsequently, Verseckes filed an amended motion to transfer venue and sought to have the case transferred to Stephens County instead of Van Zandt County, still asserting mandatory venue, but claiming that he was a resident of Stephens County as well as Van Zandt County. GeoChem then amended its petition, adding three other defendants.
Before the Dallas County trial court ruled on the motions to transfer, GeoChem nonsuited the entire case. On that same day, GeoChem refiled its suit in Van Zandt County *543 against all defendants. The defendants filed motions to transfer to Stephens County, and the Van Zandt County trial court granted those motions. The Stephens County trial court ultimately rendered final judgment against GeoChem. GeoChem appealed the venue ruling as well as other adverse determinations. The court of appeals reversed and remanded in part, but held that the case was properly transferred to Stephens County. We reverse the judgment of the court of appeals and remand to the trial court for further proceedings in accordance with this opinion.
Under our former venue practice, the filing of a proper plea of privilege constituted prima facie proof of a defendant's right to obtain a transfer. See former TEX.REV.CIV. STAT. art.2007;[1] former TEX.R. CIV. P. 87 (Vernon 1979, amended 1983); see also Tempelmeyer v. Blackburn, 141 Tex. 600, 175 S.W.2d 222, 224 (1943). The plea of privilege was required to be verified and was required to affirmatively assert certain facts. See former TEX.REV.CIV. STAT. art.2007; former TEX.R. CIV. P. 87. If a plaintiff took a nonsuit while the plea of privilege was pending, venue was fixed in the county to which transfer was sought. See Tempelmeyer, 175 S.W.2d at 224; see also Ruiz v. Conoco, Inc., 868 S.W.2d 752, 756-57 (Tex.1993). Because the plea of privilege was prima facie proof of the right to transfer, the dismissal was deemed an admission that venue was improper in the original county of suit and that the defendant had the right to transfer venue. See Ruiz, 868 S.W.2d at 757; Tempelmeyer, 175 S.W.2d at 224.
We no longer have a "plea of privilege" under our venue statutes and rules. Instead, a party seeking to transfer a suit must file a motion objecting to venue. See TEX.R. CIV. P. 86. Verification of the motion is not required, and the motion may be, but is not required to be, supported by affidavits at the time it is filed. See TEX.R. CIV. P. 86(3). As the court of appeals correctly observed, all venue facts, when properly pleaded, shall be taken as true unless specifically denied by the adverse party. See TEX.R. CIV. P. 87(3)(a). When a venue fact is specifically denied, the party pleading the fact must submit supporting affidavits or otherwise make prima facie proof. See id. A party who seeks to maintain venue in the county of suit under certain sections of the Civil Practice and Remedies Code has the burden to make prima facie proof that venue is maintainable in that county. See TEX.R. CIV. P. 87(2)(a). A party seeking a transfer has the burden to make prima facie proof that venue is maintainable in the county to which transfer is sought. Id. Thus, the pleadings at any given point in time after a motion to transfer is filed may or may not establish a prima facie case of proper venue, depending on what has been filed by the plaintiff and what has been filed by the defendant.
When a nonsuit is filed, we must consider the state of the record at that point. Under our current rules of procedure, if an objection to venue in the county of suit has been filed, with or without supporting affidavits, and the plaintiff then takes a nonsuit and has not specifically denied the venue facts averred by the party seeking transfer, the venue facts alleged in the motion to transfer are taken as true. See TEX.R. CIV. P. 87.
At the time GeoChem filed its notice of nonsuit, Verseckes had filed a motion to transfer and an amended motion to transfer in which he stated that he resided in Van Zandt and Stephens Counties. GeoChem never met its burden of proving that venue was proper in Dallas County. As discussed above, the venue facts alleged by Verseckes were taken as true under Rule 87(3)(a) until specifically denied, and GeoChem had not specifically denied them. Those mandatory venue facts became established when the nonsuit was filed.
Further, mandatory venue facts had been established by prima facie proof at the time the nonsuit was taken. Verseckes had filed affidavits in which he stated that he resided in both Van Zandt and Stephens Counties. We note that for venue purposes, an individual may have more than one residence. *544 See Snyder v. Pitts, 150 Tex. 407, 241 S.W.2d 136, 140 (1951); Rosales v. H.E. Butt Grocery Co., 905 S.W.2d 745, 748 (Tex.App. San Antonio 1995, writ denied). There is no contention in this case that the affidavits filed by Verseckes were insufficient to establish prima facie proof of residences in two counties.
The court of appeals concluded that although venue was proper in Van Zandt County, once GeoChem had made its "first choice" by filing in a county in which venue was improper, GeoChem was not entitled to refile in a second county of its choice over the objection of a defendant. 929 S.W.2d at 89. The court of appeals reasoned that "there can be only one first choice" because "any other posture would be to promote rather than prevent the very type of legal `gamesmanship' sought to be prevented under the old venue law." Id. We conclude that the venue statutes do not support this conclusion.
The court of appeals recognized that under the current venue statutes, the plaintiff has the "first choice" of venue. 929 S.W.2d at 89 (citing Wilson v. Texas Parks & Wildlife Dep't, 886 S.W.2d 259, 260 (Tex.1994)). However, the statutes do not say that the plaintiff may choose venue only once. They simply say that if the county chosen is not proper, the case must be transferred if a sufficient motion is filed and ruled upon. See TEX. CIV. PRAC. & REM.CODE § 15.063.
In this case, the mandatory venue provision regarding injunctions requires that the suit be tried in a county in which a defendant against whom the injunction is sought is domiciled. See TEX. CIV. PRAC. & REM.CODE § 65.023. When GeoChem filed its second suit in Van Zandt County, it did so in full compliance with the mandates of the venue statutes. See id. GeoChem did not lose the right, under the facts of this case, to choose between two counties in which mandatory venue is proper by filing its first suit in a county in which venue was improper. Because venue in Van Zandt County was proper under TEX. CIV. PRAC. & REM. CODE § 65.023, the trial court erred in transferring the case to Stephens County. See TEX.R. CIV. P. 87(3)(c) (providing that if a claimant has made prima facie proof that venue is proper in the county of suit, the cause shall not be transferred unless the motion to transfer is based on a mandatory exception or on grounds that an impartial trial cannot be had in the county where the action is pending).
Under Rule 59.1 of the Texas Rules of Appellate Procedure, the Court grants Geo-Chem's application for writ of error and, without hearing oral argument, reverses the judgment of the court of appeals and remands this case to Van Zandt County for further proceedings.
BAKER, J., noted his dissent.
NOTES
[1] Act of May 8, 1939, 46th Leg., R.S., ch. 27, 1939 Tex. Gen. Laws 204, repealed by Act approved May 15, 1939, 46th Leg., R.S., ch. 25, 1939 Tex. Gen. Laws 201. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1781970/ | 639 So. 2d 253 (1994)
LAKESIDE IMPORTS, INC.
v.
STATE of Louisiana.
No. 94-C-0191.
Supreme Court of Louisiana.
July 5, 1994.
*254 Ralph Everett Hood, Kizer, Hood & Morgan, for applicant.
Richard P. Ieyoub, Atty. Gen., Roy Achille Mongrue, Jr., La. Dept. of Justice, John C. Adcock, Brook, Morial, Cassibry & Pizza, for respondent.
MELVIN A. SHORTESS, Justice Pro Tem.[*]
Lakeside Imports, Inc. (plaintiff), a motor vehicle dealer licensed by the State of Louisiana to engage in the sale of new and used cars and trucks, sued the State of Louisiana seeking declaratory and injunctive relief from the application of LSA-R.S. 51:193. The Louisiana Auto Dealers Association intervened in the suit, uniting with the State in defense of the suit. Plaintiff contends R.S. 51:193 is unconstitutional because the statute violates its right to equal protection, deprives it of a property right without due process of *255 law, and is a "special" law enacted without compliance with the requirements of Article III, Section 13, of the Louisiana Constitution. The trial court dismissed plaintiff's suit, and the court of appeal affirmed that dismissal. 634 So. 2d 891 We granted certiorari to address the issue of the constitutionality of this statute.
The statute in question, LSA-R.S. 51:193, provides as follows:
No motor vehicle dealer licensed pursuant to Title 32 of the Louisiana Revised Statutes of 1950 who is engaged in the sale of new or used cars or trucks may be open on Sunday.
The statute is one of the last vestiges of the statewide mandatory Sunday closing laws which have existed in various forms in this state since 1886. Act 1 of 1986 amended and reenacted R.S. 51:191, 192, and 193, and repealed R.S. 51:194 and 195. The Act effectively repealed all other statewide Sunday closing laws contained in Title 51 but allowed the governing authority of any parish or municipality to adopt ordinances regulating Sunday sales.[1]
Plaintiff is an automobile dealership in Jefferson Parish. It seeks the right to open its entire operation (service and parts departments as well as new and used car sales) on Sundays. Plaintiff's owner, Tony Gullo, also owns several dealerships in Texas, including one in Houston which is open on Sundays. Keith Hanks, plaintiff's vice president and general manager, stated the main reason he wants to open on Sunday is to make shopping more convenient for the customer. Hanks admitted, however, that plaintiff has some "selfish motives" in wanting to open on Sundays; it wants to gain a competitive advantage.
Plaintiff faces a heavy burden of proof in this case. Statutes are presumed to be valid, and the burden of proving that an act is unconstitutional is upon the party attacking the act. Moore v. Roemer, 567 So. 2d 75, 78 (La.1990). Unless fundamental rights, privileges, and immunities are involved, the presumption that the statute is constitutional is strong, and the party attacking the statute has the burden of proving unconstitutionality by clear and convincing evidence. Ex rel. the Minor Child, J.M., 590 So. 2d 565, 572 (La. 1991); Board of Directors v. All Taxpayers, 529 So. 2d 384, 387-388 (La.1988).
Plaintiff contends, however, that R.S. 51:193 deprives him of a "fundamental right"his property right to pursue his lawful trade without substantial government interference. In Banjavich v. Louisiana Licensing Board for Marine Divers, 237 La. 467, 111 So. 2d 505 (1959), this court held that pursuit of a legal occupation is a property right. 237 La. at 485, 111 So.2d at 511. The Banjavich court stated that "to deprive a person of his right to pursue his chosen calling deprives him of his liberty, and to prevent his continuing in a lawful business or pursuit in which he is already engaged deprives him of his property...." 237 La. 467, 111 So.2d at 512, quoting State v. Chisesi, 187 La. 675, 175 So. 453, 457 (1937).
Plaintiff relies on Banjavich and West v. Town of Winnsboro, 252 La. 605, 211 So. 2d 665 (La.1967), in which we expanded the concept of property rights to include "any civil right of a pecuniary nature," which includes "the right to pursue employment or to conduct a business." 252 La. at 618, 211 So.2d at 670. We held in West that the constitutional protection of property rights extends to "any substantial interference produced by unconstitutional legislation." Id.
In order to prove deprivation of a fundamental right, a plaintiff has to prove substantial interference with his right to conduct his business and earn a living. Here plaintiff clearly is not being deprived of his right to engage in the sale of new and used cars and trucks and has produced no evidence it has suffered a pecuniary loss by being forced to close on Sunday.[2] When *256 questioned regarding whether more cars could be sold if dealers were open on Sunday, Hanks stated the number of cars sold in the state is "probably a fixed figure...." When asked to articulate how much business plaintiff had lost in sales of parts and service because of the Sunday closing law, Hanks replied, "Ask me in six months." Because plaintiff has failed to prove substantial interference with its business, it has failed to prove deprivation of a fundamental right.
Sunday closing laws are not per se unconstitutional. McGowan v. State of Maryland, 366 U.S. 420, 81 S. Ct. 1101, 6 L. Ed. 2d 393 (1961); Harry's Hardware v. Parsons, 410 So. 2d 735, 737 (La.), cert. denied, 459 U.S. 881, 103 S. Ct. 178, 74 L. Ed. 2d 145 (1982). An individual's right to dispose of private property is subject to reasonable statutory restrictions and the reasonable exercise of the police power. La. Const. art. I, § 4. When a statute does not interfere with fundamental personal rights or draw upon inherently suspect distinctions such as race or religion, the jurisprudence requires only that the classification challenged be rationally related to a legitimate state interest. City of New Orleans v. Dukes, 427 U.S. 297, 301-305, 96 S. Ct. 2513, 2516-2517, 49 L. Ed. 2d 511 (1976); Harry's Hardware, 410 So.2d at 737.
LSA-R.S. 51:193 is purely economic legislation. Thus, to determine whether it passes constitutional muster under the due process clause, we must determine whether the challenged statute bears any rational relationship to a legitimate state objective. The preamble to Act 1 of 1986 provides no guidance as to the purpose of the statute. LSA-R.S. 51:194(C), the former statute setting forth the purpose of the Sunday closing laws (which also contained authorization for injunctive relief for violation of the laws), was repealed by Act 1. However, we are aided in ascertaining legitimate state objectives for this statute by the testimony of the State's witnesses.
The State presented the testimony of four auto dealers. The parties stipulated that if five additional dealers testified, their testimony regarding the economic reasons for the Sunday closing law would be the same as the first four. These dealers stated (and even the plaintiff's witnesses agreed) there are only a finite number of cars to be sold; automobiles generally are not impulse purchases. While Sunday car purchasing might be more convenient for the working consumer, a dealer's overhead would increase if it were open seven days per week.[3] A large metropolitan dealer with a heavy sales volume could absorb the increased overhead or pass it on to the consumer. Because it can sell more cars, the large dealer can spread the increased overhead costs over a large number of consumers. A small dealer, on the other hand, could be forced either to charge higher prices than its big-city competitors (which may result in loss of business) or to try to absorb the increased overhead. The defense witnesses testified this would cause some low-volume dealers to close their doors.
The witnesses also addressed the issue of whether a local option law would be feasible or whether a small dealer could simply refuse to open on Sundays. The consensus was that because of the competitive regional nature of the automobile business, if one dealer in a region were open, all dealers in that area would feel compelled to open. Additionally, if one parish passed a law permitting Sunday sales of automobiles, neighboring parishes in the region would pass similar laws so as not to lose tax dollars.
Another rationale for the law is to protect the welfare of automobile salesmen. Hanks testified plaintiff's salesmen work 60 to 70 hours per week. They are compensated strictly by commissions. Defendant's witnesses, all of whom started in the auto business as salesmen, testified that because of the competitive nature of automobile sales, salesmen will probably be forced to work Sundays because "if the doors are open the salesmen are going to want to be there." Hanks speculated the salesmen would probably *257 not work one weekday each week if they worked Sundays. However, this possibility is belied by Hanks' testimony that plaintiff's salesmen work 60 to 70 hours per week even though 90% of their sales are on Saturdays or after 6:00 p.m. on weekdays.
The State has proven at least three legitimate state objectives in requiring auto dealers to close on Sundays: 1) to protect small rural dealerships from unfair competition by large metropolitan dealerships, 2) to protect consumers from higher prices for automobiles brought on by higher overhead from Sunday sales, and 3) to protect the welfare of commissioned auto salesmen. Plaintiff has failed to show by clear and convincing evidence that R.S. 51:193 does not bear a rational relationship to these objectives. To the contrary, the State has shown that the statute does serve its intended purposes.
Plaintiff contends that even if this statute does not violate the due process clause, it is an unconstitutional deprivation of federal and state equal protection guarantees. When an economic regulation is challenged as violating the equal protection clause, this court may not sit as a super-legislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines. In the local economic sphere, it is only the invidious discrimination, the wholly arbitrary act, which cannot stand consistently with the Fourteenth Amendment. City of New Orleans v. Dukes, 427 U.S. 297, 303-305, 96 S. Ct. 2513, 2517, 49 L. Ed. 2d 511 (1976); State ex rel. Guste v. K-mart Corp., 462 So. 2d 616, 618-619 (La.1985).
Plaintiff contends that the statute arbitrarily discriminates against licensed dealers of new and used cars and trucks because other businesses can sell motor vehicles and auto parts and services on Sundays. The only evidence adduced at trial in support of this contention was Hanks' unsupported statement that unlicensed persons can sell cars on Sundays. Plaintiff gives as an example of this alleged discrimination that a service station can open and sell motor vehicles on Sunday while licensed motor vehicle dealers cannot.[4] Plaintiff's reliance on this example is misplaced. All business in Louisiana which engage in the sale of new or used cars or trucks must be licensed. LSA-R.S. 32:1252(14); LSA-R.S. 32:773(A)(1); LSA-R.S. 32:774(A).[5]
Plaintiff also contends arbitrary discrimination is shown because auto body shops, auto parts stores, and department stores with auto service centers are permitted to open for business on Sundays. Hanks admitted that the Toyota-manufactured parts he sells cannot be purchased at an auto parts store. Thus, he is not competing with auto parts dealers for those sales. He also admitted that much of his service is warranty work which cannot be done by a department store auto service center.
Hanks stated initially that it would not be economically feasible to open plaintiff's parts and service departments on Sundays and that if R.S. 51:193 is struck down, plaintiff would open only its new car sales department. On rebuttal, Hanks recanted his statement that plaintiff would not open the parts department on Sundays if permitted to do so. He testified plaintiff has a 1,200-square-foot retail parts center with approximately $50,000.00 in inventory. This center, which is stocked with non-Toyota parts, is available for self service. The nature of that operation, he testified, is in direct competition with auto parts dealers. While the law would not prohibit him from opening this parts center on Sunday as a separate business, he stated he had never considered that option.
We find plaintiff has failed to prove that R.S. 51:193 invidiously discriminates or is *258 wholly arbitrary. The entire class of persons engaged in the business of selling new and used cars and trucks is affected by the law. Furthermore, plaintiff has produced no evidence that it is losing any business to auto parts stores. Hanks testified generally that Lakeside sells "a lot of similar parts" to those sold by auto parts dealers but could give no specifics as to how much business, if any, was lost by being closed on Sundays.
Finally, plaintiff contends R.S. 51:193 is a "special" law which was enacted without compliance with the requirements of Article III, Section 13, of the Louisiana Constitution. The term "special" is not defined in the constitution but has been defined jurisprudentially. It is used in contradistinction to the term "general." Polk v. Edwards, 626 So. 2d 1128, 1133 (La.1993). A statute is general and not special if it operates on a subject in which the people at large are interested and affects people throughout the state, even if some only indirectly. Polk, 626 So.2d at 1135. A law is considered special if it affects only a portion of the citizens or is restricted in its operations to persons or places which do not comprise all the objects or persons which naturally belong to the class. State v. Clement, 188 La. 923, 178 So. 493, 496-497 (1928).
LSA-R.S. 51:193 affects people throughout the state, including all members of the class of licensed dealers of new and used cars and trucks. We thus find no merit in plaintiff's contention that this statute is a special law to which the notice requirements of Article III, Section 13, are applicable.
For the foregoing reasons, the judgments of the trial court and the court of appeal are affirmed at plaintiff's cost.
AFFIRMED.
NOTES
[*] Judge Melvin A. Shortess, Court of Appeal, First Circuit, sitting in place of Justice James L. Dennis.
Ortique, J., not on panel. Rule IV, Part 2, § 3.
[1] Banks in Louisiana are still required to close on Sundays. LSA-R.S. 1:55.
[2] The challenged statute in Banjavich "effectually put plaintiffs out of business." 237 La. 467, 481, 111 So. 2d 505, 510. In West, the Town of Winnsboro enacted an ordinance which forced large grocery stores to close on Sundays while allowing competing small stores to remain open. The plaintiff introduced evidence that before the ordinance was passed it earned $500.00 in profits each Sunday.
[3] Although plaintiff's witnesses testified the only additional overhead would be the salary of a switchboard operator to answer the telephone for a few hours on Sundays, the State's witnesses pointed out there would need to be increased support personnel, particularly if the parts and service departments were open, additional advertising costs, and increased utility bills.
[4] This example was cited by the Georgia Supreme Court in Rutledge v. Gaylord's, Inc., 233 Ga. 694, 697, 213 S.E.2d 626, 629 (1975), which declared unconstitutional portions of Georgia's Common Day of Rest Act.
[5] There are certain limited exceptions to the licensing law. For example, a consumer may sell his personal automobile on a Sunday. None of the exceptions, however, apply to persons engaged in the business of selling new and used cars and trucks. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2135390/ | 183 Wis. 2d 54 (1994)
515 N.W.2d 276
STATE of Wisconsin EX REL. James W. KERR, Petitioner-Appellant,
v.
Gary McCAUGHTRY, Warden, Respondent-Respondent.[]
No. 92-3235.
Court of Appeals of Wisconsin.
Submitted on briefs October 8, 1993.
Decided March 3, 1994.
*55 For the petitioner-appellant the cause was submitted on the briefs of T. Christopher Kelly of Madison.
*56 For the respondent-respondent the cause was submitted on the brief of James E. Doyle, attorney general, and Michael R. Klos, assistant attorney general.
Before Eich, C.J., Dykman and Sundby, JJ.
DYKMAN, J.
This is an appeal from an order denying James W. Kerr's petition for a writ of habeas corpus challenging a detainer proceeding under the Interstate Agreement on Detainers (IAD), § 976.05, STATS. The issue is whether, after the State of Arizona's previous, identical IAD proceeding had been dismissed, Arizona could reuse documents from the first proceeding to obtain Kerr's transfer. Because we conclude that it could not do so, we reverse and direct the trial court to grant Kerr's petition for habeas corpus.
James W. Kerr is incarcerated in the Waupun Correctional Institution. On August 10, 1992, the prison received a request from an Arizona district attorney for Kerr's temporary custody so that Kerr could be tried in Arizona for possession of marijuana and other related charges. Section 976.06, STATS., requires that a hearing on the district attorney's request must be held within thirty days of the prison's receipt of the request for temporary custody, if a prisoner requests a hearing. Because Kerr's hearing was scheduled on the thirtieth day and the Wisconsin district attorney was not prepared to proceed, the circuit court dismissed the request for temporary custody.
On September 15, 1992, the Arizona district attorney sent a letter to the prison's registrar, resubmitting his request for Kerr's temporary custody. Kerr contends that this letter is not a detainer, and that without a detainer, and IAD proceeding may not be held.
*57 The record contains an IAD Form I, dated September 21, 1992, and entitled "Notice of Untried Indictment, Information or Complaint and of Right to Request Disposition." Gary R. McCaughtry, Warden of the Waupun Correctional Institution, is shown as the custodial authority. There is a space for the signature of a "Warden-Superintendent-Director," below which is typed: "by: Pamela S. Knick, Registrar." No signature appears in the space. Kerr signed Form I on September 21, indicating that he was not requesting a final disposition of the Arizona charges. Pamela S. Knick witnessed Kerr's signature.
The record also contains an IAD Form V, dated August 3, 1992, and entitled "Request for Temporary Custody." It is signed by the Arizona district attorney, an Arizona judge, and a person acting on behalf of the Governor of Arizona. The parties do not dispute that this is a duplicate copy of a document which was submitted to the Dodge County Circuit Court on September 9, 1992, and dismissed by that court on that date.
When Kerr again appeared before the circuit court, he argued that because he had been discharged from the first detainer, a second detainer proceeding was impermissible, and that even if a second proceeding were authorized, Arizona was not permitted to refile its request without again obtaining judicial approval. The trial court denied his request to dismiss the second proceeding.
SECOND DETAINER PROCEEDING
[1]
First, Kerr argues that Arizona did not lodge a second detainer against him. The IAD does not define "detainer." But in United States v. Mauro, 436 U.S. 340 *58 (1978), the Court accepted a definition found in both the House and Senate Reports: "`[A] detainer is a notification filed with the institution in which a prisoner is serving a sentence, advising that he is wanted to face pending criminal charges in another jurisdiction.'" Id. at 359 (quoting H.R. REP. No. 1018, 91st Cong., 2d Sess. 2 (1970); S. REP. No. 1356, 91st Cong., 2d Sess. 2 (1970)). The district attorney's letter does not fit that description. But the IAD Form I filed by the registrar does. Kerr does not argue that that form is defective because it was not signed by the district attorney, or for that matter, by the registrar or the warden. We therefore conclude that the IAD form filed by the registrar was a second detainer.
[2, 3]
Citing State v. Sykes, 91 Wis. 2d 436, 283 N.W.2d 446 (Ct. App. 1979), Kerr next argues that a prisoner, having once been made the subject of a detainer and then of a request for temporary custody, should not suffer the continuing effects of a detainer if he or she requests a § 976.06, STATS., hearing and is not given one within the time required by statute. But Sykes only holds that the failure to provide an inmate with a hearing on a request for temporary custody within thirty days requires the prisoner's release from the detainer. Sykes, 91 Wis. 2d at 439, 283 N.W.2d at 448. In Aiello v. State, 166 Wis. 2d 27, 33, 479 N.W.2d 178, 180-81 (Ct. App. 1991), we said: "Section 976.06, STATS., requires a hearing within thirty days of receipt of a written `request.' Section 976.06 nowhere proscribes the filing of multiple detainer requests. We will not impose such a requirement." We conclude that Aiello is dispositive of Kerr's argument.
*59 RENEWED JUDICIAL APPROVAL
Kerr's next argument is that Arizona's failure to again obtain a judge's approval of the request for temporary custody (IAD Form V) violates the IAD. The requirement of judicial oversight is found in § 976.05(4)(a), STATS., Article IV of the IAD:
The appropriate officer of the jurisdiction in which an untried indictment ... is pending shall be entitled to have a prisoner against whom he has lodged a detainer ... made available ... upon presentation of a written request for temporary custody or availability to the appropriate authorities of the state in which the prisoner is incarcerated: provided that the court having jurisdiction of such indictment ... has duly approved, recorded and transmitted the request.... [Emphasis added.]
[4, 5]
In Aiello, we noted that where the state commenced successive IAD requests, an order arising out of one of those requests was final, and that further orders in that case were ineffective. Aiello, 166 Wis. 2d at 30, 479 N.W.2d at 179. Thus, a new detainer proceeding was necessary after the dismissal of a prior proceeding. Id. at 30, 479 N.W.2d at 179-80. This suggests that when a judge dismisses an IAD request, the requesting state must begin again if it wishes to obtain the temporary custody of a prisoner. And this is consistent with the requirement of judicial oversight found in Article IV of the IAD that we have quoted. A court must approve a district attorney's request for temporary custody of an out-of-state prisoner. Inherent in the requirement of approval is the notion that the judicial branch of government be given the opportunity to do more than rubber-stamp a district attorney's request.
*60 The opportunity for inquiry permits a judge to consider a district attorney's successive attempts to use the requesting state's resources to prosecute wrongdoing. Were we to dilute this oversight by permitting the district attorney to "bank" a judge's approval, or to use a judge's approval after the facts had changed, we would be weakening the legislative directive of judicial control of IAD proceedings.
The Respondent asserts that very little had changed since the judge's approval of the IAD Form V. While that may be true, we conclude that a bright-line rule is better in IAD cases. Were we to conclude that some type of balancing test should be used in successive IAD cases, litigation questioning successive IAD requests would be the rule, and the real litigationthe criminal trial in the requesting statewould be delayed. With rapid communications available to prosecutors, judges and prisons across the country, a rule requiring a new IAD Form V for each IAD request is neither difficult nor time-consuming.
We conclude that the trial court's order dismissing the first IAD proceeding dismissed the IAD Form V, and made it unusable in a successive proceeding. We therefore reverse the trial court's order and remand with instructions to dismiss this IAD proceeding. If the Arizona district attorney still desires Kerr's temporary custody, a new proceeding will be necessary.
By the Court.Order reversed and cause remanded with directions.
NOTES
[] Petition to review denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1743160/ | 511 So. 2d 1333 (1987)
Samuel Bice JOHNSON
v.
STATE of Mississippi.
No. DP-43.
Supreme Court of Mississippi.
May 27, 1987.
Rehearing Denied July 14, 1987.
*1335 Clive A. Stafford Smith, Atlanta, Ga., Laurence T. Sorkin, Anthony Paduano, Lisa Pearson, Cahill, Gordon & Reindel, New York City, for appellant.
Edwin Lloyd Pittman, Atty. Gen. by Marvin L. White, Jr., Asst. Atty. Gen., Jackson, for appellee.
ON MOTION FOR POST-CONVICTION RELIEF
HAWKINS, Presiding Justice, for the Court:
Samuel Bice Johnson filed a petition for relief under our Mississippi Uniform Post-Conviction Collateral Relief Act (CRA), Miss. Code Ann. § 99-39-1, et seq. We address only those assignments contemplated by the CRA for which we are authorized to review in a petition of this nature. For the reasons set forth, we deny his petition.
Following a trial held in the circuit court of Pike County on August 30-September 3, 1982, Samuel Bice Johnson was convicted of capital murder and sentenced to death. His conviction was affirmed by this Court on May 8, 1985, and his petition for rehearing was denied November 6, 1985; Johnson v. State, 477 So. 2d 196 (Miss. 1985). The United States Supreme Court denied his petition for certiorari, Johnson v. Mississippi, ___ U.S. ___, 106 S. Ct. 1958, 90 L. Ed. 2d 366 (1986), and subsequently denied his petition for rehearing, ___ U.S. ___, 106 S. Ct. 2930, 91 L. Ed. 2d 557 (1986).
On August 4, 1986, he filed with this Court his petition for relief under our Mississippi Uniform Post-Conviction Collateral Relief Act (CRA), Miss. Code Ann. § 99-39-1, et seq. His petition consists of 60 pages, supported by a brief of 85 pages, a supplemental motion to amend with supporting brief, and exhibits of several hundred pages. The petition contains 43 assignments, and the amendment to the petition adds another.[1]
*1336 The purpose of a CRA petition is set forth in Miss. Code Ann. § 95-39-3(2):
(2) Direct appeal shall be the principal means of reviewing all criminal convictions and sentences, and the purpose of this chapter is to provide prisoners with a procedure, limited in nature, to review those objections, defenses, claims, questions, issues or errors which in practical reality could not be or should not have been raised at trial or on direct appeal.
Miss. Code Ann. § 99-39-21 reads in pertinent part:
(1) Failure by a prisoner to raise objections, defenses, claims, questions, issues or errors either in fact or law which were capable of determination at trial and/or on direct appeal, regardless of whether such are based on the laws and the Constitution of the state of Mississippi or of the United States, shall constitute a waiver thereof and shall be procedurally barred, but the court may upon a showing of cause and actual prejudice grant relief from the waiver.
* * * * * *
(4) The term "cause" as used in this section shall be defined and limited to those cases where the legal foundation upon which the claim for relief is based could not have been discovered with reasonable diligence at the time of trial or direct appeal.
(5) The term "actual prejudice" as used in this section shall be defined and limited to those errors which would have actually adversely affected the ultimate outcome of the conviction or sentence. [Emphasis added]
(6) The burden is upon the prisoner to allege in his motion such facts as are necessary to demonstrate that his claims are not procedurally barred under this section.
In a petition of this nature, we are also governed by Miss. Code Ann. § 99-39-27(5):
(5) Unless it appears from the face of the application, motion, exhibits and the prior record that the claims presented by such are not procedurally barred under section 99-39-21 and that they further present a substantial showing of the denial of a state or federal right, the court shall by appropriate order deny the application.
Moreover, we do not consider on a petition of this nature issues raised and decided on the original appeal, even though theories for relief different from those urged at trial and on appeal are now asserted. Miss. Code Ann. § 99-39-21(2), (3). Dufour v. State, 483 So. 2d 307, 311 (Miss. 1985), (and cases cited therein).
Within these circumscribed boundaries, we address the appropriate assignments in Johnson's petition.
I.
JOHNSON'S 1963 NEW YORK CONVICTION AS AN AGGRAVATING CIRCUMSTANCE.
During the course of the sentencing phase of trial, the State introduced an authenticated copy of a judgment of conviction of Johnson of assault, second degree with intent to commit rape, first degree, rendered by the Monroe County court New York on April 9, 1963. This was offered as one of three aggravating circumstances to support the death penalty. (R. 2171-2173). Johnson did not testify either at the guilt or sentencing phase of his trial.
During the course of his argument, the district attorney recited this conviction as a basis for the jury to render a death penalty verdict. (R. 2273)
In his motion for a new trial and on appeal, Johnson objected to the introduction of the record of this conviction because it did not channel the jury's discretion by "clear and objective standards," and because it was too remote. (Appellant's Brief, pp. 29-31) We rejected both arguments. 477 So.2d at 218-219.
In his petition for certiorari to the U.S. Supreme Court, no claim of error was made *1337 to the introduction of this record into evidence as an aggravating circumstance.
In this petition, for the first time, Johnson argues that the 1963 conviction was invalid. Apparently, following or commensurate with its filing, Johnson's counsel also took steps to have this conviction vacated by the New York courts. This Court has been furnished with a copy of an order and slip opinion of the Court of Appeals of New York, dated March 24, 1987, in which that court did indeed reverse and vacate this 1963 conviction and dismiss the indictment.
From the exhibits it appears that Johnson did not appeal his 1963 conviction and that he served a year in a New York correctional institution for this crime.
Miss. Code Ann. § 99-19-101(5)(b) provides:
(5) Aggravating circumstances shall be limited to the following:
* * * * * *
(b) The defendant was previously convicted of another capital offense of or a felony involving the use of threat of violence to the person.
The aggravating circumstances enumerated in the court's instruction at trial were:
(1) That the defendant, Samuel Johnson, was previously convicted of a felony involving the use or threat of violence to the person of another.
(2) That the defendant, Samuel Johnson, committed the capital murder for the purpose of avoiding arrest or effecting an escape from custody.
(3) The capital murder was especially heinous, atrocious and cruel.
(R. 2236)
The verdict of the jury found all three of these aggravating circumstances existed. (R. 2294)
It is apparent that Johnson waived this claim, and it is procedurally barred. At no time during his direct appeal, or in his petition for certiorari to the U.S. Supreme Court did he argue his New York conviction was constitutionally invalid. Moreover, there is nothing to suggest he took any steps to vacate this conviction until he filed this petition. On appeal Johnson's counsel alleged thirteen assignments of error, and at Johnson's own urging, his counsel added seven additional assignments. None questioned the validity of his New York conviction. See Evans v. State, 485 So. 2d 276 (Miss. 1986), at 280-281.
Also, the jury found three aggravating circumstances to support its verdict. Even if we conceded that the jury had no authority to consider this conviction, the remaining two aggravating circumstances were sufficient to support the jury's verdict. Zant v. Stephens, 462 U.S. 862, 880-884, 103 S. Ct. 2733, 2744-2746, 77 L. Ed. 2d 235, 252-254 (1983); Irving v. State, 498 So. 2d 305, 314 (Miss. 1986).
Aside from the statutory limitation of review, we remain unpersuaded by this contention.
We have never faced this question. A somewhat similar question has been before us concerning the use of a prior criminal conviction to impeach a defendant in a criminal trial. We have held that subsequent reversal on appeal of a prior conviction did not affect a defendant's trial conviction. Young v. State, 425 So. 2d 1022 (Miss. 1983); Milstid v. State, 347 So. 2d 1319 (Miss. 1977); and Nicholson v. State, 254 So. 2d 881 (Miss. 1971).
Also, in Phillips v. State, 421 So. 2d 476 (Miss. 1982), the state used a Kentucky conviction as a basis for Phillips' conviction under one of Mississippi's habitual criminal statutes. Miss. Code Ann. § 99-19-81 (Supp. 1984). We held that when the conviction was subsequently reversed, it could constitute a basis for post-conviction relief from the habitual criminal conviction.
Under Miss. Code Ann. § 99-19-81, however, upon proof of the prior conviction a circuit judge has no alternative except to sentence to the maximum authorized by law. Such sentence cannot be suspended, and the accused will never be eligible for parole or probation prior to serving this maximum sentence. In the sentencing phase of a capital murder trial the jury is not required to sentence the defendant to death, regardless of its finding.
*1338 When a prior conviction is used under either habitual offender statute, it is, of course, certain that the defendant will receive greater punishment. The admission of a prior conviction in order to impeach the accused as a witness, or at a sentencing phase of a capital murder trial may or may not materially influence the jury.
As we noted, the jury found three aggravating circumstances existed, and of the three we have little doubt that in a rational sentencing process Zant v. Stephens, supra, the other two aggravating circumstances would carry greater weight than the New York conviction in determining Johnson's sentence. Indeed, the remoteness in time of the prior conviction was a mitigating circumstance. Johnson v. State, 477 So.2d at 219.
We eschew "harmless error" in our reasoning, however, because the district attorney argued this particular aggravating circumstance as a reason to impose the death penalty. Johnson v. State, 477 So.2d at 219. Nevertheless, we reject New York's setting aside of the 1963 conviction as a basis to vitiate the verdict of the jury.
If there is one single point emphasized by the U.S. Supreme Court decisions of Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976); Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976); and Furman v. Georgia, 408 U.S. 238, 92 S. Ct. 2726, 33 L. Ed. 2d 346 (1972), it is that before a jury is permitted to sentence a human being to death, it must have clear guidelines. The centerpiece of these decisions requires the jury to find one or more aggravating circumstances exist before they can impose the death sentence. Of course, any such "aggravating circumstance" must reasonably justify making the difference between imposing a life sentence or the death penalty.
If the death penalty is to be imposed without caprice or chance, there is no doubt that a crucial guideline to assist citizens who have this formidable responsibility is whether the convicted murderer has engaged in serious criminal conduct involving violence to other people in the past. Thus, the reason for Miss. Code Ann. § 99-19-101(5)(b).
There is no question but that the state proved this aggravating circumstance in this case. At the time of Johnson's trial, New York had imposed a final conviction and Johnson had served his sentence.
If we adopted Johnson's argument, the state could never use a conviction as an aggravating circumstance, because of the extreme likelihood that a foreign state could overturn the prior conviction through collateral attack. The loss of this guideline to a jury would serve to return juries to the unbridled, unchannelled, and hence, unconstitutional discretion they had in imposing the death sentence.
We are not required in this case to go as far as Nicholson, Milstid and Young, supra, in authorizing introduction of proof of a prior conviction in a capital murder case. That is, in this case, we do not address whether a prior conviction can be used as an aggravating circumstance if that conviction is subsequently reversed on direct appeal. We do hold that a foreign state cannot vitiate the death penalty verdict in this state by setting aside a prior conviction of a violent crime through a collateral relief petition.
We deem it important to add in this case that there is no evidence or indication that the post-conviction relief proceedings in the New York courts were truly adversarial. Insofar as we can determine from Johnson's petition and exhibits, the state's attorney in New York had no significant interest or concern in vouchsafing the validity of his 1963 conviction, and we find no challenge by the state's attorney of New York of Johnson's petition. Other than Johnson, this state had the greatest interest in upholding the validity of his New York conviction. Yet, this state was not made a party to Johnson's petition and had no voice in any of the New York proceedings to vacate his conviction. Indeed, we know of no method whereby this state could have been made a party to the New York proceedings, and this state probably should not have been a party. This does not remove the fact that the proceedings *1339 lacked an essential adversarial ingredient. The New York courts are, of course, the final and proper arbiters of all judicial proceedings in that state, including the disposition of post-conviction petitions. Assuredly, by our view, we suggest no impropriety in the courts of that state taking whatever action they deem appropriate in a criminal case in New York. The fact remains that Johnson was convicted in 1963 by a New York court of a serious felony involving violence to a female for which he was imprisoned in that state. No New York court extended Johnson relief from his conviction before Johnson paid his debt to the state. If his crime was serious enough for him to be convicted and final enough for him to serve time in a penal institution, it had sufficient finality to be considered as an aggravating circumstance by a jury of this state. No death penalty verdict based upon this conviction need be vitiated by the subsequent relief granted more than twenty years later by the New York Court of Appeals.
We accordingly reject all assignments of Johnson's petition based upon his 1963 conviction in the State of New York.
II.
INEFFECTIVE COUNSEL
The only remaining assignments of Johnson not clearly procedurally barred are assignments VII and VIII wherein he claims his trial counsel were ineffective in their representation of him during the guilt and sentencing phases of his trial, thus depriving him of his Sixth Amendment right to assistance of counsel. Under the assignments he lists some forty instances in which he claims his lawyers did not render professional service guaranteed to him by the Sixth Amendment.
The Sixth Amendment states the accused has the right "to have the Assistance of Counsel for his Defense."
Literally hundreds of court decisions have grappled with this phrase since the U.S. Supreme Court in Powell v. State, 287 U.S. 45, 53 S. Ct. 55, 77 L. Ed. 158, 84 A.L.R. 527 (1932), announced the Sixth Amendment required something more than just having a person with a law license sitting at the counsel table with an accused. Also, Avery v. Alabama, 308 U.S. 444, 446, 60 S. Ct. 321, 322, 84 L.Ed 377 (1940). A number of these cases are annotated and the various authorities examined in 4 A.L.R. 4th 1 244 (1980); see also 1986 supplement.
In 1984 the U.S. Supreme Court in two seminal cases set forth guidelines to determine whether the constitutional guaranty had been met. U.S. v. Cronic, 466 U.S. 648, 104 S. Ct. 2039, 80 L. Ed. 2d 657 (1984); and Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984).
Strickland tells us the benchmark inquiry is whether defense "counsel's conduct so undermined the proper functioning of the adversarial process that the trial cannot be relied on as having produced a just result." Id. at 686, 104 S.Ct. at 2064. It is an attack on the "fundamental fairness of the proceeding." Id. at 697, 104 S.Ct. at 2070. The Court then held the "proper standard for attorney performance is that of reasonably effective assistance," and it was incumbent upon a defendant to show that "counsel's representation fell below an objective standard of reasonableness. More specific guidelines are not appropriate." Id. at 687-688, 104 S.Ct. at 2064. Also, "judicial scrutiny of counsel's performance must be highly deferential," and "every effort be made to eliminate the distorting effects of hindsight." Id. at 689, 104 S.Ct. at 2065. The Court must then determine "whether, in light of all the circumstances, the identified acts or omissions were outside the wide range of professionally competent assistance." [Emphasis added] Id. at 690, 104 S.Ct. at 2066.
In addition, the accused must show he was prejudiced. That is, he must prove there is "a reasonable probability that but for counsel's unprofessional errors, the result of the proceeding would have been different." [Emphasis added] Id. at 694, 104 S.Ct. at 2068.
And finally, in determining whether ineffectiveness of counsel justifies setting aside a conviction, the appellate court may "independently weigh the evidence," and *1340 decide whether the aggravating and mitigating circumstances on balance warranted the death penalty.
This Court has followed the guidelines of Strickland in Irving v. State, 498 So. 2d 305 (Miss. 1986); Evans v. State, 485 So. 2d 276 (Miss. 1986); Dufour v. State, 483 So. 2d 307 (Miss. 1985); Leatherwood v. State, 473 So. 2d 964 (Miss. 1985); Lambert v. State, 462 So. 2d 308 (Miss. 1984); Gilliard v. State, 462 So. 2d 710 (Miss. 1985).
What then does "assistance of counsel" mean?
It obviously means an accused has the right to a lawyer to represent him. Just as obviously, it cannot mean there is a constitutional guaranty to a lawyer who in hindsight made no errors in defending the case. This would be tantamount to a constitutional guaranty of non-conviction. It would lend to continued court battles with successive defense lawyers, each of whom in hindsight could be found to have made mistakes. This never ending battle would continue until the state wearily threw in the towel. Covington v. State, 600 S.W.2d 186 (Mo. App. 1980); People v. Moody, 676 P.2d 691 (Colo. 1984); Commonwealth v. Saferian, 366 Mass. 89, 315 N.E.2d 878 (1974); State v. Wolf, 347 N.W.2d 573 (N.D. 1984).
Yet, if the Sixth Amendment guaranty has any meaning it must mean more than simply having a man admitted to law practice as a defense lawyer for the accused. U.S. v. Cronic, supra. It must mean that a lawyer with some competence conscientiously represented the accused. Dufour v. State, supra. It must require both, because an incompetent can be conscientious, and an otherwise competent lawyer can by a lack of concern for his responsibility, fail in his adversarial duty.
Yet it does not necessarily mean that a lawyer was either incompetent or failed to responsibly represent his client because he made mistakes. However, conduct of an attorney, including the mistakes he made, can very well be of such proportion as to reveal the lack of competence or diligence. Leatherwood v. State, supra.
Therefore, any Court seeking to determine whether the constitutional guaranty has been met, must look at the entire performance of the attorney and determine whether the defense attorney was competent and whether he sincerely tried to assist his client. In Dufour v. State, supra, at 310, we stated: "There are, however, certain basic duties required of an attorney when representing a criminal defendant."
Unless the mistake or conduct was of such magnitude that the Court concludes the lawyer was incompetent or evidenced a failure to conscientiously fulfill his adversarial role, we will conclude the constitutional guaranty for performance of counsel as enunciated in Strickland has been met.
Admittedly, these criteria remain generalizations and subject to disagreement between lawyers and judges.
Nevertheless, the members of this Court have each had years to observe trial practice and procedure in this state, and each is able to pass judgment by studying a record to determine whether or not a particular attorney was both competent and had a responsible attitude in his client's defense of a lawsuit in this state.
Indeed, by studying a trial record an appellate judge cannot escape forming an opinion on the performance of trial counsel. The record in this case, contrary to Johnson's assertion, clearly reveals he was represented by competent counsel dedicated to his defense. We have again carefully reviewed the record, and our original view that he had competent, zealous counsel has been reinforced.
They most assuredly met the "reasonably effective assistance," and "wide range of professionally competent assistance," guidelines of Strickland. There clearly was no lack of competence, or failure of interest in their defense of Johnson to support the contention that the constitutional guaranty was not met.
III.
REFUSED MOTION FOR CONTINUANCE
For example, Johnson charges his counsel failed to properly move for a continuance, *1341 thereby depriving him of expert witnesses, H. Dale Nute and Stephen B. Halligan. These experts examined Johnson's and the other participants' homicide clothing, and studied the laboratory reports of the state and Federal Bureau of Investigation. We have reviewed their letter to Diaz, Johnson's trial defense counsel, dated August 23, 1982, and we find nothing in this report which compels us to conclude that the defense counsel erred in not having these witnesses present at trial. These experts did not reach a conclusion so at odds with the state's proof so as to seriously challenge Johnson's guilt. Thus their absence from trial does not appear prejudicial.
It is just as plausible that their testimony would have been weak, and upon cross-examination their testimony would have helped the state's case. On the direct appeal of this case, we suspected Johnson's counsel moved for a continuance as a tactical gesture not really expecting the court to grant it but hoping that the circuit judge's refusal to grant the continuance would be considered error on appeal. It is not an altogether unfamiliar tactic of defense counsel in criminal as well as civil cases to produce an appeal record cluttered with adverse rulings. Some occasionally stick on appeal. The temptation to use this tactic increases in inverse proportion to the weakness of counsel's case.
IV.
WITHHOLDING OBJECTIONS TO CLOSING ARGUMENT
Of like import is Johnson's claim that his trial counsel were ineffective because they asked the trial judge to permit them to withhold objections to the state's argument until its completion and outside the presence of the jury. This clearly was a tactical decision of counsel. They, of course, knew they had the right to object whenever an improper argument was made. The very fact they made this request to the court evinced an awareness this right. Rather than risk offending the jury by objecting during argument, they asked permission to withhold objection and make it outside the presence of the jury. We criticized this sort of practice because when an improper argument was in fact made, it did not give the circuit judge the opportunity to correct it promptly upon objection by opposing counsel.
A conscious choice of trial strategy by defense counsel which proves unfortunate is not to be equated with incompetency. Roe v. State, 95 Wis. 2d 226, 290 N.W.2d 291 (1980); State v. Baker, 169 W. Va. 357, 287 S.E.2d 497 (1982). Moreover, in our original opinion we found that the state did not make a prejudicial argument.
V.
FAILURE TO RAISE INVALIDITY OF 1963 CONVICTION
Johnson's claim that his counsel were ineffective for failing to inquire into the invalidity of 1963 conviction ignores the fact that Johnson did not take the stand in the sentencing phase of his trial to assert his innocence of the New York conviction, overlooks Johnson's failure to assert his innocence in the pro se document he filed with this Court on direct appeal, and disregards his counsel's failure to assert it in his appeal to this Court or in his petition for certiorari before the U.S. Supreme Court. He filed no such petition urging us to consider this issue as an additional assignment of error to those filed by his counsel.
VI.
REMAINING INEFFECTIVE ASSIGNMENTS
The remaining complaints Johnson makes of his trial counsel are a litany of Monday morning quarterbacking, attempts to again litigate issues decided, and assertions outside the record. All these fall far short of demonstrating his counsel were not reasonably effective.
The record in this case reveals that two dedicated, assidious trial attorneys did the best they could to defend Johnson. Had the facts which pointed to Johnson's guilt not been overwhelming, his attorneys, no *1342 doubt, would have fared much better. In addition, the circuit judge, a jurist renowned for his patience, kindness and forbearance, more than lived up to his reputation in trying this case. No practicing attorney could hope for more consideration from a trial judge than these attorneys received in this case.
It is true we criticized defense counsel in our decision affirming Johnson's conviction for their manner of requesting a continuance, and by their request to withhold objections to the state's closing argument until its conclusion. But there was nothing about our comments to intimate that they harmed Johnson in doing so. To hold that Johnson's trial counsel, in this case, from this record, lacked that degree of competency guaranteed by the Sixth Amendment would make the Sixth Amendment virtually impossible to abide by. No rational mind can conceive of such a proscriptive constitutional requirement as a condition precedent to the validity of a criminal conviction.
The jury in this case believed that Johnson stabbed a highway patrolman in the back and instructed another to shoot him with the patrolman's own gun. Their verdict was supported by overwhelming evidence. This officer was carrying out his duty in a peaceful manner, and posed no physical threat to Johnson or any of his companions. Civilized society depends upon peace officers for its survival. Such a murder can be equated with treason.
In his motion for post-conviction relief, Johnson asserts assignments XII, XVIII and XXIII which he failed to raise at trial or on the direct appeal. Having failed to raise them at trial or upon appeal, Johnson waived his right to assert them in his motion for post-conviction relief. Miss. Code Ann. § 99-39-21 (Supp. 1985); Irving v. State, 498 So. 2d 305, 311 (Miss. 1986); Mann v. State, 490 So. 2d 910, 911 (Miss. 1986); Evans v. State, 485 So. 2d 276, 280 (Miss. 1986); Dufour v. State, 483 So. 2d 307, 308 (Miss. 1985).
Johnson also asserts assignments III, IV, V, VI, VIII, IX, XI, XIII, XVI, XVII, XIX, XXI, XXII, XXIV and XXV, which were considered and addressed by us on the direct appeal of his case. Consequently, these assignments are res judicata and cannot be raised again. Miss. Code Ann. § 99-39-21 (Supp. 1985); Irving v. State, supra; Evans v. State, supra.
DENIED AND WEDNESDAY, JULY 22, 1987, IS SET AS THE DATE FOR EXECUTION OF THE SENTENCE AND INFLICTION OF THE DEATH PENALTY IN THE MANNER PRESCRIBED BY LAW.
WALKER, C.J., ROY NOBLE LEE, P.J., and DAN M. LEE, ANDERSON and GRIFFIN, JJ., concur.
ROBERTSON, PRATHER and SULLIVAN, JJ., dissent.
ROBERTSON, Justice, dissenting:
I.
In a question begging opinion considering a point of first impression in the administration of this state's capital sentencing system, the majority today denies Samuel Bice Johnson post-conviction relief. It does so contrary to reason and fairness. With respect for my colleagues, I dissent.
II.
The point arises from the order of the Court of Appeals of New York dated March 24, 1987, in which that court vacated and held for naught Johnson's April 9, 1963, conviction of assault, second degree with intent to commit rape, first degree rendered by the Monroe County Court of New York. We may take it that Johnson's 1963 conviction as of the moment is absolutely void and of no further force and effect. Our review of Johnson's capital murder trial in this state reflects that the 1963 conviction was proved by the prosecution and successfully and argued vigorously as an aggravating circumstance, compelling the conclusion that Johnson should be given the death sentence. Miss. Code Ann. § 99-19-101(5)(b) (Supp. 1986). The jury in fact found this as one of the aggravating circumstances, to-wit:
*1343 That the defendant, Samuel Johnson, was previously convicted of a felony involving the use or threat of violence to the person of another.
Today, that prior conviction having been declared a legal nullity, the majority begins by holding Johnson's claim "procedurally barred," adding yet another dubious chapter to this Court's recent and illicit romance[1] with procedural bars. The majority's point, as I understand it, is that, by waiting until after his 1963 conviction had been vacated before asserting any claim for relief, Johnson waived any rights he may have had in the premises.
To my mind, the opposite conclusion follows. Johnson had no basis for the claim he asserts until he obtained the order of March 27, 1987, vacating his 1963 New York conviction. Had he raised the point prior to March 24, 1987, we would no doubt have dismissed it out of hand and, consistent with the temper of the time, would probably now hold the claim barred by res judicata.
In our only consideration heretofore of the procedure by which today's point ought be raised, Phillips v. State, 421 So. 2d 476, 482-83 (Miss. 1982), we held that
[T]he proper challenge to such a defective conviction lies in a separate action brought expressly for that purpose.
421 So.2d at 482.
Phillips arose in the context of an attack upon a prior conviction which had been used for enhancement of sentence under our habitual offender statute. Miss. Code Ann. § 99-19-81 (Supp. 1982). The Court held that a defective conviction was voidable, not void, and declared further that until such time as the conviction was judicially vacated in a separate proceeding, it could be used for habitual offender purposes. The Court then repeated that, rather than raising the point at the sentencing phase of the habitual offender action, the defendant's remedy was a separate post-conviction action which, if successful, would no doubt then be the occasion for relief from his sentence as a habitual offender. Phillips, 421 So.2d at 483. The same rationale applies here.
III.
The majority next states that Johnson's death sentence should not be disturbed because, even should the prior conviction aggravating circumstance be eliminated, the jury found two other aggravating circumstances which remain undisturbed.[2] The majority then misreads Zant v. Stephens, 462 U.S. 862, 103 S. Ct. 2733, 77 L. Ed. 2d 235 (1983). Stephens considers only the federal constitutional question. It holds a death sentence not constitutionally infirm by reason of the invalidity of one of several statutory aggravating circumstances found by a jury. The majority's citation to Stephens begs today's question, for we are confronted with whether as a matter of state law the vitiation of one of the aggravating circumstances found by the jury affords Johnson relief from his death sentence and, if so, what form that relief should take. Stephens merely sets minimal constitutional limitations and addresses in no way the question we ought to confront today.
IV.
One more point need be made before proceeding to the merits of today's state law question. The majority takes a swipe at the New York action suggesting that the Court of Appeals' March 24, 1987, order should be given less than full faith and credit. We are told that the March 24, 1987, proceedings were "less than adversarial." The point is disingenuous. For starters, I wonder if we would apply this approach in the converse situation. Where prior convictions have resulted from guilty *1344 pleas, would we say that those proceedings were less than adversarial and therefore give no credit to those conviction as aggravating circumstances. I think not. Further, I am confident the New York Court has displayed no greater penchant for vacating 25-year-old convictions than has this Court. Both pre- and post-Cardozo, the Court of Appeals of New York has enjoyed a reputation as one of the nations premiere state courts. I am not for a moment prepared in indulge in the cynical assumption that the New York Court did less than its duty when it ordered Johnson's 1963 conviction vacated.
V.
These things said, we confront a novel question. Where a previous conviction is proved as an aggravating circumstance, Miss. Code Ann. § 99-19-101(5)(b) (Supp. 1986), what is the impact upon a subsequent death sentence where thereafter the "aggravating" prior conviction is vacated?[3]
The point has been addressed, albeit obliquely, in two arguably analogous contexts. First, as indicated above, there is the case of Mississippi's habitual offender statutes. Miss. Code Ann. §§ 99-19-81 and -83 (Supp. 1986). The Phillips case discussed above considered an attack upon one of the two prior convictions which had been relied upon by the prosecution in seeking enhanced punishment. Phillips makes clear that the fact that the prior conviction is under attack affords the defendant no relief. The logic of the opinion, however, is quite unmistakable: should the prior conviction ultimately be set aside, the defendant would then be entitled to relief from his enhanced sentence.
No resort to a harmless error analysis would be made in such case, for proof of the prior convictions under Section 99-19-81 or 99-19-83, as the case may be, automatically results in enhanced punishment. Assuming vacation of a prior conviction leaves the defendant with only one prior conviction within the meaning of the habitual offender statutes, it would follow as a matter of law that the defendant would be entitled to have his sentence reduced to that provided for the underlying offense without enhancement. Phillips, therefore, suggests that Johnson may be entitled to relief from his death sentence.
On the other hand, as a matter of the law of evidence, we have for years held that a defendant could be impeached by a prior felony conviction even though his previous conviction was at the time pending on appeal. And, to be sure, Nicholson v. State, 254 So. 2d 881, 883-84 (Miss. 1971) finds no error in allowing such impeachment, even though the prior conviction is later reversed.[4] 254 So.2d at 884. One may search the Nicholson opinion in vain for any reason why this result should obtain. The mere fact that a defendant's conviction of a previous offense is treated as final, though on appeal, begs the question of the effect to be given that prior conviction should it be reversed. Nicholson makes quite clear that
after the conviction has been reversed it cannot be used for impeachment purposes until the defendant is again convicted.
254 So.2d at 884.
It would seem to follow upon ordinary reasoning that the reversal of the impeaching prior conviction should have the same effect on a pre-reversal trial.
*1345 My thought regarding the impeachment via conviction on appeal issue is that the prosecution, or any other party so using such a prior conviction, proceeds at its own risk. If the prior conviction on appeal should remain undisturbed and that is certainly what happens in the overwhelming majority of cases, there is no infirmity in any new conviction. Where, however, the Nicholson situation arises, that is, where the impeachment conviction is later reversed, the structure of the argument would seem to become one of whether the harmless error rule applies. I have come to prefer a recent articulation of that rule, i.e., does the error at trial undermine confidence in the outcome? See Malone v. State, 486 So. 2d 367, 368 (Miss. 1986).
In one sense the case at bar falls between the habitual offender situation considered in Phillips and the impeachment context of Nicholson. The prior conviction is certain to have an adverse impact upon one tried under the habitual offender statute. The impact of a prior conviction in an impeachment context is far more problematic. In the case at bar, we simply have no way of ascertaining with confidence whether the prior conviction was a significant factor in the jury's determination that Johnson should suffer the penalty of death. The jury was instructed at the penalty phase trial that the prior conviction was one aggravating circumstance it could consider. The prosecuting attorneys certainly argued that this aggravating circumstance was one that merited the death penalty. The "age" on the 1963 conviction could cut either way. On the one hand, the jury might have considered it remote and therefore given it little credit. On the other hand, the fact that Johnson had been involved in a violent crime in 1963 may have led others rationally to perceive that his penchant for violence had spanned two decades, his behavior beyond correction or reformation. We simply don't know.
Because of these uncertainties and in the context of the fact that Samuel Bice Johnson's life is at stake the majority quite correctly eschews rejection of Johnson's claim on a harmless error basis. Such is consistent with the numerous cases wherein we recognize that sentences of death are qualitatively different in severity from any other that the defendant is to be given the benefit of the doubt when questions of prejudicial impact arise. See, e.g., Fisher v. State, 481 So. 2d 203, 211 (Miss. 1985); Jones v. State, 461 So. 2d 686, 690 (Miss. 1984); Billiot v. State, 454 So. 2d 445, 455 (Miss. 1984); Neal v. State, 451 So. 2d 743, 750 (Miss. 1984); Williams v. State, 445 So. 2d 798, 810-11 (Miss. 1984); Laney v. State, 421 So. 2d 1216, 1217 (Miss. 1982); Irving v. State, 361 So. 2d 1360, 1363 (Miss. 1978). The majority manages, nevertheless, to deny Johnson's petition.
VI.
These things said, in my view Johnson is entitled to relief. He has presented this Court with a certified copy of the order of the Court of Appeals of New York of March 24, 1987, sufficient that we should hold that as a matter of law that he has proved the factual basis of his post-conviction claim. Past that, the effect of the vitiation of his 1963 conviction as a matter of law for the reasons set forth above, I would hold that vitiation of Johnson's 1963 New York conviction undermines confidence in the outcome of the penalty phase of his capital murder trial. I do not see how in candor the contrary may be contended. Accordingly, I would vacate the sentence of death imposed upon Johnson and restore the case to the active docket of the Circuit Court for a new trial on the question of sentence only.
PRATHER and SULLIVAN, JJ., join in this opinion.
NOTES
[1] Johnson was represented in his trial by Gerald Diaz and Gregory L. Harper of the Jackson Bar; on appeal to this Court by Kenneth J. Rose of the Atlanta Bar; in his petition to the United States Supreme Court by Clive A. Stafford Smith of the Atlanta Bar and in his present petition by Clive A. Stafford Smith of the Atlanta Bar and Laurence T. Sorkin and Anthony Paduano of the New York Bar.
[1] My view of the seamier side of this romance appears in Evans v. State, 441 So. 2d 520, 531-33 (Miss. 1983) (Robertson, J., dissenting) and need not be repeated here. See also Wheat v. Thigpen, 793 F.2d 621, 626-27 n. 5 (5th Cir.1986).
[2] One of these is the highly problematic "the capital murder was especially heinous, atrocious and cruel." See Wiley v. State, 484 So. 2d 339, 358-60 (Miss. 1986) (Robertson, J., concurring) and Jones v. State (Miss. No. Dp-60, dec. Jan. 28, 1987) (Robertson, J., concurring) (not yet reported).
[3] The point was before us in West v. State, 463 So. 2d 1048 (Miss. 1985). At the sentencing phase of West's trial, the prosecution had proved as aggravating circumstances two prior murder convictions in Georgia appeals from which were then pending. After West had been sentenced to die in Mississippi, the Georgia convictions were reversed. West v. State, 252 Ga. 156, 313 S.E.2d 67 (1984). We subsequently reversed West's conviction and sentence by reason of error in the guilt phase of his trial and, thus, never reached today's point which would have affected only the sentencing phase.
[4] The majority's citations to Young v. State, 425 So. 2d 1022 (Miss. 1983) and Milstid v. State, 347 So. 2d 1319 (Miss. 1977) are without force or effect, for in neither of those cases had there been a reversal or vacation of the prior conviction used for impeachment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1744248/ | 436 So. 2d 797 (1983)
Herschel BRICKELL
v.
UNITED STATES FIRE INSURANCE COMPANY.
No. 53832.
Supreme Court of Mississippi.
August 17, 1983.
*798 Downey & Brown, John H. Downey, Jackson, for appellant.
Shell, Buford, Bufkin, Callicutt & Perry, Kenneth G. Perry, Jackson, for appellee.
Before BROOM, ROY NOBLE LEE and BOWLING, JJ.
ROY NOBLE LEE, Justice, for the court:
Herschel Brickell filed suit in the Circuit Court of the First Judicial District, Hinds County, Mississippi, Honorable Charles Barber, presiding, seeking reimbursement under an insurance policy, for expenses incurred as a result of defending a suit against him for malicious prosecution. The case was heard by the trial judge without a jury. At the conclusion of the evidence, he entered judgment in favor of United States Fire Insurance Company [U.S. Fire] and dismissed the suit with prejudice. Brickell has appealed here, assigning the following errors in the trial below:
I. The trial court erred in failing to render judgment in favor of appellant and against appellee since, under the undisputed evidence, appellant was entitled to judgment as a matter of law.
II. The court erred in excluding evidence of certain costs of defense for which Brickell sought recovery on objection that Brickell had not actually "paid" or "incurred" these expenses personally.
Brickell, president of Brickell Insurance Agency, has been engaged in the insurance business for more than twenty-eight (28) years. That business is his occupation and he has earned his livelihood from it through the years. However, on March 1, 1968, he agreed with an old friend, Bob Heberling, to enter into a venture for the sale of American Motors automobiles in Jackson, Mississippi. A corporation was organized, and he invested $25,000 in it, loaned another $25,000 on a five-year promissory note, and executed a guaranty instrument for a $25,000 loan from a Jackson bank. Heberling was supposed to be experienced in car dealership management, and was an employee of American Motors Corporation in Memphis, Tennessee, at the time of the agreement. Brickell had no experience whatsoever in that type business.
Brickell claimed that he went into the venture in order to help his friend, and that the plan was for Heberling to acquire all the stock of the dealership from its profits. The business fell upon hard times, and Heberling suggested that Brickell obtain another *799 manager. Brickell then entered into an agreement with one Alton E. McKey in September, 1969, which provided that McKey would buy Brickell's stock. The corporation's charter was amended to reflect the name McKey-McPhail, Inc. and the business operated as McKey American, Inc.
The business failed to revive, and check of the corporate books on October 31, 1972, showed a loss in excess of $200,000. Brickell took over the dealership on November 9, 1972, and immediately began to liquidate the corporation for the benefit of creditors. The final auction was held on January 10, 1973.
McKey-McPhail, Inc. bonded its employees through the Travelers' Indemnity Company [Travelers]. After the auction sale, Brickell turned over matters of the corporation to a law firm in Jackson. That law firm instituted suit against Travelers seeking a recovery for employee misconduct in the operation of the McKey-McPhail business. Suit was filed in the United States District Court for the Southern District of Mississippi, against Travelers in the name of McKey-McPhail, Inc., and Travelers entered a third-party complaint impleading practically everyone connected with the business and indebtedness of McKey-McPhail, Inc. and naming Clarence Chapman, a certified public accountant, who worked on the McKey-McPhail, Inc. books, as one of the third party defendants. McKey-McPhail then filed cross-complaints against other parties, including John Palmer and Clarence Chapman, certified public accountants. Whereupon, Chapman and Palmer filed a fourth party complaint impleading Brickell, who then filed a separate cross-complaint against Palmer and Clarence Chapman. The suit was dismissed as to all parties except McKey-McPhail and Travelers. The record indicates that Brickell, individually, never contemplated any action against Clarence Chapman until Brickell was sued in the fourth party complaint.
On July 12, 1977, Clarence Chapman filed suit in the Circuit Court of the First Judicial District of Hinds County against Travelers, McKey-McPhail, Inc., and Brickell for malicious prosecution. Brickell had an insurance policy issued by U.S. Fire with a personal catastrophe liability endorsement. Listed as "named insured" was Herschel Brickell and the policy provided coverage for "personal liability" which was defined to mean, among other things, mental anguish and mental injury, and malicious prosecution or humiliation sustained by any person. U.S. Fire was required to defend any suit against the insured alleging such injury or damage even if such suit was groundless, false or fraudulent.
Brickell called upon U.S. Fire to defend him in the suit. Eventually, the insurance company denied coverage under Exclusion (h) (business pursuits) of the policy. After much correspondence, in which Brickell insisted that he was covered by the policy, he employed a Jackson law firm to defend him in the suit, which terminated favorably to him. Brickell then called upon U.S. Fire to pay his expenses of defending the case, which request was denied. Hence this suit was filed.
I.
The lower court found that the "business pursuits" exclusion of the policy applies notwithstanding the definition of "business" in Paragraph A(e) under "CONDITIONS" of the policy which was a standard definition. The court stated that Brickell may, or may not, have entered into the business of McKey-McPhail, Inc. with the idea of financing it, but wound up the principal stockholder and did supervise, in a very limited capacity, the operation of the business. Brickell contends that the lower court erred in failing to enter judgment in his favor and against U.S. Fire since, under the undisputed evidence, Brickell was entitled to judgment as a matter of law.
The declaration stated a good cause of action against U.S. Fire and attached as Exhibit A a true copy of the policy in question. Therefore, the question to be decided by this Court, and which is dispositive of the issue, is the interpretation and construction of the insuring agreement, the *800 exclusions, and the conditions of the personal catastrophe liability endorsement, after considering the facts of the case.
The insuring agreement to "defense" provides the company shall:
(a) defend any suit against the insured alleging such injury or damage and seeking damages on account thereof, even if such suit is groundless, false or fradulent [sic]; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;
* * * * * *
(c) pay all expenses incurred by the company all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid or tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon;
(d) reimburse the insured for all reasonable expenses incurred at the company's request but reimbursement for loss of earnings by the insured shall not exceed $100 per day nor an aggregate of $5000; and the amounts so incurred, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this endorsement.
The policy contains the following exclusion applicable to "Personal Catastrophe Liability Endorsement:"
(h) with respect to business pursuits or business property (other than farms) of an insured, to any claim for loss or expense for which insurance is not afforded by any underlying policy listed or insurance described in Item No. 6, but this exclusion shall not apply with respect to the ownership, maintenance or use, including loading or unloading, of any automobile, aircraft or watercraft; ...
Condition (e) of the Personal Catastrophe Liability Endorsement defines "Business" as follows: "`Business' includes trade, profession or occupation."
The policy indicates no "underlying policy" insuring Brickell against "personal liability."
The parties cite cases from other jurisdictions similar to the present case and argue that those cases sustain their respective positions. Although we have not been cited to a Mississippi case which is precisely on point with the question here, we think that established Mississippi law leads to a reasonable and just answer to the question.
Without doubt, U.S. Fire's policy obligated it to defend any suit against Brickell covering the alleged injuries here, regardless of whether the suit is groundless, false or fraudulent. The record indicates that the suit filed by Chapman against Brickell was without merit. The policy contained an exclusion "with respect to business pursuits or business property of the insured," supra. The only definition of "business" contained in the policy is "`Business' includes trade, profession or occupation." We think the term is vague and ambiguous, relative to the problem facing us. U.S. Fire drafted the policy and could have specifically defined those terms and easily could have covered the question presented to the Court. In Mavar Shrimp and Oyster Co. v. U.S.F. & G., 187 So. 2d 871 (Miss. 1966), the Court said:
A study of the policy convinces us that it is ambiguous relative to this question. Since it is ambiguous, then the policy must be construed most strongly against the insurer and most favorably toward the insured. When it is so construed, we think that the fact that the Insurance Company knew that Mavar contended that Rololfich was not its employee and was fully advised that Mavar had been successful in maintaining in other cases that other persons in the same status as was Rodolfich [sic] were not its employees, obligated the Insurance Company to defend the suit. [187 So.2d at 874].
See also State Farm Mut. Auto Ins. Co. v. Taylor, 233 So. 2d 805 (Miss. 1970).
In Southern Farm Ins. Co. v. Logan, 238 Miss. 580, 119 So. 2d 268 (1960), the declaration *801 did not charge that Logan was an employee of the insured and there was no allegation that such relationship did in fact exist. The policy had the following exclusion: "This policy does not apply: ... to bodily injury to any employee of the insured while engaged in the employment of the insured; ... ." [238 Miss. at 587-88, 119 So.2d at 271]. The Court held that the mere fact Logan was loading milk cans on and off a truck belonging to the insured did not establish the relationship of employer and employee between the insured and Logan.
We think that Brickell's business, whether it be called trade, profession, or occupation, was that of insurance in which he had been involved for 28 years. The fact that he put up considerable money in McKey-McPhail, Inc. and was issued all the stock of the corporation in return, or as security therefor, and took over the company for liquidation purposes when it became defunct, did not exclude the coverage of the policy, the terms of which were vague and ambiguous. Therefore, the lower court erred in entering judgment for U.S. Fire.
II.
Brickell contends second that the lower court erred in excluding evidence of certain costs of defense, for which he sought recovery under the policy, on the objection that Brickell had not actually "paid" or "incurred" those expenses personally and that Brickell Insurance Company was not a party to the suit. Expenses claimed by Brickell follow:
(1) $ 13,095.00 - Attorney's Fees
(2) 525.00 - CPA Fees
(3) 1,091.00 - Deposition and Copying Expenses
(4) 5,000.00 - Lost Earnings
(5) 1,732.00 - Compensation for an employee, Tony Bernamonti,
for work on the defense of the suit
(6) 420.80 - Xerox copies supplied by Brickell Insurance
Company pursuant to the defense of Chapman's
suit
U.S. Fire objected to Items 4, 5 and 6 above and had no objection to Items 1, 2 and 3. Mississippi law is settled that an insured, who must defend a suit where the insurer has declined to do so, may recover costs and attorneys' fees incurred in defending the suit himself. U.S.F. & G. v. Cook, 181 Miss. 619, 179 So. 551 (1938); Southern States Fire Ins. Co. v. Hand-Jordan Co., 112 Miss. 565, 73 So. 578 (1916). Southern Farm Ins. Co. v. Logan, supra, held that, in addition to attorneys' fees and costs, an unjustified refusal to defend is a breach of contract and renders the insurance company liable for all damages resulting from the breach. [238 Miss. at 590, 119 So.2d at 272].
The lower court permitted Brickell to make a record of Items 4, 5 and 6 above, but sustained appellee's objection and excluded the testimony. Brickell contends that he contributed considerable work to the preparation and defense of the suit against him; that, if he had not consumed such time in preparing for the defense he would have been working and earning an income in his insurance business; and that he sustained a loss of time and income as a result thereof in the sum of $5,000. The evidence as to that loss was speculative and vague and was not specific. The U.S. Fire insurance policy, Condition "C", provides that, in the event of suit in which the insurance company provides the defense, the insured shall cooperate fully with the company. We are of the opinion that the lower court was correct in excluding testimony with reference to Item 4.
As to Items 5 and 6, appellee contends that they were not paid for by Brickell but by Brickell Insurance Company and were not recoverable as damages. In United States v. Myers, 363 F.2d 615 (5th Cir.1966), the court held that the United States Government was entitled to collect attorneys' fees as an item of damages, even though United States attorneys were on the government payroll as salaried employees. The same reasoning was applied in Liberty Mutual Ins. Co. v. Atlantic Coast RR Co., 66 Ga. App. 826, 19 S.E.2d 377 (1942), where the attorneys who defended the insured were retained on an annual fee basis. The insurance company in both cases claimed that the defense of those cases actually cost the government and the insured nothing. We *802 are of the opinion that Items 5 and 6 were legitimate items of damage and were recoverable as damages under the insurance policy.
Therefore, the judgment of the lower court is reversed and rendered, and judgment is entered here for $13,095.00 attorney's fees; $525.00 CPA fees; $1,091.00 deposition and copying expenses; $1,732.00 accounting services; and $420.80 for Xerox copies, aggregating $16,863.80.
REVERSED AND RENDERED.
PATTERSON, C.J., WALKER and BROOM, P.J., and BOWLING, HAWKINS, DAN M. LEE, PRATHER and ROBERTSON, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2374392/ | 470 S.W.2d 647 (1971)
Ex parte J. Boyd DAVIS, Relator.
No. B-2760.
Supreme Court of Texas.
July 28, 1971.
Rehearing Denied October 6, 1971.
*648 H. Herbert Oldham and Phillip Bordages, Beaumont, for relator.
Dale Dowell, Beaumont, for respondent.
PER CURIAM.
The relator, J. Boyd Davis, pastor of the Bible Baptist Church of Beaumont, seeks a writ of habeas corpus releasing him from restraint of a contempt order of the 58th District Court of Jefferson County. Relator was held in contempt on May 10, 1971, for violating a temporary injunction issued May 16, 1962 by the same court in the case of Gray v. Brite and affirmed by the Beaumont Court of Civil Appeals, 377 S.W.2d 223 (Tex.Civ.App.1964, no writ). The temporary injunction was issued "pending final hearing and determination of this case" enjoining Roy D. Brite and wife from making use of certain tracts of land which they owned in the Lakeview Terrace Addition to the City of Beaumont for the purpose of an animal clinic or for any purpose other than residential use. There was no subsequent hearing on the merits or issuance of a permanent injunction. There is no evidence that Mr. or Mrs. Brite ever violated the terms of the temporary injunction or caused others to do so.
On August 16, 1965, the Brites conveyed the property to the Bible Baptist Church, whose pastor is relator here. After learning of the conveyance, the plaintiffs in the original suit, through their attorney, wrote a letter to Bible Baptist Church, attention Rev. J. Boyd Davis, reciting certain residential restrictions recorded in the Jefferson County deed records, enclosing a copy of the temporary injunction against the Brites, and stating that "our clients would be forced to file injunction proceedings against you to enforce such restrictions" if a church structure were placed upon the property. On April 28, 1971, the Bible Baptist Church moved a structure to be used as a church building onto the property. It is this act and Mr. Davis' refusal to remove the structure which caused him to be held in contempt of the temporary injunction issued May 16, 1962, fined and ordered to jail until he removed the church building.
Rule 683, Texas Rules of Civil Procedure, states that an injunction is "* * * binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them * * *." Neither Bible Baptist Church nor J. Boyd Davis were parties to the 1962 temporary injunction. The question here is whether a non-party to the original injunction proceeding, was in active concert or participation with the Brites. This court in Ex Parte Foster, 144 Tex. 65, 188 S.W.2d 382 (1945) said that while a person *649 not named as a party is not ordinarily bound by the terms of the injunction decree and therefore cannot be punished for violating its terms, he is "in active concert or participation" with the named party if he participated in the original proceeding and was a real party in interest when the decree was rendered. There are other Texas cases dealing with "active concert or participation", but they all contain some evidence of involvement with the named enjoined party or involvement in the original injunctive proceeding. Ex Parte La Rocca, 154 Tex. 618, 282 S.W.2d 700 (1955); Ex Parte Conger, 163 Tex. 505, 357 S.W.2d 740 (1962).
The United States Supreme Court in interpreting Rule 65(d) F.R.C.P., from which Texas Rule 683 is taken, said in Regal Knitwear Co. v. Board, 324 U.S. 9, 14, 65 S. Ct. 478, 481, 89 L. Ed. 661 (1944), that the inclusion of those in "active concert or participation with them" is so that "defendants may not nullify a decree by carrying out prohibited acts through aiders and abettors, although they were not parties to the original proceeding." If a non-party does an act prohibited by the injunction he must be in active concert or participation with the named party in order to be in contempt for violation of the injunction.
No fact presented here establishes that relator was a party at interest in the original proceeding as in Foster, supra, or that there was any relationship between him and the Brites other than the subsequent grantor-grantee relationship of his church.
Respondents insist that, as grantee of the Brites, Bible Baptist Church and its pastor were "privy" to them. For some purposes this may be true, but standing alone it is not the type of relationship which brings them within the class of persons bound by a temporary injunction under the terms of Rule 683 and punishable for violation thereof. The remedy of injunction generally acts, not in rem, but in personam. City of Dallas v. Wright, 120 Tex. 190, 36 S.W.2d 973, 976 (1931); Cunningham v. State, 353 S.W.2d 514 (Tex. Civ.App.1962, writ ref. n.r.e.). The temporary injunction here was against the Brites only. It did not attempt to include their successors in ownership of the property. In Regal, supra, it was held that even when the injunction is worded to include "successors and assigns", it is not effective as to non-party successors because the "enforcement order of course may not enlarge its scope beyond that defined by the the Federal Rules of Civil Procedure." 324 U.S. 9, 14, 65 S. Ct. at 481.
For the reasons stated, the trial court's action holding relator in contempt of the temporary injunction is void. This holding obviates the need of passing upon relator's other grounds for relief, which include questions of due process and impossibility of performance.
Accordingly, it is ordered that relator be discharged and released. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1598953/ | 3 So.3d 959 (2007)
ADRIENNE KNIGHT
v.
ROOSEVELT McCORVEY, M.D.
No. 1051323.
Supreme Court of Alabama.
February 9, 2007.
Decision of the supreme court of alabama without opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1648682/ | 775 So.2d 1285 (2000)
W. Mac ELLIOTT, Appellant,
v.
Martha Janelle ROGERS, Appellee.
Nos. 98-CA-00753-COA, 1998-CA-01674.
Court of Appeals of Mississippi.
November 14, 2000.
Certiorari Denied, January 25, 2001.
*1286 Frank T. Moore Jr., Jackson, Attorney for Appellant.
Vaughn Davis Jr., Jackson, Attorney for Appellee.
En Banc.
MODIFIED OPINION
ON MOTION FOR REHEARING
SOUTHWICK, P.J., for the Court[1]:
¶ 1. In 1994, W. Mac Elliott and Martha Janelle Rogers were granted a divorce based on irreconcilable differences. A detailed property settlement agreement provided in part that Elliott would pay Rogers $4,000 per month for 120 months as alimony. In 1996, Elliott filed a motion to reduce or terminate the alimony. At the same time, Elliott, without court order, stopped his monthly alimony payments. Rogers filed a motion for citation of contempt. The chancellor denied the motion to modify and later found Elliott to be in contempt. We affirm.
*1287 FACTS
¶ 2. Elliott and Rogers were married on June 7, 1985, and lived together until the fall of 1994. They had no children. In early 1994 the parties decided to seek a divorce on the grounds of irreconcilable differences. They negotiated a property settlement agreement and filed a joint complaint for divorce. This divorce was granted and made final on November 4, 1994.
¶ 3. The property settlement agreement reflected a deliberate and thorough division of marital assets. Included was a provision for Elliott to pay Rogers alimony in the amount of $4,000 per month for 120 months. Rogers income for the immediately preceding year had been $93,000 while her husband had earned about $266,000.
¶ 4. There is evidence that Rogers stated in or before August 1994 during alimony discussions that her 1994 income would be about the same as in 1993. To the contrary, in the two years following the divorce, Rogers's adjusted gross income increased substantially to $183,359 in 1994 and to $313,650 in 1995. This change occurred mainly because of Rogers's promotion and election to a higher office on the board of directors at her family's bank. The record suggests that her income will continue to increase barring some unforeseen event. Elliott's adjusted gross income was $97,284 in 1994 and $285,304 in 1995.
¶ 5. On April 22, 1996, Elliott filed a motion to terminate or reduce the amount of the alimony payments to Rogers. He relied upon the substantial increase in income that his former wife was enjoying. Elliott also sought relief from certain other property agreement obligations. He has now abandoned those claims, and they are not before us. He also suspended all payments required of him under the property settlement agreement. In response, Rogers filed a motion for contempt seeking to have these payments reinstated and the original judgment enforced.
¶ 6. A hearing on the motion to modify the prior judgment was held over the course of three days in March 1997. The chancellor entered a ruling on the motion on February 12, 1998, in which he ruled that Elliott's motion should be denied because he found that there had not been a substantial change in circumstances to warrant a modification.
¶ 7. The hearing on the motion for contempt was held on October 16, 1998. The chancellor found Elliott to be in contempt for refusing to abide by the judgment of divorce. The chancellor awarded attorney's fees to Rogers in the amount of $5,911.25. Elliott appeals.
DISCUSSION
I. Evidence of change in circumstances sufficient to modify alimony
¶ 8. The chancellor found that the $4,000 per month that Elliott had agreed in 1994 to pay to Rogers for 120 months was periodic alimony. Ms. Rogers argued that it was lump sum alimony. Periodic alimony may be required in a divorce because of the husband's duty to support his wife in the manner to which she had become accustomed, to the extent of his ability to pay. Brennan v. Brennan, 638 So.2d 1320, 1324 (Miss.1994). The alimony is normally modifiable if there is a showing of a material and unanticipated change in the circumstances of the parties arising after the original decree was rendered. Anderson v. Anderson, 692 So.2d 65, 70 (Miss.1997).
¶ 9. The relevant part of the alimony provision of the property settlement agreement is this:
Husband shall pay to Wife, ... the sum of $4,000 per month, unless Wife shall die or remarry.... Said payments shall be deductible to Husband and taxable to Wife. In the event of Husband's death ... Husband's heirs and representatives shall be bound to make said payments until the earlier of Wife's *1288 death, remarriage or the expiration of said 120 month period.
Though the parties to a divorce are entitled to enter agreements regarding support, such agreements need to be approved by the court. See Miss.Code Ann. § 93-5-2(Rev.1994).
¶ 10. The Supreme Court has recognized three forms of alimony: 1) lump sum alimony, 2) rehabilitative periodic alimony, and 3) periodic alimony. "Lump sum alimony ... constitutes a fixed liability which is not subject to modification." McDonald v. McDonald, 683 So.2d 929, 931 (Miss.1996). "Rehabilitative alimony has been defined as modifiable, for a fixed period of time, and vesting as it accrues. While both rehabilitative periodic alimony and lump sum alimony which is not paid all at once can share the same characteristics of being a certain amount of money paid over a certain amount of time, they are distinguishable in their modifiability, respective purposes, and by the intent for which the chancellor grants them." Hubbard v. Hubbard, 656 So.2d 124, 129 (Miss.1995). "Periodic alimony is subject to modification and ceases upon the wife's remarriage or upon the husband's death." McDonald, 683 So.2d at 931.
¶ 11. This agreement was prepared by quite capable attorneys. There is difficulty in fitting this agreement within any of the accepted alimony categories. The parties agreed to a definite sum for a set number of months, payable by the former husband's estate if he were to die before the obligation is satisfied. That has attributes of lump sum alimony. Hubbard, 656 So.2d at 129. The chancellor concluded that it was not lump sum since no total amount was ever stated. That is a reasonable consideration, not because the calculation itself is difficult but because it appears that the parties were not thinking in terms of a fixed sum payable out over time, but were considering a periodic sum necessary for some purpose that would terminate after ten years. The chancellor also relied on the fact that the payments terminated at the recipient spouse's death, which is not a characteristic of lump sum alimony. Moreover, the payments are deductible by the payor and taxable to the recipient.
¶ 12. Another possible category is rehabilitative alimony. Hubbard, 656 So.2d at 130. An earlier recognized label for such payments was "periodic transitional alimony" that would allow a spouse whose immediate income was considered inadequate to develop over an expected period of time to where alimony could be terminated. Dufour v. Dufour, 631 So.2d 192, 195 (Miss.1994). There was little discussion of this in the trial court or in the briefs on appeal. We move to the final one.
¶ 13. Though the chancellor determined this to be periodic alimony, an initial and obvious problem with that label is that such alimony cannot have a fixed termination date. Hubbard, 656 So.2d at 129. Put another way, if this is the alimony that is justified because of the need for support, then the "parties cannot by contract deprive, and it is doubtful if any court has the authority to deprive itself of the future authority to modify ordinary periodic alimony, or make it continue beyond the remarriage of the wife or the death of the husband." East v. East, 493 So.2d 927, 931 (Miss.1986).
¶ 14. This Court is invited to participate in what might to some observers be considered little more than a tyrannical exercise in labeling. The effort arguably is necessary because the parties in reaching their consensual details of this alimony did not diligently follow established rules for a specific kind of alimony. This agreed monthly payment has attributes that are incongruous with any of the three court-recognized categories. This makes relevant whether labeling is even necessary when represented parties have entered an agreement as to alimony? Looking at the issue from a different point in time, should a chancellor refuse to approve an alimony agreement that cannot be fitted into one of the three recognized categories?
*1289 ¶ 15. We find our guidance from precedents in which the Supreme Court has not required consensual support agreements to follow the same terms as for court-imposed alimony. For example, living with a sexual partner after a divorce and without marriage is not by itself grounds to terminate periodic alimony. Hammonds v. Hammonds, 641 So.2d 1211, 1216 (Miss.1994); Hammonds v. Hammonds, 597 So.2d 653, 655 (Miss.1992). However, when a couple agreed in their divorce settlement that such cohabitation would without more automatically terminate the obligation of the husband to pay periodic alimony, this agreement was enforced. Weathersby v. Weathersby, 693 So.2d 1348, 1350 (Miss.1997). The court made this distinction: "In these cases [the two Hammonds decisions] there was no clause incorporated into the divorce decree whereby the ex-wife would forfeit her right to alimony by cohabiting with another man." Id. The Weathersby court determined that the parties had considerable freedom to impose various terms upon themselves:
In property and financial matters between the divorcing spouses themselves, there is no question that, absent fraud or overreaching, the parties should be allowed broad latitude. When the parties have reached agreement and the chancery court has approved it, we ought to enforce it and take as dim a view of efforts to modify it, as we ordinarily do when persons seek relief from their improvident contracts.
Id. at 1351.
¶ 16. Weathersby is not alone in its stance that the parties can go further in their financial agreements at the time of divorce than a chancellor may impose by order. The Supreme Court disfavors an escalator clause for support payments if the increase is tied solely to the Consumer Price Index. Speed v. Speed, 757 So.2d 221, 225 (Miss.2000). However, relying upon Weathersby, the court held that the parties in their initial agreement as to alimony could require periodic adjustments to be made solely because of changes in the CPI. Id. at 225-26.
¶ 17. This approach does not void the more general principle that some terms in agreements incorporated into final divorce decrees are modifiable if proper grounds are shown. E.g., Gregg v. Montgomery, 587 So.2d 928 (Miss.1991). On one extreme, certain terms in an agreement have been held all but unenforceable. Examples previously mentioned are attempting to deprive a court of the "future authority to modify ordinary periodic alimony, or make it continue beyond the remarriage of the wife or the death of the husband." East, 493 So.2d at 931. Nearer the opposite extreme are terms such as we address here. When this alimony obligation agreement was created, each party had a substantial income. The former husband sought to modify or terminate the payments based on evidence that each party had an even more substantial income today.
¶ 18. Mr. Elliott contracted with his former spouse as part of an overall property agreement to make payments of this amount for ten years. Even though the various referenced alimony precedents require us to look beyond the language of the agreement, we note in precedents such as Weathersby another and equally strong equity. That is the desire to enforce the agreement of the parties reached at the time of the divorce. The problem with labels may well have arisen from the fact that able counsel were trying to accomplish a variety of tasks with this part of the agreement. For us to order the cessation of the payments based strictly on the absence of identifiable need may unravel the bargain that was struck.
¶ 19. The question becomes what circumstances would permit a change in this alimony even in the face of the parties' agreement. We do not answer that today, since whatever equities might allow a modification, none is shown here. We conclude that the payments in this case, agreed as *1290 to amount and duration and which do not neatly fit within any alimony category, are within the broad latitude that divorcing couples have to resolve their affairs. Weathersby, 693 So.2d at 1351. This is far removed from a situation in which equity must act.
¶ 20. Having decided that in this appeal it does not matter what label is affixed to these payments, we necessarily are not reaching whether the chancellor was correct in finding that this was periodic alimony. As the chancellor recognized, it was not traditional periodic alimony.
¶ 21. What this case suggests is that danger lurks in divorce agreements carefully tailored by counsel if they ignore the overarching rules that apply to the parties' efforts in the area of spousal support. We have concluded that whatever hazards there are to the stability of the original agreement were not encountered here. We continue to enforce the bargain.
II. Contempt for withholding alimony payments
¶ 22. The Supreme Court has stated that "contempt matters are committed to the substantial discretion of the trial court which, by institutional circumstance and both temporal and visual proximity, is infinitely more competent to decide the matter than we are." Morreale v. Morreale, 646 So.2d 1264, 1267 (Miss.1994).
¶ 23. Elliott unilaterally withheld the alimony payments following the filing of his original motion to modify. These payments were in arrears until Elliott finally paid them the morning of his contempt hearing, some thirty months later. Until modified, the payments remain his obligation, and it is contempt as a matter of law to fail to make them unless there is an inability to pay.
¶ 24. However, the Supreme Court has held that when a motion to modify is filed simultaneously with the stopping of payments, contempt may not be justified. Setser v. Piazza, 644 So.2d 1211, 1216 (Miss.1994). Nonetheless, Setser and its precedents arose when the plea for modification was based on an inability to pay. Having done all that he is able to do financially and legally, a paying spouse should not be held in contempt once inability to pay is shown. Here, there was never an allegation of inability to pay. Therefore the equities that limit a chancellor's discretion if a spouse cannot pay there cannot be wilful ignoring of a court's order if the payments cannot be madedo not apply here. We find no error in the conclusion that Mr. Elliott was in contempt.
III. Attorney's fees
¶ 25. A chancellor is justified in awarding attorney's fees that are incurred in pursuing a contempt motion. Elliott wilfully violated the court's judgment by withholding alimony. Rogers took necessary action to enforce that judgment. When a party is held in contempt for violating a valid judgment of the court, then attorney's fees should be awarded to the party that has been forced to seek the court's enforcement of its own judgment. Varner v. Varner, 666 So.2d 493, 498 (Miss.1995).
¶ 26. The chancellor examined the fee request at a hearing. He found that the amount was based solely on the legal work necessary to pursue the contempt motion and not on the separate issues regarding modification. Since Rogers clearly was able to pay her own attorney, the only grounds that the chancellor used to order the payment of fees was that Rogers had brought a successful contempt motion. That is a valid basis here.
¶ 27. The amount of attorney's fees in a divorce action is to be set by the chancellor within a considerable range of discretion. Smith v. Smith, 614 So.2d 394, 398 (Miss. 1993). We find no error in the manner that this discretion was exercised in this case.
¶ 28. THE JUDGMENT OF THE CHANCERY COURT OF HINDS *1291 COUNTY IS AFFIRMED. STATUTORY DAMAGES AND INTEREST ARE TO BE PAID ON THE $133,714.96 AWARDED BY THE TRIAL COURT. ALL COSTS ARE ASSESSED TO THE APPELLANT.
McMILLIN, C.J., KING, P.J., BRIDGES, IRVING, LEE, MOORE, PAYNE, AND THOMAS, JJ., CONCUR.
MYERS, J., NOT PARTICIPATING.
NOTES
[1] On rehearing, the former opinion is withdrawn and this opinion is substituted. The motion for rehearing is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1666422/ | 24 S.W.3d 488 (2000)
PILGRIM ENTERPRISES, INC.; Pilgrim Convenience, Inc.; R & G No. 1, Inc.; R & G No. 2, Inc.; R & G No. 3, Inc.; Pilgrim Laundry Company, Inc.; Pilgrim Equipment Co., Inc.; R.F.S., Inc. No. 8; R.F.S., Inc. No. 11; R.F.S., Inc. No. 17; S & R No. 2, Ltd.; and PLC No. 11 Joint Venture, Appellants,
v.
MARYLAND CASUALTY COMPANY, Appellee.
Maryland Casualty Company, Appellant,
v.
Pilgrim Enterprises, Inc.; Pilgrim Convenience, Inc.; R & G No. 2, Inc.; R & G No. 3, Inc.; Pilgrim Laundry Company, Inc.; Pilgrim Equipment Co., Inc.; R.F.S., Inc. No. 8; R.F.S., Inc. No. 11; R.F.S., Inc. No. 17; S & R No. 2, Ltd.; and PLC No. 11 Joint Venture, Appellees.
No. 01-97-01421-CV.
Court of Appeals of Texas, Houston (1st Dist.).
June 22, 2000.
*490 Michael A. Pohl, Maria Teresa Arguindegui, Alice Oliver-Parrott, Houston, for Appellants.
D. Mitchell McFarland, James E. Essig, Houston, Dale Hausman, Washington, DC, Robert Barron Boemer, Houston, for Appellees.
Panel consists of Justices COHEN, NUCHIA, and DUGGAN.[*]
OPINION
LEE DUGGAN, Jr., Justice (Retired).
The principal question in this appeal from a summary judgment is as follows: for purposes of coverage under an occurrence-based comprehensive general liability ("CGL") insurance policy, do personal injury and property damage from underground contamination "occur" under Texas law only when the harm is "discovered"? We answer in the negative.
Eleven plaintiffs filed seven suits[1] in 1996 against Pilgrim Enterprises, Inc. and related entities[2] (collectively, "Pilgrim") for personal injuries and property damage allegedly caused by long term exposure to a chemical known as perchloroethylene ("PCE") and other hazardous substances released from Pilgrim's facilities. Each suit was filed by a former Pilgrim landlord or adjacent property owner. Pilgrim filed three coverage lawsuits, later consolidated by agreement into one case, against Maryland Casualty Co. ("Maryland") and other insurers, seeking a defense and indemnification. Maryland filed a motion for partial summary judgment, asserting that it had no duty to defend Pilgrim in five of the seven pending suits. The trial court granted the partial summary judgment in favor of Maryland and, over Maryland's objection, severed the judgment to allow Pilgrim to commence an immediate appeal.
Maryland appeals the trial court's action in granting the severance; Pilgrim appeals the summary judgment holding that Maryland has no duty to defend the five suits.
We affirm that portion of the trial court's judgment severing the cause; we reverse the remaining portion of the judgment, which rendered summary judgment on the ground that Maryland had no duty to defend, and remand the cause.
I.
Factual Background
Pilgrim has operated dry cleaning facilities in Harris and Bexar counties since the 1960s. In the course of its operations, Pilgrim purchased CGL insurance policies from various insurers, including four consecutive policies from Maryland between December 1981 and December 1985.
Over the years, Pilgrim used PCE as the primary solvent in its dry cleaning operations. In 1994, Pilgrim conducted soil sampling at 17 of its dry cleaning sites and discovered PCE contamination in the soil and, in some cases, the groundwater. The contamination allegedly arose from *491 repeated spills, overfills, and leakage when Pilgrim's suppliers delivered PCE and during Pilgrim's maintenance and operation of its PCE storage units and dry cleaning equipment. Pilgrim notified the Texas Natural Resources Conservation Commission ("TNRCC") of the contamination and agreed with the TNRCC to clean up the contaminated sites in 1995.
In 1996, the seven suits against Pilgrim were filed. Pilgrim notified Maryland and requested a defense and indemnity under the 1981-85 policies. Maryland initially agreed to defend each suit, subject to a reservation of its right to withdraw from the defense and assert its coverage defenses. When Pilgrim made similar demands on its other insurers, and none agreed to defend or participate in funding Pilgrim's defense, Maryland withdrew its offer of complete defense. Pilgrim rejected Maryland's offer to pay only a "pro-rata" share of the defense costs.
After Pilgrim's coverage lawsuits against Maryland and its other insurers were consolidated, Maryland filed a motion for partial summary judgment on the ground that it had no duty to defend Pilgrim in five of the seven pending PCE lawsuitsSunblossom, Briargrove, Murad, Turk III, and Agim, Maryland conceded its duty to defend in two suits, Turk I and Turk II, but asserted in its motion that the plaintiffs' claimed injuries in the five suits were not alleged to have occurred within the coverage period of Pilgrim's Maryland policies.
Maryland argued that the language of each policy triggered its duty to defend Pilgrim only if the alleged property damage or bodily injury became "manifest" during a policy period and that the tort plaintiffs' claims did not allege that. The trial court agreed, granted Maryland's motion for summary judgment on the five claims, and severed them from Pilgrim's remaining actions, specifically reciting that "[t]he Court's Partial Judgment is hereby made final so that Plaintiffs may commerce an immediate appeal."
II.
Maryland's appeal of the severance
Maryland argues in its point of error that the trial court abused its discretion in severing the five claims because they are inextricably interwoven (1) with the remaining claims Maryland must defend and (2) with the defenses of the twelve remaining defendant insurers. Further, Maryland argues, because the severance was improper, the partial summary judgment is not an appealable final judgment. Because Maryland's point of error would be dispositive of the entire appeal, if sustained, we address it first.
A. Whether the severance order separated claims that are inextricably interwoven with remaining claims
A partial summary judgment becomes final and appealable when the trial court signs an order severing into a separate case the parties and claims addressed. Mafrige v. Ross, 866 S.W.2d 590, 592 (Tex. 1993). Texas Rule of Civil Procedure 41 provides that "[a]ny claim against a party may be severed and proceeded with separately." TEX. R. CIV. P. 41. A trial court has broad discretion in the matter of severance and consolidation of causes. Guaranty Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex.1990). The standard of review for determining whether a trial court erred in ordering a severance is abuse of discretion. Id.
The reasons undergirding a proper grant of severance "are to do justice, avoid prejudice and further convenience." Id. Severance is proper if
1. the controversy involves more than one cause of action;
2. the severed claim is one that would be the proper subject of a lawsuit if independently asserted; and
3. the severed claim is not so interwoven with the remaining action that *492 they involve the same facts and issues.
Id.
Here, Maryland claims the third element of this test is not met because (1) Pilgrim's claim against Maryland for a defense in the two remaining lawsuits involves the same facts and issues as in the severed actions; (2) Maryland's other defenses to coverage (such as a pollution exclusion clause) apply equally to its duty to defend here; and (3) other defendant insurers in the consolidated case have the same policy language defining when an injury occurs.
Maryland's duty to defend each severed and each remaining claim is a contractual undertaking defined by each policy. See Whatley v. City of Dallas, 758 S.W.2d 301, 304 (Tex.App.-Dallas 1988, writ denied). The specific language of each policy and the factual allegations of each underlying plaintiffs' pleadings against Pilgrim will determine Maryland's duty to defend each claim. Nationwide Property & Cas. Ins. Co. v. McFarland, 887 S.W.2d 487, 492 (Tex.App.-Dallas 1994, writ denied).
Similarly, Maryland's indemnity obligations on the severed claims are not inextricably interwoven with the remaining claims because the duties to defend and to indemnify in both the severed and remaining claims are separate duties. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821-22 (Tex.1997). Unlike the duty to defend, the duty to indemnify is based on facts proven, not on pleadings. American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 154 (Tex.App.-Dallas 1990, writ dism'd).
We hold that the five severed claims are not inextricably interwoven with Pilgrim's remaining claims.
B. Whether a severance order is proper if it severs some, but not all, claims against a particular defendant
Maryland argues that a severance of some but not all claims against a party cannot form a final judgment for purposes of appeal, citing Martinez v. Humble Sand & Gravel, Inc., 875 S.W.2d 311, 312 (Tex. 1994), Guidry v. National Freight, Inc., 944 S.W.2d 807, 812 (Tex.App.-Austin 1997, no writ), and Rutherford v. Whataburger, Inc., 601 S.W.2d 441, 443 (Tex. App.-Dallas 1980, writ ref'd, n.r.e.). None of these cases, however, holds that severance is never proper unless all claims against a particular defendant are released.
Maryland argues that the controlling reasons for a severance, "to do justice, avoid prejudice and further convenience,"[3] apply only when all of the claims against a party are severed. However, it cites no case expressly so holding. In fact, the Texas Supreme Court has noted that severance is proper to set out a final judgment for appeal precisely when all issues against a defendant have not been disposed of. In City of Beaumont v. Guillory, the Court noted as follows:
A summary judgment ... is presumed to dispose of only those issues expressly presented, not all issues in the case. A summary judgment that fails to dispose expressly of all parties and issues in the pending suit is interlocutory and not appealable unless a severance of that phase of the case is ordered by the trial court....
751 S.W.2d 491, 492 (Tex.1988) (emphasis added). As this highlighted language emphasizes, a severance is a proper means of rendering an otherwise interlocutory appeal final when some parties and issues still remain. Otherwise, the language above would simply refer to "all parties in the pending suit," not "all parties and issues."
The mere fact that some issues or claims remain against a defendant does not render a severance invalid per se.
*493 C. Whether this court possesses jurisdiction to consider the appeal
Maryland argues that, even if the trial court's severance order was not an abuse of discretion, Pilgrim's appeal is interlocutory and this court is, therefore, without jurisdiction to consider the appeal. We disagree. "[A]n improper severance does not rob [the] court of jurisdiction to consider a case; otherwise [the court] could not consider whether the severance itself was in fact improper." Nicor Exploration Co. v. Florida Gas Transmission Co., 911 S.W.2d 479, 482 (Tex.App.-Corpus Christi 1995, writ denied).
We hold that the trial court did not abuse its discretion in severing the five defense coverage claims from Pilgrim's remaining claims. We overrule Maryland's point of error and proceed to the merits of Pilgrim's appeal.
III.
Pilgrim's appeal of the summary judgment
The policies provide coverage for alleged injury or damage "which occurs" during the policy period. Maryland urged in its motion for summary judgment, and the trial court agreed, that the term "which occurs during the policy period" means that coverage is triggered only when the injury or damage is discovered, or manifest, within the policy period. Pilgrim responded that coverage is triggered when harm is sustained from exposure to continuous pollution, even if it remains undiscovered until after the policy period. Because the policies define a covered occurrence as "an accident, including continuous or repeated exposure to conditions," Pilgrim reasons that a harm "occurs" if it happens within the policy period.
Pilgrim asserts that when and how coverage is triggered for an occurrence, as defined, depends on the plain language of the policy; that these policies do not make coverage contingent upon the time the alleged injury or damage is discovered; that the court's only role is to enforce the trigger as demanded by the policy's terms; and that by grafting the "discovery" requirement onto the unambiguous policy, the trial court judicially rewrote the policy and diminished Pilgrim's coverage. Pilgrim argues that the plaintiffs' factual allegations, fairly and reasonably construed, state causes of action potentially within Maryland's coverage periods, thus invoking Maryland's duty to defend, even if Maryland is ultimately not required to indemnify.
A. Applying the "eight corners" rule
Texas courts apply the "eight corners" rule to determine whether an insurer has the duty to defend an insured, comparing the plaintiff's pleading allegations to the insurance contract provisions without regard to the facts that develop during discovery and trial. See National Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997).
Unlike the duty to indemnify, the duty to defend arises when the plaintiff alleges facts that potentially support claims for which there is coverage. Id. The duty to defend is determined from the face of the pleading, without regard to the ultimate truth or falsity of the allegations. Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex.1973). In determining the duty to defend, we construe the plaintiff's allegations against the insured liberally, "resolving any doubt in favor of the insured," though without reading facts into the pleadings for that purpose. Cowan, 945 S.W.2d at 825.
1. The tort plaintiffs' pleadings
To apply the eight corners rule, we examine the plaintiffs' pleadings in the five severed causes of action for those portions pertaining to the chronology of the alleged occurrences. The Sunblossom suit, filed by the owner of an apartment complex where a Pilgrim facility was located, alleges *494 that (1) Pilgrim operated a dry cleaning business at the complex since 1978; (2) Pilgrim discovered in 1995 that its business had contaminated the subsurface of the property; and (3) the plaintiff suffered property damages and costs from this contamination.
The Briargrove suit, filed by the owner of a shopping center at which Pilgrim operated a business, alleges that (1) Pilgrim operated a dry cleaning service business at the shopping center "from 1960 until 1979 or 1980"; (2) Pilgrim "permitted or caused hazardous substances to seep or leak," damaging the plaintiff's property; and (3) the plaintiff discovered the contaminants and, in 1994, asked Pilgrim to pay for the costs associated with the contamination.
The Murad suit, filed by Dolares Murad, the owner of a home adjacent to a Pilgrim dry cleaning facility, alleges in the second amended original petition that (1) Pilgrim operated the business continuously since it was opened in "early 1985"; (2) Pilgrim allowed chemicals used in the dry cleaning operation to escape from the property and migrate beneath Ms. Murad's property; and (3) in addition to property damage, Ms. Murad was diagnosed with cancer as a result of the contamination.
The Turk lawsuits, filed by the owner of three shopping centers at which Pilgrim operated leased facilities, alleged that (1) Pilgrim operated a dry cleaning facility at the three locations from December 9, 1965 until at least 1990 for the first location and from November 24, 1964 and June 20, 1966, through the present, for the other two locations and (2) Pilgrim allowed PCE or other hazardous substances to enter the surface or subsurface of the premises, damaging the properties.
The Agim plaintiffs, who live near a Pilgrim dry cleaning facility, alleged that (1) Pilgrim owned and operated its dry cleaning facility "from December 1979 to the present"; (2) Pilgrim allowed PCE and other hazardous substances to migrate onto the plaintiffs' property; and (3) the contamination physically injured the plaintiffs through chronic exposure and caused damage to the property.
2. The Maryland policies' coverage language
Under each of its four policies, Maryland agreed to pay all sums that Pilgrim "shall become legally obligated to pay ... because of ... bodily injury or ... property damage ... to which this insurance applies, caused by an occurrence." (Emphasis added).
Each policy defines an "occurrence" as an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected or intended from the standpoint of the insured.
(Emphasis added.)
The policies define "bodily injury" and "property damage" as follows:
"bodily injury" means bodily injury, sickness, or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom....
"property damage" means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom; or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.
(Emphasis added.)
The policies also give Maryland "the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage."
B. Must an "occurrence" be discovered within a policy period to trigger coverage?
Maryland argued in its summary judgment motion that the definitions of "occurrence," "bodily injury," and "property *495 damage," when read together, trigger its duty to defend Pilgrim only if the alleged property damage or bodily injury is "manifest" during the policy period and that the pleadings fail to allege a manifestation of harm within any policy period. The trial court agreed and granted Maryland's motion.
Pilgrim responds that the tort plaintiffs' pleadings allege that property damage and physical injury were caused by pollution from Pilgrim facilities and that Pilgrim operated the respective premises during time periods overlapping with some or all of Maryland's policies. Pilgrim argues that the allegations at least potentially allege physical or property damage occurring during the policy period.
Maryland argues that Texas case law has "consistently interpreted" similar policies to require a "manifestation trigger," citing Dorchester Development Corp. v. Safeco Insurance Co., 737 S.W.2d 380, 383 (Tex.App.-Dallas 1987, no writ). Our review of Texas law indicates the issue is far from settled.
In American Physicians Insurance Exchange v. Garcia, the Texas Supreme Court declined to adopt a specific test for an "occurrence" for insurance policies. See 876 S.W.2d 842, 853 n. 20 (Tex.1994). Surveying the law of other jurisdictions, the Court noted at least five tests for when a harm occurs to trigger coverage under an insurance policy:
1. the "pure" or "strict" manifestation rule"triggers coverage upon actual discovery of injury";
2. the "relaxed" manifestation rule "triggers coverage in first policy period during which discovery of injury is possible";
3. the "exposure" rule"triggers coverage in any policy period in which exposure to cause of injury occurred";
4. the "injury-in-fact" rule"sets trigger in personal injury cases at point when body's defenses are `overwhelmed' "; and
5. the "multiple" or "triple-trigger" rule"requires coverage under all policies during period of continuing exposure and manifestation."
Id. (citations omitted). After noting Dorchester as limited Texas precedent for the "pure manifestation" approach, the Texas Supreme Court specifically declined "to select among these tests, or formulate [the Court's] own," because the outcome of American Physicians did not require resolution of the issue. Id.
Our research indicates only three Texas appellate decisions have addressed when harm occurs under an insurance policy. In Dorchester, a 1987 construction defect case, the Dallas Court of Appeals noted the lack of Texas authority and adopted the reasoning of Florida and Idaho decisions with identical policy provisions. 737 S.W.2d at 383. Summarizing these decisions, the Dorchester court opined that "no liability exists on the part of the insurer unless the property damage manifests itself, or becomes apparent, during the policy period." Id. (discussing Travelers Ins. Co. v. C.J. Gayfer's and Co., Inc., 366 So.2d 1199 (Fla.Dist.Ct.App.1979), and Millers Mut. Fire Ins. Co. v. Bailey, Inc., 103 Idaho 377, 647 P.2d 1249 (1982)). Based on the Dorchester plaintiff's admission that damages were not manifested during the policy period, the court held that there was no "occurrence" during the policy period. 737 S.W.2d at 383. Though Dorchester's reasoning is not explicit, it equated "occurrence" with "manifestation" of harm and denied coverage to the insured.
In its second decision predating American Physicians, the Dallas Court of Appeals cited its prior Dorchester decision for the proposition that "coverage is not afforded unless an identifiable damage or injury, other than merely causative negligence, takes place during the policy period." Cullen/Frost Bank v. Commonwealth Lloyd's, Ins. Co., 852 S.W.2d 252, 257 (Tex. *496 App.-Dallas 1993, writ denied) (emphasis added). By focusing on when harm is identifiable, rather than actually discovered, Cullen/Frost indicates the Dallas court takes a "relaxed" manifestation approach. The court ruled for the insured and held there was coverage.
Finally, the Austin Court of Appeals cited Cullen/Frost for the proposition that "property loss occurs when the injury or damage is manifested." State Farm Mut. Auto. Ins. Co. v. Kelly, 945 S.W.2d 905, 910 (Tex.App.-Austin 1997, writ denied). However, this observation is arguably dicta. Kelly was the good faith purchaser of a stolen automobile. The Kelly court refused to follow cited out-of-state authorities holding that the loss occurred "when the insured acquired the bad title, i.e., at the time of purchase, a period not covered by the policy." Id. In rejecting this authority, the Austin court stated as its first reason that it "decline[d] to follow this rationale because of the long-standing Texas precedent that ownership is not required for an insurable interest in this state." Id. As a further reason for its decision, the Kelly court wrote as follows:
Additionally, Texas courts have held that property loss occurs when the injury is manifested. See Cullen/Frost Bank v. Commonwealth Lloyd's, 852 S.W.2d 252, 258 (Tex.App.-Dallas 1993, writ denied). Mr. Kelly's loss only became evident at the time his car was confiscated, not when he received bad title.
945 S.W.2d at 910 (emphasis added). The court ruled for the insured and held there was coverage.
In short, the case law governing when harm occurs under CGL policies is far from settled. The Texas Supreme Court has declined to adopt any test or fashion its own, the Dallas Court of Appeals has adopted a "relaxed" manifestation rule,[4] the Austin Court of Appeals has arguably adopted the Dallas court's approach, and other appellate courts have not yet addressed the subject. Furthermore, no Texas appellate court has addressed what test should be used to determine when harm occurs in toxic tort suits involving CGL policies that specifically include "continuous or repeated exposure to conditions" within the definition of an "occurrence."
The Fifth Circuit Court of Appeals, in its most recent survey of Texas insurance law on the meaning of "occurrence," concluded that its "best Erie guess as to what Texas would choose as the event that triggers the insurer's duty to defend in asbestos personal injury cases under a uniform CGL policy is the exposure theory"i.e., that coverage is triggered in any policy period in which exposure to the cause of the harm occurred. Guaranty Nat'l Ins. Co. v. Azrock Indus., Inc., 211 F.3d 239, 251-52 (5th Cir.2000). Although the trial court in Azrock defined "injury" as "the date an asbestos-related condition or disease manifests or becomes identifiable," the Fifth Circuit Court of Appeals instead defined "injury" as "the subclinical tissue damage that occurs on inhalation of asbestos fibers." Id. at 244. Applying this "exposure" theory to the personal injury claims, the Azrock court remanded to the trial court to determine which of the personal injury suits, if any, alleged exposure to the defendant's asbestos-containing products during the relevant policy periods. Id.The Azrock court acknowledged that older Fifth Circuit cases had used the manifestation rule for property damage cases, however, and affirmed the trial court's application of the manifestation rule to the one underlying complaint alleging *497 property damage. Id. at 246-48.[5]
Because the Texas Supreme Court in American Physicians expressly declined either to adopt any of the tests enumerated within the opinion or to fashion a new test, we are not bound by any of the theories discussed above in analyzing the meaning of an occurrence under the Maryland policies.
Maryland urges us to apply the "pure" manifestation rule, while Pilgrim argues that an injury "occurs" under the policy when damage is actually sustained through exposure, not when it is later discovered.[6]
In an occurrence-based policy, the insured is covered for "all claims based on an event occurring during the policy period, regardless of whether the claim or occurrence is brought to the attention of the insured or made known to the insurer during the policy period." Yancey v. Floyd West & Co., 755 S.W.2d 914, 918 (Tex.App.-Fort Worth 1988, writ denied). In contrast, a claims-made policy covers only injuries or damages that come to the attention of the insured and are made known to the insurer during the policy period. Id. Thus, a claims-made policy, which contemplates a fixed termination point, is less expensive than an occurrence-based policy, for which the insurer may have difficulty calculating premiums based on the costs of the insured risks. Id. at 923 (discussing the economic distinctions between "occurrence-based" and "claims-based" policies).
Pilgrim points out that the language of the Maryland policies is occurrence-based, contemplating comprehensive (and correspondingly more expensive) coverage, and argues that the court would drastically and retroactively reduce the value of the Maryland policies if it reads into the policies a "claims-based" requirement that the injury must actually be discovered within the policy period. We agree.
The Maryland policies in question neither use the word "manifest" nor state that injury or damage must be identified within the policies' time period. Each policy's definition of "occurrence" contemplates that covered injury or damage can arise from accidents of "continuous or repeated exposure" to chemicals, and each policy defines "bodily injury" or "property damage" as "bodily injury, sickness, or disease" or "physical injury to or destruction of tangible property" occurring during the policy period. Thus, the policies contemplate that harm caused by continuous exposure during a policy period will be covered by that policy.
We agree with the Azrock decision that, for CGL policies covering continuous or repeated exposure to conditions, injury can occur as the exposure takes place. Ultimate complications from sustained exposure, on the other hand, would tend to define the scope of damages. We do not find it necessary to limit the exposure rule to physical injury, however. Azrock was constrained to follow Fifth Circuit precedent on property damage; we are faced with an issue of first impression. We find *498 the Maryland policies' language, which defines an occurrence as harm caused by continuous or repeated exposure, transforms allegations of both physical injury and property damage caused by exposure to PCE during the policy periods into covered events.
Under well settled principles of insurance policy construction, "in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in [the] insured's favor." Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965). Thus, an insurer's duty to defend arises if the factual allegations against the insured, when fairly and reasonably construed, state a cause of action potentially covered by the policy. National Union, 939 S.W.2d at 141.
At summary judgment, Maryland had the burden of proving that one of the policy's limitations or exclusions constituted an avoidance or affirmative defense. TEX. INS. CODE ANN. art 21.58(b) (Vernon Supp.2000). Maryland established only that Pilgrim and the plaintiffs were first alerted to the existence of chemical contamination after the Maryland policies had expired. In each of the severed tort lawsuits, however, the plaintiffs alleged that Pilgrim released PCE and other chemicals from its facilities and that this contamination continuously exposed property, and in some cases individuals, to the chemicals. In each case, the plaintiffs seek damages for this exposure.
The Sunblossom, Turk, and Agim lawsuits allege that Pilgrim operated its facilities before, during, and after the Maryland policy periods. Murad alleges that Pilgrim began to operate its facility in early 1985, during and after Maryland's final policy period. Briargrove, however, alleges that Pilgrim ceased operating its facility in 1979 or 1980, before the effective date of any of the Maryland policies.
Briargrove`s pleadings, therefore, require us to determine whether the triggering event under the exposure rule is the release of contaminants or the exposure to those contaminants. If the trigger is Pilgrim's initial or ongoing release of PCE or other harmful chemicals, then the Briargrove lawsuit would not be covered by any of Maryland's policies; if the trigger is the exposure to the chemicals, then Briargrove `s pleadings potentially allege ongoing exposure to contaminants during some or all of the policy periods.
In E & L Chipping Co., Inc. v. Hanover Insurance Co., the insured's woodchip pile caught fire. 962 S.W.2d 272, 275 (Tex. App.-Beaumont 1998, no pet.). The plaintiffs, surrounding landowners, alleged that the insured's attempt to extinguish the fire by spraying large quantities of water caused a runoff of contaminated water that polluted their downstream properties. Id. The insurance policy in question defined an occurrence as "`an accident, including continuous or repeated exposure to substantially the same general harmful conditions.'" Id. The pleadings, however, alleged that, while the fire began before the policy period, ongoing damage from exposure to the resulting runoff continued into the policy period. Id. The court found that the policy did not require that the "occurrence" (the accident initially giving rise to the exposure) take place within the policy period. Id. However, because runoff resulted in contamination during the policy period, the court found a duty to defend even though the occurrence (the fire and its extinction) took place before the policy period. Id.[7]
Although E & L Chipping did not adopt a particular test for the triggering of coverage, *499 its analysis is consistent with an exposure approach. Here, the Maryland policies do not define an occurrence as an event happening within a policy period, but as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage." (Emphasis added.) The policies' time restriction is found in the definitions of "bodily injury" or "property damage," which require the harm to occur during the policy period. Following E & L Chipping, we find that the policies cover physical injury or property damage caused by exposure occurring during the policy periods, even if the contamination began before the policy periods. All five of the lawsuits allege continuous exposure to contaminants released by Pilgrim that seeped or leaked into the surrounding property. Potentially, at least, all of the pleadings allege property damage occurring during the policy period because of ongoing contamination or seepage.
Though it is possible to argue, from the pleadings, that the exposure occurred outside policy periods, the pleadings also support a claim for exposure occurring during policy periods. Because the pleadings potentially allege exposure during the policy periods and damages for this exposure, we conclude that Maryland owes Pilgrim a duty of defense, even if it should later become apparent that the contamination of which the plaintiffs complain occurred at a later point. See, e.g., Texas Property & Cas. Ins. Guar. Ass'n v. Southwest Aggregates, Inc., 982 S.W.2d 600, 604 (Tex. App.-Austin 1998, no pet.) (noting that "[t]he duty to defend is not affected by facts ascertained before suit, developed in the process of the litigation, or by the ultimate outcome of the suit") (citing Maupin, 500 S.W.2d at 635).
IV.
Whether Maryland's defense costs should be allocated
Pilgrim also challenges the alternative argument in Maryland's motion for partial summary judgment that, if Maryland should owe a duty to defend, the court should allocate the cost of Pilgrim's defense among the various insurance carriers and Pilgrim. The trial court expressly granted, severed, and made final its summary judgment solely on the ground of Maryland's duty to defend. Accordingly, we do not address the merits of the alternative argument in this appeal. See Delaney v. University of Houston, 835 S.W.2d 56, 58 (Tex.1992) (declining to address legal arguments on which the district court did not base summary judgment).
V.
Conclusion
We affirm that portion of the trial court's judgment severing the cause. Because exposure to PCE or other chemicals from Pilgrim's site could potentially have fallen within the Maryland policy periods under the tort plaintiffs' allegations, we reverse the remaining portion of the judgment, which rendered summary judgment on the ground that Maryland had no duty to defend, and remand the cause.
NOTES
[*] The Honorable Lee Duggan, Jr., retired Justice, Court of Appeals, First District of Texas at Houston, participating by assignment.
[1] The seven lawsuits are as follows: in 127th District Court, Harris County, TexasTurk v. Pilgrim Enterprises, Inc., Cause No. 06-38291; Turk (II) v. Pilgrim Enterprises, Inc., Cause No. 96-38290; Turk (III) v. Pilgrim Enterprises, Inc., Cause No. 96-38289. In the Southern District of TexasSunblossom v. Pilgrim Enterprises, Inc., C.A. No. H-96-0405; Briargrove Shopping Center J.V. v. Pilgrim Enterprises, Inc., C.A. No. H-96-724. In the 113th District Court, Harris, County, TexasMurad v. Pilgrim Enterprises, Inc., Cause No. 96-021802. In the 190th District Court, Harris County, TexasAgim v. Pilgrim Enterprises, Inc., Cause No. 96-53714.
[2] The other entities are Pilgrim Convenience, Inc.; R & G No. 1, Inc.; R & G No. 2, Inc.; R & G No. 3, Inc.; Pilgrim Laundry Company, Inc.; Pilgrim Equipment Co., Inc.; R.F.S., Inc. No. 8; R.F.S., Inc. No. 11; R.F.S., Inc. No. 17; S & R No. 2, L.T.D.; and PLC No. 11 Joint Venture.
[3] Guaranty Fed. Sav. Bank, 793 S.W.2d at 658.
[4] Though American Physicians described Dorchester as "explaining" a "pure" manifestation approach, the Dorchester court never explicitly distinguished whether it was adopting a "pure" or "relaxed" manifestation rule. The later opinion, Cullen/Frost, effectively clarified its approach as "relaxed" manifestation when the court focused on whether the harm was "identifiable."
[5] In Snug Harbor, Ltd. v. Zurich Insurance, the Fifth Circuit Court of Appeals determined that an "occurrence" takes place under Texas law when the injured party suffers damage, rather than at the time of the negligent act or omission causing the damage. 968 F.2d 538, 544 (5th Cir.1992). In American Home Assurance Co. v. Unitramp Ltd., the Fifth Circuit of Appeals opined that, under Texas law, property damage occurs within the meaning of a CGL policy when the damage becomes manifest. 146 F.3d 311, 313 (5th Cir.1998). The court reasoned that "identifiable" is "synonymous with `manifest' and `apparent,'" which each mean "`capable of easy perception.'" Id. at 314 (citing WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 102 (1986)).
[6] Maryland does not expressly use the term "pure" or "strict" manifestation in its argument. However, it essentially adopts that approach by arguing that the harm became manifest only after Pilgrim's testing revealed the harm, even if the contamination was capable of being determined from testing at an earlier point. Pilgrim's argument would fall within the "exposure" rule approach, though Pilgrim does not expressly use the term.
[7] The court found the fire occurred before the policy period. Id. Though it was unclear whether the extinction of the fire extended into the policy period, the court found the pleadings alleged that contamination from runoff continued through the policy period. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1808593/ | 969 F.Supp. 270 (1997)
Robert KRAUSE, et al., Plaintiffs,
v.
CHERRY HILL FIRE DISTRICT 13, Defendant.
Civil Action No. 96-1269.
United States District Court, D. New Jersey.
June 30, 1997.
*271 Jerald R. Cureton, Renee C. Vidal, Cureton, Caplan & Clark, P.C., Mount Laurel, NJ, for Plaintiffs.
Steven S. Glickman, Ruderman & Glickman, P.C., Newark, NJ, for Defendant.
OPINION
ORLOFSKY, District Judge:
Plaintiffs, all members or former members of fire companies located in Cherry Hill, New Jersey, bring this suit against Cherry Hill Fire District 13 ("District 13") presently the exclusive provider of fire protection and fire safety services in the Township of Cherry Hill, New Jersey. Plaintiffs allege violations of the federal Fair Labor Standards Act ("FLSA"),[1] violations of certain New Jersey statutes governing public employment,[2] and common law breach of contract. Jurisdiction over plaintiffs' claims under the FLSA is based upon 28 U.S.C. § 1331. Plaintiffs invoke this court's Supplemental Jurisdiction over their state law causes of action. See 28 U.S.C. § 1367(a).
Plaintiffs move for summary judgment pursuant to Fed.R.Civ.P. 56(a) on their claims under the FLSA and the New Jersey public employment statutes. Defendant cross-moves for summary judgment pursuant to Fed.R.Civ.P. 56(b) on all of plaintiffs' claims. These motions and cross-motions require this court to decide an issue of apparent first impression in this district, namely, whether the plaintiffs are "employees" within the meaning of the Fair Labor Standards Act, or whether these firefighters fit within the exception to the Act for "volunteers."[3]
*272 The federal question presented by these motions is two-fold. Did District 13 establish an "employee," as opposed to a "volunteer" relationship with its part-time firefighters, including the plaintiffs, and, if such a relationship existed, did District 13 succeed in returning these "employees" to "volunteer" status at the time it chose to reduce the compensation paid to some firefighters for certain shifts to a rate below the prevailing minimum wage? Because an employee relationship was established between District 13 and the plaintiffs, and because such a relationship cannot be unilaterally altered by an employer's decision purporting to return some employees to "volunteer" status, the plaintiff's motion will be granted, in part. Because plaintiffs' state law claim contained in counts two through four of their complaint share no common nucleus of operative fact with their FLSA claim, and because those state law claims substantially predominate over the FLSA claim, this court will not exercise supplemental jurisdiction over those claims. Therefore, plaintiffs' state law claims will be dismissed without prejudice, and defendant's cross-motion for summary judgment on those claims will be dismissed as moot.
I. Facts[4]
On July 12, 1993, pursuant to Ordinance number 93-27, the Township of Cherry Hill, New Jersey, created Cherry Hill Fire District 13, the defendant in this action, thereby consolidating, and eliminating, what had been six independent fire districts within the Township. On January 1, 1994, after a period of transition, District 13 became the sole entity responsible for fire protection and fire safety in the Township.
District 13, like its predecessors, relies on a staff composed both of career firefighters and non-career firefighters. The career firefighters receive remuneration and benefits in accordance with a collective bargaining agreement between the Township and the International Association of Firefighters. The plaintiffs in this action, all non-career firefighters, are not now, and never have been covered by that collective bargaining agreement.
District 13 staffs some firehouses with career firefighters 24 hours per day. Other firehouses are staffed by a combination of career and non-career firefighters. Career firefighters may work as much as a ten-hour shift (7 a.m. to 5 p.m.) at some firehouses. As of January 1, 1994, non-career firefighters staffed some firehouses on "duty-crew" shifts (5 p.m. to 11 p.m. weekdays, and 7 a.m. to 3 p.m., or 3 p.m. to 11 p.m., on weekends). Non-career firefighters also staffed some firehouses from 11 p.m. to 7 a.m., the so-called "sleep-in" shift.
Between January 1, 1994, and August, 7, 1995, District 13 compensated non-career firefighters at a rate of $ 8.00 per hour, and non-career officers at a rate of $ 9.00 per hour, for all "duty crew" shifts. Non-career firefighters and officers received $ 5.05 per hour for "sleep-in" shifts.
After August 7, 1995, District 13 eliminated the weekday "duty crew" shifts for non-career firefighters. District 13 decided to staff these former "duty crew" shifts with a combination of career firefighters and, after August 7, 1995, firefighters in the newly created position of "Minimum Staffer," a part-time position paying $8.00 per hour. The "Minimum Staffers" were selected from among non-career firefighters who applied for the newly created position. None of the plaintiffs is a "Minimum Staffer." At the same time, defendant began compensating the remaining non-career firefighters, including the plaintiffs, at a rate of $20.00 per eight hour shift for the remaining "sleep-in" shifts.
District 13 requires all career and non-career firefighters to attend monthly drills, to demonstrate successful completion of a Firefighter I course, at a minimum, and to maintain the Firefighter I certificate. In addition, all firefighters must be certified in Crash Injury Management, Infectious Diseases, Cardio-Pulmonary Resuscitation, *273 Self-Contained Breathing Apparatus, and Right to Know.
II. Standard for Summary Judgment
On a motion for summary judgment, this court is required to view the underlying facts and all reasonable inferences drawn from those facts in the light most favorable to the party opposing the motion. Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir.1995) (citation omitted); see also Helen L. v. DiDario, 46 F.3d 325, 329 (3d Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 64, 133 L.Ed.2d 26, (1995); Valhal Corp. v. Sullivan Assocs., Inc., 44 F.3d 195, 200 (3d Cir.1995); Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977).
Summary judgment should be granted only if a court concludes 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." Fed.R.Civ.P. 56(c). The moving party bears the burden of proving that no genuine issue of material fact is in dispute. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86 n. 10, 106 S.Ct. 1348, 1355-56 n. 10, 89 L.Ed.2d 538 (1986). Once the movant has carried its initial burden, the nonmoving party "must come forward with `specific facts showing that there is a genuine issue for trial.'" Id. at 587, 106 S.Ct. at 1356 (quoting Fed. R.Civ.P. 56(e)) (emphasis added in Matsushita). The non-movant must present concrete evidence supporting each essential element of its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).
The question for this court, then, is whether the parties, in opposing the motion and cross-motion, have presented sufficient evidence to create a dispute regarding a genuine issue of material fact. Gottshall v. Consolidated Rail Corp., 56 F.3d 530 (3d Cir. 1995); Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir.1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993); Nathanson v. Medical College of Pennsylvania, 926 F.2d 1368, 1381 (3d Cir.1991). "Facts that could alter the outcome are `material', and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 300, 302 n. 1 (3d Cir.1995) (citations omitted).
III. Discussion
A. Fair Labor Standards Act
Plaintiffs contend that District 13 violated the minimum wage provisions of the FLSA when it adopted a $ 20.00 reimbursement for an eight-hour "sleep-in" shift. The FLSA provides that:
Every employer shall pay to each of his employees who in any workweek is ... employed in an enterprise engaged in commerce or in the production of goods for commerce, wages at the following rates:
except as otherwise provided in this section, not less than $ 4.25 an hour during the period ending September 30, 1996, not less than $ 4.75 an hour during the year beginning on October 1, 1996, and not less than $ 5.15 an hour beginning September 1, 1997.
29 U.S.C. § 206(a). In order for an enterprise to be "engaged in commerce," within the meaning of the FLSA, it is sufficient that the enterprise utilizes equipment or supplies which have traveled in interstate commerce. 29 U.S.C. § 203(s). The parties do not dispute that the Cherry Hill firefighters, unless otherwise excluded, are covered by the FLSA.
However, the FLSA further provides, in the definition of "employee":
The term "employee" does not include any individual who volunteers to perform services for a public agency which is a State, a political subdivision of a State, or an interstate governmental agency, if
(i) the individual receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and
(ii) such services are not the same type of services which the individual is *274 employed to perform for such public agency.
29 U.S.C. § 203(e)(4)(A). Thus, the Cherry Hill firefighters would be exempt from the minimum wage provisions of the FLSA if they were "volunteers," rather than "employees," within the meaning of the Act. In addressing this distinction, this court must bear in mind that cases interpreting the FLSA have established the twin principles that the Act is a remedial statute which "must not be interpreted or applied in a narrow, grudging manner," Tennessee Coal, Iron & R.R. Co. v. Muscoda Local, 321 U.S. 590, 597, 64 S.Ct. 698, 703, 88 L.Ed. 949 (1944), and that exemptions from FLSA coverage "are to be narrowly construed against the employers seeking to assert them," Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 456, 4 L.Ed.2d 393 (1960). See also Reich v. New York, 3 F.3d 581, 586 (2d Cir.1993); Nichols v. Hurley, 921 F.2d 1101, 1103 (10th Cir.1990).
1. The "Economic Realities" Test
To aid this court's analysis, the parties have extensively briefed the "economic realities" test, which they agree provides the traditional framework for determining when a worker is an employee within the meaning of the FLSA.
The FLSA contains an expansive definition of the verb "to employ," providing that it "includes to suffer or permit to work." 29 U.S.C.A. § 203(g). See also Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326, 112 S.Ct. 1344, 1350, 117 L.Ed.2d 581 (1992). It is well-settled that this definition extends "the meaning of `employee' to cover some individuals who would not qualify as such under a strict application of traditional agency law principles." Id.; see also Rutherford Food Corp., v. McComb, 331 U.S. 722, 728, 67 S.Ct. 1473, 1475-76, 91 L.Ed. 1772 (1947). Accordingly, courts interpreting the FLSA avoid common law classifications, choosing instead to apply a test of the "economic realities" of the relationship in question. Under this test, "the determination of the employment relationship does not depend on isolated factors but rather upon the `circumstances of the whole activity.'" Martin v. Selker Bros., Inc., 949 F.2d 1286, 1293 (3d Cir.1991) (quoting Rutherford Food, 331 U.S. at 730, 67 S.Ct. at 1477).[5]
In order to determine whether an FLSA employment relationship exists using the "economic realities" test, courts in this Circuit consider the following six factors:
1) the degree of the alleged employer's right to control the manner in which the work is to be performed; 2) the alleged employee's opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; 6) whether the service rendered is an integral part of the alleged employer's business.
Id. (citations omitted). "[N]either the presence nor the absence of any particular factor is dispositive." Id.
Notably, the Third Circuit admonishes district courts in this Circuit to "consider whether, as a matter of economic reality, the individuals `are dependent upon the business to which they render service.'" Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376, 1382 (3d Cir.1985) (quoting Donovan v. Sureway Cleaners, 656 F.2d 1368, 1370 (9th Cir.1981)).
Unfortunately, the six-part "economic realities" test offers little guidance in this case. The test is best suited to determine whether, as a matter of economic reality, an individual is in business for himself or herself as an independent contractor, or is an employee of another. The "economic realities" *275 test is of limited utility in determining whether an individual is an "employee," as opposed to a "volunteer."
For example, the degree of control exercised by a putative employer is meaningful in determining whether an individual is an independent contractor because one anticipates that an independent contractor exercises significant, although not absolute control over its own activities. No such expectation exists for volunteers. An individual may volunteer his or her services to an organization, and yet succumb completely to the dictates of the organization in matters of scheduling and assignments. Indeed, a volunteer may work alongside an employee, performing the same task, without losing his or her volunteer status. Put another way, a volunteer, unlike an independent contractor, need not expect to control his or her activities in relation to the services performed.[6]
Similarly, whether the profit or loss belongs to the putative employer, or to the individual, is meaningless in the case of a volunteer, who expects no profit at all. Furthermore, it is likely, where volunteers are concerned, that the putative employer may, as in this case, be a non-profit organization. Likewise, volunteers make no investment in facilities, nor could they be expected to do so.
The degree of specialized skill required of the individual performing the service, is indicative of an independent contractor status, when that skill exceeds, or differs significantly from the skills the putative employer normally seeks in its employees. However, the fact that a "volunteer" firefighter, like a part-time paid firefighter, must maintain various certifications, does not illuminate any distinction in status between the volunteer and the employee.
The two remaining factors, of the six set forth in Selker Brothers and DialAmerica, are potentially helpful in this context. Both of them lend aid to plaintiffs' position. The permanency of these plaintiffs is demonstrated by the fact that each has worked continuously, if intermittently, for District 13 since defendant took over all fire protection and fire safety services for the Township of Cherry Hill in 1994. None, as far the record reveals, has served as a firefighter for any other organization during this time period. In addition, it is unquestionably the primary role of District 13 to provide fire protection services. As firefighters, therefore, plaintiffs services are an integral part of the work performed by District 13.
Finally, the plaintiffs have demonstrated their "economic dependence" upon District 13. In this regard, it is irrelevant that many, though not all of the plaintiffs had other gainful employment during the time periods at issue in this case.
The economic-dependence aspect of the ["economic realities"] test does not concern whether the workers at issue depend on the money they earn for obtaining the necessities of life.... Rather, it examines whether the workers are dependent on a particular business or organization for their continued employment.
DialAmerica, 757 F.2d at 1385 (citations omitted). In a sense, this inquiry is related to the question of "permanency" in the relationship between the worker and the putative employer. A worker who has an "impermanent" relationship, is also likely to be a worker with numerous options for employment in the particular field at issue, and therefore, not economically dependent on a single employer.
Consideration of the relevant factors of the "economic realities" test leads to the conclusion that the plaintiffs were employees of District 13. Perhaps more important than any of these factors, however, in analyzing whether these plaintiffs are "employees" or "volunteers," is the definitional scope of the FLSA. Recent developments in constitutional law, have impacted upon this analysis.
*276 2. The Definition of a "Volunteer"
In 1985, in the wake of Garcia v San Antonio Metro. Transit Auth., 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985),[7] Congress passed amendments to the FLSA intended to create certain exclusions for employees of state and local governments. Fair Labor Standards Amendments of 1985, Pub.L. No. 99-150, 99 Stat. 790 (1985). It was the intent: of Congress "to make clear that persons performing volunteer services for state and local governments should not be regarded as `employees' under the statute." S.Rep. No. 99-159, at 14 (1985), reprinted in 1985 U.S.C.C.A.N. 651, 662. The portion of the amendments relevant to these motions is found at 29 U.S.C. § 203(e)(4)(A).[8] What Congress failed to make clear, however, is when a person is a "volunteer," and when he or she is an "employee." It was left to the Secretary of Labor to issue regulations in this area.
The regulation defining the term "volunteer" for purposes of the FLSA, provides, in part:
An individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered, is considered to be a volunteer during such hours.
29 C.F.R. § 553.101(a) (1996). This definition contains two requirements: (1) a civic, charitable, or humanitarian reason; and, (2) the absence of an expectation of, or actual compensation for services rendered.
As to the first part, it is clear that anyone who is willing to undertake the dangerous job of a firefighter, must be, at least to a considerable degree, motivated by an altruistic sense of civic responsibility. As the New Jersey Supreme Court has observed, firefighters, even when paid for their services, routinely "confront crises and allay dangers created by an uncircumspect citizenry, a circumstance that serves to distinguish firefighters ... from most other public employees." Berko v. Freda, 93 N.J. 81, 86, 459 A.2d 663 (1983).
In view of this fact, the DOL regulations must surely require more than a generalized public spiritedness on the part of the individual concerned, or that the organization for which the individual performs services be the type which is involved in a "civic, charitable, or humanitarian" mission. This was the conclusion of the court in Rodriguez v. Township of Holiday Lakes, 866 F.Supp. 1012 (S.D.Tex.1994). After minimizing plaintiff's contention that he had been "coerced" into donating his services,[9] the Rodriguez court nevertheless concluded that an unpaid patrol officer was an "employee" of the defendant municipality, rather than a "volunteer," for purposes of the exemption from the minimum wage provisions of the FLSA. Id. at 1019. A critical factor in the court's decision was its finding that the plaintiff patrol officer did not perform the services in question for "civic, charitable, or humanitarian" reasons, but, rather, performed them in order to obtain additional employment as a road-construction flagman in a neighboring county that required its flagmen to be police officers. Id. Although the court observed that the plaintiff had chosen a "strikingly inefficient" manner in which to make a living, id. at 1018, it nevertheless concluded that 29 C.F.R. § 553.101(a) clearly requires the individual in question to be motivated by "civic, charitable, or humanitarian reasons." Id. at 1019. However improbable, Rodriguez's explanation of his motivations was plausible. The summary judgment record before this court, however, does not provide a clear statement from each plaintiff, of a similar pecuniary motive.
*277 The plaintiffs' motivations, however, are only relevant if the plaintiffs have undertaken to perform firefighting services "without promise, expectation or receipt of compensation." It is undisputed that the plaintiffs received compensation, at a minimum rate of $ 5.05 per hour, and a maximum rate of $ 9.00 per hour, from January 1, 1994 to August 7, 1995. On May 5, 1995, more than seventeen months after District 13 took over all fire services in the Township of Cherry Hill, Michael A. Saraceni, Deputy Chief of Administration for District 13 ("Saraceni"), wrote to Richard C. Richards, District Director of the Wage and Hour Division of the Department of Labor ("Richards"), requesting an Opinion Letter regarding District 13's "compliancy" with the FLSA. Glickman Aff., exhibit 20. On May 16, 1995, Richards replied that the only "potential FLSA problem" he could identify from the facts related in Saraceni's letter was: "the payment of an hourly rate to `volunteers' to provide station staffing." Glickman Aff., exhibit 21. Richards went on to note that:
[I]ndividuals would not lose their "volunteer" status if they are [sic] furnished expenses, reasonable benefits or are [sic] paid a nominal fee (such as your $ 4.00 per response from home). On the other hand, your practice of paying $ 8.00/$ 9.00 an hour to staff a station is more than a nominal fee and is sufficient to create an employment relationship and thus destroy their "volunteer" status. Once the individual becomes an "employee", [sic] he/she is then prohibited from volunteering the same type of services to the same employer.
Id. Richards concluded his letter with the caveat that his was an advisory opinion only, and "should not be relied upon as an official position of this agency." id. Despite this clear instruction, on July 21, 1995, Saraceni circulated a memorandum to "All Part-time/volunteer Personnel," which begins: "Due to a recent determination by the United States Department of Labor, Fire District 13 is required to restructure how personnel are classified." Glickman Aff., exhibit 23. Presumably, Saraceni was referring to Richards' letter when he wrote, "a recent determination by the United States Department of Labor."
On August 11, 1995, Saraceni once again wrote to Richards, describing the action District 13 had taken to achieve compliance with the FLSA. Glickman Aff., exhibit 24. According to Saraceni, the new plan "eliminated the position of part-time employee, returning our personnel to true volunteer status." Id. If there was any response to this letter, and the letter requests none, that response has not been made a part of the summary judgment record.
In view of the fact that the plaintiffs both expected and received hourly compensation, in an amount greater than a "nominal" fee, it is clear that plaintiffs were not volunteers from January 1, 1994, at least until August 7, 1995, when District 13 imposed a "nominal fee" structure. Richards' letter to Saraceni practically compels this conclusion. This conclusion, without more, disposes of no issues in this case, as plaintiffs were paid compensation at greater than the minimum wage for the entire period from January 1, 1994, to August 7, 1995.
District 13 contends that, even if it created an employment relationship with the plaintiffs during the time period before August 7, 1995, the plaintiffs were volunteers after August 7, 1995, and properly received only the nominal $ 20.00 fee per eight-hour shift. Therefore, having concluded that plaintiffs were employees of District 13 prior to August 7, 1995, I must now consider whether District 13 properly restructured its staffing to eliminate part-time employees and "return" some former employees to "volunteer" status.[10]
*278 In support of its argument that it could "return" its employees to "volunteer" status, District 13 relies on a DOL Letter Ruling permitting an employer to "excuse," or "lay off," a municipal employee in order to avoid overtime. Glickman Aff., exhibit 42. District 13 argues, by analogy, that even if an employment relationship existed with the non-career firefighters prior to August 7, 1995, the defendant should be able to "return" the non-career firefighters, including the plaintiffs, to "volunteer status" in order to avoid the minimum wage provisions of the FLSA. For the reasons that follow, I conclude that this analogy fails.
The FLSA does not entitle any employee to overtime. The law merely requires overtime pay for actual hours of overtime worked. On the other hand, the FLSA does require employers to pay at least the minimum wage to all employees. Furthermore, the defendant's contention that it could "reestablish" the volunteer status of the non-career firefighters, even if those firefighters had become employees by virtue of the prior wage structure, flies in the face of the specific provision of the regulations which states that: "An individual shall not be considered a volunteer if the individual is otherwise employed by the same public agency to perform the same type of services as those for which the individual proposes to volunteer." 29 C.F.R. § 553.101(d). In other words, an employee may not, of his or her own accord, assume "volunteer" status once he or she has entered into an employment relationship. This provision is intended to prevent manipulation of employees or abuse of minimum wage requirements through coercion or undue pressure. S.Rep. No. 99-159, supra, at 14, 1985 U.S.C.C.A.N. at 662; 29 C.F.R. § 553.101(b). Congress forbade employees from unilaterally offering to volunteer their services to an employer, out of concern that employers might pressure employees to volunteer, or employees might feel obliged to volunteer. Having gone to these lengths to protect employees, ultimately even from themselves, it is unlikely that Congress intended to permit employers to change unilaterally an employee's status to that of a volunteer. I am unwilling to read such an exception into the FLSA. To do so, would completely swallow the rule against employees volunteering their "same-type" services to public employers. 29 C.F.R. §§ 553.101, 553.103.
The relationship between District 13 and the plaintiffs, when viewed in its entirety, is one of employment. Accordingly, plaintiffs' motion for summary judgment on the FLSA claim contained in count one of the complaint must be granted.
3. Damages
Plaintiffs have provided, and defendants have not disputed, a calculation of plaintiffs' back wages in the amount of $ 17,765.00. In addition to these back wages, plaintiffs seek liquidated damages in an equal amount.[11]
*279 The FLSA, as written, makes an award of liquidated damages mandatory, and the Supreme Court has so interpreted the Act. See 29 U.S.C. § 216(b); Overnight Motor Transportation Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942). However, dissatisfied with the sometimes harsh results of this interpretation, Congress included a provision in the Portal-to-Portal Pay Act of 1947,, ch. 52, 61 Stat. 84, which grants trial courts the authority to deny or limit liquidated damages when the "employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation" of the FLSA. 29 U.S.C. § 260.[12]
"To avoid liability for liquidated damages, the employer must make a showing of good faith and reasonable grounds for its conduct. If the employer fails to carry its burden of demonstrating good faith and reasonable grounds, the award of liquidated damages is mandatory." Selker Bros., 949 F.2d at 1299. The Third Circuit has made clear that, in demonstrating good faith and reasonable grounds, the employer bears a "plain and substantial" burden of proving his entitlement to discretionary relief. Tri-County Growers, 747 F.2d at 128-29.
The good faith requirement is a subjective one that "requires that the employer have an honest intention to ascertain and follow the dictates of the Act." ... The reasonableness requirement imposes an objective standard by which to judge the employer's conduct ... Ignorance alone will not exonerate the employer under the objective reasonableness test....
To carry his burden, a defendant employer must show that he took affirmative steps to ascertain the Act's requirements, but nonetheless, violated its provisions.
Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 907-08 (3d Cir.1991). Moreover, the Third Circuit has noted that, without more, the mere absence of affirmative evidence in the record that the employer willfully intended to avoid compliance with the FLSA, "falls short of satisfying [the] objective component of the good faith requirement." Id. at 909 (citing Tri-County Growers, 747 F.2d at 129).
As a threshold matter, I note that, although plaintiffs' moving papers assert their entitlement to liquidated damages, defendants nowhere address this issue. Inasmuch as District 13 seeks summary judgment on the plaintiffs' FLSA claim, however, the court may fairly assume that District 13 regards its conduct as meeting the good faith and reasonableness requirements of 29 U.S.C. § 260. Accordingly, relying on the arguments defendant presents in opposition to summary judgment, I will determine whether I may exercise my discretion, consistent with the FLSA and the cases construing it, to deny or limit liquidated damages in this case.
District 13 took affirmative steps toward ascertaining the requirements of the FLSA. In the first place, Saraceni considered himself well-versed in the requirements of the FLSA. Dep. of Saraceni at 723-74, attached as exhibit 12 to Vidal Aff. Saraceni also testified that he had an understanding, largely derived from a seminar he attended, that District 13 was paying the volunteers too much. Id. at 80-81. Perhaps to confirm this suspicion, Saraceni wrote to the District Director of the Wage and Hour Division of the Department of Labor requesting an opinion regarding District 13's compliance with the FLSA. In response, Richard C. Richards, District Director of the Wage and Hour Division, alerted Saraceni of the potential "problem" District 13 faced as a result of having paid its "volunteers" from $ 5.05 to $ 9.00 per hour. Richards' letter specifically warned *280 Saraceni that "your practice of paying $ 8.00/$ 9.00 an hour to staff a station is more than a nominal fee and is sufficient to create an employment relationship." Richards did not address, and was not asked to address, whether, if an employment relationship had been created, District 13 could unilaterally end that relationship, and return these "employees" to "volunteer" status. If District 13 took additional steps to ascertain whether such a plan would conform with the FLSA and existing DOL regulations, those steps do not appear in the summary judgment record.
On May 22, 1995, soon after he received Richards' letter, Saraceni communicated with the station commanders, instructing them not to accept any new members for "duty crew" or part-time shifts until further notice. Vidal Aff., exhibit L. Saraceni attributes this change in policy to "a recent ruling by the Department of Labor." Id. On July 21, 1995, Saraceni presented the reorganization plan to "All Part-time/volunteer Personnel," including the creation of the "Minimum Staffing" positions. Glickman Aff., exhibit 23. The July 21st memorandum explains that District 13 intends to discontinue its "part-time system," with the exception of "[s]leepin and weekened [sic] crews," which will remain as "`stipended' shifts only." Id. Again, this memorandum clearly implies that these changes were mandated by the Department of Labor. Saraceni begins by referring to Richards' letter as a "recent determination of the United States Department of Labor," although Richards' letter expressly states that it does not represent the official position of the DOL. Id. Furthermore, Saraceni states that "due to" that determination, "District 13 is required to restructure how personnel are classified, reimbursed and utilized." Id.
On August 11, 1995, Saraceni wrote to Richards to thank him for his earlier letter and to report the results of the reorganization of District 13. Glickman Aff., exhibit 24. There is no evidence that Saraceni, or anyone else, sought an opinion, before August 7, 1995, from the DOL concerning the crucial issues presented in this case, whether the "volunteers" became "employees" through the receipt of substantial hourly compensation, and, if they did, whether the planned reorganization would reinstate these employees in "volunteer" status. This omission is all the more dramatic, given that District 13 elsewhere relies upon several DOL letter rulings in which public employers submitted planned changes to DOL for approval.[13]See, e.g., Letter Ruling of Oct. 28, 1993 (Board "is considering the adoption of a retention and incentive program"), attached as exhibit 40 to Glickman Aff.; Letter Ruling of Nov. 12, 1993 ("[M]unicipality anticipates creating a program"), attached as exhibit 41 to Glickman Aff.
Thus, District 13 took steps to review the reimbursement scheme in existence prior to August 7, 1995, as it applied to these plaintiffs, but it apparently took no steps to obtain an authoritative review of its planned reorganization. Therefore, District 13's decision to institute its reorganization plan on the strength of a single letter from DOL, in which that plan is not even mentioned, cannot satisfy the objective reasonableness requirement of 29 U.S.C. § 260. Accordingly, I conclude that an award of liquidated damages is mandatory in this case.
B. Plaintiffs' State Law Claims
Before this court may consider the motion and cross-motion for summary judgment on plaintiffs' state law claims, I must determine whether the exercise of this court's supplemental jurisdiction is appropriate in this case.
In 1990, Congress combined and codified the judicially created doctrines of pendent and ancillary jurisdiction under the rubric of "Supplemental Jurisdiction." See Judicial Improvements Act of 1990, Pub.L. No. 101-650, 104 Stat. 5113 (codified at 28 U.S.C. § 1367). Statutory "Supplemental Jurisdiction," as applied to cases based upon federal question jurisdiction, embodies the jurisdictional standard enunciated by the Supreme Court in United Mine Workers v. Gibbs, 383 *281 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). See also Lyon v. Whisman, 45 F.3d 758, 760 (3d Cir.1995); Sinclair v. Soniform, Inc., 935 F.2d 599, 603 (3d Cir.1991).
To determine whether a claim is part of the "same case or controversy," this court looks to whether "[t]he state and federal claims ... derive from a common nucleus of operative fact." United Mine Workers, 383 U.S. at 725, 86 S.Ct. at 1138. In Lyon, the Third Circuit held that a plaintiff's claim for overtime wages under the FLSA shared no common nucleus of operative facts with her state law claims for breach of contract and tort based on her employer's alleged failure to pay a promised bonus on time. The Third Circuit pointed out that the proper analysis of the "common nucleus" requirement of United Mine Workers, requires an intensely fact-specific inquiry. Lyon, 45 F.3d at 760. Moreover, the Lyon court declared, that, in a federal court action in which jurisdiction is based upon the FLSA, the fact that both state and federal claims arise out of the "employment relationship," without more, provides an insufficient factual nexus to confer supplemental jurisdiction. Id. at 762.
The court in Lyon also observed that the FLSA was a statute with a narrow, well-defined purpose to guarantee minimum standards and eliminate abuses in wages and hours worked. Id. at 763. As such, the Third Circuit expressed doubt that Congress, in enacting the FLSA, intended to authorize supplemental jurisdiction to the full extent of Article III. Id. at 764. Indeed, the Lyon court warned that "when a court exercises federal jurisdiction pursuant to a rather narrow and specialized federal statute it should be circumspect when determining the scope of its supplemental jurisdiction." Id.
In Lyon, the Third Circuit decided, sua sponte, to vacate the district court's order as it applied to the Lyon's state law claims, and to remand with directions to dismiss those claims without prejudice. In view of the fact that neither of the parties in Lyon had challenged the district court's exercise of supplemental jurisdiction, just as neither party has challenged supplemental jurisdiction here, the Third Circuit's conclusion in Lyon is particularly significant. See id. at 764 n. 10. It is fair to say, at least in actions predicated upon the FLSA, that the Third Circuit "interprets section 1367 and Gibbs very narrowly." Derasmo v. Hospitality Franchise Sys., Inc., Civ. A. No. 93-46, 1995 WL 274501, at *8 (D.N.J. May 8, 1995).
The Third Circuit clearly indicates that, when a narrow statute such as the FLSA is the only source of federal jurisdiction, the exercise of supplemental jurisdiction is proper only when the state and federal claims "are merely alternative theories of recovery based on the same act." Lyon, 45 F.3d at 761 (quoting Lentino v. Fringe Employee Plans, Inc., 611 F.2d 474, 479 (3d Cir.1979)). Applying the teaching of Lyon to the present case, I conclude that plaintiffs' state law claims, both statutory and common law, involve distinct factual issues, which will require distinct proofs, not encompassed within plaintiffs' FLSA claim.
Federal courts in this district routinely exercise supplemental jurisdiction over claims brought under New Jersey's Law Against Discrimination, when jurisdiction is predicated upon Title VII. This is unremarkable, in view of the fact that the Law Against Discrimination is aimed at much the same evils that Title VII addresses, and its analytical structure mirrors that of Title VII. See, Abrams v. Lightolier Inc., 50 F.3d 1204, 1212 (3d Cir.1995) ("New Jersey courts in applying the NJIAD generally follow the standards of proof applicable under the federal discrimination statutes[.]"); Kapossy v. McGraw-Hill, Inc., 921 F.Supp. 234, 240 (D.N.J.1996); Maidenbaum v. Bally's Park Place, 870 F.Supp. 1254, 1258 (D.N.J.1994), aff'd, 67 F.3d 291 (1995). Indeed, in such cases, the state law claim is generally the equivalent of an alternative legal theory, because it shares the identical factual basis, the challenged employment action.
In this case, plaintiffs' minimum wage claim under the FLSA requires no more than proof of an employment relationship, which is disputed, and proof of the wages paid and time periods involved, which is apparently undisputed. By contrast, plaintiffs' New Jersey statutory claims, as well as their breach of contract claim, require much more.
*282 Plaintiffs contend that District 13 has violated provisions of New Jersey's public employment law, including the following:
Except as otherwise provided by law no permanent member or officer of the paid or part-paid fire department or force shall be removed from his office, employment or position for political reasons or for any cause other than incapacity, misconduct, or disobedience of rules and regulations established for the government of the paid or part-paid fire department and force, nor shall such member or officer be suspended, removed, fined or reduced in rank from or in office, employment or position therein except for just cause as hereinabove provided and then only upon a written complaint, setting forth the charge or charges against such member or officer.
N.J. Stat. Ann. § 40A:14-19 (West 1993). It is undisputed that no formal charges have been proffered, nor hearings held involving these plaintiffs. However, to prove a violation of this statute, plaintiffs must establish, at a minimum, that they have been "suspended, removed, fined or reduced in rank from or in office, employment or position." This crucial fact is unrelated to plaintiffs' FLSA claim. Indeed, as in Lyon, this claim shares no more than the fact of the employment relationship with plaintiffs' FLSA claim. Plaintiffs must prove distinct facts in order to prevail, and they seek much different relief.[14]
Plaintiffs next contend that District 13 violated certain provisions of New Jersey's Exempt Fireman's Tenure Act, which prohibit the removal of any firefighter holding an exempt certificate, except for cause. N.J. Stat. Ann. §§ 40A:14-60, 40A:14-63 (West 1993). Section 40A:14-60 establishes that:
Whenever any person possessing an exempt fireman certificate holds an office, position or employment of the State, or a county or municipality or a school board or board of education for an indeterminate term, such person shall hold his office, position or employment during good behavior and shall not be removed therefrom for political reasons but only for good cause after a fair and impartial hearing.
Section 40A:14-63 provides that:
No department of the State government nor any board of chosen freeholders of a county, or governing body of a municipality, or a school board or board of education shall abolish, change the title or reduce the emoluments of any office or position held by an exempt fireman for the purpose of terminating his service.
To establish a violation of these sections, plaintiffs must show, in addition to an employment relationship: (1) that they hold exempt fireman certificates; (2) that they have been subjected to "removal," "change of title," or "reduction in emoluments" within the meaning of the Act; and (3) that these actions were taken for "political reasons," or "for the purpose of terminating [their] services."
These facts exclusively concern District 13's decision to revise its staffing procedures, including its decision to eliminate the weekday "duty crew" shift. By the same token, those facts are entirely superfluous in proving plaintiffs' FLSA claim. Indeed, had District 13, on August 7, 1995, made the same management decisions relating to staffing its firehouses, while continuing the $ 5.05 per hour minimum rate, or even lowered the minimum rate to $ 4.75 per hour, plaintiffs could still have brought this challenge based upon the Exempt Fireman's Tenure Act, although they could not, at that time, have brought suit under the FLSA.
Finally, plaintiffs' breach of contract claim, will require proof of a contract, either written, oral, or implied pursuant to Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284, 491 A.2d 1257, modified, 101 N.J. 10, 499 A.2d 515 (1985). Although the complaint alleges that the reduction in the rate for "sleep-in" shifts was one element of the breach of contract, a fact which this claim shares with the plaintiffs' FLSA claim, the complaint also alleges that District 13 breached its contract by "terminating wage payments," and by "removing Plaintiffs from their positions." *283 Complaint ¶ 33. These last two allegations share common facts with plaintiffs' state law statutory claims, with the additional claim of unpaid back wages, but share no common factual basis with plaintiffs' FLSA claim.
Thus, each of plaintiffs' state law claims involves critical facts in addition to proof of an employment relationship within the meaning of the FLSA. As noted, the employment relationship alone is an insufficient nexus on which to establish supplemental jurisdiction. Lyon, 45 F.3d at 762. This pivotal additional factual material, because it is entirely extraneous to the plaintiffs' FLSA claim, counsels caution in the exercise of supplemental jurisdiction in this case. Based on Lyon, it is doubtful that supplemental jurisdiction exists under § 1367(a).
However, even if I were to find that plaintiffs' state law causes of action and their FLSA claim arose out of a common nucleus of operative fact, I would still decline to exercise supplemental jurisdiction over those claims. The Supplemental Jurisdiction statute provides that a district court may, in its discretion, decline to assert jurisdiction over a state law claim when "the claim substantially predominates over the claim or claims over which the district court has original jurisdiction." 29 U.S.C. § 1367(c)(2). In this case, plaintiffs' multifaceted state law claims clearly "predominate" over the relatively narrow FLSA minimum wage claim, in that the state law claims involve challenges to the authority and propriety of several decisions taken by the governing officers of District 13.
Accordingly, plaintiffs' claims contained in counts two through four of the complaint will be dismissed without prejudice.
IV. Conclusion
For all the foregoing reasons, plaintiffs' motion for summary judgment will be granted in part, and summary judgment will be entered in favor of plaintiffs and against Defendant, Cherry Hill Fire District 13 on plaintiffs' claim for $ 17,765.00 in back wages, and $ 17,765.00 in liquidated damages. The cross-motion of defendant, Cherry Hill Fire District 13, for summary judgment on plaintiffs' FLSA claim will be denied, and plaintiffs' remaining claims based upon alleged violations of New Jersey statutory and common law will be dismissed without prejudice. Plaintiffs' motion for summary judgment on their New Jersey statutory claims will be dismissed as moot; Cherry Hill Fire District 13's cross-motion for summary judgment on plaintiffs' New Jersey statutory claims and on plaintiffs' common law claim for breach of contract will likewise be dismissed as moot. In view of the fact that summary judgment will be entered in favor of the plaintiffs, plaintiffs are also entitled to an award of attorneys' fees and costs pursuant to 29 U.S.C. § 216.[15] The court will enter an appropriate order.
NOTES
[1] 29 U.S.C. §§ 201-219.
[2] N.J. Stat. Ann. §§ 40A:14-19, 14-60, 14-64 and 14-65.
[3] Whether a particular situation is an employment relationship under the FLSA is a question of law which may appropriately be resolved on a motion for summary judgment. See Fegley v. Higgins, 19 F.3d 1126 (6th Cir.1994).
[4] Unless otherwise noted, the undisputed facts set forth herein are recorded in a joint stipulation executed by counsel on May 5, 1997.
[5] In Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985), the Secretary brought suit against a nonprofit religious foundation which derived its income entirely from the operation of commercial businesses staffed by its converts. The staff members who testified at trial asserted that they were "volunteers," although they were entirely dependent on the Foundation. The Supreme Court rejected even the testimony of the workers themselves, noting that the test of employment is one of "economic reality." Id. at 301, 105 S.Ct. at 1961.
[6] Defendants contend, as evidence of lack of control, that no plaintiff was required to complete an employment application. It is not clear how the absence of an employment application, demonstrates the absence of an employment relationship. See Haavistola v. Community Fire Co., 6 F.3d 211, 222 (4th Cir.1993) (district court erred in concluding that "because [the plaintiff] was not conscripted into service with the Fire Company, she could not be its employee.").
[7] Garcia explicitly overruled National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976), which had held that the Commerce Clause did not empower Congress to enforce the minimum wage and overtime provisions of the FLSA against the States, when the States acted "in areas of traditional government function," such as providing police and fire protection. Id. at 852, 96 S.Ct. at 2474.
[8] For the relevant text, see supra, page 273-74.
[9] Department of Labor regulations provide: "Individuals shall be considered volunteers only where their services are offered freely and without coercion, direct or implied, from an employer." 29 C.F.R. § 553.101(c).
[10] There can be little dispute that the payments, prior to August 7, 1995, constituted compensation for services. At his deposition, Saraceni was asked how he would characterize the payment of $ 8.00 per hour. He replied, "Reimbursement for services." The following colloquy occurred:
Q. Reimbursement for services? That would include so it would be something that you're paying to a person in return for them providing a service to you?
A. Yes.
Q. Okay. It wasn't reimbursement for expenses?
A. No.
Dep. of Michael A. Saraceni at 41, attached as exhibit L to Aff. Of Steven S. Glickman, Esq.
[11] The relevant subsection provides:
Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Any employer who violates the provisions of section 215(a)(3) of this title shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of section 215(a)(3) of this title, including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages. An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action. The right provided by this subsection to bring an action by or on behalf of any employee, and the right of any employee to become a party plaintiff to any such action, shall terminate upon the filing of a complaint by the Secretary of Labor in an action under section 217 of this title in which (1) restraint is sought of any further delay in the payment of unpaid minimum wages, or the amount of unpaid overtime compensation, as the case may be, owing to such employee under section 206 or section 207 of this title by an employer liable therefor under the provisions of this subsection or (2) legal or equitable relief is sought as a result of alleged violations of section 215(a)(3) of this title.
[12] I note that an FLSA plaintiff cannot recover both liquidated damages and pre-judgment interest. See Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 715, 65 S.Ct. 895, 906, 89 L.Ed. 1296 (1945) (liquidated damages serve "as compensation for delay in payment of sums due under the Act").
[13] These letter rulings otherwise provide no support for defendant, inasmuch as they are all factually distinguishable from the instant case.
[14] In the first count of the complaint, plaintiffs' FLSA claim, they seek unpaid minimum wages, liquidated damages, attorneys' fees and costs. In the remaining state law counts, plaintiffs seek reinstatement, compensatory damages, and back wages, as well as attorneys' fees and costs.
[15] This section provides, in pertinent part: "The court in [any private party] action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action." 29 U.S.C. § 216(b). Accordingly, this court will retain its jurisdiction to entertain an application on the plaintiffs' behalf for reasonable attorneys' fees associated with its FLSA claim. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2342828/ | 212 F. Supp. 2d 710 (2002)
AMOCO PIPELINE COMPANY, Plaintiff,
v.
HERMAN DRAINAGE SYSTEMS, INC., James Herman, Eric Herman, and Larry Timm and Carlen Timm, both individually and jointly and severally, Defendants.
Case No. 1:00-CV-729.
United States District Court, W.D. Michigan, Southern Division.
February 6, 2002.
*711 *712 *713 Gene S. Davis, Detroit, MI, for Plaintiff.
Michael B. Ortega, Kalamazoo, MI, James R. Durant, Portage, MI, James W. Smith, Kalamazoo, MI, for Defendants.
OPINION
QUIST, District Judge.
Plaintiff, Amoco Pipeline Company ("Amoco"), has sued Defendants, Herman Drainage Systems, Inc. ("HDS"), James Herman, Eric Herman (referred to along with James Herman as the "Hermans"), and Larry and Carlen Timm (the "Timms"), in this diversity action alleging claims for violation of the Michigan "MISS-DIG" act for the protection of underground facilities, M.C.L. §§ 460.701.718, negligence, trespass on Amoco's pipeline easement, and performance of an inherently dangerous activity without taking special precautions to avoid harm. The incident upon which Amoco's claims are based occurred on March 16, 1999, when the Hermans struck Amoco's pipeline and caused it to rupture while laying drainage tile for the Timms in the Timms' field. Now before the Court are: (1) Amoco's motion for partial summary judgment; (2) the Timms' motion for summary judgment; and (3) Amoco's motion to amend its complaint to add a claim under the Michigan Natural Resources Environmental Protection Act.
Facts
The State of Michigan has enacted a law designed to prevent damage to underground facilities during excavation or other similar activity (the "MISS-DIG act" or *714 "Act") by requiring certain persons to notify the MISS-DIG association prior to conducting such activities. After receiving notice, the association notifies its members to enable them to mark the location of their underground facilities in the area in which the activity is to occur. Section 5(1) of the MISS-DIG act provides, in relevant part, that
a person ... responsible for excavating ... in a street, highway, other public place, a private easement for a public utility, or near the location of utility facilities on a customer's property ... shall give written or telephone notice to the [MISS-DIG] association ... at least 2 full working days ... but not more than 21 calendar days, before commencing the excavating....
M.C.L. § 460.705(1).
Amoco is engaged in the business of providing and maintaining pipelines for the transport of gasoline and other petroleum substances. Amoco owns and maintains a pipeline which runs between Whiting, Indiana and River Rouge, Michigan. The pipeline runs through Branch County, Michigan, and in particular, in a southwesterly to northeasterly direction through a 254 acre field owned by the Timms located in the north half of section 35, Sherwood Township (the "field"). Amoco located and maintained the pipeline in the field pursuant to an easement granted in 1948 by the Timms' predecessor-in-interest to Amoco's predecessor-in-interest, Standard Oil Company.
Throughout this litigation, the parties have referred to the field as consisting of an east field and a west field. As depicted on the photographs and other exhibits submitted by the parties in support of and in opposition to the motions, the east field and the west field are roughly divided by a county drain which runs across the field in a north and south direction. (Pl.'s Resp. Defs. Timm Mot. Ex. A; Defs. Timm Exs. Supp. Mot. Ex. B.) The drain is open in the north part of the field. An untillable marsh area is located immediately to the west of the open drain and a wooded area is located adjacent to the southeast corner of the marsh. A pile of stones is located immediately west of the wooded area. The pipeline runs through the west field immediately south of the stone pile and continues through the marsh and into the east field.
Eric Herman and his father, James Herman, are full-time farmers and have lived on and farmed land in the area near the field for many years. (James Herman 6/20/01 Dep. at 3-5, Defs. Timm Exs. Supp. Mot. Ex. M; Eric Herman 6/20/01 Dep. at 3-4, Defs. Timm Ex. Supp. Mot. Ex. K.) Based upon their experience in the area, both men were familiar with the pipeline; in fact, it runs across their respective farms. (James Herman 6/20/01 Dep. at 10.) Eric Herman organized HDS in 1996 for the purpose of conducting a drain tile installation business. HDS's equipment consists of a bulldozer with a tile plow attached and a stringer cart that holds the drain tile as it is being installed. A laser mounted on the bulldozer helps to ensure that the tile is installed on a proper grade. Eric Herman is the only employee of HDS, although James Herman sometimes provides labor to HDS as an independent contractor. (James Herman Aff. ¶¶ 6-8, Def. J. Herman's Br. Opp'n Ex. 9.) Because Eric Herman installed drain tile on a part-time basis, by 1998 he had done only eight or nine jobs. (Eric Herman 6/20/01 Dep. at 37-38.)
The Timms, who are also engaged in farming, purchased the field in 1988 and, because they were familiar with the area, were aware that the pipeline ran through the field even prior to that time. In late 1997 or early 1998, Larry Timm and a neighbor installed drain tile in the east *715 field near the pipeline in order to make more of the land tillable. At that time, Timm called MISS-DIG and had the area flagged, or marked in order to avoid hitting the pipeline. (Larry Timm Dep. at 39-40, Pl.'s Br. Supp. Ex. 3.)
In 1998, Timm spoke with Eric Herman about installing additional drain tile in the east field. Timm decided to have HDS perform the work because Timm's previous work did not improve the drainage and HDS had equipment Timm did not have that would allow the drain tile to be placed at the proper grade. After some discussions, the parties reached an oral agreement that HDS would do the work and charge 28¢ per foot for the installation. There was no written contract. Initially, Timm told Eric Herman that he wanted four-inch lines run easterly to the six-inch line Timm and his neighbor had previously installed. (Larry Timm. Aff. ¶ 9, attached to Defs.' Timm Mot. Summ. J.) However, after surveying the field, Eric Herman advised Timm that because the field was so flat, several four-inch tiles should run in a southwesterly direction parallel with the pipeline into the drainage ditch.[1] (Id.; Eric Herman 6/20/01 Dep. at 49-50.) Eric Herman and Timm agreed that the lines should be spaced fifty feet apart, after Timm rejected Eric Herman's suggestion that the tiles be laid closer together. (Eric Herman 12/19/00 Dep. at 49, Pl.'s Br. Supp. Ex. 5.)
Although Eric Herman, James Herman, and Timm were aware of the pipeline, they did not discuss who would be responsible for calling MISS-DIG. However, Eric Herman made the call and notification was given to Amoco. On June 26, 1998, after receiving the information, Amoco's head pipeliner, Harland Brown ("Brown"), visited the site to flag the pipeline according to the information he received from MISS-DIG. Brown flagged the pipeline in the east field from Van Warmer Road up to the drainage ditch. (Brown Dep. at 21, Defs.' HDS and Eric Herman Br. Supp. Mot. Ex. 4.) After speaking with Eric Herman, Brown returned to the field a few weeks later and marked from the other side of the drainage ditch through the marsh up to the edge of the west field. (Id. at 22, 38-39.)
Eric Herman and James Herman completed most of the work in the east field in March 1999 without incident. At the conclusion of that work, Timm asked Eric Herman to install three drain tiles in the west field beginning at the ditch, going around the woods, and stopping short of the stone pile. Although the proposed installation would cross the pipeline, no one called MISS-DIG and the pipeline was not flagged. On March 15, while laying tile in the west field, Eric Herman hit what he believed to be a rock near the stone pile. The following day, while the Hermans were working in the same area, the tile plow struck the pipeline and broke it. The Hermans notified Brown, who advised them he would come to the site immediately. The Hermans then notified the Timms of the accident. Approximately 3,300 gallons of gasoline were released from the pipeline. Amoco was required to hire outside contractors to remove the gasoline, repair the pipeline, and remove the contamination from the soil. On September 28, 2000, Amoco filed this action against the Hermans and HDS seeking to recover its costs for clean up and repair as a result of the accident. Amoco filed its amended complaint on February 5, 2001, adding the Timms as defendants.
*716 Summary Judgment Standard
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed. R.Civ.P. 56. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id. The court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Agristor Financial Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir.1992)(quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986)).
Discussion
I. Motions for Summary Judgment
Amoco contends that it is entitled to summary judgment on all of its claims against all of the defendants because there is no genuine issue of material fact that under the MISS-DIG statute and the common law, all of the defendants had the duty to contact MISS-DIG and to refrain from interfering with Amoco's easement but failed to do so, thus causing Amoco's damages. The Timms also seek summary judgment upon several grounds. First, the Timms contend that the Hermans and HDS were responsible for the excavation and, therefore, under the MISS-DIG statute, they were solely responsible for contacting MISS-DIG to ensure that the pipeline was properly marked. Second, the Timms contend that they have no liability because HDS was an independent contractor and none of the exceptions to the independent contractor rule apply. Finally, the Timms contend that Carlen Timm cannot be held liable because except for signing the checks for the work done by HDS, she played no part at all in the accident. James Herman contends that Amoco's motion must be denied because at the time of the accident, he was essentially a bystander not responsible for the tiling operations. In addition, James Herman, along with Eric Herman and HDS, contends that summary judgment must be denied because there is evidence tending to show that Amoco itself was negligent in failing to flag the pipeline as requested.
A. The MISS-DIG Act
Count I of Amoco's First Amended Complaint alleges that Defendants violated the MISS-DIG act by failing to ascertain the location of the pipeline before excavating and by failing to serve written or telephonic notice of their intent to excavate in the west field to allow Amoco sufficient time to mark the pipeline in order to minimize the risk of injury to the pipeline. Section 3 of the act states: "A person ... shall not ... excavate ... in ... a private easement of a public utility ... without having first ascertained ... the location of all underground facilities of a public utility in the proposed area of excavation...." M.C.L. § 460.703.[2] Pursuant to section 5, "a person ... responsible for excavating ... in ... a private easement for a public utility" is required to "give written or telephone notice to the [MISS-DIG] association ... at least 3 full working days, excluding Saturdays, Sundays, and holidays, but not more than 21 calendar days, before commencing the excavation." M.C.L. *717 § 460.705(1). Once a member utility such as Amoco has received notice from the MISS-DIG association, the utility must inform the notifying person at least one day prior to commencement of the excavation or other activity of the location of the utility's underground facilities by marking with colored stakes or flags. M.C.L. § 460.708. Upon receipt of such information from a public utility, "a person ... excavating ... [must] exercise reasonable care when working in close proximity to the underground facilities of [the] public utility," including use of "hand-digging" if the facilities are or are likely to be exposed. M.C.L. § 460.711. Any person responsible for giving notice but who fails to do so is liable for any "resulting damage to the underground facilities," subject to a reduction for the proportion of the public utility's negligence, if any, for failing to properly mark its facilities. M.C.L. § 460.714. Amoco contends that all Defendants are liable under the Act based upon their failure to give notice to MISS-DIG of their intent to excavate in the west field.
1. Person Responsible for Excavating
The Timms contend that they cannot be held liable under the Act because they were not "a person ... responsible for excavating" and thus were not responsible for giving notice to MISS-DIG. Although the Act contains a definitions section, it does not define the term "responsible," although it does define "person" as including "an individual, partnership, corporation, or association." M.C.L. § 460.701(b). The Timms contend that under the Act, the person performing the actual work is the person responsible for giving notice to MISS-DIG. In support of their argument, the Timms cite the following language in section 5(1): "a person ... responsible for excavating ... on a customer's property ... shall give written or telephone notice to" MISS-DIG. M.C.L. § 460.705(1). The Timms also point out that under section 11, once the utility marks the location of its facilities, "a person.. excavating ... [must] use reasonable care when working in close proximity to the underground facilities." M.C.L. § 460.711. In addition, the Timms note that liability is imposed upon "the person responsible for giving the notice of intent to excavate." M.C.L. § 460.714.
Amoco contends that the provisions of the Act are broad enough to impose responsibility for notifying MISS-DIG upon property owners, such as the Timms, who hire or arrange for someone to excavate on their property. In particular, Amoco relies on the following language in section 5(2): "The written or telephone notice of intent shall contain the name, address, and telephone number of the person or public agency filing the notice of intent, [and] the name of the person or public agency performing the excavation...." M.C.L. § 460.705(2). Amoco argues that this language supports its position because it contemplates that the person giving the notice may be someone other than the person doing the excavating, such as the property owner.
When called upon to interpret a statute, a court must ascertain and give effect to the intent of the legislature. Frankenmuth Mut. Ins. Co. v. Marlette Homes, Inc., 456 Mich. 511, 515, 573 N.W.2d 611, 613 (1998). The court must look to the specific language of the statute and may apply judicial rules of construction only if the language of the statute is not clear. Mich. State Bldg. & Constr. Trades Council v. Perry, 241 Mich.App. 406, 411, 616 N.W.2d 697, 700 (2000). All words and phrases of the statute must be given effect; a construction which negates any part of the statute or renders it surplusage should be avoided. People v. Borchard-Ruhland, 460 Mich. 278, 285, *718 597 N.W.2d 1, 6 (1999). "Unless explicitly defined in a statute, every word or phrase of a statute should be accorded its plain and ordinary meaning, taking into account the context in which the words are used." Mich. State Bldg. & Constr. Trades Council, 241 Mich.App. at 411, 616 N.W.2d at 700. Where the meaning of the language in the statute is doubtful, the court must examine the purpose of the statute and construe it in a manner that will fulfill the legislature's purpose. Marquis v. Hartford Accident & Indem., 444 Mich. 638, 644, 513 N.W.2d 799, 802 (1994).
The Court begins its analysis first with section 11 of the Act, which imposes liability for failure to notify MISS-DIG upon "the person responsible for giving the notice of intent." Section 5(1) specifies the person responsible for giving the notice: "a person ... responsible for excavating." Whom is "responsible" for excavating is not entirely clear from the statute. The dictionary definition of responsible includes "answerable or accountable, as for something within one's power, control, or management," or "chargeable with being the author, cause, or occasion of something." The Random House Dictionary of the English Language 1641 (2d ed.1987). There is no question that the person who actually performs the work is "responsible for excavating." Responsibility can also be considered in a broader sense. For example, assume an owner hires a general contractor to build a building, the general contractor hires a subcontractor to do the cement work, and the cement contractor hires a subcontractor to dig out the foundation. All of those persons could be considered responsible for the excavation because each one played some role in causing it to occur. However, only one of those persons the person actually digging the foundation is responsible for performing the excavation.
This Court concludes that the phrase "a person ... responsible for excavating" is limited to the person or persons actually responsible for performing the work. An owner who hires a contractor to perform excavation work is responsible only in the sense that he or she has decided to have the work done. The responsibility for ensuring that the excavation work is done correctly and according to workmanlike standards, such that it does not interfere with underground facilities, is on the contractor. Such a construction makes sense because generally, the contractor is in the best (although perhaps not the only) position to provide the necessary information to MISS-DIG, and the contractor, who is on-site, can verify whether the marked underground facilities are in the area where the work is to be performed. Requiring the person actually performing the excavation to notify MISS-DIG thus provides certainty because there can be no question among several possible parties about who should give the notice.
Amoco's argument regarding section 5(2), i.e., that the statute contemplates notice by a person other than the contractor, does not support Amoco's interpretation. The fact that one person may provide notice and another person may perform the excavating does not persuade this Court that someone other than the person (be it an individual, a corporation, etc.) responsible for performing the excavation is responsible for giving the notice. Section 5(1) addresses who must provide the notice and section 5(2) addresses the content of the notice. For example, if ABC Corporation (a person under the Act) is hired to perform excavation services, one of its employees may give notice to MISS-DIG and another employee may be in charge of performing the work. ABC Corporation, as the person responsible for the excavation, is still responsible for providing the notice. Or, a person other than the contractor *719 may agree to give the notice, even though not specifically required to do so by law.
Amoco contends that it would be contrary to the purposes of the Act to hold that an owner, such as the Timms, with knowledge of an underground pipeline on the property could hire someone to excavate on the property yet have no responsibility for notifying MISS-DIG that the contractor was digging in the area of the pipeline. The Court disagrees, because nothing in the Act suggests that a person is responsible for providing notice to MISS-DIG depending upon his knowledge of underground facilities on the property; rather, the inquiry is whether he is responsible for the excavation.
In this case, Larry Timm hired HDS and Eric Herman to install the drain tile, including the excavation work necessary to complete the installation. Larry Timm instructed Eric Herman where to install the drain tiles but otherwise was not responsible for any aspect of the job. Therefore, the Timms were not persons responsible for the excavation and cannot be held liable. On the other hand, there is no dispute that Eric Herman and HDS were responsible for the excavation and are liable for damage resulting to the pipeline due to their failure to provide notice of intent to excavate to MISS-DIG. In fact, Eric Herman provided the notice to MISS-DIG prior to performing the work in the east field but failed to do so with regard to his work in the west field.
Although James Herman did not raise the issue in his brief, the Court concludes that, like the Timms, James Herman was not responsible for providing notice to MISS-DIG because he was not responsible for the excavation. While it is true that James Herman assisted Eric Herman in installing the drain tile, Larry Timm hired HDS to do the work. (Larry Timm Dep. at 43.) It is undisputed that James Herman was not an employee of HDS and did not operate the bulldozer. Because James Herman was only providing assistance to HDS and did not perform the excavation, he was not responsible for the excavation and thus cannot be held liable for failure to give notice.
2. Amoco's Failure to Mark
Although James Herman, Eric Herman, and HDS do not raise any specific arguments in their briefs regarding the Act, they argue that summary judgment must be denied because there is a genuine issue of material fact with regard to whether Eric Herman gave the required notice. The Hermans and HDS contend that the notice given by Eric Herman was for a significantly larger area than that initially and subsequently flagged by Brown and that the west field was not flagged as a result of Amoco's negligence in either failing to follow, or obtain clarification of, the directions received from MISS-DIG. The Court rejects this argument because it is contrary to both the undisputed facts and the law. The only evidence before the Court regarding notice given by Eric Herman was the notice he gave to MISS-DIG in June 1998. At that time, Larry Timm had only requested Eric Herman and HDS to install drainage tiles in the east field. While it is true that Brown made another trip to the Field to perform additional flagging west of the drainage ditch in July 1998 after speaking with Eric Herman, it is undisputed that Larry Timm did not even mention the work in the west field to Eric Herman until March 1999, more than six months after Brown made his last visit to the Field. (Eric Herman 6/20/01 Dep. at 23-24.) Thus, there was no reason for Brown or anyone else to believe in 1998 that it would be necessary to mark the pipeline into the west field-well beyond the area where the proposed work was to be performed. *720 Furthermore, even if Eric Herman had requested that the west field be flagged in 1998, the request would not have complied with the statute because it would have been made more than 21 days prior to the time the work commenced. See M.C.L. § 460.705(1). Thus, pursuant to M.C.L. § 460.714, Eric Herman and HDS are liable for "the resulting damage to the" pipeline.
B. Trespass
Amoco alleges in Count III of its first amended complaint that Defendants committed a trespass by intruding in Amoco's easement and interfering with Amoco's use of the pipeline. A trespass is an unauthorized entry upon the land of another. Am. Transmission, Inc. v. Channel 7 of Detroit, Inc., 239 Mich.App. 695, 705, 609 N.W.2d 607, 613; Cloverleaf Car Co. v. Wykstra Oil Co., 213 Mich.App. 186, 195, 540 N.W.2d 297, 302 (1995). Although the defendant's intent is generally irrelevant to a claim of trespass, Traver Lakes Cmty. Maint. Ass'n v. Douglas Co., 224 Mich. App. 335, 345, 568 N.W.2d 847, 852 (1997), the defendant must intend to enter the plaintiff's property without authorization to do so. Cloverleaf Car Co., 213 Mich. App. at 195, 540 N.W.2d at 302.
Michigan courts have held that a trespass occurs where a person interferes with another's right to use an easement. See Marathon Pipe Line Co. v. Nienhuis, 31 Mich.App. 407, 188 N.W.2d 120 (1971). The most recent case from Michigan courts addressing a claim of trespass in the context of an underground structure is the Michigan Court of Appeals' unreported decision in S.D. Warren Co. v. Hydaker-Wheatlake Co., Nos. 216208, 216271, 2001 WL 753896 (Mich.Ct.App. Feb. 6, 2001)(per curiam). The specific issue presented, as framed by the court, was "how the `intent to intrude' element required for liability in trespass should be applied in a case involving damage to a privately-owned, underground sewer line located within a valid easement." Id. at *4. In that case, the City of Muskegon retained Consumers Power Company to install a power line through property the city leased from the State of Michigan. After conferring with the city regarding the route and method of installation of the power line, Consumers Power contacted MISS-DIG. MISS-DIG disclosed the existence of an oil pipeline in the area of the installation but did not disclose the plaintiff's sewer line because it was not registered with MISS-DIG. Subsequently, while installing the power line, the contractor hired by Consumers Power struck and damaged the plaintiff's sewer line. The plaintiff sued Consumers Power and its contractor alleging claims for trespass and negligence. The plaintiff moved for summary judgment, arguing that the defendants were liable for trespass as a matter of law because it was undisputed that the defendants intruded upon the plaintiff's sewer line without the plaintiff's permission. The defendants argued that the claim should be dismissed because the plaintiff could not show that the defendants had actual or constructive notice of the sewer line. The trial court agreed with the plaintiff and granted the plaintiff's motion. The court of appeals reversed, concluding that the plaintiff was required to show that the defendants had actual or constructive knowledge of the sewer line. Id. at *8. In its analysis, the court examined two prior cases dealing with underground structures, Edison Illuminating Co. v. Misch, 200 Mich. 114, 166 N.W. 944 (1918), and Marathon Pipe Line Co. v. Nienhuis, 31 Mich.App. 407, 188 N.W.2d 120 (1971), and noted that while their holdings "are less than clear, both cases contain language suggesting that notice or knowledge is a factor to consider in determining a contractor's liability in trespass *721 for damaging an underground structure." S.D. Warren Co., 2001 WL 753896, at *6. The court also noted that the requirement of actual or constructive notice of the underground structure it was adopting represented the view of a majority of jurisdictions. Id. at *8.
Although S.D. Warren Co. is an unreported decision, this Court finds the decision persuasive and believes that it correctly defines Michigan law on the issue before the Court. Thus, in order to prevail on its trespass claim, Amoco must show that: (1) the defendants interfered with Amoco's use and enjoyment of the easement; and (2) the defendants had "actual or constructive notice of the location and existence of the" pipeline. Id. at *4, 8.
1. Eric Herman and HDS
Amoco has presented evidence establishing all of the necessary elements for a claim of trespass against Eric Herman and HDS. Eric Herman, acting on behalf of HDS, committed the trespass when he struck the pipeline, which was located within Amoco's easement, with the tile plow. See id. at *4. At that time, Eric Herman had actual and constructive knowledge of the existence and location of the pipeline in the west field where he was working, based both upon his many years as a resident and a landowner in the community and his experience in performing the work in the east field. In fact, Eric Herman had actual knowledge of the pipeline because he contacted MISS-DIG before doing his work in the east field to make sure that the pipeline was marked.
Eric Herman and HDS do not dispute that Eric Herman knew that the pipeline ran through the west field. They argue, however, that there remains a question for the jury as to whether Amoco is solely at fault because it failed to properly mark the pipeline into the west field where the accident occurred. As discussed above, this argument must be rejected because the undisputed evidence shows that Brown, Amoco's representative, marked the portion of the pipeline within the area of the work performed in the east field in 1998. The work performed in the west field was not even discussed until March 1999; therefore, Brown had no reason to mark that portion of the field in 1998.
2. James Herman
James Herman contends that he cannot be held liable for trespass because he was not operating the bulldozer and had no control over it when it struck the pipeline, he had no authority to direct the business of HDS, and he was not an employee of HDS. James Herman asserts that he cannot be held liable because at the time of the accident, he was just walking along the side of the bulldozer without interfering with Amoco's easement.
Under Michigan law, a person need not actively participate in a trespass in order to be held liable. "Generally, all who wrongfully contribute to the commission of a trespass are equally liable with the person committing the act complained of." Helsel v. Morcom, 219 Mich.App. 14, 22, 555 N.W.2d 852, 855 (1996)(per curiam) (citing Kratze v. Indep. Order of Odd-fellows, 190 Mich.App. 38, 43, 475 N.W.2d 405, 408 (1991)(per curiam), aff'd in part and rev'd in part on other grounds, 442 Mich. 136, 500 N.W.2d 115 (1993)). Liability arises where the person not actively engaged in the trespass contributes to the trespass through encouragement, advice, or suggestion. Id. Applying this rule, there is sufficient evidence to hold James Herman liable for trespass based upon the role he played in the installation of the drainage tile, which ultimately lead to the trespass. James Herman's suggestion that he was "just walking beside the bulldozer" is not an accurate characterization *722 of the evidence. James Herman testified in his deposition that at the time of the accident he was helping to install the drainage tile by stringing it out from the stringer cart. (James Herman 12/19/00 Dep. at 22-23.) When the bulldozer hit the pipeline, James Herman signaled to Eric Herman that they hit the pipeline and "motioned for him to back up, raise the plow up, and take off." (Id. at 25-26.) Thus, James Herman was more than just a detached observer; he was actively involved in the activity that lead to the trespass.
3. Larry Timm[3]
Amoco contends that Larry Timm is liable for the trespass by Eric Herman and HDS because Timm hired Eric Herman and HDS to perform the work in the west field with full knowledge that the work would be performed in the area of the pipeline. Larry Timm argues that he cannot be held liable for trespass because the MISS-DIG Act imposes a statutory duty upon the person responsible for the excavation Eric Herman and HDS for ascertaining the location of underground facilities by giving notice and holds such person liable for damage resulting from the failure to give notice. While not saying so directly, Larry Timm argues in so many words that the MISS-DIG statute has abolished common law negligence or trespass, at least with regard to underground facilities.
The Court rejects the argument, to the extent it is raised by Larry Timm, that the MISS-DIG Act has abolished common law negligence and trespass. "Well-settled common-law principles are not to be abolished by implication, and when an ambiguous statute contravenes common law, it must be interpreted so that it makes the least change in the common law." Burden v. Elias Bros. Big Boy Rests., 240 Mich.App. 723, 727, 613 N.W.2d 378, 381 (2000)(per curiam). The purpose of the Act is to prevent damage to underground facilities by creating an organization designed to receive notice of proposed excavation or other work and to convey notice to member utility companies to enable them to clearly mark the location of their facilities. To achieve its purpose, the Act places responsibility for providing such notice upon those responsible for performing the work and imposes liability if damage occurs due to failure to provide notice. The Court finds nothing in the Act suggesting that the legislature intended to abolish or restrict the availability of the common law torts of negligence or trespass where underground structures owned by MISS-DIG member utilities are involved. Moreover, there is nothing in the MISS-DIG Act which is inconsistent or contrary to the common law.
The evidence in the record supports liability against Larry Timm for at least two reasons. First, as noted above in the discussion regarding James Herman, a third-party who does not actively participate in a trespass may be held liable for providing some form of assistance or encouragement to the person committing the trespass. Kratze, 190 Mich.App. at 43, 475 N.W.2d at 408. Here, Larry Timm not only made it possible for Eric Herman and HDS to commit the trespass by allowing them on the property, but directed them to the area of the pipeline with knowledge of its existence. Larry Timm is also liable because he employed HDS and Eric Herman:
One who employs an independent contractor to do the work which the employer knows or has reason to know to be likely to involve a trespass upon the land of another or the creation of a Public or a private nuisance, is subject *723 to liability for harm resulting to others from such trespass or nuisance.
Bleeda v. Hickman-Williams & Co., 44 Mich.App. 29, 34, 205 N.W.2d 85, 88-89 (1972)(quoting Restatement (Second) of Torts § 427B (1965)). See generally, 17 Am.Jur.2d Trespass § 73 (1991)("One who employs an independent contractor to do work, which the employer knows or has reason to know is likely to involve a trespass upon the land of another, is subject to liability for the harm resulting to others from such trespass."). In Bleeda, the plaintiffs sued Korno's, a company engaged in coke screening, and Hickman-Williams, Korno's only customer, alleging that dust and odors emanating from Korno's plant constituted a nuisance. Hickman-Williams argued that Korno's was an independent contractor and, therefore, Hickman-Williams was not liable for the nuisance as a matter of law. In rejecting the argument, the court adopted the rational espoused by various scholars for holding a defendant liable for the acts of its independent contractor, namely: a defendant should accept responsibility for the risks it creates in its enterprise as a cost of doing business. Bleeda, 44 Mich. App. at 35-36, 205 N.W.2d at 89. The court concluded that Hickman-Williams could be held liable for the nuisance because it was aware of Korno's method of screening and how the coke would be sized and because it was aware of the extent of damage to the plaintiffs caused by Korno's screening method. Id. at 37, 205 N.W.2d 85. Although Bleeda involved a nuisance claim, its rationale is applicable here because Larry Timm was aware of the work HDS and Eric Herman were to perform, was familiar with the method for accomplishing the work, and knew of the special risk presented by the pipeline. Therefore, Larry Timm is liable for the trespass by Eric Herman and HDS.
C. Negligence
Amoco's final claim is that Defendants are liable for negligence. In order to establish a claim of negligence, a plaintiff must present evidence showing that: (1) the defendant owed a duty to the plaintiff; (2) the defendant breached the duty; (3) the breach was the proximate cause of the plaintiff's injuries; and (4) the plaintiff suffered damages. Spikes v. Banks, 231 Mich.App. 341, 355, 586 N.W.2d 106, 112-13 (1998). Whether a defendant owed a duty to the plaintiff is an issue of law for the court to decide. Tame v. A.L. Damman Co., 177 Mich.App. 453, 455, 442 N.W.2d 679, 680 (1989).
In determining whether a duty exists, courts look to different variables, including: foreseeability of the harm, existence of a relationship between the parties involved, degree of certainty of injury, closeness of connection between the conduct and the injury, moral blame attached to the conduct, policy of preventing future harm, and the burdens and consequences of imposing a duty and the resulting liability for breach.
Krass v. Joliet, Inc., 233 Mich.App. 661, 668-69, 593 N.W.2d 578, 582 (1999)(citing Buczkowski v. McKay, 441 Mich. 96, 100-01 & n. 4, 490 N.W.2d 330, 333 & n. 4 (1992)).
1. Eric Herman and HDS
Eric Herman and HDS breached their duties to Amoco in two respects. First, under the Act, Eric Herman and HDS had a duty to notify MISS-DIG of their intent to excavate in order to allow Amoco the opportunity to mark its pipeline. The purpose for requiring notice of such activity is the prevention of damage to underground facilities, such as the pipeline at issue in this case. Eric Herman and HDS failed to provide the required notice, thus depriving Amoco of the opportunity *724 to mark the pipeline. All witnesses agreed that the accident would not have occurred if the pipeline had been flagged in the west field. The Court also concludes that Eric Herman and HDS owed a duty to Amoco to use reasonable care not to strike or damage the pipeline while installing drainage tile in the west field based upon Eric Herman's prior knowledge of the location and existence of the pipeline and his previous dealings with Amoco. Eric Herman knew that the pipeline ran through the field, that laying drainage tile in the Field would present the risk of bodily or property injury due to the presence of the pipeline, that the lack of markers increased the risk of striking the pipeline, and that the risk could have been eliminated through simple precautions, such as a telephone call to MISS-DIG. Eric Herman's and HDS's failure to use reasonable care was the direct and proximate cause of Amoco's injuries.
2. James Herman
James Herman contends that he cannot be held liable for negligence because he was not an owner, employee, or agent of HDS and therefore cannot be liable for the corporation's acts. The Court disagrees. The considerations discussed above with regard to Eric Herman also apply to James Herman. That is, from his prior experience performing the work in the east field, James Herman knew that the pipeline extended into and ran across the west field. James Herman also knew that it was forseeable that laying drainage tile in the west field without the pipeline being marked involved a substantial risk and high probability of injury that could have been easily avoided. James Herman was not a casual bystander merely observing what Eric Herman was doing; he was actively involved in the activity that lead to the injury. For these reasons, James Herman, like Eric Herman, had a duty to use reasonable care to not strike or damage the pipeline while laying drainage tile. Amoco's injuries were caused by James Herman's breach of that duty.
3. Larry Timm
Amoco contends that there are two bases for holding Larry Timm liable for negligence. First, Amoco contends that Larry Timm is directly liable because he breached his duty to notify MISS-DIG of the excavation and he breached his duty as the owner of the subservient estate not to interfere with Amoco's use and enjoyment of the easement. Second, Amoco contends that Larry Timm is vicariously liable for the negligence of Eric Hermans.
With regard to the issue of Larry Timm's own negligence, the Court has already concluded that Larry Timm was not responsible for the excavation and, therefore, was not responsible for giving notice to MISS-DIG. However, the Court agrees with Amoco that Larry Timm, as the owner of the subservient estate, did owe a duty to Amoco not to interfere with its use and enjoyment of the easement. Because there are disputed issues of material fact, the issue of whether Larry Timm breached that duty cannot be decided on summary judgment. Larry Timm testified that he mentioned the pipeline to Eric Herman in March of 1999 before the work in the west field commenced. (Larry Timm Dep. at 65-67.) Eric Herman gave contradictory testimony, stating that Timm never mentioned the pipeline to them in connection with the work in the west field. (Eric Herman 12/19/00 Dep. at 64.) Given the conflicting testimony, the Court concludes that a material issue of genuine fact remains with regard to whether or not Larry Timm breached his duty of care to Amoco. If Larry Timm's testimony is believed, the jury may conclude that he was not negligent because he brought the pipeline *725 to the attention of Eric Herman, who was responsible for giving notice to MISS-DIG. On the other hand, if the jury chooses to accept Eric Herman's testimony, it may conclude that Larry Timm was negligent because he failed to instruct Eric Herman to have the pipeline marked.
Amoco also contends that Larry Timm is vicariously liable for the negligence of Eric Herman and HDS. Larry Timm contends that he cannot be held liable for the acts of HDS and Eric Herman because HDS was an independent contractor. In general, an owner who retains an independent contractor may not be held liable in negligence to third parties for the acts of the contractor. Candelaria v. B.C. Gen. Contractors, Inc., 236 Mich. App. 67, 72, 600 N.W.2d 348, 352 (1999). However, one of the well-recognized exceptions to this rule, which Amoco pleads as its fourth claim, is the inherently dangerous activity doctrine, which provides that "[a]n employer is liable for harm resulting from work `necessarily involving danger to others, unless great care is used' to prevent injury, or where the work involves a `peculiar risk' or `special danger' which calls for `special' or `reasonable' precautions." Butler v. Ramco-Gershenson, Inc., 214 Mich.App. 521, 525, 542 N.W.2d 912, 915 (1995)(quoting Bosak v. Hutchinson, 422 Mich. 712, 727-28, 375 N.W.2d 333, 340 (1985)) (citations omitted). In order for this doctrine to apply, the special risk of danger must have been apparent to the owner at the time the work was contracted. Phillips v. Mazda Motor Mfg. (USA) Corp., 204 Mich.App. 401, 406, 516 N.W.2d 502, 506 (1994). Liability is "closely akin to, but not exactly the same as, strict liability." Vannoy v. City of Warren, 15 Mich.App. 158, 163, 166 N.W.2d 486, 489 (1968). Liability should not be imposed, however, where the activity at issue was not unusual, reasonable safeguards against injury could have been provided by taking well-recognized safety measures, and a responsible and experienced contractor was selected. Funk v. Gen. Motors Corp., 392 Mich. 91, 110, 220 N.W.2d 641, 649 (1974).
In Inglis v. Millersburg Driving Association, 169 Mich. 311, 136 N.W. 443 (1912), one of the earliest Michigan cases to apply this doctrine, the plaintiff sued the defendants for injuries to his land and destruction of his timber when a fire the defendants set to clear their land spread to the plaintiff's land. Near the close of trial, the defendants introduced into evidence a contract between the defendant association and an independent contractor for the clearing of the defendants' property, for the purpose of setting up the defense that an independent contractor was responsible for the damage to the plaintiff's property. Based upon the contract, the trial court directed a verdict in favor of the defendants on the ground that they were not responsible for the acts of an independent contractor. The Michigan Supreme Court held that the trial court erred in granting judgment to the defendants because, it concluded, the defendants were estopped by their conduct from raising the independent contractor defense in the first instance. Aside from an estoppel, however, the court held that the defendant could not escape liability for the negligent acts of the independent contractor because the evidence established that conditions were very dry and the defendants were aware of the danger posed by setting open fires. The court applied the following rule:
Where the work is dangerous of itself, or as often termed, "inherently" or "intrinsically" dangerous, unless proper precautions are taken, liability cannot be evaded by employment of an independent contractor. Stated in another way, where injuries to third persons must be expected to arise, unless means are adopted by which such consequences may be prevented, the contractee is *726 bound to see to the doing of that which is necessary to prevent the mischief. The injury need not be a necessary result of the work, but the work must be such as will probably, and not which merely may, cause injury if proper precautions are not taken.
Id. at 319-20, 136 N.W. at 447. The court also observed that the rule is not without limits:
It is not applied to those cases where the injuries occur which are collateral to the employment, like the dropping of material by the servant of a contractor upon a person passing by, but where a duty is imposed upon the employer in doing work necessarily involving danger to others, unless great care is used, to make such provision against negligence as may be commensurate with the obvious danger.
Id. at 321, 136 N.W. at 447.
In Oberle v. Hawthorne Metal Products Co., 192 Mich.App. 265, 480 N.W.2d 330 (1991)(per curiam), the court held that there was sufficient evidence for the jury to decide whether the work in question was inherently dangerous. The plaintiff, an employee of an independent contractor hired by the defendant to install a press in a thirteen-foot-deep pit in the defendant's plant, was seriously injured when he walked into the unguarded pit. The plaintiff's evidence established that installation of a press into a thirteen-foot-pit, without guardrails or other barriers to protect those working in and around the pit from falling into it, presented a situation involving peculiar risk or special danger of physical harm. Id. at 269, 480 N.W.2d at 333. In addition, the plaintiff presented evidence that the defendant was aware that the work was inherently dangerous because it prepared the blueprints for the job and knew that installation of the press would involve working around the unguarded pit. Id. The inherently dangerous activity doctrine was also found to apply in Vannoy v. City of Warren, 15 Mich.App. 158, 166 N.W.2d 486. There, the plaintiff's husband died when he was overcome by deadly gas while working in a manhole in connection with the installation of a sewer. The plaintiff argued that the city, which had hired the plaintiff's husband's employer as an independent contractor, was liable under the inherently dangerous activity doctrine. The court concluded that the issue was properly submitted to the jury, stating, "It is ludicrous to intimate that working in an atmosphere of deadly, tasteless, odorless and colorless gas without any protective devices is not a dangerous activity." Id. at 164, 166 N.W.2d at 489.
Where the activity does not present any unusual or extraordinary risk, liability will not be imposed when a risk is subsequently created by the negligence of the independent contractor. For example, in Bosak v. Hutchinson, 422 Mich. 712, 375 N.W.2d 333 (1985), the plaintiff's hand was injured while he was assisting in erecting a crane in cold, wet conditions late in the day with poor lighting. The plaintiff, an employee of the subcontractor, sued the contractor, alleging liability under the inherently dangerous doctrine. The court concluded that the doctrine was not applicable under the facts of the case, based upon this limitation:
It must be emphasized, however, that the risk or danger must be "recognizable in advance," i.e., at the time the contract is made, for the doctrine to be invoked. Thus, liability should not be imposed where a new risk is created in the performance of the work which was not reasonably contemplated at the time of the contract.
Id. at 728, 375 N.W.2d at 340. The dangerous activity was not the erection of the crane, the court stated, but rather erecting *727 the crane with inadequate lighting. Id. at 729, 375 N.W.2d at 340. Because there was no evidence that the general contractor was aware of the need to erect a crane on the job site or that the erection would be done at night, the general contractor could not have known that the erection of the crane, which the court described as "a fairly routine job as construction jobs go," would have involved inherently dangerous activity. Id. at 729-30, 375 N.W.2d at 340-41.
Courts have also held that liability does not arise under this doctrine where the particular job was not unusual, well-recognized safety measures could have been taken to prevent the injury, and the contractor was responsible and experienced. For example, in Funk v. General Motors Corp., 392 Mich. 91, 220 N.W.2d 641 (1974), the court held that General Motors could not be held liable for the injuries to the plaintiff, who fell from the roof of a building while he was installing piping, because the job was not an unusual construction job and standard safety measures, such as suspending nets, scaffolding, bucket cranes, and safety belts, could have been provided by the plaintiff's employer. Id. at 102, 110, 220 N.W.2d 641, 645, 649. Similarly, in Rasmussen v. Louisville Ladder Co., 211 Mich.App. 541, 536 N.W.2d 221 (1995)(per curiam), the court held that the inherently dangerous activity doctrine did not apply because the activity which the defendant hired the independent contractor to perform was "the fairly routine task of constructing a multistory building using hanging scaffolding." Id. at 549, 536 N.W.2d at 225. The dangerous activity that caused the plaintiffs' injury was not the use of scaffolding, but the independent contractor's decision to forgo the use of steel safety cables. Id. According to the court, the defendant anticipated that the independent contractor would use reasonable safeguards and there was no evidence that the defendant knew that the independent contractor (the plaintiff's employer) would substitute hemp rope for steel safety cables. Id.See also Helzer v. CBS Boring & Machine Co., No. 205805, 1999 WL 33441300, at *2 (Mich.Ct.App. June 8, 1999)(per curiam)(concluding that "shutting off the main power before working on the crane was a well-recognized safety measure in the industry" which would have prevented the plaintiff's injuries).
Amoco argues that installing drainage tile with a large piece of equipment across an underground pipeline without taking any precautions to avoid striking it is an inherently dangerous activity. While that may be true, Larry Timm hired HDS to install drainage tile in his field, a fairly routine task. As in Funk and Rasmussen, a reasonable safeguard existed that would have prevented the injury in this case: a telephone call to MISS-DIG. Contacting MISS-DIG was a precaution Larry Timm could have reasonably expected HDS and the Hermans to take because, as discussed above, the MISS-DIG statute places a duty upon the person responsible for the excavating to contact MISS-DIG. That routine precaution was taken by Larry Timm when he performed his work in the east field and by Eric Herman when he performed the work in the east field. Contacting MISS-DIG is not a requirement only when the person has knowledge of the existence of an underground facility; rather, it is a requirement in all cases. The nature of the work of installing drainage tile was not transformed into an inherently dangerous activity simply because Larry Timm and the Hermans had actual knowledge of the pipeline.[4] Under Amoco's argument, almost any routine activity *728 could be turned into an inherently dangerous activity. For example, most electrical work is not dangerous to perform. However, even the most basic work, such as installation of a light fixture, can be extremely dangerous if the person performing the work neglects to take the basic precaution of turning the power off at its source.
The evidence also shows that the Eric Herman was an experienced contractor. While Eric Herman had only performed eight or nine drainage tile installation jobs prior to performing the work for Larry Timm, he had also installed his own drainage tile and was aware of the necessity to contact MISS-DIG because he had done so on other jobs, including his work in the east field.[5] Therefore, the Court concludes that Larry Timm cannot be held liable under the inherently dangerous activity doctrine.
Amoco also contends that Larry Timm is liable for the negligence of HDS and the Hermans pursuant to the "retained control" exception to the independent contractor rule. Under this exception, an owner who retains and exercises sufficient control over the performance of the work may be held liable for its own negligence in failing to implement reasonable safety measures. Funk, 392 Mich. at 108, 220 N.W.2d at 648. In other words, "the owner or general contractor's retention of supervisory control provides the basis for the imposition of an independent duty on the part of the owner or general contractor to exercise its retained control with reasonable care." Candelaria, 236 Mich.App. at 73, 600 N.W.2d at 352. The Court concludes that the "retained control" exception does not apply in this case for two reasons. First, in order for the exception to apply, there must be a "common work area shared by the employees of more than one subcontractor." Groncki v. Detroit Edison Co., 453 Mich. 644, 662, 557 N.W.2d 289, 297 (1996). Here, there was no common work area shared by employees of different subcontractors in many different trades, as in Funk. See Funk at 645, 220 N.W.2d at 645. Second, there is no evidence that Larry Timm retained supervisory or coordinating authority over the job site. Although there is no bright line test, the cases suggest that the owner must at least be involved in the performance of the work in some aspect. Compare Phillips v. Mazda Motor Mfg. (USA) Corp., 204 Mich.App. 401, 408, 516 N.W.2d 502, 507 (1994) (stating, "[t]here must be a high degree of actual control; general oversight or monitoring is insufficient") with Samodai v. Chrysler Corp., 178 Mich. App. 252, 256, 443 N.W.2d 391, 393 (1989) ("The requisite nature of this standard requires that the owner retain at least partial control and direction of actual construction work, which is not equivalent to safety inspections and general oversight."). Amoco contends that this exception applies because Larry Timm requested that HDS and the Hermans perform the work in the west field and specified where he wanted the drainage tiles installed. Apart from telling the Hermans what he wanted done, there is no evidence that Larry Timm *729 visited the work site while the work was being performed to oversee or direct their work. Thus, there is no evidence that Larry Timm controlled or directed the actual construction work.
D. Liability of Carlen Timm
The Timms argue that Carlen Timm cannot be held liable for Amoco's injuries because she did not make the decision to hire, nor did she hire, the Hermans. She contends that her only role was writing the checks to pay HDS for its work when the bills were finally submitted after the accident. Amoco contends that Carlen Timm is liable because she and Larry Timm were engaged in a joint enterprise. In describing the relationship between Larry and Carlen Timm, Amoco uses the terms "joint enterprise" and "joint venture" interchangeably. While those terms both rely on the law of principal and agent and are closely related, they mean different things. A "joint enterprise" is generally used to describe a noncommercial joint adventure, for example, in the operation of an automobile resulting in injury, while a "joint venture" is usually undertaken for profit. First Pub. Corp. v. Parfet, 246 Mich.App. 182, 188, 631 N.W.2d 785, 789 (2001)(per curiam); Berger v. Mead, 127 Mich.App. 209, 215-16, 338 N.W.2d 919, 923 (1983)(per curiam). Because Amoco contends that Larry and Carlen Timm operated the farming operation for profit, the issue is whether a "joint venture," as distinguished from a "joint enterprise," existed. A joint venture consists of the following elements: (1) an agreement showing an intention to undertake a joint venture; (2) a joint undertaking of a single business enterprise for profit; (3) sharing of profits and losses; (4) contribution of skills or property by the parties; (5) community of interest and control over the subject of the enterprise. Berger, 127 Mich.App. at 214-15, 338 N.W.2d at 922.
The Timms argue that a joint venture could not have existed between the Timms because running a family farm is not a single project or business enterprise. The Timms have not cited any authority from Michigan to support their argument. However, courts from other jurisdiction have recognized that farming may be the subject of a joint enterprise, see, e.g., Myers v. Lillard, 215 Ark. 355, 220 S.W.2d 608 (1949), and this Court sees no reason why that could not be so in this case.
Amoco contends that it has presented sufficient evidence to support summary judgment in its favor on the issue of a joint venture. In particular, Amoco points to the following: (1) Larry Timm's testimony that the farm was a joint operation which the Timms had operated for the 23 years of their marriage; (2) the fact that Carlen Timm primarily handles the financial affairs of the farm, although she does help out in the field on occasion; (3) the fact that the trucks used in the farming operation bear the logo "Timm Farms"; and (4) the fact that anything left after the expenses are paid is the Timms' profit.
The Court concludes, based upon the evidence in the record, that whether Larry Timm and Carlen Timm are joint venturers is a question of fact for the jury. In Miller v. City Bank and Trust Co., 82 Mich.App. 120, 266 N.W.2d 687 (1978), the issue was whether a husband and wife operated a nursery business as a partnership. The evidence established that the wife, who was the plaintiff in the case, kept all the books and hired and fired employees. In addition, the husband and wife each received periodic payments from the business account at the same time and in the same amounts. See id. at 122, 266 N.W.2d at 689. There was also evidence that the husband had referred to his wife as his "partner" and had filed a business registration certificate indicating that the *730 business was a partnership. Id. at 122-23, 266 N.W.2d at 689. In spite of that evidence, the trial court held that there was no partnership, and the Michigan Court of Appeals affirmed. The court of appeals noted that while the party asserting a partnership has the burden of proof, that burden is even "stricter" where the alleged partners are relatives. Id. at 123, 266 N.W.2d at 689-90. The court of appeals held that there was sufficient evidence to support a finding of no partnership. For example, the court observed that the fact that the husband and wife received equal payments might show nothing more than the husband's desire to share equally with his wife. Id. at 125, 266 N.W.2d at 690. Similarly, the court stated that the fact that the wife performed work for the business could be viewed simply as the acts of a helpful wife assisting her husband. Id. In addition, there was no partnership agreement and the income tax returns and schedules and other documents listed the business as a sole proprietorship. Id. at 126-27, 266 N.W.2d at 691.
While the evidence presented by Amoco may provide a basis for concluding that Larry and Carlen Timm operate the farm as a joint venture, it is just as consistent with acts normally arising in the husband-wife relationship that have nothing to do with a joint venture. See generally, 46 Am.Jur.2d Joint Ventures § 58 (1994). For example, the financial and bookkeeping services provided by Carlen Timm may show nothing more than that Carlen Timm desires to be helpful to her husband in his business. Thus, in light of the "stricter" burden of proof Amoco bears on this issue, the evidence does not establish the absence of a genuine issue of material fact on this issue.
II. Motion to Amend
In its motion to amend, Amoco seeks to add a claim under the Michigan Natural Resources Environmental Protection Act ("NREPA"). Amoco claims that it learned facts through discovery which would support a claim under this statute.
On February 26, 2001, the Court entered a Case Management Order. Pursuant to that Order, the parties had until March 31, 2001, to amend pleadings and until September 15, 2001, to complete discovery. Under Rule 15(a) of the Federal Rules of Civil Procedure, once a responsive pleading has been filed, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party." Fed.R.Civ.P. 15(a). Rule 15(a) also provides that "leave shall be freely given when justice so requires." Id. The mandate that "leave shall be freely given" embodies "the principle that cases `should be tried on their merits rather than the technicalities of the pleadings.'" Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir.1986)(per curiam)(quoting Tefft v. Seward, 689 F.2d 637, 639 (6th Cir.1982)). However, because a Rule 16 order has been entered in this case, the Court can consider whether Amoco has satisfied the more liberal standards of Rule 15(a) only if Amoco makes the showing required by Rule 16(b) for modification of a scheduling order. W. Va. Hous. Dev. Fund v. Ocwen Tech. Xchange, Inc., 200 F.R.D. 564, 566 (S.D.W.Va.2001). Rule 16(b) states that "[a] schedule shall not be modified except upon a showing of good cause."
Rule 16(b)'s "good cause" standard is much different than the more lenient standard contained in Rule 15(a). Rule 16(b) does not focus on the bad faith of the movant, or the prejudice to the opposing party. Rather, it focuses on the diligence of the party seeking leave to modify the scheduling order to permit the proposed amendment. Properly construed, "good cause" means that scheduling deadlines cannot be met despite a party's diligent efforts. *731 Dilmar Oil Co. v. Federated Mut. Ins. Co., 986 F. Supp. 959, 980 (D.S.C.1997) (citations omitted); see also United States v. Boyce, 148 F. Supp. 2d 1069, 1078 (S.D.Cal.2001)(noting that Rule 16(b)'s "good cause" inquiry focuses upon the diligence of the party seeking the amendment); Scheidecker v. Arvig Enters., Inc., 193 F.R.D. 630, 631 (D.Minn.2000)("The `good cause' standard is an exacting one, for it demands a demonstration that the existing schedule `cannot reasonably be met despite the diligence of the party seeking the extension.'" (quoting Federal Rules of Civil Procedure, Advisory Comm. Notes 1983 Am.)).
The Court concludes that Amoco has failed to meet Rule 16(b)'s "good cause" standard. Amoco states in its motion that it became aware of the facts supporting a claim under NREPA after it completed the depositions of all defendants in July 2001, several months after the deadline for amendments. For the most part, however, Amoco became aware of all pertinent facts in December 2000, when it deposed the Hermans at least two months before the scheduling order was even entered. Based upon those depositions, Amoco had all the necessary facts to plead a claim under NREPA. Moreover, Amoco does not identify what particular facts it became aware of after the deadline for amendments passed that alerted it to the possibility of a NREPA claim in this case. Finally, the Court notes that Amoco did not take prompt action, but rather waited almost four months before filing its motion to amend. This conduct does not demonstrate diligence. Therefore, the motion will be denied.
Conclusion
For the foregoing reasons, the Court will grant Amoco's motion for summary judgment in part and deny it in part. The motion will be granted with respect to Eric Herman and HDS on Amoco's claims for violation of the MISS-DIG act (Count I), negligence (Count II), and trespass (Count III); with respect to James Herman on the negligence and trespass claims; and with respect to Larry Timm on the trespass claim. The motion will be denied as to all Defendants on the inherently dangerous activity claim (Count IV), and that Count will be dismissed with prejudice. The motion will be denied with respect to Larry Timm on Amoco's claims for violation of the MISS-DIG act and negligence. The motion will also be denied with respect to Carlen Timm. The Court will also grant and deny in part Defendants Larry and Carlen Timms' motion for summary judgment. The motion will be granted with respect to the claim for violation of the MISS-DIG act and the inherently dangerous activity claims. The motion will be denied with respect to the trespass and negligence claims against Larry Timm and with respect to Carlen Timm on the issue of joint venture. Finally, the Court will deny Amoco's motion to amend its complaint.
An Order consistent with this Opinion will be entered.
ORDER
In accordance with the Opinion filed this date,
IT IS HEREBY ORDERED that Plaintiff's Motion for Partial Summary Judgment (docket no. 49) is GRANTED IN PART AND DENIED IN PART. The motion is granted with respect to Plaintiff's claims against Defendants Eric Herman and Herman Drainage Systems, Inc. for violation of the MISS-DIG act (Count I), negligence (Count II), and trespass (Count III); against Defendant James Herman on the negligence and trespass claims; and against Defendant Larry Timm on the trespass claim. The motion is denied with respect to Plaintiff's inherently dangerous activity claim against all *732 Defendants, and that claim (Count IV) is hereby dismissed with prejudice. The motion is denied with respect Plaintiff's claims against Defendant Larry Timm for violation of the MISS-DIG statute and negligence. Finally, the motion is denied with respect to all claims against Defendant Carlen Timm.
IT IS FURTHER ORDERED that Defendants Larry and Carlen Timms' Motion for Summary Judgment (docket no. 48) is GRANTED IN PART AND DENIED IN PART. The motion is granted with respect to Plaintiff's claims against Defendants Timm for violation of the MISS-DIG act and inherently dangerous activity. The motion is denied with respect to Plaintiff's negligence and trespass claims against both Defendants.
IT IS FURTHER ORDERED that Plaintiff's Motion to Amend Complaint (docket no. 56) is DENIED.
NOTES
[1] The decision to run the drain tiles parallel with the pipeline was made sometime after Amoco marked the pipeline.
[2] A "public utility" includes a "pipeline company subject to the jurisdiction of the public service commission." M.C.L. § 460.701(d). Defendants do not argue that Amoco is not a "public utility" as defined by the act.
[3] The Court will discuss Carlen Timm's liability separately.
[4] In fact, it seems obvious that having knowledge of the existence of an underground utility makes the work less dangerous than not having such knowledge.
[5] Amoco also contends that HDS and Eric Herman were not responsible because they did not have insurance. In Funk, the court suggested that the fact that an owner selects a contractor who is not financially responsible might have some bearing on whether the owner was negligent in selecting the contractor. However, the court also indicated that a contractor's lack of financial responsibility may be relevant in situations where the contractor's financial difficulties make the contractor less likely to observe safety precautions. Funk, 392 Mich. at 110 n. 14, 220 N.W.2d at 649 n. 14. There is no connection here between HDS's lack of insurance and the injury as a matter of law because the failure to observe the safety precaution making a telephone call could not have been influenced by a desire to cut corners on safety or insurance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2491395/ | 35 F. Supp. 2d 861 (1999)
Joycealyn L. CHANDLER, Plaintiff,
v.
SAMFORD UNIVERSITY, Defendant.
No. 97-AR-1939-S.
United States District Court, N.D. Alabama, Southern Division.
January 19, 1999.
*862 James Alan Mendelsohn, Gordon Silberman Wiggins & Childs, Birmingham, AL, for Joycealyn L. Chandler.
Robert M. Girardeau, Brandy J. Murphy, Huie Fernambucq & Stewart, Birmingham, AL, Peyton Lacy, Jr., Timothy A. Palmer, Ogletree Deakins Nash Smoak & Stewart PC, Birmingham, AL, for Samford University.
MEMORANDUM OPINION
ACKER, District Judge.
Presently before the court is a motion for summary judgment filed by defendant, Samford University ("Samford"). For the reasons set forth herein, the motion is due to be granted.
I. Background
Plaintiff, Joycealyn L. Chandler ("Chandler"), is an African-American woman under forty years of age. She holds an associate's degree in business administration from Lawson State University, a bachelor of general studies in administrative and community services (a non-traditional business degree) from Samford University, and attended the Birmingham School of Law from 1992 through 1993 and again from January, 1997 through May, 1998.
From August 1996 through February 11, 1997, Chandler held various temporary employment positions at Samford University. During that time, Chandler applied for but did not obtain permanent employment with Samford. On February 12, 1997, Chandler filed a charge with the Equal Employment Opportunity Commission ("EEOC"), claiming that Samford had discriminated against her because of her race. She received a right to sue letter from the EEOC on April 30, 1997 and instituted the instant suit on July 28, 1997.
During a deposition taken in this action, Chandler revealed that she had filed a Chapter 13 bankruptcy on August 30, 1996. The Chapter 13 bankruptcy was converted to Chapter 7 on March 25, 1997, over a month after Chandler filed her EEOC charge. Chandler never informed the bankruptcy *863 court of the pending EEOC matter or of her potential claim against Samford. Chandler's bankruptcy matter was termed a "no asset case" by the trustee of the bankruptcy estate and by the bankruptcy court itself. Chandler received a discharge on July 24, 1997 and on August 21, 1997, the case was closed. Upon learning that Chandler had not disclosed her EEOC charge or her potential claim against Samford, plaintiff's counsel attempted to amend the 1996-97 bankruptcy proceeding to reflect this information, but the trustee expressed no interest in re-opening the matter.
On April 29, 1998, Chandler filed another Chapter 13 bankruptcy petition.[1] Although the instant action had been pending for approximately nine months as of the date of her second filing, Chandler again failed to inform the bankruptcy court of her claims against Samford. Chandler provided this information to the bankruptcy court on October 27, 1998, only after plaintiff's counsel became aware of her pending bankruptcy. Neither party has presented information to indicate that the 1998 bankruptcy matter has terminated.
Upon learning of Chandler's bankruptcies, Samford filed a motion for summary judgment, arguing that the doctrine of judicial estoppel prevents Chandler from asserting claims that she failed to disclose as assets in her bankruptcy proceedings.
II. Discussion
Judicial estoppel is intended to protect the integrity of the judicial system. Brassfield v. Jack McLendon Furniture, Inc., 953 F. Supp. 1424, 1432-33 (M.D.Ala. 1996); see Ryan Operations, G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 360 (3rd Cir.1996). This doctrine, distinct from the concept of equitable estoppel,[2] precludes a party from assuming a position in a legal proceeding inconsistent with one previously asserted when inconsistency would allow the party to "play fast and loose with the courts." Ryan, 81 F.3d at 361-62; Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 419 (3rd Cir.1988), cert. denied, 488 U.S. 967, 109 S. Ct. 495, 102 L. Ed. 2d 532; see McKinnon v. Blue Cross & Blue Shield of Alabama, 935 F.2d 1187, 1192 (11th Cir. 1991). The applicability of the doctrine of judicial estoppel therefore requires a determination that (1) the positions asserted are in fact inconsistent, and (2) the inconsistency would allow a party to benefit from deliberate manipulation of the courts. Ryan, 81 F.3d at 361; see In re Tippins, 221 B.R. 11, 26-27 (Bankr.N.D.Ala.1998).
Courts of various jurisdictions have held that a debtor's assertion of legal claims not disclosed in earlier bankruptcy proceedings constitutes an assumption of inconsistent positions. Tippins, 221 B.R. at 26-27; Bertrand v. Handley, 646 So. 2d 16, 19 (Ala. 1994); Luna v. Dominion Bank of Middle Tennessee, Inc., 631 So. 2d 917, 918 (Ala. 1993); Underwood v. First Franklin Financial Corp., 710 So. 2d 424, 426 (Ala.Civ.App. 1997), reh'g denied, cert. denied (1998); see Payless Wholesale Distributors, Inc. v. Alberto Culver, 989 F.2d 570, 571 (1st Cir.1993), cert. denied, 510 U.S. 931, 114 S. Ct. 344, 126 L. Ed. 2d 309 (1993); Oneida, 848 F.2d at 419; Brassfield, 953 F.Supp. at 1432-33. This holding stems from the requirement that a debtor seeking the shelter provided by federal bankruptcy laws disclose all legal or equitable property interests to a bankruptcy court. See 11 U.S.C. §§ 521(a), 541; Ryan, 81 F.3d at 362; Oneida, 848 F.2d at 416. Because the bankruptcy court relies on the information disclosed by a debtor, the importance of full disclosure cannot be overemphasized. Luna, 631 So.2d at 918 (quoting Oneida, 848 F.2d at 417).
*864 With regard to the second prong of the judicial estoppel analysis, many courts have found that the combination of a party's knowledge of the claim and motive for concealment in the face of an affirmative duty to disclose the claim provides sufficient evidence of intent to manipulate the judicial system. See, e.g., Ryan, 81 F.3d at 363 (describing rational in Oneida); Tippins, 221 B.R. at 27. Where there is no such knowledge, or where there is no affirmative duty to disclose, courts have not applied the doctrine of judicial estoppel to bar a party from asserting claims not disclosed during the course of bankruptcy proceedings. See, e.g., Ryan, 81 F.3d at 363; Brassfield, 953 F.Supp. at 1433. For example, in Brassfield v. Jack McLendon Furniture, Inc., the United States District Court for the Middle District of Alabama declined to find the plaintiff judicially estopped from asserting Title VII and state law claims because it "[could not] say that the plaintiff knew/should have known that her causes of action had accrued such that her failure to schedule these claims was a deception of the bankruptcy court and the judicial system." 953 F. Supp. at 1433. The Brassfield Court also concluded that the plaintiff had no affirmative duty to disclose her claims because the claims accrued only after the commencement of her Chapter 7 bankruptcy proceeding.[3]Id.
Though the matter appears to be one of first impression for this court and for the Eleventh Circuit, this court joins the multitude of courts recognizing the doctrine of judicial estoppel as a bar to a debtor's assertion of a claim not identified as an asset in an earlier bankruptcy proceeding. In so doing, this court accepts the two-pronged analysis requiring a demonstration that the assertion of the claim is inconsistent with the earlier non-disclosure and that the assertion of inconsistent positions is an attempt to deliberately manipulate the judicial system.
Applying this holding to the facts at hand, it is apparent that the first prong of the judicial estoppel analysis is satisfied. The bankruptcy court relied on Chandler's representation that she had no assets. See Exhib. B to Def.'s Mot. (bankruptcy court issues "order closing estate and discharging trustee in no asset case;" final report of trustee in "no asset case") (emphasis supplied). Chandler's later assertion of claims against Samford is inconsistent with her earlier representation that she had no assets. See Tippins, 221 B.R. at 26-27; Bertrand, 646 So.2d at 19.
The undisputed facts are also sufficient to satisfy the second prong of the judicial estoppel analysis. First, Chandler had knowledge of her claims against Samford during the pendency of her Chapter 13 proceeding and prior to the commencement of her Chapter 7 proceeding. Chandler filed her Chapter 13 bankruptcy petition on August 30, 1996. Because she had only recently commenced her employment with Samford, it is possible that she was unaware, at that time, of claims she might have against Samford. Though it is unknown whether Chandler contemplated filing an EEOC charge at any time before her association with Samford ceased on February 11, 1997, it is obvious that Chandler was aware of her potential claims against Samford when she filed an EEOC charge the very next day. Chandler is therefore unlike the plaintiff in Brassfield and one of the plaintiffs in Tippins, who were unaware of their claims during the relevant time period. See Brassfield, 953 F.Supp. at 1433; Tippins, 221 B.R. at 27.
Second, Chandler had an affirmative duty to disclose her claim against Samford. At the time Chandler filed her EEOC charge, her bankruptcy case was proceeding as a Chapter 13 petition. A Chapter 13 debtor has a duty to disclose all interests in property the estate acquires after the commencement of the estate. See 11 U.S.C. § 541(a)(7). Despite this affirmative duty, Chandler chose not to amend her schedule to reflect her assets. Even if Chandler's conversion *865 of her Chapter 13 proceeding to a Chapter 7 proceeding is considered, that conversion did not occur until March 25, 1997 over one month after Chandler filed her EEOC charge. Because Chandler's interest in her potential claim arose prior to the commencement of the Chapter 7 proceeding, an affirmative duty to disclose her potential claims as assets exists even when Chapter 7 requirements are applied. See Brassfield, 953 F.Supp. at 1432-33.
Third, Chandler had an obvious motive for concealing her claims against Samford. The non-disclosure prompted the bankruptcy court to proceed as if Chandler's case was a "no asset case" and may have contributed to the choice made by the parties in interest not to raise objections to the proposed administration of Chandler's bankruptcy estate.
Chandler attempts to rebut the evidence indicating that her non-disclosure was a deliberate attempt to play fast and loose with the courts by claiming that she would have disclosed her claims against Samford as assets if only her attorneys would have informed her that such disclosure was necessary. Even if this "explanation" is true, it is irrelevant. Research reveals no case in which a court accepted such an excuse for a party's failure to comply with the requirement of full disclosure. Moreover, because Chandler did not disclose her pending EEOC charge despite the schedule's specific instruction that she identify any pending administrative proceedings, it is difficult to credit her claim of ignorance. The fact that she is a well educated individual who has not only taken a course in bankruptcy law, but also testified that bankruptcy law was one of her favorite classes, further discredits her attempted excuse. Despite this court's doubts, its conclusion does not depend upon any assessment of Chandler's credibility. The court's conclusion is based on uncontroverted facts.
III. Conclusion
Having joined courts of other jurisdictions in recognizing judicial estoppel as a bar to a debtor's assertion of claims not disclosed in an earlier bankruptcy proceeding when the later assertion is both inconsistent with the debtor's representations to the bankruptcy court and a deliberate manipulation of the judicial system, this court finds that Chandler has presented no genuine issue of material fact to preclude the entry of summary judgment in Samford's favor. An appropriate order granting Samford's motion for summary judgment will be separately entered.
NOTES
[1] During her deposition, Chandler discussed the 1996-97 bankruptcy but did not discuss the bankruptcy filed on April 29, 1998. Because Chandler's 1998 bankruptcy schedule has been amended to include the claim against Samford, this opinion focuses only on the consequences of Chandler's failure to include the claim as an asset in the 1996-97 bankruptcy proceeding.
[2] Equitable estoppel focuses on the relationship between the parties to the prior litigation and requires a demonstration that a party claiming equitable estoppel relied to its detriment on a position maintained by its adversary in an earlier proceeding. See Ryan, 81 F.3d at 360.
[3] Debtors filing bankruptcy under Chapter 11 or 13 must disclose all legal or equitable interest in property as of the commencement of the case as well as any interest in property the bankruptcy estate acquires after the commencement of the estate. In contrast, a Chapter 7 debtor retains possession of property acquired after the commencement of the bankruptcy case and thus has no duty to disclose after-acquired property. Brassfield, 953 F.Supp. at 1432. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3166608/ | IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
COMMONWEALTH OF PENNSYLVANIA, : No. 279 WAL 2015
:
Respondent :
: Petition for Allowance of Appeal from
: the Order of the Superior Court
v. :
:
:
RAYMOND J. RIVERA, :
:
Petitioner :
ORDER
PER CURIAM
AND NOW, this 30th day of December, 2015, the Petition for Allowance of
Appeal is DENIED.
Mr. Justice Eakin did not participate in the decision of this matter. | 01-03-2023 | 12-30-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1624066/ | 603 S.W.2d 246 (1980)
LOS ANGELES AIRWAYS, INC., Appellant,
v.
William R. LUMMIS, Temporary Administrator, Appellee.
No. B2335.
Court of Civil Appeals of Texas, Houston (14th Dist.).
June 18, 1980.
Rehearing Denied July 16, 1980.
*247 Timothy M. Thornton, Robert E. Hinerfeld, David Elson, Pamela S. Miller, Murphy, Thornton, Hinerfeld & Cahill, Los Angeles, Cal., Jack F. Ritter, Jr., Austin, for appellant.
Hugh M. Ray, Karen B. Pettigrew, Andrews, Kurth, Campbell & Jones, Robert H. Roch, Fisher, Roch & Gallagher, Houston, William M. Bitting, Hill, Farrer & Burrell, Los Angeles, Cal., for appellee.
Before COULSON, SALAZAR and JUNELL, JJ.
COULSON, Justice.
Los Angeles Airways, Inc. (LAA) appeals from a summary judgment granted in favor of William R. Lummis, Temporary Co-Administrator of the Estate of Howard R. Hughes, Jr., Deceased (Lummis). Suit was filed by LAA on February 4, 1977, after its creditor's claim had been rejected. The suit alleged promissory estoppel, breach of an oral contract with partial performance and fraud and deceit in connection with an alleged agreement made sometime between August 15, 1968 and the fall of 1970 by Hughes, through his associates, to purchase Los Angeles Airways, Inc.
LAA's claims, or variations thereof, have been litigated on several occasions. A final judgment was entered against LAA in Nevada on June 5, 1978 on the ground that the Nevada statute of limitations had run on LAA's claim.
LAA's sole point of error urges that the summary judgment granted in favor of Lummis below was erroneous.
Lummis's motion for summary judgment was predicated on two theories. First that the prior Nevada judgment was entitled to res judicata effect and full faith and credit in the courts of the State of Texas as a matter of law. Second that LAA's cause of action was barred by the Texas statutes of limitation, Tex.Rev.Civ.Stat.Ann. arts. 5526[1] and 5529 (Vernon 1958), because Hughes was legally present in Texas and amenable to service of process prior to the expiration of the statutes of limitation.
Lummis's only summary judgment proof was an exemplified copy of the complaint and decree in the Nevada case.
The judgment of the court below does not state on which of Lummis's two theories the summary judgment was granted. We will, therefore, determine if the summary judgment was proper under either theory.
*248 Lummis contends that the Texas courts must give res judicata effect to the Nevada summary judgment granted in favor of Lummis on the basis that the Nevada statute of limitations had run before the action was instituted. It is well settled that "the statutes of limitation are a part of the remedy, and not of the law affecting the rights." St. Louis & S.F.R. Co. v. Sizemore, 116 S.W. 403, 409 (Tex.Civ.App. 1909, no writ) quoting Ross v. Kansas City S.R. Co., 79 S.W. 626 (Tex.Civ.App. 1904, no writ). Since a statute of limitations question is a matter of remedy and procedure, it is governed by the law of the state in which the action is brought. Hobbs v. Hajecate, 374 S.W.2d 351 (Tex.Civ.App. Austin 1964, writ ref'd). Texas will look to its own statute of limitations, and the Nevada summary judgment based on limitations had no res judicata effect on a Texas court. The summary judgment granted below was not proper if based on Lummis's res judicata theory.
LAA, in its Brief in Opposition to Motion for Summary Judgment, urged that the Texas tolling statute, Tex.Rev.Civ.Stat. Ann.art. 5537 (Vernon 1958) prevented the statute of limitations from running against Hughes while he was absent from the state. This contention is based on LAA's claim that Hughes was a Texas domiciliary at all times pertinent to the litigation. If Hughes were a Texas domiciliary at all times pertinent to the litigation, article 5537 would operate to toll the statute of limitations under the holding in Stone v. Phillips, 142 Tex. 216, 176 S.W.2d 932 (1944) which states:
... if he is actually in the State or is domiciled here at the time the obligation arises, the running of limitation is suspended during his subsequent absence, even though he is not actually in the State at the date when the cause of action becomes a present, enforceable demand in the sense that the obligation has matured for suit. 176 S.W.2d at 934.
The interposing of a suspension statute by the non-movant requires the party seeking a summary judgment based on the expiration of the statute of limitations to negate the applicability of the tolling statute in order to conclusively establish the limitation defense. Zale Corporation v. Rosenbaum, 520 S.W.2d 889 (Tex. 1975). As stated above, Lummis's only summary judgment proof was a copy of the complaint and decree in the Nevada case. In that complaint LAA alleged "[t]hat at all times during the period between August 1, 1968, and approximately November 28, 1970, Hughes was residing in the Penthouse suite of the Desert Inn Hotel in Las Vegas, Nevada." (emphasis ours). Lummis contends that LAA's allegation in the Nevada complaint precludes it from asserting that Hughes was a Texas domiciliary and thus claiming the benefits of the Texas tolling statute. An allegation of Hughes's Nevada residence does not negate the possibility of his being a Texas domiciliary. As stated in Stone, the fact that one resides elsewhere does not destroy one's Texas domicile so long as there was an intention to retain that domicile. 176 S.W.2d at 933.
Lummis failed to offer any summary judgment proof which would conclusively negate the applicability of the tolling statute. If such evidence exists, it may be offered at a future summary judgment proceeding.
We do not address the merits of the domicile question. We only hold that appellee did not come forward with any summary judgment proof to refute LAA's claim that the statute of limitations was tolled because Hughes was a Texas domiciliary throughout the period in question.
We reverse and remand this cause to the trial court inasmuch as a summary judgment could not properly have been granted on the res judicata issue and appellee did not supply proper summary judgment proof to conclusively establish that appellant's claims were barred by limitations.
Reversed and remanded.
NOTES
[1] Subsequently amended: Tex.Rev.Civ.Stat. Ann. art. 5526 (Vernon Supp. 1980). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1671020/ | 705 S.W.2d 301 (1986)
P.J. PATTERSON, d/b/a Pat's Trucking Company, Appellant,
v.
A.L. POSS & SONS, INC. and Allen Construction Co., Inc., Appellees.
No. 04-85-00064-CV.
Court of Appeals of Texas, San Antonio.
January 29, 1986.
Rehearing Denied March 7, 1986.
*302 Gregory W. Canfield, San Antonio, for appellant.
Dennis R. Martin, Craig L. Austin and R.L. House, San Antonio, for appellees.
Before CADENA, C.J., and REEVES and TIJERINA, JJ.
OPINION
TIJERINA, Justice.
This cause of action was initiated by a subcontractor who sought to recover damages for breach of contract and on quantum meruit. The jury answered the seven special issues favorably to appellant, and awarded damages for both breach of contract and quantum meruit. Subsequently, the trial court, on motion by appellees, rendered judgment non obstante veredicto.
The record evidence established that Allen Construction, Inc. contracted with the Texas Department of Highways and Public Transportation as general contractor on a highway construction project in Pecos County. Appellees, by subcontract with the general contractor, agreed to haul all flexible base (material composed of crushed rock mixtures) at a price of fifty-four cents per ton without regulation. It was further agreed that in the event the State should regulate the tonnage hauled, the hauling price per ton would be negotiated. Thereafter, appellant, by separate subcontract under the same terms and conditions, assumed appellees' obligations under the contract with the general contractor. The contract specifically allowed three move-ins by the subcontractor. The term "move-in" refers to the movement of men and equipment from one location to another as the project progresses.
The State did regulate the gross vehicle weights and appellees requested negotiation on the hauling price. Appellees contend that the general contractor instructed appellant to continue with the work and after completion to submit a statement to appellees on a just and fair price. Appellees did not pay for the alleged additional hauling. Appellant additionally claims to have furnished extra services consisting of extra man hours and truck usage totaling 103.5 hours plus five move-ins and move-outs not included in the contract.
Appellees' version of the facts is that they paid to appellant one hundred percent of all amounts paid by the general contractor for services rendered under the contract. Appellees assert that the general contractor, having received the benefits of the extra services rendered, is responsible for paying appellant on the new hauling price and additional work.
This court has previously held that a judgment non obstante veredicto will be sustained only if there is no evidence to support the jury findings on the special issues. San Antonio Independent School District v. National Bank of Commerce, 626 S.W.2d 794, 795 (Tex.App.San Antonio 1981, no writ); see also Douglass v. Panama, Inc., 504 S.W.2d 776, 777 (Tex. 1974). The standard of review for a judgment non obstante veredicto requires us to consider all the evidence favorable to the party against whom the judgment was granted; every reasonable intendment deducible from the evidence is to be indulged in such party's favor. See Coffee v. F.W. Woolworth Co., 536 S.W.2d 539, 541 (Tex. 1976). In this context we review appellant's first two complaints that the trial court erred in refusing to enter a judgment based on the jury's verdict, and in granting appellant's motion non obstante veredicto.
It is undisputed that the contracted price to be paid appellant for hauling the flexible base material was fifty-four cents per ton without State regulation. The contract further provided that the hauling price per ton was to be negotiated, in the event that the State regulated the tonnage hauled by each truck. After appellant had partially performed under the contract, the State regulated the gross vehicle weights. The record reflects that Mrs. Patterson, appellant's wife and office worker, testified that *303 she talked to appellees and advised them that the State was now regulating the tonnage being hauled and requested the negotiation of a new hauling price. She stated that appellees instructed appellant to continue with the hauling and after completion to submit a fair and reasonable price. This evidence is not directly controverted. The following colloquy during the cross-examination of Mrs. Patterson by appellant is pertinent and relevant to this question:
Q: Instead you come into court with approximation based upon hourly rates when you're not paying hourly rates upon move-in, when move-ins are included in the price you gave them per ton; isn't that what you're doing?
A: As far as the lease trucker, yes.
Q: So, you really can't tell us what you were out over and above the contract, can you? What you actually paid out?
A: No, I can't tell you. I don't know.
Q: It's all an approximation, isn't it?
A: Yes.
We cannot accept appellees' contention that appellant cannot prevail in the absence of exact proof of actual damages. It is not necessary that damages be proven with mathematical exactness. All that is required is reasonable certainty as to the amount of damages. Southwest Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098 (Tex.1938). "Where there is proof, within the permissible range of certainty, that a right of a plaintiff has been invaded, he should not be denied a substantial recovery because of the difficulty in accurately measuring his damages." Hindman v. Texas Lime Co., 157 Tex. 592, 305 S.W.2d 947, 953 (Tex.1957); see Helfman Motors, Inc. v. Stockman, 616 S.W.2d 394, 398-99 (Tex.Civ.App.Fort Worth 1981, writ ref'd n.r.e.). Damages will not be disallowed merely because the amount thereof can be stated only approximately. Hindman, supra; Grandview Farm Center, Inc. v. First State Bank, 596 S.W.2d 190, 193 (Tex.Civ.App.Waco 1980, writ ref'd n.r.e.).
In the instant case there is factually sufficient evidence to support the special issue on damages caused by appellees' failure to pay the regulated price for hauling the flexible base material. It is undisputed that Mrs. Patterson testified as to the approximate amount of damages sustained by appellant. Her testimony was sufficient to establish a material fact issue as to damages for breach of contract. We, therefore, sustain the point of error in reference to the question on damages for breach of an express contract.
We now address appellant's complaint that he is entitled to payment on quantum meruit for extra work. Specifically, appellant argues that they furnished appellees with extra man hours and truck usage totaling 103.5 hours, plus five additional "move-ins" not included in the contract. Appellees do not contest this assertion, but claim they are not liable for the extra work since they received no benefit from appellant's extra work. In Texas, the right to recover in quantum meruit is independent of a claim on contract and is based upon a promise implied in law to pay for beneficial services rendered and knowingly accepted. Davidson v. Clearman, 391 S.W.2d 48, 50 (Tex.1965). As a rule, a party may recover in quantum meruit if the failure to pay for extra work results in an unjust enrichment to the party that benefited from the work. University State Bank v. Gifford-Hill Concrete Corp., 431 S.W.2d 561, 574 (Tex.Civ.App.Fort Worth 1968, writ ref'd n.r.e.); see also Colbert v. Dallas Joint Stock Land Bank, 136 Tex. 268, 269, 150 S.W.2d 771, 773 (1941). In the instant case there is testimony that appellees turned over to appellant one hundred percent of all payments received from the general contractor. We cannot perceive of any resulting benefit that would unjustly enrich appellees. The point of error in reference to the award of damages in quantum meruit is overruled.
In view of our rulings on points of error one and two, we remand this case to the *304 trial court for a determination of appropriate attorney's fees.
The trial court's judgment n.o.v. is reversed and rendered as to damages awarded under the contract; it is affirmed as to the quantum meruit award for waiting time and move-ins. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1722302/ | 965 S.W.2d 18 (1998)
T-N-T MOTORSPORTS, INC., Roy Terpstra and Joe Terpstra, Appellants,
v.
HENNESSEY MOTORSPORTS, INC., Appellee.
No. 01-97-00815-CV.
Court of Appeals of Texas, Houston (1st Dist.).
February 12, 1998.
Rehearing Overruled March 13, 1998.
*20 Michael K. Hurst, Marcie Lande Romick, Dallas, for Appellants.
William C. Norvell, Scott D. Marrs, Bruce Charles Morris, Houston, for Appellee.
Before TAFT, MIRABAL and SMITH,[*] JJ.
OPINION
TAFT, Justice.
This is an interlocutory appeal[1] from the grant of a temporary injunction against appellants, T-N-T Motorsports, Inc., Roy Terpstra, and Joe Terpstra. We address: (1) whether the trial court abused its discretion in enjoining former employees from using information regarding, or working on, three types of motor vehicles they had worked on for their former employer; and (2) whether the temporary injunction is overbroad. We reform, and affirm the temporary injunction as reformed.
Facts
In 1991, John Hennessey founded Hennessey Motorsports, Inc. (appellee), which specializes in high performance upgrades for a variety of vehicles, including the Dodge Viper Roadster and Dodge Viper GTS coupe. By May 1993, appellee had designed its first custom performance and enhancement package for a Dodge Viper.[2] In late August 1993, appellee hired Roy Terpstra to assist in meeting the increased demand for the Venom upgrades and to perform research and development. In April 1994, appellee hired Joe Terpstra to again meet increased demand for its products.
In 1996, the Terpstras incorporated their part-time body shop as T-N-T Motorsports, Inc. Prior to T-N-T's incorporation, the Terpstras worked for T-N-T as well as for appellee, with appellee's knowledge. During this time period and with appellee's consent, T-N-T manufactured and designed products that it sold to appellee for use in connection with the Venom upgrades. Also with appellee's knowledge, T-N-T performed engine modifications for customers other than appellee's, although not on Vipers.
On May 20 1997, the Terpstras terminated their employment without notice to appellee, and began full-time employment with T-N-T. On May 30, 1997, Roy Terpstra attended a Viper Club meeting in Florida at which he distributed T-N-T business cards and T-N-T brochures advertising the availability of high grade performance upgrades for Vipers. Roy Terpstra told a private investigator hired by appellee that the T-N-T upgrades were identical to the Venom upgrades, that he had learned how to create these packages as an employee of appellee, and that he offered the same upgrades as appellee but at a better price. He said at least three of appellee's customers had already moved their *21 business to T-N-T. He also told the investigator that appellee was his only competitor.
In addition to using the same products and vendors, T-N-T also planned to perform the same tests and have an identical warranty on its cars as appellee, and use the same type of equipment that appellee used. T-N-T intended to use a similar name for its packages ("Serpent" instead of "Venom").
In June 1997, appellee sued appellants and successfully obtained temporary injunctive relief.
Standard of Review
The sole issue before a trial court in a temporary injunction hearing is whether the applicant may preserve the status quo, pending trial on the merits. Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978); Manufacturers Hanover Trust Co. v. Kingston Inv. Corp., 819 S.W.2d 607, 610 (Tex.App.-Houston [1st Dist.] 1991, no writ).
We limit our review of the grant or denial of a temporary injunction to determining whether the trial court clearly abused its discretion in entering the interlocutory order. Rugen v. Interactive Bus. Sys., Inc., 864 S.W.2d 548, 551 (Tex.App.-Dallas 1993, no writ); Manufacturers Hanover, 819 S.W.2d at 610. We will not substitute our judgment for that of the trial court, but will only determine whether the court's action was so arbitrary as to exceed the bounds of reasonable discretion. Rugen, 864 S.W.2d at 551. We draw all legitimate inferences from the evidence in the light most favorable to the trial court's order. Id. Because an appeal of an order granting or denying a temporary injunction is an appeal from an interlocutory order, the merits of the applicant's case are not presented for appellate review. Rugen, 864 S.W.2d at 551; Manufacturers Hanover, 819 S.W.2d at 610.
Abuse of Discretion
In points of error one through five, appellants challenge the sufficiency of the evidence supporting the trial court's findings that appellee demonstrated (1) substantial probability of success on the merits, (2) probable injury in the interim, (3) substantial risk of imminent harm, (4) substantial risk of irreparable injury, and (5) absence of any adequate remedy at law. In point of error six, appellants complain the court erred as a matter of law in determining that appellee met the requisite elements of preliminary injunctive relief. In points of error seven through 12, appellants challenge the trial court's findings regarding appellee's confidential information, and assert no identifiable "trade secrets" exist that might be subject to misappropriation.
The basis of appellee's underlying suit is that, by virtue of their employment with appellee, the Terpstras acquired confidential information,[3] which they then used to compete directly with appellee. Appellee sued appellants alleging misappropriation and conversion of confidential information, breach of fiduciary duty, breach of contract, breach of confidential relationship, tortious interference with prospective relations, civil conspiracy, fraud or fraudulent concealment, and negligence or negligent misrepresentation.
Appellants' concerns are for their right to earn a livelihood in their area of expertise in competition with their former employer. Appellants invoke the free enterprise system as a basis for limiting the general right of former employees to wide-open competition with former employers only where employers have obtained: (1) covenants not to compete; or (2) confidentiality agreements. See MPI Inc. v. Dupre, 596 S.W.2d 251, 254 (Tex.Civ. App.-Fort Worth 1980, writ ref'd n.r.e.). We deal here with a third exception to the general rule, which is one designed to protect the trade secrets of a former employer in the absence of a confidentiality agreement.
A. Trade Secrets
Certain duties, apart from any written contract, arise upon the formation of *22 an employment relationship. Miller Paper Co. v. Roberts Paper Co., 901 S.W.2d 593, 600 (Tex.App.-Amarillo 1995, no writ). One of those duties forbids an employee from using confidential or proprietary information acquired during the relationship in a manner adverse to the employer. Id. This obligation survives termination of employment. Id. Although this duty does not bar use of general knowledge, skill, and experience, it prevents the former employee's use of confidential information or trade secrets acquired during the course of employment. Id. at 600-601; American Precision Vibrator Co. v. National Air Vibrator Co., 764 S.W.2d 274, 278 (Tex. App.-Houston [1st Dist.] 1988, no writ).
When a claim of improper disclosure or use of trade secrets arises from a confidential relationship, the injured party is not required to rely upon an express agreement that the offending party will hold the trade secret in confidence. Gonzales v. Zamora, 791 S.W.2d 258, 265 (Tex.App.-Corpus Christi 1990, no writ). However, the employer must show that the information was, in fact, a trade secret. American Precision, 764 S.W.2d at 279.
A trade secret may consist of any formula, pattern, device, or compilation of information that is used in one's business, and which gives one an opportunity to obtain an advantage over competitors who do not know or use it. Computer Assoc. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.1996); Rugen, 864 S.W.2d at 548. "A trade secret may be a device or process which is patentable; but it need not be that. It may be a device or process which is clearly anticipated in the prior art or one which is merely a mechanical improvement that a good mechanic can make." K & G Oil Tool & Serv. Co. v. G & G Fishing Tool Serv., 158 Tex. 594, 314 S.W.2d 782, 789 (1958). When money and time are invested in the development of a procedure or device that is based on an idea which is not new to a particular industry, and when that certain procedure or device is not generally known, trade secret protection will exist. K & G Oil Tool, 314 S.W.2d at 785; Gonzales, 791 S.W.2d at 264. Further, when an effort is made to keep material important to a particular business from competitors, trade secret protection is warranted. Rugen, 864 S.W.2d at 552; Gonzales, 791 S.W.2d at 265. Items such as customer lists, pricing information, client information, customer preferences, buyer contacts, market strategies, blueprints, and drawings have been shown to be trade secrets. Miller Paper, 901 S.W.2d at 601; American Precision, 764 S.W.2d at 278.
The word "secret" implies that the information is not generally known or readily available. Rugen, 864 S.W.2d at 552; Gonzales, 791 S.W.2d at 264. Courts have refused to give trade secret protection when the material or procedure sought to be protected has been publicly disclosed. Gonzales, 791 S.W.2d at 264. The mere fact that knowledge of a product may be acquired through inspection, experimentation, and analysis does not preclude protection from those who would secure that knowledge by unfair means. K & G Oil Tool, 314 S.W.2d at 788; Weed Eater, Inc. v. Dowling, 562 S.W.2d 898, 901 (Tex.Civ.App.-Houston [1st Dist.] 1978, writ ref'd n.r.e.).
Appellants assert that they are merely utilizing general knowledge and expertise acquired through years of experience within the automotive industry, both prior to and during their tenure with appellee. They also contend that a lack of secrecy prevents appellee's alleged confidential information from being trade secrets. They assert that the specifications of the performance upgrades and the identities of appellee's customers and vendors are available to the public, and are common knowledge through publication of various magazine articles about appellee's upgrades and via appellee's Internet website. However, Roy Terpstra admitted John Hennessey told him the information he learned on behalf of appellee about designing, modifying, and building the Venom upgrades was proprietary.
The idea of upgrading the performance of any vehicle is not a new idea. However, the specific means by which appellee upgrades the performance of the Vipers is not common knowledge. Hennessey explained that through years of trial and error, appellee *23 builds the "fastest normally aspirated[4] Vipers." He knows which components work and which do not. Appellee spent a substantial amount of time and money developing the upgrade packages that would fit the exact needs of its clientele. Hennessey testified that the component parts used by appellee in its upgrade packages are confidential. Many components are not available and need to be built from the ground up. Although materials for these parts are purchased from outside vendors, most parts are then modified to fit together and work in concert with all the other components to achieve the desired horsepower, so that the car performs reliably and is cost efficient and profitable. Even appellee's customers are not told the exact specifications of the work done on their vehicles.
Hennessey testified it has taken him four years to compile a list of vendors he considers capable of providing the materials and service he needs, who have the best prices, and who are the most reliable. Although retail prices are public, the overall cost of the Venom upgrades, the cost of items sold separately, the cost of components and sub-assemblies, and the cost of labor associated with assembling and process development is not public.
Contrary to appellants' assertions, the specifics of the Venom upgrades, appellee's customer and vendor information, and appellee's pricing are not known to the general public. The magazine articles and appellee's website do not reveal how the various parts are assembled, or explain the process of designing or modifying the various parts that go into a Venom upgrade. There is no access to this information except through appellee.
Hennessey testified that only certain people within the company have access to and were trained to use its computer systems. Computers containing certain information are located in a locked room separate from employees. Access to the customer database requires a password. Appellee's customer database contains information such as names, addresses, and telephone numbers, the types of vehicles they own, whether other upgrades have been done on the vehicle, birthdays, and e-mail addresses. Hennessey testified that some customers even leave instructions not to tell their wives how much money was spent on the upgrades. Although appellee purchases a list of new vehicle buyers from an outside source, this information is contained in a separate database from its customer list. The customer list has been compiled over a four-year period, and appellee does not sell it to outsiders.
Appellee's shop is a large, non-air-conditioned airplane hangar. Hennessey stated the shop is at a remote location because he does not want off-the-street customers wandering in. The airport has a secured access gate from 6:00 p.m. to 6:00 a.m. that requires a code for entry. Non-employees are allowed in the shop area only after they have checked in with the office. Cylinder heads and specific components are kept in a separate area from the shop.
The record indicates the information about the specifics of the Venom upgrades, appellee's customers, and its vendors is confidential and intended to be kept a secret. The court did not abuse its discretion in determining that appellee had shown a probability of success in proving that its confidential information deserved trade secret protection.
B. Temporary Injunction
At the preliminary hearing, the applicant is not required to prove it will prevail at final trial. Sun Oil Co. v. Whitaker, 424 S.W.2d 216, 218 (Tex.1968). To be entitled to a temporary injunction, an applicant must plead a cause of action, show a probable right to recover on that cause of action, and show a probable injury in the interim. Sun Oil, 424 S.W.2d at 218; Manufacturers Hanover, 819 S.W.2d at 610. The applicant also must show that no adequate legal remedy exists. Manufacturers Hanover, 819 S.W.2d at 610.
A probable right of success on the merits is shown by alleging a cause of *24 action and presenting evidence that tends to sustain it. Miller Paper Co., 901 S.W.2d at 597. Probable injury includes elements of imminent harm, irreparable injury, and no adequate remedy at law for damages. Surko Enters., Inc. v. Borg-Warner Acceptance Corp., 782 S.W.2d 223, 225 (Tex.App.-Houston 1989, no writ). A legal remedy is inadequate if damages are difficult to calculate or their award may come too late. Miller Paper, 901 S.W.2d at 597.
Prior to leaving appellee's employ, Roy Terpstra was the director of Viper operations, and he admitted this was a position of trust. He performed specialized performance upgrades on vehicles, and designed, developed, tested, and assembled parts for the Venom upgrades. He worked with Hennessey in strategizing product development. He admitted that both T-N-T and appellee were in the business of custom high performance upgrades.
Although he had the knowledge to build the same various upgrades done by appellee for other vehicles prior to his employment with appellee, Roy Terpstra had never designed, modified, or built certain parts specifically for the Viper. It was while employed by appellee that he learned about Viper upgrades. He located vendors who could fabricate, modify, or supply parts for the upgrades for different types of vehicles, and he knew who were the best and most reliable. He also learned how to increase the horsepower of a vehicle, such as the Viper, because of the research and development done at appellee's shop. He admitted that the Venom upgrades took time and money to develop, and it was appellee who paid for product development.
The Terpstras did not, and were not required to, sign any agreement not to compete or confidentiality agreement. But a former employee may not use, for his own advantage and to the detriment of his former employer, confidential information or trade secrets acquired by or imparted to him in the course of his employment. Rugen, 864 S.W.2d at 551. "Injunctive relief is recognized as a proper remedy to protect confidential information and trade secrets." Id. The record supports the court's conclusion that appellee demonstrated a likelihood of success on the merits of its claims against appellants.
The record indicates that appellants possess appellee's confidential information and are in a position to use it to compete directly with appellee. Under these circumstances, it is likely appellants will use the information to appellee's detriment. The record supports the court's conclusion that use of this information by appellants to perform services on the two types of Dodge Vipers or the Mitsubishi 3000 GT poses an inherent threat to the disclosure or use of appellee's trade secrets.
Appellants argue that any damages suffered by appellee are compensable through money damages, and, therefore, appellee has not demonstrated that no adequate remedy at law exists. Injunctive relief is proper to prevent a party, which has appropriated another's trade secrets, from gaining an unfair market advantage. The only effective relief available to appellee is to restrain appellants' use of its trade secrets and confidential information pending trial. At the time of the injunction hearing, appellee had over 20 Vipers in its shop. Hennessey stated that if the Venom upgrades could be obtained anywhere, there would be no reason for people to send their Vipers to appellee. He testified that if the confidential information was distributed, appellee would lose its advantage. He estimated that appellee's gross sales for 1997 would drop from approximately $4 million to about $2 million. He also said the loss of good will was immeasurable. The potential damage to appellee's business cannot be easily calculated; therefore, a legal remedy is inadequate.
We hold that appellee satisfied its burden so that the trial court did not abuse its discretion by granting the temporary injunction against appellants. Accordingly, we overrule points of error one through 12.
Injunction Overbreadth
In point of error thirteen, appellants contend the court granted relief that was not specifically sought by appellee. Specifically, appellants assert the decretal paragraphs of the injunction make no mention of the confidential information as defined by the court. *25 In point of error fourteen, appellants contend the court granted broader relief than was necessary. Appellants argue that the injunction is not limited to appellee's alleged trade secrets or confidential information. Instead, appellants assert, the injunction restrains not only them, but other nondisclosed and nonascertainable entities from disclosing, using, selling, or testing any information related to the two types of Dodge Vipers or the Mitsubishi 3000 GT. Appellants also contend the injunction prevents them and various other parties from working on or providing any type of service for Dodge Viper GTS, Dodge Viper Roadster, or Mitsubishi 3000 GT vehicles. Appellants assert that, read literally, the injunction would prevent former customers of appellants from even changing the oil or rotating the tires on their own cars.
Rule 683 of the Texas Rules of Civil Procedure provides:
Every order granting an injunction and every restraining order shall set forth the reasons for its issuance; 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; and is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise.
Every order granting a temporary injunction shall include an order setting the cause for trial on the merits with respect to the ultimate relief sought. The appeal of a temporary injunction shall constitute no cause for delay of the trial.
TEX.R. CIV. P. 683.
The injunction tracks this language by including within its scope appellants, "their officers, agents, servants, employees, representatives, attorneys, and all persons, firms, corporations or other entities, acting or purporting to act in concert or participation with any of them who receive actual notice of this Order by service or otherwise...." The injunction does not impose any restraint on individuals or entities other than appellants, except to the extent others act or purport to act in concert or participation with appellants.
The trial court found that:
[Appellee's] trade secrets include the compilation of certain assembly techniques, design information, future product information, installation techniques, machining specifications, manufacturing processes, performance specifications on component parts, wholesale pricing information, product compositions, product specifications, servicing procedures and specifications, testing methods and results, customer and vendor information regarding customer performance enhancements (defined as any custom enhancements made for the purpose of improving the performance and horsepower of the motor vehicle) that [appellee] performs on Dodge Vipers and Mitsubishi 3000 GT motor vehicles (collectively the "Hennessey Trade Secrets")....
However, as appellants observe, the temporary injunction did not enjoin appellants from using or disclosing only trade secrets or confidential information. The pertinent portion of the order restrains appellants from:
1. directly or indirectly disclosing, using, selling or testing, for any purpose, (or imparting to any other person, firm, corporation or other entity) any information relating to the Dodge Viper GTS, Dodge Viper Roadster or Mitsubishi 3000 GT motor vehicles; and
2. working on, designing, repairing, installing, testing, soliciting, contacting, accepting any business from and/or providing any types of services on any Dodge Viper GTS, Dodge Viper Roadster or Mitsubishi 3000 GT motor vehicles, regardless of model year, except that Defendants may finish the work they were doing on the remaining Dodge Vipers owned by Ken Addington and Joe Bob Shirley.
(Emphasis added.)
We agree with appellants that the temporary injunction is overbroad. We may modify an overbroad injunction. See San Augustine Ind. Sch. Dist. v. Woods, 521 S.W.2d 130, 133 (Tex.Civ.App.-Tyler 1975, no writ). Accordingly, we sustain appellants' thirteenth and fourteenth points of error and *26 grant appellants their alternative relief. We order that the above portion of the temporary injunction be reformed to limit disclosure and use of trade secrets, as follows:
1. directly or indirectly disclosing, using, selling or testing, for any purpose, (or imparting to any other person, firm, corporation or other entity) any Hennessey Trade Secret information relating to the Dodge Viper GTS, Dodge Viper Roadster or Mitsubishi 3000 GT motor vehicles; and
2. working on, designing, repairing, installing, testing, soliciting, contacting, accepting any business from and/or providing any types of services using Hennessey Trade Secret information on any Dodge Viper GTS, Dodge Viper Roadster or Mitsubishi 3000 GT motor vehicles, regardless of model year, except that Defendants may finish the work they were doing on the remaining Dodge Vipers owned by Ken Addington and Joe Bob Shirley.
(Emphasis on language ordered to be added.)
Conclusion
We reform the order of the trial court granting a temporary injunction against appellants and affirm the order as reformed.
NOTES
[*] The Honorable Jackson B. Smith, Jr., retired Justice, Court of Appeals, First District of Texas at Houston, sitting by assignment.
[1] TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(4) (Vernon 1997).
[2] Appellee has designed and installed a number of Viper upgrade packages (each of which uses "Venom" in its name), which collectively shall be referred to as the Venom upgrades.
[3] Appellee defines the confidential information to include assembly techniques, compilation of products, customer information, design information, future product information, installation techniques, machining specifications, manufacturing processes, performance specifications on component parts, pricing information, product compositions, product specifications, servicing procedures and specifications, testing methods and results, and vendor information.
[4] "Normally aspirated" means that no additional means are used to increase power to the motor; the car uses only the power from the motor itself. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2430495/ | 339 S.W.2d 360 (1960)
EL PASO DEVELOPMENT COMPANY, Appellant,
v.
Dr. Vincent M. RAVEL and wife, Annette Ravel, Appellees.
No. 5404.
Court of Civil Appeals of Texas, El Paso.
October 5, 1960.
Rehearing Denied October 26, 1960.
*361 R. Neill Walshe, Richard C. White, El Paso, for appellants.
Mayfield, Broaddus & Goodman, El Paso, for appellees.
LANGDON, Chief Justice.
This is an action for damages based on fraud and deceit in a real estate transaction. Appellees, Dr. Vincent M. Ravel, and wife, recovered judgment against appellant, El Paso Development Company, developer of the land, and against one W. A. Steinbach, contractor, for damages sustained by appellees to a dwelling constructed for them by defendant contractor, on a vacant lot (located at 3916 Flamingo Drive), in the City of El Paso, Texas, purchased from appellant El Paso Development Company.
*362 Appellees alleged that appellant El Paso Development Company fraudulently represented to them that the lot in question was free of "clay and fill" and was a suitable site for the construction of a large and expensive dwelling thereon. Suit was also against the defendant Steinbach, contractor, for damages for breach of contract.
The judgment was for $4,000 against defendant contractor, Steinbach, for breach of contract; and for $22,250 against appellant El Paso Development Company, developer of the land, for misrepresentation of the sub-soil condition of the lot. No appeal was taken from the judgment by defendant Steinbach. El Paso Development Company alone has appealed. All prerequisites of appeal have been complied with, and this case is properly before us.
The case was submitted to the jury on sixteen special issues, the first four of which related to the cause of action alleged against the defendant contractor, and the remaining issues to the appellant El Paso Development Company. The jury found against the defendant-contractor on the following numbered issues: (3), that defendant Steinbach failed to construct the improvements upon the lot in question in a good and workmanlike manner; and, (4), the damages, $4,000. The remaining issues relating to appellant El Paso Development Company were found by the jury as follows: (5), that defendant, El Paso Development Company, through its president, represented to plaintiff Ravel, prior to April 17, 1954, that the lot in question was free of clay and fill; (6), that such representation was false; (7), that defendant El Paso Development Company knew such representation was false at the time that it was made; (8), that such defendant, in the exercise of ordinary care, should have known that such representation was false; (9), that such defendant knew at the time such representation was made that plaintiff intended to have a four-bedroom house erected on said lot; (10), that plaintiff was induced by such representation to construct a four-bedroom house on said lot; (11-12), that defendant El Paso Development Company did not know that if said house was built on said lot, it would be damaged as a result of the soil conditions thereunder, but defendant, in the exercise of ordinary care, should have known if said house was built thereon, it would be damaged as a result of the soil conditions thereunder; (13-14), that plaintiffs learned of the falsity of the representations in January, 1957; and, also, in the exercise of ordinary care, plaintiffs should have learned of its falsity in January, 1957; and finally, the damage questions, special issues (15) and (16), in which the jury found, first, that the reasonable market value of said house and land in August 1954 (at the time of the delivery of same to plaintiffs) would have been $52,250, if said house had been constructed on soil without clay or fill; and secondly, found the reasonable market value of the house and land in August 1954, in the actual condition of the house constructed thereon and delivered to plaintiffs at such time, was $30,000.
The damages awarded appellees was the difference between these two figuresthe sum of $22,250. The measure of damages under the statute, Article 4004, Vernon's Annotated Texas Civil Statutes, is stated as follows:
"* * * the rule of damages being the difference between the value of the property as represented or as it would have been worth had the promise been fulfilled, and the actual value of the property in the condition it is delivered at the time of the contract."
The only property represented by appellant was the vacant lot; and, under the facts of this case, no other property was delivered by appellant except the vacant lot. Appellant is not charged with, nor does the evidence reflect, that he made any representation with respect to the house that was subsequently constructed thereon. Thus, this case does not fall within that line of cases where the house or other improvements are already constructed, represented to have been constructed, or promised *363 to be constructed on the land made the subject of the alleged false representation.
Appellant's appeal is predicated upon fourteen points of error.
By Points 1 and 2, appellant contends that appellees are limited, as a matter of law, to such damages as they may show are related to the purchase of the vacant, unimproved lot. It is also contended that the remedy provided by the statute (Art. 4004) is exclusive, and that in Texas the only damages that may be recovered, in an action based on fraud in a real estate transaction, are confined to the damages allowed by the statute.
By appropriate counter-points, appellees submit that this was not a suit for damages arising out of the purchase of the lot, but is a suit for special damages sustained by appellees directly resulting from appellant's fraudulent representations as to the suitability of the lot in question as a building site for the construction of a dwelling thereon. Appellees state that this was not a suit founded upon any representation as to the price or the value of the lot in question, as contemplated by Article 4004, but is, instead, based upon a fact situation which was misrepresented by the appellant, and which directly resulted in damage to appellees when acted upon by appellees in reliance thereon.
Prior to the enactment of Article 4004, supra, in 1919, the Texas rule for measuring damages in fraud cases involving transactions in land was the rule announced in 1906 by the Supreme Court of Texas, in the case of George v. Hesse, 100 Tex. 44, 93 S.W. 107, 8 L.R.A.,N.S., 804, and followed by that Court in Booth v. Coward, Tex. Com.App., 265 S.W. 1026, 1027, in which the Court said:
"* * * that since the cause of action was not upon breach of contract but to recover damages for fraudulent representations, the measure of compensation was the difference between the values that were exchanged and not the difference between the value of the land received by a plaintiff without a well on it and the value of that land if a well had been upon it." (Emphasis ours.)
The statute (Art. 4004) enlarged the measure of damages from the "out of pocket" damages allowed by the rule announced in the Hesse case (supra) to the damages which are measured by the difference between the value of the property as represented, or as it would have been worth had the promise been fulfilled, and the actual value of the property in the condition in which it is delivered or received at the time of the contract. The statutory measure of damages is sometimes referred to as the "benefit of the bargain" rule.
In the case at hand, appellees caused an expensive home to be constructed on the lot in question, before discovering that falsity of the representations concerning the sub-soil conditions of the lot. Since the value of the lot was not shown to have been affected by the truth or falsity of the representation, the measure of damages allowed by the statute would afford no relief, and neither would the equitable remedy of rescission.
The damages, alleged and sought to be recovered by appellees in this action, are not the direct or general damages provided by the statute (Art. 4004), which the law implies or presumes to have occurred from the wrong complained of, but are in the nature of special or consequential damages. The only difference between general and special damages is that general damages are the necessary and usual result of the wrong complained of, while special damages need not be, but must be the proximate result thereof.
Special damages, predicated upon a wrong, which are not necessarily the usual or ordinary result of such wrong, but are directly traceable to the wrongful act complained of and result therefrom, may be recovered in a common law action based on *364 fraud and deceit; but all other damages will be held to be too remote.
We believe the law to be well settled in Texas, as well as under general principles as to damages, that an injured party is entitled to recover in a tort action such damages as result directly, naturally and proximately from fraud. However, remote damages, or those which are too uncertain for ascertainment, or are purely conjectural, speculative or contingent, cannot be recovered. Connally & Shaw v. Saunders, Tex.Civ.App., 142 S.W. 975; Parker v. Solis, Tex.Civ.App., 277 S.W. 714; Bantuelle v. Jones, Tex.Civ.App., 52 S.W.2d 93.
Bearing on the question of whether the statute (Art. 4004) superseded the common-law rule and provided an exclusive remedy for the recovery of damages in an action based on fraud in a real estate transaction, we believe this question has been settled by the case law of Texas, and that the answer is "No."
In the case of Sibley v. Southland Life Ins. Co., 36 S.W.2d 145, 146, decided in 1931 by the Supreme Court of Texas, it was said:
"The rule announced in the year 1906, in the case of George v. Hesse, * * * and followed in Booth v. Coward, * * * has been supplemented, if not superseded, by the above statutory rule."
Sibley had represented to the plaintiff company that each of 22 lots had a brick dwelling house on it, and the jury found that, as to one of these 22 lots, said representation was false. This was Lot No. 7 which was, in fact, vacant; but Lot No. 6, an improved lot, was represented to be Lot No. 7. The value of the vacant lot and the value of the improved lot were found by the jury, and the court allowed plaintiff to recover the difference between these two values as found by the jury, holding this to be the proper measure of damages under the statute.
The "benefit of the bargain" rule was applied in the Sibley case, supra; but the failure of a case to come within the provisions of the statute (Art. 4004) does not prevent a recovery for fraud as recognized under the general laws and rules of equitable jurisprudence. See Fraud and Deceit, 20-A Tex.Jur. 26, sec. 8.
In El Jardin Immigration Co. v. Karlan, Tex.Civ.App., 245 S.W. 1043, 1045, plaintiff-appellee was shown one tract of land by the agent, George, a defendant, as the land he was selling to appellee, but another and different tract was conveyed to him. Appellee went into possession of the land and made valuable improvements thereon. The court, in holding that the case was not one within the purview of the statute (Art. 4004), since it was not apparent that there were any promises to perform a future act, no evidence what the difference was in the relative value of the two tracts for irrigation purposes, and no showing what damage was done to and suffered by appellee, said:
"The facts in this case do not establish the right to recover herein under any possible construction of the statute * * * but that does not prevent a recovery under the general laws and rules of equitable jurisprudence against the actual perpetrators of the alleged fraud."
The Court of Civil Appeals, in the case of Cockburn v. Less, 257 S.W.2d 470, 475 in passing upon the question of whether the remedy provided by the statute was exclusive, said this:
"* * * we are of the opinion that appellant had alternative remedies. He chose to base his action for damage on fraud both under Art. 4004, V.A. C.S., and the common-law action of fraud and deceit, and not for breach of contract. The remedy under Art. 4004 is remedial and cumulative." (Emphasis supplied.)
*365 In a fraud case involving a transaction in land (particularly vacant or unimproved land), falsely represented as suitable for a particular purpose when it is, in fact, harmfully inappropriate for such purpose, it sometimes happens, as was alleged in this case, that the fraud is not discovered until after the recipient of the false representation has expended money in an attempt to use said land for the purpose for which it was falsely represented to be suitable. Where the fraud is discovered after the purchase or exchange of properties is made, but before the recipient of the false representation has expended money in attempting to use the land for purposes for which it was represented to be suitable, the remedy provided by the statute is entirely adequate; but the statute affords no remedy at all to the recipient of a false representation concerning realty who, after having purchased the land, does not discover the falsity of the representation until after he has expended money in an attempt to use such land.
Under the common law, a remedy was provided for both of the above situations. There, damages which the recipient of a fraudulent representation was entitled to recover was the pecuniary loss shown to have resulted from the falsity of the matter represented, including not only (1), the difference between the value of the thing obtained and its purchase price or the value of the thing exchanged for it; but, also, (2), pecuniary loss suffered otherwise as a consequence of the recipient's reliance upon the truth of the representation. We are of the opinion that the statute supplemented, but did not supersede, any of the remedies at common law. Appellant's Points 1 and 2 are accordingly overruled.
Unlike the general damages allowed both at common law and by the statute (Art. 4004), where special damages only are alleged, such damages must be shown to be the proximate result of the fraud. The court's charge failed to restrict the jury in its findings on the damage issues, Nos. 15 and 16, to damages which proximately resulted from the fraud.
Holding as we do that the liability of the maker of a false representation involving a transaction in land is not confined to the measure of damages fixed by the statute, but that the recipient thereof may also recover from such maker, regardless of privity, such additional damages as are directly traceable to the wrongful act complained of and which result therefrom, we believe the basic question presented by appellant's Points 3 and 5, and Points 6 through 8, is the question of whether or not the total of the damages found by the jury is directly traceable to the false representation made by appellant, and resulted therefrom. Appellant's Point No. 7.
The issues on damages were submitted by the trial court and answered by the jury as follows:
"Question No. 15
"What sum do you find from a preponderance of the evidence, represents the reasonable market value in El Paso County, Texas, of plaintiffs' house and land in August 1954, at the time of the delivery of the same to the said Vincent M. Ravel, if said improvements were constructed on soil without clay or fill? Answer in dollars and cents.
"We answer: $52,250.00."
"Question No. 16
"From a preponderance of the evidence, what sum do you find represents the reasonable market value of plaintiffs' house and land in El Paso County, Texas, in August 1954, in the actual condition of the house constructed thereon and delivered to him at such time? Answer in dollars and cents.
"We answer: $30,000.00."
In answer to other special issues, the jury found that the defendant contractor, *366 W. A. Steinbach, failed to construct the improvements upon the lot in question in a good and workmanlike manner. In addition, the evidence also reflects that there were a number of deficiencies in the construction attributable to sub-contractors, as well as outright deviations from the plans and specifications:
1. The wire mesh used to reinforce the concrete slab floor was not pulled up into the concrete;
2. The concrete slab at some points was only 1.88 and 2 inches thick, and at another point only 2.81 inches thick, and not 4 inches thick as called for in the specifications;
3. The wire mesh was supposed to be imbedded in the concrete, not placed under it;
4. Water pipes were imbedded in the concrete, when they should have been placed under it;
5. Galvanized nipples and fittings were used on the copper plumbing, which will cause leaks to develop from erosion of the pipe due to electrolysis;
6. The pipe was located on top of the felt pad and on top of the wire mesh, which should not be done;
7. No provision was made for expansion of slabs between joints;
8. Pipe was run directly through the concrete slab into the house, the usual practice being to place a sleeve in the concrete whenever any pipes are required to pass through concrete.
It appears to be undisputed that the damage to plaintiffs' home resulted when a leak developed in the copper plumbing beneath the concrete slab floor of appellees' house, which permitted large quantities of water to be discharged beneath the slab. The water expanded the soil, causing pressure from below which raised the slab, and, as the water continued to escape, the slab went lower from opposite effects, and caused cracks to develop in the house. After the leaks were repaired, the moisture below the slab was reduced by percolation and evaporation, which caused an un-uniform differential movement of the structure above the slab. This placed strain on the structure and cracks resulted.
There was evidence to the effect that, had a leak not developed beneath the slab, nothing would have happened to the house; that the pipe would not have broken had it been placed underneath the concrete, and there would have been no leak.
The jury found that appellant did not know that appellees' house would be damaged as a result of the soil conditions thereunder, but that, in the exercise of ordinary care, appellant should have known that it would be damaged as a result of such soil conditions.
What is the limit, if any, of appellant's responsibility for consequential damages caused by the fraud and deceit? Because of the similarity of this class of tort action to cases on contract, courts have been led, occasionally, to say that the result must have been within the probable contemplation of the parties when the representation was made or acted upon. We think the better rule is that announced by the majority of the cases in which the test adopted in tort cases, generally, has been appliednamely, the standard of the "proximateness" of the result.
In the case at hand, the trial court gave the jury no instructions as to the measure of damages. Under the issues as submitted, the jury was permitted to attribute to appellant's misrepresentation of the sub-soil conditions of the lot all of the loss thereafter sustained by appellees, without having first determined that the damage found by them proximately resulted from the wrongful act of the appellant.
Appellant's Point No. 7 is sustained, and its Points 3, 5, 6 and 8 are sustained insofar as these points relate to the question of proximate cause and the failure of the court to properly instruct and limit the jury to a finding of only such damages *367 as were shown to have proximately resulted from the misrepresentation. In the absence of jury findings based on proximate cause, the "special" damages found by the jury constitute immaterial findings of damages, which are too remote and speculative to support a judgment.
In a common-law action based on fraud and deceit, all of the elements of fraud must be alleged and proven, if a judgment in favor of plaintiff is to be supported. If special damages, as distinguished from general damages, are sought, then such damages must be shown to have proximately resulted from the fraud.
From what we have said, it follows that this case must be reversed as to that part of the judgment appealed from by El Paso Development Company. Since this case is to be remanded to the trial court for a new trial, other errors complained of will not be specifically passed upon. However, in view of the possibility of a retrial of this case, we have set out below what we deem to be the basic elements required to be alleged and proven by plaintiff in an action based on fraud and deceit. The enumeration may also serve as a guide to the trial court in submitting the controlling issues:
(1) That defendant made or was connected with the making of the representation;
(2) That it was as to a material fact;
(3) That it was false at the time it was made;
(4) That it was made with intent to induce the plaintiff to do or to refrain from doing some act;
(5) That plaintiff relied on it, believing it to be true, and was induced thereby to act or to refrain from acting;
(6) That plaintiff thereby suffered injury. (Issues on proximate cause are required only where "special" damages are sought to be recovered.)
By other assignments of error, appellant complains that the court's charge is a "quasi-negligencequasi-fraud" charge; that such charge, as submitted to the jury, contained issues sounding in negligence (a theory of recovery not plead by appellee), and on which action the Statute of Limitation would have been a complete bar; that the submission of such issues, although immaterial to the allegation of fraud, would influence and prejudice the jury in its consideration of other issues submitted by the court, including the question of damages. It is apparent from the record that the cause of action alleged against appellant, El Paso Development Company, was based on fraud and deceit, and not on a theory of negligence. In such case, issues submitted by the court and sounding in negligence would constitute error. While it is true that a false representation may give rise to a cause of action based on either fraud or negligence, recovery may be had upon but one such action, and not upon both.
Appellant also complains of certain argument attributed to appellees' counsel during opening and closing arguments, which was as follows (First, during opening argument, by Mr. Mayfield):
"* * * these two things that have cost the Ravels, in addition to * * * just untold heartaches in this thing. I thinkI don't think there is any question in anybody's mind from the testimony that was brought forth in this case, the heartaches that occurred, when people built what they thought was fine, fine home, for their family, to see it break, and then have people come in there and strip the walls, and do it again and again. But heartache in this thing is something you can't put money value on, * * *.'
(and finally, in the closing argument by Mr. Broaddus):
"What is that against a million and eight hundred thousand dollars?"
No objection appears to have been made by appellant, at the time, to the argument made by Mr. Mayfield, and no request was *368 made that the jury by instructed to disregard it. Objection was made, however, to the argument of Mr. Broaddus, on the ground that it was outside the record, was an effort to impress upon the jury an excessive amount of wealth on the part of appellant, and that such was highly prejudicial and was made for the purpose of prejudicing the jury. Appellant's motion that the jury be instructed to disregard in full that line of argument, and appellant's motion that a mistrial be declared by reason of such statement, were both overruled by the court; to which rulings by the court exception was taken, and the matter has been preserved for our consideration by appellant's Bill of Exception No. Two.
In view of the disposition to be made of this case, and since the error, if any, complained of is not essential to our holding herein, we refrain from passing upon the question of whether reversible error has been presented by the Bill. We are of the opinion, however, that such argument was improper, and assume that it will not be repeated in the event of a retrial of this cause.
That part of the judgment appealed from by appellant El Paso Development Company is reversed and is remanded to the trial court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1354101/ | 36 S.W.3d 229 (2001)
Marshall T. GASPARD, Appellant,
v.
Diane Christina BEADLE & Kenneth Lupo, Appellees.
No. 01-99-00962-CV.
Court of Appeals of Texas, Houston (1st Dist.).
January 11, 2001.
*232 Daryl L. Moore, Sharon McCally, Houston, for Appellant.
Kenneth G. Lupo, Houston, for Appellee.
Panel consists of Chief Justice SCHNEIDER, and Justices TAFT and SMITH[*].
OPINION
SCHNEIDER, Chief Justice.
Appellant, Marshall "Mitch" Gaspard, sued appellee, Diane Christina Beadle, for past due legal fees for services rendered. Beadle hired appellee, Kenneth Lupo, to *233 represent her. Lupo filed a counterclaim for fraud and misrepresentation on Beadle's behalf. Beadle also sued for emotional distress and sought exemplary damages. Gaspard amended his petition to add Lupo as a defendant, and sued Lupo for filing a frivolous counterclaim, perjury, slander, and defamation. The judge dismissed all of Gaspard's non-contractual causes of action. The jury found in favor of Beadle, finding Gaspard both defrauded Beadle and intentionally inflicted emotional distress upon her. Beadle recovered actual damages, mental anguish damages, and exemplary damages. The judge sanctioned Gaspard for filing a frivolous counterclaim against Lupo. Gaspard appeals. We reverse the damages award to Beadle, but affirm the sanctions imposed against Gaspard.
A. Facts and Procedural Background
Because the sufficiency of the evidence is challenged, we begin with a detailed summary of the facts. Gaspard, an attorney, met Beadle and her husband in September 1993. The Beadles entered into a written agreement with Gaspard, agreeing to pay him a fee of $150 per hour for legal representation in a real estate matter. In December 1993, Beadle filed for a divorce. The divorce proceedings lasted three years, and the divorce was finally granted in December 1996.
In March 1994, while both the divorce and the real estate matters were still pending, Beadle and Gaspard began dating. They maintained a sexual relationship. The stopped dating in December 1994. In October 1995, Gaspard wrote Beadle a letter indicating that he missed her. Beadle and Gaspard resumed their relationship in October 1995 and dated until February 1997.
Gaspard was not Beadle's attorney during the divorce; however, he assisted her with a usury claim that arose during the divorce proceedings[1] in December 1995 and January 1996. Gaspard suggested he might be able to help, and so Beadle called her divorce attorney to offer Gaspard's assistance in drafting the pleadings on the usury issue. Gaspard drafted the pleadings and did the initial research. The facts are in dispute as to the method of payment intended for this legal assistance. Gaspard takes the position that he intended to bill Beadle for the work after the divorce action was completed. But Beadle testified that Gaspard never mentioned to her that she would have to pay for the services at an hourly rate. Beadle also testified that Gaspard agreed to perform the work for no compensation, and when he could "no longer work for free," he told her to hire another attorney.
Beadle testified she was emotionally and financially vulnerable, and continued the sexual relationship with Gaspard because of his numerous false representations. These representations included: (1) she would not have to pay him for the legal work in the usury matter; and (2) he loved her, would marry her, and take care of her. In January 1997, Beadle and Gaspard began to argue about Gaspard's ex-wife. Beadle was upset that Gaspard was spending time with his ex-wife instead of with Beadle and her children. Gaspard ended his relationship with Beadle in February 1997.
On June 16, 1997, Gaspard sent Beadle an invoice for the legal work he did on the usury matter. Gaspard acknowledged that he waited almost two years to send the invoice. He explained that the delay was so Beadle could receive the settlement money from her divorce and would be in a position to pay him. Beadle failed to pay the bill. She argues she was unable to pay the invoice because her only source of income was a meager monthly child support payment, some of which had been returned for insufficient funds.
*234 Beadle's attorney, Lupo, urged Gaspard to "write off the fees" because Lupo felt Gaspard had breached his fiduciary duty to Beadle by maintaining a sexual relationship with a client. Nevertheless, Gaspard sued Beadle for the past-due legal fees. Beadle countersued for fraud, intentional infliction of emotional distress, and punitive damages, alleging Gaspard fraudulently represented he had romantic feelings for Beadle and implied he would marry her in order to entice her into a sexual relationship. Gaspard amended his petition and also sued Lupo for filing a frivolous counterclaim, perjury, slander, and defamation. He also filed a Motion to Disqualify Lupo as Beadle's counsel, which was denied. The judge dismissed Gaspard's non-contractual causes of action and sanctioned him under Rule 13 of the Texas Rules of Civil Procedure for filing a frivolous pleading.
The jury returned a verdict in Beadle's favor on both the fraud and intentional infliction of emotional distress claims, and they found no attorney-client relationship existed between Gaspard and Beadle. The jury awarded Beadle the following: (1) $3,800 in actual damages for fraud; (2) $12,500 for intentional infliction of emotional distress; and (3) $65,000 in punitive damages. The trial court assessed monetary sanctions against Gaspard in the amount of $20,000. Gaspard appeals. We affirm in part and reverse in part.
B. Fraud
In his first issue, Gaspard contends the pleadings and evidence were insufficient to support a finding of fraud. In his second issue, Gaspard argues that the evidence was legally and factually insufficient to support the jury's award of $3,800 in actual damages.
1. The Pleadings
In Beadle's Verified First Amended Answer and Counterclaims, she pleaded fraud both as an affirmative defense and as a counterclaim. A pleading is sufficient if it gives notice of the cause of action and facts being alleged so that the opposing party may adequately prepare his defense. See TEX.R.CIV.P. 45(b), 47(a); Roark v. Allen, 633 S.W.2d 804, 809-10 (Tex.1982); Transmission Exch. Inc. v. Long, 821 S.W.2d 265, 269 (Tex.App.-Houston [1st Dist.] 1992, writ denied). The actual cause of action and the elements do not have to be specified in the pleadings; it is sufficient if a cause of action can be reasonably inferred. See Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993). In the absence of filed special exceptions, a petition should be liberally construed in favor of the pleader. See id. Our review of the pleadings indicates a fraud cause of action can reasonably be inferred. Because Gaspard did not file any special exceptions, and because he had notice of the fraud claim via the pleadings, we find the pleadings were sufficient to support a fraud cause of action. We overrule issue one in part.
2. The Evidence: The Finding of Fraud
In reviewing the legal sufficiency of the evidence, we consider only the evidence and reasonable inferences tending to support the jury's finding, viewing it in the light most favorable to the verdict. See Havner v. E-Z Mart, 825 S.W.2d 456, 458 (Tex.App.-Houston [1st Dist.] 1992, writ denied). A legal sufficiency challenge will be overruled if there is more than a scintilla of evidence to support the finding. See Star Houston, Inc. v. Shevack, 886 S.W.2d 414, 417 (Tex.App.-Houston [1st Dist.] 1994, writ denied).
We will only set aside the jury's findings for factual insufficiency if, after reviewing, weighing, and considering all the evidence, the jury finding was so against the great weight and preponderance of the evidence that the verdict was manifestly unjust. See Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 (Tex. 1986); Miller v. Kendall II, 804 S.W.2d 933, 939 (Tex.App.-Houston [1st Dist.] 1991, no writ). All evidence in the record *235 must be considered in the light most favorable to the verdict. See Formosa Plastics Corp. v. Presidio Engineers and Contractors, 960 S.W.2d 41, 48 (Tex.1998).
Proof of fraud requires establishing: (1) a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of its truth; (4) the speaker made the representation with the intent that it should be acted upon by the party; (5) the party acted in reliance upon the representation; and (6) the party thereby suffered injury. See Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex.1990); Transmission Exch., 821 S.W.2d at 270. These elements were correctly presented to the jury for consideration in Question 9 of the charge. Some courts have also held that fraud is "an elusive and shadowy term which has been defined in some cases as any cunning or artifice used to cheat or deceive another." Santanna Natural Gas Corp. v. Hamon Operating Co., 954 S.W.2d 885, 890 (Tex.App.-Austin 1997, pet. denied); see also First State Bank v. Fatheree, 847 S.W.2d 391, 395-96 (Tex.App.-Amarillo 1993, writ denied).
The jury found Gaspard committed fraud against Beadle. However, we find the evidence legally and factually insufficient to support the jury's fraud finding because there was no false misrepresentation made. Beadle based her claim of fraud on two alleged misrepresentations. We consider each in turn.
First, Beadle alleged that Gaspard acted as though he loved her and promised he would take care of her.[2] This is not an actionable misrepresentation. A misrepresentation is a falsehood or untruth with the intent to deceive. See Great S. Life Ins. Co. v. Doyle, 136 Tex. 377, 151 S.W.2d 197, 201 (1941); Vela v. Marywood, 17 S.W.3d 750, 760 (Tex. App.-Austin 2000, pet. filed). The jury charge correctly defined a misrepresentation as:
(1) a false statement of fact;
(2) a promise of future performance made with an intent not to perform as promised, or
(3) an expression of opinion that is false, made by one claiming or implying to have special knowledge of the subject matter of the opinion.
Gaspard's behavior and statements do not rise to this level. Gaspard showed Beadle love, treated her kindly, and wanted to take care of her. The couple ended their relationship, and Gaspard changed his mind about wanting to take care of Beadle. Falsehood with intent to deceive was not present. Gaspard did not use cunning to deceive Beadle. Couples will often promise to do things for their partner while they are involved in a romantic relationship. These promises do not rise to the level of an actionable affirmative misrepresentation. Because there was no intent to deceive at the time the promise was made, the promise does not become actionable fraud when the relationship ends.
Second, Beadle argued that Gaspard falsely represented to her that she would not have to pay for the usury legal work that was performed. Beadle contends Gaspard made a false misrepresentation when he told her "I can no longer work for free," and asked her to find a new attorney. We hold that this statement is not sufficient to rise to the level of an actionable affirmative misrepresentation as required to prove fraud.
Trial testimony indicates that Beadle thought she would not have to pay for Gaspard's legal work because of their close relationship. Witnesses testified Beadle had no knowledge that Gaspard was going to charge her for the legal services. Gaspard's *236 normal billing practice consisted of sending a statement and bill for legal services one or two months after work was performed, but he did not bill Beadle until almost two years after he performed legal services for her. Gaspard also testified that his normal practice was to enter into written contracts with his clients for legal representation, but in this case he did not do so. Beadle knew Gaspard's billing practices because she and her husband had entered into a written contract with him for legal representation prior to the divorce. However, there was no actionable misrepresentation.
By saying he could no longer work for free, Gaspard may have made an admission that he had worked for free in the past. But, even making every inference in Beadle's favor, the statement does not mean Gaspard never intended to charge her. It merely means that he wanted to be paid for any future work. We cannot assume that Gaspard's statement that he wanted to be paid for future work was a representation that he would never bill Beadle for previous work performed.
We find that there was no affirmative misrepresentation upon which the jury could have relied to find fraud. Based on the evidence, no reasonable jury could have concluded that a false representation was made by Gaspard. The record does not contain a scintilla of evidence that fraud was committed by Gaspard, and, thus, the evidence is legally insufficient. See Star Houston, 886 S.W.2d at 417. Furthermore, after considering all the evidence, we conclude the jury's fraud finding is against the great weight and preponderance of the evidence, and, thus, the evidence is factually insufficient to support the jury's fraud finding. See Lofton, 720 S.W.2d at 805. We sustain the rest of Gaspard's issue one. We reverse and render judgment that Beadle take nothing on her fraud claim. In light of our holding on this issue, we need not address Gaspard's issue two concerning fraud damages and decline to do so.
Intentional Infliction of Emotional Distress
In issues three, four, five, and six, Gaspard argues the pleadings and evidence are: (1) insufficient to support a finding of intentional infliction of emotional distress; (2) insufficient to support any award for emotional distress; (3) insufficient to establish causation; and (4) insufficient to support a finding that Gaspard acted with malice. Gaspard also challenges the specific amount of $12,500.00 awarded to Beadle.
1. The Pleadings
In Beadle's Verified First Amended Answer and Counterclaims, counterclaim III concerned emotional distress. In the counterclaim, Beadle stated that Gaspard caused her to suffer severe emotional distress. Moreover, Beadle specified the physical manifestations of emotional distress she intended to show at trial, including headaches, depression, and loss of sleep. Based on this information, Gaspard had the requisite notice of Beadle's cause of action and had enough information to prepare an adequate defense as required by the Texas Rules of Civil Procedure. See TEX.R.CIV.P. 45(b), 47(a). Thus, the pleadings were sufficient to support a finding and an award for emotional distress suffered by Beadle. See Boyles, 855 S.W.2d at 601. We overrule part of Gaspard's issues three and four.
2. The Evidence: The Finding of Intentional Infliction of Emotional Distress and Damages Thereon
Gaspard contends the evidence presented by Beadle was legally and factually insufficient to support a finding and award for emotional distress. In reviewing the legal sufficiency of the evidence, we view the evidence in the light most favorable to the verdict. See Havner, 825 S.W.2d at 458. If there is more than a scintilla of evidence to support the finding of emotional distress, Gaspard's legal sufficiency challenge will be overruled. See Star *237 Houston, 886 S.W.2d at 417. In examining the factual sufficiency of the evidence, the jury finding of emotional distress will only be set aside if, after considering all the evidence, we find the jury finding was so against the great weight and preponderance of the evidence that the verdict was manifestly unjust. See Lofton, 720 S.W.2d at 805; Miller v. Kendall II, 804 S.W.2d 933, 939 (Tex.App.-Houston [1st Dist.] 1991, no writ).
To prove intentional infliction of emotional distress, a plaintiff must establish: (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 was severe. See Twyman v. Twyman, 855 S.W.2d 619, 621 (Tex.1993). These elements were correctly presented to the jury in Question 12 of the charge. The jury found Gaspard intentionally inflicted emotional distress upon Beadle. However, we find the evidence legally and factually insufficient to support the jury's finding of intentional infliction of emotional distress because there is no evidence that Gaspard's conduct was extreme and outrageous.
Trial testimony indicates that Gaspard, an attorney, began a sexual relationship with Mrs. Beadle, a client, while she was in the middle of her divorce and while he was representing both Mr. and Mrs. Beadle in a real estate matter. While they dated, Gaspard spent time with Beadle's children, met her friends, joined in her family's Christmas and birthday celebrations, and generally treated her well. During this time, Gaspard also provided Beadle with legal assistance by drafting some pleadings in a usury counterclaim she was pursuing in her divorce action. Beadle apparently did not consider Gaspard's conduct to be extreme or outrageous until he ended the relationship with Beadle and sent her an invoice for his legal work.
There is no doubt that Beadle was unhappy after the break-up. Her emotional distress symptoms included weight gain, nausea, lack of sleep, headaches, and clinical depression. Testimony indicates she was bewildered, shocked, and distraught at receiving a bill for services she thought Gaspard would do for free. Beadle kept wondering "why he [Gaspard] would do this to her" when she "thought he had helped her out of the goodness of his heart." Beadle's neighbor testified that Beadle felt desperate, became lethargic, and displayed a general "inability to get things done." A co-worker testified that Beadle would cry in the bathroom at work. She sought professional help when her crying disrupted her job performance. Beadle's doctor testified he prescribed her "Prozac," a prescription drug for her feelings of worthlessness. Beadle also contemplated suicide, although she "wasn't going to run into the bathroom and cut [her] wrist" immediately.
Although Gaspard did not behave in a socially appropriate manner, we hold, as a matter of law, that his conduct was not extreme and outrageous. In a claim of intentional infliction of emotional distress, the nature of the conduct must be considered. See Twyman v. Twyman, 855 S.W.2d 619, 621 (Tex.1993). A plaintiff can only recover for intentional infliction of emotional distress "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." Twyman, 855 S.W.2d at 621. Whether a defendant's conduct may reasonably be regarded as extreme and outrageous is a question of law. See Wornick Co. v. Casas, 856 S.W.2d 732, 734 (Tex.1993).
As the Texas Supreme Court has indicated, a party must have latitude to exercise his rights even if some emotional distress will result. See City of Midland v. O'Bryant, 18 S.W.3d 209, 217 (Tex.2000). In the case before us, Gaspard *238 believed he had a right to be paid for his legal work. The timing of his bill and the manner in which Gaspard performed the legal work was not prudent; however, sending someone a bill and ending a relationship with them at the same time is simply not extreme and outrageous behavior. Insensitive or rude behavior does not amount to outrageous behavior. See Mattix-Hill v. Reck, 923 S.W.2d 596, 597 (Tex. 1996).
Similarly, mere insults, indignities, or other trivialities do not rise to the level of extreme and outrageous conduct. See GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 612 (Tex.1999). "Occasional malicious and abusive incidents should not be condoned, but must often be tolerated in our society." Id at 617. It is only when such conduct becomes a regular and continuous pattern of behavior that it will rise to the level of extreme and outrageous conduct. See id.
We are cognizant of the Texas Supreme Court's directive that the context and the relationship between the parties must be considered when determining whether certain conduct is extreme and outrageous. See GTE Southwest, 998 S.W.2d at 612. In this situation, the fact that Gaspard was sexually involved with a former client and sent her a bill after ending the relationship does seem to add insult to injury; however, we do not consider such actions to be extreme and outrageous conduct.
We are also aware that some Texas courts have upheld findings of intentional infliction of emotional distress when plaintiffs become so worried that they consider taking their own lives, as Beadle did in the case before us. See, e.g., Motsenbocker v. Potts, 863 S.W.2d 126, 135 (Tex.App.-Dallas 1993, no writ). In addition, when a jury considers the evidence and makes a finding of emotional distress based upon correct definitions in the charge, some courts have upheld the award and finding even if the actions do not amount to extreme and outrageous conduct in their own personal view. See, e.g., Tidelands Auto. Club v. Walters, 699 S.W.2d 939, 945 (Tex. App.-Beaumont 1985, writ ref'd n.r.e.).
However, rude behavior does not equate to outrageousness. See Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994) (noting that when an employee has benefit checks delayed, is given the "runaround" and fabricated excuses of lost files and malfunctioning computers, the employee was treated rudely but the conduct cannot be regarded as extreme and outrageous). In today's society, individuals need to have thick skin. As such, "[p]laintiffs must necessarily be expected and required to be hardened to a certain amount of rough language, and to occasional acts that are definitely inconsiderate and unkind." RESTATEMENT (SECOND) OF TORTS § 46 cmt.d.
In the present case, we find Gaspard's behavior does not amount to an actionable intentional infliction of emotional distress claim because we find, a matter of law, there was no extreme and outrageous conduct.
We sustain the remainder of issues three, four, five, six and seven. Accordingly, we reverse the judgment awarding Beadle damages on her intentional infliction of emotional distress claim and render judgment that she take nothing on such claim. In light of our holding on this issue, we need not address Gaspard's causation issue and decline to do so.
Exemplary Damages
In issue eight, Gaspard complains there is no actual damage finding sufficient to support an exemplary damage award. It is well settled that actual damages must be awarded in order to support a finding of exemplary damages. See City Prod. Corp. v. Berman, 610 S.W.2d 446, 450 (Tex.1980). Because we have reversed Beadle's recovery for both fraud and intentional infliction of emotional distress, there are no actual damages upon which to base the jury's award of exemplary damages. We sustain issue eight, reverse the exemplary damage *239 award, and render judgment that Beadle take nothing on her claim for exemplary damages. In light of our disposition, we need not address Gaspard's claim in issue nine that the evidence is insufficient to show malice or his jury charge argument, and we decline to do so.
Sanctions
Finally, in issue 10, Gaspard argues the trial court erred in assessing sanctions against him in the amount of $20,000. We disagree. The decision to impose a sanction is left to the discretion of the trial court. See Onwuteaka v. Gill, 908 S.W.2d 276 (Tex.App.-Houston [1st Dist.] 1995, no writ). We review a trial court's Rule 13 sanction order under an abuse of discretion standard to determine whether the court acted without reference to any guiding rules and principles. See Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985); Laub v. Pesikoff, 979 S.W.2d 686, 693 (Tex. App.-Houston [1st Dist.] 1998, pet. denied).
Rule 13 sanctions may be imposed against an attorney who files a pleading that is both groundless and brought in bad faith. See Woodward v. Jaster, 933 S.W.2d 777, 782 (Tex.App.-Austin 1996, no writ). Rule 13 of the Texas Rules of Civil Procedure defines "groundless" as having no basis in law or fact and not warranted by good faith argument. TEX.R.CIV.P. 13. A Rule 13 sanction order must be supported by specific allegations of good cause. See Dyson Descendant Corp. v. Sonat, 861 S.W.2d 942, 950 (Tex.App.-Houston [1st Dist.] 1993, no writ); Spiller v. Spiller, 21 S.W.3d 451, 456 (Tex.App.-San Antonio 2000, no pet.). A trial court's failure to specify the good cause for sanctions in a sanction order may be an abuse of discretion. See Mattly v. Spiegel, Inc., 19 S.W.3d 890, 896 (Tex. App.-Houston [14th Dist.] 2000, no pet.) (citing Thomas v. Thomas, 917 S.W.2d 425, 432 (Tex.App.-Waco 1996, no writ)).
In this case, the sanctions order was included as part of the final judgment, but the trial judge did not list the particulars of the good cause. Gaspard complains that the trial court abused its discretion in awarding the sanctions because the judge did not state good cause for imposing the sanctions in her order.
Nonetheless, a failure to make particular findings will be harmless error if a trial court's findings of fact and conclusions of law "supply the particulars of the good cause required by Rule 13." Bradt v. Sebek, 14 S.W.3d 756, 769-70 (Tex.App.-Houston [1st Dist] 2000, pet. denied). In her findings, the trial judge specified the conduct upon which she was basing the sanctions. The judge stated on the record "I find good cause to issue sanctions ... under Rule 13 for the conduct that happened after [the filing of the initial lawsuit] and the counterclaim and discovery and the whole proceedings of this case up to then. I'm also thinking that your conduct was not up to the standards of how lawyers should conduct themselves in a lawsuit... so I'm going award sanctions in the amount of $20,000."
The judge also noted that Gaspard filed discovery requests that were designed to harass Beadle, including an irrelevant request for an interrogatory that asked her to admit or deny if her sex drive was higher than his, and one that asked Beadle to admit she would have sexual relations with Gaspard at any time and any place. In addition, the judge noted that Gaspard asked the court to "horse whip" Beadle and Lupo in several pleadings. He also used other unnecessary, inflammatory language, including suggestions that Beadle and Lupo had conspired with the devil to ruin his good name. Finally, Gaspard admitted under oath that he had no evidence of any damage to his reputation when he filed his cause of action for libel and slander. When pleadings and motions are filed for harassment purposes, a trial court may impose sanctions against the attorney. See Hawkins v. Estate of *240 Volkmann, 898 S.W.2d 334, 337 (Tex. App.-San Antonio 1994, writ denied). The statements in Gaspard's amended petition included:
I resent them using this Court to slander and defame me with a pack of lies! At a minimum, they should be horse whipped!! These people have set out to inflict as much damage and harm to my persoanl [sic] reputation as they could conceive with the help of the devil. Again, I sue both of them under any legal theory available in this State ...
Beadle's expert witness testified that such behavior was inappropriate for the legal profession and this testimony was not rebutted. We do not find the sanctions to be excessive. We find the judge's ruling on the record complies with the Rule 13 requirement that the particulars of good cause be specified. We find no abuse of discretion in this case.
Gaspard also argues that Beadle has waived her right to sanctions because a motion for sanctions was not filed pre-trial, relying upon Remington Arms Co. Inc. v. Caldwell. See 850 S.W.2d 167 (Tex.1993). The court in Remington Arms found that, by failing to request a pre-trial hearing on discovery abuse, the respondents waived their right to complain about the conduct for the first time at trial. See id. at 170. But the Remington Arms court recognized the rule was not absolute. See id. They explained that an absolute rule would bar the imposition of sanctions revealed for the first time during or after trial. See id. In the case before us today, the issue of discovery abuses was brought before the court pre-trial; however, the trial court chose to postpone ruling on the sanctions issue until after trial. A trial judge may chose to withhold her ruling on a motion until after she hears the relevant trial evidence. We find this to be within the discretion of the trial court. We affirm the sanctions award and overrule issue 10.
Conclusion
We reverse the judgment on the fraud damage award, the intentional infliction of emotional distress award, and the exemplary damages award, and render judgment that Beadle take nothing on these claims. We affirm the trial court's judgment with respect to the sanctions against Gaspard.
NOTES
[*] The Honorable Jackson B. Smith, Jr., retired Justice, Court of Appeals, First District of Texas at Houston, participating by assignment.
[1] Beadle's father-in-law's estate intervened in the Beadles' divorce proceeding to recover money he loaned them to build a house. The usury claim was a counterclaim Beadle asserted against her father-in-law's estate.
[2] Beadle does not contend that Gaspard falsely promised to marry her; she only thought he would propose marriage because their relationship was going well. Even if she did so contend, Texas no longer recognizes the cause of action of wrongful seduction. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1761204/ | 704 So.2d 1199 (1997)
STATE of Louisiana
v.
Dwayne ALEXANDER.
No. 97-K-1803.
Supreme Court of Louisiana.
December 12, 1997.
Denied.
JOHNSON, J., not on panel. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1799417/ | 700 So.2d 1030 (1997)
ESTATE OF Nero BRADFORD, Plaintiff-Appellant,
v.
Gertha Mae THOMAS, et al., Defendant-Appellee.
No. 29807-CA.
Court of Appeal of Louisiana, Second Circuit.
September 24, 1997.
*1031 Sir Clyde Lain, II, Monroe, for Plaintiff-Appellant.
Wright & Underwood by Patrick H. Wright, Jr., Monroe, for Defendant-Appellee.
Before NORRIS, WILLIAMS and CARAWAY, JJ.
NORRIS, Judge.
The plaintiff, Louis R. Bradley, as administrator of the succession of Nero Bradford, appeals the judgment that sustained defendant Gertha Mae Thomas's peremptory exception of no right of action on the grounds that the court appointing Bradley as administrator lacked jurisdiction. For the reasons expressed, we reverse and remand.
Facts/Procedural History
Nero Bradford ("decedent") died testate in 1984 and was survived by four sisters, one of whom is Ms. Thomas. His will designated Ms. Thomas as his universal legatee and Kelly Barnes as succession administrator. The succession was opened in Jackson Parish, and subsequently, the testament was challenged by decedent's other sisters. While the action to annul the will was pending, Ms. Thomas petitioned the court to have herself placed in full possession of the estate as universal legatee in accordance with the will. Ms. Thomas did not relate to the court that the will was presently being attacked, and eventually obtained a judgment of possession which was, however, ultimately annulled. See, Bradford v. Thomas, 499 So.2d 525 (La.App. 2d Cir.1986), writ denied, 503 So.2d 480 (La.1987). Subsequently, the will itself was declared null for want of form. Thus, decedent's succession fell intestate.[1]
*1032 Nevertheless, it appears from the record, that Ms. Thomas, acting alone and in proper person, purportedly opened another succession for the decedent in Bienville Parish in June of 1990. Although decedent's testament had been declared null, Barnes, listing himself as administrator, executed a "transfer deed" conveying decedent's immovable property located in Bienville Parish to Ms. Thomas on December 12, 1990.[2] This transfer deed was filed in the conveyance records of the clerk of court's office in Bienville Parish the same day.
Subsequently, in 1993, decedent's other heirs, not including Ms. Thomas, nominated Bradley as administrator of the succession. The Jackson Parish court appointed him administrator, and subsequently authorized a private sale of decedent's immovable property. Pursuant to that order, Bradley sold the immovable property to Horace and Ora Loyd ("the Loyds") in 1994. This act of sale was filed in the conveyance records of the clerk of court's office in Bienville Parish.
However, the 1990 transfer acted as a cloud on the Loyds' title to the property. Therefore, in 1996 Bradley, in his capacity as administrator in an effort to clear title to the property that he had conveyed, filed the instant rule to show cause [3] in Bienville Parish against Ms. Thomas[4] to show why the 1990 transfer deed should not be stricken from the conveyance records. Bradley notified the district court that decedent's testament had been declared null in the Jackson Parish proceedings before the 1990 transfer. Bradley contended that because the testament, designating Barnes as administrator and Ms. Thomas as universal legatee, was declared null, Barnes had no authority to act as administrator and transfer the property to Ms. Thomas.
Ms. Thomas, in response, filed the instant exception no right of action. Citing La. C.C.P. Art. 2811,[5] Ms. Thomas alleged that decedent was domiciled in Bienville Parish at the time of his death, and thus, the Jackson Parish court lacked subject matter jurisdiction over the succession. At the trial of the exception, Ms. Thomas introduced a credit deed showing that the decedent bought immovable property in Bienville Parish in 1932; the 1990 transfer deed and the tax certification from the Bienville Parish tax assessor; and the 1994 act of sale with the Jackson Parish court order authorizing the sale. The transcript indicates that she also filed a copy of the record of the "Succession of Nero Bradford" that was opened in Bienville Parish in 1990, although this record consists of only three pages. Finally, Ms. Thomas testified that decedent built a house on the immovable property and lived in it until his death. Ms. Thomas therefore contended that all orders and appointments issued from Jackson Parish, including Bradley's appointment as administrator, were absolutely null due to a lack of subject matter jurisdiction[6] and therefore, Bradley had no right of action to sue on behalf of the succession.
Bradley introduced a copy of the Louisiana Supreme Court's per curiam opinion in Succession of Nero Bradford, 95-1884 (La.12/28/95), 664 So.2d 393, and a copy of this court's opinion in Bradford v. Thomas, *1033 499 So.2d 525 (La.App. 2d Cir.1986).[7] Because of our decision today, we need not address the impact of these documents.
Based on the evidence adduced at the trial of the exception, the court found that the decedent was a resident[8] of Bienville Parish at the time of his death. The Bienville Parish district court sustained the exception and dismissed Bradley's suit. Bradley appeals urging that the district court erred in sustaining the exception of no right of action. We are unable at this time to consider the merits of this argument. We notice, on our motion, that parties needed for just adjudication have not been joined.
Discussion
Ms. Thomas does not argue whether Bradley was in fact appointed as administrator or whether the instant action is of the variety contemplated by La. C.C.P. art. 685 for a succession representative to enforce. Both by the text of her exception and the argument in the district court and on appeal, it is apparent that the thrust of Ms. Thomas's position was to allege that the judgment appointing Bradley as administrator, as well as all other judgments and orders issued from Jackson Parish, were absolute nullities based on a lack of subject matter jurisdiction. See, Succession of Guitar, supra. In her exception, she prays for a judgment declaring the appointment of Bradley to be "null and void," and that the Bienville Parish court be recognized as the court with subject matter jurisdiction. At the trial of the exception, Ms. Thomas offered no evidence addressing Bradley's right or interest in the action to clear title. Instead, she primarily offered evidence as to decedent's domicile. In addition, the District Court's reasons for judgment state that "Jackson Parish would not therefore have jurisdiction and any judgment or orders emanating therefrom would be a nullity." Therefore, the trial of the matter at the district court was in fact a nullity action styled as an exception of no right of action. Raising an absolute nullity by means of an exception is permitted under our jurisprudence. Standard Mach. Co. v. Melancon-Bourgeois Lumber Co., 60 So.2d 238 (La. App. 1st Cir.1952); Andrews v. Sheehy, 122 La. 464 (1908), 47 So. 771; Cf., Bryant v. Pierson, 583 So.2d 97 (La.App. 3d Cir.1991). Furthermore, an absolutely null judgment may be attacked collaterally, in any court, and at any time. La. C.C.P. 2002; Roach v. Pearl, 95-1573 (La.App. 1st Cir. 5/10/96), 673 So.2d 691.
Maintaining the exception would immediately result in nullifying the appointment of Bradley. However, the overall effect of sustaining the exception could effectively erase nearly 13 years of litigation, judgments and orders originating from Jackson Parish involving this minuscule estate. See, supra n. 5.
The joinder of parties needed for just adjudication is addressed in La. C.C.P. art. 641,[9] which provides that:
A person shall be joined as a party in the action when either:
(1) In his absence complete relief cannot be accorded among those already parties.
(2) He claims an interest relating to the subject matter of the action and is so situated that the adjudication of the action in his absence may either:
(a) As a practical matter, impair or impede his ability to protect that interest,
(b) Leave any of the persons already parties subject to a substantial risk of incurring multiple or inconsistent obligations.
The failure to join a party under La. C.C.P. art. 641 and 642 may be noticed by an *1034 appellate court on its own motion. La. C.C.P. arts. 645 and 927; State Dept. of Social Services v. Norris, 26, 831 (La.App.2d Cir. 12/7/94), 648 So.2d 9.
In the instant action, the consequence of maintaining this exception would be to deprive decedent's other sisters of their intestate inheritance rights and the Loyds of their property. These persons would likely pursue duplicate litigation in which res judicata could be an issue. However, none of these persons[10] were parties to the nullity action.
Decedent's other sisters are parties needed for just adjudication. They are intestate heirs. Nullifying Bradley's appointment could ultimately strike down the judgment declaring the decedent's will as null for want of form. Therefore, the rights of decedent's other sisters as intestate heirs, would be expunged which could result in depriving them of ownership of succession property. Thus, they are parties needed for just adjudication. See, Succession of Burgess, 323 So.2d 914 (La.App. 4th Cir.1975), and Succession of Populus, supra; Blanchard v. Naquin, 428 So.2d 926 (La.App. 1st Cir.1983), writ denied, 433 So.2d 162.
Because the attack on the administrator appointment could directly affect the 1994 act of sale, the Loyds are parties needed for just adjudication. The judgment allowing Bradley to sell the property would be null, if it were deemed that Jackson Parish lacked subject matter jurisdiction, and thus, title to the immovable property that the Loyds acquired from Bradley would presumably be void. Adjudication without them would as a practical matter impair or impede their ability to protect their interest and subject the present parties to possibly multiple or inconsistent obligations. See, Stewart v. Williams, 572 So.2d 1085 (La.App. 1st Cir. 1990).
Therefore, to bring final resolution to this matter on remand, the entire record of all proceedings occurring in Jackson Parish, including the initial affidavit of death, domicile, and heirship should be filed into evidence. Furthermore, in adjudicating the nullity action, the trial court should take note of Ms. Thomas's actions in the Jackson Parish proceeding, and the proof presented regarding subject matter jurisdiction therein. Finally, the court should consider any applicable rules on nullity including whether there has been any acquiescence in judgment. See, La. C.C.P. art. 2003.
Conclusion
For the reasons expressed, the judgment sustaining the exception of no right of action is reversed and the case remanded for a determination by the trial court of all parties needed for just adjudication consistent with La. C.C.P. art. 641, and for further proceedings consistent with this opinion. Trial and appellate costs are assessed to appellee, Gertha Mae Thomas.
REVERSED AND REMANDED.
NOTES
[1] Furthermore, litigation involving this minuscule estate has thrived for nearly 13 years. See, 499 So.2d 525 (La.App.2d Cir.1986), writ denied, 503 So.2d 480 (La.1987); 550 So.2d 678 (La. App. 2d Cir.1989); 567 So.2d 751 (La.App. 2d Cir.1990); 27,123 (La.App.2d Cir. 6/21/95), 658 So.2d 248, 95-1884 (La.12/8/95), 664 So.2d 393.
[2] The parties do not dispute that the property is located in Bienville Parish.
[3] This rule to show cause was eventually amended due to a successful dilatory exception of unauthorized use of summary procedure.
[4] Kelly Barnes and Francis N. Joyner, Clerk of Court and ex-officio Notary Public were also named as defendants, but neither answered the amended rule to show cause nor the present appeal.
[5] Article 2811 states in relevant part that "[a] proceeding to open a succession shall be brought in the district court of the parish where the deceased was domiciled at the time of his death."
In proceedings to open successions, venue rules are treated as jurisdiction ratione materiae. Succession of Guitar, 197 So.2d 921 (La.App. 4th Cir.1967), citing Howell v. Kretz, 15 La.App. 454 (1930), 131 So. 204.
[6] Only the district court which sits in the parish of the decedent's domicile at the time of his death has jurisdiction to adjudicate succession matters. A decree of any other district court opening the succession, sending heirs into possession, or appointing an administrator is absolutely null. Taylor v. Williams, 162 La. 92 (1926), 110 So. 100.
[7] The opinions were admitted by the court subject to the introduction of all pleadings related to the opinions.
[8] The district court's reasons for judgment states "resident," whereas Article 2811 requires "domicile" to vest subject matter jurisdiction.
[9] La. Acts 1995 No. 662 amended La. C.C.P. arts. 641 and 642 by removing the terms "necessary" and "indispensable" parties, and inserting the concept of "joinder of parties needed for just adjudication." La. C.C.P. art. 641.
Under the revision, an analysis of the interest of the joined and non-joined parties with respect to the action is required to determine whether the action may proceed. Succession of Populus, 95, 1469 (La.App. 1st Cir. 2/23/96), 668 So.2d 747.
[10] From the judicial record, it appears that other third persons may have acquired an interest in the present succession. See, Succession of Bradford, 567 So.2d 751 (La.App. 2d Cir.1990).
Therefore, a hearing shall be held upon remand to determine the parties needed for just adjudication. If any of the intestate heir's interest has been completely assigned, then the assignor may not be a party needed for just adjudication. See, Robichaux v. Boutte, 492 So.2d 521 (La.App 3d Cir.1986), writ denied, 496 So.2d 352. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1860468/ | 874 So.2d 18 (2004)
James LEWIS, Appellant,
v.
STATE of Florida, Appellee.
No. 4D01-4048.
District Court of Appeal of Florida, Fourth District.
April 21, 2004.
Rehearing Denied June 14, 2004.
Carey Haughwout, Public Defender, and Nan Ellen Foley, Assistant Public Defender, West Palm Beach, for appellant.
Charles J. Crist, Jr., Attorney General, Tallahassee, and Sue-Ellen Kenny, Assistant Attorney General, West Palm Beach, for appellee.
WARNER, J.
Appellant appeals the trial court's order revoking his probation as well as the order of restitution. He claims that the trial court revoked his probation because he *19 tested positive for marijuana when drug testing was not imposed as a condition of probation. Because the court found that appellant failed to abide by the conditions of probation by using a controlled substance, this drug testing issue was not properly preserved, and we affirm. However, we reverse the restitution award made to the Broward County Sheriff's Office Restitution Fund because the sheriff's office is not considered a "victim" under the statute authorizing restitution.
In 1991, appellant James Lewis pled to multiple counts of armed sexual battery, robbery, and aggravated battery on an elderly person. The court imposed a negotiated sentence of sixteen and one-half years imprisonment followed by ten years of probation on one count, and concurrent fifteen-year prison terms on the remaining counts. The written order of probation imposed conditions that required appellant not to violate any law or use controlled substances without a prescription and to abide by the instructions of his probation officer.
Appellant was released from prison in 1998 and began serving his probationary term. Approximately three years later the state filed an affidavit of violation of probation which included the following allegations:
Violation of Condition (15), which states, "you shall not do any of the following (without first obtaining the consent of your probation officer), violate any law of any city, county, state, or the United States (a conviction in a court of law is not necessary for you to be found in violation)," in that, the aforesaid, on or about 2/5/01, did possess marijuana as evidenced by the aforesaid testing positive for marijuana as a result of a urine drug test given to him in the DeLand probation office on 2/5/01 with this test being confirmed by PharmChem Laboratories on 2/9/01.
Violation of Condition (J4), which states, "You must do each and every of the following, follow carefully and faithfully both the letter and spirit of valid instructions given you by a duly authorized probation officer," in that, the aforesaid was instructed by his officer to refrain from use of drugs and the aforesaid failed to comply with this instruction on or about 2/5/01 as evidenced by the aforesaid testing positive for marijuana as a result of a urine drug test given to him in the DeLand probation office on 2/5/01 with this test being confirmed by PharmChem Laboratories on 2/9/01.
At the revocation hearing, Lewis's probation officer testified that he instructed Lewis as to the conditions of his probation, including the requirement not to use controlled substances. When appellant came to the probation office in February 2001, the officer told Lewis that he wanted him to submit to a urine test. Lewis told him it would test positive for marijuana but agreed to take the test. Indeed, the test proved positive for marijuana and was admitted into evidence. The officer had Lewis sign an admission, which was also entered into evidence.
The trial court deferred ruling on the allegation that Lewis violated the law by testing positive for marijuana, but found that he had substantially violated his probation by failing to follow the officer's instructions on the use of drugs, as well as committing a second violation by driving while his license was suspended.[1]
*20 On appeal, Lewis claims that the court relied on his positive test for marijuana to revoke his probation when drug testing was not a condition of his probation. This issue was never raised in the trial court and was thus not properly preserved for appeal. It is also not fundamental error. The state charged appellant with failing to follow his probation officer's instructions not to use drugs. The probation order contained a specific condition that Lewis not use controlled substances, and the officer instructed Lewis on this condition. Not only was this proven by the positive drug test which was not objected to at trial on this ground, but it was also proven by Lewis's own admission. Therefore, no fundamental error is present.
We distinguish Alvarez v. State, 635 So.2d 1053, 1054 (Fla. 4th DCA 1994), in which this court held that the trial court erred in revoking probation based upon a positive drug test where there was no condition requiring testing in the probation order. That case neither involved fundamental error nor a probationer who admitted the violation.
We reverse the order of restitution which required appellant to pay restitution, as mandated by section 775.089, Florida Statutes (2001), to the "Sheriff of Broward County Restitution Fund-BSO Finance Division." Because the sheriff's office does not meet the statutory definition of "victim" it is fundamental error to order restitution to be paid to the sheriff's office. See Rodriguez v. State, 691 So.2d 568, 569 (Fla. 2d DCA 1997) (citations omitted). Although in some cases a government agency may be a conduit for directing restitution money to the ultimate victim, see Seidman v. State, 847 So.2d 1144, 1146 (Fla. 4th DCA 2003), there is no evidence in this case that the order was intended for a victim. Therefore, the court erred in ordering restitution to the sheriff's office.
Affirmed in part; reversed in part and remanded to vacate the order of restitution.
POLEN and KLEIN, JJ., concur.
NOTES
[1] The state also charged appellant with violating probation by driving with a suspended license. He has challenged the trial court's findings with respect to that condition. However, we affirm on that issue without further discussion. The marijuana violation was clearly the more important of the violations charged. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1985178/ | 116 B.R. 873 (1990)
In re Gabriel A. ARCURI, Jr., Debtor.
James MacLEOD, Plaintiff,
v.
Gabriel A. ARCURI, Jr., Defendant.
Bankruptcy No. 88-30531, Adv. No. 88-7047.
United States Bankruptcy Court, S.D. New York.
June 30, 1990.
*874 Victor M. Meyers, Rapport, Meyers, Griffen & Whitbeck, Hudson, N.Y., for plaintiff.
*875 Lewis D. Wrobel, Wrobel & Genova, Poughkeepsie, N.Y., for debtor-defendant.
DECISION ON OBJECTION TO DISCHARGE PURSUANT TO 11 U.S.C. § 727(a)(4)(A) and (B)
JEREMIAH E. BERK, Bankruptcy Judge.
This is an objection to discharge pursuant to Section 727(a)(4)(A) and (B) of the Bankruptcy Code ("Code"), 11 U.S.C. § 727(a)(4)(A) and (B), by James MacLeod ("Plaintiff") against the Debtor, Gabriel A. Arcuri, Jr. ("Debtor"). Plaintiff is a disputed unsecured creditor holding a claim in the amount of $15,000,000 arising out of personal injuries sustained in an automobile accident.
Plaintiff alleges that the Debtor gave false information on the schedules appended to his bankruptcy petition either intentionally or with such reckless indifference to the truth as to constitute fraud. Plaintiff claims that the Debtor falsely listed a secured obligation owing to Geygln Corporation ("Geygln"), a family owned enterprise, on the Schedule of Creditors Holding Security ("Schedule A-2") filed with his Chapter 7 petition on September 19, 1988. Plaintiff asserts that the Debtor owes no money to Geygln, and that even if he did, the obligation is unsecured. Further, Plaintiff claims that the Debtor misrepresented the value of his 20 percent ownership of Geygln, listed as an asset on his Schedule of Personal Property ("Schedule B-2").
Prior to the commencement of trial, the Debtor moved to dismiss a portion of the complaint, but the motion was denied. Plaintiff then moved for summary judgment, but this motion was also denied. Trial was held on the first claim of the complaint. A summary of the pertinent facts adduced at trial on Plaintiff's objection to discharge follows.
I. FINDINGS OF FACTS
The parties agreed to the following facts. Tr. at 11-13 (Nov. 15, 1989). The Debtor filed a voluntary petition for relief under Chapter 7 on September 19, 1988. At all times relevant to this proceeding, the Debtor owned 20 percent of the stock of Geygln, a non-publicly traded corporation owned solely by members of the Debtor's family. The Debtor's ownership of Geygln is represented by stock certificate number 7 which did not bear any notation that it was subject to a security interest. Plaintiff's Exhibit 4. The parties agreed that the Debtor was neither an officer nor a director of Geygln for the period in question.
In addition we make the following findings. The Debtor listed Geygln as a secured creditor holding an undisputed, non-contingent claim in the approximate amount of $50,000. Plaintiff's Exhibit 1. Under that portion of Schedule A-2 requiring disclosure of the security, the Debtor stated: "Loan against shares in family corporation", and indicated the approximate market value of the stock to be $45,000. In response to the requirement on Schedule B-2 to identify all stock interests, the Debtor reported: "Family Corporation 20% ownership, used as collateral on loan", but stated the market value at "0.00". By amendment filed September 15, 1989, the Debtor reduced his obligation to Geygln to $19,329 and again reported that the market value of the stock was "0.00". Plaintiff's Exhibit 3.
The Debtor, 34 years old at the time of trial, testified that he had completed four years of college, but did not obtain a degree. Tr. at 17 (Nov. 15, 1989). Although his college major was biology, in 1981 he became a securities salesperson after taking several qualifying exams. Id. at 18-19, 72. As a result of successfully completing these and other exams, he was permitted to sell both retail and wholesale stocks, bonds, mutual funds and life insurance. Id. at 19-22. Working successively at various investment firms, he eventually attempted to purchase an investment business in Albany during 1984. Id. at 21-23, 42-45. Ultimately, he terminated this business endeavor and went to work for the family corporation, Geygln. Id. at 23.
*876 During the time the Debtor was employed by Geygln, he served in various capacities. Id. at 23, 29-32, 74-76. He received $19,600 from Geygln as annual salary in 1986 and 1987. Id. at 56-58. In addition, he received from Geygln in January, 1987 a "bonus" of $37,000, although he did not know why it was paid or who made the decision to issue it. Id. at 58-61, 85; Plaintiff's Exhibit 6.
The Debtor and his four siblings each owned 20 percent of the corporation's stock. Tr. at 25-26 (Nov. 15, 1989); Tr. at 69-70 (Dec. 20, 1989). It appears that either his father, Gabriel Arcuri, Sr., or his brothers, Graig and Gary Arcuri, were the chief officers of Geygln. Tr. at 28-29 (Nov. 15, 1989); Tr. at 64-65, 102-05 (December 20, 1989). Throughout his employment, the Debtor was neither an officer nor a director of Geygln. Tr. at 26, 73 (Nov. 15, 1989). At no time during the period in question was he involved in the decision-making processes nor did he have any authority to make loans or write checks for the corporation. Id. at 73, 84-85.
The Debtor began to borrow money from Geygln in late 1984 or early 1985 in order to pay for various legal fees incurred in defending against criminal charges resulting from an automobile accident and for expenses associated with the Albany investment firm he attempted to establish. Id. at 42, 44-49, 80-82. He also used Geygln loan proceeds to pay legal fees to defend against a disciplinary proceeding before the National Association of Securities Dealers. Id. at 82-84.
The Debtor could not recall the terms of the loans, but knew that Geygln had not charged any interest nor made any demand for repayment. Id. at 49-50, 55-56. He recalled that he had not signed any promissory notes or other documents memorializing the loans. Id. at 50, 55, 107-08. The loan proceeds were either paid to him or to third parties, although the Debtor did not know the amounts or dates of payment. Id. at 52, 55. At one point he testified that he was still borrowing from the corporation, but later stated that he was no longer borrowing from Geygln, but rather from his family members directly. Id. at 55, 107.
The Debtor testified that he believed his stock was retained by Geygln as collateral for his loans, although there was no agreement documenting this. Id. at 64-68. The stock certificate was maintained by Geygln with the corporate books and he never took possession of it. Id. at 26-27, 90-91. His brother Graig, an officer of Geygln during the time the loans were made, also testified that these loans were made "against the stock". Tr. at 70, 96-97 (Dec. 20, 1989). He too stated that there was no writing evidencing the pledge of stock as security for the loans, but noted that all of the outstanding stock was held by Geygln. Id. at 70, 98.
The Debtor was confused about how much he had borrowed from the family corporation. While aware that his creditors would rely on his bankruptcy schedules, he admitted that he read the Chapter 7 petition and supporting schedules "quickly" and was not sure of some responses. Tr. at 34-36 (Nov. 15, 1989). He explained that the petition was prepared in haste to prevent the continuation of an arbitration hearing on a securities disciplinary complaint. Id. at 76-78, 82-83. Although he subsequently reduced the amount shown on Schedule A-2 from $50,000 to $19,329, the Debtor nevertheless maintained at trial that he was unsure of the actual amount owed to Geygln and still believed that he owed Geygln $50,000. Tr. at 39-41 (Nov. 15, 1989); Plaintiff's Exhibit 1 and 3. He stated:
A. I don't know what the actual value of the loan is. I know in my mind what it should be. I can't tell you exactly what it is.
Q. Well, is it $50,000 or is it $19,000?
A. I don't know.
Q. So that isn't accurate either then, is it, the amended schedule?
A. I don't know.
Q. You don't know whether it is accurate?
A. I don't know whether it is accurate.
*877 Q. Well, you claim that you owe Geygln some money, is that right?
A. That's correct.
Q. You don't know the amount that you owe them, though, is that correct?
A. The exact amount I don't know.
Tr. at 41 (Nov. 15, 1989).
The Debtor explained that he calculated the $50,000 debt "in his head" primarily based on what he was told by Geygln's bookkeeper, Kay Laraway, approximately one year before he filed the Chapter 7 petition. Id. at 78. He "had heard" that the corporation's accountant, Richard Koskey, had fixed the market value of his shares at $45,000. Id. at 89-90. Thereafter, he obtained the information used to amend Schedule A-2 to show the reduced obligation to Geygln and to value his stock at zero directly from the accountant. Id. at 86-87, 89.
Although his recollection was poor and frequently inconsistent regarding dates of loan transactions and related facts, id. at 32, 40-46, 49-55, other witnesses corroborated the essential facts of the Debtor's testimony.
For example, Richard Koskey, the accountant responsible for preparing Geygln's tax returns, testified that the corporation's 1985 tax return reflected year-end loans from the corporation to shareholders in the amount of $55,426. Tr. at 5-7, 23 (Dec. 20, 1989); Defendant's Exhibit A. In 1986, the corporation reported year-end shareholder loans of $55,226. Tr. at 22-23 (Dec. 20, 1989); Defendant's Exhibit B. Although Geygln's 1987 tax return did not show any shareholder loans at year-end, Koskey explained that the shareholder obligations could have been reported under the category of trade notes and accounts receivable elsewhere on the tax return. Tr. at 26-27, 32 (Dec. 20, 1989); Plaintiff's Exhibit 7.
To substantiate these loans, Kay Laraway, Geygln's bookkeeper, and Graig Arcuri, the officer responsible for approving most of the advances, testified. Through these witnesses, seven checks from Geygln to the Debtor or to third parties were received in evidence. Tr. at 37-41, 50-52, 54-63, 66-69; Defendant's Exhibits C through I. These checks, four of which bear the notation "loan", total $17,650. Graig Arcuri, who signed five of these checks, stated that Geygln advanced money to the Debtor on "numerous" occasions. Tr. at 65-66, 69 (Dec. 20, 1989). Denying that these advances were gifts, Graig Arcuri testified that they were in fact loans and that Geygln expected the money to be repaid. Id. He explained that the "bonus" was given to the Debtor in 1987, notwithstanding the Debtor's indebtedness to Geygln, in order to assist him financially as well as to avoid certain tax consequences to Geygln. Id. at 72-75, 84-85. Graig Arcuri also testified that no terms of repayment were specified and that Geygln never attempted to collect the loans. Id. at 94.
II. DISCUSSION
A. In general
Aptly described as a "cornerstone" of the debtor's economic rehabilitation, In re Shapiro, 59 B.R. 844, 847 (Bankr.E.D.N.Y. 1986), the discharge provisions of the Bankruptcy Code represent the "foremost remedy to effectuate the `fresh start' which is the goal of bankruptcy relief to the debtor." In re Graham, 111 B.R. 801, 805 (Bankr.E.D.Ark.1990); Dilworth v. Boothe (In re Dilworth), 69 F.2d 621, 624 (5th Cir.1934) (discharge of debts is "[o]ne of the great objects" of the bankruptcy law); In re Berman, 100 B.R. 640, 644 (Bankr.E. D.N.Y.1989) ("The granting to a debtor of a `fresh start' is the quintessence of the bankruptcy code and the litmus against which any argument impacting discharge must be compared in determining compliance with congressional intent."); In re Diodati, 9 B.R. 804, 809 (Bankr.D.Mass. 1981) ("The fresh start offered by the 1978 Act may well be the most extensive since the seven year release described in the Old Testament. . . ."). Through discharge, as the Supreme Court has observed, a debtor gains a "`new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.'" Lines v. Frederick, 400 *878 U.S. 18, 19, 91 S.Ct. 113, 113-14, 27 L.Ed.2d 124 (1970) (quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934)).
Lying at the "heart" of the fresh start provisions of the Bankruptcy Code is Section 727. H.R.Rep. No. 595, 95th Cong., 1st Sess. 384 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787; Matter of Brooks, 58 B.R. 462, 464 (Bankr.W.D.Pa.1986) (Code § 727 is the "core of the fresh start provision in bankruptcy law"). As with each form of bankruptcy relief available under the Code, however, § 727 attempts to work a compromise between diametrically opposed interests. Whereas a discharge from debts is the debtor's "ultimate goal," B. Weintraub & A. Resnick, Bankruptcy Law Manual ¶ 3.01 at 3-2 (2d ed.1986), the law's predilection to afford financial relief is not "meant to protect the dishonest debtor." Matter of Bonanza Import & Export, Inc., 43 B.R. 570, 575 (Bankr.S.D.Fla. 1984). A discharge under Code § 727 is a privilege, not a right. It may only be "granted [to] the honest debtor." In re Tabibian, 289 F.2d 793, 794 (2d Cir.1961); In re McManus, 112 B.R. 773, 775 (Bankr. E.D.Va.1990) (bankruptcy is a "privilege"); In re MacDonald, 50 B.R. 255, 259 (Bankr. D.Mass.1985) (a debtor has "no inherent right to a discharge"). This provision is designed to prevent a dishonest debtor from utilizing the law's protection to shield wrongdoing.
When presented with an objection to discharge, we must be "especially circumspect" in light of these important considerations. In re Switzer, 55 B.R. 991, 997 (Bankr.S.D.N.Y.1986). The court is required to construe the objection strictly against the objectant and liberally in the debtor's favor. In re Tabibian, 289 F.2d at 794; In re Muscatell, 113 B.R. 72, 73 (Bankr.M.D.Fla.1990); In re Graham, 111 B.R. at 805; In re Bernard, 99 B.R. 563, 569 (Bankr.S.D.N.Y.1989); In re Montgomery, 86 B.R. 948, 955 (Bankr.N.D.Ind.1988); In re Latimer, 82 B.R. 354, 359 (Bankr.E. D.Pa.1988); In re Johnson, 82 B.R. 801, 804 (Bankr.E.D.N.C.1988); Matter of Brooks, 58 B.R. at 464; In re Switzer, 55 B.R. at 997. The rationale for construing discharge objections liberally in the debtor's favor is that "[t]he filing of a bankruptcy petition would be of little aid to debtors in need of a `fresh start' if creditors could easily attack the granting of a discharge." In re Woerner, 66 B.R. 964, 971 (Bankr.E.D.Pa.1986).
1. Burden of proof
Plaintiff bears the burden of proving the objection to discharge under Bankruptcy Rule 4005. This Rule, however, does not address the burden of going forward with the evidence and leaves to the court the responsibility to formulate rules governing the shift of this burden.
Although the burden of proof or persuasion must be borne by the plaintiff, once sufficient evidence is presented by the plaintiff to satisfy the burden of going forward with the evidence, the burden thereafter shifts to the debtor to provide additional evidence reflecting a satisfactory explanation to rebut the plaintiff's prima facie case. However, the plaintiff must bear the ultimate burden of persuasion by proving all of the essential elements necessary to bar a discharge by clear and convincing evidence.
In re Bernard, 99 B.R. at 570 (citations omitted); In re Martin, 88 B.R. 319, 321 (D.Colo.1988); In re Montgomery, 86 B.R. at 956; Matter of Brooks, 58 B.R. at 464; Matter of Ramos, 8 B.R. 490, 494 (Bankr. W.D.Wis.1981).
2. Standard of proof
Courts disagree as to the standard of proof applicable to objections to discharge under Code § 727(a)(4). Some apply a fair preponderance standard, Farmers Co-operative Association v. Strunk, 671 F.2d 391, 395 (10th Cir.1982); In re Mascolo, 505 F.2d 274, 276 (1st Cir.1974); In re Ward, 82 B.R. 484, 486 (Bankr.E.D. Ark.1988); In re Gonday, 27 B.R. 428, 432 (Bankr.M.D.La.1983); In re Irving, 27 B.R. 943, 946 (Bankr.E.D.N.Y.1983). Others impose the more stringent clear and convincing standard, North Community Bank v. Boumenot, 106 B.R. 149, 150 (N.D.Ill. 1989); In re Studley, 35 F.Supp. 277, 279 *879 (D.Me.1940); In re Muscatell, 113 B.R. at 74; In re Portner, 109 B.R. 977, 986 (Bankr.D.Colo.1989); In re Ingersoll, 106 B.R. 287, 292 (Bankr.M.D.Fla.1989); In re Syrtveit, 105 B.R. 596, 598 (Bankr.D.Mont. 1989); In re Serritella, 103 B.R. 313, 315 (Bankr.M.D.Fla.1989); In re Latimer, 82 B.R. at 359; In re Greene, 81 B.R. 829, 834 (Bankr.S.D.N.Y.1988), aff'd, 103 B.R. 83 (S.D.N.Y.1989); In re Somerville, 73 B.R. 826, 835 (Bankr.E.D.Pa.1987); In re Woerner, 66 B.R. at 972; In re Shapiro, 59 B.R. at 847. Under the former Bankruptcy Act, the Second Circuit applied the fair preponderance standard to an objection to discharge under § 14(c)(1), the predecessor to Code § 727(a)(4). See, e.g., In re Robinson, 506 F.2d 1184, 1187 (2d Cir.1974); In re Slocum, 22 F.2d 282, 285 (2d Cir.1927).
The legislative history to Code § 727(a)(4), at first blush, appears to suggest that the fair preponderance standard should apply.
The fourth ground for denial of discharge is the commission of a bankruptcy crime, though the standard of proof is preponderance of the evidence rather than proof beyond a reasonable doubt. These crimes include the making of a false oath or account, the use or presentation of a false claim, the giving or receiving of money for acting or forbearing to act, and the withholding from an officer of the estate entitled to possession of books and records relating to the debtor's financial affairs.
H.Rep. No. 595, 95th Cong., 1st Sess. 384 (1977); Sen.Rep. No. 989, 95th Cong., 2d Sess. 98-99 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5884-5885, 6340.
However, the legislative history seems inconclusive. It "speaks not of setting a standard of proof, but instead, apprises us that a false oath case, although akin to perjury, need not be tested by the traditional criminal standard of proof beyond a reasonable doubt." In re Portner, 109 B.R. at 980.
We believe the appropriate standard of proof for a Code § 727(a)(4) objection to be clear and convincing evidence. A debtor is presumed "innocent, honest, and entitled to a discharge unless and until proven otherwise." Id. at 985. As one court noted:
Provisions dealing with the discharge have been traditionally recognized to be remedial and, as such, have always been liberally construed in favor of the debtor and against persons challenging the debtor's right to discharge of the Bankruptcy Code. Thus, it is well established that the burden is on the objecting party to prove that a debtor should be denied a discharge by way of clear and convincing evidence.
In re Ingersoll, 106 B.R. at 292 (citations omitted).
Where fraud is alleged, the appropriate standard of proof should be clear and convincing.
B. Section 727(a)(4)(A)
1. Purpose
Code § 727(a)(4)(A) provides that a discharge shall be granted unless "the debtor knowingly and fraudulently, in or in connection with the case made a false oath or account." The purpose of this provision has been variously stated. Courts generally view Code § 727(a)(4)(A) as designed to insure that the debtor provides "reliable," In re Muscatell, 113 B.R. at 74; In re Ingersoll, 106 B.R. at 293; In re Johnson, 82 B.R. at 805; In re Ingle, 70 B.R. 979, 983 (Bankr.E.D.N.C.1987); In re MacDonald, 50 B.R. at 259, "dependable," In re Tabibian, 289 F.2d at 797; In re Martin, 88 B.R. at 323; In re Shapiro, 59 B.R. at 849; In re Shebel, 54 B.R. 199, 202 (Bankr.D.Vt.1985); In re Diodati, 9 B.R. at 807; In re Mazzola, 4 B.R. 179, 181 (Bankr. D.Mass.1980), or otherwise verifiable information for any party having an interest in the proper administration of the debtor's bankruptcy estate, In re Wines, 114 B.R. 794 (Bankr.S.D.Fla.1990) ("adequate information"); Matter of Brooks, 58 B.R. at 467 ("all of the necessary information"). A debtor has an "affirmative duty" to identify all assets, liabilities and to answer all questions fully and with the utmost candor. In re Graham, 111 B.R. at 806.
Creditors and those charged with the administration of the bankruptcy estate are *880 entitled to a "truthful" statement of the debtor's financial condition. In re Johnson, 82 B.R. at 805; In re Ingle, 70 B.R. at 983; In re Mazzola, 4 B.R. at 182 ("The trustee and creditors are entitled to honest and accurate signposts on the trail showing what property has passed through the bankrupt's hands during a period prior to his bankruptcy."). Such complete disclosure is "essential" to the proper administration of the bankruptcy case, In re Evans, 106 B.R. 722, 723 (Bankr.M.D.Fla. 1989), and is a "prerequisite" to the debtor's ability to obtain a discharge. In re Montgomery, 86 B.R. at 956; In re MacDonald, 50 B.R. at 259 ("cooperation is impelled by § 727(a)(4)(A)'s sanction for dishonesty"). As one court noted, "In order to obtain the blessings of a general discharge the debtor must reveal and not conceal her financial condition, because complete disclosure is the touchstone for receiving a bankruptcy discharge." In re Lubin, 61 B.R. 511, 513 (Bankr.S.D.N.Y. 1986). Another court explained:
On the one hand, bankruptcy is an essentially equitable remedy. . . . In that vein, the statutory right to a discharge should ordinarily be construed liberally in favor of the debtor.
* * * * * *
On the other hand, the very purpose of certain sections of the law, like 11 U.S.C. § 727(a)(4)(A), is to make certain that those who seek the shelter of the bankruptcy code do not play fast and loose with their assets or with the reality of their affairs. The statutes are designed to insure that complete, truthful, and reliable information is put forward at the outset of the proceedings, so that decisions can be made by the parties in interest based on fact rather than fiction. . . . Neither the trustee nor creditors should be required to engage in a laborious tug-of-war to drag the simple truth into the glare of daylight. The bankruptcy judge must be deft and evenhanded in calibrating these scales.
In re Tully, 818 F.2d 106, 110 (1st Cir.1987) (citations omitted).
2. Elements
A plaintiff must establish the following elements under Code § 727(a)(4)(A): (1) the debtor made a statement under oath, (2) such statement was false, (3) the debtor knew the statement was false, (4) the debtor made the statement with fraudulent intent, and (5) the statement related materially to the bankruptcy case. Williamson v. Fireman's Fund Insurance Co., 828 F.2d 249, 251 (4th Cir.1987); In re Bernard, 99 B.R. at 570; In re Johnson, 82 B.R. at 805; In re Shebel, 54 B.R. at 202. Whether the debtor made a false oath within the meaning of Code § 727(a)(4)(A) is a question of fact. Williamson v. Fireman's Fund Insurance Co., 828 F.2d at 251; In re Bernard, 99 B.R. at 570. The plaintiff must prove each element. In re Shebel, 54 B.R. at 202; In re Nazarian, 18 B.R. 143, 146 (Bankr.D.Md.1982).
Plaintiff alleges that the Debtor made the following false oaths in connection with his bankruptcy schedules and statements: (1) the Debtor falsely stated that he is indebted to Geygln; (2) even if the loans exist, the Debtor falsely overstated the amount of the obligation, (3) the Debtor falsely understated the value of his interest in Geygln; and (4) the Debtor falsely represented that his stock was pledged as collateral.
On his original schedules and statement of affairs, as well as the amendment to Schedule A-2 filed September 15, 1989, the Debtor declared "under penalty of perjury" that he read the documents and that they were "true and correct" to the best of his "knowledge, information and belief." Plaintiff's Exhibits 1 and 3. Code § 727(a)(4)(A) "clearly extends" to documents such as these filed under penalty of perjury. H. Sommer, Consumer Bankruptcy Law and Practice § 14.2.2.3 (3d ed.1988); B. Weintraub & A. Resnick, Bankruptcy Law Manual ¶ 3.03[4][a] at 3-9-10 (2 ed.1986). Thus, Plaintiff has established the first element of proof under Code § 727(a)(4)(A).
Likewise, Plaintiff established the fifth element of proof. The purportedly false statements are material as they relate directly *881 to the possible discovery of undisclosed assets that could be made available for distribution to creditors. Materiality is established if the false oath relates to the "debtor's business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of the debtor's property." In re Johnson, 82 B.R. at 805; In re Chalik, 748 F.2d 616, 618 (11th Cir.1984); In re Mascolo, 505 F.2d at 277; In re Shapiro, 59 B.R. at 849; In re Kessler, 51 B.R. 895, 899 (Bankr.D. Kan.1985); Matter of Ramos, 8 B.R. at 495; H. Sommer, Consumer Bankruptcy Law and Practice § 14.2.2.3 (3d ed.1988).
We agree with those courts that require the debtor to make full disclosure, even of seemingly worthless assets. In re Chalik, 748 F.2d at 618; In re Muscatell, 113 B.R. at 74; In re McManus, 112 B.R. at 775; In re Mazzola, 4 B.R. 179, 183 (Bankr.D.Mass.1980). But see In re Bergman, 6 F.Supp. 898, 901 (S.D.N.Y.1934); In re Lineberry, 55 B.R. 510, 513 (Bankr.W.D. Ky.1985); In re Waddle, 29 B.R. 100, 103 (Bankr.W.D.Ky.1983). Detriment or prejudice to creditors is not an element of materiality. In re Robinson, 506 F.2d at 1188; In re Slocum, 22 F.2d at 285; Matter of Brooks, 58 B.R. at 467; In re Cline, 48 B.R. 581, 584 (Bankr.E.D.Tenn.1985) ("materiality does not depend on whether the falsehood is detrimental to creditors"). If the false oath pertains to an asset of de minimis value, however, this may tend to vitiate the debtor's fraudulent intent. See, e.g., In re Taub, 98 F.2d 81, 82 (2d Cir. 1938); In re Irving, 27 B.R. at 946. "The determination of relevance and importance of the question is not for the debtor to make. It is the debtor's role simply to consider the question carefully and answer it completely and accurately." In re Mazzola, 4 B.R. at 182; In re Chalik, 748 F.2d at 618.
For the following reasons we find that Plaintiff has failed to sustain his burden of proving the elements necessary to support his objection to discharge under § 727(a)(4)(A).
3. The existence of the Geygln loans
Plaintiff alleges that the Debtor falsely stated on Schedule A-2 and his subsequent amendment thereto that he is indebted to Geygln. Plaintiff attempted to prove this allegation primarily through the testimony of the Debtor. Not only did the Debtor testify that he was indebted to Geygln, Tr. at 39-42, 44-49, 80-84 (Nov. 15, 1989), but an officer of and the bookkeeper for Geygln testified as to the existence of the Debtor's obligation, Tr. at 37-41, 50-52, 54-63, 66-69 (Dec. 20, 1989). The Debtor also submitted documentary proof purporting to substantiate the borrowings, including a series of checks. Defendant's Exhibits A through I.
Although the Debtor's testimony concerning the specific dates, terms of repayment, interest rate and other facts pertaining to the loans was vague, we find that Plaintiff failed to present clear and convincing proof to the contrary. It was incumbent upon Plaintiff to establish the falsity with evidence that was both "definite and certain." 4 L. King, Collier on Bankruptcy ¶ 727.04 at 727-61 (15th ed.1990). Clearly, to deny a discharge for making a false statement, the statement must first be proven to be false. Feldenstein v. Radio Distributing Co. (In re Feldenstein), 323 F.2d 892, 893 (6th Cir.1963). Where, however, the plaintiff "offers only an argument, and no record, to support his allegation," the plaintiff fails to sustain his burden of proof. In re Somerville, 73 B.R. at 835.
We acknowledge the difficulty in establishing a "false oath" objection to discharge. A party should not be expected to "prove the negative", especially where evidence necessary to support the objection is far more likely to lie in the debtor's hands. Yet, where a debtor responds with credible evidence to substantiate his scheduled debts, their existence must be accepted. In re Aubrey, 111 B.R. 268, 274 (9th Cir. Bankr.1990).
4. Amount of the loans
Plaintiff alternatively argues that even if some borrowing from Geygln took place, the Debtor overstated the amount of the *882 indebtedness. In support of this argument, Plaintiff cites the subsequent amendment downward by the Debtor, from $50,000 to $19,329, nearly one year after the bankruptcy case was filed. Plaintiff's Exhibit 3. Plaintiff additionally relies on the fact that the Debtor was able to produce checks, purporting to document the loans, totaling only $17,650.
The Debtor's amendment of his Schedule A-2 reducing the amount of the Geygln obligation constitutes an admission that the amount originally listed was false. The general rule is that an amendment "does not expunge the falsity of an oath." In re Cline, 48 B.R. at 585; In re Diorio, 297 F.Supp. 842, 845 (S.D.N.Y.1968), aff'd, 407 F.2d 1330 (2d Cir.1969) (false statement in a schedule "is not `cured' by the bankrupt's subsequent disclosure"); In re Graham, 111 B.R. at 806; In re Evans, 106 B.R. at 723; In re Montgomery, 86 B.R. at 957; In re Johnson, 82 B.R. at 805. As one court noted:
Section 727(a)(4)(A) does not provide for a grace period within which one can undo a false statement, made under penalty of perjury, by later declaring the truth. Nor is there any authority for the proposition that the amendment of a false statement requires the Court to pretend that the statement originally made was true.
In re Shebel, 54 B.R. at 203.
On the other hand, subsequent disclosure may be "some evidence of innocent intent." In re Tabibian, 289 F.2d at 797; Matter of Kilson, 83 B.R. 198, 203 (Bankr. D.Conn.1988). The inference of innocent intent reflected by a subsequent amendment becomes "slight", however, where the debtor amends schedules or changes testimony after the trustee or creditors have uncovered what the debtor has sought to hide. Matter of Kilson, 83 B.R. at 203. In our case it took nearly one year after the original petition and schedules were filed for the Debtor to move to amend his Schedule A-2. Indeed, the amendment was made after the objection to discharge was filed.
In an attempt to explain the error, the Debtor recalled that the original Schedule A-2 was filed in haste to forestall the commencement of litigation concerning his securities license. Tr. at 34-35, 76-77 (Nov. 15, 1989). The original amount scheduled as owing to Geygln was based on what the Debtor calculated "in his head" from information supplied to him one year earlier. Id. at 78. He amended Schedule A-2 to reflect the lesser amount upon new information he obtained from Geygln's accountant. Id. at 86-87, 89. At trial the Debtor nevertheless maintained that he still believed the correct amount due Geygln was $50,000, the amount originally scheduled. Id. at 41.
We reject that part of the Debtor's explanation seeking to excuse the error due to haste in preparation of the initial schedules. The considerable delay between the original schedules of September 19, 1988 and their amendment on September 15, 1989 undermines this excuse. Where, as here, the original filing is done in haste, but the amended filings "were done at the debtor's leisure," such tardy amendment falls "well short of the requisite disclosure." In re Tully, 818 F.2d at 111; In re Nazarian, 18 B.R. at 147 (even if haste caused the original error, "no carelessness could excuse the Debtor's failure to amend his schedules promptly when he had the leisure to do so"); In re Gonday, 27 B.R. at 433. We further note that the "correction" did not occur until after the commencement of the instant proceeding.
A debtor cannot, merely by playing ostrich and burying his head deeply enough in the sand, disclaim all responsibility for statements which he has made under oath.
* * * * * *
Sworn statements filed in any court must be regarded as serious business. In bankruptcy administration, the system will collapse if debtors are not forthcoming. . . . The law, fairly read does not countenance a petitioner's decision to play a recalcitrant game, one where the debtor hides, and the trustee is forced to go seek. *883 In re Tully, 818 F.2d at 111-12; Matter of Kilson, 83 B.R. at 203.
Nonetheless, a statement is not fraudulent simply because it is false. In re Lovich, 117 F.2d 612, 613-14 (2d Cir.1942) ("Not every false oath in relation to a bankruptcy proceeding is made a criminal offenseonly those that are `knowingly and fraudulently' given. It must be an intentional untruth with respect to a material matter.") In re Slocum, 22 F.2d at 285; In re Carlson, 18 F.2d 1003, 1003 (E.D.Idaho 1926) (a discharge will not be denied for a "mere misstatement of fact"; there "must be willful misstatement of fact under oath . . . in short, actual fraud"); In re Crenshaw, 95 F. 632, 633 (S.D.Ala.1899). The debtor's fraudulent intent must be proven to be "actual and not constructive," In re Montgomery, 86 B.R. at 957; In re Shebel, 54 B.R. at 204; B. Weintraub & A. Resnick, Bankruptcy Law Manual S3-3 (Supp.1988).
As direct evidence of fraudulent intent is "rarely possible", In re Sklarin, 69 B.R. 949, 953 (Bankr.S.D.Fla.1987); Williamson v. Fireman's Fund Insurance Co., 828 F.2d at 252 ("the problems inherent in ascertaining whether a debtor has acted with fraudulent intent are obvious."); In re Kaiser, 722 F.2d 1574, 1582 (2d Cir.1983) ("Fraudulent intent is rarely susceptible to direct proof."); In re Montgomery, 86 B.R. at 957; In re Nazarian, 18 B.R. at 146-47 ("a debtor is unlikely to testify directly that his intent was fraudulent"), fraudulent intent may be inferred, In re Mascolo, 505 F.2d at 276; In re Ingersoll, 106 B.R. at 292; In re Sklarin, 69 B.R. at 953; In re Cline, 48 B.R. at 584, or proven by circumstantial evidence, In re Aubrey, 111 B.R. at 274; In re Johnson, 82 B.R. at 805; In re Ingle, 70 B.R. at 983. For example, where there has been a "pattern" of falsity, In re Syrtveit, 105 B.R. at 598; In re Johnson, 82 B.R. at 805; In re Ingle, 70 B.R. at 983, or a "cumulative effect" of falsehoods, In re Shapiro, 59 B.R. at 849; In re Gonday, 27 B.R. at 433, a court may find that fraudulent intent has been established.
Likewise, a court may infer fraudulent intent under Code § 727(a)(4)(A) from a debtor's reckless indifference to or cavalier disregard of the truth. In re Montgomery, 86 B.R. at 957; Sullivan v. Tracey (In re Tracey), 76 B.R. 876, 880-81 (Bankr.D. Mass.1987); In re Zahneis, 75 B.R. 201, 203 (Bankr.S.D.Ohio 1987); In re Ingle, 70 B.R. at 983; In re Shapiro, 59 B.R. at 849; In re Shebel, 54 B.R. at 204; In re MacDonald, 50 B.R. at 260; In re Savel, 29 B.R. 854, 857-58 (Bankr.S.D.Fla.1983); In re Gugliada, 20 B.R. 524, 528 (Bankr.S.D. N.Y.1982); In re Diodati, 9 B.R. at 808-09; In re Mazzola, 4 B.R. at 182.
The requirement imposed upon the debtor to not be deliberately dishonest is a reasonable quid pro quo for release from his financial hardship. Similarly, if a debtor is unprepared to provide honest answers and actions, preferring to adopt a cavalier and arrogant attitude toward truthfulness, this Court cannot in good conscience grant the discharge.
Matter of Brooks, 58 B.R. at 468.
At trial, the Debtor continued to believe that he owed Geygln $50,000 notwithstanding his amended Schedule A-2 showed only $19,329 owed and the Geygln checks offered to substantiate the loans totaled only $17,650. Upon these facts, as well as the Debtor's general demeanor and credibility, we find no pattern of falsity or reckless disregard for the truth. The Debtor appeared to be genuinely unsure of the exact amount borrowed from the family enterprise. An honest mistake or inadvertence do not evince a fraudulent intent within the meaning of Code § 727(a)(4)(A). In re Muscatell, 113 B.R. at 74; In re Evans, 106 B.R. at 724; In re Ingersoll, 106 B.R. at 293; In re Ligon, 55 B.R. 250, 253 (Bankr.M.D.Tenn.1985); In re Shebel, 54 B.R. at 202; In re MacDonald, 50 B.R. at 259; In re Diodati, 9 B.R. at 807; In re Terkel, 7 B.R. 801, 803 (Bankr.S.D.Fla. 1980); In re Fischer, 4 B.R. 517, 518 (Bankr.S.D.Fla.1980); In re Mazzola, 4 B.R. at 182. We, therefore, find that Plaintiff failed to sustain his burden as to the Debtor's misstatement of the amount due Geygln.
*884 5. Value of Geygln stock
The Debtor initially valued his 20 percent stock interest in Geygln at $45,000 on Schedule A-2. He subsequently filed an amendment to this schedule restating the value of the stock as worthless. Based on the amendment, the Debtor clearly made a false statement as to the value of his stock. Plaintiff appears to assert that the amendment is a fraudulent undervaluation of the Debtor's interest in Geygln.
A false valuation of an asset is clearly within the purview of Code § 727(a)(4)(A). See, e.g., Matter of Bobroff, 69 B.R. 295 (E.D.Pa.1987); In re Johnson, 82 B.R. 801 (Bankr.E.D.N.C.1988); In re Ligon, 55 B.R. 250 (Bankr.M.D.Tenn.1985); In re Seruntine, 46 B.R. 286 (Bankr.C.D.Cal. 1984); In re Valley, 21 B.R. 674 (Bankr.D. Mass.1982). For instance, a debtor valued his stock interest as "unknown" on his schedules, yet on prior financial disclosure statements "never had any trouble valuing his stock" as $100,000 or $163,500, In re Ligon, 55 B.R. at 253. The court found the debtor's "valuing of the stock as unknown [to be] a poorly conceived effort to disguise and conceal this substantial asset" and that "the inference of fraud is unavoidable." Id.
Where it reasonably appears that the oath is false, the burden falls upon the debtor to come forward with evidence to prove that it was not an intentional misrepresentation. "Otherwise, the court may infer fraudulent intent from the unexplained false statement." B. Weintraub & A. Resnick, Bankruptcy Law Manual ¶ 3.03[4][a] at 3-10 (2d ed.1986); see, e.g., In re Mascolo, 505 F.2d at 276; Matter of Bobroff, 69 B.R. at 297; In re Ward, 82 B.R. at 486. Absent a "credible explanation," In re Cline, 48 B.R. at 584, the court may infer fraudulent intent from an unexplained false statement. In re Mascolo, 505 F.2d at 276.
The Debtor explained how he originally valued his stock interest in Geygln at $45,000 by the following:
When I misread the thing up here it says market value, I didn't realize it was market value. I thought it meant the asset value, something like that. The best of my knowledge was that in '85 I had heard that Richard Kosky [sic] [Geygln's accountant] had valued the shares to be 20 20 percent of the shares to be worth 45,000. I felt, number one, I knew it wasn't exactly that. I felt that that was high, and I figured if you had to err, err on the side of, you know, being optimistic. However, if, you know, the fact that its market value, stock that isn't liquid isn't worth too much.
Tr. at 90 (Nov. 15, 1989).
He admitted that for the three-year period between the time he first heard of the valuation and the time he filed his petition in Chapter 7, he did not make any inquiry as to the proper value of the stock. Id. at 93. He stated that Geygln's accountant subsequently provided the information upon which he reduced the valuation of the stock from $45,000 to zero on his amendment to Schedule A-2. Id. at 87-89; Plaintiff's Exhibit 3.
Plaintiff, however, presented "no concrete evidence as to the exact value" of the stock. In re Wines, 114 B.R. at 797, and failed to "carry his burden of demonstrating that the stock had any value." In re Terkel, 7 B.R. at 803; In re Seruntine, 46 B.R. at 287-88; In re Gugliada, 20 B.R. at 528. The record is devoid of any evidence demonstrating the Debtor's fraudulent intent within the meaning of Code § 727(a)(4)(A). See, e.g., In re Schnoll, 31 B.R. 909, 912 (Bankr.E.D.Wis.1983).
6. The Geygln stock as collateral
Plaintiff claims that the scheduling of the loans from Geygln as being secured by his stock is fraudulent within the meaning of Code § 727(a)(4)(A). To substantiate the fraud, Plaintiff relies on the fact that no security agreement or other writing exists between the Debtor and Geygln evidencing the pledge of Debtor's stock as collateral for the loans. Plaintiff also believes that the lack of any notation on the original stock certificate to show that it was subject to a lien further proves the fraud.
*885 Both the Debtor and his brother Graig testified that it was their belief that the stock served as collateral for the loan. Graig Arcuri explained that Geygln required the stock as collateral because "no one else was getting money from the company in that manner, and to make it fair, we had to have something to back it up in case everything just broke loose for Gabe and he ended up with nothing, it just wouldn't be fair to the other family members." Tr. at 87 (Dec. 20, 1989).
An attempt to obfuscate the value of estate assets by the ruse of a fictitious security interest or assignment falls within the type of conduct prohibited by Code § 727(a)(4)(A). See In re Collins, 45 F.Supp. 990 (E.D.N.Y.1942). If, however, a misrepresentation is made without "[s]cienter and fraudulent, willful intent" a Code § 727(a)(4)(A) objection is not established. In re Irving, 27 B.R. at 945.
Plaintiff argues that New York Uniform Commercial Code § 8-103 mandates that a stock certificate bear a notation that it is subject to a security interest. This section states:
A lien upon a security in favor of an issuer thereof is valid against a purchaser only if
(a) the security is certificated and the right of the issuer to such lien is noted conspicuously thereon, or
(b) the security is uncertificated and a notation of the right of the issuer of such lien is contained in the initial transaction statement sent to such purchaser.
N.Y.U.C.C. § 8-103 (McKinney 1990).
The Debtor, in response, notes that this provision applies only to a situation where the transferee of the stock is a purchaser and is inapplicable where the Debtor, who was not a purchaser, merely pledged the stock back to the original issuer. In support of this contention, the Debtor relies upon New York Uniform Commercial Code § 8-321, which provides in pertinent part:
(1) A security interest in a security is enforceable and can attach only if it is transferred to the secured party or a person designated by him pursuant to a provision of subsection (1) of Section 8-313.
(2) A security interest which has thus been transferred pursuant to agreement by a transferor who has rights in the security to a transferee who has given value is a perfected security interest, but a security interest which has been transferred solely under subparagraph (1)(i) of Section 8-313 becomes unperfected after 21 days, unless, within such 21 days, the requirements for transfer under any other provision of subsection (1) of Section 8-313 are satisfied.
(3) A security interest in a security is subject to the provisions of Article 9 except that
(a) no filing is required to perfect the security interest; and
(b) no written security agreement signed by the debtor is necessary to make the security interest enforceable, except as otherwise provided in subparagraph (1)(h) or (1)(i) of Section 8-313.
N.Y.U.C.C. § 8-321 (McKinney 1990).
To deny a discharge, Code § 727(a)(4) requires that the debtor "swears to what he knows to be false." Morris Plan Industrial Bank v. Henderson, 131 F.2d 975, 977 (2d Cir.1942). As the clear and convincing standard is "demanding," In re Latimer, 82 B.R. at 359, "evidence [that] is in equilibrium" fails, In re Muscatell, 113 B.R. at 74. Although "ignorance of the law does not excuse anyone," there must first be proof that an asset was concealed knowingly and fraudulently. In re Cohen, 20 F.Supp. 298, 303 (S.D.N.Y.1937). Where a mistake occurs in an area of law that is the "subject of considerable litigation", or simply unclear as the preceding references to Article 8 of the New York Uniform Commercial Code indicate, the requisite knowledge and fraudulent intent are not demonstrated. Id. We accept the testimony of the Debtor and his brother that they intended to treat the Debtor's stock as collateral for his loans from Geygln.
*886 C. Code § 727(a)(4)(B)
At the commencement of trial, Plaintiff indicated that he was also asserting an objection to discharge under Code § 727(a)(4)(B). Tr. at 15-16 (Nov. 15, 1989). This objection was not developed at trial nor specifically addressed in the parties' post trial memoranda. To the limited extent, however, that this issue was presented, we make the following findings.
Code § 727(a)(4)(B) provides that a discharge may be denied if the debtor "presented or used a false claim". The purpose of this provision is to prevent "fraud by presentation of inflated or fictitious claims or use of such claims." 4 L. King, Collier on Bankruptcy ¶ 727.05 at 727-66 (15th ed.1990). In practice, however, "[v]ery few cases have ever arisen under this provision." Id. at n. 2.
This discharge objection has been applied to a situation where the debtor filed a falsely inflated proof of claim on behalf of his father-in-law without the claimant's authorization. In re Cline, 48 B.R. 581 (Bankr.E.D.Tenn.1985). The court found that the debtor failed to provide any credible excuse and accordingly denied the debtor's discharge. The provision has also been applied to a situation where a debtor falsely listed a debt for alimony owed to a former spouse. In re Pope, 18 B.R. 125, 127 (Bankr.S.D.Fla.1982). The court in Pope, however, found that although the debt "at best represented a dubious liability," the debtor did not fraudulently or knowingly misstate this debt. Id.
In In re Woerner, 66 B.R. 964 (Bankr.E. D.Pa.1986), the plaintiff attempted to prove that money advanced to the debtor by his father to pay legal fees constituted a gift, rather than a loan. The plaintiff argued that the debtor's scheduling of this as a debt warranted the denial of the debtor's discharge under Code § 727(a)(4)(B). The court relied on the debtor's testimony in finding it "reasonable that, while the Father obviously wanted to do everything he could to assist the Debtor in connection with the criminal matter, the Debtor would be expected to repay such a large sum of money. . . ." Id. at 975-76.
Our findings concerning Plaintiff's objection under Code § 727(a)(4)(A) are relevant to this issue as both require a showing of fraudulent intent. Presumably, the only statements that could constitute false claims under Code § 727(a)(4)(B) are the four allegations previously addressed, namely, the existence of Geygln's loans, the amount of the obligation, the valuation of Debtor's stock, and the stock's status as collateral for the loans.
Having found that Plaintiff failed to establish by clear and convincing evidence that any of these statements were made with fraudulent intent within the meaning of Code § 727(a)(4)(A), we note that Plaintiff presented no additional evidence to demonstrate the Debtor's fraudulent intent under Code § 727(a)(4)(B). Therefore, for the same reasons we denied Plaintiff's objection under Code § 727(a)(4)(A), we must similarly deny his objection under Code § 727(a)(4)(B).
CONCLUSIONS OF LAW
1. The Court has jurisdiction pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157(a). This is a core proceeding as provided by 28 U.S.C. § 157(b)(2)(J).
2. Plaintiff failed to prove by clear and convincing evidence that the Debtor made a false oath or account under Code § 727(a)(4)(A).
3. Plaintiff failed to prove by clear and convincing evidence that the Debtor presented or used a false claim under Code § 727(a)(4)(B).
4. Accordingly, the complaint objecting to the Debtor's discharge under Code § 727(a)(4)(A) and (B) is denied.
An Order shall enter in conformity herewith. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2235438/ | 929 N.E.2d 787 (2010)
RICKS
v.
STATE.
Supreme Court of Indiana.
March 4, 2010.
Transfer denied. All Justices concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3351645/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]
MEMORANDUM OF DECISION
On June 28, 1991, the State of Kansas by Connecticut counsel initiated a Petition for Habeas Corpus requiring the father Dean Martel bring his daughter Krystal Stutsman to court on July 11, 1991 so that the court might make orders concerning the custody of the daughter. The matter was continued for hearing which concluded on November 13, 1991. Because Krystal was the subject of a Kansas custody order and had resided in Kansas, the action presents two basic issues:
1. Should Connecticut exercise jurisdiction under the provisions of the Uniform Child Custody Jurisdiction Act (UCCJA). Conn. Gen. Stat. Chap. 8150?
2. If yes, should custody be placed in the father?
The court answers "yes" to both questions.
No useful purpose would be served by recounting the pre-petition pleading and procedural history of the situation other than to note a stamped January 16, 1991 ex parte custody and stay order giving temporary custody of Krystal to the father, based on a motion [sic] for custody; the docket sheet and memorandum suggest that the January 16th order merely continued in effect an order issued on August 20, 1990. Section 46b-98. Contact was made with Kansas in connection with those previous Connecticut motions. Section 46b-96. Despite certain advantages of a juvenile matter docketing, a custody habeas writ would be heard on the family relations docket. Sections 46b-1; 46b-121;46b-122. Nevertheless, with the concurrence of all concerned, because subject matter jurisdiction was not involved this court agreed to hear the petition on the merits.
Martel is represented by a private attorney and the daughter and the mother, even though the mother does not appear to be a party, are represented by court appointed attorneys. CT Page 9847 See section 46b-54(b) and Practice Book Section 1045.
I
Krystal was born on July 20, 1982 in Kansas to Roberta Stutsman as the result of a somewhat relationship with Dean Martel while he had been stationed at Fort Riley in Kansas. The father was not informed of the child's birth or existence by the mother. In response to a December 1989 letter from the Child Support Enforcement Section of the Kansas Department of Social and Rehabilitative Services, the father first learned of a possible paternity. On May 14, 1990 Kansas initiated a Uniform Reciprocal Enforcement of Support (URESA) petition Conn. Gen. Stat. Chap. 816 seeking support, reimbursement and establishment of paternity from Dean Martel whose home address was listed in the petition. In the interim after calling the mother; Dean Martel began to write, phone weekly and send gifts to Krystal culminating in an agreed summer visitation of the child in Connecticut beginning June 16, 1990. Krystal has remained in Connecticut since then.
After investigating a March 1990 neglect referral, the Social Services Section of the Kansas Department of Social and Rehabilitation Services (SRS) on June 22, 1990, requested the County Attorney to file a Child in Need of Care petition (CINC) based on a recital of an extraordinarily dirty home. SRS noted that the agency felt that the mother would not cooperate this second confirmed case because of her 11 year past history and current evasive action, even though the mother and four children at question, including Krystal, had moved to clean quarters; in-home placement was suggested. The mother has had several children, perhaps as many as seven each with a different father. The four child CINC petition was filed on June 28, 1990 without listing any father, although by then SRS knew of Martel as a putative father. On July 5, 1990 Dean Martel acknowledged paternity in the Connecticut court under the URESA petition. On July 10 the mother told SRS social worker that the child was in Connecticut and presumably with the father. The SRS worker phoned Martel about the July 16, 1990 initial hearing. Obviously, the CINC petition was not served on Martel. Kansas Stat. sections 38-1531 — 38-1534. He denies he was told he could attend the hearing.
At the July 16, 1990 Kansas hearing the court was told that Krystal was out of state with Martel. The custody affidavit may not have complied with UCCJA requirements. Without any formal order of notice, the court may have ordered father and child to appear, but, the SRS worker again called Martel; the matter was continued to July 30, 1990. A guardian at litem was appointed for the four children yet no contact by him was CT Page 9848 made with Krystal or Martel.
On July 30, 1990 the Kansas court granted legal custody of all four children to SRS. The custody decree has not been filed in Connecticut, but the failure is insignificant. Section 46b-105.
On October 11, for court review, SRS recommended that custody continue for, among other reasons, mothers failure to undergo a psychological evaluation. By then, charges of nonmaternal sexual abuse of Krystal had been revealed. Exhibit F-8. In fact, the three Kansas children always remained at home. Kansas returned legal custody of the three to their mother on April 1, 1991.
Martel had consulted a Connecticut attorney about the court activities in Kansas. He did not appear in Kansas personally or by attorney. He received no formal notice.
II
Dean Martel is now married with a daughter born February 9, 1990 and a son born November 7, 1985. He is a member of an extended family which lives in proximity to him and he owns his own home on two acres in Barkhamsted. Krystal has her own room with waterbed, desk, T.V., fish tank, books and toys. Exhibit F-9.
If the child is returned to Kansas, she would be placed in foster care until Kansas resolves custody. Kansas concedes that it is not in best interest to return child to mother at this time. The SRS worker admits Kansas could not now produce as favorable home study as the Connecticut Department of Children and Youth Services. Exhibit F-9. Kansas agrees that if child wants to remain in Connecticut, as she does, and if the therapist agrees, and he does, the better solution is father rather than foster home.
When Krystal arrived in Barkhamsted in early summer 1990 at her father's expense she was a reserved, withdrawn unkempt child. She was unfamiliar with a toothbrush and had never been to a dentist; her cavity was treated in Connecticut. She was examined by a pediatrician and a hearing doctor who found a 95% loss of hearing in one ear. The child reported she had been accidently struck in that ear during a fight between her mother and a neighbor. At the recommendation of the pediatrician, Krystal was evaluated by psychologist Dr. Freedman who recommended the Martels as custodial parents. Exhibit C-2. When allegations of sexual abuse surfaced, the father declined to return Krystal to the mother. Exhibit C-3 and F-13. Even now, it is not clear CT Page 9849 that the mother's then boy friend does not have current access to the home. The mother has not had phone contact from her mother since Thanksgiving, 1990.
Krystal is currently in her second year at the Barkhamsted School. In Kansas Krystal attended special education classes for one half day because she was unmanageable. She yelled, kicked a teacher and threw objects. There has been a dramatic change: Krystal is in full day, regular school classes and her Wexler test now shows her as above average. The school psychologist confers weekly with the child and occasionally with teacher and parents. The focus is on developing teaching strategies to close the gaps in the child's educational background. Exhibit F-10.
Krystal presently is an outgoing, lively talkative child.
The strong opinion of the school psychologist is that Krystal remain with the Martels.
III
The UCCJA requirements of notice and opportunity to be heard were not met in Kansas. Kansas knew before its decree of Martel's address as a putative father, his present custody of the child and the paternity proceeding. Cf. sections 46b-94, 46b-95. Kansas sections 38-1502; 38-1516, 38-1531; 38-1533. Failure to provide adequate notice and opportunity has constitutional dimensions. Stanley v. Illinois, 405 U.S. 645 (1972). Kansas agrees. Beebe v. Chavey, 226 Kan. 591, 602 P.2d 1279,1286 (1979; In Interest of Woodward, 231 Kan. 544, 646 P.2d 1105
(1982). The Kansas commitment of custody, therefore, is not binding on the father. Section 46b-103.
Although the Kansas custody affidavit, if any, has also been challenged, the court does not consider whether any affidavit error was harmful or can be raised collaterally. Cf. section 46b-99(a) with Kansas section 38-1309(a). Perez v. Perez, 212 Conn. 63, 72-75, 561 A.2d 907 (1989).
Whether the Kansas proceedings were effective against: the father, the same issue of jurisdiction under UCCJA would remain.
The purpose of UCCJA is to avoid jurisdictional competition in matters of child custody. Section 46b-91. Connecticut could exercise jurisdiction if it is the home state of Krystal at time of commencement of the proceeding. Section 46b-93(1)(A). Home state means the state in which the child immediately lived with a parent for at least six consecutive CT Page 9850 months. Section 46b-91(5). Whatever the UCCJA time calculation on the initial Connecticut court activity, this independent habeas corpus petition was commenced on June 28, 1991 when Krystal had been with her father in Connecticut for approximately one year. In addition, it is in the best interest of Krystal that Connecticut assume jurisdiction as the child and the father both have a significant connection with this state and there is available here substantial evidence from among others, school authorities, a psychologist, a psychiatrist, dentist and pediatrician, concerning her present and future care, protection, training and personal relationship. Section 46b-93(2). Whether the sexual abuse allegations are accurate, Krystal believes in the reality and that can be treated here. Connecticut is not an inconvenient forum. Section 46b-97.
The Kansas CINC proceedings were not pending when the habeas was filed. Section 46b-96.
IV
A habeas corpus action is a proper procedure to determine custody and visitation of a minor child. The paramount issue is the best interest of the child. Nye v. Marcus,198 Conn. 138, 140-141, 502 A.2d 869 (1985); McGaffin v. Roberts,193 Conn. 393, 479 A.2d 176 (1984).
Even if this habeas is considered a request by father that custody be modified, there has been a material change of circumstances and the Kansas custody order, however well motivated, was not based upon the best interests of Krystal. Hall v. Hall, 186 Conn. 118 440 A.2d 839 (1982).
If Kansas had returned custody of Krystal to her mother on April 1, 1991, then this custody dispute would be between mother and father instead of Kansas and father. See the January 16, 1991 affidavit of the mother, as on file. The father is a fit parent and there has been no showing that it would be detrimental to the child to permit the parent father to have custody. The presumption of best interest goes with the father; it has not been rebutted. Section 46b-56b; Perez v. Perez, supra p. 77-80.
Even apart from the presumption, the best interest of Krystal requires that she be allowed to remain in Connecticut under the control of her father.
Nevertheless, the mother should maintain a parental relationship with Krystal. The task is difficult because of distance, finances and maturity. The mother has limited income; she does not have a phone. The father's solution was vague as CT Page 9851 to frequency and duration; the mother was also ambiguous. Hopefully, specifics can be established by the parents. The court suggests that the father consider his extended family for possible lodging of any Kansas visitors, including mother. Any immediate arrangements may be subject to future revision as Krystal becomes more confident, leading possibly to Kansas visits for partial summers and holidays if accomplished without placing Krystal at risk.
If the parties cannot achieve an agreement for the immediate future, the issue is referred to Family Relations for mediation, including teleconferencing, if feasible.
V
On the day of the hearing, the father filed a motion for counsel fees from the sovereign state of Kansas. Apart from the court's view of the trial and file, the only evidence on fees was the father's testimony that he had incurred expenses of $20,000.00 in this situation, including $14,000.00 as legal. No financial affidavit was filed.
In any proceeding concerning custody, the court may order either parent to pay reasonable attorney's fees of the other parent in accordance with their respective financial abilities and section 46b-82. See Krasnow v. Krasnow, 140 Conn. 254,99 A.2d 104 (1953).
In the absence of a satisfactory evidentiary and legal showing, the motion has been denied.
VI
Accordingly, it is ordered:
1. Custody of Krystal Stutsman shall be in the father Dean Martel.
2. The Kansas mother Roberta Stutsman shall have reasonable contact and parenting time with the child in Connecticut. To that purpose, the father shall (a) pay annually for one round trip transportation of Krystal's three half siblings, Rachael, Darrell and James, from Kansas to Connecticut and provide suitable lodging during their stay, (b) encourage unlimited mail communication between Krystal and her Kansas relations, including appropriate cards and gifts for holidays and birthdays, (c) permit a weekly phone call at a designated date and time, one call of which limited to 10 minutes shall be at father's expense per month, (d) pay for a 10 minute phone call on Krystal's birthday and Christmas Day, and (e) pay annually CT Page 9852 for 1/2 round trip transportation of the mother from Kansas to Connecticut and assist the mother with locating minimal cost lodging. In the event the mother or siblings are otherwise in Connecticut the father shall provide a reasonable opportunity for contact.
3. Upon expiration of any appeal process, this file is transferred to the adult family relation docket without payment of any filing fee.
SAMUEL S. GOLDSTEIN JUDGE, SUPERIOR COURT | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/2294675/ | 40 A.3d 123 (2012)
METROPOLITAN EDISON CO.
v.
PENNSYLVANIA PUBLIC UTILITY COM'N.
No. 427 EAL (2011).
Supreme Court of Pennsylvania.
February 28, 2012.
Petition for allowance of appeal denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2376613/ | 530 S.W.2d 138 (1975)
S. Peter LAMBROS et ux., Appellants,
v.
The STANDARD FIRE INSURANCE COMPANY, Appellee.
No. 15398.
Court of Civil Appeals of Texas, San Antonio.
November 5, 1975.
Rehearing Denied December 3, 1975.
Levey & Goldstein, San Antonio, for appellants.
Joe Meador, San Antonio, for appellee.
CADENA, Justice.
Plaintiffs, S. Peter Lambros and wife, Sophia P. Lambros, appeal from a judgment rendered n. o. v., that they take nothing in their suit against defendant, The Standard Fire Insurance Company, to recover, under the so-called "all risks" homeowner's policy, for damage allegedly caused to plaintiffs' dwelling by underground water.
*139 In their first amended original petition, plaintiffs alleged that their dwelling "suffered serious structural damage and structural slab collapse caused by movement of water below the ground surface exerting pressure on the foundation, floors, sidewalks, driveways, walls. . . ." In their first supplemental petition, plaintiffs, in answer to defendant's allegations that the loss suffered by plaintiff was not within the coverage afforded by the policy, but fell within certain exclusions set out by defendant in its pleading, alleged that the damage "was caused by and resulted from water below the surface of the ground, including that which exerted pressure on (or flowed, seeped or leaked through) sidewalks, . . foundations, walls, basements ... or through doors, windows or any other openings in such ... foundations, walls or floors." Plaintiffs conceded that such loss was excluded in the standard printed policy from, but that such exclusion, being exclusion d(3), was deleted in consideration of the payment by plaintiffs of an additional premium. They further alleged, in the alternative, that the loss was caused by and resulted from "settling, cracking, bulging, shrinkage, expansion of foundations, walls, floors, ceilings, roof structures, . . .; and that said loss was not excluded under the terms of said policy since said loss was caused by a collapse of the building or a part thereof and said loss was otherwise covered under Plaintiffs' said policy." In its original printed form, the policy contained the following exclusion:
d. Loss caused by or resulting from:
(1) Flood, surface water, ...;
(2) water which backs up through sewers or drains;
(3) water below the surface of the ground including that which exerts pressure on (or flows, seeps or leaks through)... foundations, walls, basement or other floors, . . . or through . . openings in such ..., foundations, walls or floors[.]
Attached to the policy is Form No. HO-353, which is captioned, "Loss caused by water which backs up through sewers and drains and subsurface water assumption endorsement." This endorsement reads: "In consideration of an included additional premium, Exclusions d(2) and d(3), in the form attached to this policy, under the caption `Perils insured Against' are hereby eliminated.. . ."
Plaintiffs' policy, then, insured against "all risks of physical loss" except:
a. [not applicable here]
b. [not applicable here]
c. [not applicable here]
d. Loss caused by or resulting from:
(1) flood, surface water ...;
(2) [deleted]
(3) [deleted]
e. Loss caused by or resulting from freezing ...;
f. [not applicable]
g. Loss caused by earthquake, landslide or other earth movement;
h. [not applicable]
i. Loss caused by inherent vice, wear and tear, deterioration; rust, rot, mould or other fungi; dampness of atmosphere,...;
j. [not applicable]
k. Loss ... caused by settling, cracking, bulging, shrinkage, or expansion of foundations, walls, floors, ceilings, roof structures ...;
The foregoing Exclusions a through k shall not apply to ensuing loss caused by fire, smoke or explosion and Exclusions i, j and k shall not apply to ensuing loss caused by collapse of building, or any part thereof, water damage ..., provided such losses would otherwise be covered under this policy.
The jury answered the special issues as follows: (1) Plaintiffs' dwelling sustained a physical loss on or about July 1, 1972. (2) The loss was caused by, or resulted from, water below the surface of the ground, *140 including that which exerted pressure on sidewalks, drives, foundations, walls, subbasements or other floors. (3) The loss was not caused by, nor did it result from, surface water. (4) The loss was not the result of, or caused by, earthquake, landslide or earth movement. (5) The loss was not caused by inherent vice. (6) The loss was caused by "settling, cracking, bulging, shrinkage or expansion of foundations, walls, floors, ceilings, roof structures, walks, drives, curbs, fences or retaining walls." (7) The loss "was caused by a collapse of the building or any part thereof or by water damage." (8) Defendant waived the requirement that plaintiffs file a proof of loss within 91 days after the loss. (9) The full and reasonable cost of repair of plaintiffs' dwelling, without deduction for depreciation, is $32,301.00.
After defendant filed its motion urging the court that the answers to issues 1, 2, 3, 4, 5, 7 and 9 be disregarded, the trial court entered judgment sustaining defendant's motion for judgment n. o. v. insofar as it relates to the answer to issue 7 and, after disregarding the answer to issue 7 on the ground that it was without support in the evidence, decreed that plaintiffs take nothing.
It is clear that the jury's finding, in responses to issue 6, that the loss was caused by settling, cracking, etc., brings the loss within exclusion k. Plaintiffs insist that this finding does not prevent recovery because, since the exclusion applicable to loss caused by underground water had been eliminated, and since the jury found that the loss was caused by underground water, exclusion k is inapplicable. As we understand this contention, the argument is simply that, since, as a result of the deletion of the underground water exclusion, the policy covers loss caused by underground water, all losses caused by underground water are covered and the exclusions which are still part of the policy are not applicable to such losses.
We are thus faced with the problem of determining the extent, if any, to which the deletion of a particular exclusion or exclusions, limits the applicability of remaining exclusions.[1]
Giving to the deletion of exclusion d(3) its full effect, and reading such effect into the coverage provisions in the manner most advantageous to plaintiff, we arrive at a policy which insures against "all risks of physical loss, including loss caused by underground or subsurface water, except . . k. loss caused by settling, cracking, bulging, shrinkage, or expansion of foundations, walls, floors, ceilings, roof structures, walks, drives, curbs, fences, retaining walls or swimming pools." Even after this plaintiff-oriented rewriting, it is clear that loss caused by settling, etc. is not covered. The cause of the settling is irrelevant, unless exclusion k is also rewritten to limit it to settling, etc., not caused by underground water. We conclude that the deletion of the subsurface water exclusion did not eliminate exclusion k or limit it to settling not caused by underground water.
Plaintiffs next argue that, by the express terms of the paragraph following exclusion k, that exclusion is not applicable here, since exclusion k is made inapplicable to "ensuing loss and collapse of building, or any part thereof," or water damage, provided such loss would otherwise be covered under the policy.
Admittedly, the "ensuing loss" exception to exclusions i, j and k presents some difficulty. At the outset, there are two possible interpretations of the exception. The first interpretation would restrict the modifying phrase, "ensuing loss" to building collapse, as though the exception were, insofar as here relevant, written in the following form:
*141 . . . Exclusions i, j and k shall not apply to
(1) ensuing loss caused by collapse of building or any part thereof,
(2) water damage.
The second possible interpretation would construe the exception as though it were written in the following form:
. . . Exclusions i, j and k shall not apply to ensuing loss caused by
(1) collapse of building or any part hereof,
(2) water damage.
Despite the rule that insurance contracts are to be construed against the insurer and in favor of the insured, we believe that the second interpretation of the exception is the only reasonable construction. That is, the exception to exclusions i, j and k is applicable only to "ensuing loss" caused by collapse of the building, or any part thereof, and to "ensuing loss" caused by water damage. This is the construction adopted in McKool v. Reliance Insurance Company, 386 S.W.2d 344 (Tex.Civ.App.Dallas, 1965, writ dism'd). While there is no indication in the McKool opinion that any other interpretation was urged by the insured, the interpretation there adopted gives to the language of the exception, when the contract and, particularly, the coverage provisions are construed as a whole. To construe the exception as making exclusions i, j and k completely inapplicable to "water damage" rather than only to "ensuing loss caused by water damage" would effectively destroy all of exclusion d, which excludes most forms of water damage from the policy's converage. This would clearly be the result if we consider the exclusionary provisions in their original form as they appeared in the original version of the printed policy. It can, of course, be argued that in the case before us, since exclusions d(2), relating to loss resulting from water which backs up in sewers and drains, and d(3) relating to loss resulting from the action of underground water, such a construction would amount to no more than a recognition of the effect of the deletion of such exclusions. Nevertheless, such a construction would effectively destroy exclusion d(1), relating to damage caused by surface water, unless we give to the same language two different meanings, making the exception applicable to all losses resulting from subsurface water and water backing up in sewers and drains, but restricting its applicability only to "ensuing "loss" caused by surface water damage.
To "ensue" means "to follow as a consequence or in chronological succession; to result, as an ensuing conclusion or effect." Webster's New International Dictionary 852 (2d ed., unabridged, 1959). An "ensuing loss," then, is a loss which follows as a consequence of some preceding event or circumstance. McKool, 386 S.W.2d at 345. Assuming that plaintiffs' loss resulted from the action or presence of water beneath the surface, it nevertheless cannot be contended that such loss was an "ensuing loss" caused by water damage. Such a conclusion would involve "a backward application of the ensuing loss exception." Gollaher, Op. cit., 24 Sw.L.J. at 651. Such a construction, in effect, reads "ensuing" out of the exception. If we give to the language of the exception its ordinary meaning, we must conclude that an ensuing loss caused by water damage is a loss caused by water damage where the water damage itself is the result of a preceding cause. What is the preceding cause which gives to the exception the effect of taking the ensuing loss out of the reach of exception k? Again, the plain language of the exception compels the conclusion that the water damage must be a consequence, i. e., follow from or be the result of the types of damage enumerated in exception k. "Ensuing loss caused by water damage" refers to water damage which is the result, rather than the cause, of "setting, cracking, bulging, shrinkage, or expansion of foundations, walls, floors, ceilings...." Since the evidence in this case, even when viewed in the light most favorable to plaintiffs, conclusively establishes that water damage was *142 the cause, rather than the consequence, of settling, etc., exclusion k is applicable. See Park v. Hanover Ins. Co., 443 S.W.2d 940, 942 (Tex.Civ.App.Amarillo 1969, no writ).
Plaintiffs next contend that they are entitled to recover under the portion of the exception which makes exclusion k inapplicable to "ensuing loss caused by collapse of building, or any part thereof."
Our Supreme Court, saying that the term "collapse" is unambiguous,[2] defined it as "to fall or shrink together, to cave in, to fall into a flattened, distorted or disorganized state." With reference to partial collapse, the Court said: "[A] partial collapse would certainly means that the foundation or walls or other supporting structures had been impaired with respect to their function of supporting the superstructure. We think the term can be defined properly as a sinking, bulging, breaking or pulling away of the foundation or walls or other supports so as materially to impair their function and to render the house unfit for habitation." Employers Mut. Cas. Co. of Des Moines, Iowa v. Nelson, 361 S.W.2d 704, 708, 709 (Tex.1962).
In this case there is no evidence of falling in or loss of shape, no reduction to flattened form or rubble. There is, therefore, no evidence of a collapse of the building. With reference to partial collapse, there is ample testimony to the effect that unless repairs are made to plaintiffs' home, a collapse "could" occur in the future. The evidence discloses cracks in the walls, doors "dragging out of line," separations on the terrazzo floor, imperfections in the terrace, and a pulling away of the stairs from the house. Some of the supporting piers have dropped, causing the house to settle some two to three inches in the front. There is evidence of the "shearing" of one stud column and the cracking of others. One of defendant's witnesses testified that if the "sheared" column had been "left alone and left unabated and continuing" the entire structure might have come down. This witness testified that there was a partial collapse of the structure, although he stated there had been no collapse of the foundation.
The witness who testified that there had been a partial collapse of the structure defined "collapse" as "failure of the structure" and added, "When you think of collapse, in engineering terms, you think of a structure that just falls completely down; and a partial collapse is where part of it falls down. In engineering terminology that's the way we use it, and that's the way I'm referring to it."
It is clear that this witness did not use the term "partial collapse" in the same sense as that term was used by our Supreme Court in Nelson, since the definition given by the witness would make it possible to find "partial collapse" even though the dwelling had not been rendered "unfit for habitation." It is clear that the Supreme Court considered the requirement that the dwelling be rendered unfit for habitation an important element of a partial collapse, since in the course of the Nelson opinion there is a clear disapproval of the decision in Jenkins v. United States Fire Ins. Co., 185 Kan. 665, 347 P.2d 417 (1959), where the trial court's definition was held erroneous because it contained the requirement that the building be rendered unfit for use as a dwelling.
Plaintiffs fail to call our attention to any testimony to the effect that the dwelling in question was rendered unfit for habitation. The evidence relating to the nature of the damage to the structure does not even tend to indicate that the structure is no longer habitable. There is no evidence that the structure is unsafe or even unfit for use as a dwelling.
In view of the highly restrictive meaning which our Supreme Court has given to the *143 terms with which we are concerned, we must conclude that the trial court was correct in ruling that there is no evidence of a collapse or partial collapse of plaintiffs' home.
Since we have concluded that the judgment in favor of defendant must be affirmed, it is unnecessary to discuss defendant's 44 cross-points, since the questions raised by such cross-points would become relevant only if we concluded that the judgment in favor of defendant was erroneous.
The judgment of the trial court is affirmed.
NOTES
[1] This specific problem was foreseen in Gollaher, The 1960 Texas Standard Homeowners Policy, 24 Sw.L.J. 636, 657 (1970), with specific reference to the applicability of the "settling" exclusion where the underground water exclusion has been deleted.
[2] Cf. Travelers Fire Ins. Co. v. Whaley, 272 F.2d 288, 290-91 (10th Cir. 1959), treating "collapse" as an ambiguous term. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1779095/ | 765 S.W.2d 893 (1989)
Jose Luis VALENCIA and Carolina Valencia, Appellants,
v.
Andriana Elisa GARZA and Juan Garza, Appellees.
No. 04-88-00218-CV.
Court of Appeals of Texas, San Antonio.
February 22, 1989.
*894 Edel P. Ruiseco, Del Ruiseco, P.C., Harlingen, for appellants.
Rodolfo R. Munoz, San Antonio, for appellees.
Before BUTTS, REEVES and CARR, JJ.
OPINION
BUTTS, Justice.
The controversy in this case arose from a contract for sale of a house located in San Antonio. Appellee Andriana Elisa Garza purchased property and received a warranty deed from Ponciano Sauceda, Jr., and his wife. She employed Sauceda to build a house on her property. Appellants Jose Luis and Carolina Valencia (Valencia) moved into the house in June 1985. They paid Garza the sum of $5000 in July 1985. On August 6, 1985, the parties met in a lawyer's office to execute the contract for sale of the house. The price was $30,000 including the down payment of $5000. They discussed the terms; however, only Garza signed the contract of sale. The contract provided in part:
Third. When the entire purchase price, both principal and interest, as well as all other indebtedness owed hereunder, has been paid by Buyer(s) in accordance with the terms and provisions of this contract, *895 Seller will convey said property to Buyer(s) by warranty deed, on current form of the State Bar of Texas, conveying good and indefeasible title, with covenant of general warranty ...
This was an executory contract. The contract also provided for cancellation of the contract due to default by the buyers. In that event, the buyers would become tenants at will and the seller could institute forcible entry and detainer proceedings. In all respects this was a contract for sale and for conveyance of the title after the principal and interest had been paid in full and other contractual conditions met.
Valencia refused to sign the contract on August 6, 1985. At trial the explanation for the refusal was that they did not read and write English and wanted the terms explained. There was other testimony, however, that they wanted to obtain a deed and deed of trust at that time instead of a contract for sale. The contract remained unsigned.
Valencia continued to live in the house. Both Garza and Valencia agree the contractor failed to correct construction problems in the house or to make necessary repairs. On January 21, 1986, Garza retained a lawyer to make demand on the builder and to file suit. Garza filed a Deceptive Trade Practices Act suit against the contractor in March 1986. The contract for sale still did not contain Valencias' signatures.
On February 12, 1986, Valencia signed a copy of the contract after consulting with a lawyer. On February 14, Valencia signed the original. Garza's father was present. Garza did not sign it again. Valencia then intervened in the suit against the builder, also suing Garza. Thereafter, Valencia moved for severance of the present suit against Garza, which was granted. Shortly after that Valencia nonsuited the builder.
Valencia discontinued paying any monthly sum to Garza in July 1986. We point out that on appeal this court does not have before it for determination and does not decide those other matters included in the record, such as a forcible entry and detainer suit, motion for sanctions in the county court at law, the writ of attachment and habeas corpus involving Garza, motion for protective orders, nor any purported action originating in Hays County. Our subject is only the judgment on appeal.
Valencia sued Garza for rescission of the contract and damages for fraud and misrepresentation and, in the alternative, for specific performance and damages. The trial court found for Garza. Valencia brings twelve points of error.
The trial court entered findings of fact and conclusions of law. The findings are that Valencia refused Garza's offer to sell pursuant to a contract for sale/deed; that Garza retained counsel to prosecute suit against the builder on January 21, 1986; that Valencia intervened in Garza's suit and subsequently asserted "several causes of action" against Garza; that the trial court heard the severed cause (which is the present case). The trial court then concluded that Valencia rejected the offer and that Garza has sole and exclusive title to the property. The court also placed in this portion (conclusions of law) the finding that Valencia recover the sum of $4,800 from the initial "down payment." The court allowed Valencia an equitable lien on the property to insure payment. (Valencia was ordered to vacate the property in the judgment.)
The first two points of error challenge the legal and factual sufficiency of the evidence to support the finding of refusal to accept the offer. We will view the evidence as required by the appropriate standards on appeal.
The trial judge as the trier of fact may take into consideration all the facts and surrounding circumstances in connection with the testimony of each of the witnesses tendered, and to arrive at his conclusion as to the facts controlling this case. He may accept or reject all or any part of the testimony of the witness tendered. Electro-Hydraulics Corp. v. Special Equipment Engineers, Inc., 411 S.W.2d 382, 386-87 (Tex.Civ.App.Waco 1967, writ ref'd n.r.e.).
*896 Although there may have been conflicting evidence regarding what transpired in the lawyer's presence during the visit to his office and what each believed was the reason Valencia refused to sign the contract for sale on August 6, 1985, the evidence shows clearly that Valencia did refuse to sign on that date.
It is axiomatic that a contract for sale of land is executory where the deed of conveyance has not been delivered and accepted. Podolnick v. Hamilton, 349 S.W.2d 715, 716 (Tex.1961). Thus, the legal title remains in the seller until the purchase money is paid.
The trial court was required to determine whether Valencia refused Garza's offer of a contract for sale (a contract to convey upon payment of the purchase price). Did Valencia's signature in February, six months after the offer on August 6, 1985, effect a binding contract?
It is the established law in this state that where a case has been tried without a jury and there is ample evidence in the record to support the findings of the trial court, such findings have the same force and effect as a verdict of the jury on the facts found, and a reviewing court must affirm the trial court's judgment in the absence of other substantial error. Hilton v. Haden Associates, Inc., 458 S.W.2d 854, 858-59 (Tex.Civ. App.Fort Worth 1970, no writ) (citations omitted). Under a "no evidence" challenge to the finding (legal insufficiency), the appellate court considers only the evidence tending to support the finding and disregards all evidence to the contrary. Ray v. Farmers' State Bank of Hart, 576 S.W.2d 607, 609 (Tex.1979). Where there is at least some evidence of probative force to support the finding, it is binding on the appellate court. Id. at 610.
When a factual insufficiency challenge is made, this Court must consider all the evidence. See In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951). Even though the finding may appear to be against the preponderance of the evidence, it will be upheld unless it is so against the overwhelming weight of the evidence as to be clearly and manifestly wrong. Houston National Gas Corp. v. Pearce, 311 S.W.2d 899, 903 (Tex.Civ.App.Houston 1958, writ ref'd n.r.e.). Thus, unless there is no evidence to support the finding or unless the finding is so contrary to the great weight and preponderance of the evidence as to be clearly wrong, the appellate court may not set it aside. Corporate Personnel Consultants v. Wynn Oil Company, 543 S.W.2d 746, 748 (Tex.Civ.App.Texarkana 1976, no writ).
The trial court considered evidence presented by Garza, who denied that she ever entered into a contract for sale with the Valencias because Valencia refused to agree to the terms of the contract, thereby refusing to agree to the sale under the contract she offered. An attorney consulted by Valencia testified that they wanted a deed and deed of trust. He telephoned Garza's lawyer to discuss drawing up those instruments for the parties. Garza was notified by letter that Valencia wanted a deed. This constituted a counteroffer by Valencia and non-acceptance of the contract for sale. Garza testified that she therefore considered the Valencias to be renters (tenants at will).
An offeree's power of acceptance terminates when the offeree receives from the offeror a manifestation of intention not to enter into a contract. RESTATEMENT (SECOND) OF CONTRACTS § 42 (1981). The offeree may acquire indirect reliable information inconsistent with an offer. Thus, the power of acceptance is terminated. Id. Even if the offer had remained viable, the acts of the owner (offeror) demonstrated her intention not to enter into the contract.
In this case Garza as title owner of the subject property retained legal counsel to move against the contractor on January 21, 1986. Notice, as required, was sent to the contractor. Thereafter Valencia consulted a lawyer and signed a copy of the sales contract. Valencia on February 14, 1986, signed the original contract. Garza did nothing at that time. While there was evidence that her father knew of the Valencia action, there is no evidence that Garza directed him in any regard. We hold that *897 the "old" August 6, 1985, signature of Garza was not evidence, in and of itself, that the offer remained viable on February 15, 1986, and that the presence of her father at the time is not the required strict proof of agency.
It is basic contract law that there must be a common intention of the parties, with the offer by one and acceptance by the other of stated terms to effect a contract. We agree with the trial court's implied finding that these requisites did not occur at that time.
There is another basis for the judgment in this case. An offeree's power of acceptance is terminated at the time specified in the offer, or if no time is specified, it is terminated at the end of a reasonable time. RESTATEMENT (SECOND) OF CONTRACTS § 41 (1981). What is reasonable time is a fact question, depending on all the circumstances existing when the offer and attempted acceptance are made. Some factors to be considered are: the nature of the proposed contract; the purposes of the parties; and the course of dealing between them. Id. Comment b.
The test for a reasonable time to accept the offer of a contract for sale may be compared to the test for reasonable time for performance under a contract. Where the contract does not fix a time for performance, the law allows reasonable time for its performance. Texas Farm Bureau Cotton Ass'n. v. Stovall, 113 Tex. 273, 253 S.W. 1101, 1105 (1923); Houston County v. Leo L. Landauer & Associates, Inc., 424 S.W.2d 458, 463 (Tex.Civ.App.Tyler 1968, writ ref'd n.r.e.). A reasonable time has been defined to be such time as is necessary, conveniently, to do what the contract requires to be done, and as soon as circumstances will permit. Reasonable time depends on the circumstances in each case, including the nature and character of the thing to be done and the difficulties surrounding and attending its accomplishment and is generally for the jury [factfinder]. Id. (citations omitted).
If it were determined the offer in the present case remained a viable one even after the refusal of the offer by Valencia, the fact question for the trial court was: what was a reasonable time for Valencia to accept the offer (the terms of a contract for sale)? Under the circumstances of this case, where the Valencias remained in the house and were being advised by legal counsel, the trial court could have determined that a reasonable time for acceptance had expired long before six months passed. The court could also have determined the offer had terminated. Further, the court could have determined the power of acceptance by Valencia had terminated.
After viewing the evidence in the light favorable to the finding, we find there was some probative evidence to support the finding that Valencia refused the offer, and the legal conclusion that Valencia rejected the offer is correct. The evidence, we find, would also support a conclusion that the power of acceptance was terminated before February 14, 1986. We further hold, after examining all the evidence, that the finding is not so clearly against the great weight and preponderance of the evidence as to be manifestly wrong. The first two points are overruled.
The third point of error is that Valencia's motion for summary judgment should not have been denied. An order denying a motion for summary judgment is not a final judgment and therefore not appealable. See Novak v. Stevens, 596 S.W.2d 848, 849 (Tex.1980). When a trial judge denies a motion for summary judgment, the cause is held for trial on the merits. The denial is not a proper subject for appeal. The point is overruled.
In points of error four and five Valencia challenges the legal and factual sufficiency of the evidence to support the finding of fact or conclusion of law that there was no contract. There is no specific finding of fact that there was no contract. Nor was there a conclusion of law as to that. As previously noted, the trial court did find that Garza's offer was refused, and the evidence supports this finding. It was concluded that the offer was rejected [thus, no contract came into existence]. The principal usefulness of conclusions of law is to denote to the appellate court the *898 theory on which the action was tried. If the controlling finding of facts will support a correct legal theory, incorrect legal conclusions will not require a reversal. Benavides v. Warren, 674 S.W.2d 353, 362 (Tex. App.San Antonio 1984, writ ref'd n.r.e.) (citations omitted). However, in the present case we believe the trial court correctly concluded that Valencia rejected the offer. The two points are overruled. Moreover, even if the conclusions of law were incorrect, the judgment would be upheld based on the findings of fact.
Valencia argues in point of error six that the trial court erred in not finding that Garza's father was her agent and had affirmed the original offer, or had made a new offer, by advising Valencia to sign the contract on February 14, 1989. It is settled law that there must be proof of the agency relationship as well as the acts performed in the capacity of agent. This was pointedly denied by Garza. The burden was on Valencia to prove the agency relationship. See Abbott v. Earl Hayes Chevrolet Company, 384 S.W.2d 782, 784 (Tex.Civ.App. Tyler 1964, no writ). The evidence presented in this case does not reflect proof of an agency relationship as required. The point is overruled.
Point of error seven is that the trial court erred in not finding there was an oral contract to purchase because the evidence showed that the buyer met the requirements of the exception to the statute of frauds. Both parties agree this issue was not raised at the time of trial. It was, therefore, waived. See Greater Fort Worth and Tarrant County Community Action Agency v. Mims, 627 S.W.2d 149, 150-51 (Tex.1982).
To constitute a contract, an offer to sell must be accepted by the offeree. The acceptance must be identical with the offer. See 63 Tex.Jur.3d, Real Estate Sales, § 33 (1988). Valencia asserts in point of error eight that the trial court should have found there was anticipatory repudiation of the contract when Garza filed an eviction suit against Valencia.
Without repeating the facts already set out, we note that a valid contract must first be established in order to prove repudiation. Here the proof of acceptance by Valencia was found to be insufficient. The evidence supports the finding. Therefore, because the proposed contract was not accepted by the offeree, as found by the trial court, there was no contract in writing between the parties. Compare Imholz v. Southern Oil Corporation of America, 134 S.W.2d 301 (Tex.Civ.App.Eastland 1939, no writ). Absent a valid written contract in the present case, there can be no repudiation of the "contract." The point is overruled.
Points of error nine and ten are that the trial court erred in awarding sole and exclusive title to the property to Garza. First it is argued that the pleadings do not support the award, and second, that there is no legally or factually sufficient evidence to support the award. We point out that even had the court determined there existed a valid contract for sale, legal title would necessarily be in Garza as the title owner with authority to offer a contract for sale.
An examination of the evidence shows that no one questioned Garza's ownership of the subject property. Proof showed that she purchased the property from Sauceda. Although no warranty deed was introduced into evidence, it was marked for identification and discussed before the trial court. There was no objection regarding best evidence or otherwise. Therefore, that objection (best evidence) urged on appeal was waived.
Since the trial court impliedly found that no contract came into existence, and this court agrees, there can be no claim of title by Valencia. Indeed, the burden of proof was upon Valencia to prove a valid contract. The trial court correctly concluded that sole and exclusive title was in Garza. Moreover, the challenge to the pleadings arises for the first time on appeal and comes too late. TEX.R.CIV.P. 90 and 67. The points are overruled.
In the last two points of error Valencia maintains that the earlier suit for forcible entry and detainer in which the court found that Valencia did not receive proper notice and, therefore, left possession in Valencia, is determinative of, and res judicata on, the issue of possession.
*899 The forcible entry and detainer action is not exclusive, but 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 (1936). If all matters between the parties cannot be adjudicated in the justice court ... due to the justice court's limited jurisdiction, then 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 (1935).
McGlothlin v. Kliebert, 672 S.W.2d 231, 233 (Tex.1984).
A judgment of possession in a forcible detainer action is a determination only of the right to immediate possession of the premises, and does not determine the ultimate rights of the parties to any other issue in controversy relating to the realty in question. Martinez v. Beasley, 572 S.W.2d 83, 85 (Tex.Civ.App.Corpus Christi 1978, no writ). In the present case the issue of title was paramount. As the result of the findings by the trial court, as reflected in the judgment, Valencia has no claim of title based on a contract for sale.
We hold that the forcible detainer action is not res judicata on the issue of possession in this case. That judgment determined only the question of immediate possession at that time and did not determine the ultimate rights of the parties to any other issue in controversy relating to the subject realty. See Buttery v. Bush, 575 S.W.2d 144, 146 (Tex.Civ.App.Tyler 1978, writ ref'd n.r.e.), citing Martinez v. Beasley, supra. Points eleven and twelve are overruled.
We have examined the record in regard to Garza's cross-points and find the trial court did not abuse its discretion in failing to impose sanctions or award attorney fees. The denial of Garza's motion for summary judgment is not a proper subject for appeal purposes. The cross-points are overruled.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1799565/ | 977 S.W.2d 746 (1998)
FORT WORTH HOTEL LIMITED PARTNERSHIP d/b/a Fort Worth Hilton, Appellant,
v.
ENSERCH CORPORATION, d/b/a Lone Star Gas Company, Appellee.
No. 2-96-046-CV.
Court of Appeals of Texas, Fort Worth.
July 27, 1998.
*749 Gardere & Wynn, L.L.P., Joseph W. Spence, Dallas, for Appellant.
Holman, Hogan, Dubose & Townsend, Roger Townsend, Houston, Martin, Farr, Miller & Grau, Michael Miller, Dallas, Fillmor & Harrington, H. Dustin Fillmore, Fort Worth, for Appellee.
Before LIVINGSTON, RICHARDS and HOLMAN, JJ.
CORRECTED OPINION
LIVINGSTON, Justice.
I. INTRODUCTION
The Court's March 5, 1998 opinion and judgment is withdrawn and this corrected opinion and judgment are substituted.[1] Appellant Fort Worth Hotel Limited Partnership d/b/a Fort Worth Hilton (Fort Worth Hilton) appeals from the jury's verdict in its suit against Enserch Corporation d/b/a Lone Star Gas Company (Lone Star Gas) arising out of a gas explosion that allegedly damaged its hotel. In nine points, Fort Worth Hilton contends: (1) the jury's failure to find gross negligence is wrong as a matter of law or is against the great weight and preponderance of the evidence and manifestly unjust; (2) the trial court abused its discretion by allowing the interjection of life safety issues into the trial; (3) the trial court abused its discretion in excluding Jack Gilbert's expert report and evidence of the bias of several experts called by Lone Star Gas; (4) the trial court abused its discretion by denying Fort Worth Hilton's motion for mistrial and new trial based on Lone Star Gas's counsel's intentional and repeated misconduct; (5) the jury's award of zero damages for business interruption and/or loss of income was erroneous as a matter of law or was against the great weight and preponderance of the evidence and violates the "zero damage" rule; and (6) the trial court erred in its calculation and award of prejudgment interest.
In three cross-points, Lone Star Gas alleges the trial court erred in overruling: (1) its motion to disregard the jury findings because Fort Worth Hilton presented no legally sufficient evidence that the reasonable cost of repairs in Tarrant County was $140,298.01; (2) its motion for sanctions because Fort Worth Hilton committed perjury regarding its relationship with several experts employed *750 by Travelers Insurance Company; and (3) its supplemental motion for sanctions because Fort Worth Hilton committed perjury regarding its claim for structural damage.
Because we find that Fort Worth Hilton failed to present evidence to show the reasonableness of repairs, we reverse the trial court's judgment and render a judgment that Fort Worth Hilton take nothing against Lone Star Gas.
II. PRELIMINARY FACTUAL BACKGROUND
In 1986, the City of Fort Worth hired L.D. Conatser Construction Company (L.D.Conatser) to do some excavation work on a water main near the Frank Kent Cadillac Building (Cadillac Building) on the outskirts of downtown Fort Worth, Texas. L.D. Conatser provided Lone Star Gas with its proposed path of excavation and Lone Star Gas sent one of its line locators, J.P. Goldsmith, to identify and mark Lone Star Gas's existing gas lines before the excavation began. Two gas lines were present near the excavation site: (1) a plastic line that ran under Lancaster Avenue to the east end of the Cadillac Building (the east line); and (2) a steel line that ran under Lancaster Avenue to the west end of the Cadillac Building (the west line).
Lone Star Gas normally relied upon its master line map system to identify and mark gas lines. However, the relevant master map, map D-243,[2] did not portray the west line and, at trial, Goldsmith claimed to have remembered the whereabouts of the lines and marked them by memory without the help of the mapping system. Either way, Goldsmith failed to properly mark the west end line and L.D. Conatser encountered a gas line while working on the excavation project despite following its proposed path and the markings of Lone Star Gas. Lone Star Gas sent Goldsmith to the scene and he told L.D. Conatser it could continue on its proposed path after he determined the line did not contain any gas.
Then, at approximately 9:15 a.m. on March 16, 1986, L.D. Conatser's track-hoe snagged the west end line and pulled it from the ground despite following its proposed path and the markings of Lone Star Gas. Lone Star Gas dispatched one of its construction maintenance supervisors, W.C. Duebler, to the scene. However, Duebler stopped to have coffee with a co-worker before going to the site and, upon his arrival, he and his crew were unable to turn off the gas shutoff valve because it had been covered by asphalt and dirt and they did not have the correct tools to turn the valve. Meanwhile, gas from the ruptured line accumulated inside the Cadillac Building and, at 10:08 a.m., the Cadillac Building exploded.
The explosion sent a shockwave across Interstate 30 that blew out multiple windows in the north and south towers of Fort Worth Hilton and allegedly caused severe structural damage to the south tower of the hotel. Walker Harman, the president of Metro Hotels and part owner of Fort Worth Hilton, testified the blast: (1) caused multiple cracks in the south tower's vertical concrete columns; and (2) deflected the south tower's horizontal concrete slabs such that the floors were uneven, doors would not open, and the ceilings and walls were disjointed. The hotel remained open after the blast and some of the cosmetic damages were repaired. However, the extent of the structural damage was not immediately known and the south tower was closed down for the month of January 1987 to conduct tests on the alleged structural damage. Then, on January 8, 1988, the south tower was shut down for good on the advice of one of Fort Worth Hilton's structural engineers, James Mitchell. The entire hotel was foreclosed on September 6, 1988 and currently is operated by Ramada.
After the explosion, the owners of the Cadillac Building brought suit and obtained a judgment against Lone Star Gas in the 17th District Court of Tarrant County. See Lone Star Gas v. F.F.F.Corp., No. 2-90-284-CV (Tex.App.Fort Worth April 6, 1994, writ denied) (not designated for publication). The jury found that Lone Star Gas's negligence proximately caused the explosion. See id. Fort Worth Hilton filed suit against Lone *751 Star Gas and L.D. Conatser[3] in 1988 and amended its petition after the decision in F.F.F. Corp. to ask for actual and punitive damages on grounds Lone Star Gas was collaterally estopped from contesting negligence as to the explosion.
Approximately seven years of prolonged discovery ensued, during which multiple, ancillary events occurred to shape the trial that was to come. Several events and revelations from this period are relevant for purposes of this appeal.
After the blast, Fort Worth Hilton, Lone Star Gas, L.D. Conatser, Travelers Insurance Company (Travelers)[4], and Metropolitan Life Insurance Company (Met Life)[5] all hired various structural engineering firms to inspect Fort Worth Hilton. During these respective investigations, which spanned a number of years, it was discovered that the south tower, which was completed in 1981, was not built to building code standards. Specifically, it was determined that the south tower had a deficient punching shear capacity, which meant the horizontal concrete floor slabs were susceptible to being punctured by the vertical concrete columns, a problem that could cause the slabs to deflect or collapse. Lone Star Gas seized on this information at trial, as well as the testimony of numerous former hotel employees, to argue the alleged structural damage was present before the explosion and was caused by the deficient design of the building.
Second, it was discovered that Travelers had suppressed an expert report by Jack Gilbert and hired new experts after Gilbert determined that the explosion had caused the structural damage to the hotel. Travelers apparently hired Gilbert soon after the blast, reviewed his unfavorable report (because coverage only extended to damage caused by the blast), then fired Gilbert and hired another group of experts (Travelers experts)[6] with the specific goal of gaining a determination that the structural damage predated the blast and therefore was not covered by the policy. Using the findings of the Travelers experts, Travelers contested coverage but agreed to enter into a December 29, 1987 litigation agreement with Fort Worth Hilton to pursue damages against Lone Star Gas while retaining Fort Worth Hilton's right to coverage under its policy for any structural damage caused by the blast. Fort Worth Hilton did not learn of Travelers' deception until years later when the Lone Star Gas case had stalled and Fort Worth Hilton and Travelers entered into arbitration to decide the coverage issue. The arbitrator found that the explosion had caused the structural damage and that the damage totaled over $4.5 million. Fort Worth Hilton sued Travelers for bad faith and later settled. None of this information was heard by the jury.
Meanwhile, in 1988, Lone Star Gas and L.D. Conatser learned of the existence of the Travelers experts and sought to discover their reports. Fort Worth Hilton moved for a protective order claiming the Travelers experts and their reports were privileged. This led to multiple motions and hearings on the discoverability of almost all experts involved in the case. In the end, the Travelers experts and numerous other experts were deemed discoverable and many testified at trial. Because of this ruling, Fort Worth Hilton filed, and the trial court granted, a motion in limine designed to prevent Lone Star Gas from commenting on the fact that the Travelers experts were hired by Fort Worth Hilton or its insurer.
During opening statements, Lone Star Gas named the various Travelers experts and told the jury they were not hired by Lone Star Gas, they did their studies before Lone Star Gas was sued, and they would testify that the damage pre-existed the blast. In an attempt to rebut any inferences gleaned from these statements, Fort Worth Hilton, which had not timely designated Gilbert as an expert *752 witness, attempted to have Walker Harman testify about the existence of Gilbert, his report, and the fact that Gilbert and the Travelers experts were hired by the same entity. Fort Worth Hilton also tried to introduce Gilbert's two reports into evidence. In light of the motion in limine and in order to avoid confusing the jury with the protracted Travelers coverage litigation, the trial court denied Fort Worth Hilton's proposed line of questioning and its request to introduce Gilbert's reports. However, it did allow Fort Worth Hilton to preserve Harman's testimony in a bill of exceptions.
In addition to the motion in limine regarding the Travelers experts, Fort Worth Hilton filed, and the trial court granted, motions in limine to prevent Lone Star Gas from commenting on: (1) the appropriateness of operating the hotel after the blast (referred to below as life safety issues); (2) MetLife's right to recover anything from the lawsuit; and (3) the fact that one of the head structural engineers who constructed the south tower, Rodney Black, had his license revoked. The trial court also ruled that certain factual findings from a governmental accident report were admissible but that the portions of the report dealing with probable cause were not admissible.
The trial began on June 19, 1995 and lasted until August 8, 1995. The two key issues were: (1) whether Lone Star Gas's failure to mark the gas line and adequately respond to the leak amounted to gross negligence; and (2) whether the alleged structural damage to the hotel pre-existed the explosion or was caused by the explosion. Concerning the gross negligence issue, Fort Worth Hilton provided evidence of an archaic mapping system, an inept gas line marking procedure, and an inadequate response to the gas leak. Lone Star Gas attempted to explain away its apparent negligence by arguing its actions did not really cause the damage to the hotel. Concerning the damages issues, Fort Worth Hilton argued the hotel had no serious structural problems before the explosion, had recently undergone a $1.8 million overhaul, and was effectively destroyed by the explosion. Lone Star Gas painted a picture of a defectively designed hotel with major structural damage whose owners were losing money and sought to capitalize on the explosion by blaming the pre-existing damage on the explosion.
The charge contained four questions and instructed the jury that "[i]n a prior lawsuit it was determined that Lone Star Gas Company was negligent, and that such negligence was a proximate cause of the natural gas explosion at Frank Kent Cadillac dealership on March 12, 1986." The jury answered the following three questions:
Question No. 1
Was the physical injury to the hotel that resulted from the explosion at Frank Kent Cadillac on March 12, 1986 "permanent" or "temporary"?
. . . .
Answer: Temporary
. . . .
Question No. 3
What sum of money, if paid now in cash, would fairly and reasonably compensate Hilton for its damages, if any, for the repairs to restore the Hilton resulting from the natural gas explosion in question?
. . . .
Answer in dollars and cents for damages, if any.
a. cost of repairs $140,208.01
b. loss of income $0
c. loss of income due to interruption of hotel operations $0
Question No. 4
Did Lone Star Gas Company's negligence that proximately caused the explosion at Frank Kent Cadillac amount to gross negligence?
. . . .
Answer: No
III. DISCUSSION
A. The Jury's Failure to Find Gross Negligence
In its first point, Fort Worth Hilton contends the jury's failure to find gross negligence in question number four is erroneous as a matter of law or is against the great weight of the evidence. Lone Star Gas *753 contends Fort Worth Hilton waived error concerning the jury's failure to find gross negligence because it: (1) failed to brief the alternate issue of whether the jury failed to find that Lone Star Gas proximately caused the explosion; and (2) cannot rely on collateral estoppel because the jury in F.F.F. Corp. did not affirmatively find any of Fort Worth Hilton's specific allegations of negligence or gross negligence. We disagree.
We first address the causation issue. As stated above, the jury was instructed that Lone Star Gas was negligent and that its negligence was the proximate cause of the explosion at the Frank Kent Cadillac Building. Thus, the jury was not required to re-find ordinary negligence or causation on the part of Lone Star Gas. As a result, the jury was not required to make a new finding of causation in order to find, or not find, gross negligence. See Costa v. Storm, 682 S.W.2d 599, 603 (Tex.App.Houston [1st Dist.] 1984, writ ref'd n.r.e.) ("[r]egarding proximate cause, any negligence that caused injuries, and that also constitutes gross negligence, would also be the cause of the same injuries"). Where a jury or court has previously found that a tortfeasor was negligent and that the tortfeasor's negligence proximately cause an event, it is axiomatic that the issue of whether that tortfeasor's actions constituted gross negligence turns on the tortfeasor's mental state, not on a re-litigation of the proximate cause issue. See Hall v. Stephenson, 919 S.W.2d 454, 467-68 (Tex.App.Fort Worth 1996, writ denied) (opining that "[w]hat lifts ordinary negligence into gross negligence is the defendant's subjective mental state" and "a finding of ordinary negligence is a prerequisite to a finding of gross negligence"); Trevino v. Lightning Laydown, Inc., 782 S.W.2d 946, 949-50 (Tex. App.Austin 1990, writ denied) (finding that gross negligence is merely a higher degree of negligence).
We find support for our position in the bifurcated, exemplary damages provision of the Texas Civil Practices and Remedies Code Annotated. See TEX. CIV. PRAC. & REM.CODE ANN. § 41.009 (Vernon 1997). Under section 41.009, a case is separated into two parts; one to determine liability and the amount of actual damages and another to determine the amount of exemplary damages. See id.; Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 30 (Tex.1994). In the second proceeding, the jury analyzes, among other things, the culpability of the tortfeasor. See Moriel, 879 S.W.2d at 30. It does not re-litigate the causation issue. See id. Although this case is slightly different because the jury was asked to determine whether Lone Star Gas was grossly negligent, we see no reason to require a party to re-introduce evidence on causation after the jury has already been told Lone Star Gas was negligent and the key issue was its culpability.
We turn to the application of collateral estoppel in this case. The doctrine of collateral estoppel or issue preclusion is designed to promote judicial efficiency, protect parties from multiple lawsuits, and prevent inconsistent judgments by precluding the relitigation of issues. See Sysco Food Services, Inc. v. Trapnell, 890 S.W.2d 796, 801 (Tex. 1994). A party seeking to assert the bar of collateral estoppel must establish that: (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first action; (2) those facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action. See id.
Lone Star Gas does not specifically challenge any of these collateral estoppel requirements. Instead, it contends collateral estoppel should not have been applied because the F.F.F. Corp. jury did not make any specific finding that a particular act or omission was negligent and a proximate cause of the explosion. However, it is undisputed that the F.F.F. Corp. jury found that Lone Star Gas's negligence proximately caused the explosion. Under our system of broad form submission of issues, it was not necessary for the trial court in F.F.F. Corp. to submit individual questions on the various allegations of negligence in order to obtain the verdict. See Mobil Chemical Co. v. Bell, 517 S.W.2d 245, 255-56 (Tex.1974) (approving submission of broad form negligence issues); see also Lemos v. Montez, 680 S.W.2d 798, 799-800 (Tex.1984) (detailing history of broad form submission). Moreover, the jury in the *754 case at hand was asked to find, or not find, gross negligence. It was not required to enunciate the reasons why it did or did not find gross negligence.
Fort Worth Hilton cites no case law for the proposition that a general finding of negligence should preclude the application of collateral estoppel. Nor do we believe the policies behind collateral estoppel would be served by narrowing the doctrine. Judicial efficiency would suffer if all negligence cases decided under broad form submission were denied collateral estoppel effect. Litigants who know of a case that will proceed before their own will be forced to pressure those in privity on a particular issue to use the more burdensome multi-issue submission format or risk having to re-try issues that have already been determined. Thus, we find: (1) Fort Worth Hilton did not waive the merits of its first point by failing to address the causation issue; and (2) application of collateral estoppel was appropriate in the case at hand.
We turn to the merits of Fort Worth Hilton's point. If an appellant is attacking the legal sufficiency of an adverse answer to a finding on which he had the burden of proof, the Texas Supreme Court has stated that the appellant must, as a matter of law, overcome two hurdles. See Victoria Bank & Trust Co. v. Brady, 811 S.W.2d 931, 940 (Tex.1991). First, the record must be examined for evidence that supports the finding, while ignoring all evidence to the contrary. Second, if there is no evidence to support the fact finder's answer, then the entire record must be examined to see if the contrary proposition is established as a matter of law. See id.; Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989).
In reviewing a point asserting that an answer is "against the great weight and preponderance" of the evidence, we must consider and weigh all of the evidence, both the evidence that tends to prove the existence of a vital fact as well as evidence that tends to disprove its existence. See Ames v. Ames, 776 S.W.2d 154, 158-59 (Tex.1989), cert. denied, 494 U.S. 1080, 110 S. Ct. 1809, 108 L. Ed. 2d 939 (1990); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). So considering the evidence, if a finding is so contrary to the great weight and preponderance of the evidence as to be manifestly unjust, the point should be sustained, regardless of whether there is some evidence to support it. See Watson v. Prewitt, 159 Tex. 305, 320 S.W.2d 815, 816 (1959); In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951).
The test for gross negligence contains both an objective and a subjective prong. See Moriel, 879 S.W.2d at 21-22; Wal-Mart Stores, Inc. v. Alexander, 868 S.W.2d 322, 326 (Tex.1993). Objectively, the defendant's conduct must create "an extreme degree of risk." Moriel, 879 S.W.2d at 22; see Wal-Mart, 868 S.W.2d at 326. This component, being a function of both the magnitude and the probability of the potential injury, is not satisfied if the defendant's conduct merely creates a remote possibility of serious injury; rather, the defendant's conduct must create the "likelihood of serious injury" to the plaintiff. Moriel, 879 S.W.2d at 22. Subjectively, the defendant "must have actual, subjective awareness of the risk involved, but nevertheless proceed in conscious indifference to the rights, safety, or welfare of others." Id. at 23. Evidence of simple negligence will not suffice to prove either component of gross negligence. See Wal-Mart, 868 S.W.2d at 327.
Fort Worth Hilton contends the evidence clearly established that Lone Star Gas created an extreme degree of risk, had actual subjective awareness of the risk, and proceeded in conscious indifference to that risk. In support of its position, Fort Worth Hilton argues the evidence shows Lone Star Gas: (1) failed to maintain an accurate and updated map system detailing the whereabouts of its gas lines; (2) failed to correctly mark the west end line because it was not portrayed on map D-243; (3) told L.D. Conatser to continue its excavation after it struck an old gas line on the same project; (4) failed to adequately train employees to do their job and to respond to an emergency; (5) failed to adequately respond to the gas leak in that Duebler went for coffee before going to the scene; (6) allowed the manhole and shutoff valve for the west end line to be covered with asphalt and dirt and did not have the correct *755 tools to shut off the valve; and (7) neglected to take any steps to assess or correct its emergency response system after several governmental agencies condemned their performance before and during the incident.
Lone Star Gas contends Fort Worth Hilton failed to prove that: (1) there was a likelihood of serious injury or that there was an extreme risk of harm; (2) Lone Star Gas was grossly negligent in maintaining accurate maps; (3) Lone Star Gas's response to the gas leak was grossly negligent; and (4) Lone Star Gas's management was actually aware of and consciously indifferent to an extreme risk of serious harm. We agree.
We have reviewed the evidence supporting the jury's finding of no gross negligence and find that Fort Worth Hilton failed to prove that Lone Star Gas was grossly negligent as a matter of law. We find there is sufficient evidence that Lone Star Gas did not consciously ignore an extreme risk that would likely cause injury to Fort Worth Hilton. Fort Worth Hilton provides a detailed account of the evidence that it alleges conclusively established that Lone Star Gas was grossly negligent. However, we look only to the evidence that supports the jury's finding and there is ample evidence that: (1) the mapping system, although antiquated, was not so deficient or unusable so as to constitute gross negligence as a matter of law; (2) Goldsmith's failure to use the mapping system to mark the west line, and Lone Star Gas's apparent failure to have the west line marked on the appropriate map, was negligent but not so egregious as to constitute gross negligence in light of testimony that the west end line was on a map provided to L.D. Conatser and that Goldsmith marked a portion of the line; (3) the lack of formal training received by Goldsmith and Laboy Sotomayer, Lone Star Gas's map maker, was not gross negligence in light of the hands-on training they received; and (4) Duebler's response to and actions during the incident were not so flagrant so as to constitute gross negligence in light of the testimony that he stopped to have coffee with a former employee who was more knowledgeable about the gas lines in the area of the gas leak and there are thousands of valves in the area. Moreover, Lone Star Gas's actions after the explosion are irrelevant to the determination of whether it was grossly negligent in causing the explosion.
We have also reviewed the evidence in its entirety and find the jury's finding of no gross negligence was not against the great weight and preponderance of the evidence or manifestly unjust. An appellate court need not give details of supporting evidence when upholding factual sufficiency of the evidence underlying the trial court's judgment. See Ellis County State Bank v. Keever, 888 S.W.2d 790, 794 (Tex.1994). However, we note that both sides presented numerous expert witnesses, fact witnesses, and exhibits that painted two very different, irreconcilable accounts of the severity and egregiousness of Lone Star Gas's actions. The parties were equally divergent on the issues of pre-blast damage and the propriety of Fort Worth Hilton's actions. Thus, we believe it was within the jury's province to weigh all of the conflicting evidence that portrayed both parties in two drastically different lights. See Wal-Mart Stores, Inc. v. Gonzalez, 954 S.W.2d 777, 781 (Tex.App.San Antonio 1997, n.w.h.); Jim Walter Homes, Inc. v. Castillo, 616 S.W.2d 630, 634 (Tex.Civ.App. Corpus Christi 1981, no writ).
We will not disturb a jury's finding where almost every piece of evidence tending to support either account was picked apart and contradicted by the other side. See Gonzalez, 954 S.W.2d at 781. Moreover, Fort Worth Hilton fails to cite, and we have not found, a single case since Moriel where an appellate court has sustained a point in which a party with the burden of proof claimed the jury erroneously failed to find gross negligence. We overrule Fort Worth Hilton's first point.
B. Introduction of Life Safety Issues
In its second and third points, Fort Worth Hilton complains that the trial court erred in allowing Lone Star Gas to repeatedly ask questions concerning the safety risks of operating the hotel after the blast because: (1) the court granted Fort Worth Hilton's motion in limine on the issue; (2) the issue was irrelevant and highly prejudicial; and (3) *756 Lone Star Gas pursued this line of questioning solely to portray Fort Worth Hilton and its president, Walker Harman, as greedy and unconcerned about the safety of the hotel's patrons.
Lone Star Gas contends Fort Worth Hilton failed to preserve any error concerning the "life-safety" issue because it did not object to the mention of the topic during opening statements and only sporadically objected to it during trial. In the alternative, Lone Star Gas alleges the "life-safety" issue was relevant and probative because: (1) the jury was asked to decide whether the hotel's damage was caused by the explosion or by prior structural deficiencies; (2) Fort Worth Hilton invited an attack of Mr. Harman during opening arguments; (3) it was necessary to impeach Mr. Harman; and (4) it was directly relevant to the severity of damages.
We first address the issue of whether Fort Worth Hilton preserved error. To preserve a complaint for our review, a party must have presented to the trial court a timely request, objection, or motion that states the specific grounds for the desired ruling, if they are not apparent from the context of the request, objection, or motion. See TEX.R.APP. P. 33.1(a); see also TEX.R. CIV. EVID. 103(a)(1). If a party fails to do this, error is not preserved, and the complaint is waived. See Bushell v. Dean, 803 S.W.2d 711, 712 (Tex.1991) (op. on reh'g). An objection must be made immediately after the statement is made or the error is waived. See Miller v. Bock Laundry Mach. Co., 568 S.W.2d 648, 653 (Tex.1977); Williams v. Lavender, 797 S.W.2d 410, 413-14 (Tex.App.Fort Worth 1990, writ denied).
The record reveals Lone Star Gas first alluded to life safety issues during its opening statement on June 21, 1995. Fort Worth Hilton did not object to these statements when they were made. Nor did it raise this issue when it moved for mistrial after the conclusion of opening statements. However, the trial court did not grant Fort Worth Hilton's motion in limine regarding the introduction of life safety issues until July 5, 1995. Thereafter, on July 11, Lone Star Gas raised the life safety issue during its cross-examination of James Mitchell, one of the hotel's structural engineers, and Fort Worth Hilton timely objected to this line of questioning on the ground that it was in violation of the motion in limine, irrelevant, and prejudicial. The trial court overruled the objections on the ground Mitchell opened the door to the questions by testifying at trial that it was not dangerous to continue operating the hotel after the explosion despite previously contending in his deposition and in a letter[7] written to the city that it was dangerous to continue operating the hotel after the blast.
The trial court then declared that it would treat each life safety issue separately when it came up. The issue came up again the next day and Fort Worth Hilton objected and moved for a mistrial. The trial court denied the motion for mistrial and, later, allowed Lone Star Gas to introduce life safety issues for purposes of impeachment against two other witnesses, Walker Harman and James Notch.
Lone Star Gas cites Douglas v. Winkle, 623 S.W.2d 764, 767-68 (Tex.App.Texarkana 1981, no writ), for the proposition that Fort Worth Hilton waived any error when it did not object when the issues were first brought up during opening statements. However, Douglas dealt with prior testimony and held that failure to object to the introduction of evidence can preclude an objection when similar evidence is introduced later on during trial. See Id. (emphasis added). Here, the alleged prior "evidence" came during opening statements. Opening statements are not evidence. See Carrasco v. Texas Transp. Inst., 908 S.W.2d 575, 580 (Tex. App.Waco 1995, no writ); Border Apparel-East, Inc. v. Guadian, 868 S.W.2d 894, 898 n. 6 (Tex. App.El Paso 1993, no writ). Therefore, appellant did not waive error when he failed to object to the introduction of life safety issues during opening statements.
*757 Lone Star Gas cites Winkel v. Hankins, 585 S.W.2d 889, 894 (Tex.Civ.App.Eastland 1979, writ dism'd), for the proposition that failure to continually assert a previously ruled upon objection will waive the initial objection. We agree that waiver can occur in such circumstances. However, Lone Star Gas fails to point out where Fort Worth Hilton failed to object to the introduction of the life safety issues and our review of the record as it relates to Fort Worth Hilton's point shows it sufficiently preserved error in relation to the life safety issue being raised during the testimony of Mitchell, Notch, and Harman.
We turn to the merits of Fort Worth Hilton's points. The admission or exclusion of evidence is left to the trial court's sound discretion. See City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex.1995). A trial court's refusal to grant a motion for mistrial is reviewed under an abuse of discretion standard. See Century 21 Real Estate Corp. v. Hometown Real Estate Co., 890 S.W.2d 118, 131 (Tex.App.Texarkana 1994, writ denied). To determine whether a trial court abused its discretion, we must decide "whether the trial court acted without reference to any guiding rules or principles; in other words, whether the act was arbitrary or unreasonable." Worford v. Stamper, 801 S.W.2d 108, 109 (Tex.1990); see Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986).
Merely because a trial court may decide a matter within its discretion in a different manner than an appellate court in a similar circumstance does not demonstrate that an abuse of discretion occurred. See Downer, 701 S.W.2d at 241-42. An abuse of discretion does not occur where the trial court bases its decisions on conflicting evidence. See Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978); Kirkpatrick v. Memorial Hosp. of Garland, 862 S.W.2d 762, 776 (Tex. App.Dallas 1993, writ denied). Furthermore, an abuse of discretion does not occur as long as some evidence of substantive and probative character exists to support the trial court's decision. See Holley v. Holley, 864 S.W.2d 703, 706 (Tex.App.Houston [1st Dist.] 1993, writ denied).
We begin by addressing Lone Star Gas's disregard for the motion in limine. A motion in limine is a procedural device that permits a party to identify, before trial, certain evidentiary rulings that the court may be asked to make. See Hartford Accident & Indem. Co. v. McCardell, 369 S.W.2d 331, 335 (Tex.1963). The purpose of a motion in limine is to prevent the other party from asking prejudicial questions and introducing prejudicial evidence in front of the jury without first asking the court's permission. Id. The trial court's ruling on a motion in limine is not a ruling that excludes or admits evidence; it is merely a tentative ruling that prohibits a party from asking a certain question or offering certain evidence in front of the jury without first approaching the bench for a ruling. See Chavis v. Director, 924 S.W.2d 439, 446 (Tex.App.Beaumont 1996, no writ). When a trial court's order on a motion in limine is violated, we review the violation to see if it is curable by instructions to the jury to disregard it. See Dove v. Director, State Employees Workers' Compensation Div., 857 S.W.2d 577, 580 (Tex. App.Houston [1st Dist.] 1993, writ denied).
As we have already noted, the motion in limine was not granted until a week into trial and the trial court stated it would determine the admissibility each time the issue was raised. While it is true Lone Star Gas did not approach the bench before introducing Mitchell's letter, we find the timing of the motion and the overall circumstances of the case, when combined with the seemingly contradictory stances put forth by both sides on this issue, reveal this to be an issue that should be left to the sound discretion of the trial court. See Davis, 571 S.W.2d at 862; Kirkpatrick, 862 S.W.2d at 776; see also Holley, 864 S.W.2d at 706. Thus, we find the trial court did not abuse its discretion as to Lone Star Gas's actions concerning the motion in limine.
We turn to the merits of Fort Worth Hilton's points. Relevant evidence is that which has any tendency to make the existence of any fact that is of consequence to the determination of the action more or less *758 probable than it would be without the evidence. See TEX.R. CIV. EVID. 401. 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. TEX.R. CIV. EVID. 403. Unfair prejudice has been defined as "an undue tendency to suggest [a] decision on an improper basis, commonly, though not necessarily, an emotional one." Turner v. PV Int'l Corp., 765 S.W.2d 455, 471 (Tex.App.Dallas 1988), writ denied per curiam, 778 S.W.2d 865 (1989).
We find that the proffered evidence was relevant, necessary for impeachment, and not unfairly prejudicial. Both sides admit that fact issues were raised as to whether: (1) the hotel's damage was caused by the explosion or by structural deficiencies; (2) the damage was temporary and repairable or permanent and irreparable; and (3) Fort Worth Hilton had knowledge of the damage before the explosion. Another fact issue surfaced during trial; whether the building was safe for occupants before and after the blast.
Fort Worth Hilton contends the propriety of operating the hotel after the blast was irrelevant. However, the jury was asked to determine the value of the hotel after the explosion and the value would surely be affected if the hotel was dangerous in its post-blast condition. Moreover, Lone Star Gas's case was based on the dual premise that the hotel was damaged before the blast and that money was Harman's primary concern. Thus, if the jury was to believe Lone Star Gas's account, the hotel was dangerous before and after the blast and the value of the hotel before and after the blast would differ. Also, Walker Harman and James Mitchell testified the hotel was irreparable but that it was still operable in its damaged condition yet Mitchell previously co-authored the letter to the City that outlined the dangers of operating the hotel. Thus, not only was the life safety issue directly relevant to the issue of damages, it was also relevant for impeachment purposes of Mitchell and Harman.
Fort Worth Hilton contends the evidence, even if relevant, should have been excluded because it was unfairly prejudicial. While the evidence is prejudicial, we do not think it is unfairly prejudicial. See John Deere Co. v. May, 773 S.W.2d 369, 373 (Tex. App.Waco 1989, writ denied) (stating that not all prejudicial evidence is unfairly prejudicial). First, Lone Star Gas's entire case was designed to destroy the credibility of Walker Harman. The life safety issue was merely one of many tactics used to show Walker Harman had a reason to blame the damage on the blast. Second, Fort Worth Hilton opened the door to an attack on Walker Harman's credibility during opening statements by alluding to the fact that Lone Star Gas would call him a fraud. See McInnes v. Yamaha Motor Corp., 673 S.W.2d 185, 187-88 (Tex.1984) (finding that a party that invites testimony cannot complain when it is offered). Third, it is only fair that Lone Star Gas be able to impeach Mitchell with the letter when Mitchell was such an integral part of Fort Worth Hilton's case. Thus, we find the trial court did not abuse its discretion in admitting evidence on life safety issues and in denying Fort Worth Hilton's motion for mistrial. We overrule Fort Worth Hilton's second and third points.
C. Jack Gilbert and the Travelers Experts
In its fourth and fifth points, Fort Worth Hilton complains the trial court abused its discretion by excluding Jack Gilbert's report and testimony and by denying it the opportunity to present evidence of bias on the part of the Travelers experts after Lone Star Gas characterized them as "independent." Specifically, Fort Worth Hilton contends the trial court erred in excluding Jack Gilbert's expert report and testimony because: (1) they were offered to rebut the implication that the Travelers experts were independent; (2) Gilbert was timely designated; and (3) good cause existed to admit the report and testimony if he was untimely designated. In addition, Fort Worth Hilton claims Walker Harman should have been allowed to testify that: (1) Travelers hired Jack Gilbert; (2) Gilbert prepared two reports concerning the structural damage caused by the blast; and *759 (3) Travelers later hired the Travelers experts and did not show them Gilbert's reports.
Lone Star Gas contends: (1) any evidence on the bias of the Travelers experts was irrelevant because it never claimed the experts belonged to Fort Worth Hilton; (2) Fort Worth Hilton was judicially estopped from showing bias on the part of the Travelers experts because of its pre-trial contention that it was not adverse to Travelers; (3) Fort Worth Hilton repeatedly "invited" the trial court to exclude evidence of the Travelers experts; and (4) Fort Worth Hilton failed to preserve error because its offer of proof was deficient. Lone Star Gas also claims Gilbert's testimony and report were properly excluded because he was designated as an expert after the deadline set in the trial court's pre-trial order and good cause was not shown. We find: (1) Lone Star Gas did not violate the motion in limine and open the door to the introduction of Harman's testimony and Gilbert's report; (2) Fort Worth Hilton failed to properly designate Jack Gilbert as an expert and failed to show good cause for the failure; and (3) the trial court did not err in denying introduction of Gilbert's reports and Harman's testimony in light of the circumstances of the case.
We first address whether Fort Worth Hilton should have been able to show bias on the part of the Travelers experts using Harman's testimony and Gilbert's reports in light of Lone Star Gas's actions during opening statements. The trial court granted Fort Worth Hilton's motion in limine covering "[a]ny characterization of [the Travelers experts] as belonging to, being retained by or having been assigned to the Plaintiffs by Travelers (or any such similar characterization)." During opening, Lone Star Gas intentionally avoided any overt statement that the Travelers experts were retained by Fort Worth Hilton. Instead, Lone Star Gas told the jury that it did not hire the Travelers experts. Although this tactic skirts the boundaries of the motion in limine, it was permissible under the literal wording of the motion because it dealt only with Lone Star Gas's relationship to the Travelers experts, not Fort Worth Hilton's relationship. Fort Worth Hilton could have sought a motion in limine to keep Lone Star Gas from disavowing the Travelers experts but it did not do so.
Thus, Fort Worth Hilton's contentions lack merit because the motion in limine was not violated. In addition, we find that the timing and substance of Fort Worth Hilton's proposed actions reveal the trial court ruled properly in denying Harman's testimony and Gilbert's reports. First, Fort Worth Hilton sought to impeach witnesses who had not yet taken the stand and introduce a person, Gilbert, that the jury had not heard of and would not hear from. This would undoubtedly confuse the jury. Second, in order to impeach these witnesses, Fort Worth Hilton would have had to violate its own motion in limine and introduce insurance and the entire Travelers litigation into the case. Fort Worth Hilton acknowledged this dilemma and sought to avoid it by tempering its offer of proof in such a way as would only give the jury a hint of Travelers role in the case. Again, this hint would only confuse the jury and further complicate prior and future evidentiary rulings. Thus, it was within the discretion of the trial court to deny Fort Worth Hilton the opportunity to delve into these issues.
Fort Worth Hilton also claims the trial court erred because Gilbert was timely designated or, in the alternative, Fort Worth Hilton established good cause for any untimely designation. We disagree. The record reveals Gilbert was not timely designated as an expert pursuant to the trial court's pre-trial discovery order. See TEX.R. CIV. P. 166b(6)(b) (allowing trial court to modify deadlines for supplementation of discovery). Fort Worth Hilton brought up Gilbert for the first time in connection with impeachment of the Travelers experts. Only after the trial court inferred it would not allow Gilbert's reports in for impeachment purposes did Fort Worth Hilton claim timely designation or good cause for the untimely designation as an alternative basis for the admissibility of the reports.
Texas Rule of Civil Procedure 166b(6)(b) states:
*760 If the party expects to call an expert witness when the identity or the subject matter of such expert witness' testimony has not been previously disclosed in response to an appropriate inquiry directly addressed to these matters, such response must be supplemented to include the name, address and telephone number of the expert witness and the substance of the testimony concerning which the expert witness is expected to testify, as soon as is practical, but in no event less than thirty (30) days prior to the beginning of trial except on leave of court.
TEX.R. CIV. P. 166b(6)(b).
However, as stated above, the trial court can modify the 30 day deadline. See id. If a party fails to comply with the rules or orders on supplementation, the evidence is excluded unless good cause is shown. See TEX.R. CIV. P. 215(5). A trial court has discretion to determine whether the offering party demonstrated good cause for failing to supplement. See Aluminum Co. of Am. v. Bullock, 870 S.W.2d 2, 3 (Tex.1994) Thus, we ask whether the trial court's ruling was arbitrary and unreasonable, and made without any reference to any guiding rules or principles. See id. Factors in the determination of whether good cause has been shown include: (1) inadvertence of counsel; (2) lack of surprise, unfairness, or ambush; (3) uniqueness of the excluded evidence; and (4) the fact that a witness has been deposed. See Alvarado v. Farah Mfg. Co., 830 S.W.2d 911, 915 (Tex. 1992).
Having read the record and understanding the circumstances of the case, it appears Fort Worth Hilton's failure to timely designate Gilbert as an expert witness had more to do with discovery tactics than inadvertence of counsel or any of the other factors that would warrant a finding of good cause. Moreover, the evidence of good cause presented at trial was thoroughly refuted by Lone Star Gas and new arguments raised on appeal should not be considered. See Bott v. Bott, 962 S.W.2d 626, 628-29 (Tex.App. Houston [14th Dist.] 1997, n.w.h.). Thus, the trial court did not abuse its discretion in denying Gilbert's reports into evidence. We overrule Fort Worth Hilton's fourth and fifth points.
D. Unethical Conduct and Sanctions
In its sixth point, Fort Worth Hilton contends the trial court abused its discretion in denying its motion for mistrial because Lone Star Gas's trial counsel deliberately utilized unethical and unprofessional tactics to unfairly prejudice the jury. Specifically, Fort Worth Hilton contends Lone Star Gas's counsel: (1) intentionally misled the jury by inferring that MetLife chose not to sue because it determined that the suit was without merit; (2) improperly implied that an inadmissible portion of a government report on the explosion was favorable to his client by asking the court, in front of the jury, to explain to the jury why the portion of the report was inadmissible; (3) improperly asked, in disregard of an order in limine, whether a structural engineer who had worked on the south tower had lost his license; (4) deliberately raised life-safety issues despite an order in limine; (5) made improper "jury speech" objections; (6) "whispered" to co-counsel in a way that the jury could hear what they were saying; and (7) badgered and belittled several witnesses during cross-examination. Lone Star Gas asserts: (1) Fort Worth Hilton failed to timely or properly object to the bulk of the alleged infractions; and (2) the cumulative effect of Lone Star Gas's counsel's actions do not amount to reversible error. We find the cumulative effect of Lone Star Gas's counsel's actions do not amount to reversible error.
Texas Rule of Appellate Procedure 44.1(a) states:
No judgment may be reversed on appeal on the ground that the trial court made an error of law unless the court of appeals concludes that the error complained of:
(1) probably caused the rendition of an improper judgment; or
(2) probably prevented the appellant from properly presenting the case to the court of appeals.
TEX.R. CIV. P. 44.1(a).
We have reviewed Fort Worth Hilton's specific allegations and the entire record as a *761 whole and are of the determination that Lone Star Gas's counsel's actions did not "cause[] the rendition of an improper judgment." TEX.R.APP.P. 44.1(a)(1); Dixon v. Van Waters & Rogers, 674 S.W.2d 479, 484 (Tex. App.Fort Worth 1984, writ ref'd n.r.e.) (finding no cumulative error). We acknowledge that Lone Star Gas's counsel repeatedly pushed the envelope of zealous advocacy throughout the trial. We have no doubt Lone Star Gas's counsel's adherence to certain motions in limine was questionable, his numerous sidebar comments were antagonistic in nature, and his assault on Walker Harman was unrelenting.
However, the trial did not take place in a vacuum and, in the continuum of this prolonged and hotly contested litigation, we cannot say that his actions resulted in an improper judgment. The jury was inundated for seven weeks with highly technical, and inherently contradictory, accounts of the merits of the suit. Intermittent with the testimony and evidence, Lone Star Gas's counsel made numerous, subtle jabs at Walker Harman, Fort Worth Hilton, and its witnesses. While the jury may have noticed some of Lone Star Gas's counsel's tactics, the vast majority of his comments were made outside the presence of the jury during arguments on the various objections and motions for mistrial.
As for Fort Worth Hilton's primary complaint, the conduct relating to the motions in limine, we believe any acts or omissions were tempered in that: (1) Lone Star Gas's counsel's actions seemed designed to follow the letter if not the spirit of the court's rulings; (2) the trial court intentionally left open many of its ruling to adapt to the ebb and flow of the trial; and (3) the substance and timing of many of Fort Worth Hilton's objections were deficient. As such, we do not believe: (1) the trial court abused its discretion in denying Fort Worth Hilton's motion for mistrial; or (2) the jury was so affected so as to render an improper verdict. We overrule Fort Worth Hilton's sixth point.
Lone Star Gas's second and third cross-points complain the trial court erred in overruling: (1) its motion for sanctions because Fort Worth Hilton committed perjury regarding its relationship with several experts employed by Travelers Insurance Company; and (2) its supplemental motion for sanctions because Fort Worth Hilton committed perjury regarding its claim for structural damage. We have reviewed the record and find the trial court did not err in denying either of Lone Star Gas's motions for sanctions.
As to the first motion for sanctions, we acknowledge that Fort Worth Hilton took mutually exclusive stances on the adversarial versus privileged nature of the Travelers experts during the course of the case. However, these contradictory positions must be reviewed in the context of the entire litigation process and in light of Fort Worth Hilton's ancillary action against Travelers, which has been discussed in detail above. In light of Traveler's deception, Fort Worth Hilton's dual stances, while questionable, do not stray from the realm of zealous advocacy and do not amount to perjury. We overrule Lone Star Gas's second cross-point.
As to the second motion for sanctions, we find that ample testimony was admitted to support the positions taken by both sides concerning the cause of the structural damage. That the jury believed Lone Star Gas's account does not mean Fort Worth Hilton and its witnesses perjured themselves and should have been sanctioned. We overrule Lone Star Gas's third cross-point.
E. Damages
In its seventh and eighth points, Fort Worth Hilton contends the jury's award of zero damages for loss of income under question 3(b) and loss of income due to business interruption under 3(c): (1) was erroneous as a matter of law or was against the great weight and preponderance of the evidence; and (2) violates the "zero damage" rule. Specifically, Fort Worth Hilton asserts it proved up: (1) business interruption loss damages of $109,000 suffered immediately after the blast in March 1986; (2) business interruption/loss of revenue damages of $129,000 suffered during January 1987 when tests were being performed in the south tower; and (3) loss of income damages of $176,349 *762 per month suffered from January 1988 to September 1988 during the time the south tower was shut down before the hotel was foreclosed.
Lone Star Gas contends: (1) Fort Worth Hilton failed to brief the issue of causation on appeal; (2) it was within the jury's discretion to find a lack of causation between the blast and the damages asserted; (3) Fort Worth Hilton submitted the wrong measure of damages; and (4) Fort Worth Hilton failed to prove loss of income and business interruption. We find: (1) Fort Worth Hilton failed to sufficiently prove business interruption loss during March 1986; and (2) it was within the jury's discretion to find a lack of causation between the blast and the damages asserted concerning January 1987 and the January 1988 to September 1988 time period.
Fort Worth Hilton claims it proved business interruption damage of $109,000 during March 1986. However, the only testimony as to this amount came from Rex Stewart, the former vice president of finance at Metro Hotels, who apparently came to this figure by reading a report made by Lone Star Gas's expert David Nieses. Nieses did not testify at trial and his report was not entered into evidence. Thus, the jury simply heard Stewart agree to a number reached by someone else. Stewart never told the jury why $109,000 was reasonable, what it accounted for, or how the figure was reached. Walker Harman testified to possible lost bookings and early departures but these events were never linked to the $109,000 figure and the jury apparently took little stock in anything Harman said. Thus, we have a situation where it seems possible that some reservations were canceled and some guests departed but no concrete evidence of such events was presented.
Moreover, during closing, Fort Worth Hilton combined the three time periods and blithely asserted that "the answer to part B should be a $1,410,792" and "the answer to [q]uestion 3C should be a $1,649,373." Essentially, Fort Worth Hilton told the jury to plug numbers into the charge without being given viable reasons to do so. Therefore, we find the jury's answer of "$0" damages was not erroneous as a matter of law or against the great weight and preponderance of the evidence as it related to the period of March 1986.
We turn to the last two time periods, January 1987 and January 1988 to September 1988. As stated above, the record reveals the jury heard ample testimony that the blast did not cause the structural damage to the hotel and that Fort Worth Hilton knew of the damage before the blast. As a result, it was within the province of the jury to find that any losses due to testing and the eventual closing of the hotel occurred as a result of the deficient construction of the hotel, not the blast. See Gonzalez, 954 S.W.2d at 781; Castillo, 616 S.W.2d at 634. Thus, the jury's answer of "$0" damages was not erroneous as a matter of law or against the great weight and preponderance of the evidence. We overrule Fort Worth Hilton's seventh and eighth points.
We turn to Lone Star Gas's first cross-point. Lone Star Gas asserts the trial court erred in overruling its motion to disregard the jury findings because Fort Worth Hilton presented no legally sufficient evidence that the reasonable cost of repairs in Tarrant County was $140,298.01. We agree. A party seeking recovery for the cost of repairs must prove their reasonable value. See, e.g., Ebby Halliday Real Estate, Inc. v. Murnan, 916 S.W.2d 585, 589 (Tex.App. Fort Worth 1996, writ denied); GATX Tank Erection Corp. v. Tesoro Petroleum Corp., 693 S.W.2d 617, 619 (Tex.App.San Antonio 1985, writ ref'd. n.r.e.) (stating "[i]t is incumbent upon the parties seeking recovery for the cost of repairs to prove the reasonable value of such repairs"). Ordinarily, to establish the right to recover costs of repairs, it is not necessary for a claimant to use the words "reasonable" and "necessary"; a claimant need only present sufficient evidence to justify a jury's finding that the costs were reasonable and the repairs necessary. See Murnan, 916 S.W.2d at 589; Ron Craft Chevrolet, Inc. v. Davis, 836 S.W.2d 672, 677 (Tex. App.El Paso 1992, writ denied). However, mere proof of amounts charged or paid does not raise an issue of reasonableness and such amounts ordinarily cannot be recovered without *763 evidence showing the charges were reasonable. See, e.g., Murnan, 916 S.W.2d at 589; GATX Tank Erection Corp., 693 S.W.2d at 620; Bradley v. Castro, 591 S.W.2d 304, 306 (Tex.Civ.App.Fort Worth 1979, no writ); Frost Nat'l Bank of San Antonio v. Kayton, 526 S.W.2d 654, 666-67 (Tex.Civ. App.San Antonio 1975, writ ref'd n.r.e.); Allright, Inc. v. Lowe, 500 S.W.2d 190, 191 (Tex.Civ.App.Houston [14th Dist.] 1973, no writ).
In GATX Tank Erection Corp., the court discussed the plaintiff's burden for proving the cost of repairs:
The only evidence presented by Tesoro as to the cost of repairs is basically proof of the payment of certain invoices or accounts as to the repairs, without proof as to the reasonableness of such costs. Clearly there is proof as to the necessity of repairs to the tanks involved. However, under established principles of law it is necessary to prove both that such repairs were necessary and that the costs of repairs were reasonable.
GATX Tank Erection Corp., 693 S.W.2d at 619.
Here, as in Murnan and GATX Tank Erection Corp., there is evidence that Fort Worth Hilton believed repairs were necessary, but no evidence that the specific work done was necessary or that the costs spent on it were reasonable. See, e.g., Murnan, 916 S.W.2d at 589; GATX Tank Erection Corp., 693 S.W.2d at 620. Fort Worth Hilton's efforts to prove up the actual and estimated cost of cosmetic repairs to the hotel amounted to Walker Harman reading a chart listing the alleged damages, the names of companies that made the repairs or provided estimates, and the bills for work that was actually done. Moreover, Harman did not address or even infer necessity or reasonableness in Tarrant County, as submitted in the charge. Thus, the jury was left to speculate whether money spent on the work was reasonable and whether that particular work was necessary. See Murnan, 916 S.W.2d at 589. We sustain Lone Star Gas's first cross-point. As a result, we need not address Fort Worth Hilton's ninth point concerning prejudgment interest.
IV. CONCLUSION
We reverse the trial court's judgment and enter a take-nothing judgment in favor of Lone Star Gas.
NOTES
[1] TEX.R.APP. P. 19.3(a).
[2] Lone Star Gas also claimed that another map, map F-6A, portrayed the west line.
[3] L.D. Conatser was non-suited in September 1990.
[4] Travelers was Fort Worth Hilton's insurer.
[5] Met Life held the note on Fort Worth Hilton, which totaled approximately $14 million.
[6] These experts were: Ron Watkins, Brian Kendrick, and Jack Haston of Trinity Engineering; Robert Henry, Thomas Rowe, Tom Patty of Wiss, Janney & Elstner Associates, Inc.; Jack Rosenlund & Company; and Trinity Engineering (TETCO).
[7] In 1992, Mitchell, James Notch and Walter Moore wrote a letter to the city after they learned the hotel's new owners were seeking a permit to reopen the south tower. The letter opined that "the re-opening of this tower in its present condition may result in endangerment of the lives, safety, health and welfare of the general public." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1113093/ | 75 So. 2d 227 (1954)
226 La. 152
Albert HARRIS
v.
GUARANTY INCOME LIFE INSURANCE COMPANY.
No. 41200.
Supreme Court of Louisiana.
July 2, 1954.
Rehearing Denied October 5, 1954.
*228 Irving Ward-Steinman, Alexandria, for plaintiff-appellant.
Gamble & Gamble, New Orleans, for defendant-appellee.
HAWTHORNE, Justice.
Plaintiff Albert Harris, the beneficiary named in an insurance policy on the life of his deceased mother, Mrs. Henriette Dufour Mayeux, issued by the Guaranty Income Life Insurance Company in the principal amount of $5,000, instituted this suit to recover the face amount of this policy. After trial on the merits there was judgment rejecting his demands and dismissing his suit, and he has appealed.
The insurance policy in the instant case was dated May 4, 1949, and called for an annual premium of $261.35. The premium for the second year, which fell due on May 4, 1950, was not paid, and the policy lapsed for nonpayment of this annual premium. After the policy lapsed, the agent or solicitor of the defendant insurance company called upon the plaintiff three or four times in an effort to have him reinstate the policy on the life of his mother, but the plaintiff beneficiary informed him that he did not have sufficient funds available for this purpose, although the record discloses that he owned property at that time having a value of approximately $75,000. On September 4, 1950, after the policy had lapsed, the insured, plaintiff's mother, consulted Dr. Hardy in Alexandria on the advice of her family physician. Dr. Hardy at that time tentatively diagnosed her ailment as cancer. She was hospitalized, and this diagnosis was confirmed by surgical procedure on September 7, 1950. The insured was discharged from the hospital on September 10. Three days later the plaintiff informed the insurance agent that he was ready to have the policy reinstated, and accordingly the application for reinstatement was filled out, plaintiff paid the premium which was in default, and on September 19, 1950, the policy was reinstated. Seven months later, on April 18, 1951, the insured died of the cancer which had been previously diagnosed by Dr. Hardy and for which she had been receiving treatment since that diagnosis up until the time of her death.
The application for reinstatement reads in part as follows:
"I Hereby Apply for reinstatement of the above numbered Policy, and for the purpose of inducing said Company to reinstate said Policy and with the understanding that it will rely and act on what I here say, I represent to it that am now, to the best of my knowledge and belief, in good health; that within the past twelve months I have not suffered any illness or bodily injury nor have I consulted with or been treated by any physician nor have I been prevented by illness or accident from continuously pursuing my customary occupation which is the same now as it was when I applied for the said Policy; that I am withholding no material facts and know no reason why I am not a good risk * * *.
"* * * if true answers are not given by me in response to each of the above matters inquired of me, any reinstatement of the said Policy made upon this application shall be void and without effect. * * *" (Italics ours.)
The statements made as to the condition of the health of the insured in the application for reinstatement for the purpose of *229 inducing the insurance company to reinstate the policy were, of course, untrue or false, as the insured at that time had, and was receiving treatment for, the cancer from which she subsequently died. However, the record gives no indication that the insured herself ever knew as a matter of fact that application for reinstatement of the lapsed policy had been made.
The beneficiary, the plaintiff in this suit, could not read or write, and according to the testimony of the defendant insurance company's agent who was called as plaintiff's witness, he (the agent) filled out the application and signed it with the name of the insured and mailed it to the company without reading it to the plaintiff. He testified positively that he had no knowledge of Mrs. Mayeux' illness. He had some slight recollection that he had inquired of plaintiff about his mother's health and was informed that she was all rightin good health.
The rule prevails in this state that an insurance agent in procuring an application for insurance and in reducing it to writing acts as the agent of the insurer. Under this rule, when an agent acting under the scope of his authority undertakes to fill out, and does fill out, an application for a policy of insurance, his acts, representations, and mistakes are those of the insurance company, in consequence of which, if the agent by reason of mistake, fraud, omission, or negligence inserts erroneous or untrue answers to the questions contained in the application, these representations bind the insurer but are not binding upon the insured, provided he (the insured) is justifiably ignorant thereof, has no actual or implied knowledge thereof, and has been guilty of no bad faith or fraud. Hardy v. Commercial Standard Ins. Co., 172 La. 500, 134 So. 407; Beene v. Southern Casualty Co., 168 La. 307, 121 So. 876; Parker v. Citizens Fire Insurance Company of Missouri, 4 La.App. 711; Willhite v. Hartford Fire Ins. Co., 8 La.App. 538.
The rule is stated as follows in 5 Cooley's Brief on Insurance (2d ed.), pp. 4120, 4131:
"Where the application is filled up by the agent, and signed by him in the name of the insured, without the latter's knowledge and without any declaration by him, the company is estopped from interposing the falsity of any of the representations as a defense to the policy.
* * * * * *
"The rule that the insured is not responsible for false answers in the application, where they have been inserted by the agent through mistake, negligence, or fraud, is not absolute. The decisions supporting the doctrine are usually based on the theory that the insured has acted in good faith throughout, and that the false answers were inserted without his knowledge or consent." (Italics ours.)
See also 2 Couch, Cyclopedia of Insursurance Law, sec. 524, pp. 1528 et seq.; 12 Appleman, Insurance Law and Practice, sec. 7307, p. 431; 29 Am.Jur., Insurance. sees. 843, 844, 847, pp. 641, 642, 645; 45 C.J.S., Insurance, §§ 729, 732, pp. 735, 740.
The basis of the rule would make it applicable also to a case where it is the beneficiary who deals with the insurance agent with reference to the reinstatement of a life insurance policy, and the same rule that requires an insured to be in good faith where misrepresentations by the agent are made would also require good faith on the part of the beneficiary dealing with the agent in regard to the insurance. Accordingly we must determine in the instant case whether the beneficiary, the plaintiff herein, in securing the reinstatement of the lapsed policy acted in good faith throughout and whether there has been any bad faith or fraud on his part.
The plaintiff by his testimony tried to convince the court that he was in total ignorance of his mother's serious illness when he applied for the reinstatement, that he believed her to be in excellent health until a few weeks before her death, and that he had no knowledge that cancer was the cause of her death even at the time of the *230 trial. We are convinced, as was the district judge, that his testimony is not believable and that the facts and circumstances show his bad faith.
The illness of the deceased insured was diagnosed positively as cancer on September 7, and she was released from the hospital uncured on September 10. While the insured was still in the hospital, the physician who made the diagnosis informed her of her condition and also at that time discussed this diagnosis with the plaintiff or his wife. The doctor was positive in any event that he discussed the mother's condition with Mr. Harris at some time during her treatment. Mr. Harris denied that the doctor ever discussed his mother's condition with him. He admitted that he took his mother to see the doctor at the hospital a few times, but he said he could not remember whether he took her before or after applying for the reinstatement. He conceded that he took his mother to the hospital for X-ray treatments, and that his wife told him his mother was ill, but, according to him, his wife told him only that his mother had "female trouble". The circumstance that three days after she was discharged from the hospital the plaintiff beneficiary requested the reinstatement of the lapsed policy, together with all the other facts, convinces us beyond any doubt that, at the time the beneficiary requested the lapsed insurance policy to be reinstated, he was well aware that his mother had cancer. Plaintiff's wife had cancer, and there was a history of cancer in the plaintiff's family, and no doubt he was fully cognizant of the seriousness of this disease.
The district judge in rejecting plaintiff's demands informs us in his reasons for judgment that he was of the opinion that the plaintiff knew all along of his mother's condition. We are fully in accord with his finding of bad faith, and consequently this bad faith bars plaintiff from recovery.
For the reasons assigned the judgment appealed from is affirmed, appellant to pay all costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1455118/ | 235 F. Supp. 698 (1964)
John R. PETERSON et al., Libellants,
v.
S. S. WAHCONDAH et al., Respondents.
Admiralty No. 5417.
United States District Court E. D. Louisiana, New Orleans Division.
December 2, 1964.
*699 Fernand F. Willoz, III, New Orleans, La., for libellants.
Samuel C. Gainsburgh, Kierr & Gainsburgh, New Orleans, La., for respondent Miami Marine Service, Inc., intervenor.
FRANK B. ELLIS, District Judge.
When this litigation last appeared in this Court it had already navigated a tortuous path. At that time, in distributing the funds remaining from the sale of the vessel, two claims were disallowed and the balance was ordered paid to Miami Marine Service, Inc. (Miami), the former agent and present owner of the vessel. Peterson v. S. S. Wahcondah, 216 F. Supp. 642 (E.D.La.1963). In the meantime the Fifth Circuit Court of Appeals has, in effect, affirmed the dismissal of those two claims, reversed the distribution of the remaining funds to Miami, and remanded the case for further proceedings and a determination of "libelants' claim for statutory penalties which may have been due them under the provisions of 46 U.S.C.A. § 596." Peterson v. S. S. Wahcondah, 331 F.2d 44, 49 (5 Cir. 1964).
Libellants then filed interrogatories on Miami, and based primarily on answers to those interrogatories now move for summary judgment under Admiralty Rule 58 as to the question of penalty wages. They allege, in support of their motion, that funds in the form of earned freight were available to pay their wages when they initially became due, and that the withholding of those wages was an arbitrary and willful refusal entitling libellants to recover penalty wages.
The Act granting merchant seamen the right to recover penalty wages provides, inter alia:
"Every master or owner who refuses or neglects to make payment in the manner hereinbefore mentioned without sufficient cause shall pay to the seaman a sum equal to two days' pay for each and every day during which payment is delayed beyond the respective periods, * * *." (Emphasis supplied.) 46 U.S.C.A. § 596.
Miami's defense is, basically, that the earned freight did not accrue to the owner of the vessel, but to a time-charterer, and that since the owner was insolvent at the time and the vessel produced no further income, sufficient cause existed *700 to support the failure to pay wages and prevent the claim for penalty wages herein.
It is now clear that insolvency of the owner and "the arrest of the vessel, subject to accrued claims beyond its value" constitutes sufficient cause to relieve the owner from statutory liability for penalty wages. Collie v. Fergusson, 281 U.S. 52, 54, 50 S. Ct. 189, 191, 74 L. Ed. 696 (1930); Peterson v. S. S. Wahcondah, 331 F.2d 44, 48 (5 Cir. 1964). Here the owner was insolvent, having filed bankruptcy proceedings in March, 1962, and even though the vessel was not seized until September 19, 1962, after the crew's wages became due there apparently was no income produced by the vessel.
Wages had been paid the crew through May 1, 1962. Thereafter the vessel was under time-charter to Florida Inter-Island Shipping Corp. at a rate of $11,500.00 per month, and on June 20, 1962, a shipment of Costa Rican sugar was unloaded at the Colonial Sugar Refinery in Gramercy, Louisiana, earning "freight" in the amount of $9,293.25. The final "freight" payment was made August 1, 1962. The issue then is whether the "freight" payment accruing to the time-charterer is considered a fund from which payment of crew's wages could have been made by the owner or its agents.
The seamen's lien for penalty wages is accorded the same sacred priority as the lien for wages, and attaches to proceeds from both the sale of the vessel and the earned "freight". Clifford v. Merritt-Chapman & Scott Corp., 57 F.2d 1021 (5 Cir. 1932); The Else, D. C., 27 F.2d 935 (1928). However, the lien for penalty wages arises under 46 U.S.C.A. § 596 only where there has been a refusal to pay regular wages when due. That statute is designed to prevent "arbitrary refusals to pay wages, and to induce prompt payment when payment is possible." (Emphasis supplied.) Collie v. Fergusson, 281 U.S. 52, 56, 50 S. Ct. 189, 191 (1930). Inherent in the language of the statute then is a pre-requisite that some fund exist out of which the owner or its agents could have paid the regular wages when they became due, or paid them sometime thereafter.
Libellants point to the "freight" payment from the sugar cargo as the fund from which wages could have been paid. At the time that cargo was transported though, the vessel was under time-charter and the "freight" payment belonged not to the owner of the vessel, but to the time-charterer. In nautical parlance, as this case demonstrates, the term "freight" has a specific meaning. That meaning is indicated at 1 Benedict on Admiralty 284, § 92:
"All agreements for the conveyance of persons or the carriage of property by vessels are contracts of affreightment and all hire or reward for the use of vessels is freight."
Here the vessel's owner had no agreement for the carriage of property, only a time-charter contract of hire for the use of the vessel. Thus the "freight" earned by the owner consisted of the charter hire payments and not the proceeds from the contract of affreightment.
How can it be said then that the shipowner could have paid the crew's wages out of the time-charterer's receipts and still retain a right to receive the charter hire payments? It would be inequitable and probably contrary to the terms of the charter party agreement.[1] Moreover, crew members are the shipowner's men, not the time-charterer's. Bergan v. International Freighting Corp., 254 F.2d 231 (2 Cir. 1958). Proctor for libellants has not cited, nor could this Court locate, any case wherein a shipowner was permitted to pay wages out of the time-charterer's proceeds from a contract of affreightment. The only conclusion then is that the timecharterer's *701 "freight" receipts did not constitute a fund within the control of the owner from which wages could have been paid. Hence, to that extent, the refusal was for sufficient cause.
On the other hand, while the sugar cargo "freight" receipts were not available for the payment of wages, a statement of account in the record indicates that at some time between December 31, 1961 and June 30, 1962 Miami collected $3,647.08 on behalf of the vessel from Florida Inter-Island Shipping Corp. for a charter party and applied that amount against advances it had made for the vessel. It may be that those funds could have been used to pay wages.
Suffice to say that at this point there remains a genuine issue of material fact precluding the granting of summary judgment under Admiralty Rule 58. Therefore, it is ordered that libellant's motion for summary judgment on the issue of penalty wages be, and the same is hereby denied.
NOTES
[1] The time-charter agreement between Ahern Shipping Co., Ltd., the former owner of the vessel, and Florida Inter-Island Shipping Corp., is not in the record. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1479981/ | 18 F.2d 413 (1927)
THE FORT GAINES.
No. 1458.
District Court, D. Maryland.
March 31, 1927.
Wm. H. Lawrence, George T. Mister, and Brown, Brune, Parker & Carey, all of Baltimore, Md., for libelants.
SOPER, District Judge.
On October 5, 1926, a libel was filed for supplies furnished to the steamship Fort Gaines, whereupon the vessel was seized by the United States marshal, and kept in his custody until November 8th, when she was sold by order of court. The net proceeds of sale amounted to $9,327.45. Various claims against her for supplies and services, filed by others than the master and crew, amount to something over $12,000. Intervening libels in the aggregate sum of $3,557.71 for wages, extra pay, and subsistence have been filed by the master, officers, and crew of the vessel. The question before the court is whether the last-mentioned claims give rise to prior liens on the vessel.
The Fort Gaines was a Norwegian vessel. The shipping articles, signed by the seamen, contain the following statement: "That they shall serve on board the vessel in capacity here below stated with the obligation and privileges provided in the Maritime Law of July 20, 1893, and February 16, 1923." The laws referred to are Norwegian laws. It is stipulated that the Act of February 16, 1923, section 34, provides as follows:
"If a seaman is dismissed before the termination of the engagement, without such dismissal being warranted according to section 32 or section 33, he shall be entitled to two months' wages from the date of leaving, provided he is a mate or engineer, or to one month's wages, provided he belongs to the remaining crew."
Sections 32 and 33 apply exclusively to discharge by reason of illness, incapacity occasioned by injury, or breach of discipline, gross neglect of duty, theft or other misconduct. Section 3 of the same act provides as follows:
"The master may be dismissed at any time by the owner. If he is dismissed before the expiration of the period of service and such dismissal is not warranted according to section 4 or section 5, he shall be entitled to wages for three months after leaving."
Sections 4 and 5 deal exclusively with cases where the master is dismissed on account of illness or incapacity due to injury, or on account of incompetence, dishonesty, or gross fault or negligence while in the service of the ship.
The Maritime Law of Norway of July 20, 1893, chapter 11, section 268, makes the following provision:
"A maritime lien upon the ship and freight shall attach to the following claims; the claims of the master and crew for wages and for remuneration to which they are lawfully entitled for services on board the ship."
It is conceded that in no case was the employment of any of the crew terminated for one of the excepted clauses, but was brought about in each case by the seizure of the ship. *414 The main question involved is whether such circumstance amounts to a dismissal within the meaning of the laws of Norway. No interpretation by the Norwegian courts has been furnished. The statutes may therefore be given such interpretation as would be given under like circumstances to laws of the United States, for, as was said in the case of The Hoxie (C. C. A.) 297 F. 189: "There is no presumption that the law of foreign countries is unlike ours. One who would rely upon the difference * * * must prove its existence. If he does not, we apply our own law to the case."
The failure of the owners of a vessel to pay claims against her when seized upon legal process followed by sale of the vessel, and the termination of the employment of the crew consequent upon such proceedings, have been held to constitute a termination of the shipping, agreement, under section 4529 of the Revised Statutes (Comp. St. § 8320), which provides that a master or owner shall pay every seaman his wages within a certain period after termination of the agreement under which he was shipped, and also provides that a master or owner, who refuses or neglects to make payment in the manner provided, "without sufficient cause, shall pay to the seaman a sum equal to two days' pay for each and every day during which payment is delayed beyond the respective periods, which sum shall be recoverable as wages." The circumstance that the owner is in financial difficulties does not relieve him from the obligation with respect to claims for wages, including extra pay.
The general rule that the rights of other creditors are subordinate to the claims for wages is applicable, since the rights of seamen have always been cautiously guarded by statutes, and the courts should make their decrees in accord with the spirit and intent of the law to protect the seamen. Gerber v. Spencer (C. C. A.) 278 F. 886. A similar decision was rendered in the case of The Great Canton (D. C.) 299 F. 953, wherein seamen were permitted to recover an extra month's wages under R. S. § 4527 (Comp. St. § 8318), for an improper discharge, and were allowed a prior maritime lien. Section 4527 provides that any seaman who has signed an agreement and is afterward discharged before the commencement of the voyage or before one month's wages are earned, without fault on his part, and without his consent, shall be entitled to receive in addition to earned wages, a sum equal to one month's wages as compensation. See, also, Covert v. Wexford (D. C.) 3 F. 577; The Adolph (D. C.) 7 F. 501.
It follows from these authorities that the officers and crew of the Fort Gaines were dismissed and became entitled to extra pay as provided by the Norwegian statutes. Moreover, such extra pay may fairly be described as remuneration to which they are lawfully entitled for services on board the ship under the provisions of the Norwegian Act of July 20, 1893. This conclusion is supported by the decision in Gerber v. Spencer, supra, wherein it is held that the extra pay provided for seamen under R. S. § 4529, is made by way of compensation for delay, and is an incident to the claim of wages proper. Again it has been held in Buckley v. Oceanic S. S. Co. (C. C. A.) 5 F.(2d) 545, that the double wages provided by R. S. § 4529, are to be considered as wages rather than as a penalty. The rights of the officers and crew in this case to extra pay therefore give rise to a lien upon the ship, and such a lien must be held to be prior to the claims of other creditors in accordance with the general rule applicable in the courts of the United States.
The officers and crew are claiming not only for the extra compensation referred to, but also for services rendered the vessel and for subsistence during various periods subsequent to the seizure by the United States marshal on October 5th. There is nothing in the stipulations on which the case is submitted to indicate that the services were necessary to the ship after its seizure under the order of this court. Under these circumstances, there is no maritime lien in favor of the crew of the vessel for the services and subsistence in question. The Astoria (C. C. A.) 281 F. 618. If the legal proceedings are to be held as equivalent to a dismissal of the crew, it is fair to assume that dismissal was effective when the custody of the vessel was taken away from the master and passed to the official of the court. The decree will allow to the officers and members of the crew the extra wages provided by the Norwegian law, but the claims for subsistence and services rendered after the seizure of the vessel will be dismissed.
The decision upon the libel of the master will be withheld until it is shown by stipulation or by evidence what supplies and materials were furnished to the ship by the other libelants, and whether the supplies and materials were furnished on the order of the master. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2092915/ | 927 F. Supp. 986 (1996)
Michael MATTALINO, Plaintiff,
v.
TRINITY PETROLEUM EXPLORATION, Defendant.
Civil Action No. H-94-3302.
United States District Court, S.D. Texas, Houston Division.
May 2, 1996.
*987 *988 Benjamin T. Willey, Oklahoma City, OK, for Plaintiff.
barron W. Dowling, San Antonio, TX, for Defendant.
OPINION ON SUMMARY JUDGMENT
HUGHES, District Judge.
1. Introduction.
A geologist sued a promoter for breaching their agreement that the geologist would receive a specified overriding royalty on leases taken by the geologist in the area of interest. Because he accepted a lower royalty to enable the promoter to sell the deal and because the promoter did not take the leases itself, the geologist will be left with the reduced interest as his full compensation.
2. Facts.
Michael Mattalino sued Trinity Petroleum Exploration, Inc., for breach of contract. The contract covered Trinity's use of geological research by Mattalino. Mattalino seeks either a higher overriding royalty under the contract or compensation for Trinity's not having marketed the oil prospects more advantageously.
On November 11, 1989, Mattalino and Trinity agreed on a geological retainer. Mattalino agreed to furnish geological interpretations for oil and gas prospects in Texas and Louisiana. In return, Mattalino was to receive pay, expenses, bonuses, and an overriding royalty. On prospects recommended by Mattalino and acquired by Trinity, Mattalino was to get an overriding royalty of 1% of an 8/8ths mineral interest; the geologist's interest was to be reduced in the same proportion as Trinity's initial working interest was less than 8/8ths. The contract ran from October 1, 1989, to October 1, 1990.
In December 1989, Mattalino disclosed to Trinity a promising site in a heavily developed region south of Laredo, Texas. Trinity, acting as a promoter, recommended the prospect to Sterling Energy Corporation with which it had a consulting contract. Sterling acquired leases to the Ervin, Richter, Lafon, and Wright tracts.
Sterling's deal with Trinity was for Trinity to get a 1.5% overriding royalty and Mattalino to get a 1.0% overriding royalty in the Richter and Ervin leases only. Sterling would yield no overriding royalties in the Lafon and Wright leases. Sterling then made a deal with Anderman/Smith Operating Company. Anderman agreed to buy a 50% working interest in the four leases from Sterling; however, it agreed to bear its proportionate share of Trinity and Mattalino's royalties only on the Richter and Ervin leases. Anderman was unwilling to bear the overriding royalties on the Lafon and Wright leases.
Sterling told Trinity and Mattalino that Anderman did not want to pay them on the Lafon and Wright leases. As Anderman and Sterling structured their deal, Trinity and Mattalino would get their full compensation on one-half of the land and one-half of their expected compensation on the other one-half, effectively reducing their interests to three-quarters of the expected rate on the whole deal. Trinity and Mattalino recall different results of this meeting. Mattalino says that he never accepted the reduction; Trinity admits that it accepted and claims Mattalino did, too.
On August 30, 1990, Sterling assigned Mattalino his diminished share in the Lafon and Wright tracts. The assignments were recorded on October 3, 1990. At no time did Trinity have a working interest in the leases.
3. Claims under the Contract.
Trinity contends that the contract provides no basis for Mattalino to seek a larger overriding royalty. Because the agreement contemplates a reduction of Mattalino's overriding royalty proportionate to Trinity's initial working interest, Trinity argues that the agreement relates only to prospects in which Trinity acquires a working interest.
Mattalino argues that the phrase "acquired by Trinity" refers to any interest acquired by Trinity. Mattalino says he is entitled to his full 1.0% overriding royalty because Trinity has overriding royalties in both the Lafon and Wright leases.
*989 "Acquire" means "to become an owner of property; to make property one's own." Blacks Law Dictionary 24 (6th ed. 1990). The meaning of acquire suggests a totality lacking in Mattalino's interpretation. Acquiring an overriding royalty is different from acquiring the working interest in a prospect.
The key distinction lies in the difference between a working interest and an overriding royalty. One who has a working interest shares in the costs and management of the drilling operation as well as the profits. One who has an overriding royalty shares only in the gross revenues and has no role in the management of the well. With 50% working interests each, Sterling and Anderman both "acquired" the prospect. They were to run it and be responsible for it. With small overriding royalties, Trinity and Mattalino did not "acquire" the prospect. They were not charged with developing or operating the wells. Their role was that of a beneficiary.
This reading of the contract accords with language found later in the same clause. That the parties anticipated calibrating Mattalino's overriding royalty to the level of Trinity's working interest demonstrates that the agreement applied only to leases where Trinity had a working interest. The proportionate reduction clause, if applied to all interests of Trinity, would result in Mattalino getting what he got because his overriding royalty is fully proportionate to Trinity's overriding royalty.
The contract is unambiguous and summary judgment is proper.
4. Acquiescence as Waiver.
Trinity argues that the signing of a division order by an experienced oil and gas man like Mattalino, coupled with his acceptance of the reduced royalty payments, waived his rights to larger royalties.
While the Texas Division Order Statute does not support Trinity's contention that Mattalino waived his contractual rights as a matter of law, signing the division order does count as evidence of an intent to waive one's rights. Tex.Nat.Res.Code Ann. § 91.401(3) (1978).
Because of his experience in the oil and gas business, Mattalino recognized immediately that his overriding royalty was not what it should be when he received the division order. Mattalino signed the division order and accepted the royalty payments for several months, yet he never made a formal demand or complaint. Without a factual dispute, the evidence of waiver is sufficient for summary judgment.
Trinity's alternative argument that Mattalino should be equitably estopped from pursuing his claim fails. Trinity did not demonstrate reliance on its part that would be affected negatively by Mattalino's change in position.
5. The Statute of Frauds.
Trinity claims that Mattalino's contract falls within the statute of frauds because it lacks the requisite specificity of material terms to be an enforceable writing. Trinity argues that the word "prospect" was not defined in the contract. Trinity contends that, without an express definition of "prospect," the contract is vague about a material term and must fail.
Both parties were aware of the meaning of "prospect." Trinity fails to argue that the parties actually disputed the meaning of the word, instead arguing that the word is inherently vague. When no active disagreement exists, no vagueness exists. So long as the court can reasonably fix the responsibilities of the parties, the contract is enforceable. Solomon v. Greenblatt, 812 S.W.2d 7 (Tex.App. Dallas 1991, no writ).
6. Extraordinary Duties.
Mattalino argues that Trinity should not have recommended the prospect to a company unable to bear the overriding royalties on all four leases. By doing so, Mattalino contends that Trinity violated duties that went above and beyond the contract. Trinity maintains that, as a matter of law, it owed no extraordinary duties to Mattalino to market the information in a specific way.
*990 Trinity is correct. Duties beyond those specified in a contract can exist only when an extraordinary relational bond exists between the parties. None of these elements is present here. Crim Truck and Tractor Co. v. Navistar Int'l Transp. Corp. 823 S.W.2d 591 (Tex.1992); Aranda v. Ins. Co. of North America, 748 S.W.2d 210 (Tex.1988). Mattalino did not retain an interest in controlling the marketing of the prospects once acquired by Trinity.
7. Statute of Limitations.
Trinity insists that Mattalino's claims arose more than four years before he filed suit and that they are barred by the Statute of Limitations. Tex.Civ.Prac. & Rem.Code Ann. §§ 16.003, 16.004, 16.035, 16.051 (1986). This argument fails. The assignments detailing his reduced share of the Lafon and Wright leases were not recorded until October 3, 1990. Mattalino filed suit on September 26, 1994, within the four-year period. That Sterling acquired the lease at an earlier time is irrelevant. Mattalino's claim did not arise until Sterling recorded the assignment demonstrating Mattalino's reduced overriding royalty. If a trial were required, Trinity might be able to prove that Mattalino knew of the reduction before the recording, but it can now only be said that he knew as a matter of law when the assignment was recorded.
8. Conclusion.
Because Trinity never acquired a working interest in the leases and because it owed Mattalino no extraordinary duties, Mattalino's claims fail. Reading the contract broadly, Mattalino still has no claim because he got his correct share proportioned to what Trinity acquired. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1367065/ | 192 F. Supp. 97 (1961)
Joseph William WILLIAMS, Petitioner,
v.
UNITED STATES of America, Respondent.
No. 57/61.
United States District Court S. D. California, Central Division.
March 16, 1961.
Caryl Warner and Russell E. Parsons, Los Angeles, Cal., for petitioner.
Laughlin E. Waters, U. S. Atty., Thomas R. Sheridan, Asst. U. S. Atty., Chief, Criminal Division, Wm. Bryan Osborne, Asst. U. S. Atty., Asst. Chief, Criminal Division, Los Angeles, Cal., for respondent.
WESTOVER, District Judge.
In May, 1959, an Indictment in five counts was filed in this court against the above-named Joseph William Williams (No. 27,639-CD), charging interstate transportation of forged securities in violation *98 of Title 18 U.S.C. § 2314. Count 4 of the Indictment is in the following language:
"On or about July 16, 1958, defendant Joseph William Williams, with unlawful and fraudulent intent, caused to be transported a security, to wit, charge slip NO. E 7990 of Standard Oil Company of California, dated July 16, 1958, in the amount of $91.55, bearing the signature, Gerald Cohen, in interstate commerce from Vancouver, Washington to Los Angeles County, California, in the Central Division of the Southern District of California, which security was falsely made and forged as the defendant then and there well knew."
On May 18, 1959 defendant appeared in court for arraignment and plea, at which time the Court ordered the cause continued to May 25, 1959, having appointed Caryl Warner, Esquire, to represent defendant.
On May 25, 1959, defendant and his counsel appeared in court, and defendant entered a plea of "not guilty" to Counts 1, 2, 3 and 5 and a plea of "guilty" as to Count 4 of the Indictment. Thereafter, on June 12, 1959 defendant was sentenced to the custody of the Attorney General for a period of six years for the offense charged in Count 4. The remaining counts of the Indictment were dismissed.
On July 5, 1959 defendant filed a letter with the court, requesting modification of sentence. The letter was processed as a petition for modification of sentence and, on July 23, 1959, was denied.
On August 16, 1959 defendant filed another letter which was treated as a petition or motion for modification of sentence. On September 15, 1959 the modification request was denied.
On January 13, 1961 defendant filed another letter with the court, citing the decision of the Honorable Leon R. Yankwich of this court in the case of United States of America v. Fordyce, 192 F. Supp. 93, in which Judge Yankwich held a credit card and charge slips were not "securities" within the meaning of Title 18 U.S.C. § 2314. Petitioner in his letter contends that he, too, had been indicted and sentenced on a "charge slip" offense and as "Judge Leon R. Yankwich, * * *, ruled by dismissal, that Interstate Transportation of a stolen implement used for forgery, namely, a credit card, was not a violation of a Federal Law and that their is no such law on the statute books" petitioner was sentenced illegally.
In the Fordyce case, upon which petitioner relies, Judge Yankwich held that a Diners Club Credit Card and charge slips emanating from the use thereof and a Hilton Carte Blanche Credit Card were not securities within the meaning of § 2314.
Upon receipt of defendant's letter the Court ordered it filed as a petition under Title 28 U.S.C. § 2255 and appointed Russell E. Parsons, Esquire, as counsel in the case to be associated with Caryl Warner, Esquire, appointed at the inception of the Indictment proceedings. On February 9, 1961, counsel filed a formal Motion to Vacate Judgment of Conviction under § 2255.
This question (whether a credit card and charge slips resulting from the use thereof constitute "securities" within the meaning of § 2314) is an important one. During the past decade the credit card business has increased tremendously. Practically all the large oil companies issue credit cards for customer use. Hotels, motels, restaurants, night clubs and many other businesses accept credit cards, operating extensively through this media. As a result, thousands of credit cards have been issued, and untold numbers of charge slips are executed and transported daily. Not only is this an important question so far as the petitioner herein is concerned, but it is also a question of importance to those who facilitate commerce and trade through credit cards and the charge slips arising from their use.
The Court is unable to find that this particular questioninterstate transportation *99 of credit cards and charge slips has been passed upon by an Appellate Court. Several district courts have considered the matter, and there is no unanimity of opinion.
In United States v. Fred Dwight Jones (No. 29,147-SD), Judge Kunzel of this court instructed the jury that as a matter of law a credit card charge slip is a security within the meaning of § 2314, Title 18 U.S.C.
Judge Marion D. Boyd of the United States District Court for the Western District of Tennessee, Western Division, in U. S. A. v. Verta Green and Anna Grace Miller McCarroll, No. 8858 (November, 1959)a credit card-charge slip caseinstructed a jury as follows:
"For your information, the Court instructs you the so-called invoices, delivery or charge tickets referred to in the proof, upon which merchandise was allegedly obtained by the defendants on different occasions, are securities within the meaning of the statute on which the indictment herein and each count thereof is based. A security within the meaning of the statute, you understand, may be an instrument or document which gives one the right to demand and receive property not in his possession.
"To be a security within the purview of the statute in this case, the Court instructs you a so-called invoice, delivery or charge ticket must have been falsely made before and while it is being transported, or caused to be transported, in commerce."
Reporter's Tr., pages 6 and 7.
In the above case the defendants used a stolen credit card to obtain merchandise at numerous filling stations in their travels around the country. The defendants were convicted and sentenced. No appeal has been taken.
Judge Ridge of the Western District of Missouri decided that a credit card charge slip is not a securityUnited States v. Jones, D.C., 182 F. Supp. 146.
Inasmuch as a Judge of this court has decided a Diners Club Credit Card and charge slip are not securities within the meaning of § 2314, Title 18 U.S.C.A., it would appear (if the case is in point) that we should be bound by Judge Yankwich's decision. He did not write an opinion in the case but gave his ruling orally from the bench, stating in part:
"* * *, and my view is that this indictment does not state an offense because neither the cards nor the credit slips are securities within the meaning of the section to which I shall refer in a minute, nor are they instruments of a type which the two sections contemplate [§§ 2314 and 2311 of Title 18]."
(Tr. p. 2)
"* * *, I would hold that a credit card is nothing more than a means which tells the merchant that you will pay for merchandise when a bill is presented. * * *
"So when Congress used the word `security' it meant what you commonly call a security, a pledge, a promise, like a promissory note, or the like."
(Tr. pages 4 and 5)
A perusal of the remarks made by Judge Yankwich in the Fordyce case, supra, (No. 29,124) indicates the Court gave most of its consideration to the question of whether a credit card was a security. No comment was made by the Court concerning the language contained in § 2311 which defines "securities" as (among other enumerated items) "any * * *, evidence of indebtedness, * *"
We have no hesitance in agreeing with our Brother Judge that a credit card in and of itself is not a "security" within the meaning of §§ 2311 and 2314, nor is it in and of itself an "evidence of indebtedness" as contained in § 2311. A credit card is nothing more than an indication to sellers of commodities that the person who has received a credit card from the issuer thereof has a satisfactory credit rating and that, if credit is *100 extended, the issuer of the credit card will pay (or see to it that the seller of the commodity receives payment) for the merchandise delivered. A credit card signifies that the legal owner thereof is a good credit risk and the issuer guarantees payment for goods, wares and merchandise sold and delivered on the basis of the card.
But an entirely different problem is presented when consideration is given to the charge slips. As a general rule, the holder of a credit card presents it to the merchant and, upon the strength of the credit card, a charge slip is made out and signed by the purchaser. The original charge slip is then sent to the proper place for redemption and is paid by the issuer of the credit card. This may be either before or after the holder of the credit card is billed for the merchandise sold to him when he presented his credit card.
In the instant case defendant found a credit card issued to one, Gerald Cohen. As alleged in Count 4 of the Indictment the count to which defendant entered a plea of guiltyhe presented the credit card to a service station operator in Phoenix, Arizona, representing himself to be Gerald Cohen. The service station employee made out the usual credit charge slip, on which he wrote the name "Gerald Cohen" as shown on the credit card exhibited by defendant, the date of the sale, the quantity of merchandise delivered, and the sales price thereof; whereupon defendant signed the name "Gerald Cohen" on the charge slipa forgery. A carbon copy of the charge slip was delivered to defendant. The original thereof was thereafter transported in interstate commerce from Phoenix, Arizona, to Los Angeles County, California, for payment.
There is no question that defendant, petitioner herein, was in possession of the credit card illegally; and that he used it by forging the name of the true owner thereof to the charge slip which was thereafter transported in interstate commerce. The issue to be determined by the Court is whether such charge slip is a document within the contemplation of "security" as used in §§ 2311 and 2314 of Title 18 U.S.C.
Section 2311 is as follows:
"2311. Definitions
* * * * * *
"`Securities' includes any note, stock certificate, bond, debenture, check, draft, warrant, traveler's check, letter of credit, warehouse receipt, negotiable bill of lading, evidence of indebtedness.[*] * * *; instrument or document or writing evidencing ownership of goods, wares, and merchandise, or transferring or assigning any right, title, or interest in or to goods, wares and merchandise; * * *"
After merchandise is sold on the strength of a credit card presentation and a charge slip is prepared by the seller and signed by the credit card holder, and the latter leaves the place of the sale transaction, the only evidence of indebtedness possessed by the seller is the charge slip. He has parted with his merchandise to the credit card holder. In place thereof he has the signed charge slip, evidencing that the purchaser is indebted to the seller in the amount shown. The seller expects to be paid for the merchandise sold upon surrender of this evidence of indebtedness. It is, in fact, the only evidence he has to show he has a debt due him and is entitled to payment. To the seller, therefore, the charge slip must certainly be an "evidence of indebtedness."
In light of the foregoing, this Court is inclined to believe that a charge slip issued as a result of presentation of a credit card comes within the purview of § 2314 and is an "evidence of indebtedness" as enumerated in § 2311.
The Motion of petitioner herein to vacate the judgment of conviction upon plea of guilty is denied.
NOTES
[*] Emphasis supplied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1687165/ | 927 S.W.2d 122 (1996)
Dan THOMAS, Appellant,
v.
Sherry BROWN, et. al., Appellees.
No. 14-95-00737-CV.
Court of Appeals of Texas, Houston (14th Dist.).
June 13, 1996.
*124 Dan Thomas, Iowa Park, for appellant.
Ralph Longmire, Austin, David Halpern, Houston, for appellees.
Before LEE, HUDSON and EDELMAN, JJ.
OPINION
EDELMAN, Justice.
Dan Thomas, an inmate at the Texas Department of Criminal Justice, Institutional Division (TDCJ) appeals from a summary judgment granted in favor of Sherry Brown, Program Administrator for TDCJ's Access to the Courts program, on the ground that there were genuine issues of material fact. He also appeals from the dismissal of his claim against TDCJ on the grounds that his claim has an arguable basis in law. We affirm.
Proceeding pro se and in forma pauperis, appellant filed suit against Brown in both her individual and official capacities for both damages and injunctive relief. Appellant claimed that (1) a new legal materials policy implemented by Brown violated appellant's constitutional right of access to the courts and (2) Brown's implementation of the policy before the Texas Board of Criminal Justice (TBCJ) adopted it violated the holding in Ruiz v. Estelle[1] to the effect that only the TBCJ has discretion to alter legal materials policies. Appellant also asserted a claim against TDCJ under the Texas Tort Claims Act[2] (the "Act") alleging in effect that it was liable for Brown's negligent use of TDCJ office equipment to implement the new legal materials policy.
Brown filed a motion for summary judgment claiming that (a) appellant's claim that the policy was implemented without TBCJ approval was moot because TBCJ had subsequently *125 adopted the policy,[3] (b) appellant could not show that he was deprived of his right of access to the courts or that he was harmed by the policy, and (c) Brown was immune from suit in both her official and individual capacities. Brown's summary judgment evidence explained how the policy works and why it was instituted. Appellant filed no summary judgment response or evidence.
TDCJ filed a motion to dismiss pursuant to Section 13.001 of the Texas Civil Practices and Remedies Code[4] on the basis that appellant's claim was frivolous in that it had no arguable basis in law or fact. In separate orders, the trial court granted both defendants' motions without stating the basis therefor.
In the first of his two points of error, appellant contends that the trial court erred in granting Brown's motion for summary judgment.
The movant for summary judgment has the burden to show that there are no genuine issues of material fact and that he is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c). To be entitled to summary judgment, a defendant must either (1) conclusively negate at least one essential element of each of the plaintiff's causes of action, or (2) conclusively establish each element of an affirmative defense to each claim. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). In reviewing a summary judgment, the nonmovant's evidence is accepted as true, and every reasonable inference is indulged and all doubts are resolved in the nonmovant's favor. Id.
Appellant's suit against Brown is based on 42 U.S.C. § 1983, which provides, in pertinent part:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in action at law, suit in equity, or other proper proceeding for redress.
42 U.S.C.A. § 1983 (West 1994). The initial analysis in a Section 1983 action is to determine whether (1) the conduct complained of was committed by a person acting under color of state law; and (2) this conduct deprived a person of rights, privileges or immunities secured by the Constitution or the laws of the United States. Parratt v. Taylor, 451 U.S. 527, 535, 101 S. Ct. 1908, 1913, 68 L. Ed. 2d 420 (1981).
As to the first element, when sued for damages, officials acting in their official capacities are not "persons" who may be liable under Section 1983. See Will v. Michigan Dep't of State Police, 491 U.S. 58, 71, 109 S. Ct. 2304, 2312, 105 L. Ed. 2d 45 (1989). Therefore, appellant's Section 1983 action for damages against Brown in her official capacity was not actionable, and the trial court correctly granted summary judgment as to that claim. However, when sued for injunctive relief, officials acting in their official capacities are "persons" under Section 1983. Will, 491 U.S. at 71 n. 10, 109 S.Ct. at 2311 at n. 10. This is so because these actions for prospective relief are not treated as actions against the State. Id. Thus, appellant's claim for injunctive relief against Brown in her official capacity is within Section 1983.
As to the second element, prisoners have a constitutional right of access to the courts that is adequate, effective and meaningful. Bounds v. Smith, 430 U.S. 817, 822, 97 S. Ct. 1491, 1495, 52 L. Ed. 2d 72 (1977). This right of access to the courts "requires prison authorities to assist inmates in the preparation and filing of meaningful legal papers by providing prisoners with adequate law libraries or adequate assistance from persons trained in the law." Id., 430 U.S. at 828, 97 S.Ct. at 1498. This right can be satisfied either through appointed counsel, access to a law library, or access to legally *126 trained paraprofessionals. Id., 430 U.S. at 830-31, 97 S.Ct. at 1499-1500.
A prisoner contending that his right of access to the courts was violated because of inadequate access to a law library must establish two elements: (1) the access was so limited as to be unreasonable and (2) the inadequate access caused him actual injury. Blaylock v. Painter, 901 F. Supp. 233, 236 (W.D.Tex.1995) (citing Vandelft v. Moses, 31 F.3d 794, 797 (9th Cir.1994)); see also Marange v. Fontenot, 879 F. Supp. 679, 684 (E.D.Tex.1995).
With regard to whether access is so limited so as to be unreasonable, a prison regulation that impinges on an inmate's constitutional rights may nevertheless be valid if it is reasonably related to legitimate penological interests. See Turner v. Safley, 482 U.S. 78, 89, 107 S. Ct. 2254, 2261, 96 L. Ed. 2d 64 (1987); see also Henthorn v. Swinson, 955 F.2d 351, 353 (5th Cir.) (applying the Turner test to an access to the courts claim), cert. denied, 504 U.S. 988, 112 S. Ct. 2974, 119 L. Ed. 2d 593 (1992). Several factors are relevant in determining the reasonableness of the regulation at issue. Turner, 482 U.S. at 89, 107 S.Ct. at 2262. First, there must be a "valid, rational connection" between the prison regulation and the legitimate governmental interest put forward to justify it. Id., 482 U.S. at 89-90, 107 S.Ct. at 2262. Thus, a regulation cannot be sustained where the logical connection between the regulation and the asserted goal is so remote as to render the policy arbitrary or irrational. Id., 482 U.S. at 89-90, 107 S.Ct. at 2262. Moreover, the governmental objective must be a legitimate and neutral one. Id. A second factor is whether there are alternative means of exercising the right that remain open to prison inmates. Id. A third factor is the impact accommodation of the asserted constitutional right will have on guards and other inmates, and on the allocation of prison resources generally. Id. Finally, the absence of ready alternatives is evidence of the reasonableness of a prison regulation. Id. However, this is not a least restrictive means test. Id.
Appellant complains of the new legal materials policy that ended the practice of delivering actual law books to inmates who are not allowed to physically enter the law library because of their administrative segregation status.[5] The new procedure requires that TDCJ personnel instead provide these inmates photocopies of case law, Shepard's citations, statutes, and regulations without charge upon proper request.[6] However, administrative segregation inmates continue to have access to actual law books that are helpful in locating legal authorities, such as Texas Digest, Supreme Court Digest, United States Code Annotated, Vernon's Texas Statutes Annotated, and the like.[7] Because appellant challenges only the new procedure, we limit our discussion to the changes that were made in the legal materials policy.
Prior to the change, administrative segregation inmates could have up to five law books at a time delivered to their cells, six days per week. An inmate could keep the books for at least eight hours before the *127 books had to be returned to the law library.[8] Under the new procedure, administrative segregation inmates continue to receive up to five requested items of legal research material per day, six days a week. The only difference is that instead of receiving the actual law book, inmates are now provided with photocopies of requested cases, statutes, and other legal materials.
Appellant complains that the new procedure will deprive him of his right to access to the courts when he does not know the specific cite to a book, that receiving copies of cases is not the same as receiving the actual books, and that the new procedure will hinder his ability to read advance sheets to keep current of changes in the law. However, he has not indicated how this would occur. On the other hand, Brown's uncontroverted summary judgment evidence indicated that Brown instituted the new policy after the TDCJ conducted a survey of law book use by inmates within its maximum security units. This survey indicated that as many as sixty percent of all law books requested by and delivered to maximum security inmates were being used for improper purposes, including use as weights for weight lifting and use as end tables or stools by stacking the books on top of each other. Additionally, the survey showed that tens of thousands of dollars, as well as hundreds of man-hours, are expended annually in the replacement and/or repair of law books damaged through this misuse or abuse by inmates.
The change in procedure thus increases accessibility to the law library's limited resources by increasing the amount of time that law books are available in the library both for the general prison population and for copying for administrative segregation inmates. This evidence establishes that, under the new policy, appellant and other administrative segregation inmates will have the same or greater access to legal resources and materials than under the old policy, and that the policy is reasonably related to legitimate penological interests. Having concluded that appellant's constitutional right to access to the courts was not impinged by the new policy as a matter of law, we overrule appellant's first point of error.
In his second point of error, appellant argues that the court erred by granting TDCJ's motion to dismiss.
A court in which an affidavit of inability to pay under Rule 145 of the Texas Rules of Civil Procedure has been filed may dismiss the action if the action is frivolous. TEX.CIV.PRAC. & REM.CODE ANN. § 13.001(a) (Vernon Supp.1996). In making that determination, the court may consider whether the claim has an arguable basis in law or in fact. Id. § 13.001(b). However, where, as here, no hearing on the factual issues has been held, the trial court may dismiss the action only when there is no basis in law for the suit. See Moore v. Collins, 897 S.W.2d 496, 499 (Tex.App.Houston [1st Dist.] 1995, no writ).
Under the doctrine of sovereign immunity, the State is not liable for the negligence of its employees absent a constitutional or statutory provision for liability. University of Texas Med. Branch v. York, 871 S.W.2d 175, 177 (Tex.1994). Section 101.021 of the Act sets out the waiver of immunity.[9]
Relying on Section 101.021(2) of the Act, appellant claims that Brown's use of equipment and supplies, i.e., tangible personal property, in writing and distributing the new legal materials policy caused him personal injury.
*128 Tangible personal property refers to something that has a corporeal, concrete, and palpable existence. York, 871 S.W.2d at 178. It is well established that information and pronouncements, even when reduced to writing, are not tangible personal property for purposes of the Act.[10] Thus, the new policy was not itself tangible personal property. Nor is the use of computers and other equipment to collect, record or communicate such information a use of tangible personal property under the Act. See Dear v. City of Irving, 902 S.W.2d 731, 737 (Tex.App.-Austin 1995, writ denied). Therefore, the use of office equipment in this case to implement the new legal materials policy was not a use of tangible personal property which is actionable under the Act. In the absence of a use of tangible personal property, and thus a basis in law for appellants suit, the trial court properly granted TDCJ's motion to dismiss. Accordingly, we overrule appellant's second point of error and affirm the judgment of the trial court.
NOTES
[1] See 503 F. Supp. 1265 (S.D.Tex. 1980) aff'd in part and vacated in part, 679 F.2d 1115 (5th Cir.), amended in part, 688 F.2d 266 (5th Cir. 1982), cert. denied, 460 U.S. 1042, 103 S. Ct. 1438, 75 L. Ed. 2d 795 (1983).
[2] See TEX.CIV.PRAC. & REM.CODE ANN. §§ 101.001-101.109 (Vernon 1986 & Supp.1996).
[3] Appellant has since conceded that this point became moot when TBCJ adopted the policy.
[4] See TEX.CIV.PRAC. & REM.CODE ANN. § 13.001 (Vernon Supp.1996).
[5] According to Brown's motion for summary judgment, administrative segregation is a non-punitive custodial status for inmates who are generally identified as either assaultive or affiliated with a known gang, thus posing a continuing safety threat to themselves and others, as well as posing a continuing security risk to the penal institution. Security considerations are proper factors in determining the manner in which access to a library is provided. See Eason v. Thaler, 73 F.3d 1322, 1328 (5th Cir.1996) (noting that restrictions on direct access to legal materials may be warranted when prison security is involved); Brooks v. Buscher, 62 F.3d 176, 179 (7th Cir.1995) (noting that the Constitution requires meaningful access, not necessarily direct access, and that security reasons may justify the manner in which access is provided).
[6] A proper request requires that an inmate reference a specific citation, including a volume number, volume name, page number, and/or case name. An example of a proper request for a copy of a case that was provided to the prisoners in a memo was as follows:
537 F. Supp. 766, Cohen v. Martin's, or
537 F.Supp., Cohen v. Martin's
537 F. Supp. 766.
An example of a proper request for Shepard's was: 537 F. Supp. 766. Additionally, if a prisoner cited a page number that was not the first page of the case, the policy requires that the entire case be copied for the prisoner.
[7] The policy stated that all legal material, except that listed to be photocopied, would be available to prisoners, as under the old policy.
[8] The record does not indicate the maximum time a book could be kept.
[9] Section 101.021 of the Act provides that a governmental unit in the state is liable for:
(1) property damage, personal injury, and death proximately caused by the wrongful act or omission or the negligence of an employee acting within the scope of his employment if:
(A) the property damage, personal injury, or death arises from the operation or use of a motor-driven vehicle or motor-driven equipment; and
(B) the employee would be personally liable to the claimant according to Texas law; and
(2) personal injury and death so caused by a condition or use of tangible personal or real property if the governmental unit would, were it a private person, be liable to the claimant according to Texas law.
TEX.CIV.PRAC. & REM.CODE ANN. § 101.021 (Vernon 1986).
[10] See Dallas County v. Harper, 913 S.W.2d 207, 207-08 (Tex.1995) (holding that indictment is no more than a grand jury's pronouncement reduced to writing and not tangible personal property under the Act); Kassen v. Hatley, 887 S.W.2d 4, 14 (Tex.1994) (holding that hospital medical records, patient file and emergency room procedures manual were not tangible personal property under the Act); University of Texas Med. Branch v. York, 871 S.W.2d 175, 179 (Tex.1994) (holding that information which may or may not be recorded in medical records is not tangible personal property under the Act). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1134300/ | 529 So.2d 374 (1988)
George J. BUTLER, George J. Butler, Inc. and Leo Bianchini
v.
Winston C. BABER d/b/a Progress Petroleum Company, Highlands Insurance Company, Robert P. Waldron, Inc. and Robert P. Waldron.
No. 87-C-2121.
Supreme Court of Louisiana.
May 23, 1988.
Rehearing Denied September 8, 1988.
*375 Alvin LeBlanc, Jr., DeMartini, LeBlanc, D'Aquila & Volk, Kenner, for applicant.
J. Walter Ward, Jr., Christovich & Kearney, Jesse Guillot, New Orleans, for respondent.
Michael Osborne, Christopher Gobert, Osborne & McComiskey, Oliver A. Houck, Tulane Law School, New Orleans, amicus curiae for the Organization of Louisiana Fishermen.
DIXON, Chief Justice.
This case involves a claim for damage to oysters and water bottoms as a result of the dredging of a canal for use in drilling an oil well. Plaintiffs,[1] George Butler, George Butler, Inc. and Leo Bianchini, are holders of oyster leases in Wilkinson Bay. Defendant Winston Baber d/b/a Progress Petroleum Company, insured by Highlands Insurance Company, dredged a canal through Wilkinson Canal, part of Bayou Dupont, and the marsh into Wilkinson Bay in Plaquemines Parish. Also named as defendants were Robert Waldron, Robert Waldron, Inc., the consultant hired by Baber to select routes for the canal, Southern Louisiana Contractors, Inc., the dredger, and J. Ray McDermott and Company, Inc., hired to backfill and dam the canal. Southern Louisiana Contractors and McDermott later settled with the plaintiffs and were dismissed along with their third party demands.
The trial court rendered judgment in favor of the defendants. The court of appeal affirmed with one dissent. Butler v. Baber, 512 So.2d 653 (La.App. 4th Cir.1987). We reverse.
FACTS
The district judge concluded that the plaintiffs failed to carry their burden of proof that the defendants' activities, incident to their mineral lease, were conducted negligently and without reasonable skill and proper precautions in disregard of plaintiffs' rights under their oyster leases. The court of appeal in its opinion reviewed the facts and expert testimony in great detail, but found the plaintiffs' evidence insufficient to support their cause of action or to prove that the defendants acted negligently.
Plaintiffs argue that they carried their burden establishing that the defendants owed a duty which they breached, and caused the damages suffered by plaintiffs. Plaintiffs also argue that defendants should be held strictly liable under C.C. 667. Defendants allege that other factors, including fresh water intrusion and eroding coast lines, contributed to the silt overburden in Wilkinson Bay and the blackening and mortality of the oysters in the leases in Wilkinson Bay. Defendants argue that plaintiffs did not prove that they acted negligently in dredging the canal, and that C.C. 667 is not applicable.
The trial took place intermittently over three years time, producing thirteen volumes of testimony. We find ample evidence, produced by both sides, to establish plaintiffs' claims. There was testimony by experts for both parties, including Robert Waldron, a defendant, that the oyster leases involved in this case were producing oysters in paying quantities prior to the dredging operation, and the water bottoms were firm to hard and suitable for oyster production. Although there was testimony that the salinity levels in Wilkinson Bay were sometimes on the low end of the scale for oyster production, there was also testimony that the lower salinities made the oysters less susceptible to predators, positive factors for natural oyster reproduction.
*376 Baber wanted to drill an oil well in Wilkinson Bay, and because the water in the Bay was only four or five feet deep, he decided to dredge an access canal through the marsh from Wilkinson Canal and Bayou Dupont to the west side of Wilkinson Bay, in order to move the drilling rig and equipment into Wilkinson Bay. Baber hired Waldron, a consulting geologist, to select possible routes for the canal. Waldron proposed three possible routes; Baber chose the one to be executed.
Ultimately the route was changed to avoid damaging an area where plaintiffs had seeded oysters, and when Baber applied for a dredging permit, the United States Corps of Engineers required that the well location be placed northeast of the originally selected site so that it would be farther from plaintiffs' oyster planting. When the canal was actually surveyed, staked and dredged, it again was moved slightly.
Baber paid plaintiffs for a right of way, and the canal was dredged through the marsh, ponds and bayous west of Wilkinson Bay. The canal was to be seventy feet wide with spoil placed on either side of the channel. Southern Louisiana Contractors used a small dredge, first dredging a narrow channel through the marsh from Bayou Dupont, opening into Wilkinson Bay and then widening the canal as the dredge moved back toward Bayou Dupont. The canal remained open for six months, from May to October, 1978.
The well was dry, and J. Ray McDermott and Company was hired to plug the canal. McDermott removed the spoil bank which extended into Wilkinson Bay from the Bay's western shore. McDermott also plugged both ends of the canal, at its Wilkinson Bay end and at its beginning in Bayou Dupont.
Witnesses testified that the plug on the Wilkinson Bay end of the canal has eroded, allowing boats to enter the canal from the Bay. The western plug, at the Bayou Dupont end, is intact but has a cut in the top over which boats or animals have crossed and is partially submerged at high tides.
When plaintiffs' employees returned in August, 1978 to dredge for oysters in Wilkinson Bay after the canal had been opened, they found blackened oysters which were dead or dying and an overburden of mud on the oyster reefs and beds. When the Wildlife and Fisheries investigators and the other expert witnesses inspected the area, they found increased oyster mortality and a soft, fluffy, organic silt covering the bottoms in varying thicknesses. Other sources of this silt were suggested by defendants' witnesses, including Waldron, who, although a defendant, was accepted as an expert witness. However, Wildlife and Fisheries personnel and independent experts, including Charles Dugas of Wildlife and Fisheries, who was a defense witness, testified that the most likely source was the dredging of the canal. The witnesses found that several inches of mud covered the oyster beds and blackened and suffocated the oysters.
Waldron's testimony, which lasted several days and covered a wide range, was inconclusive. He testified that he designed the canal to include angulations which he thought would decrease the current through the canal from Wilkinson Canal and Bayou Dupont. Even his testimony, however, showed that there was increased mud and increased oyster mortalities after the dredging. His testimony also verified that there had been significant oyster production in Wilkinson Bay as far back as 1959 (when Waldron inspected the area while working from Wildlife and Fisheries for a year) and as recently as just before the dredging.
Expert witnesses suggested three sources to account for the amount of sediment which was washed into the Bay: (1) the sediment naturally moving down the system; (2) the sediment that washed from the dredging material along the bank of the canal; (3) the sediment coming out of the ponds through which the canal was dredged.
Both the defendants' mineral lease and the plaintiffs' oyster leases were obtained from the State of Louisiana.
*377 Plaintiffs suggest two theories of recovery: (1) negligence under C.C. 2315 and (2) strict liability under C.C. 667. After reviewing the testimony, the court of appeal found evidence to suggest that the defendants' dredging operation "may have been a cause in fact of damage to the oysters and oyster bottoms." However, the court of appeal held that this "cause in fact" evidence was not sufficient since "plaintiff's bore the burden of proving defendants conducted the operation negligently or without reasonable prudence and proper precaution." The court of appeal held that plaintiffs failed to show a lack of prudence or precaution on defendants' part. The court found that the evidence established that the defendants "carefully surveyed the entire project, considered alternative routes for the canal, selected the route thought to pose the least risk of damage and thereafter performed the project." According to the court of appeal there was no showing that defendants "displayed less than ordinary skill, care, and expertise, or utilized unreasonable or imprudent procedures." For these reasons, the court of appeal denied recovery under C.C. 2315.
Regarding recovery under C.C. 667, the court of appeal found it questionable whether plaintiffs and defendants, as co-lessees of the same property, should be considered "proprietors" under the language of article 667, and held that plaintiffs and defendants cannot properly be considered "neighbors" so as to render C.C. 667 applicable. For this reason, the court of appeal denied recovery under this theory as well.
It is our conclusion that the plaintiffs prevail under C.C. 667.
Civil Code article 667 establishes an obligation of vicinage, a limitation on the use of property. Article 667[2] reads as follows:
"Although a proprietor may do with his estate whatever he pleases, still he can not make any work on it, which may deprive his neighbor of the liberty of enjoying his own, or which may be the cause of any damage to him."
The development of C.C. 667 in this court indicates a trend in the direction of a broader interpretation of the language of the article. Prior to the translation of the French commentators by the Louisiana Law Institute and the subsequent commitment to the interpretation of the Civil Code without reference to common law doctrine, article 667 was interpreted in terms of common law nuisance, and distinctions were made between nuisance per se and nuisance in fact. Since the early 1970's, the direction has been to move away from nuisance theory.
In 1971 three cases dealing with C.C. 667 were considered by this court. Robichaux v. Huppenbauer, 258 La. 139, 245 So.2d 385 (1971), involved the operation of a horse stable within a residential area of the City of New Orleans which was found to be not a nuisance per se but a nuisance in fact. Plaintiffs relied on C.C. 669 to support their claims. Although 667 and its companion articles 668-669 were referred to in the opinion, the court found the Civil Code articles did not deal explicitly with the standards to be followed and chose, therefore, to use these articles "together with the common law theory of nuisance to grant relief where a use of property causes inconvenience to a neighbor." Robichaux v. Huppenbauer, supra at 389. The court held that noxious smells, rats, flies and noise may be actionable nuisance although produced and carried on by a lawful business, where they result in material injury to neighboring property or interfere with its comfortable use and enjoyment by persons of ordinary sensibilities. The court remanded for a determination as to whether it was possible to maintain the stable free of complaints. Justice Barham concurred. *378 but was of the opinion that the result should have been reached solely by application of the civil law, more particularly article 669, without resort to common law authority or terminology. Barham felt that the language of 669 should be read as illustrative.
In Chaney v. Travelers Insurance Co., 259 La. 1, 249 So.2d 181 (1971), article 667 was found to be applicable to damage from construction incident to canal improvement by the parish. The adjoining property owner suffered cracks in the walls and ceilings of his home from the vibrations created by the use of heavy equipment within ten feet of the house. The court found that "work" includes "activity" as well as "structure," even though the proprietor's actions are prudent by usual standards. The majority also found the agents of the proprietor, such as contractors and representatives, are solidarily liable with the proprietor if his activity causes damage to a neighbor.
Hilliard v. Shuff, 260 La. 384, 256 So.2d 127 (1971), the third case in 1971, dealt with four above ground fuel tanks on the property of a truck stop owner. The court found that when storage of fuels creates a substantial hazard, then use of the property runs counter to C.C. 667-669. There, 58,800 gallons of gasoline and diesel were found to prevent plaintiff from safely operating an auto, truck, tractor, or power mower within fifty feet of the fuel tanks. Since this threatened the physical security of plaintiff's family, it was held to be an enjoinable nuisance. The court remanded the case for evidence as to methods of correction.
Justice Barham would have granted a permanent injunction applying article 667 alone, because danger of fire and explosion is not a mere inconvenience under C.C. 668-669, but rather gave plaintiff a right under C.C. 667.
In 1973 the court rendered judgment in a case involving seventeen suits by one hundred nineteen plaintiffs claiming residential damages from construction and installation of an underground concrete drainage canal under a street. Lombard v. Sewerage and Water Board of New Orleans, 284 So.2d 905 (La.1973). In that case both the city and the Sewerage and Water Board were found to constitute "proprietors" under 667. Justice Barham in his concurrence objected to the majority's willingness to call anyone a "proprietor" in order to reach a result which broadens the base of liability for damages resulting from hazardous activities which cause damage even with the exercise of due care. The majority had again held that non-proprietors are solidarily liable under 667, and Barham felt that the court should use 2315, analogizing 667-669, or 2315 and 2317, to reach this result. He was of the opinion that parties other than proprietors are not made responsible for non-negligent acts under 667, whereas the majority did not cast liability under any other Code article. Barham felt that non-proprietors could only be cast for damages under the majority's theory of the case if they are negligent.
Lombard sets out the proper analysis for cases under C.C. 667. First, causation must be proved, but to be actionable cause need not be the sole cause, although it must be a cause in fact. In order to be a cause in fact in a legal contemplation, it must have a proximate relation to the harm which occurs, and it must be substantial in character. The court noted that certainty is generally unattainable from testimony produced in court. The law of evidence has long required that the testimony of witnesses be weighed by probabilities. Causation may also be proved by circumstantial evidence, which in many instances is the only evidence by which it can be proved. Circumstantial evidence must exclude other reasonable hypothesis with a fair amount of certainty, but this does not mean that it must negate all other possible causes. Also, saying that the plaintiff must establish a disputed fact by a preponderance of the evidence means that a plaintiff must prove that the existence of the disputed fact is more probable than its nonexistence. Lombard v. Sewerage and Water Board of New Orleans, supra at 913.
Salter v. B.W.S. Corporation, Inc., 290 So.2d 821 (La.1974), involved a situation in *379 which a lessee had a legally cognizable interest and right of action under 667 to enjoin the defendant from using its neighboring property for disposal of chemical waste in underground trenches. The court found that the evidence established the probability that disposal without adequate precautions would pollute the well where plaintiff obtained water, posing a threat to health and safety. Although the operation could be conducted safely and in a manner not violative of the duties of vicinage, since the consequences of failure to exercise great care to prevent escape of poisonous materials were so serious, the court found a qualified injunction appropriate and remanded. The majority cited State ex rel. Violett v. King, 46 La.Ann. 78, 14 So. 423 (1894), which held that a tenant had a right of action to enjoin objectionable aspects of an operation conducted on neighboring property where that operation threatened the health and comfort of the tenant. Also the court noted in Lombard, supra, it was recognized that "proprietor" as used in 667 need not be limited to owners. Again Justice Barham concurred, with Justice Tate joining in the concurrence, and noted that 667 is designed to protect property from the abuse of right of ownership by the works made on a neighboring estate. According to Barham, lessees have only personal rights in immovable leases, and because art. 669 gives the lessee a personal right, the lessee had a right of action.
One of the major cases on this issue was decided in 1975 where damage and depreciation from construction of a gas pipeline was found to violate 667. Hero Lands Company v. Texaco Inc., 310 So.2d 93 (La. 1975). The hazardous, high pressure gas pipeline adjacent (within fifteen feet of the property line) gave rise to an action for damage caused by the proximity which impaired the market value and the full use of the neighboring estate. In this case the court noted that the circumstances of each case determine the applicability of article 667. This court contrasted article 2315 with article 667 and said that "recovery under Article 667 may be granted despite the reasonableness and prudence of the proprietor's conduct, when the work he erects on his estate causes damage to his neighbor." Hero Lands Co. v. Texaco, supra at 97. This decision also goes on to explain the nature of the circumstances which require redress:
"... But the extent of inconvenience the property owner must tolerate without redress depends upon the circumstances. When the actions or works cease to be inconveniences and become damaging is a question of fact. The problem is one which involves the nature of the intrusion into the neighbor's property, plus the extent or degree of damage. No principle of law confines this damage to physical invasion of the neighbor's premisesan extrinsic injury, as it were. The damage may well be intrinsic in nature, a combination of facts and conditions which, taken together, do not involve a physical invasion but which, under the circumstances, are nevertheless by their nature the very refinement of injury and damage." Hero Lands Co. v. Texaco, supra at 98.
The majority also said that violation of 667 is not a tort action in the sense that deliction in its usual connotation is a necessary element. A defendant under 667 must repair damage even though his actions are prudent by usual standards. It is not the manner in which the activity is carried on that is significant; it is the fact that the activity causes damage. Thus, 667 expresses the doctrine of strict liability which does not depend on deliction. Whereas, under 2315, "fault" must be proved, under 667, there is recovery despite reasonableness and prudence if the work causes damage.
Justice Tate concurred in this opinion but disagreed with what he regarded as the dicta that "fault" under 2315 need be distinguished from "fault" derived from 667. Justice Barham, in his concurrence, noted that in the jurisprudence "liability without fault" really means "liability without negligence," and therefore strict liability does not depend on negligence. He said that violation of 667 may constitute delictual action based on fault under 2315; it is fault which does not require proof of negligence.
*380 See Langlois v. Allied Chemical Corp., 258 La. 1067, 249 So.2d 133 (1971). Referring also to Langlois, Barham explained that 2315 "fault" is not limited to negligent acts and intentional misconduct, but also encompasses conduct which, because of its ultrahazardous nature, may cause harm even when the greatest care is exercised.
In 1976 this court dealt with the application of C.C. 667 to damages from chemical emissions from defendant's plant which killed or adversely affected trees on plaintiff's property. Dean v. Hercules, Inc., 328 So.2d 69 (La.1976). After an analysis of the article's history, the court found a one year prescriptive period applicable to 667. The right of ownership is subject to limitations imposed by law, and 667 imposes such a limitation. 2 Aubry et Rau, Droit Civil Francais, § 194 (7th ed. La. State Law Inst. tr. 1966). In prerevolutionary France, these limitations on the right of ownership were regarded as personal obligations founded on the quasi contract of vicinage. The court found that the codification of the sic utere doctrine deals with obligations much broader than the obligations arising from servitude. Yiannopoulos, Civil Responsibility in the Framework of Vicinage: Articles 667-9 and 2315 of the Civil Code, 48 Tul.L.Rev. 195, 203 (1974). The court went on to say that an action for damages for a violation of article 667 is most closely associated with an action for damages based on article 2315. It can be said that a violation of article 667 constitutes fault within the meaning of article 2315. Langlois v. Allied Chemical Corp., supra. In footnote 4 the court notes that Professor Stone pointed out that such an approach finds favor among many of the French commentators. Stone, Tort Doctrine in Louisiana: The Obligations of Neighborhood, 40 Tul.L.Rev. 701, 709 (1966). Also in Langlois, supra, article 667 is cited as an example of liability for fault which does not encompass negligence. Article 667 is not limited in its operation to damage to immovable property. The article seems to encompass liability for personal injuries as well as damage to movable property. Furthermore, in cases involving industrial pollutants, an act of man is required, and therefore no servitude can be acquired by the offending landowner by prescription. C.C. 727.
In one court of appeal case involving damage to oyster beds by allegedly negligent dredging operations, Justice Lemmon in his partial dissent disagreed with the court's holding that the oyster lessee could not recover damages caused willfully, though non-negligently, by the mineral lessee, in the absence of an agreement expressly relieving the mineral lessee of liability for those damages. Jurisich v. Louisiana Southern Oil & Gas Co., 284 So.2d 173, 184 (La.App. 4 Cir.1973).
"The mineral lease in this case expressly granted Louisiana Southern the right to dredge canals in connection with its oil exploration. In my opinion the State thereby consented in advance only to reasonable, necessary and skillful dredging and to those changes on the leased premises normally incident to those dredging activities. The phrase `dredging canals' normally denotes the removal of earth, the creation of enlargement of a cavity, and the placement of excavated soil on a spoil bank in proximity to the canal. I do not believe that it is reasonable to infer when a lessor grants the right of `dredging canals' that he thereby consents to any other changes on the leased property or to the damage or destruction of valuable assets, such as oyster beds. These changes and damages are no more normally incident to the dredging of a canal than would be the destruction of crops, buildings or other valuable assets on the leased property.
Therefore, when Louisiana Southern, through its contractor caused damage to the oyster beds within the leased area, a cause of action for recovery of the damage arose in favor of the lessor or its oyster lessee, regardless of the presence or absence of negligence."
This court has also recognized that an oyster lessee has a valuable property right in his oyster beds, for the loss of which he can recover against one whose fault the loss was incurred. Doucet v. Texas Co., *381 205 La. 312, 17 So.2d 340, 341 (1944). Where in Doucet, as here, there were competing interests between the oyster lessee and the mineral lessee, this court found "[i]t was never the legislature's intention to give to the mineral lessees the right to operate or conduct their operations in such a manner as to pollute the waters over these beds and bottoms in utter disregard of the rights of the oyster lessees."
From the foregoing jurisprudence, it is clear that article 667 applies to lessees. There is no reason that co-lessees of the same or adjacent property cannot be neighbors under the language of article 667.
The court of appeal's limiting interpretation of the applicability of article 667 to proprietors and landowners as neighbors is not in keeping with the developing concept of property rights. Professor Yiannopoulos points out that "[t]he suggestion has been made ... that the word `proprietor' should not be given a literal interpretation and limited to `landowner.'" Yiannopoulos, 48 Tul.L.Rev. at 226. See also Yiannopoulos, Violations of the Obligations of Vicinage: Remedies Under Articles 667 and 669, 34 La.L.Rev. 475, 477 (1974).
Professor Stone suggests, "In these days of long term leases, complex mineral rights, and horizontal property divisions it would be a mistake to limit the word `proprietor' to its early nineteenth century connotation, thus ignoring modern developments in property rights." Stone, 40 Tul.L. Rev. at 705.
This court in Langlois v. Allied Chemical Corp., supra at 138, held that "[i]n considering the various activities which create a foreseeable harm to those in the neighborhood, even when conducted with the greatest of prudence and care, the trend has been toward an expansion of the classes of those who are entitled to recovery as well as an expansion of the classes from whom recovery can be had." Although Langlois deals with C.C. 669, the reasoning is applicable to article 667 as well.
Professor Stone discusses the derivation of the terms used in 667 and notes that although the Romans used the term dominium, the holder of land by emphyteusis was also treated in many ways as an owner. Domat used the word propriétaire, but Carbonnier said that the relation of neighborhood (voisinage) a priori can be conceived between tenants (locataires) or between farmers (fermiers) just as well as between owners (propriétaires). In Louisiana "the obligation of art. 667 has been enforced against the holder of a mineral lease ... and against the holder of a long term lease." Stone, 40 Tul.L.Rev. at 704-705, citing Fontenot v. Magnolia Petroleum Co., 227 La. 866, 80 So.2d 845 (1955); Devoke v. Yazoo & M.V.R. Co., 211 La. 729, 30 So.2d 816 (1947); McGee v. Yazoo & M.V.R. Co., 206 La. 121, 19 So.2d 21 (1944).
Liability under article 667 has been called strict liability, but strict liability is liability without negligence, not liability without fault. "Fault" in the sense of Langlois encompasses more than negligence, and violation of 667 constitutes fault. Fault under 667 is the damage done to neighboring property, and relief under 667 requires, therefore, only that damage and causation be proved.
The facts of this case clearly establish that the defendants' dredging operation caused damage to the plaintiffs' oyster beds and the oyster production from those beds. Despite the care and prudence exercised by defendants, plaintiffs are entitled to damages for their oyster leases.
Robert Waldron, however, and Robert Waldron, Inc., are neither "neighbors" nor "proprietors" of any sort. Unlike Boh Brothers (the construction contractor) in the Lombard case, and Jenkins Construction Company in the Chaney case, Waldron's activity did not destroy or damage the oyster beds. Waldron was employed by Baber to collect information for him and advise him. Waldron did not dredge the canal, as did Southern Louisiana Contractors (who settled and is no longer a party). The court of appeal was correct as to Waldron when it decided the plaintiffs' had failed to carry their burden of proving liability. The judgment of the court of appeal *382 is affirmed as to defendants Robert Waldron and Robert Waldron, Inc.
As to the other defendants, the judgments of the courts below are reversed, and there is now judgment for the plaintiffs, George Butler, George Butler, Inc. and Leo Bianchini, and against the defendants, Winston Baber, d/b/a Progress Petroleum Company and Highlands Insurance Company declaring defendants liable to plaintiffs for damages to their oyster leases, all at defendants' cost.
Since neither court below reached the issue of damages, the case is remanded to the district court for further proceedings consistent with this opinion.
COLE and WATSON, JJ., concur.
DENNIS, J., concurs with reasons.
DENNIS, Justice, concurring.
I respectfully concur basing my conclusion on a somewhat different rationale.
A mineral lessee is obliged to repair the damage caused any other person by the lessee's faulty acts in mineral operations. La.Civ.C. art. 2315. Fault in this context is not limited to negligence; it may also consist of a failure to observe a standard of conduct derived by analogy from relevant civil code and statutory principles. Stone, Tort Doctrine in Louisiana, 17 Tul.L.Rev. 159 (1942); Langlois v. Allied Chemical Corporation, 258 La. 1067, 249 So.2d 133 (1971). As indicated by the majority opinion, the obligations of a landowner to his neighbors are particularly relevant to determining the duties owed by a mineral lessee to other nearby landusers. La.Civ. C. arts. 667-669. However, these articles cannot be applied literally or directly but must be applied by analogy to determine whether the mineral lessee is to be held responsible under a definition of fault that is comparable to the strict liability of a landowner under Articles 667-669. Stone, Tort Doctrine in Louisiana, supra; Langlois v. Allied Chemical Corp., supra.
Moreover, in formulating standards of strict liability in this manner, a court should conduct an objective search for a rule to govern the case; looking for analogies among codal and statutory rules, principles, concepts or doctrines; and taking into account all of the social, moral, economic and other considerations that an objective rule maker would consider in forming a rule to govern the case. See Bell v. Jet Wheel Blast, Division of Ervin Industries, 462 So.2d 166, 170 (La.1985); Geny, Methode d'Interpretation Et Sources En Droit Privé Positif §§ 155, 156 (Trans.La. St.Law Inst.1954); Cardozo, The Nature of the Judicial Process (1921); Cueto-Rua, Judicial Methods of Interpretation of the Law, 80-81 (footnotes omitted), copyright by the Paul M. Hebert Law Center Publications Institute (1981); Entrevia v. Hood, 427 So.2d 1146 (La.1983); Langlois v. Allied Chemical Corp., 258 La. 1067, 249 So.2d 133 (1971). Accordingly, there are several highly relevant precepts, in addition to those expressly referred to in the majority opinion, which must be considered by the court in determining the standard of liability to be applied in this case.
The mineral code contains several provisions which should be applied by analogy in formulating the rule. "The owner of land burdened by a mineral right and the owner of a mineral right must exercise their respective rights with reasonable regard for those of the other". La.R.S. 31:11. Since the oyster lessee in the present case derives his rights directly from the owner and stands in the same position, this precept and any commentary thereon or interpretation thereof is analogous and may be applicable. The "reasonable regard" principle of Mineral Code art. 11 is intended to provide a flexible formula governing the relationship between the mineral servitude owner and the owner of the servient estate. Accordingly, each party must exercise his rights to use the land with reasonable regard for those of the other. It should permit concurrent uses of land by the owner of mineral rights and the owner of the land and those deriving use rights from him. Note, Reasonable Regard: A Solution To The Lignite Problem, 43 La.L.Rev. 1239, 1244 (1983). Significantly, the standard does not attempt to suggest that rights and liabilities must always be based *383 on negligence. Mineral Code art. 11, Comment; Broussard v. Northcott Exploration Co., Inc., 481 So.2d 125 (La.1986); Ashby v. IMC Exploration Co., 496 So.2d 1334 (La.App.3d Cir.1986), affirmed 506 So.2d 1193 (La.1987); Morgan, Correlative Rights: Surface Owner vs. Mineral Owner, 26 Inst.Min.Law 141, 155 (1979).
Moreover, under the mineral code, when the owner of a mineral servitude exercises it, "he is entitled to use only so much of the land as is reasonably necessary to conduct his operations. He is obligated, insofar as practicable, to restore the surface to its original condition at the earliest reasonable time.". La.R.S. 31:22. Article 22 has been applied between the landowner and the mineral lessee, and the reasonableness standard utilized therein is similar to that applied under article 11. Thus, the principle of article 22 may be applied by analogy to resolve disputes between mineral lessees and competing surface users deriving their rights from the land owner. Note, Reasonable Regard: A Solution To The Lignite Problem, 43 La.L.Rev. 1239, 1244 (1983).
Additionally, consideration should be given to the substantial body of jurisprudence and scholarly commentary discussing the civil code, mineral code and other sources in land use disputes. See, e.g., Comment, Concurrent Right to Surface Use in Conjunction with Oil and Gas Development in Louisiana, 33 La.L.Rev. 655 (1973); Note, Reasonable Regard: A Solution To The Lignite Problem, 43 La.L.Rev. 1239, 1244 (1983); Morgan, Correlative Rights: Surface Owner vs. Mineral Owner, 26 Inst. Min.Law 141, 155 (1979); Hall, Priorities and Liabilities For Using the Lease Premises: The Oil Operator and Concurrent Users, 18 Inst.Min.Law 3 (1971). Several auxiliary precepts useful in implementing the codal principles have been developed or suggested for adaptation. For example, it has been observed that other jurisdictions have applied the "doctrine of accommodation" which requires that where there are alternative methods practiced in the industry on similar lands put to similar uses which are usual, customary, and reasonable, and such methods do not interfere with the existing uses of the surface owner, these methods should be implemented. If there is a "reasonable alternative", the mineral lessee must not employ interfering methods or manners of use of the leasehold. See Note, Reasonable Regard: A Solution To The Lignite Problem, 43 La.L. Rev. 1239, 1244 (1983); Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tx.1971); Pennington v. Colonial Pipeline Co. 260 F.Supp. 643 (E.D.La.1966); aff'd, 387 F.2d 903 (5th cir), modified on other grounds, 400 F.2d 122 (5th Cir.1968).
Furthermore, consideration should be given to whether the parties derogated by their contracts from the standard of liability that would otherwise be formulated by interpreting the codal and statutory principles. For example, the landowner in a prior recorded mineral lease may have expressly or impliedly renounced his right to certain surface uses, thus effectively depriving a subsequent surface lessee of any right against the mineral lessee. On the other hand, such a renunciation of right or privilege by the landowner may be expressly or impliedly forbidden and rendered null if it is in conflict with a law enacted for the protection of the public interest. La.Civil Code Article 7; Id., Revision Comments 1987. One such rule of law having a great potential for application is Article IX § 1 of the 1974 Louisiana Constitution which recognizes that the state is required to act as public trustee for its people for the protection, conservation and replenishment of all natural resources. This provision specifically lists air and water as natural resources, commands protection, conservation and replenishment of them insofar as possible and consistent with health, safety and welfare of the people, and mandates the legislature to enact laws to implement this policy. Save Ourselves, Inc. v. La. Environmental Control Commission, 452 So.2d 1152 (La.1984). Even if this constitutional environmental protection standard does not require nullification of a contractual provision in a particular case, it contains important elements which should be considered by the courts in formulating the standard of liability, along with the codal, *384 statutory and secondary sources discussed earlier.
Application of these precepts, leads to the same conclusion as that of the majority opinion. The mineral lessee should be held responsible for the damages caused by its unwarranted interference with the rights of the oyster lessee. It is my appreciation that the mineral lease was a standard contract and that the state did not renounce therein its right to harvest oysters that it subsequently leased to the oyster lessee. It appears that the mineral lessee feasibly could have conducted its operations without doing serious damage to the oyster beds by selecting an alternate site for the canal or by adopting an alternate design for the canal and by dredging, backfilling and plugging more competently. Accordingly, the mineral lessee had reasonable alternative. means by which it could have exercised its mineral rights without causing substantial damage, as opposed to mere inconvenience, to the oyster lessee's rights. Failure to pursue these alternative means created a breach in its legal duty to exercise reasonable regard for the rights of its fellow lessee neighbor.
NOTES
[1] Bianchini sold most of the leases involved in this case to his adopted son George Butler in 1977 but maintained joint ownership with Butler to two of the leases. Butler sold all but one of the leases to Dr. Hugh Champagne in 1979 but reserved his rights to any cause of action arising from defendant's drilling and dredging operations in Wilkinson Bay.
[2] C.C. 659, the introductory article to "Legal Servitudes," states: "Legal servitudes are limitations on ownership established by law for the benefit of the general public or for the benefit of particular persons." C.C. 659 was new, but was not intended to change the law. Revision Comments, 1977. Sections of Act 514 of 1977 declared: "Articles 665, 667, 668, 669, 707 of the Louisiana Civil Code of 1870 ... are not amended or repealed by the provisions of this act." These articles were not renumbered. Since there was no revision of Articles 667, 668 and 669, they are to be interpreted consistently with the jurisprudence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1298412/ | 778 P.2d 685 (1989)
The PEOPLE of the State of Colorado, Complainant,
v.
James Mitchell SMITH, Attorney-Respondent.
No. 88SA239.
Supreme Court of Colorado, En Banc.
July 24, 1989.
Linda Donnelly, Disciplinary Counsel, Denver, for complainant.
Bender & Treece, P.C., Michael L. Bender, Denver, for attorney-respondent.
KIRSHBAUM, Justice.
A disciplinary complaint was filed with the Grievance Committee charging the respondent, James Mitchell Smith, with unprofessional conduct. A hearing panel of the Grievance Committee unanimously approved the findings of fact and recommendation of the hearing board that the respondent be suspended from the practice of law for a period of two years and that, prior to reinstatement, the respondent be required to undergo psychological and physiological tests and furnish explanations of the results and conclusions reached by the health professionals administering such tests concerning his ability and fitness to practice law. Upon receipt of this recommendation, this court issued an order to show cause why a more severe sanction should not be imposed in this case. Having received responses to that order, we conclude that the respondent should be suspended from the practice of law for a period of two years.
The respondent was admitted to the practice of law in Colorado in May of 1979, and is subject to the jurisdiction of this court and the Grievance Committee. C.R.C.P. 241.1(b). The respondent was admitted to the practice of law in the Commonwealth of Massachusetts in 1976. The respondent has previously received one letter of admonition, dated October 29, 1984.
In November of 1979, the respondent developed a chemical dependency on cocaine and alcohol. He continued to use cocaine through March of 1984.
Sometime prior to July 1983, the respondent developed a social relationship with the complaining witness in this proceeding. In July 1983, the complaining witness was charged with the offense of possession of cocaine and retained the respondent to represent him. The complaining witness ultimately pled guilty to the charge and received a sentence to probation. The respondent's representation of the complaining witness in that matter was completed prior to December of 1983.
In February of 1984, George Ridley, a police informant, and another party visited the respondent's home and informed the *686 respondent that three individuals had been arrested in Jefferson County on charges of sale of cocaine. The respondent agreed to seek the release of the defendants and to represent them in preliminary matters. At that meeting the party accompanying Ridley claimed ownership of the cocaine that had been seized from the defendants upon their arrest.
The respondent advanced money for bonds for the three defendants. Only one of them reimbursed the respondent. The respondent made several phone calls to the other two defendants requesting reimbursement. Some of those calls were intercepted by police officials by means of a wiretap on the telephone of one of the defendants. On March 16, 1984, the respondent was permitted by the trial court to withdraw as counsel for one of the defendants.
On March 27, 1984, an investigator from a district attorney's office and an agent from a police department contacted the respondent. They informed him that they were aware that he used cocaine and that they believed he was an active participant in drug-selling operations. The officers demanded the respondent's cooperation in investigating the conduct of third parties and threatened to file criminal charges against the respondent if he did not assist their investigations. The respondent immediately filed a motion to withdraw as counsel for the two parties he had represented in the pending Jefferson County case, which motion was granted on April 21, 1984.
During these initial discussions, the respondent informed the police authorities that the cocaine involved in the Jefferson County case belonged to the party who had accompanied Ridley to the respondent's home. Ridley had already reported this information to police officials.
In May of 1984, the respondent agreed to perform undercover activities for the Colorado Bureau of Investigation (CBI) with respect to an investigation of the complaining witness. Upon the advice of an assistant state attorney general, CBI representatives requested the respondent to record telephone conversations secretly. After obtaining assurances from a member of the attorney general's office that such conduct would not violate the Code of Professional Responsibility, the respondent agreed. He did so in part because of a concern that criminal charges might be filed against him if he did not agree.
In August, the respondent placed several phone calls to the complaining witness requesting to purchase cocaine. On September 6, 1984, he did purchase cocaine from the complaining witness. During that transaction, the respondent wore a body microphone to permit CBI agents to monitor the conversation. On December 19, 1984, the complaining witness was arrested and charged with the sale of cocaine to the respondent. In May of 1985, the complaining witness entered pleas of guilty to three felony drug-related charges.
The respondent admits that he illegally purchased and used cocaine from November 1979 to March 1984, and that his conduct violated the Code of Professional Responsibility. C.R.C.P. 241.6(1) (violating a provision of the Code); 241.6(2) (violating accepted rules or standards of legal ethics); 241.6(3) (violating the highest standards of honesty, justice or morality); and 241.6(5) (violating criminal laws). The respondent further admits that his cocaine use adversely affected his fitness to practice law, in violation of DR1-102(A)(1) (violating a disciplinary rule), and DR1-102(A)(5) (engaging in conduct prejudicial to the administration of justice), and that he improperly revealed information communicated to him in confidence by a client in violation of DR4-101(B)(1) (impermissibly revealing a secret of a client). These multiple violations of the minimal standards of professional conduct required for all attorneys are in themselves sufficient to warrant the imposition of a severe sanction.
The respondent's surreptitious recordings of conversations with the complaining witness constitute additional violations of provisions of the Code. While the respondent no longer represented the complaining witness, the conduct in all probability would not have occurred had the respondent not relied upon the trust and confidence placed in him by the complaining witness as a result of the recently completed attorney-client relationship between the *687 two. The undisclosed use of a recording device necessarily involves elements of deception and trickery which do not comport with the high standards of candor and fairness to which all attorneys are bound. People v. Selby, 198 Colo. 386, 390, 606 P.2d 45, 47 (1979). See People ex rel. Attorney General v. Ellis, 101 Colo. 101, 70 P.2d 346 (1937). We conclude that these acts violated the provisions of DR1-102(A)(4) (prohibiting conduct involving dishonesty, fraud, deceit, or misrepresentation).
The respondent asserts that his conduct should be deemed an exception to these ethical considerations because he was acting under the direction of and pursuant to the advice of law enforcement officials in their pursuit of their professional responsibilities. It may well be that important public policy considerations permit executive officials to rely upon techniques involving fraud and misrepresentation to obtain information about criminal conduct.
We do not comment in this opinion upon what some jurisdictions have expressly recognized as a prosecutorial exception to the general rule that the standards for prohibiting deceit, dishonesty and fraud preclude attorneys from surreptitiously recording communications with clients and others. United States v. Sutton, 801 F.2d 1346, 1366 (D.C.Cir.1986); United States v. Kenny, 645 F.2d 1323, 1339 (9th Cir.), cert. denied, 452 U.S. 920, 101 S.Ct. 3059, 69 L.Ed.2d 425 (1981); People v. Holman, 78 Misc.2d 613, 356 N.Y.S.2d 958, 960-61 (N.Y.App.Div.1974). See also ABA Comm. on Ethics and Professional Responsibility, Formal Op. 337 (1985).
The respondent, however, was a private attorney, not a prosecuting attorney. We do not agree that the above-described policy considerations permit private counsel to deal dishonestly and deceitfully with clients, former clients and others. To hold otherwise would fatally undermine the foundation of trust and confidentiality that is essential to the attorney-client relationship in the context of civil as well as criminal proceedings.
The respondent asserts that his conduct was not motivated by an attempt to obtain leniency for himself at the expense of the complaining witness, but that it is best explained by the fact that he was physically and emotionally distraught at the time. The respondent notes that he sought advice from law enforcement officials regarding his participation in the criminal investigation of the complaining witness and was assured by a member of the state attorney general's office that such conduct would not violate professional ethical standards. The hearing board concluded, however, that the respondent's conduct in revealing a secret of his client to police officials was motivated in part by a desire to reduce his own exposure to prosecution. The evidence supports this finding. The respondent's agreement to obtain information for the CBI about the complaining witness was also motivated in part by that concern. Given all of these circumstances, we reject the respondent's argument that his conduct did not constitute deceitful conduct as contemplated by DR1-102(A)(4) (engaging in conduct involving dishonesty, fraud, deceit or misrepresentation).
II
The question of imposition of an appropriate sanction involves a balancing of the seriousness of the offense with mitigating and aggravating factors disclosed by the record. ABA Standards for Imposing Lawyer Sanctions § 9.1, commentary (1986). The respondent has received psychiatric treatment for his drug dependency and has not used cocaine since 1984. He now enjoys a successful practice of law in Massachusetts, and has participated actively in several Massachusetts organizations, including bar association groups that deal with problems of substance abuse. These are mitigating factors. See ABA Standards for Imposing Lawyer Sanctions § 9.32(j) (1986).
The respondent argues that his conduct does not warrant a severe sanction because it caused no harm to others. It is true that his disclosure of his client's secret did not harm the client in this case because the information was already known to police officials. However, the sale of cocaine by the complaining witness was deceitfully encouraged by the respondent. Although the *688 complaining witness' own criminal activities constituted the illegal conduct for which he was prosecuted, the respondent's professional misconduct contributed to those activities.
Furthermore, the respondent's conduct with respect to the complaining witness resulted in part from his desire to reduce personal repercussions flowing from his own admitted illegal use of cocaine. Thus, his case is distinguishable from People v. Driscoll, 716 P.2d 1086 (Colo.1986), and People v. Simon, 698 P.2d 228 (Colo.1985), wherein attorneys received public censures for conduct resulting from drug dependency. In neither of those cases did the attorneys intentionally aid law enforcement officials in prosecuting former clients by obtaining information and evidence by means of unconsented recordings of conversations.
Section 5.12 of the ABA Standards for Imposing Lawyer Sanctions recommends suspension from the practice of law when an attorney knowingly engages in illegal use of drugs and the conduct did not involve the sale, distribution or importation of drugs. Section 4.62 of those Standards also recommends suspension for engaging in deceptive behavior causing injury to a client. We have already indicated that the respondent's conduct did contribute to injuries suffered by the complaining witness and that the respondent placed his personal concerns above those of his former client. We also note as a further aggravating factor that the respondent has previously been sanctioned for conduct violative of the Code.
The mitigating factors established by evidence of the respondent's apparent rehabilitation and outstanding contributions to the practice of law in the Commonwealth of Massachusetts support our conclusion that disbarment for the repeated and various acts of professional misconduct admittedly engaged in by the respondent over a five-year period of time would constitute too severe a sanction. Nevertheless, in view of the variety and character of the respondent's professional misconduct and the fact that the respondent has previously been disciplined, we agree with the recommendation of the Grievance Committee.
Accordingly, the respondent, James Mitchell Smith, is suspended from the practice of law for a period of two years. The respondent shall pay the costs of these proceedings, in the amount of $193.10, to the Grievance Committee, 600-17th Street, Suite 500-S, Denver, Colorado XXXXX-XXXX within sixty days of the date of this opinion. The respondent shall not be reinstated until the costs of these proceedings have been paid.
ERICKSON, J., dissents, and VOLLACK, J., joins the dissent.
ERICKSON, Justice, dissenting:
I respectfully dissent to the sanction imposed. The respondent breached the confidential attorney-client relationship and participated in drug transactions in such a manner as to bring disrespect and a dishonor to the legal profession. In my view, the sanction should not be less than disbarment.
VOLLACK, J., joins in this dissent. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1401772/ | 984 F.Supp. 157 (1997)
Terrence HILL, Petitioner,
v.
John P. KEANE, Warden, Sing-Sing Correctional Facility, Respondent.
No. CV 97-2554.
United States District Court, E.D. New York.
December 22, 1997.
*158 Terrence Hill, Dannemora, NY, Pro Se.
Denis Dillon, Nassau County District Attorney by John F. McGlynn, Assistant District Attorney, Mineola, NY, for respondent.
MEMORANDUM AND ORDER
WEXLER, District Judge.
Terrence Hill petitions this Court for a writ of habeas corpus pursuant to 28 U.S.C. § 2254, challenging his 1993 state court convictions of robbery in the first degree and attempted robbery in the first degree. For the reasons discussed below, the petition is dismissed as untimely under the one-year limitation period imposed by the Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA"), Pub.L. No. 104-132, 110 Stat. 1214 (1996), codified in pertinent part at 28 U.S.C. § 2244(d)(1).
FACTS
On November 22, 1993, upon his pleas of guilty, petitioner was convicted in the County Court of Suffolk County, on charges of robbery in the first degree and attempted robbery in the first degree. On February 14, 1995, this conviction was affirmed by the Appellate Division. See People v. Hill, 212 A.D.2d 632, 622 N.Y.S.2d 593 (2d Dep't 1995). On April 26, 1995, the Court of Appeals denied leave to appeal, thus ending Hill's chain of direct appeals. See People v. Hill, 85 N.Y.2d 939, 627 N.Y.S.2d 1001, 651 N.E.2d 926 (1995). On or about July 20, 1995, Hill moved for a writ of error coram nobis to vacate the Appellate Division's order of February 14, 1995, alleging the ineffective assistance of appellate counsel. On October 23, 1995, the Appellate Division denied Hill's motion. People v. Hill, 220 A.D.2d 686, 632 N.Y.S.2d 977 (2d Dep't 1995). On or about July 11, 1996, Hill filed in the Appellate Division a motion for reargument of his appeal. The Appellate Division denied his motion on October 31, 1996.
Also on or about July 20, 1995, Hill brought a collateral attack on his conviction pursuant to Criminal Procedure Law § 440.10, alleging the ineffective assistance of counsel, but relying solely on facts on the record of the trial court proceeding. The trial court denied the motion on December 5, 1995. On April 10, 1996, the Appellate Division denied Hill's motion for permission to appeal the trial court's order. The instant petition was filed in this Court on May 2, 1997, Hill having handed the petition to prison authorities for filing on April 17, 1997. Respondent contends, inter alia, that the petition is untimely under the AEDPA.
DISCUSSION
On April 24, 1996, the AEDPA became law when it was signed by President Clinton. The AEDPA instituted a one-year statute of limitations for state prisoners seeking habeas relief, stating as pertinent to this case:
A 1-year period of limitation shall apply to an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court. The limitation period shall run from ... (A) the date on which the judgment became final by the conclusion of direct review or the expiration of the time for seeking such review.... or (D) the date on which the factual predicate of the claim or claims presented could have been discovered through the exercise of due diligence.
28 U.S.C. § 2244(d)(1). Direct review of Hill's convictions concluded on April 26, 1995, nearly one year prior to the enactment of the AEDPA with its one-year limitations period.
The AEDPA's limitations provision is, in some circumstances, subject to a tolling provision: the "time during which a properly filed application for State post-conviction or other collateral review ... is pending shall not be counted toward any period of limitation." See 28 U.S.C. § 2244(d)(2) (emphasis added). Hill's July 20, 1995 petition for collateral relief from his convictions pursuant to CPL § 440.10(1) was not properly filed because it relied solely on record facts. Under New York law, a defendant is procedurally barred from moving to vacate a judgment of conviction under § 440.10(1) when he could have raised his claims on direct appeal. See *159 CPL § 440.10(2)(c); Mabery v. Keane, 939 F.Supp. 193, 199 n. 5 (E.D.N.Y.1996); Bacchi v. Senkowski, 884 F.Supp. 724, 731 (E.D.N.Y. 1995), aff'd 101 F.3d 683 (2d Cir.), cert. denied, ___ U.S. ___, 117 S.Ct. 237, 136 L.Ed.2d 167 (1996). A petitioner, however, cannot evade the AEDPA's limitations period simply by filing procedurally barred motions. See Valentine v. Senkowski, 966 F.Supp. 239, 241 (S.D.N.Y.1997) (CPL § 440.10 motion must be "non-frivolous" in order to be "properly filed" within the meaning of § 2244(d)(2)). Similarly, Hill's motion, dated July 11, 1996, to the Appellate Division for reargument of his appeal was not properly filed because it was untimely. Under the Appellate Division's rules, a motion for reargument must be made within 30 days of the decision unless good cause is shown. 22 N.Y.C.R.R. § 670.6[a]. Hill did not file for reargument until some seventeen months after the appeal had been decided nor did he attempt to show good cause for the delay.
As for Hill's July 20, 1995 application for a writ of coram nobis seeking to vacate the Appellate Division's order affirming the judgment of conviction, that application was denied on October 23, 1995, some six months prior to the AEDPA's enactment and nearly 18 months before the instant petition was filed. Consequently, this collateral attack cannot serve to extend the limitations period.
Where, as here, a state prisoner's time to file under § 2244(d)(1) would expire before or shortly after the effective date of the AEDPA and its one-year limitations period, the Second Circuit has afforded state prisoners a "reasonable time" to file their petition after the enactment date. See Peterson v. Demskie, 107 F.3d 92, 93 (2d Cir.1997). In the case of incarcerated pro se litigants, a petition is deemed filed on the date that the petition and accompanying papers are handed to prison authorities for filing. Houston v. Lack, 487 U.S. 266, 271-72, 108 S.Ct. 2379, 2382-83, 101 L.Ed.2d 245 (1988). Here, the petition was turned over to prison authorities on April 17, 1997, some 358 days after the AEDPA's enactment. Hill offers no persuasive reason why he could not have filed the petition earlier.
Hill exhausted his direct appeals on April 26, 1995. He could have filed his habeas petition at any time thereafter. Once the AEDPA became effective on April 24, 1996, Hill had a reasonable time in which to file. Instead, he waited nearly a year to do so. The Court finds that the instant petition was not filed within "a reasonable time" within the meaning of the AEDPA as construed in Peterson. Accord Reese v. Greiner, No. 97-5622, 1997 WL 694716, at *2 (S.D.N.Y. Nov. 6, 1997) (petition untimely when filed "almost one year after effective date of AEDPA"); Reid v. Greiner, No. 97-1852, 1997 WL 694723, at *2 (S.D.N.Y. Nov.3, 1997) (filing 341 days after effective date untimely); Santana v. United States, 982 F.Supp 942, 944-45 (S.D.N.Y. 1997) (306 days); Avincola v. Stinson, No. 97-1132, 1997 WL 681311, at *2 (S.D.N.Y. Oct.31, 1997) (266 days); Garcia v. New York State Dep't of Correctional Servs., No. 97-3867, 1997 WL 681313, at *2 (S.D.N.Y. Oct.31, 1997) (350 days); Roldan v. Artuz, 976 F.Supp 251, 253 (S.D.N.Y.1997) (328 days); Morales v. Portuondo, No. 97-2559, 1997 WL 433478, at *2 (S.D.N.Y. Aug.1, 1997) (335 days).
CONCLUSION
For the foregoing reasons, the habeas petition is dismissed. Given that the petition is time-barred, the merits of petitioner's claims need not be addressed. The Clerk of the Court is directed to close the case.
SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1702730/ | 401 So.2d 1302 (1981)
C.G. IVY
v.
GRENADA BANK.
No. 52723.
Supreme Court of Mississippi.
August 5, 1981.
Mitchell M. Lundy, Lundy & Lundy, Grenada, for appellant.
Edwin Tharp Cofer, Keeton, Cofer & Embry, Grenada, for appellee.
Before ROBERTSON, P.J., and WALKER and LEE, JJ.
LEE, Justice for the Court:
The Chancery Court of Grenada County entered a decree against C.G. Ivy in favor of the Grenada Bank for the sum of $125,000. Ivy has appealed and assigns three errors in the trial below. The assignments of error may be disposed of under one proposition, viz, whether or not the lower court erred in holding that Ivy was liable upon his continuing guaranty in the amount of $125,000, whether or not appellee was estopped to claim the indebtedness and whether or not the indebtedness was cancelled.
On June 6, 1976, Ivy, Robert Lewis Smith and Judith G. Vick, stockholders in Elliott Industries, Inc., jointly signed a continuing guaranty agreement in order to establish a line of credit for such corporation. Each co-signer guaranteed to pay the Grenada Bank up to $125,000 of the corporation's debts incurred to the bank. The instrument provided that it would continue in force until written notice of termination was delivered to one of the executive officers of the bank. In that event, the instrument would terminate but would not affect the liability of the co-signers for obligations arising prior to the termination. Ivy disposed of his corporate stock in November of 1976 and thereafter, one Russell Y. Greene bought an interest in the corporation. On January 31, 1977, Smith, Vick and Greene executed new continuing guaranties which were identical to that executed by Ivy, Smith and Vick on June 16, 1976.
Appellant contends that he was not given a copy of the instrument when he signed same, that he did not know its contents, that when he sold his interest in the corporation the Grenada Bank vice-president knew he had no further interest in the corporation and that the bank is equitably estopped from asserting the claim against him. However, Mr. W.R. Jones, vice-president of the Grenada banking system, who made the original loan to Elliott Industries, Inc., testified that he personally explained the full import of the guaranty to Ivy and *1303 that he would not release any of the original members from their liability on the notes of Elliott Industries, Inc. Appellant admitted that, after selling his interest in the corporation, he did not go to the Grenada Bank and ask to be released from liability on the instrument, that no one at the Grenada Bank told him he was released from such liability, and that he never went by to see the guaranty instrument. Mississippi Code Annotated section 75-3-415 (1972), defines an accommodation party as one who signs an instrument in any capacity for the purpose of lending his name to another party. In McCubbins v. Morgan, et al, 199 Miss. 153, 23 So.2d 926 (1945), the Court said:
"A person cannot avoid a written contract which he has entered into on the ground that he did not read it or have it read to him, and that he supposed the terms were different, unless he was induced not to read it or have it read to him by the other party on which he was entitled to rely." (199 Miss. at 159, 23 So.2d at 927)
Birmingham v. Conger, 222 So.2d 388 (Miss. 1969), held that a party claiming equitable estoppel must show (1) that he changes his position in reliance upon the conduct of another, (2) that he suffered detriment caused by his change of position in reliance upon such conduct.
The record reflects that appellant knew he was signing the instrument to establish a line of credit for Elliott Industries, Inc., and knew he was liable to the extent of $125,000 for the debts of that corporation. The fact that he may not have read the instrument or received a copy of it does not absolve him from liability. Under the uncontradicted facts of the case, equitable estoppel will not afford relief. The lower court correctly entered the decree in favor of the Grenada Bank.
AFFIRMED.
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/2366905/ | 671 S.W.2d 79 (1984)
Morin M. SCOTT, Trustee, Appellant,
v.
Tom VANDOR, Trustee, Appellee.
No. 01-83-0207-CV.
Court of Appeals of Texas, Houston (1st Dist.).
April 5, 1984.
Rehearing Denied May 10, 1984.
*82 Harold Lloyd, Houston, for appellant.
Herbert N. Lackshin, Louis Gurwitch, Bernard Fischman, Lackshin & Nathan, Tom F. Coleman, Able & Coleman, Houston, for appellee.
Before DUGGAN and BULLOCK, JJ., and QUENTIN KEITH, J. (Ret.).
OPINION
QUENTIN KEITH, Justice (Ret.), Sitting by Designation.
Defendant below appeals from an adverse judgment, based upon jury findings which awarded plaintiff's assignee specific performance of an option contract for the sale of a certain parcel of land in Harris County, Texas. The basic dispute centers around the lack of a description of the land in the option contract.
The testimony showed that in 1978 Leonard Cassack and Tom Vandor represented "West Oak Developments 200" and were seeking land near the Houston Medical Center upon which to build a multi-story residential building with at least 300 units. Cassack asked a real estate broker, Vince Vallone, to negotiate with the defendant, Morin M. Scott, the owner of the commercial tract now involved in this litigation, then being leased by Scott for use as a parking lot. Vandor and Scott entered into an earnest money contract for the conveyance of the property for a net price of $14.00 per square foot. As earnest money, Vandor was to deposit $25,000, to be held in escrow by Medical Center Bank, with the sum of $2,500 to be forfeited to the seller in the event of default by the purchaser.
Purchaser alleged the execution and subsequent oral modification of the February 6, 1979, contract for sale and obtained admission into evidence of a copy of that instrument. The contract states that
Seller hereby sells and agrees to convey, and Purchaser hereby purchases and agrees to pay for, the tract of land in Harris County, Texas, being fully described in Exhibit "A," attached hereto and incorporated herein by reference for all purposes....
No Exhibit "A" was attached to the contract, and it is undisputed that no Exhibit "A" containing any description of the property was attached at the time the contract was executed. According to the contract, the dimensions of the property were to be determined by "a duly licensed land surveyor designated by the Purchaser and accepted by the Title Company...." The judgment appealed from awards purchaser clear title to 58,810.83 square feet, or 1.350 acres of land out of Lot 6, University Place First Subdivision in Harris County, Texas, and it includes a proper metes and bounds description. Seller claims, "There is no evidence and no pleading that the [seller] entered into a written agreement with [Vandor] to sell to him this particular tract of land."
At closing, the earnest money deposit and an additional $25,000 were to be paid to seller. The remainder of the purchase price was to be paid as follows: $50,000 plus interest on or before October 30, 1979; $50,000 plus interest on or before April 31 [sic], 1980; $100,000 plus interest on or before October 30, 1980; $100,000 plus interest on or before April 30, 1981; $200,000 plus interest on or before April 30, 1982; *83 and the balance of principal and interest on or before October 30, 1982.
The closing was to be held on or before April 30, 1979, at which time Scott would convey to Vandor by general warranty deed the title in fee simple, free and clear of all liens and encumberances except current real estate taxes. The deed would be held by Medical Center Bank and released to purchaser after purchaser had paid the first $150,000, that is, the initial $25,000 earnest money deposit, the $25,000 paid at closing, and the first two $50,000 installments on the promissory note.
According to the witness, Cassack, seller orally agreed to modify the preceding contract about a month prior to the closing. The purchaser would provide at closing two letters of credit of $50,000 each to secure the two $50,000 installments of principal due on October 30, 1979, and April 31 [sic], 1980, respectively. In return, seller agreed the general warranty deed would be delivered at closing.
The parties and their attorneys attended the closing April 25, 1979, at Louisville Title Company. Two objections to the closing papers submitted by the purchaser, one having to do with a restrictive covenant inadvertently omitted from the deed and one having to do with the time at which interest was to accrue on the promissory note, were resolved to seller's satisfaction. The proceeds from the $25,000 in earnest money, used to purchase a certificate of deposit at Medical Center Bank, were delivered in the form of a cashier's check. According to the purchaser's closing statement, after allowance for proration of real property taxes, the amount due from the purchaser was $21,960.26. This was tendered in the form of a check in the amount of $25,000 payable to Louisville Title Company from Rockwell Investments Ltd., one of the members of the joint venture known as West Oak Developments 200. The letters of credit were delivered to the closing officer. Apparently, there was no discussion regarding the acceptability of either the letters of credit or the tendered check at the closing. Vandor signed and delivered to the closer the promissory note and deed of trust giving seller a first mortgage and other papers, including his assignment of earnest money contract to West Oaks Developments 200. The field notes describing by metes and bounds the dimensions of the property were attached to the deed, deed of trust, and other instruments prior to their execution. The seller executed the deed and seller's closing statement, which were given to Mark Muellerweiss, the escrow officer and closer representing the title company.
According to Muellerweiss, upon conclusion of the document signing, he stated his intention to record the documents upon receipt of an executed release of lien from Medical Center Bank. Seller stated at trial he understood that the general warranty deed would be recorded.
The next day, following a conversation with broker Vallone, Cassack called seller, who informed him that Medical Center Bank would not release its lien and was unwilling to accept the letters of credit. Seller told him the "deal was off." However, the bank president's deposition testimony was to the contrary, his testimony being that the bank was prepared to release its lien.
The Trial Sequence
Purchaser, filed his original petition and motion to enter declaratory judgment on May 16, 1979. Since he had assigned his interest in the contract, an amended petition was filed naming West Oak Developments 200, a Texas joint venture, as plaintiff. It alleged that, purchaser having performed all conditions precedent to its right to full and complete performance by seller, seller's attempted repudiation and his failure and refusal to deliver the release of lien constituted a breach of contract. Purchaser sought specific performance of seller's promise to deliver fee simple title, the reasonable rental value of the property from the closing date until entry of judgment, and abatement out of the purchase price for expenses incurred in removing encumbrances upon the title. Alternatively, *84 purchaser sought declaratory relief. Seller answered by general denial, specifically alleging failure by purchaser to exercise its option to purchase the property in strict accordance with the written contract. Seller also asserted, among its defenses, the statute of frauds, waiver, ambiguity, impossibility of performance, mutual mistake of fact, and breach of contract, and he counterclaimed for liquidated damages under the earnest money contract.
Trial was to a jury, which found that purchaser exercised the option contract in accordance with its terms and that the parties orally agreed that the deed would be delivered to purchaser at the closing. The jury found, further, that by executing the closing documents and delivering the deed at closing to the title company, the seller was estopped from requiring that the deed be delivered, instead, to the Medical Center Bank and had waived delivery of the deed to the Medical Center Bank. The jury also answered issues relating to rental value and attorney's fees.
The trial court, finding purchaser was entitled to specific performance of the contract of February 6, 1979, decreed that fee simple title and right of possession were vested in purchaser, subject to purchaser tendering into the court's registry the purchase price of the property, adjusted by certain increments and abatements. The clerk of court was to deposit this amount into a certificate of deposit or interest bearing account at Medical Center Bank and use funds in the account to discharge a promissory note in the original principal amount of $400,000 executed by seller in 1976, payable to the order of Medical Center Bank, and secured by recorded deeds of trust to the subject property. Upon delivery of a notarized release of these liens to the clerk, seller was to receive the balance of the funds on deposit. Following denial of seller's motion for a new trial, he perfected this appeal.
In his first series of points, appellant contends that the evidence was legally and factually insufficient to support the jury's finding to Special Issue No. 1, that the purchaser exercised the option contract in strict accordance with the terms thereof. Appellant also argues that the undisputed evidence disclosed that the $50,000 cash consideration mentioned in the contract was not tendered at the closing.
The earnest money contract executed February 6 provided that seller would accept $2,500 as compensation in the event purchaser should not buy the property. Thus, the agreement was an option contract because seller was obligated to accept a specified sum in full settlement of purchaser's liabilities for default. Broady v. Mitchell, 572 S.W.2d 36, 40 (Tex.Civ.App. Houston [1st Dist.] 1978, writ ref'd n.r. e.); Smith v. Hues, 540 S.W.2d 485, 488 (Tex.Civ.App.Houston [14th Dist.] 1976, writ ref'd n.r.e.). The option could only be accepted by purchaser's tendering full compliance in strict accordance with its terms and within the time limits provided therein, time being of the essence to an option agreement. Smith v. Hues, supra; Tabor v. Ragle, 526 S.W.2d 670, 675 (Tex.Civ.App. Fort Worth 1975, writ ref'd n.r.e.). Seller's general contention and argument under points of error two, three, six, seven, eight, and ten is that purchaser never exercised its option under the earnest money contract and that the option terminated without any contract coming into existence. Specific performance of a contract to sell real estate will not be decreed if the plaintiff seeking specific performance has himself committed a material breach of the contract. Cowman v. Allen Monuments, Inc., 500 S.W.2d 223 (Tex.Civ.App.Texarkana 1973, no writ) (cited with approval in Hudson v. Wakefield, 645 S.W.2d 427, 430 (Tex.1983)).
Seller contends that purchaser's performance was deficient in two ways, one having to do with the cash down payment required and the other involving the use of letters of credit. The jury found, in answer to Special Issue No. 1, that purchaser did exercise the option in strict accordance with the terms of the contract and, in answer to Special Issue No. 3, that the parties orally agreed the deed would be *85 delivered to purchaser at closing. Consequently, we now turn to the only relevant inquiry: whether the evidence supports those findings. In passing upon the challenges to the findings of the jury, we will follow the rules laid down in Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965).
Paragraph 2 of the sales contract provides that an earnest money deposit of $25,000 is to be placed by purchaser in a certificate of deposit at Medical Center Bank and an additional $25,000 is due seller at closing, the remaining principal and interest to be paid in six specified payments. Paragraph 7 provides that purchaser shall, at closing,
(i) Pay to Seller the portion of the purchase price for the Property stipulated in Paragraph 2 hereof, which is due in cash; less credit for the earnest money deposited hereunder; and,
(ii) Deliver to Seller a duly executed promissory note for the balance ....
At the closing on April 25, 1979, seller called Medical Center Bank and instructed the bank to send over a cashier's check for the $25,000 that purchaser's agent, Cassack, had placed in a certificate of deposit. A check in the amount of $25,299.75 was delivered by the bank's messenger, and Cassack tendered an additional check in the amount of $25,000 to the closer, as payment of the $21,960.26 still due. This latter check, Plaintiff's Exhibit No. 4, was drawn on the Texas Commerce Bank account of Rockwell Instruments, Ltd., of Montreal, Canada, and made payable to Louisville Title Company. Seller insists the tender of a personal check drawn on the account of a Canadian firm not known to seller to be a party to the transaction constitutes a failure to comply with the requirement of the contract that purchaser would pay, at closing, an additional $25,000 in cash.
But seller made no objection to the tendered check at the closing. Further, the tender of this check was not among the reasons seller gave to justify his attempted cancellation of the transaction the day following the closing.
Seller's claims that he never saw or approved the check and his complaint that it was submitted by an entity not a party to the transaction are without merit. Tom Vandor, Trustee, assigned the earnest money contract to West Oak Developments 200, a Joint Venture, at the closing, and West Oak is the grantee named in the warranty deed executed by seller. Seller was on notice that Vandor was not the purchaser, and he could have inquired as to the source of the funds.
The belated objection to the form of tender was waived. The word "cash" in its strict sense refers to coins and paper money, but it is also used to refer to checks and demand deposits in banks and savings institutions. Stewart v. Selder, 473 S.W.2d 3, 9 (Tex.1971). Nothing in the parties' contract suggests that payment by check was not contemplated. Seller may not at this late date complain that a check was an improper tender when he failed to object on that ground at the closing. See Baucum v. Great American Insurance Co. of New York, 370 S.W.2d 863, 866 (Tex.1963).
Seller also insists purchaser's performance under the option contract was deficient because of purchaser's attempt to alter its terms by the additional tender of two $50,000 letters of credit in return for immediate delivery of the warranty deed. Under the written contract, the executed deed was to be held by Medical Center Bank until purchaser had paid $150,000 of the total purchase price, i.e., the down payment of $50,000 and the payments due in October 1979 and April 1980.
Witness Cassack testified for the purchaser that he met with seller about 30 days before the closing date to arrange some method of having delivery of the deed at closing. He said that seller agreed that, if he posted a letter of credit to guarantee the first two payments on the note and the bank was agreeable, he would not object and would deliver the deed to the purchasers at closing. This oral modification of the sales contract is corroborated by testimony of purchaser's attorney regarding a *86 conversation he had with seller's attorney and by a letter from seller's attorney to purchaser's attorney.
The letters of credit were delivered to the closer, Muellerweiss, at the closing, yet seller made no objection, accepted purchaser's note and deed of trust and signed the warranty deed and closing statement. At trial seller insisted, on the other hand, that he never saw and never approved the letters of credit. His testimony is conflicting as to whether he closed the transaction based upon his attorney's telling him the bank approved the letters of credit.
Seller also contends the evidence demonstrates an attempt by purchaser to exercise the option contract as modified orally, and not the option contained in the written contract. In fact, purchaser did both. In addition to the change in the date at which the title would pass from Morin M. Scott, Trustee, to purchaser, by tendering the letters of credit, the purchaser accepted personal liability for making the first two $50,000 payments due on the promissory note, an additional obligation not required by the written contract.
A party seeking specific performance of a contract for the purchase and sale of real property need only prove that he is ready, willing and able to pay the agreed price for the property and perform the essence of the agreement and offer to do so. Cowman v. Allen Monuments, Inc., supra, at 227; Burford v. Pounders, 145 Tex. 460, 199 S.W.2d 141, 144 (1947). This the purchaser has done, and seller breached the written agreement. Seller had no right to repudiate the contract the day after closing even if there was no oral agreement changing the date of delivery of the deed. In that case, he could have rescinded the escrow agreement under which the deed was originally to be delivered only if purchaser failed to comply with the escrow. Cf. Glover v. Donohoo, 197 S.W.2d 531, 534 (Tex.Civ.App.El Paso 1946, no writ). Having examined the record with care, we find that the evidence is legally and factually sufficient to support the jury's findings and points two, three, six, seven, eight, and ten are each overruled. Garza v. Alviar, supra.
We also overrule appellant's points of error 4, 11, 18, 19, and 20, which challenge the enforceability of the modified option contract and the admission of parol evidence of the oral modification. The parties' agreement to abandon their original escrow arrangement in return for letters of credit guaranteeing payment of purchaser's first two installment payments was outside the statute of frauds. Upham v. Banister, 44 S.W.2d 1014, 1015 (Tex.Civ. App.Amarillo 1931, no writ); Miller v. Deahl, 239 S.W. 679 (Tex.Civ.App.Amarillo 1922, writ ref'd). See also Garcia v. Karam, 154 Tex. 240, 276 S.W.2d 255, 257 (1955).
Since the parties themselves resolved any inconsistencies and ambiguities in the option contract by agreeing to consumate the transaction at the closing, we need not address appellant's points of error five and nine. Harris v. Rowe, 593 S.W.2d 303 (Tex.1979).
We turn now to Seller's points 12, 14, and 15, wherein he complains of the evidence and instructions pertaining to the jury finding on the issue of estoppel (Special Issue No. 9). The trial court included in its charge to the jury the following definition:
You are instructed that the term "estoppel" is defined as when a representation or act by one party causes the other to do an act which would operate to his detriment if the first party is allowed to complain or where a party recognizes the validity of a transaction and accepts the benefits from the transaction and then attempts to repudiate it.
The court submitted as Special Issue No. 9 the following:
Do you find from a preponderance of the evidence that by executing the closing documents and delivering the deed at closing to the Title Company, the seller is estopped from requiring that the deed be *87 delivered at closing to Medical Center Bank?
The jury answered, "We do."
Seller objected to the preceding definition and tendered an alternative definition on the ground that it is incorrect and fails to include a statement that the representation or act by one party which causes another party to act to its detriment must be a false representation or concealment of a material fact. He also complains on appeal, though not in the trial court, that the addition of the phrase "if the first party is allowed to complain" cannot be supported by authority. The jury's affirmative answer to Special Issue No. 9 clearly was affected, he argues, by the erroneous definition of the term "estoppel." We remain unpersuaded.
Purchaser agrees that the elements of equitable estoppel set out in Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929 (1952) include false representation or concealment of a material fact, but it insists the instruction was substantially correct, citing Landrum v. Devenport, 616 S.W.2d 359, 363 (Tex.Civ.App.Texarkana 1981, no writ) (identical definition), or, if erroneous, it was harmless error.
If an act or admission is susceptible of two constructions, one of which is consistent with the right asserted by the party sought to be estopped, it forms no estoppel. Gulbenkian, supra, 252 S.W.2d at 932. Seller alleges that the title company, a neutral party at the closing, had a duty to follow the instruction regarding delivery of the deed to the bank found in the written earnest money contract and that there is no evidence seller instructed the title company to deliver the deed to buyer or to record the deed prior to the purchaser's payment of the first two installments. His act of handing the executed deed to the closer is consistent with his contention, claims seller, that the title company should deliver the deed to the bank. He further claims there is no evidence buyer suffered any prejudice merely by reason of the execution of the closing documents and the delivery of the deed at closing to the title company.
The facts in our record refute this argument against the finding of estoppel. What the title company's closer believed is not the issue. Rather, what did seller lead the buyer to believe and act upon? Testimony by witness Cassack concerning the seller's agreement to accept the letters of credit in return for early delivery of the deed, the letter from seller's attorney to buyer's attorney stating that title would pass at the closing, and seller's failure to speak out when the letters of credit were tendered at closing conflict with seller's trial testimony that he never accepted the letters of credit. The closer, Mark Muellerweiss, testified that, after all the documents were executed, he told the parties he intended to record them as soon as he received the proper releases from the bank. Seller made no objection. Estoppel may be based upon silence or inaction rather than an affirmative misrepresentation if by such silence or inaction on the part of one under a duty to speak, the opposing party is misled to his injury. Storms v. Tuck, 579 S.W.2d 447 (Tex.1979). Seller's deposition testimony shows that his attorney told him he thought the bank had approved the letters of credit. He admitted that he permitted the closing to go forward knowing buyer had brought the letters of credit to the closing. If seller did not intend to accept the letters of credit in exchange for immediate passage of title, then he had a duty to say so at the time.
The evidence supports a finding of estoppel even under the definition tendered by seller. In reliance upon representations by seller or his agents that the deed would be delivered at closing and the further concealment by seller of any reservations he had concerning that means of payment, purchaser made himself, by means of the letters of credit (secured at a cost to purchaser of $1,100), personally liable for payment by seller of his note to the bank. This was proof of conduct by seller calculated to mislead purchaser and was acted upon by purchaser in good faith to his detriment. Furthermore, in view of the *88 jury's finding that buyer exercised the contract in strict accordance with its terms and the parties orally agreed to delivery of the deed at closing (Special Issue Nos. 1 and 3), the jury's findings on waiver and estoppel are unnecessary to support the judgment. The error, if any, in submission of the instruction of estoppel, was harmless. T.R. C.P., Rule 434. This series of points is overruled.
We turn now to Seller's first point of error complaining of the legal inadequacy of the contract sued upon because of the lack of any legal description of the land involved. As noted earlier, while the option contract referred to an exhibit containing a legal description of the land, none was attached. The first point of error, set forth below, attacks this matter directly.[1]
The lack of a property description in the option contract did not render the option contract void. Avinger v. Campbell, 499 S.W.2d 698, 704 (Tex.Civ. App.Dallas 1973, writ ref'd n.r.e., 505 S.W.2d 788). This result is reached because, under the Statute of Frauds, an oral contract to sell real estate is not void, but only voidable, in a suit to enforce specific performance. Mason v. Abel, 215 S.W.2d 377 (Tex.Civ.App.Dallas 1948, writ ref'd n.r.e.). As applied to the facts at bar, the option contract was rendered enforceable by the seller executing the general warranty deed and the deposit of it in escrow with the closer for the title company. See generally Simpson v. Green, 231 S.W. 375 (Tex.Comm.App.1921, judgment adopted).
Nor are we impressed with seller's authorities submitted by way of a post-submission brief. Wright v. Povlish, 498 S.W.2d 686 (Tex.Civ.App.Corpus Christi 1973, writ ref'd n.r.e.), one of the cases so cited, is readily distinguishable upon the facts, which have little, if any, similarity to the case under consideration.
We find no merit in appellant's first point of error, and it is overruled.
Our review of the record has not disclosed error, and we turn now to the next three points, complaining of the decree, which orders the deed to be delivered to purchaser when it has made the payments set out therein. The judgment recites that there is attached thereto four exhibits, "A", "B", "C", and "D", but the judgment found in our transcript does not have any exhibits attached. Seller argues that the Medical Center Bank lien, mentioned earlier, could not be satisfied at the time the judgment became final; hence, he contends, the judgment is not subject to being enforced. We disagree; the judgment was enforceable when rendered since it made allowance for seller's failure or inability to procure the necessary release of the lien by directing the clerk to remit to the lien holder, out of the monies deposited by the purchaser into the court's registry, all sums necessary to procure the release of the lien. Points 21, 22, and 23 are each overruled.
Purchaser's cross-point, noting the absence of the exhibits to the judgment, argues that we should reform the judgment, nunc pro tunc; but Exhibit "C," one of two deeds of trust securing Medical Center Bank's lien, was not admitted into evidence and is not in our record, although its existence was conclusively established. The judgment, as entered, contains a complete description of the missing Exhibit "C," in these words:
That certain deed of trust dated October 18, 1977, executed by Morin M. Scott, Trustee, conveying to D.W. Neuenschwander, Trustee, of Harris County, Texas, an undivided twenty-two (22%) percent interest in the property, said Deed of Trust filed for record under Harris County Clerk's File No. F-386440....
Because of this omission from the judgment, we are of the opinion that the correction *89 should be made in the trial court by procuring a certified copy of said deed of trust and attaching it to the judgment upon remand, along with copies of Exhibits "A," "B," and "C." To that end, we reverse the judgment of the trial court and remand the cause for correction of the judgment by attaching the exhibits described above to the judgment of the court signed on December 13, 1982. See Dikeman v. Snell, 490 S.W.2d 183, 186 (Tex.1973).
There remains one further item requiring our action. The jury found that $12,500 would be a reasonable attorney's fee for perfecting the appeal to the Court of Appeals; and, if an application for a writ of error was made to the Supreme Court of Texas, an additional sum of $7,500 would be a reasonable fee. The judgment, as signed, does not specifically award any attorney's fees for appeals, as such, but does provide for "abatement" of the sums due from purchaser in the amounts of $12,500 and $7,500 if such contingencies were met. While we might speculate that such amounted to an allowance of attorney's fees in the sums found by the jury, the judgment does not so recite.
Consequently, we sustain seller's twenty-fourth point of error with reference to such attorney's fees, and now direct the trial court, upon remand, to clarify such award and specify in the reformed judgment that such "abatements" of the purchase price are for attorney's fees as found by the jury.
The judgment of the trial court is reversed and the cause is remanded with instructions to amend the judgment as set forth in the last three concluding paragraphs of this opinion.
Reversed and remanded with instructions.
NOTES
[1] First Point of Error: "The trial court erred by rendering a judgment ordering specific performance of the alleged contract to convey real estate dated February 6, 1979, when the land to be conveyed was not described in the written instrument or in another writing referred to therein which was in existence at the time of the execution of the purported contract." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2758700/ | COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00355-CR
Rhonda Lorene Ladon § From the Criminal District Court No. 3
§ of Tarrant County (1374235D)
v. § December 4, 2014
§ Per Curiam
The State of Texas § (nfp)
JUDGMENT
This court has considered the record on appeal in this case and holds that
the appeal should be dismissed. It is ordered that the appeal is dismissed.
SECOND DISTRICT COURT OF APPEALS
PER CURIAM | 01-03-2023 | 12-09-2014 |
https://www.courtlistener.com/api/rest/v3/opinions/3106759/ | Brooke
Fourth Court of Appeals
San Antonio, Texas
March 21, 2014
No. 04-12-00703-CV
Eric WARD,
Appellant
v.
Brooke WARD,
Appellee
From the County Court at Law No 4, Williamson County, Texas
Trial Court No. 11-1851-FC4
The Honorable John B. McMaster, Judge Presiding
ORDER
Sitting: Sandee Bryan Marion, Justice
Rebeca C. Martinez, Justice
Luz Elena D. Chapa, Justice
The panel has considered the Appellant’s Motion for Rehearing, and the motion is
DENIED.
_________________________________
Sandee Bryan Marion, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 21st day of March, 2014.
___________________________________
Keith E. Hottle
Clerk of Court | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1685845/ | 467 So. 2d 940 (1985)
Jerry McCommon
v.
STATE of Mississippi.
No. 55240.
Supreme Court of Mississippi.
April 24, 1985.
Rehearing Denied May 15, 1985.
Samuel H. Wilkins, Jackson, for appellant.
Edwin Lloyd Pittman, Atty. Gen. by Carolyn B. Mills, Special Asst. Atty. Gen., Jackson, for appellee.
En Banc.
*941 DAN M. LEE, Justice, for the Court:
Jerry McCommon stands convicted of being a rather uncommon carrier. A jury in the Circuit Court of Simpson County found him guilty of knowingly possessing more than one kilogram of marijuana. The marijuana was discovered in the trunk of McCommon's car after law enforcement officers, acting on a tip from a confidential informer, followed McCommon to Miami, Florida and back to Simpson County.
After McCommon was detained officers asked him where he had been. He told them that he had been on the Mississippi Gulf Coast camping. Knowing this to be a lie, and having other indicia of probable cause, two of the officers left the scene to secure a search warrant for McCommon's vehicle. McCommon was taken into custody and his vehicle was taken to the Simpson County courthouse. After a search warrant had been secured, McCommon's trunk was opened and four bales of marijuana were found therein. Following his conviction and sentence to a term of 15 years in the custody of the Mississippi Department of Corrections, with the last five years being on supervised parole, and a fine of $20,000, McCommon brings this appeal. McCommon's sole assignment of error relates to the search and seizure of his automobile. We affirm.
PROBABLE CAUSE
In Lee v. State, 435 So. 2d 674 (Miss. 1983), this Court adopted the totality of the circumstances test for determining the existence of probable cause which was articulated by the United States Supreme Court in Illinois v. Gates, 462 U.S. 213, 103 S. Ct. 2317, 76 L. Ed. 2d 527 (1983). That test has subsequently been followed in Hall v. State, 455 So. 2d 1303 (Miss. 1984) and Stringer v. State (Miss. No. 54,805, decided February 27, 1985, not yet reported). As Stringer makes clear, the totality of the circumstances test applies whether we are construing the probable cause requirement of Section 23, Art. 3 of the Mississippi Constitution or that found in the Fourth Amendment to the Constitution of the United States.
Under the totality of the circumstances test "[T]he task of the issuing magistrate is simply to make a practical, common sense decision whether, given all the circumstances set forth in the affidavit before him, including the veracity and basis of knowledge of persons supplying hearsay information, there is a fair probability that contraband or evidence of a crime will be found in a particular place and the duty of a reviewing court is simply to insure that the magistrate had a substantial basis for... conclud-[ing] that probable cause existed." Lee at 676 and Stringer, slip at 8, quoting Gates at 462 U.S. 238, 103 S. Ct. 2332, 76 L. Ed. 2d 548.
We are asked to decide whether, under the totality of the circumstances, the justice court judge who issued the search warrant to search McCommon's vehicle was correct in deciding that the state had probable cause to believe that "contraband or evidence of a crime" would be found in Jerry McCommon's car. By simply reviewing the affidavit and the warrant on their face, the following facts support the state's assertion that probable cause was present. (1) In May, 1982, McCommon had been arrested for possession of cocaine. The search of his vehicle revealed a large amount of marijuana debris. (2) Information from a confidential source revealed that McCommon was driving to Miami, Florida and returning with large amounts of marijuana in his vehicle. (3) On July 13, 1982, two associates of McCommon were arrested for possession of approximately 500 pounds of marijuana. One of the vehicles containing the marijuana belonged to McCommon. One of these associates had been in Miami, Florida at the same time as Jerry McCommon. (4) A confidential source told Sgt. Barrett of the Jackson Police Department, that McCommon was going to Miami, Florida "possibly to pick up a load of drugs." McCommon was followed to Florida and observed at a residence occupied by a person known to the United States Drug Enforcement Administration *942 as a marine smuggler. When McCommon returned to Mississippi his vehicle was sagging in the rear although it had not done so on the trip to Florida. (5) When McCommon was stopped and questioned by authorities he told them that he had been on the Mississippi Gulf Coast camping, a statement known by police officers to be untrue. Given all of these circumstances, we conclude that there was probable cause to issue the search warrant.
WAS THE WARRANT ISSUED BY A NEUTRAL AND DETACHED MAGISTRATE?
McCommon here argues that the issuing magistrate, Justice Court Judge Nevel Mangum, was not a neutral and detached magistrate. Both the United States Supreme Court and this Court have held that the individual issuing the warrant must be a neutral and detached magistrate. Johnson v. United States, 333 U.S. 10, 68 S. Ct. 367, 92 L. Ed. 436 (1948); Birchfield v. State, 412 So. 2d 1181 (Miss. 1982). A magistrate who fails to perform his neutral and detached function and who serves "merely as a rubber stamp for the police" cannot validly issue a search warrant. Lo-Ji Sales, Inc. v. New York, 442 U.S. 319, 99 S. Ct. 2319, 60 L. Ed. 2d 920 (1979).
Judge Mangum was called as a witness for the state during the suppression hearing in this cause. On cross-examination by the defense attorney, Judge Mangum testified that he relied primarily on the fact that the people who requested the warrant were sworn police officers rather than anything in particular in the affidavit of underlying facts and circumstances. Judge Mangum did add however, "Well, if I didn't feel like it was warranted, now, then, naturally, I wouldn't issue it."
McCommon asserts that the judge's testimony that he primarily relied on the fact that sworn police officers were asking for the warrant is evidence that he was not a neutral and detached magistrate. We disagree. Judge Mangum's testimony that he would not have issued the warrant had he not thought it appropriate is evidence that he was not serving "merely as a rubber stamp for the police." We therefore find no merit in McCommon's argument; however, it is appropriate that we add a comment here for the benefit of both the bar and those state officials in whom resides the duty of issuing search warrants.
The importance of the neutral and detached magistrate cannot be over emphasized. That magistrate stands as the barrier against unwarranted intrusions into the private lives and personal effects of the people. As the United States Supreme Court said in Coolidge v. New Hampshire, 403 U.S. 443, 481, 91 S. Ct. 2022, 2045, 29 L. Ed. 2d 564, 569 (1971):
[T]he warrant requirement has been a valued part of our constitutional law for decades, and it has determined the result in scores and scores of cases in courts all over this country. It is not an inconvenience to be somehow `weighed' against the claims of police efficiency. It is, or should be, an important working part of our machinery of government, operating as a matter of course to check the `well-intentioned but mistakenly overzealous executive officers' who are a part of any system of law enforcement.
We realize that the task of a magistrate who issues search warrants is not an easy one. Their role requires detachment and study as they consider whether they have been presented with sufficient probable cause to issue a warrant to search or seize a particular person, place or thing. We fully appreciate the gravity of that role and are optimistic that those vested with that responsibility do likewise. The justice court judges, police judges and other judicial officers of the state called upon to issue warrants must remember that they are judges. On their oaths they may not issue warrants just to help law enforcement. They must always remember that a request for a warrant requires a judicial determination. Impartiality and reasoned application of legal principles are the foundation of a judicial determination.
*943 WAS IT ERROR TO ALLOW THE STATE TO AMEND ITS PROOF AND SUBSTITUTE A SIGNED COPY OF THE SEARCH WARRANT AND AFFIDAVIT AS OPPOSED TO THE UNSIGNED COPY ADMITTED DURING THE STATE'S CASE?
During the supression hearing the state introduced a copy of the affidavit for a search warrant which was presented to Justice Court Judge Mangum. Following the close of the state's case the defense moved for a directed verdict based on the fact that those copies did not contain Judge Mangum's signature or seal. On the day of trial, the court allowed the state to amend the affidavits for a search warrant so as to insert the original into the record which contained the judge's signature. The judge testified that he had signed those documents on October 6, 1982, the day they were issued.
In Powell v. State, 355 So. 2d 1378 (Miss. 1978), this Court wrote:
The other proposition argued is that the search warrant was fatally defective because the Justice Court Judge failed to sign the jurat of the affidavit. We find no merit in this argument. Undisputed testimony shows that the affiant appeared before Judge Dale, who put him under oath and obtained the information contained in the underlying facts and circumstances of the affidavit. After giving that information to the judge under oath, Pickens signed the affidavit and Dale wrote the date and his title at the bottom. Pursuant to the affidavit, Dale then issued the search warrant for the residence rented by appellant. The search warrant bears Dale's signature, which by reference incorporates the content of the affidavit.
355 So.2d at 1380.
In the instant case the undisputed testimony also showed that the affiants were put under oath and Judge Mangum elicited the information which appeared in the affidavit from them. Under the authority of Powell we hold that no error occurred when the trial court allowed the state the opportunity to amend its proof and present the original jurat as opposed to the defective copy.
Based on all of the foregoing, we hereby affirm Jerry McCommon's conviction of possession of knowingly possessing more than one kilogram of marijuana.
AFFIRMED.
PATTERSON, C.J., and PRATHER, ROBERTSON, SULLIVAN and ANDERSON, JJ., concur.
ROY NOBLE LEE, P.J., concurs in part.
HAWKINS, J., and WALKER and ROY NOBLE LEE, P.JJ., specially concur.
ROBERTSON, J., concurs.
ROBERTSON, Justice, concurring:
I concur unreservedly that there was in fact and in law probable cause sufficient to require issuance of the search warrant in this case, that Jerry McCommon's assignment of error predicated upon the admission of evidence discovered in the search is without merit, and that in the final analysis McCommon's conviction and sentence must be affirmed. I write separately because, in the course of his testimony regarding the issuance of the search warrant, Justice Court Judge Nevel Mangum displayed an attitude which could hardly be described as judicial. It is an example that ought to be explicated, to the end that others might profit.
The majority correctly points out that Judge Mangum testified that in his view the search warrant was justified under the evidence. Judge Mangum concluded, "Well, if I didn't feel like it [issuance of the search warrant] was warranted, now, then, naturally, I wouldn't issue it." Notwithstanding, prior to this point Judge Mangum offered comments which unmask a no doubt bona fide belief that his office is an adjunct of law enforcement and that a major criterion for issuance of the search warrant should be that it was requested by law enforcement authorities.
*944 Consider the following colloquy between Judge Mangum and counsel for McCommon.
Q. You would have issued it [the search warrant] anyhow?
A. Certainly, because the officer you've got to have enough faith and confidence in the officer that's asking for the search warrant to warrant it for him and then if it proves it's invalid, well, or whatever, there's nothing there what they're hunting that's not the first time I ever made a search warrant.
Q. So, you were relying on the fact that these officers were of the law
A. Of the law sworn
Q. and they were in there they were sworn officers
A. That's right.
Q. they were in there telling you that this fellow was a drug dealer and they wanted to search his car
A. That's exactly right.
Q. and you relied on that rather than any particulars of this thing?
A. That's exactly right.
Q. Had you ever seen these officers before?
A. No, sir.
Q. You had never seen them before?
A. Not to know that they were drug officers.
Q. All right.
A. No, sir.
Q. So, you really issued the search warrant because you were asked for it by the officers of law rather than any particular thing they told you?
A. Well, I based my decision not primarily on that, but because if Sheriff Jones walked in there and said, "Judge, I need a search warrant to search John Doe for Marijuana," drugs or whatever liquor or whatever it might be, I'm going to go on his word because he's I take him to be an honest law enforcement officer and he needs help to get in to search these places and it's my duty to help him to fulfill that.
Q. Okay. And it's really based on that request other than any particular thing he might tell you?
A. That's right. That's right.
Q. And that's what the situation was here?
A. Well, if I didn't feel like it was warranted, now, then, naturally, I wouldn't issue it.
Q. Okay, but it was pretty it was the swaying fact was that this was two sworn officers of the law rather than anything they told you in these Underlying Facts and Circumstances?
A. That's right. They were officers of the Narcotics.
I wish to state in language clear and unequivocal that I for one regard the attitude displayed by Judge Mangum in this case as wholly out of line. It is inconsistent with the judicial character of the office Judge Mangum holds. On his oath, Judge Mangum and the other justice court judges of the state are not mere adjuncts of law enforcement. They are judges, sworn to act like judges.
Detachment and neutrality are the essence of judicial behavior. In each case within his or her jurisdiction, the judge is required to find the facts fairly and impartially, to identify the applicable rule of law by reference to his education, training and experience, and finally to apply the rule to the facts and achieve a result. This we call an adjudication. These things each judge including justice court judges must do without fear or favor, letting the chips fall where they may.
There are good reasons why our justice court judges must regard scrupulously the nature of their office. In the first place, most of our citizens (including law enforcement officers) have their primary, if not only, direct contact with the law through the office of the justice court judge. See In Re Inquiry Concerning Garner, 466 So. 2d 884, 887 (Miss. 1985). The preception of justice of most of our citizens is forged out of their experiences with our justice court judges. If our justice court judges do not behave with judicial temperament *945 and perform their duties by reference to the process of adjudication, there seems little hope that our citizenry at large may understand and respect the judicial process.
Second, in the context of this case, it is the justice court judge who has the front line responsibility for translating into a living and breathing reality the right of citizens to be secure from unreasonable search and seizures and from issuance of search warrants except upon probable cause. These are rights secured by the Fourth Amendment to the Constitution of the United States and by Article 3, Section 23 of the Mississippi Constitution of 1890. As such they are fundamental rights. Our people will little understand or enjoy these rights except they be respected by our justice court judges. As a practical matter, no exclusionary rule or other remedial device can secure vindication of Fourth Amendment/Section 23 rights as effectively and efficiently may the justice court judges of this state, if they will only do their duty.
Finally, the application for a search warrant is one of the few instances in our judicial system where judges are authorized to make adjudications without hearing from the party affected. Application for a search warrant is made by a law enforcement officer under circumstances where it is wholly impracticable to afford the party to be searched an opportunity to present his case to the effect that there may be no probable cause. Because of the ex parte nature of the proceedings, it is all the more important that our justice court judges do their duty consistent with the three steps of the process of adjudication described above.
I am not so much concerned about this case as I am those others where the evidence in support of issuance of the warrant may be more meager. The facts in this case have been adequately detailed in the opinion of Justice Dan M. Lee. The applicable rule of law is the totality of the circumstances definition of probable cause currently in vogue. When that rule is applied to the facts, the conclusion is inescapable that there was probable cause for the issuance of the warrant. For this reason, I concur.
The bigger question is whether the time is approaching when we will begin to insist that our justice court judges be just that judges. Some say this is unrealistic, that our judges for the most part have no formal training in the law. No doubt these public servants are at a disadvantage.
Little expertise in the law is required for one to know that the title "judge" connotes neutrality and impartiality. A high school civics student knows that a judge by the nature of his office may not act out of favoritism or partiality toward one party or the other. Whatever prerogative other public officials may have to help one interest group or another, detachment is demanded of our judges.
When a person assumes the office of justice court judge in this state, he or she surrenders the right to favor law enforcement officials, those criminally accused, collection agencies, or anyone else. When such a person takes the oath of office, he or she yields the prerogative of executing the responsibilities of the office on any basis other than the fair and impartial application of the law to the facts. The preservation of the rule of law as our last best hope for the just ordering of our society requires nothing less than an insistence by this Court that our justice court judges be in fact what they are in name: judges.
DAN M. LEE and SULLIVAN, JJ., join in this opinion.
HAWKINS, Justice, specially concurring:
I concur in the results reached in this case.
When the validity of a search is at issue, Courts have an obligation to make a scrupulous examination of the underlying facts and circumstances surrounding the search to determine:
(1) the affidavit and warrant on their face comply with our statutes and our Constitution;
(2) the officers had probable cause to support the affidavit;
*946 (3) the issuing magistrate was furnished with sufficient facts by the officers to constitute probable cause;
(4) the magistrate occupied an officially neutral and detached position from that of the law enforcement officers.
It is also my view that the Constitution does not require a reviewing court to probe the state of mind of every magistrate who issues a search warrant, and the majority opinion should so state.
In this case it is abundantly clear that the officers had probable cause to make the affidavit, and that the magistrate was furnished with facts constituting probable cause. Furthermore, he held an officially neutral and detached position from the officers.
Neither the circuit judge nor we are required to go further.
WALKER and ROY NOBLE LEE, P.JJ., join this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1798184/ | 421 So. 2d 229 (1982)
STATE of Louisiana
v.
Jimmy R. ROBINSON
No. 81-KA-1801.
Supreme Court of Louisiana.
October 18, 1982.
*230 William J. Guste, Jr., Atty. Gen., Barbara Rutledge, Asst. Atty. Gen., John M. Mamoulides, Dist. Atty., Abbott J. Reeves and David C. Loeb, Asst. Dist. Atty., for plaintiff-appellee.
A.J. Boudreaux, Metairie, William Noland, New Orleans, for defendant-appellant.
LEMMON, Justice.
This is an appeal from a conviction of first degree murder and a sentence of death. Although we affirm the conviction, we must set aside the sentence because of the prosecutor's improper closing argument to the jury. We accordingly remand the matter for the trial court to conduct a new sentencing hearing.
Facts
On August 5, 1980, defendant and Keith Stewart knocked at the door of the apartment of Mrs. Joyce Waites, who managed an apartment complex. They told Mrs. Waites that they wanted to apply for a job, but they left when she advised that there were no positions available. Approximately 30 minutes later, Mrs. Waites answered another knock at the door and was confronted by the same two men, who drew guns and demanded money. When Mrs. Waites pointed to her purse, defendant placed a gun against her head and told her to lie on the floor.
Defendant held the gun to Mrs. Waites' head, while Stewart searched the house for valuables. Mrs. Waites warned that her husband was coming home for lunch soon and begged them to leave, but they did not do so. When the husband arrived, defendant and Stewart used the gun to require him to lie on the floor next to Mrs. Waites. Defendant then made Mrs. Waites accompany him upstairs to search for more money. When they came back downstairs, defendant again told her to lie on the floor next to her husband.
Mrs. Waites told defendant that she could not stop shaking and asked for a cigarette, which defendant gave her. At defendant's instruction, she placed her head on the floor and closed her eyes. When she heard a shot, she looked up and started screaming when she saw that her husband had been shot. Defendant placed the gun against her head and told her to shut up or she would be next. Shortly thereafter, defendant and Stewart left the apartment with the stolen money in the Waites' car.
Mr. Waites died of a gunshot wound to the head. Later the same day, defendant was arrested and confessed to the shooting, but claimed that the gun went off accidentally. Defendant admitted, however, that the hammer of the gun was cocked prior to the shooting.
Review of Guilt Phase
The evidence clearly supports the jury's finding that defendant committed the murder, with specific intent to kill, and was engaged in the perpetration of an aggravated burglary. R.S. 14:30. While armed with a dangerous weapon, defendant entered an inhabited dwelling without authority and with the intent to commit a theft therein. R.S. 14:60. Defendant's cocking of the gun's hammer and his subsequent threat to kill Mrs. Waites militate against defendant's claim of accident and support the jury's finding of a specific intent killing.
Defendant's only contentions with regard to the guilt phase of the trial are that the trial judge erred in refusing to allow him to waive the jury trial and in refusing to allow him to plead guilty without capital punishment.
While an accused in Louisiana has a statutory right to waive a jury trial in noncapital cases, La. Const. Art. I, § 17 (1974) requires that a capital case shall be tried before a jury of 12 persons. Furthermore, an accused's Sixth Amendment right to a jury trial does not carry with it the *231 privilege of insisting on the opposite of that right. Singer v. United States, 380 U.S. 24, 85 S. Ct. 783, 13 L. Ed. 2d 630 (1965). An accused in a capital case does not have an independent statutory or constitutional right to be tried by a judge alone. State v. Whitt, 404 So. 2d 254 (La.1981).
Although this court has recognized the trial court's authority (with the state's consent) to accept a plea of guilty in a capital case if both sides stipulate that a life sentence is to be imposed, the trial judge here properly refused to accept defendant's unilateral offer to plead guilty and thereby deprive the state of the opportunity to seek capital punishment. State v. Jett, 419 So. 2d 844 (La.1982). While C.Cr.P. Art. 557 only expressly prohibits a defendant in a capital case from entering an unqualified plea of guilty (thereby preventing "judicial suicide"), a defendant may not enter a "qualified plea" of guilty in a capital case unless the district attorney agrees to accept the plea. See C.Cr.P. Art. 558.
Review of Penalty Phase
Defendant argues several assignments of error concerning the penalty phase. However, since the prosecutor's improper closing argument requires the setting aside of the death penalty, it is unnecessary to resolve the merits of defendant's other contentions.[1]
In closing argument, the prosecutor stated:
"[N]ow is the time when I have to ask you to do the most difficult thing that I can ask you to do. I have to ask you to recommend to the judge that the defendant be sentenced to death. But I'm not going to stand here and pretend to you that that recommendation is going to result in the certainty of the defendant's execution. And I want you to be fully aware of this because I think it is important for you to consider during your deliberations. If you decide to recommend *232 to Judge Currault that he sentence the defendant to death, then Judge Currault will have an opportunity to decide whether that is appropriate and if not, he has the power to grant the defendant a new trial. And if Judge Currault doesn't do that then the law provides that this case will be reviewed by the seven Justices of the Louisiana Supreme Court and they also will review your recommendation of death.
"Article 905.9 of the Code of Criminal Procedure provides that `The Supreme Court of Louisiana shall review every sentence to determine if it is excessive. The Court by rule[s] shall establish such procedures as are necessary to satisfy constitutional criteria for review.' Part of those criteria and I'll read them to you `Every sentence of death shall be reviewed by this court,' meaning the Louisiana Supreme Court, `to determine if it is excessive. In determining whether the sentence is excessive the court shall determine [a] whether the sentence was imposed under the influence of passion, prejudice or any other arbitrary factors and (b) whether the evidence supports the jury's finding of a statutory aggravating circumstance, and (c) whether the sentence is disproportionate to the penalty imposed in similar cases considering both the crime and the defendant.'
"If the Louisiana Supreme Court finds that your recommendation is appropriate, then there is a very strong possibility probability that this case will be reviewed by the Federal Court System and possibly eventually by the United States Supreme Court. And those nine justices will also sit in review of your decision to recommend the death penalty for this defendant.
"And if, after all of those judges have reviewed every single thing that we have done during the course of this trial, they feel that it is still appropriate, then and only then does it become possible to execute the defendant. And even then the Governor of this State must review what you have done to determine whether he feels it is appropriate.
"So, ladies and gentlemen, you are only the first step. Only the first step. I can't even be honest and say that there is a strong possibility that we will get through all of that review."
* * * * * *
"If there is such a strong possibility that the defendant will never see the electric chair why would I waste your time? Why would I waste this court's time in going through all of the things we have gone through in the last few days? I've asked myself that question hundreds of times over the last several months and the answer is, ladies and gentlemen, we have to do something. We cannot sit idly by and be murdered in our own homes during the middle of the day. Some place, sometime, we have to say to our community that the activities, the killing committed by this defendant is not acceptable and we will not permit that sort of destruction of our community. We will not tolerate it. We have had enough of being murdered in our own homes during the middle of the day."
* * * * * *
"If we are going to send a message to our community; if we are going to go home and live with ourselves, we have to do something. I'm not going to pretend to you that if you recommend that this defendant be sentenced to death we're going to solve the problem of crime in the streets. I'm not going to even argue to you that it will make a significant contribution to that but ladies and gentlemen, we've got to do something. We can't sit idly by and be murdered in our own homes during the middle of the day."
* * * * * *
"If ever there was a time when I can feel justified in saying to you that it is appropriate now to say to our community enough, this is the case. I know that the burden of making that decision is heavy indeed. I carry the same burden when I decided in this case to ask you for the death penalty. But as I know you must know, and as I told you earlier in this *233 argument, you will not be alone in reviewing. After you have reviewed it, Judge Currault will review it; the seven Justices of the Louisiana Supreme Court will review it and the Justices of the United States Supreme Court will also have an opportunity to review it. But you have to take the first step. I have gone as far as I can go. I can do no more. Thank you."
And in rebuttal closing argument, the prosecutor stated:
"If you come back and you recommend to Judge Currault that he impose a sentence of death, as I told you that recommendation will be reviewed and rehashed and reviewed and rehashed many, many times. Judges and lawyers will be looking at this case for years to come deciding whether what we've done here is correct, but if you don't recommend the death penalty at the first instance it will never get to that. It will never get to that. You individually and you collectively will have to take that first step. You will have to make that recommendation. That is your burden. That is what I chose you to do. You have an opportunity, ladies and gentlemen. You have an opportunity to say, we have had enough. We're not the guilty ones. We don't deserve to have to put burglar bars on our windows and on our doors and alarms on our houses. We're not guilty. We shouldn't have to be afraid in our own homes. And we can do something. We can do something about it. I can't pretend to you that it's going to be much but it's something. It's better than sitting in our homes and being murdered." (Emphasis supplied.)
The closing argument requires that the death sentence be set aside, because this court cannot determine that misleading and improper remarks of this magnitude did not influence the jury's recommendation. See State v. Willie, 410 So. 2d 1019 (La.1982).
The prosecutor informed the jury that the trial judge had the power to set aside an inappropriate death sentence (by granting a new penalty trial), that the entire federal court system could review such a sentence, and that the governor must review it.[2] He then strongly suggested the improbability that a death sentence would be sustained when "we ... get through all of that review". He ended his closing argument by telling the jurors that their decision was unlikely to "make a significant contribution" because of the extensive process of appellate review of capital cases. In rebuttal closing argument, the prosecutor reviewed the evidence of statutory aggravating and mitigating circumstances before concluding with a reminder that the jury's decision would be "reviewed and rehashed... for years to come" and that the importance of their function in the capital sentencing process was not "going to be much but it's something".
The function of the jury, while important in every case, is particularly critical in the bifurcated trial of capital cases, because the jury alone has the prerogative to impose a death sentence. C.Cr.P. Arts. 905 and 905.3. It is therefore imperative that the jury's sentencing discretion be protected from the influence of arbitrary and inappropriate factors.
Remarks concerning appellate review of death sentences are generally inappropriate, because such remarks may suggest to a conscientious juror that his awesome responsibility is lessened by the extensive system of subsequent review, thus diverting the juror's attention from the central sentencing issue of whether death is the appropriate punishment for this offense and this offender. See State v. Berry, 391 So. 2d 406 (La.1980). Because the jury's function is to weigh the aggravating and mitigating circumstances in deciding whether to recommend a death sentence, *234 remarks concerning postsentence review proceedings are generally irrelevant. Moreover, the jury's recommendation is virtually unassailable when supported by the evidence and when the penalty trial was free of arbitrary and prejudicial considerations. Any suggestion that the jury's responsibility is lessened by appellate review or that the jury's recommendation is just a "beginning step" in the process can easily mislead a layman who is unfamiliar with the limitations governing appellate review. See State v. Willie, above.
In State v. Berry, above, this court warned:[3]
"Any prosecutor who refers to appellate review of the death sentence treads dangerously in the area of reversible error. If the reference conveys the message that the jurors' awesome responsibility is lessened by the fact that their decision is not the final one, or if the reference contains inaccurate or misleading information, then the defendant has not had a fair trial in the sentencing phase, and the penalty should be vacated.
"But virtually every person of age eligible for jury service knows that death penalties are reviewed on appeal. There is no absolute prohibition against references to this fact of common knowledge, and this court should not impose an absolute prohibition, since such a reference does not necessarily serve to induce a juror to disregard his responsibility. The issue should be determined in each individual case by viewing such a reference to appellate review in the context in which the remark was made." (Footnote omitted.)
The court affirmed the death sentence in the Berry case because the prosecutor's remarks on appellate review, which were included in a commentary on the fairness of the legislative scheme for capital punishment, did not serve to lessen the jurors' appreciation of the significance of their role in the overall scheme.
The remarks in the present case, unlike those in Berry, tended to convince the jurors that their role in imposing the death penalty was minimal because of extensive appellate safeguards. This is especially true in view of the prosecutor's suggestion that there was a "strong possibility that the defendant [would] never see the electric chair" despite the jury's death penalty recommendation.
Because we cannot say that the jury's sentencing discretion was unaffected by the prosecutor's repeated and often misleading references to the largely irrelevant consideration of appellate review of death sentences, we must set aside the death sentence and remand for a new sentencing hearing.
Accordingly, the conviction is affirmed, but the sentence is set aside and the matter is remanded for a new sentencing hearing.
DIXON, C.J., concurs.
MARCUS, J., concurs and assigns for reasons assigned by WATSON, J.
DENNIS, J., concurs with reasons.
WATSON, J., concurs and assigns reasons.
DENNIS, Justice, concurring.
I respectfully concur but object to and disagree with the procedure employed by the majority in its footnote number 1. First, the footnote says that it will not address the issue of whether defendant's confession containing other crimes evidence is admissible. Second, it then goes on to give several reasons why the evidence should be admissible. Third, it justifies its failure to address any of the forceful arguments presented in defendant's brief with the questionable statement that "we intimate no inclination on the merits of these issues." This treatment of a very important issue is perplexing. If the majority wishes to "intimate no inclination" it should *235 not present an argument for introduction of the evidence. On the other hand, if it wishes to decide the issue, commit this court to a position and give guidance to the trial court, it should forthrightly address both sides of the argument and resolve it decisively in the text of its opinion.
WATSON, Justice, concurring.
As a general rule, prosecutors and defense counsel should be allowed considerable latitude in arguing cases to the jury.
Jurors are told over and over at every stage of the proceedings that the opening statements and closing statements are not to be regarded as evidence but only as argument.
It is naive to believe that a few words in a closing argument can fill modern-day jurors with prejudice and passion against the defendant, causing them to ignore the evidence and the law and convict. Likewise, a brief and correct statement concerning the possibility of pardon does not interject such an arbitrary factor into deliberations in a capital case as to require setting aside the sentence.
Therefore, I have been strongly disinclined to reverse convictions or sentences in otherwise fair trials on the basis of a few poorly chosen or misguided words from the prosecutor in closing argument.[1]
However, the prosecutor's argument here represents a most thorough and most persistent attempt to minimize the jury's role in deciding whether the defendant is to receive capital punishment. In at least eight different examples by actual count, the prosecutor advised the jury that some other authority would review their decision as he belittled the role of the jury. The prosecutor's remarks represent a gross disregard for confining argument to the law and the evidence. LSA-C.Cr.P. art. 774. Reversal of the sentence is required.
I concur with the majority in affirming the conviction, reversing the sentence and remanding for further proceedings.
NOTES
[1] Because we are remanding for a new penalty hearing (and for the selection of a new subsequent sentencing jury), we need not consider defendant's other complaints regarding the conduct of the penalty hearing. Any complaints defendant may have regarding the excusing of prospective jurors based on their attitude toward imposition of the death penalty are moot, because the recommendation of that jury is being set aside. See State v. Edwards, 406 So. 2d 1331 (La.1981). The alleged "Witherspoon" error does not affect the guilt determination and thus is moot in view of our reversal of the death penalty. See State v. Kent, 391 So. 2d 429 (La.1980). Compare State v. Turner, 253 La. 763, 220 So. 2d 67 (1969). For guidance on the "Witherspoon" issue in the selection of the new penalty jury, see Williams v. Maggio, 679 F.2d 381 (5th Cir. 1982); C.Cr.P. Art. 798.
We are also not required to resolve defendant's complaint regarding the admissibility at the penalty trial of defendant's confession (determined in the guilt phase to be voluntary) that he committed a series of other burglaries and a robbery in close temporal proximity to the commission of the offense in question. The evidence was offered to prove the statutory aggravating circumstance that defendant had a "significant prior history of criminal activity". C.Cr.P. Art. 905.4(c). Defendant, citing Arnold v. State, 236 Ga. 534, 224 S.E.2d 386 (1976), argues that the aggravating circumstance is unconstitutional, because the statute does not set forth sufficiently clear and objective standards.
On the other hand, the disputed portion of C.Cr.P. Art. 905.4(c) arguably is an appropriate corrollary to the statutory mitigating circumstance of the lack of a significant prior history of criminal activity. C.Cr.P. Art. 905.5(a). And even without the express inclusion of "prior significant history of criminal activity" (which was added to C.Cr.P. Art. 905.3(c) by Act 74 of 1979), such evidence could perhaps be introduced to negate the existence of the mitigating circumstance, which the trial judge reads to the jury in his instructions, whether or not either side introduces evidence. Further, the offenses were proved by reliable evidence (defendant's own voluntary confession), of which defendant clearly had notice. In addition, the other crimes evidence related to offenses which were committed in close temporal proximity to the first degree murder and which could fairly be described as part of the same "crime spree".
Although the issues of the admissibility of "other crimes" evidence and the constitutionality of the "significant prior history" addition to C.Cr.P. Art. 905.3(c) may be presented again if the subsequent sentencing jury is exposed to such evidence and again recommends the death penalty, our resolution of the merits of those issues at this point would involve reaching a constitutional issue which need not now be decided, in view of our setting aside the death sentence on other clear grounds. Therefore, we intimate no inclination on the merits of these issues.
[2] This statement was inaccurate because, under the statutory scheme adopted by Acts 1978, No. 758, amending R.S. 15:567, the trial court, rather than the Governor, orders defendant's execution and sets the date. The Governor may exercise his constitutional authority to commute a death sentence, but this step requires an affirmative intervention by the chief executive. La. Const. Art. IV, § 5(E).
[3] The quoted statement was made in a per curiam denial of rehearing on November 26, 1980. The closing argument in the present case was made on January 8, 1981, after the warning in Berry.
[1] See, for example, dissents in State v. Jordan, 420 So. 2d 420 (La., 1982) and State v. Brown, 414 So. 2d 689 (La., 1982). Also see State v. Sharp, 418 So. 2d 1344 (La., 1982). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1880302/ | 194 So. 2d 801 (1967)
Alexander ARMSTRONG et al., Plaintiffs-Appellants,
v.
C. C. COPELAND, Defendant-Appellee.
No. 10745.
Court of Appeal of Louisiana, Second Circuit.
January 24, 1967.
Dhu and Lea S. Thompson, Monroe, for appellants.
Armand F. Rabun, Farmerville, for appellee.
Before HARDY, GLADNEY, AND BOLIN, JJ.
HARDY, Judge.
In this suit plaintiffs prayed for judgment annulling, setting aside and declaring illegal, fraudulent and forged, a cash deed in the form of an authentic act purportedly signed by one of the plaintiffs, Alexander Armstrong, dated June 24, 1963, filed and recorded June 9, 1964, in Conveyance Book *802 236, page 158 of the Conveyance Records of Union Parish, Louisiana. From judgment in favor of defendant rejecting plaintiffs' demands, and further recognizing the deed to be the valid, true and genuine act of the parties, the plaintiffs have appealed.
The deed in question, apparently signed by plaintiff, Alexander Armstrong, and by his nephew, Theodore J. Armstrong, conveyed all of their right, title and interest in and to a certain described 90 acre tract of land located in Union Parish unto defendant, C. C. Copeland, for a cash consideration of $1,000.00. The interest of Alexander Armstrong in the property involved is shown to have been an undivided one-fourth, equivalent to 22½ acres. No attack is made against the conveyance of the interest of Theodore J. Armstrong, since deceased. The fraud alleged by plaintiffs rests upon the claim that the signature of Alexander Armstrong was forged. The issue presented by this appeal relates to the sufficiency of the proof adduced on behalf of plaintiffs in support of their claim of fraud by forgery.
The only direct and positive testimony on trial of the case was given by plaintiff, Alexander Armstrong, and defendant, C. C. Copeland, which testimony is irreconcilably contradictory. Alexander Armstrong testified that he did not sign the deed while defendant, on the contrary, testified that Armstrong did sign the deed. The notary and one of the witnesses to the act testified as to its execution and the signature by the party representing himself to be Alexander Armstrong, with whom, however, they were not personally acquainted and, therefore, could not identify.
In written reasons for judgment the district judge concluded that plaintiffs had not discharged the burden of proof and with this conclusion we are completely in accord.
The charge of fraud is exceptionally serious and the jurisprudence of our State has uniformly established the principles that the burden rests upon the party alleging fraud to establish such allegation by exceptionally strong proof more onerous than the mere preponderance of the evidence; that the possibility of fraud or the suspicious character of surrounding circumstances is not sufficient; Sanders v. Sanders, 222 La. 233, 62 So. 2d 284 (and cases cited). The charge of forgery of the signature to an authentic act requires strong, clear and positively convincing proof; Le Boeuf, et al. v. Duplantis (La. App., 1st Cir., 1935), 162 So. 592; Abraham Lincoln Home Founding Co., Inc. v. Gibson (La.App., 2nd Cir., 1935), 162 So. 237.
Counsel for appellants urgently argues that evidence of circumstances creating reasonable doubts or suspicions as to the honesty and validity of a transaction are sufficient to establish a prima facie case and shift the burden of proof. With this contention we cannot agree. Counsel cites in support of his argument the case of Burch v. Nichols, 126 So. 2d 713, in which he inadvertently erred in applying the above noted principle to the issue of forgery. The Burch case was an action in simulation and presented no issue with respect to fraud by forgery. Examination of our jurisprudence is convincing as to the conclusion that an action of simulation falls in that category of fraudulent conduct, which is less demanding of and burdensome upon the party alleging simulation than in other cases involving fraud; Howard v. Howard (2nd Cir., 1957), 96 So. 2d 345.
In any event, the suspicious circumstances relied upon in this case, consisting of defendant's failure to record the conveyance for a period of approximately two years; his failure to take possession of the property, and his apparent acquiescence in the effect of an oil and gas lease executed by the Armstrongs after execution but prior to recordation of his deed cannot be accorded any substantial weight. Defendant's testimony established reasonable explanations of these circumstances and they *803 cannot be considered as fulfilling the requirements of strict and convincing proof above and beyond a mere preponderance of the evidence.
As pointed out by the district judge, plaintiffs in this case failed to offer for examination any genuine signatures of the plaintiff, Alexander Armstrong, which could have been used as a basis for comparison with the disputed signature, nor did they offer the testimony of any experts on handwriting which would have been pertinent, material and substantial.
Our examination of the record not only fails to disclose ground for error with respect to the judgment appealed from, but, on the contrary, serves to convince us of the correctness of the judgment below.
For the reasons assigned the judgment appealed from is affirmed at appellants' cost. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1880301/ | 100 B.R. 881 (1988)
In the Matter of UNIMET CORPORATION, Debtor.
Bankruptcy No. 685-00240.
United States Bankruptcy Court, N.D. Ohio.
June 14, 1988.
On Motion for Reconsideration May 26, 1989.
*882 Jeffrey T. Heintz of Brouse & McDowell, Akron, Ohio, for trust.
Gregg P. Hirsch, New York City, for Metropolitan Life Ins. Co.
MEMORANDUM OF DECISION
JAMES H. WILLIAMS, Chief Judge.
Presently before the court is an objection filed by the Official Committee of Unsecured Creditors[1] to the proof of claim of Metropolitan Life Insurance Co. (Metropolitan). Metropolitan and the Trustee met informally and exchanged documentation in an attempt to resolve the objection. Unfortunately, no resolution was forthcoming and a pre-trial conference was held before the court at which the parties agreed that the threshold issue, the number of employees to be included in Metropolitan's claim, would be submitted to the court upon stipulations of fact and briefs.
FACTS
From November 15, 1979 through February 28, 1985, Metropolitan, through a contract with Unimet Corporation (Unimet), provided employee benefits to employees of Unimet, Esmet, Inc., Intech Systems, Inc. (Intech), both subsidiaries of Unimet, and Cordex, a division of Unimet. (Collectively, the Unimet plan).
The nature of the benefits offered to the employees under the Unimet plan varied during the period of coverage, but as of the date the insurance policies were canceled, such benefits included basic life insurance, accidental death, dental, prescription drugs, and major medical insurance.
On August 14, 1984, the Cordex division was sold to Burcliff Industries. As part of the sale, a provision in the sales contract between Unimet and Burcliff Industries called for the employees of Cordex to continue on the Unimet plan for an additional thirty (30) day period.
On March 8, 1985, Unimet, Esmet and Intech filed for relief under Chapter 11 of Title 11 of United States Code. On June 27, 1985, Metropolitan filed a proof of claim against Unimet in the amount $1,552,603.33 for liabilities arising under the group policies issued by Metropolitan to Unimet. This claim was asserted as a general unsecured claim in the amount of $787,609.55 and a priority claim under 11 U.S.C. § 507(a)(4) for $764,993.78.
Intech's Chapter 11 bankruptcy was dismissed on June 13, 1986. On November 24, 1986, a Joint Plan of Reorganization was confirmed for Unimet and Esmet with the Unimet Assets Disposition Trust being created. Subsequently, on March 18, 1987, Metropolitan filed an amended proof of claim in the amount of $1,940,368.69 which included a priority claim under Section 507(a)(4) in the amount of $957,583.14.
As of 180 days before the filing of bankruptcy, 316 active employees were covered under the Unimet plan. Employment by company was as follows:
1. Unimet employees 15
2. Esmet employees 36
3. Intech employees 129
4. Cordex employees 136
___
Total 316
DISCUSSION
11 U.S.C. Section 507(a)(4) provides for the priority treatment of a claim for contributions to an employee benefit plan. It states:
*883 (a) The following expenses and claims have priority in the following order:
. . . . .
(4) Fourth, allowed unsecured claims for contributions to an employee benefit plan
(A) arising from services rendered within 180 days before the date of the filing of the petition or the date of the cessation of the debtor's business, whichever occurs first; but only
(B) for each such plan, to the extent of
(i) the number of employees covered by each such plan multiplied by $2,000; less
(ii) the aggregate amount paid to such employees under paragraph (3) of this subsection, plus the aggregate amount paid by the estate on behalf of such employees to any other employee benefit plan.
The issue before the court, which appears to be one of first impression, is the determination of the number of eligible employees to be included in the priority pool created by Section 507(a)(4)(B)(i), supra. The Trustee does not dispute that the Unimet and Esmet employees, a total of 51, are includable. The Trustee, however, does dispute the inclusion of the Cordex and Intech employees, asserting that they were not, within 180 days prior to the filing of the bankruptcy petition, employees of the debtor, did not render services to the debtor, and thus do not qualify for inclusion.
Metropolitan, citing the Code provisions and equitable considerations, argues that all the employees covered by the benefit plan should be included in determining the amount of the priority claim.
In determining which employees are to be included, the court is guided by the provisions of Section 507(a)(3). Under the former Bankruptcy Act, unpaid wages were entitled to a second priority. See, Bankruptcy Act § 64(a)(2); 11 U.S.C. § 104(a)(2), (1970). When the Bankruptcy Reform Act of 1978 was enacted, former Section 64(a)(2) was changed. One of the changes was the creation of a new priority section for contributions to employee benefit plans. As the legislative history states:
[T]he bill establishes a new category, a fourth priority immediately following the wage priority, for contributions and payments to employee benefit plans. This will include health insurance programs, life insurance plans, pension funds, and all other forms of employee compensation that is not in the form of wages. The priority is limited to the unused amount of the wage priority, but contributions during the full year preceding bankruptcy are given priority. The bill makes a third change by having measurement of the priority date from the date of bankruptcy or from the cessation of the debtor's business, whichever occurs first. This will provide additional protection to the employees of a bankrupt enterprise.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 187-188 (1977), U.S.Code Cong. & Admin. News 1978, pp. 5787, 6148.
As can be seen from the legislative history, the priority treatment given to contributions to employee benefit plans is directly tied to the wage priority of Section 507(a)(3).
For a party to be entitled to priority treatment for wages, there must be an employer-employee relationship between the debtor and the party claiming the priority. In re Dahlman Truck Lines, Inc., 59 B.R. 218 (Bankr.W.D.Wis.1986). A similar relationship seems an appropriate prerequisite for Section 507(a)(4) priority.
Additional support for this analysis can be found in the legislative purpose for the inclusion of Section 507(a)(4) in the Bankruptcy Reform Act of 1978. It was included, we are told, to specifically overrule the body of cases which had previously narrowly construed wage priority to exclude health benefit contributions. See, Sen.Rep. No. 989, 95th Congress, 2nd Sess. 69 (1978). In that priority statutes are to be given strict construction, See, In re Pittston Stevedoring Corp. 40 B.R. 424 (Bankr.S.D.N. Y.1984), Section 507(a)(4) should not be broadened beyond the limitations imposed *884 in Section 507(a)(3) when the legislative intent is clear that Section 507(a)(4) was only enacted to cure certain defects in the predecessor to Section 507(a)(3).
Support for this interpretation can also be found in the language of Section 507(a)(4) itself. As previously noted, Section 507(a)(4)(A) provides that the claim is based upon "services rendered within 180 days before the date of the filing of the petition or the date of the cessation of the debtor's business. . . ." (Emphasis added).
In the instant proceeding, the only debtors are Unimet and Esmet. Intech's bankruptcy was voluntarily dismissed on June 13, 1986, and Cordex was sold prior to the 180 day period.
Also, Section 507(a)(4)(B)(i) and (ii) limit the amount of the claim to $2,000.00 per employee minus what the employee received under Section 507(a)(3), which requires, as previously noted, an employer-employee relationship. This language again points out the relationship between Sections 507(a)(3) and 507(a)(4) and reinforces the court's finding that a claim for contributions to an employee benefit plan depends upon the existence of an employer-employee relationship between the debtor and the party asserting the priority.
Finally, as the last sentence of the House Report, supra, pg. 883, states: "[t]his [Section 507(a)(4)] will provide additional protection to the employees of a bankrupt enterprise." (Emphasis added).
Accordingly, the court finds that only the employees of Unimet and Esmet, which total 51, are to be included in determining the amount of Metropolitan's priority claim.
An order in accordance herewith shall issue.
ON MOTION FOR RECONSIDERATION
Metropolitan Life Insurance Company (Metropolitan) seeks the reconsideration of this court's Memorandum of Decision and Order of June 14, 1988, wherein the court determined the number of employees to be included in the calculation of Metropolitan's Section 507(a)(4) priority claim against the debtor to be 51. Metropolitan has set forth four grounds as to why the court should reconsider its prior decision. Metropolitan also requests that an evidentiary hearing be scheduled to consider any factual matters which may be in dispute.
A brief in opposition to Metropolitan's motion has been filed on behalf of Lee J. Dicola, trustee of the Unimet Assets Disposition Trust. Thereafter, Metropolitan filed a reply brief.
FACTS
The court's prior Memorandum of Decision contained a full statement of the facts as agreed upon by the parties. A summary follows, with such omissions and additions as are deemed necessary.[1]
From November 15, 1979 through February 28, 1985, Metropolitan, through a contract with Unimet Corporation (Unimet), provided employee benefits to employees of Unimet, Esmet, Inc., (Esmet), Intech Systems, Inc. (Intech), both subsidiaries of Unimet, and Cordex, a division of Unimet. (Collectively, the Unimet plan).
On August 14, 1984, the Cordex division was sold, and as part of the sale, a provision in the contract between Unimet and the buyer called for the employees of Cordex to continue under the Unimet plan for an additional thirty (30) day period.
On March 8, 1985, Unimet, Esmet and Intech filed for relief under Chapter 11 of Title 11 of the United States Code. On June 27, 1985, Metropolitan filed a proof of claim against Unimet in the amount of $1,552,603.33 for liabilities arising under the group policies issued by Metropolitan to Unimet. This claim was asserted as a general unsecured claim in the amount of $787,609.55 and a priority claim under 11 U.S.C. § 507(a)(4) for $764,993.78.
Intech's Chapter 11 bankruptcy was dismissed on June 13, 1986. On November 24, *885 1986, a Joint Plan of Reorganization was confirmed for Unimet and Esmet with the Unimet Assets Disposition Trust being created. Subsequently, on March 18, 1987, Metropolitan filed an amended proof of claim in the amount of $1,940,368.69 which included a priority claim under Section 507(a)(4) in the amount of $957,583.14.
As of 180 days before the filing of bankruptcy, 316 active employees were covered under the Unimet plan. Employment by company was as follows:
1. Unimet employees 15
2. Esmet employees 36
3. Intech employees 129
4. Cordex employees 136
___
TOTAL 316
On June 14, 1988, this court issued its Memorandum of Decision wherein it found that only the employees of Unimet and Esmet, a total of 51, were to be included in determining the amount of Metropolitan's priority claim. Thereafter, Metropolitan timely filed a notice of appeal. On appeal, the District Court for the Northern District of Ohio found this court's decision and order to be interlocutory in nature. Therefore, the District Court held it was without jurisdiction and the appeal was dismissed.
Subsequent thereto, Metropolitan filed the instant motion in this court setting forth the following grounds.
1. The Court's interpretation of Section 507(a)(4) failed to implement the Congressional objective to protect workers covered by employee benefit plans;
2. The Court's order failed to recognize that the services performed by employees of the Debtor's subsidiary, Intech Systems, Inc., provided benefit to the Debtor;
3. The Court's order misconstrued the relationship between Sections 507(a)(3) and 507(a)(4) of the Bankruptcy Code; and
4. The appropriate measuring date for purposes of determining priority under Section 507(a)(4) with respect to claims attributable to employees of the Debtor's Cordex division was the date of the sale of the division, not the date of the filing of the bankruptcy petition.
As previously noted, Metropolitan also requests an evidentiary hearing be scheduled to consider any factual matters that remain in dispute.
DISCUSSION
In view of the fact that its prior Memorandum of Decision and Order was interlocutory, the court has the discretion to reconsider its prior decision. "[U]ntil entry of judgment, [interlocutory orders] remain subject to change at any time. The doctrine of the law of the case does not limit the power of the court in this respect." 1B Moore's Federal Practice para. 0.404[2] at p. 124, 2nd ed. 1988 (citations omitted).
The court, upon review of its prior Memorandum of Decision and the briefs supplied by the parties, finds, however, no compelling grounds to alter its previous holding. Accordingly, Metropolitan's motion will be denied for the reasons set forth below.
A.
In its prior Memorandum of Decision, the court noted that the issue of the number of eligible employees to be included in the priority pool created by Section 507(a)(4)(B)(i) appeared to be one of first impression. Accordingly, the court did not reach its decision lightly, but undertook an extensive review of the prior Bankruptcy Act, the legislative history underlying Section 507(a)(4), the statute itself and its relation to the other priority provisions of Section 507.
Metropolitan first argues that the court failed to implement Congressional objectives underlying enactment of Section 507(a)(4). The argument is without merit. As previously noted, this court undertook a review of the legislative history behind Section 507(a)(4) and found that an employer-employee relationship is required. Metropolitan, beyond asserting that the court failed to implement Congressional objectives, has suggested nothing which would justify altering the prior finding.
*886 Secondly, Metropolitan argues that the court failed to recognize the benefits provided to Unimet by the Intech employees. The court finds, however, that Metropolitan's argument is not supported by the Bankruptcy Code or the legislative history. Priority statutes are to be given strict construction. In re Pittston Stevedoring Corporation, 40 B.R. 424 (Bankr.S.D.N.Y. 1984). Section 507(a)(4) and its legislative history are devoid of any language that could be construed as granting a priority to a party who bestows a "benefit." Instead, Section 507(a)(4) clearly points to the requirement of an employer-employee relationship.
Finally, Metropolitan asserts the court misconstrued the relationship between Section 507(a)(3) and 507(a)(4). The purpose of Section 507(a)(4) was to specifically overrule the body of case law which had previously narrowly construed the wage priority to exclude health benefit contributions. See, Sen.Rep. No. 989, 95th Cong.2d Sess. 69 (1978). The very purpose of Section 507(a)(4) ties it to Section 507(a)(3). Therefore, the court finds the employer-employee requirement of Section 507(a)(3) is also applicable to Section 507(a)(4).
B.
The final ground asserted by Metropolitan as a basis for reconsideration is that the appropriate measuring date under Section 507(a)(4) for the employees of the Cordex division is the date of sale, not the filing date of the bankruptcy petition. This argument was not raised by Metropolitan in the prior proceedings before this court and the trustee strenuously objects to it being raised at this juncture.
Under Rule 56(a) and (d) and Rule 42(b), the district court exercises a broad authority to dispose of cases in stages. These decisions are interlocutory in character and until entry of judgment, they remain subject to change at any time. The doctrine of the law of the case does not limit the power of the court in this respect. Yet the very purpose of deciding some issues ahead of others is to aid in the logical and orderly disposition of the whole. It would be utterly destructive of this end if each successive decision resulted in the reconsideration of every previous one, and a sequence of decisions in the case based on different views overlapping issues of law would likely result in an internally inconsistent judgment. To avoid the horns of this dilemma, it is the practice to treat each successive decision as establishing the law of the case and depart from it only for convincing reasons.
1B Moore's Federal Practice para. 0.404[2] at p. 124-125, 2d ed.1988 (citations omitted).
The court finds no convincing reason to permit Metropolitan to advance now its new theory as to its entitlement to a priority claim for contributions to an employee benefit plan.
As previously noted, this court's prior decision was based upon agreed stipulations of fact and briefs submitted by the parties. Nowhere in the stipulations of fact or in Metropolitan's initial brief is there any mention of the cessation of business argument it now advances. Metropolitan even had the opportunity to, and did, in fact, file a reply brief in the prior proceeding where again, no mention of the cessation of business argument can be found.
Metropolitan has been represented by counsel throughout these entire proceedings. The facts that could possibly support its new theory have always been present. It would be inequitable to allow Metropolitan to raise a new theory of recovery after the trustee and the court relied upon the earlier agreement of the parties to proceed upon stipulations of fact and briefs.
Accordingly, the court finds no compelling reasons to alter its prior holding nor to schedule a hearing to address any additional facts relating to the cessation of business argument of Metropolitan.
An order in accordance herewith shall issue.
NOTES
[1] Pursuant to the Joint Plan of Reorganization, which was confirmed by this court on November 24, 1986, the Unimet Asset Disposition Trust was created with Lee J. DiCola, being appointed Trustee. Mr. DiCola, having sole and complete control over the Trust assets, is vested with the power to pursue objections to claims including the objection to Metropolitan's claim.
[1] This court's prior Memorandum of Decision and Order arose out of an agreement between the parties to present the threshold issue of the number of employees to be included in the Section 507(a)(4) calculations to the court upon stipulations of fact and briefs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1880308/ | 194 So. 2d 702 (1967)
Glenn TANNER, Appellant,
v.
Georgia B. TANNER, Appellee.
No. 6918.
District Court of Appeal of Florida. Second District.
January 4, 1967.
Rehearing Denied February 23, 1967.
*703 George W. Phillips, Tampa, for appellant.
No appearance for appellee.
ADKINS, JAMES C., Jr., Associate Judge.
The husband appeals from a final decree of divorce and takes exception to those portions awarding the wife a special equity in his business and awarding the wife's attorney a fee in the amount of $5,000.00. The husband filed suit for divorce and the wife counterclaimed seeking separate maintenance. During the trial, the wife amended the counterclaim and prayed for a divorce. The final decree found that the wife was entitled to a decree of divorce on the counterclaim. In addition to granting the divorce, the final decree awarded custody of the four children to the wife, granted her use of the jointly owned dwelling, use of an automobile, and awarded alimony and support. None of these provisions are challenged by the husband.
It was the duty of the attorney for appellee-wife to file in this court a brief, maintaining the correctness of the proceedings and judgment of the trial court. Bolles v. Carson, 73 Fla. 504, 511, 74 So. 509 (1917); Jacksonville Tractor Company v. Nasworthy, 114 So. 2d 463 (Fla. App. 1st Dist. 1959). This he has failed to do, although the record contains a memorandum furnished the trial court at final hearing. The record consists of seven volumes, and the neglect of the attorney imposes an inordinate burden on the appellate court. If any cause exists for not preparing the brief, it should be seasonably reported to this court and counsel excused. Jacksonville Tractor Company v. Nasworthy, Id.
The husband contends that the court erred in awarding the wife a special equity in his business, in that the wife failed to sustain the burden of proving such equity to the exclusion of any reasonable doubt.
There are two circumstances under which such an award may be made: the first is where she has contributed financially to the husband's business or acquisition of property; the second is based on personal services which contributed materially to the husband's acquisition of property. Roberts v. Roberts, 101 So. 2d 884 (Fla.App.2nd Dist. 1958).
The burden of proof was upon her to establish, to the exclusion of reasonable doubt, that she had acquired either a legal or equitable interest in the property. Lindley v. Lindley, 84 So. 2d 17 (Fla. 1955). *704 Just as in cases involving a constructive trust, the evidence to establish the equity of the wife must be so clear, strong, and unequivocal as to remove from the mind of the chancellor every reasonable doubt as to the existence of her special equity. See Cannova v. Carran, 92 So. 2d 614, 619 (Fla. 1957).
During the early years of the marriage the wife performed valuable services in the businesses known variously as, Supreme Radio Service, Tanner Radio and Electronic Supply, Inc., and Wired Music, Inc. She had an equal ownership of stock in Wired Music, Inc. with her husband. This corporation was dissolved by the husband in 1949. The chancellor found that the stock in Wired Music, Inc. had a gross value of approximately $45,000.00, but the evidence does not sustain this finding. The lower court also found that upon dissolution of Wired Music, Inc., as a corporation, it was then operated by him as a sole proprietorship without any distribution of assets. There is no "clear, strong, and unequivocal" evidence to show any amount of money which the wife may have contributed to any business of the husband.
This couple arrived in Tampa, Florida, during 1951, and since that time the husband has built a business of considerable value. The wife has performed certain minor services for the business, but the evidence fails to show that she advanced money to him for use in his business or that her services were above and beyond the performance of ordinary marital duties to the husband's accumulations of property. See Banfi v. Banfi, 123 So. 2d 52 (Fla.App.3rd Dist. 1960).
That portion of the final decree awarding the wife a special interest in the amount of $43,000.00 is not sustained by the evidence.
Alimony is determined by the necessities of the one party and the abilities of the other. The allowance of the special equity in the amount of $43,000.00 to be paid from the business of the husband had a material bearing upon the necessities of the wife as well as the abilities of the husband. Upon remand, the lower court may, in his discretion, make a redetermination of alimony and support.
The husband also contends that the evidence was insufficient to support an award of attorney's fee in the amount of $5,000.00. A practicing attorney was called as a witness, and testified that he "glanced" through the court file and made notes as to information he gathered; that the wife's attorney informed the witness that 200 hours had been spent on the case; that he understood the assets of the husband were over "a quarter of a million dollars." Although the witness stated he discussed the matter with the wife's attorney for only 10 minutes, he nevertheless detailed the progress of the case in his testimony and adequately described the legal work involved in a case of this nature. In his opinion, "considering the time involved in the complex matters involving the businesses, a reasonable fee would be $7,500.00". The court allowed a fee of $5,000.00. The testimony of the expert witness was competent and there was adequate proof of the reasonable value of the services of the wife's attorney.
The decree appealed from should be revised to omit the objectionable matters discussed above and, in the discretion of the chancellor, alimony and support money may be redetermined. In all other respects the final decree is hereby affirmed. The case is remanded with directions to revise the final decree in conformity herewith.
Affirmed in part, reversed in part and remanded for further proceedings consistent with the views herein expressed.
ALLEN, C.J., and SHANNON, J., concur. | 01-03-2023 | 10-30-2013 |
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